§ 3.8 p.m.
§ Moved, That the Bill be now read a first time.—(Lord Waddington.)
§ Lord McIntosh of Haringey
My Lords, the Bill is now presented to this House in exactly the same form as it was when it left the House of Commons; that is, without having been reprinted. I rise to raise the question of the status of the Explanatory and Financial Memorandum in the light of the ministerial Statement made at 11 p.m. on Monday evening, after the Bill had originally been printed and after the production of the print which is now before your Lordships this afternoon.
Mr. Portillo, speaking on behalf of the Government at 11 o'clock on Monday evening, announced fairly significant changes to the community charge reduction scheme which is referred to in the financial memorandum. I shall not tax the House with the details of his statement which will no doubt arise in discussion of the Bill. He ended by saying:The Bill's explanatory and financial memorandum needs to be read in the light of the remarks that I have just made".—[Official Report, Commons, 25/3/91; Col. 729.]In other words, the Explanatory and Financial Memorandum is wrong. Yet it has not been changed. I must ask the Government what explanation they have for not producing an Explanatory and Financial Memorandum before this House which reflects the true state of affairs.
§ Lord Waddington
My Lords, this Bill has arrived here having received an unopposed Second and Third Reading in another place. Any points on the Explanatory and Financial Memorandum can clearly be raised during the debate on Second Reading.
§ On Question, Bill read a first time.
§ Then, Standing Order No. 44 having been dispensed with (pursuant to Resolution of 25th March):
§ 3.10 p.m.
§ Lord Waddington
My Lords, I beg to move that the Bill be now read a second time.
I wish to repeat at the outset what I said the other day. I regret having had to ask your Lordships to waive standing orders so that all stages of the Bill may be taken today. It is a most unusual procedure which I am sure should be used only very rarely indeed. However, the Bill is very limited in scope and the circumstances are exceptional. It is certainly very much in the interests of those who will benefit from its terms that it should be enacted without delay.
We are not setting out in this Bill to reform local government. I suspect that that will require a much longer measure than the one before your Lordships today. However, it reflects that part of the Budget Statement of my right honourable friend the Chancellor of the Exchequer last week in which he said that local taxes were being asked to bear too large a share of the cost of local government activities. This resulted in too high a community charge. He therefore proposed to make a substantial switch from local to central taxation and bring down the charge for the coming year.
That therefore is the purpose of the Bill. The amount set by a charging authority for its personal community charge in 1991–92 is to be reduced by £140, except in the case of an authority where the community charge is below £140. In the latter case, the charge will be reduced to zero. Extra grant goes to local authorities to pay for this. The overall effect of the measure will be that the average headline charge will come down from £392 to £252, which is £105 less than the average headline charge of £357 this year and £22 less than the average rate bill per adult under the old rating system.
For many people the amount they pay will of course be considerably less than the headline charge due to the assistance available under the community charge rebate scheme and the community charge reduction scheme. As my right honourable friend the Chancellor made clear in another place, it is the aim of the measures that the Government are now introducing—the £140 reduction and the improvements to the community charge reduction scheme announced on Monday —that charge payers should on average next year pay less than £175.
The Bill deals with the £140 and provides for reimbursement to local authorities of the cost of it. Strictly speaking, we are concerned with no more than that. However, it would not be right for me to give the impression that we intend the change in the balance between national and local taxation to be only for next year. My right honourable friend the Chancellor and 1075 my right honourable friend the Secretary of State for the Environment have both made it clear that we are talking of a fundamental shift in that balance, which in the years beyond 1991–92 will reduce local taxation, whatever form it takes, to a more acceptable level than its level in 1990–91.
Perhaps I may now briefly go through the Bill. Clause 1 provides that the community charges which authorities have set for 1991–92 are replaced the day after the Bill's enactment by new charges which are £140 lower. Councils will not need to meet to set the new charges, but the charges will be treated in all respects as though they were set by authorities in the usual way.
Clause 1(4) means that there can be no possibility of the reduced charge being held to be unlawful on grounds of insufficiency. Clause 1(5) suspends a person's liability to pay any charge for 1991–92 until he or she receives a new bill reflecting the new lower amount. Clause 1(6) enables the billing regulations to reflect the £140 reduction.
The provision allowing the regulations to have retrospective effect is merely to guard against the possibility of their not being made before 1st April. However, it is our intention to see that they are made before then.
Clause 2 deals with special cases such as a local authority which first sets its charge for the coming year after the Act is passed. The clause says that the charge will not he lawfully set if account is taken, in so doing, of the £140 in the Bill. Clause 3 sets out the appropriate reductions in Scotland and Clause 4 empowers the Secretary of State—
§ Lord Taylor of Gryfe
My Lords, may I ask the noble Lord whether in considering the provisions for Scotland account is taken of the fact that the Scots have suffered the poll tax for two years? Consequently, provision should be made for £280 and not £140.
§ Lord Waddington
My Lords, I do not believe that that is logical. We could have a long argument about the level of the poll tax in Scotland compared with the level in England and Wales due to the much larger support per capita which is granted to people in Scotland.
Clause 3 sets out the appropriate reductions in Scotland. Clause 4 empowers the Secretary of State to pay grants to local authorities to make good the loss of income resulting from the reduction in charges and also to cover the additional administrative costs arising as a consequence of the Bill.
It is important that everyone liable to community charge should know where he or she stands as soon as possible. It is also important that local authorities should start collecting next year's charge as early as possible in the financial year. I hope that as a result of the decision of this House today many authorities will be able to issue new bills and begin to get the money in as soon as possible after the start of the financial year.
In order to keep authorities in the picture and help them in their preparations, the Department of the Environment wrote to all of them last Tuesday 1076 explaining in broad terms the effect of the proposed legislation. Yesterday, the department wrote with copies of the Bill and the draft regulations. Also explained was the effect of the improvement in the community charge reduction scheme announced on Monday. It is hoped that tomorrow authorities will he sent all the regulations needed to put these new measures into effect. They will then have all they need to prepare the new bills.
We are also adjusting our payments from the non-domestic rates pool to compensate for any delay in raising charge income so that the cash flow of authorities will not suffer.
I have introduced the Bill briefly, not because it is unimportant—it is very important—but because it is narrow in scope and comes to us, as I said a short while ago, from another place where it received an unopposed Second Reading, was unamended in Committee and thereafter received an unopposed Third Reading. I hope that your Lordships will also find it acceptable.
§ Moved, That the Bill be now read a second time. —(Lord Waddington.)
§ 3.20 p.m.
§ Lord McIntosh of Haringey
My Lords, the noble Lord the Lord Privy Seal was quite right to start his introduction of the Bill by pointing out that it is a most unusual precedent for your Lordships to be asked to take all the stages of a controversial Bill of this kind on one day. We on these Benches will not oppose the passage of the Bill. When the matter was put to us, we were persuaded that it would be wrong for us to oppose the proposal that the Bill should be taken on one day for two reasons. First of all, if the Bill were delayed until after Easter, that would mean a delay in the ability of local authorities to send out their poll tax demands. As a result local authorities would not only lose revenue because of the timing problem, but, as experience showed last year, when demands are sent out late, the collection rate is also reduced. We felt that from the point of view of local authorities alone, if the Bill were to be approved it should be approved rapidly.
The second reason why we were persuaded not to oppose this proposal was a technical one. If the Bill did not become law before 1st April, strictly speaking we would all become liable for the poll tax on 1st April and then subsequently, with the passage of the Bill, we would no longer be liable for it. That would clearly cause considerable confusion, difficulty and further expense. For those reasons we have waived what would otherwise be the strongest possible objections to a Bill of this importance—the noble Lord the Lord Privy Seal mentioned that—being considered in this way.
The precedent is of great significance. If it is now possible for the Government to deal with controversial Bills in this way, it is possible for other governments to adopt the same course with other controversial Bills. Mr. Alan Beith said that very clearly in another place. I pay tribute to him for his clarity. Under those circumstances there is no reason why we should not put forward a Bill to renationalise 1077 British Telecom, or why the Liberal Party should not put forward a Bill for local income tax, or why the Government should not themselves put forward important Bills and expect them to be passed in one day. This is a dangerous precedent and the House should be well aware of the difficulties which it may cause for our procedures and for our credibility as a revising Chamber in agreeing to this kind of procedure.
Having agreed to it, the more I think about the Bill the more I am convinced that the real reason for pushing it through has nothing to do with anyone's convenience, or with constitutional principle, but is simply the result of political expediency. With greater rapidity than I have ever before witnessed on the part of any government, this Government have got themselves into a state of utter confusion as regards what to do with local authority finance. I shall illustrate later on how the Government are still making up policy as they go along. However, the events of last week speak for themselves.
Last Monday the Government started the process with a rumour inspired by a member of the environment team in another place which suggested that radical changes would be made to the poll tax, to the structure of local authorities and to all aspects of the functions, structure and finance of local government. In his Budget Statement only eight days ago the Chancellor of the Exchequer—it seems like a lifetime ago, and no doubt seems like even more of a lifetime to noble Lords opposite—introduced a new provision to bribe electors with their own money. In other words, the electors are to have money taken from them in the form of the value added tax and given back to them in the form of a reduction in the poll tax. In a few minutes we shall discover the economic effects of that. I am sure that my noble friend Lord Peston will have a few comments to make about that.
§ Lord Tordoff
My Lords, I am grateful to the noble Lord for giving way. Would he care to invite the noble Lord, Lord Strathclyde, to make a speech now, if that is his intention, rather than continue to interrupt from a sedentary position as he has done throughout the whole of the present speech?
§ Lord McIntosh of Haringey
My Lords, there are noble Lords on the Government Front Bench who find it difficult to restrain themselves. I understand their difficulties and I feel sympathetic towards them. However, I do not think it would be appropriate to invite the noble Lord to expose his intellectual problems to the whole House for everyone to hear.
When we come to consider the political expediency, on mature reflection it becomes very clear. The Government want to get this so-called gift to the poll tax payers out before the May elections. That is the major reason for the measure. The Government are hoping that the electorate will forget that over the whole of the year, and no doubt in years to come, they will be paying more for everything they buy, other than certain essentials, as a result of value added tax, whereas the apparent effect of the reduction in the poll 1078 tax will appear when .the first bills are issued. The Government are hoping that under those circumstances local government electors will he foolish enough to mistake a single gift in the month of April for a real gift, whereas the real payment will come from them over the year and over the years to come. During the passage of this Bill we shall have a few words to say about the cost of this whole ludicrous exercise of the poll tax over the past few years.
We have here a little Bill which arises, frankly, from panic measures on the part of the Chancellor of the Exchequer, the Department of the Environment, and now it appears also from No. 10 Downing Street. What we have might politely have been called political economy, but it is really a matter of electoral economics. The whole thinking behind this Bill is to seek to get the Government out of the hole they have dug themselves into as regards the poll tax. We shall see that over and over again as we consider the details of the Bill.
We on these Benches will not permit the Bill to be examined in the absence of a proper consideration of the future of the poll tax. It seems to us utterly improper for a government to put forward a Bill, the effects of which are to last for one year, which is not designed to deal with the problem of the poll tax but to cover up the smell of the poll tax. That is the real objective behind it. Medieval ladies and gentlemen rather than wash themselves used to cover themselves with pomade and paint. They applied heavy spices and heavy perfumes to conceal the fact that their whole bodies stank. Instead of a cleansing of the poll tax, the Government are covering it up with paint, spices and perfumes. That will not work. I nearly said it will not wash. The Government's measure is not intended to wash, but to persuade us of something that is clearly not the case. We on these Benches will table amendments in Committee which will seek to ensure that when the Bill comes to an end—it is only meant to last one year—there is introduced a fairer system of local government finance immediately without waiting the two, three or four years which constitute the period of reform promised to us by the Secretary of State.
Even if the Bill were acceptable on constitutional grounds, and even if it were acceptable as a first stage to a proper reform of local government finance, it is profoundly defective. I remind the House of the context in which we are considering this matter. Over the whole period of office of the former Labour Government, central government support for local government provided, give or take a few per cent. either way, 62 per cent. of local government finance. Since that time the support has decreased—the Secretary of State confirmed this in his speech yesterday—by approximately 2 per cent. a year until we have reached the stage where central government cover from their grant only 33 per cent. of the costs of local government finance. It is now proposed that at a stroke we should go back not to the figure of 62 per cent. but at least to the level of central government support which was a feature of local government for 1079 many years and which was deliberately departed from, mainly by the present Secretary of State in his first incarnation.
However, it is worse than that. When we go back to a higher level of central government support that central government support does not come from income tax revenue, it does not come from a progressive tax; it comes from VAT. That is an expenditure tax and therefore bears more heavily than income tax on poorer people. It bears more heavily on poorer people, as a percentage of their disposable income, than on richer people. So what is being taken from the people of this country in order to pay for the reduction in the poll tax is being taken from them in an unfair way.
It is then being given out in an unfair way. Instead of the money being given to local authorities in such a way that those most in need will benefit from the reduction in the poll tax, it is being given on the basis of a flat rate per head in the same way as the poll tax. However, it is not even a flat rate per head. The Government have allowed it to appear that everybody will receive £140 off their poll tax Bill. That has been expressed as the average when government Ministers are being particularly conscientious and exact, but the impression has been allowed to gain ground that the figure is £140. That is the significance of the £140.
Of course the amount is not £140. It is not even £140 off each bill, as the noble Lord, Lord Strathclyde, who now appears to he prepared to go on the record, is happy to say. No, my Lords, it is £140 for those who have one home and who do not benefit from rebates or from a transitional scheme. Those who pay only 20 per cent. because they receive rebates—and those are the people who are most in need in our community and on whose needs we spent many hours of debate when we considered the 1988 Bill—will receive only 20 per cent. of the rebated amount. They will receive only £28 of the £140. Yet those people who have more than one home and who pay a single personal community charge on their residence and a standard community charge on their second residence will not receive £140 —they will receive £280; or if they pay a double standard community charge they will receive £420.
That is the true measure of what is being given back. The rich will receive up to £420 and the poor will receive £28, yet it is all presented as if it is a flat rate of £140. What is being taken from people unfairly in the form of VAT is being given hack to other people even more unfairly, as the Bill has been drafted. I said that that is bribing electors with their own money. That in itself is enough of a nerve. However, to do it in such a blatantly unjust way is beyond belief. Needless to say we have prepared significant groups of amendments which attempt to deal with that problem and to make the Bill fairer.
A further major consideration which we have to take into account is the administrative cost of the exercise. We must do so in the light of the constant statements made by the Secretary of State over the last few months (since he returned to his office in Marsham Street) that the balance between central government finance and local government expenditure was about right. He has now turned round 100 per cent. He now 1080 says that what he said between November and 19th March was all wrong and now the Government think that the balance between the central government contribution and the local government contribution to local authority expenditure was all wrong and now has to be changed dramatically. He can be excused for not commenting on the fact that it is now going back to almost what it was under a Labour government.
The effect has been that this wildly expensive exercise, for which the preparation and implementation has been taking place since 1987 in Scotland and 1988 in England and Wales, will now cost even more. We have all seen pictures in the newspapers of the bills which have already been prepared and which will have to be shredded. We have all seen the estimates, which have been made by people who have no reason to over-estimate, of the costs resulting from the fact that the change took place after the poll tax figures had been declared and most of the preparatory work had been done. Those local authorities which were the most provident, most advanced and most likely to get their bills out by 1st April in order that they could take effect by 15th April are suffering the most. There is an entire clause—Clause 2 —which is designed to make sure that no one conceivably benefits.
The classic example of what is happening now is the case of the city of Gloucester. I am told that the local authority in the city of Gloucester was very wise. It had not printed its bills before the Budget and therefore immediately set to work to print its bills to take account of the £140 reduction. The authority thought that it had done really well by its poll tax payers and everything was hunky-dory. However, at 11 o'clock on Monday night Mr. Portillo announced changes to the community charge reduction scheme; namely, the transitional arrangements. Those are very dramatic and major changes. As a result, all of the authority's newly printed bills went out of the window and it had to start again from scratch.
If the cost of the re-billing exercise is less than £100 million I shall be astonished, because it does not only involve reprinting and new postage; following Mr. Portillo's statement it also involves the complete rewriting of the software on which the rebate system was based.
I have said that the Government are making their policy up as they go along. They made up one story on Monday of last week, another story on Tuesday of last week, a further story with the Secretary of State's Statement on Thursday, and they made up a fourth story with Mr. Portillo's statement on Monday of this week.
I fear that that is still going on. I wonder whether the Lord Privy Seal or the Minister would care to tell the House when they conclude the debate whether it is true that the Department of Social Security is now proposing to make changes to the tapers and to the minimum levels of rebate. We understand that changes are now proposed which would force local authorities to rewrite their rebate calculation software before the bills go out. I am not asking that the department should not do so because any changes to the taper and the minimum amount would be very valuable, but at least the Government should have 1081 made up their mind before now. They should not come before this House with a Bill which is so patently incomplete and ill thought out. Noble Lords can count on it that this will not be the end of the story. When we pass the Bill later tonight further changes will be required for local government finance within the course of 1991–92.
All of this has been presented to noble Lords without a single word of apology from the Government, either to us for the waste of our time, which is a petty matter, or, much more importantly, to the people of this country. The House is being treated with profound disrespect. We are being asked to rubber-stamp legislation which was ill thought out at the beginning, and which has been exposed as being inadequate, unsustainable and incapable of gaining the confidence of members of the public. Yet it is members of the public who are being blamed for that failure and not the Government.
It is your Lordships who have the unpleasant task of seeing the Bill through. I regret that we shall not be able to oppose it. It is with a heavy heart that we do not oppose the Second Reading of the Bill.
§ 3.40 p.m.
§ Earl Russell
My Lords, we are back where we started. In 1979, introducing the first Budget of this Government, Sir Geoffrey Howe offered taxpayers income tax cuts with which to pay their VAT. Now, introducing what may well prove to be this Government's last Budget, Mr Lamont offers them poll tax cuts with which to pay their VAT. The process, as Sir Geoffrey Howe's phrase illustrates clearly, is an inherently circular one.
It is important to be clear. This is not a tax reduction Bill; it is a tax redistribution Bill. For that reason it can only be justified if the Government admit a good deal more clearly than they have done hitherto that the reason for the Bill is that the method of imposition of charges under the community charge was unacceptable and unjust. That is why we have the Bill which is in front of us.
Thinking of the implications, I am reminded of a fairy story. It concerns two Czech peasants, so poor that my noble kinsman Lord Henley would instantly concede that they were at subsistence level. They were struggling to keep body and soul together. A fairy appeared and offered them three wishes—anything in the world that they might desire. He said, "I would like a black pudding." She said, "What a stupid wish. I hope it sticks to the end of your nose." It did. So they had to use the third wish to get it off again. Noble Lords will understand why I have come to think of this Bill as the Black Pudding Removal Bill.
Like the Czech peasants, we recognise that the black pudding must be removed. In so far —I stress the qualification—as we consider the Bill an efficient instrument for that purpose, the Liberal Democrats will support it. Like the Czech peasants, we feel that we should not have started from here in the first place. We think, as the Czech peasants might well have thought if they had been modern ones, that if the charter—in this case Charter 88—had been in place, 1082 none of this would have been necessary. The whole sorry story is in part a measure of the weakness of our Parliament.
Many noble Lords will remember that 183 Peers followed Lord Chelwood into the Lobby against the flat rate principle. It is not often that 183 Peers vote against the Government. But it did not result in a victory. One might reflect that it may be a misfortune for a party to have too loyal followers. Thinking about that, rather than reaching in my Roget for synonyms for humiliation, I asked myself when a government last suffered an equally great humiliation in matters of taxation. One does not have to go back to the reign of Richard II. I think that the last equivalent occasion was when this House quashed the judgment in Rex v. John Hampden and therefore administered the coup de grâce to ship-money. By a happy coincidence the 350th anniversary of that day fell a week before polling day in Ribble Valley.
The parallel is worth thought in a great many respects. I shall not dwell on the fact that ship-money was originally intended to be introduced with a pilot scheme in Scotland, for that government, unlike this one, was persuaded to think better of the idea. I shall dwell on the fact that both schemes were abandoned not because the governments were convinced that they were wrong but because of defeat, because of force majeure I do not intend to allude to the strength of the Prime Minister's personality.
Recent statements from the Government Front Bench do not appear to indicate great regret. The noble Lord the Lord Privy Seal at Question Time on 14th March said:This is not a matter of repentance … We are learning from experience". [Official Report, 14/3/91: col. 292.]It is not only a matter, as the noble Lord, Lord McIntosh of Haringey, remarked, of saying that they are sorry. When a government make a mistake on this scale it is important that they should understand what mistake they have made so that we can be reasonably sure that they will not make it again.
It so happens that a considerable debate has been taking place among my colleagues over ship-money —about whether the grievance was simply that the burden of tax was too heavy or whether its imposition was regarded as inherently unjust. Nobody says that it does not matter how heavy a tax is, but within that limit the weight of academic opinion has swung heavily in favour of the view that the main reason for objection was the sense that it was unjust.
We believe that the Government have reached the wrong conclusion about what mistake they made. In the passage quoted by the noble Lord the Lord Privy Seal, the Chancellor of the Exchequer said that he concluded that the mistake was that the level of tax was too high. No doubt that was resented. It always is. But the two big mistakes made by the Government were, first, introducing a flat rate tax and, secondly, attempting to introduce a tax which everybody pays. Those two actions have been done only once before in a thousand years of English history. When the Local Government Finance Bill had its Second Reading in this House, I said that it seemed that those who do not 1083 know history are compelled to repeat it. They have done so. I hope that it is the last time in the history of this country that it happens.
I agree entirely with what the noble Lord, Lord McIntosh, said about the timetable of the Bill. I understand the points about the financial year and about the secrecy of the Budget. What I do not understand is why it would not have been possible to have had the Budget a week earlier, therefore giving us a little more time to attempt to improve a Bill which needs improvement. If the answer is that the Government had not thought of the measure, it just illustrates my point; namely, that this is something cobbled together and rushed through in a hurry.
For some reason I have never thought of the Secretary of State for the Environment as Salome. Yet here we have a Dance of the Seven Veils, and this is only the second or third veil. We do not know what the conclusion will be. Until these proposals are fully unveiled before us, we cannot decide how far, if at all, we may wish to embrace them.
Nevertheless there are points which call for comment. The Bill has had the effect of distorting the retail prices index. The reason why that has happened is that the £140 rebates—I agree by the way with all that the noble Lord, Lord McIntosh, said about it not being £140 in some cases—are included but previous rebates and schemes are not included. The average net reduction in fact is £108. So the actual reduction in prices is 0.9 per cent. But the reduction in the retail prices index is 1.3 per cent. At a time when the City is expressing concern because the retail prices index has come down by 0.2 per cent., less than expected, a distortion of 0.4 per cent. is in fact quite significant. I entirely acquit the Government and the statisticians of any evil intent. The statistical methods were fixed before this measure was dreamt up. I think that seeing an opportunity they took it.
I notice that in his Budget speech the Chancellor of the Exchequer referred to the effect on the retail prices index and not to the effect on prices. He worded his Statement with such care that I am sure he understood the point. That illustrates a weakness in the principle of performance indicators. They create a temptation to mistake the symbol for the substance, to concentrate on the performance indicator and not on the performance. If the Government have fallen victim to this temptation, is it not possible that many others —whether the police, academics, railways or the Public Record Office —may fall victim also? Is it not a danger in the use of performance indicators?
The full circle is not complete. It is the circle that I used to draw at the age of six when I first used compasses and they slipped. It does not quite meet. People on income support, as the noble Lord, Lord McIntosh of Haringey, said, are receiving only £28. Yet they pay VAT in full. Institutions pay VAT. The charities complain that they lose about £33 million under the Bill. The Committee of Vice-Chancellors and Principals makes a tentative estimate of a loss of between £30 million and £40 million and will not get that back in the £140 reduction.
I deeply regret that the opportunity has not been taken to do anything about the uniform business rate. 1084 If this country wishes to make its living, it must do something about the uniform business rate and do it urgently.
On billing and administrative costs, I agree with everything that the noble Lord, Lord McIntosh, said. I am tempted to use a phrase which is normally used as the alternative to conspiracy. However, when it was last used in the House by the noble Lord, Lord Jenkins of Putney, it was maintained that it was out of order. I hope therefore that I may be within order if I refer to the confusion created as an indiscreet elevation.
We are told that the administrative costs will be £60 million. When the noble Lord the Lord Privy Seal replies, perhaps he will explain precisely how that figure was arrived at. Did it take account of distribution costs? Did it take account of printing costs? Did it take account of reproduction and the price of paper?
I deeply regret also—it is a matter that we shall discuss at Committee stage —that the Government have not taken the chance to abandon the principle that everybody pays. That was the central evil of the poll tax. It is something that no government have yet managed to achieve in 1,000 years of English history. There have always been considerable numbers of people who simply could not pay taxes. The effect of trying to make them do so is a vast administrative cost and very little yield in revenue, to say nothing of the question of justice.
I am not happy with the wording of Clause 4 of the Bill. The Secretary of State is empowered to pay to local authorities such amounts as he may, with the consent of the Treasury, determine. In fixing those amounts, he is required by the Bill to have regard to the cost to the local authorities of paying out these sums. I am reminded of the wording of the amendment of my noble friend Lord Banks on child benefit which was passed in 1988. That required the Secretary of State to review child benefit having regard to the level of the retail prices index. Of course the Secretary of State always said that he had done so, but nothing happened. Does the Bill mean that the Secretary of State is bound to pay the local authorities the full amount of the £140? Or is he entitled to say that he will pay only 95 per cent. or only 35 per cent of it? By leaving the Bill loosely worded, do we leave him completely free to act in that way?
I am worried by the wording of Clause 4(3) on setting conditions. I do not understand what conditions are meant. I do not want the clause to be used by this or any future administration as a way of setting out on a witch-hunt against local authorities that they do not like. I would welcome reassurances on the matter.
The most important point is the one which the noble Lord the Lord Privy Seal kindly spelt out, namely, that he would not wish us to have the impression that this shift from local to central taxation is intended to last for one year only. The autonomy of local government is a matter about which we on these Benches care deeply. Local government is not only about efficiency; it is about liberty, consent and political pluralism. I think that Members opposite 1085 have forgotten during the past 12 years how difficult government by consent may be. Those who were Members in 1945 may recall it after thought.
If one finds giving consent repugnant, and many of us often do, it matters that one has a local authority which expresses the values current in one's area, whose principles are different, and which may help to bind up the wounds caused by the effort made in giving that consent. It is vital that accountability should be to the local electors and not to the Treasury. We are not sure that the Bill satisfies that point. It is a matter to which we shall return in Committee later today.
§ 3.56 p.m.
§ Lord Boyd-Carpenter
My Lords, my noble friend the Lord Privy Seal was appropriately apologetic at the beginning of his speech on the subject of the procedure that is being followed on the Bill. It is, I am afraid, true that this House has not been very well treated in that respect and that particular regard has not been shown to its revising function. I fully understand the Government's timetable difficulties. However, it would have been possible, if the Government's business managers had so wished, to take the Bill earlier at the cost of deferring part of the Budget debate in another place in order to bring the Bill to this Chamber earlier this week and allow perhaps a couple of days for its debate. However, the Government's business managers preferred the convenience of another place to the position in which they were going to place this House. I. for one. regret that.
The noble Lord, Lord McIntosh of Haringey, said that it created a precedent. It is not an entirely new precedent. I understand that the Labour Government did something of the kind in 1977. The noble Lord therefore need not be so self-righteous about it. However, it is a further precedent. Indeed, in the words of The Merchant of Venice:Twill be recorded for a precedent, And many an error by the same example Will rush into the state".If we were, for example, to have the misfortune of having a government of the party of the noble Lord, Lord McIntosh of Haringey, I do not have the slightest doubt that they would do the same. It is therefore a pity that we are presenting such a precedent to them when it would have been possible, by inflicting modest inconvenience on another place, to save this House from that situation. It certainly makes it difficult, in debating what my noble friend rightly described as an important Bill, to justify that situation.
I wish to ask my noble friend one question of fact. Why is the figure £140? How was it arrived at? It is not the conventional figure that £150 might have been. Is it based on some immensely subtle calculation of the needs of local authorities; or is it a case of, "Think of a number. £140. All right". I believe that before passing such a Bill your Lordships' House is entitled to be told how the figure—which is the key element in the proposal—has been arrived at. It is an extremely important aspect of the matter.
1086 I had some sympathy with the noble Lord, Lord McIntosh of Haringey. When standing at the Dispatch Box he waxed furious about the Bill. With his characteristic vigour he denounced the Government and then announced that he and his noble friends would not vote against the Bill. That was perhaps something of an anti-climax. He is right in that respect because your Lordships will recall—
§ Lord McIntosh of Haringey
My Lords, if I were to say the opposite, could we hear the noble Lord's speech denouncing us for denying the electorate the benefit of the reduction? I should he glad to change my tack for a moment in order to hear the noble Lord waxing furious about how irresponsible we are for opposing the Bill.
§ Lord Boyd-Carpenter
My Lords, I am flattered to know that the noble Lord wants to hear another speech from me but I doubt whether the House as a whole will support his request. I must deal with the noble Lord on the assumption that he meant what he said. Perhaps that is a wrong assumption.
The noble Lord said that he would not oppose the Bill. That is a most interesting aspect of the matter and all the more so because your Lordships will recall that his speech contained not a word of what he, his noble friends and his party would do if they were faced with the circumstances which now face the Government. When opposing a government measure on a matter of great importance it is more usual to bring out one's alternative measure, if one has one, and point out how good it is. The fact that the noble Lord, who is such an expert debater and orator on behalf on his party, made not one single mention of what his party would do in the circumstances only confirms what one has learnt in other directions: that the Labour Party has not the faintest idea what it would do in this situation if it were responsible—
§ Lord Boyd-Carpenter
My Lords, of course. I am sure that the noble Lord will speak for the Labour Party, but whether Members of his Front Bench will enjoy that, I do not know!
§ Lord Molloy
My Lords, I am grateful to the noble Lord for his generosity. We would have no particular policy on such an incident because we would never have allowed our nation to get into the thorough mess that the Conservative Party has got it into.
§ Lord Boyd-Carpenter
My Lords, I do not know whether that comment is made on behalf of the Labour Party but it means that the noble Lord does not have the faintest idea about what to do in this situation. I believe that in that respect he speaks for his party; it does not know what it would do. Therefore, one must judge a measure of this kind on the basis that the official Opposition, which claims to be capable of taking over government at any time, has no alternative to offer. However doubtful one may have been in the first instance, that fact makes one look at the proposals in a somewhat different light.
1087 Some measure is plainly needed in order to prepare for the study and for the development of further policies in respect of local government finance. Indeed, my noble friend the Lord Privy Seal made an interesting statement that I had not previously heard. He said that it is intended to make a fundamental shift in the balance between local and central government finance. I wish to ask the noble Baroness to amplify that statement in her reply. Is it proposed that the shift will be effected as it is being effected in this Bill for the coming year; that is, by placing on the general taxpayer a large part of the burden which otherwise would have fallen on the local ratepayer? Or is it intended to give relief to the local ratepayer or community taxpayer by transferring the cost of certain functions from local to central government?
That is an important issue because the great merit of the community charge—and I have always seen it as the most powerful argument in its favour—was that it sought to secure that those who voted in local authority elections could vote for high expenditure if they were prepared to pay for it. I maintain the view that the old rating system was completely indefensible because in most local areas a large majority of the voters voted for high expenditure knowing that the costs would fall on the limited number of ratepayers. That was the great justification for the community charge.
I hope that, in the developments that will take place as a result of the study being carried out, some element of that approach will be preserved. If local authorities are to behave responsibly we must introduce the discipline whereby those who must pay are those who are entitled to vote. Obviously there must be exceptions in respect of people at the lowest end of the economic scale. However, generally the great majority of those who are allowed to vote must pay if they vote for excessive expenditures, or even for fairly substantial expenditures. That was the great merit of the community charge and I do not resile from my support of it in this House and outside. Obviously the difficulties that have arisen justify the Government reviewing the matter, but I hope that they will attach importance to that element and seek to preserve It—
§ Lord Tordoff
My Lords, does the noble Lord intend to extend that important principle to national government? Will the principle that people will not get representation without taxation at a local level also be applied at the national level?
§ Lord Boyd-Carpenter
My Lords, that applies automatically. There is no individual in the country who does not pay national taxation in one form or another. It may be by way of duty on cigarettes and beer, VAT and various other taxes that fall. If the noble Lord can identify to me a citizen who pays no national taxation I should be most grateful because I should seek to adapt my style of living entirely towards that highly desirable end. I doubt whether the noble Lord can identify such a citizen. The difference is that to a greater or lesser extent national taxation falls on everyone, whereas under the old system of 1088 rates local taxation was limited to a minority of people. It was limited to a larger section, although not a complete section, by the community charge.
I wish to hear more about that issue from the noble Baroness in her reply. I also wish to hear how it is proposed to effect the shift of cost away from local authorities to central government. I hope that will not take the form of simply stepping up central government grants. Obviously the measure must be taken this year to ensure that local government carries on during the period of the review. However, as regards the long-term future, if the cost of local government is to be reduced and more put on central government, it follows that central government should assume more of the responsibilities that are currently exercised by local authorities. Nothing would be more harmful than for the Government to supply taxpayers' money in substantial sums to local authorities which are free to decide how it should be spent.
It is my understanding of the Government's statement that the £140—more than £4 billion in total —which is being spent in order to support local authorities will be found by increasing VAT. VAT is a tax with very considerable defects. I do not know whether it is intended that the increase should be permanent or merely temporary—we have not been told that that is so, but I profoundly hope that it is temporary—to deal with the £4 billion required this year for the support of local authorities. But if it is to be increased its defects become even more important.
I shall not weary the House at any length with a commentary on VAT, save to say that it is untrue, as has been stated in the press, that VAT does not fall on food. It certainly does fall on food, one classic example being the fact that if you buy a chocolate biscuit you pay VAT, but if you buy a chocolate cake you do not. What conceivable difference of principle decides whether VAT should fall on one or the other, I cannot say. But it is a very good symptom of the defects of the system.
The VAT system is highly inflationary. There is no doubt that increasing it to 17½ per cent. will have some inflationary effect because it falls on so many of the necessities of life, and therefore compares very badly in that respect with the old purchase tax which, as your Lordships may recall, fell mainly on luxuries and had very little effect, if any, on the cost of living.
VAT is a bad tax and we are to rely on it even more. Therefore, it is incumbent upon the Government to secure that the working of the VAT system is reviewed. VAT emerged from the purlieus of Brussels and bears many of the marks of the meddlesome muddle which one should perhaps expect from that quarter. But when it is to be applied as British taxation, and applied now in so important a proportion of British taxation, then indeed it is very important that the Government, and Her Majesty's Treasury in particular, should look at it very carefully indeed.
It is generally agreed—it is agreed even by the noble Lord, Lord McIntosh of Haringey—that in these circumstances your Lordships' House has no option but to pass this Bill into law, however unhappy we may be about the procedure which, in my view 1089 somewhat unnecessarily, the Government have seen fit to adopt for its passage. What matters now is what is to be evolved for the future.
I do not know whether it is too early—it probably is—for the noble Baroness to give us some of the ideas that must be in the Government's mind for a future and more reliable situation. I hope, as I have said before, that the new system will still preserve some of the elements of accountability—that is to say that those standing for local authorities and implementing their policies shall be answerable to their electors who will have to meet some of the cost. I am sure that one can do nothing other than wish Her Majesty's Government, and particularly those in the departments concerned, the best of good fortune in what is probably one of the most difficult tasks that has faced a British Government for a great many years.
§ 4.13 p.m.
§ Lord Barnett
My Lords, the noble Lord, Lord Boyd-Carpenter, can normally be relied upon to find something good in almost anything that the Government introduce, but even he with his great debating skills found it extremely difficult today, and understandably so. He asked one particular question about VAT. I fear that the Government Front Bench is unlikely to have too many answers for him, but I think that the real answer as to why the figure is £140 is simply that that is how the Treasury add these things up. It wanted the 2½ per cent. VAT increase to do it, as he said, and he thought that it might one day come down again—I doubt it very much, because once it has got it, it will hold on to it—but that raised £4.3 billion approximately, and that was approximately £140 a head. I fear that that is likely to be the simple calculation that was done by my old friends in the Treasury.
Let me refer to one other point that was raised from both Front Benches about the Explanatory and Financial Memorandum and the cost of £60 million for administrative expenses. In the memorandum we are told that there will not be any significant manpower effect. That is very interesting. I do not know how the Treasury has decided what is significant in these terms—perhaps things have changed since my days —but to spend £60 million without any significant manpower effect and no particular goods passing, I should have thought, might be a little difficult. Maybe it has just assumed that it would not cost anything to change envelopes in computer systems and so on, but I find it a little hard to understand that explanation.
§ Lord McIntosh of Haringey
My Lords, one of the explanations may well be that Mr. Portillo's statement on Monday night, particularly the statement which said that the transitional relief will be allowed for every adult in the house, involves not only changing the figures used to calculate the rebate but rewriting all the software. That means that there will be a huge amount of expenditure on data processing without 1090 any particular increase in manpower. It also means, by the way, that no local authority will conceivably get its revised poll tax bills out before the May elections.
§ Lord Barnett
My Lords, the noble Lord may be right. I am not privy to the reason for that. But I want to begin my brief remarks with a confession. As Chief Secretary to the Treasury, I started to cut the central government grant to local authority expenditure during the years 1974 to 1979 in order to attempt to squeeze local authority expenditure. I am bound to tell your Lordships that I was not very successful in that effort. Local authority expenditure rose from £11,382 million in 1973–74 to £26,220 million in 1979–80. However, I was a little more successful in cutting the percentage of local authority expenditure covered by central government from a high of 48.1 per cent. in 1977–78 to 45.4 per cent. when I left at the start of 1979–80.
The present Government have tried to cut initially, as I did, by squeezing local authority expenditure and the net result is that the level of local authority expenditure that they inherited in 1979–80 has risen to £66,300 million in 1991–92. Indeed they increased the central government grant from 45.4 per cent. to 51.2 per cent. in 1986–87. It then fell, by not quite as much as in 1979–80, to 48.1 per cent. in 1991. Now with this Bill it has risen again to 57.8 per cent.
I confess that my way was not really a good way of deciding what should he an appropriate level of central and local government expenditure. As a one-off means of reducing the burden on local taxpayers, this Bill must surely be, equally, not a good way of doing that particular job. It would be nice if today the Minister would also confess that the Government do not think this is a good way to do things. Indeed I noted that the Lord Privy Seal, the noble Lord, Lord Waddington, confirmed that beyond 1991–92 the Government intend, if they are still in office, to continue with a higher central government grant towards local government expenditure.
I wonder whether he, or the noble Baroness who is to reply, will tell us whether that means that policy within the Treasury has changed to such a degree that hypothecation will become the order of the day in the interim years—I do not think it will just be the one year—before the poll tax is wholly abolished. It would be very good to know. Because of the current mess and past failures of all governments, new instant solutions are being sought and this Bill is one of them.
But surely, instead of seeking this kind of instant solution, it would have been better to take a little time to think through the serious mess that we are in with local and central government expenditure in this area. I know that it would have upset Mr. Nigel Lawson, but as the Government have already done that, there is no harm in continuing to do it a little more.
The central question that needs to he faced is whether we want a local democracy. This is what it is all about. I hope the answer to that is yes from all sides of your Lordships' House. Certain questions follow. What should be the proportion of central government grant, whichever way it is done? The noble Lord, Lord Boyd-Carpenter, does not like it being done by way of 1091 grant, but what proportion should be financed by central government and what proportion by local government? What services should or should not be financed from local taxation? What is the correct structure of local government? That at least we know the Government are taking some time over because there is to be a Royal Commission. On the other hand, the structure cannot be divorced from everything else and dealt with in a vacuum; it is necessary to know how the new structure is to be financed. This is a crazy way of setting about clearing up the mess we are in and trying to put something better in its place.
My answer to those questions is coloured by the fact that basically I agree that central government must have overall responsibility for control of the economy. I would not dispute that in any way. Anybody who has ever had anything to do with handling the national economy knows that you cannot take it out of the hands of central government. Certainly no government could allow large unlimited increases in local authority expenditure. No government have done that in the past and I do not believe any government would in the future.
That is why I tried to squeeze local authority expenditure by cutting the grant. I failed. That is why the present Government tried first, squeezing local authority expenditure and, when that again failed, capping local authority expenditure. When that was not enough, they added the poll tax to allow accountability to the electors. That was the basic argument: the electors would then help to keep down the level of local authority expenditure. It failed in that respect, as indeed it manifestly deserved to do, because of the huge unfairness of the poll tax system. I can remember on one occasion in your Lordships' House a noble Duke or an Earl from the Conservative Benches making a very short statement: "Somehow it doesn't seem fair that I and my gamekeeper should pay the same tax". I was not absolutely sure whether he meant that he should not pay as much, but I assume it was the other way round. However, to cap as well, as the Government have done, makes a nonsense of the argument about accountability, as is generally recognised now. Where then is the accountability of local authorities to their electors?
I do not pretend that there is a miracle solution; there is not. The subject is too big and too complex to be solved by the Bill we are discussing today or indeed by any other single Bill. I very much doubt whether the Government between now and the autumn will be able to consult and then give the parliamentary draftsman a clear indication of what kind of Bill they are to introduce and get through both Houses—unless they intend again to guillotine it and push it through in a day or two. I hope they will not attempt to do that. I know they want to scrap the poll tax, although there are some who think they are going to scrap it only partially; but I very much doubt whether they can have a Bill ready by the end of this year which is at all sensible. I hope they will not try. It would be better if they took more time, even if it turned out to be 1st April 1994 or 1995. At least we could then have something sensible in place rather than another rushed Bill in the autumn of this year.
1092 Meanwhile, I assume that the Government are serious about consultation, and therefore I should like to put in my own "two penn'orth", as we say in Lancashire. Let me say at once that personally I am delighted that the Government are not rushing into this. I was astonished that Nigel Lawson attacked them in this area. Again, I hate to rush to the defence of the Government, but I find it odd that the right honourable gentleman, of whom I have had some experience in debate, should have called in aid a French socialist prime minister, and not a particularly good one at that, during his final bitter attack on the Government. So I do not blame the Government for being a bit upset about it; but that is an aside.
I start from where we are. I assume that the Bill will become an Act and that, as it stands, local authorities will be financing, as we are told in the red book, only some 11 per cent. of local government expenditure through the poll tax. That has led some people to argue, including some very seriousness honourable gentlemen in another place, that, therefore, as it is so low, it is too low and so we should not bother; we should do away with local authority taxation altogether. I see that a man I have a great deal of respect for, the chairman of the Treasury Select Committee and a former Treasury Minister, Terence Higgins, has said the same thing. However, I hope that nobody will take that argument seriously because to do that would effectively abolish any semblance of local democracy.
I cannot believe that the present Government, though they have moved a long way in a short time, would wish to do that. The That cherite principle of accountability would be thrown right out of the window—and about as far as you can get. If you do not have any local taxation at all there would effectively he no local democracy. So I hope nobody will work on the assumption that if, as the noble Lord, Lord Waddington, said, we are to keep the central government grant high in one way or another, we do not need local taxation. I hope it will be recognised that we must have some form of local taxation if we are to have some form of local democracy.
So I return to the fundamental conflict between central government desire for overall economic control and local government desire for democratic freedom to decide its own levels of expenditure. That is the nub of the problem. I have made my position clear: central government can never give up power over the economy, and particularly not in so large an area as the £66 billion of local government expenditure. Central government are bound to be interested in expenditure of that size. That is the problem; and neither the government in which I had the honour to serve nor their successors over the past 12 years have managed to go a long way towards dealing with the fundamental problem.
Today when I speak to local councillors of all parties I find that what frustrates them is how little they can do. They have no real power. There are very few decisions they can make; everything is on the tiniest of tiny margins. That has led some people to conclude that not only should we abolish local 1093 authority taxation but we should remove all powers from local councillors. Again, I hope that is not the conclusion that will he reached.
My own conclusion is that before we despair and destroy local democracy altogether we should give it a chance to work, albeit within more limited boundaries. Therefore I would finance centrally the major areas of expenditure such as the police and education, where local authorities in any case have very little control. Levels of pay, size and policy are all decided centrally and local authorities have very little to do in those respects. I hope that there would still be co-operation between local and central government, and I believe there could be. But with the removal of that financing, we would be dealing with a much smaller and more manageable level of local government expenditure. Incidentally, this Bill certainly does not deal with the problem, and the way the Government are proceeding with it does not help. But if that was done, and if more thought was given to a fair system of local taxation to finance a smaller and more manageable level of expenditure, we should be able to get the co-operation of local authorities.
Also we should not forget not forget that the vast majority of local councillors are perfectly reasonable and sensible people, who desperately want to do a decent job for their people. There always will be a few exceptions. Noble Lords opposite will always be able to quote a few "nutters", and I have come across them myself. But we should not even have to go to the trouble of capping if that more manageable level of expenditure was left to local authorities to decide for themselves and if they were made genuinely accountable to their local electors. That is not an ideal solution. As I have said, there is no such thing, but it seems to me that it is a darn sight better than the instant thoughts we are now having and the instant solutions we have in the Bill. I hope that something along those lines can eventually be provided.
§ 4.30 p.m.
§ Lord Bonham-Carter
My Lords, I agree wholeheartedly with the suggestions made by the noble Lord, Lord Barnett, that what we require is a more respectful attitude towards the importance of local government in this country and that that means a careful, unhurried look at the functions that it should perform and how those functions should be financed. The mistake made in the past few years has been to look at the finance before we decide on the functions. That is wrong. The functions should be decided first, and the finance must follow therefrom.
What we are discussing is not the long-term future of local government, which is an enormously complex and important task, but what the noble Lord the Leader of the House called the exceptional circumstances of the Bill. They are indeed exceptional, for the reasons to which my noble friend Lord Russell referred. We are discussing one of the great political fiascos of this century. My noble friend described events going back to the 17th century. I do not claim to be able to tick off the fiascos century by century in the way that he does. But certainly an astonishing 1094 series of events led to the Bill coming before the House at the last moment and to our being asked to put it through in one day. That is what is being put to your Lordships in relation to a measure which has proved almost everything that a measure should not be. It has proved to be extremely expensive; it has proved to be extremely unfair; and it has proved to be extremely unpopular.
The measure arose from a major error of judgment on the part of the Government who claimed that they would not be a government which made U-turns. They have not made a U-turn today; they have turned a somersault. I cannot think of any change of policy more violent, more obvious and more humiliating than the one we are witnessing today. The flagship has been scuttled. The lady left the bridge some time ago. One person—I regret to say that he is not here today —remains aboard, almost alone. The noble Lord, Lord Wyatt of Weeford, like Mrs. Hemans's boy on the burning deck, still stands defending the poll tax as being in his own words,the fairest scheme that could be devised".There can be few people who agree with that statement now.
Your Lordships have been asked to do something to help the Government get themselves out of the booby-trap they laid for themselves. It is not as if they were not warned. It is necessary before we pass on and let the Government have the Bill, which we shall do, to remind them of the warnings they received. They were warned in 1976 by the Layfield Committee; in 1981 by the Green Paper on Alternatives to Domestic Rates; in 1982 by the Environment Select Committee of the other place; and, in 1983 by the White Paper on Rates. They found that they had support for their scheme from not one local authority association. Even the Conservative-dominated Association of County I Councils opposed it. One would have thought that advice from so many quarters, which could not be called unqualified or ignorant, might have had some effect. Not at all. They did not listen. Therefore the consequence that we see today is the consequence of a style of government which has proved dangerously fallible. It has not proved to be merely dangerously fallible, but enormously expensive, as the noble Lord, Lord McIntosh, pointed out.
Quite apart from being unfair and unpopular, to be so expensive is a sad comment on the Government's everyday competence. Various estimates of the total cost have been given. Goodness knows how those estimates are arrived at. According to what I have seen, they range from £4 billion to £10 billion and from £100 a head to £200 a head. I do not know whether these estimates are true, but the exercise has been hugely expensive.
The Conservative Party's reputation as the party which could be trusted with the prudent management of public money has hardly been enhanced by the recession, inflation, unemployment, and the interest rates which this country is now described as enjoying. That record of incompetence has now been compounded by the cost of the poll tax and the cost of 1095 unravelling the poll tax, which make the financial record of some of the dottier Labour councils look like models of financial sobriety.
We welcome the demise of the poll tax and claim some responsibility for that happy event. However we cannot welcome the way that the Bill was passed in the other place nor the process by which it will be passed in your Lordships' House, as the noble Lord, Lord Boyd-Carpenter, rightly pointed out. The Bill was whipped and guillotined in the first instance through the other place. As my noble friend Lord Russell said, your Lordships will remember the debate we had here on 23rd May 1988 on the late Lord Chelwood's amendment. That amendment, as my noble friend said, was defeated by no fewer than 317 votes to 183 —a vote which hardly added to the reputation of this House as a revising chamber. I remember a bewildered Peer from the backwoods of the City of London asking one of my noble friends how he could vote for the Government. My noble friend, being a gallant gentleman, gave him the advice that he wanted, which is more than I would have done.
Yesterday in another place, and here today, we are asked to rectify a catalogue of errors by passing a Bill published last Thursday, forced through another place yesterday unamended with the Second Reading guillotined, and with one hour put aside to consider Lords' amendments. Such procedures, for the reasons given by my honourable friend Mr. Beith in another place, do not add to the reputation of parliamentary democracy. The finance of local government, as my noble friend Lord Russell and the noble Lord, Lord Barnett, said; the relationship between local and central government; and the degree of local autonomy which local government has, and which is reflected in those financial arrangements, are crucially important to the country if it is to be governed by consent. Government by consent is what we believe in, as my noble friend said.
To bulldoze through legislation of this kind on matters of this importance and of this complexity—the complexity and importance were brought out by the speeches of both the noble Lord, Lord McIntosh, and the noble Lord, Lord Barnett —puts at risk the reputation of our parliamentary institutions. That is very serious.
§ 4.40 p.m.
§ Baroness Carnegy of Lour
My Lords, I agree with the noble Lord, Lord Bonham-Carter, that the procedure by which we are discussing this Bill makes it difficult to do justice to it. It is not something that we wish to do very often, but noble Lords have accepted that that is the procedure which we are now using.
We must not allow any anxiety about the procedure and the lack of discussion which is forced upon us to mask the importance and urgency of the Bill. The noble Lord, Lord Bonham-Carter, did not mention just how important and urgent this Bill is for hard pressed poll tax payers whose interests Parliament exists to serve and as a first stage of the Government's current review of local finance.
1096 The noble Lord, Lord Barnett, said that it was very important that the Government should take time to get their thinking and the financial system right. I believe that I understood the noble Lord, Lord McIntosh, to say that the Labour Government would not take time but would introduce the scheme quickly and just go ahead with it. There is rather a difference there. Perhaps the noble Lord, Lord McIntosh, was listening hard to the noble Lord on the Cross-Benches.
Clearly, the Government's review will take time. There will be a consultation document after Easter, the collection and consideration of views on that document, the publication of firm proposals and subsequent legislation for and implementation of the new scheme.
During that time our local councils must continue to be financed. Had the poll tax levels been reasonable in all council areas, the present system, with its rebates, could have continued at least until the new system was ready and, perhaps, indefinitely. Now that is simply not possible. Some high spending authorities have set impossibly high poll tax levels which are made higher because some Members of Parliament, councillors and other political activists have not paid and have persuaded others that they need not pay. It seems to me that if an apology is called for in this debate, it may be from those people.
In Scotland, where many local authorities are highly responsible, as the noble Lord, Lord Barnett, said, the increase last year in the poll tax was 5 per cent. across Scotland, whereas this year it is 30 per cent. in spite of a government grant increased well above the rate of inflation. There is something wrong there.
The burden thrust by councils on conscientious, law-abiding charge payers had to be alleviated and had to he alleviated now because the charge bills must be reduced before people pay, and at the same time councils must be compensated for what they have lost. The Bill simply sets the legal framework for achieving that. Because of the way in which VAT operates, it may involve more people eating cake than biscuits, as the noble Lord, Lord Boyd-Carpenter, said. The amount of VAT that one pays depends on how much one spends. There is a great deal to be said for that. As the noble Lord, Lord Barnett, said, there is a desire by government to increase VAT as part of the taxation package in any event and this measure fits in with that desire.
I should like to say a few words in response to those who describe time for consultation and consideration as dithering and who say—as, surprisingly, the noble Lord, Lord McIntosh, did—that they will fight the Government's proposals every step of the way. That is what he said last Thursday, although today he does not seem to be fighting them but merely trying to amend them.
§ Lord McIntosh of Haringey
My Lords, last Thursday I was talking about the Heseltine proposals and not about this Bill.
§ Baroness Carnegy of Lour
; My Lords, the noble Lord had not seen the Bill but was talking about its timetable, although I do not have his words in front of me.
Such people should bear in mind that local government is unlikely to survive at all if political parties continue, as they have done over the past three or four years, to use the system of local government finance as a constant opportunity for party political warfare. As I said in a recent debate, if no agreement can be reached across the political parties for a system of local government finance, it seems to me that the only answer is 100 per cent. funding by central government. There are many disadvantages in that but there would also be many advantages. I hope that that possibility will not be lost in the whole discussion.
Whatever new system Parliament eventually decides upon, if local government is to survive there will need to be acceptance by Parliament, the political parties and by local councils, and that acceptance will not come about without a degree of co-operation and consultation taking place. This Bill gives a breathing space and times for those consultations to take place. During that time it will make the present system tolerable for charge payers and for councils. That is what it is for. It may turn out to be a permanent shift in the balance of funding, but at present that is what the Bill is about. It deserves our support. I am glad that we are having this kind of debate and not the kind which we had the other day, because this is far more constructive and far more likely to get a good Bill on the statute book.
§ 4.47 p.m.
§ Lord Taylor of Gryfe
My Lords, I am delighted to follow the noble Baroness, Lady Carnegy of Lour, because both she and I share a common interest in and experience of local government. We appreciate the complexity of the issue of the relationship between local and central government.
That appeared very simple to me at the age of 22 when I entered Glasgow City Council. The first thing I did was to table a resolution that the city council should petition Her Majesty's Government to have a local income tax established in Scottish rating. That did not carry and since that time I have learnt a great deal about the subject.
However, when I saw the name of the noble Baroness, Lady Carnegy of Lour, on the list to speak today, I reflected that the last time we had a serious discussion on this matter it was in the presence of a very formidable spokesman of this House—and I refer to Lord Ross of Marnock, who would have been delighted to have been here today as we bury the poll tax. I recall very well that we sat late on a number of Committee sittings in March and April 1987. The Government ultimately imposed the poll tax on Scotland. At that time we argued that it was unfair, socially unjust, complicated, difficult to operate and very expensive. However, perhaps I may say that the noble Baroness, Lady Carnegy of Lour, on that occasion, supported by the noble Lord, Lord Strathclyde, whom I am delighted to see is now on the Front Bench, and by the noble Lord, Lord Sanderson, 1098 assured us that our fears were exaggerated and that none of those prophecies would be fulfilled in the fact. Now we come today to bury the poll tax. I believe that a little humility is called for and some apology for the colossal blunder which has been made by the Government and which has caused not only massive hardship but the constitutional difficulties which have been discussed already.
I did not mind Scotland being used as a guinea-pig. However, one of the things that Scots resent is that the iniquity of the poll tax became an important national issue only when it hit England. We suffered a year of this tax. We discussed in this House some of the inequities and unfairness of the tax in Scotland, but those views were not heeded. Anyway, the tax has now hit England. I would have thought that the experiment of a year of the tax in Scotland would have convinced the Government—that is why you conduct a limited experiment—how unworkable and undesirable this measure was.
Here are the consequences of it in Scotland: at the moment there are 3.8 million people in Scotland liable to pay the tax. Of that number summary warrants have been issued for non-payment against 1.25 million people. At present 730,000 cases are before the sheriffs. That is a serious matter because many of these people are unable to pay. For the first time in their lives the sheriff's officer is knocking at the door; for the first time in their lives they have got into debt and for the first time in their lives this debt marks against their credit rating and affects their ability to raise a mortgage or any other credit they may require. That is a very serious matter, but it is a consequence of imposing this measure on Scotland for the past two years.
I am delighted to see the noble Lord, Lord Strathclyde, present. At the moment in the Strathclyde region, 46 per cent. of the people have not so far paid the poll tax this year. Some of them have a socially justifiable reason, but for others it is a form of political protest. I am not justifying breaking the law. In a sense the protest has diminished respect for the law. It is a bad law. When people who arc normally law-abiding citizens break the law to this extent it brings the law into disrepute.
§ Lord Strathclyde
My Lords, will the noble Lord recognise that it was out of pure political expediency that the unelected supporters of his party and the Members of Parliament itself, besides local councillors, refused to pay the tax? That was done for purely petty political reasons. Will the noble Lord support those who have paid up?
§ Lord Taylor of Gryfe
My Lords, I will. As I said before, I am in favour of observing the law. It is not my view of constitutional democracy to disobey the law. You can work to change it. I paid the tax. It was a very small minority of Labour Party members in the other place and in local government who disobeyed the law and refused to pay. In a way, the non-payers are now claiming victory, which is very unfortunate if you break the law. It was an unjust tax and in some cases the non-payers felt that non-payment was a justifiable form of protest.
1099 What is happening now? Because the tax is difficult to collect and because this particular piece of legislation is in disrepute, money is not coming into the local authorities. The Government have made some adjustments and given limited allowance for that, but not enough. Many local authorities such as Strathclyde have now to borrow in order to make up the deficiency. They have had to cut very drastically the local authority services particularly in education. They have had to cut back on road expenditure and on the donations and support for the voluntary sector which are so important for social services. That is bad.
What do we do now? I would remove the tax on students. At present they have a liability of £60 a year; the collection charges for that £60 are very substantial. We are talking about £6 million. It will be sensible, socially just and good economics for students to be exempt from paying this tax. I would also take out the 500,000 people in Scotland who are on income support. In that regard one is pursuing people who cannot afford to pay. The cost there would be about £40 million, which is small money compared to the cost involved in the new legislation.
As regards the future structure of local government, I notice that England is to have an independent commission to look at this difficult subject. In the case of Scotland the Secretary of State is to consult. There is a difference, because an independent commission is an independent commission. The Secretary of State for Scotland is a political leader of the Government. I suggest that this matter should be looked at again. I very much support the Bill before us which will be universally welcomed in Scotland. My only regret is that the warnings of Lord Ross of Marnock, my noble friend Lord Carmichael and myself were not heeded at the time.
§ 4.57 p.m.
§ Lord Stoddart of Swindon
My Lords, my noble friend Lord Taylor of Gryfe and other noble Lords have referred to the demise of the poll tax. I fear that their celebrations are rather premature. This Bill, and the preliminary indications of Government policy, do not show that the poll tax is going to be killed. Indeed there is every indication that some elements of the poll tax will be retained. If the opinion polls are to be believed, 70 per cent. of the British population believe that the poll tax will still be with us after this Bill and any future reorganisation of local government finance. I say very kindly to my noble friend, "don't celebrate too soon. We have not got rid of the poll tax yet". We shall not get rid of it until we have a Labour Government for which we must all strive.
This Bill is a panic measure. It is designed to try to save the Conservatives from being routed at the next general election. But the electorate is unlikely to be fooled by this cynical exercise. Neither will they easily forget the financial hardship to individuals and the administrative chaos caused by the poll tax which was wilfully introduced against all experienced advice from every quarter, in particular from the local authorities, both Tory as well as Labour, who should know best. Furthermore the voters do not need the back-stabbing ex-chancellor, Nigel Lawson, to tell 1100 them that the Government are still deeply divided about what is to be the pattern of local government finance in future. Indeed Mr. Lawson's speech on Monday was itself a cynical exercise bearing in mind that he himself, as well as being the architect together with the Prime Minister, of Britain's economic misery, voted in the Lobbies for the introduction of the poll tax. Now, apparently, he is advocating a local government financing system which would hit hardest the pockets of the poorest and at the same time deprive local government of any of its own resources, thus removing any semblance of democratic accountability. It seems then that it is not only the Government who are deeply divided but the whole of the Tory Party, as individuals and groups within it vie with each other to put forward alternatives to the hated poll tax.
Perhaps the greatest poll tax debacle has done one good thing. It has exposed the lie that the Government have been perpetrating these past seven or eight years that it is profligate spending by local authorities that has caused a large rise in local taxation. The Government now admit that the major cause of soaring local taxation has been the withdrawal of central government financial support from local authorities. This Bill underlines the extent of the resources denied by the Government to local authorities for the pursuit of their social and statutory duties in order that income tax cuts, largely benefiting the well off in society, could be made in pursuit of the Government's aim of transferring resources from the poor to the well off. That is what it was all about. The local authorities were deprived in order that the Conservatives nationally could derive the opportunity to cut taxes to help them win elections.
In my own view the Government have even muffed the poll tax relief scheme as the £4.3 billion referred to in the Bill is to be raised not by direct taxation through income tax, as my noble friend noted, but through VAT—an expenditure tax —which cannot by its nature be as discriminating. Thus, for example, young people struggling to set up home, having to buy new carpets and furniture, will be harder hit than those already established and comfortably off. In my view 4p on income tax is far preferable to 2.5 per cent. on VAT. The anomalies remain. People up and down the country will now have to pay more for their goods in order that Wandsworth residents shall pay nothing for their local services. That has nothing to do with efficiency; it has to do with the maladministration and maldistribution of grant.
I have received some information from the Reading Borough Council which may be of interest to the House. It shows what could happen if four major towns in Berkshire swapped grants with Wandsworth. Let me just show how this would happen. In Reading, for example, the poll tax before grant would have been £1,048. If Reading swapped grants with Wandsworth, Reading, less grant of £1,060, would be paying minus £12 in poll tax—instead people in Reading pay £476. In Newbury, a Tory controlled council, poll tax before grant is £909. If Newbury swapped with Wandsworth, its poll tax payers would pay minus £151. All these councils are in Berkshire. In Wokingham, another 1101 Tory controlled council, the poll tax before grant would be £919. Given the Wandsworth grant, the charge payers would receive a handout from the council of £141 instead of having to pay to the council £390.
But what would happen in Wandsworth? This is interesting, because the poll tax, before grant, in Wandsworth is higher than in Reading. In Reading the figure is £1,048; in Wandsworth it is £1,196. If Wandsworth had Reading's grant of £574, Wandsworth would be paying £622—not nothing, but £622. We see that there is great maldistribution in the grant system which is causing people up and down the country, who should not be paying so much in poll tax, to be paying it so that people in Wandsworth can pay nothing for their local services. I thought it was government policy that everybody should pay something for their local services, but now apparently they are quite happy that Wandsworth and others should pay nothing. I shall give way to my noble friend.
§ Baroness Phillips
My Lords, I naturally support my noble friend in everything he says. Does he agree that Westminster is solving its problems and letting people have a very low poll tax by making dozens of teachers redundant in the schools? In other words, Westminster is sacrificing the services in order that it can then say to the Tory Government how marvellous it is.
§ Lord Stoddart of Swindon
My Lords, that is so. With the poll tax being relatively low, and lower than the rates, it is having to get rid of teachers and other staff who provide the services to the residents of that area.
The problems in Reading and other Berkshire towns—and indeed in Swindon, which I used to represent in another place—are no less acute than in Wandsworth, particularly in relation to housing, roads and transport. Even after the £140 reduction, I shall still be required to pay £336, not only for myself but for my wife as well. Such anomalies, which are reported up and down the country, whereby some people pay high charges and others pay nothing for virtually the same range and quality of service, are offensive. This Bill aggravates, rather than removes, those anomalies.
The people of Reading—I speak of Reading because I vote and live there—because of the high level of charge and consequently a significant level of non-collection (the two go together do they not?) have to pay £34 extra per poll tax payer to make up for non-payers. So, again, while in Wandsworth services are free—there is no problem of getting money as no one has to pay anything—because people are hard pressed in Reading other poll tax payers have to pay £34 extra in order to make up for that. That is an anomaly in the Bill because it does nothing to correct that anomaly.
What is the position of authorities such as Thamesdown and Swindon which are highly efficient and have already sent out their bills? How about them? How disappointing and frustrating for both 1102 councillors and staff. The Government have demanded that they should be efficient. Yet when they are efficient they find that that efficiency has been nullified by the Government's own incompetence, hesitation and downright inefficiency.
Whitehall clearly wants to grab more of, if not all of, the real powers from town and county halls. But if its handling of local government finance these past 10 years is an example of how Whitehall will administer local services and finance, God help us all.
§ 5.9 p.m.
§ Lord Brocket
My Lords, the noble Lord, Lord Barnett, said that we all wish to have a local democracy. But there was a day when local councillors were not allied to a political party. They served to ensure that services in the community were run well and efficiently—and they were not paid. Now councillors ally themselves to political parties and they are paid. It does not require a politician to run a street lamp system or to mow the grass; it requires someone with a business mind.
The same sad fate has befallen education in this country. Education is nothing to do with politics. It is now run by political parties and that leads to such decisions—which I suppose are necessary—as that which concludes that history stops at 1970! Politicians at any level should not go near education, nor should they run local services.
With regard to the community charge, I must say that I agree with the principle of what is proposed as no socially minded person could possibly disagree with the principle of everyone contributing at least something. Voters should not be able to vote an authority into office and then he immune from the results of that authority's actions. The fact that the Government have failed to get their message across merely shows that communications is not one of the Conservative Party's greatest skills.
Perhaps we may return to the day when people served their community because they felt that they had something to give of themselves. Perhaps voters will elect authorities not because of the political party for which they stand but because of their ability. Politicians and politics do not run street lights and they do not empty dustbins; ability and efficiency does. Similarly, politics will not produce better linguists or mathematicians in our schools. If all that seems too much like Utopia, then the only route that I can see is funding from central government— quantified by goodness knows what—linked either to the amount we spend or the amount we earn. In that regard I agree with the increase in VAT as being a fair way to distribute wealth. But I have to say that a much fairer way would be to have higher rates of VAT on luxury goods, as was the case with the old purchase tax system, and a zero rate of VAT for necessities, especially food. That is a basic principle and I believe that we are going very wrong in that regard.
However, if we have to go in the direction of central government funding, we then have to rely on councillors being good business managers. That is where everything is going wrong. Regrettably, councillors who are chosen by political labels do not 1103 necessarily have to know how to add up, let alone subtract. Of course, they may know that "Baa, baa, green sheep" is a non-racist nursery rhyme. Therefore, what happens next to these centrally distributed funds is anyone's guess. What would the worthy councillors of Liverpool in Victorian times have thought of the behaviour these days of Derek Hatton?
I welcome the provision of VAT to lower the community charge. I can thoroughly recommend to the poll tax demonstrators in Wandsworth the game of cricket, or perhaps rugby, if they are at a loose end. The real answer lies not only in a system of fair taxation which is applicable to all, but also in the banishing of political animals and having worthy and able citizens running our services. Perhaps it would be a good idea to ban the naming of political parties together with candidates' names on voting slips at the local elections. One can just imagine the confusion on voting day. It is possible that 90 per cent. of the voters would not have a clue as to whom to vote for; they would not know the abilities of the candidates. They would be stuck. If we go along that route we may banish such absurdities as statute placement officers being paid £42,000 and prevent the cost of emptying a dustbin in one area being double the cost in another area.
Finally, and most important, is the business rate. I am amazed and most concerned that no one has talked about the business rate. It seems to have totally escaped everyone's attention. There seems to be no indication from the Government that there will be any change in this respect. In my opinion, one of the unquestionable benefits of the Thatcher boom years of the 1980s was the rekindling of the British entrepreneurial spirit without which this great country is nothing.
During the 1980s people were encouraged to go it alone and set up their own businesses. They borrowed money and bought premises. But then the business rate was introduced. Thousands of people have since gone out of business and been declared bankrupt. These days they cannot even sell the property for which they borrowed. Such property has become worthless. For example, the little corner shop upon which some people based all their figures and for which they laid out all their money is now unsellable because of the business rate attached to it.
We are all aware of the well-known examples of the increases which have taken place. They were given much publicity in the press. Harrods' business rate went from £l million to £8.3 million. But no publicity was given in the press reports to the less well-known examples. I refer to the small businesses like the corner shops the rates on which rose from £1,000 to £3,000 overnight. There is also the example of the small car repair business under the railway arches. Its rate rose from £1,000 to £5,000. There is also the case of one of my local pubs. Its rate rose from £1,200 to £14,200. The owners have gone bust but they are unable to sell the business. I could continue with such examples. We are in fact looking at increases which range from double to 18-times the original rate.
The village shop has suffered the same pathetic fate. Those businesses may only be marginal in business 1104 terms, but they are a vital part of our society; they provide a vital public service. Moreover, many of those small businesses will be the seeds of future great businesses. These people have been badly let down. They have had the rug pulled out from under them and they are the very people whom we promised to support. They are also the people whose support this Government needs. The Government seem either not to care about the problem or not to know about it.
I must implore the Government to ignore at their peril the disastrous effect of the uniform business rate on our entrepreneurs and small businesses. This House has a reputation for being fair; it is also known for speaking on matters which are not dealt with in another place. The problem of the UBR must be dealt with. The small people concerned have no voices. They are not members of any chamber of commerce. Moreover, they are not the Tescos or the ICIs of this world, but they are the backbone of this country. If we ignore them, I believe that this Government will fall at the next election; but if we destroy them, our children will still feel the consequences when they are grown up.
§ 5.19 p.m.
§ Lord Carmichael of Kelvingrove
My Lords, I am speaking today from the Front Bench, although we have another speaker on the list who will conclude the debate because of the importance of the poll tax for Scotland.
As your Lordships will be well aware, Scotland is in its third year of the poll tax. We were in effect the guinea-pigs and, like my noble friend Lord Taylor of Gryfe, I have no great concern about being used as an experiment so long as there are enough resources ready quickly to bale out Scotland if anything should go wrong with the system. I say that I have no great concern about our being used for experiments in the hope that the next experiment will be devolution and the break up of the sheer monolithic nature of government. People want more immediate government. We were the guinea-pigs and I am sure that I many in the Chamber today will remember the debates in which we were assured by Ministers that the poll tax was the final answer to the problems of local government finance. The assurances were given charmingly and convincingly. I believe that the then Minister is not quite so enthusiastic now, but he did his job well.
The tragedy in the first instance for the people of Scotland, and later the people of England and Wales, is that the whole concept of the poll tax was thought up as a panic measure. It has caused great family and personal distress to the people of Scotland. No serious study of the effects of the poll tax has been carried out. The idea was dismissed in a White Paper in 1981. In a further White Paper in 1983 the Government's reliance on the rating system was clearly stated. That White Paper was produced by a Conservative Government. It stated:There is little point in replacing rates with an untried and unfamiliar system having little support from the outset. The Government has therefore decided to make reforms to the rating system which is basically sound but needs improvement".1105 It is not absolutely true that nothing was done about the poll tax. A sudden glossy White Paper was produced on it. My late friend Lord Ross of Marnock has been mentioned. Anyone who remembers him during the series of debates will recall the wit and passion with which he spoke. We had no White Paper on the poll tax but we had a Green Paper, which is usually less precise than a White Paper. As Lord Ross of Marnock said, we had a Green Paper called Paying for Local Government. It was priced at £11.20. As he said, it was the talk of the Gorbals; everyone was racing out to buy it. It was not a Green Paper really, he said, but a glossy magazine, lacking only the advertisements. That phrase put it most succinctly. That was all we had.
The real cause of the panic, which came out very clearly when we discussed the subject in those days, was that domestic and other properties were revalued in Scotland in 1985. There was no revaluation at the same time in England; people had to wait a long time before properties were revalued. The revaluation in Scotland showed a shift in value which helped industrial ratepayers much more than anyone else. It certainly did not help the domestic ratepayers. There was a small rise in rateable values for the small shopkeeper, as the noble Lord, Lord Brocket, mentioned. He pointed out their difficulties, and this was built into the argument as though it was the real cause of the trouble. However, the people who were stung by the revaluation were the domestic ratepayers. I remember the former chairman of the Conservative Party in Scotland, the noble Lord, Lord Goold, and the pictures taken of him showing this horrible paper, the rates bill, and saying that something must be done.
That was the reason for the poll tax Bill. There was panic following the revaluation and a conference was held in Perth by the Conservative Party. The then Prime Minister was told in no uncertain terms that something must be done. Thus, the poll tax was brought forward, and that is the reason we are in this difficulty.
§ Baroness Carnegy of Lour
My Lords, will the noble Lord give way for a moment? What he said is not absolutely correct all over Scotland. For example, in the area where I live, the town of Forfar, an important shop found its valuation multiplied by three and a half, whereas the equivalent in the city of Dundee was halved. So there was a distortion in the same area or the same region of local government which caused the trouble. It was not the domestic rate; it involved shops. What the noble Lord said is not absolutely true. It is probably an average figure given by the CBI.
§ Lord Carmichael of Kelvingrove
My Lords, in Scotland an average figure for small businesses of 1.3 per cent. was given by the CBI. I agree: one of the problems in Scotland was undoubtedly the famous sports fields. There was a small cricket pitch somewhere in Fife that paid almost as much as Lord's. There were great anomalies and I have never understood exactly how the assessment worked in various areas. There was apparently a science in it. Figures were produced to show that there was a 1106 reason for setting the rateable value at a certain amount. The matter was brought up many times in this House and in another place.
The Government found that they had done away with the rates and brought in the poll tax which they thought would do a wonderful job. It proved to be very unpopular. Figures were given by my noble friends Lord Taylor of Gryfe and Lord Stoddart of Swindon and others on this side to show just how unpopular the tax has become. The Government hoped that after the Perth conference and by the introduction of this tax they would do wonders. They promptly lost 11 seats in Scotland at the 1987 election. Thus, bells began to ring.
One group still felt that there was fairness in the idea of the poll tax, and one or two people agreed. They kept plugging away. That is why it was not until the catastrophe hit them recently that the Government realised that something had to be done. During all the debates in the House they were warned of the problems that could arise from the unfairness of the tax, its denial of the importance of ability to pay and especially the iniquity of the 20 per cent. rule, as has been mentioned already today. The 20 per cent. charge for people on income supplement is quite vicious.
Practical problems were also pointed out. There is the movement of people from house to house and across county boundaries. We continually said that the one great advantage of a rating system is that property does not move. It is easy to establish when someone leaves a property or takes up residence and when the property is empty.
Questions were asked about all these and many other practical problems from all sides of the House. The Minister was only able to give general assurances, although he gave them with great confidence. I believe that he is much less enthusiastic now.
We have had rates for over a century. With all their imperfections and all the examinations and White Papers, only improvements have been suggested. Even as late as 1983, in a full study, the idea of a poll tax was not given serious consideration. It was dismissed. Then in 1987, with no depth of study, we were given the poll tax.
I have given this potted history because I fear we are doing exactly the same again. The Bill has little by way of serious study to support it. If one goes through the debates in the other place one finds that the Secretaries of State for the Environment and for Scotland answer every question with a reply such as, "Well, we shall study that", "There will be a working party on it" or "It will be looked at more thoroughly". But we have been told practically nothing about the guts of the Bill.
This is another panic Bill, only this time the Government are pretending they have all the answers. They appear to me to be throwing money at the problem in the hope that before the situation becomes even more acute they will have worked out some of the answers. This is a sad Bill. However, as my noble friend Lord McIntosh said, we obviously cannot vote against a Bill that will give, or is supposed to give, everyone £140. But what is disturbing is what may lie behind the Bill. I find that worrying as regards 1107 Scotland. If central government are slowly to take over more and more of the finance of local government, central government will at the same time want to have more and more control in local government. That will lead to the death of local democracy.
A number of speakers have asked what we on this side of the House would do in this situation. At least in Scotland we have been clear on this issue. We in Scotland are more advanced in our thinking on local government reform than the people in England. Our proposal was dubbed rather sneeringly a roof tax. I strongly believe that after all the arguments have been heard on this Bill, and after all the many reviews that the Government are to carry out have been commissioned, we shall not be all that far away from a roof tax, a floor space tax or something of that kind.
I conclude by referring to politics in local government. The grandfather of the noble Lord, Lord Strathclyde, and my father sat on Glasgow Corporation. The noble Lord, Lord Taylor of Gryfe, was on the corporation at the same time. The clash of ideas on the corporation produced some extremely advanced thinking. We experienced our heavy industry dying away and we came through that. We are coming through a recession again because the local authority is a politically motivated one which has to substantiate every idea it puts forward. I believe there are only five or six Conservatives on Glasgow Corporation. I believe that is about right. That is the kind of figure that the corporation can accommodate. We should not agree to accept any more Conservatives on the corporation. I have no doubts at all that one cannot discuss the disbursement of finance without involving politics. That is why I am sorry that the noble Lord, Lord Brocket, is no longer in his place. We have to accept the Bill, but we await with great interest the results of the many reviews that the Government are to undertake.
§ 5.33 p.m.
§ Lord Houghton of Sowerby
My Lords, it is 80 years this year since the partial downfall of your Lordships' House occurred. It is due only to a provision of the Parliament Act 1911 which excluded local taxation from the matters covered by that Act that we are able to help the Government in their present troubles. It is sad for anyone who has been in government to see Ministers in such difficulties. However, those difficulties have been largely brought upon themselves.
When we were discussing the community charge legislation we gave the Government plenty of warning of the likely consequences of what they were doing. Certainly I well remember saying that a high collection rate on direct payment of the kind of amounts that were to be levied would be almost impossible to achieve. I said that without some provision for deduction from wages, we would never collect the tax fully. Income tax would have collapsed years and years ago but for a withheld tax system. However, the Government took the view that it was morally good for local citizens to pay over directly some payment for services rendered which would help in the exercise of accountability.
1108 The psychology of that concept was completely wrong. Everyone is so used nowadays to payment by debit, by bankers orders and by deduction from wages. Everyone is encouraged to avoid making payments in cash and carrying cash around with them. Payments are almost universally made nowadays by means of extraction from one's hank account or pay packet. It was ridiculous to expect a new tax of this kind to be paid willingly by large numbers of people who had not had to do such a thing before. That has turned out to be the case.
In the months to come the Government ought to try to fathom the psychology of the public as regards this Bill. It has been deeply disturbing to witness passive resistance on the scale that has occurred and to witness such a scale of tumult, shouting, violence and demos. Nothing like that has occurred before on a matter of taxation. The last occasion when there was passive resistance to the payment of local rates occurred during my childhood after the passage of the education legislation in the early part of this century. That legislation levied an education rate which could include an element of support to denominational schools. My father thought that meant the catechism was to he more important than the curriculum. He voted to keep the vicar out of the classroom by refusing to pay.
That non-conformist passive resistance was quite extensive at the time throughout the country. Widespread actions for recovery were taken. My father chose to spend 14 days in prison rather than pay the rate. He spent 14 days in prison year after year until the outbreak of war in 1914. I used to ask my mother whether my father was a had man as he used to go to prison. She replied that he was a good man who was standing up for his principles.
But where are the principles in this matter? I can understand someone having strong principles as regards the use of his money. A number of people object to paying their taxes because they do not like contributing to defence expenditure—that is quite common—but one wonders what the basis was for such an emotional reaction in this matter. The reaction did not occur wholly on the part of people who could not afford to pay. Many young people especially reacted emotionally and refused to pay the poll tax. I know families where fathers have paid the poll tax for their children as their children have refused to pay it and the fathers do not want the children to be sent to prison for non-payment of the community charge.
What disturbs me about all the tumult that has occurred over the poll tax is that it is difficult to grasp the motivation behind the objections. Were they politically motivated or was there a desire for riotous behaviour? What was the motivation? Although we are told this is a universally hated tax, it is difficult to grasp precisely what it is hated for. The principle that everyone should share and share alike the cost of certain services provided by local authorities does not seem, in principle, to be objectionable. However, what is objectionable is not so much a matter of principle but of practice, and that is, if we are sharing and sharing alike, the burden must come within the ability 1109 to pay of the average citizen. Apart from that concept, there is still much that needs to he understood about the public's reaction to this form of taxation. The burden was too high. It was much higher than we thought it would be. A great many people were willing, however grudgingly, to see the new tax come in if it was not too high, but it turned out otherwise.
My noble friend Lord Barnett, with whose speech I agreed almost entirely, explained that the squeeze on local authorities and the reduction in central government grant, coupled with rising costs of administration, left the local authorities very hard pressed. They had to raise their demands through the poll tax and were driven to other measures to make good the shortfall in their resources—borrowing money, indulging in dubious financial transactions and other measures—which to some extent have brought local government into disrepute.
Now we wonder where we go from here. For a minute or two I should like to consider some of the prospects. The Government have not left themselves much time to do anything as well as it should be done. That is a pity. The issue ought to have been dealt with much earlier in this Parliament, or in a previous one, to allow it to be dealt with in the right atmosphere for proper consideration. We are now being driven by a timetable and the force of events.
We have talked about a reform of the rating system for 50 years, and nothing has been done about it. We have not even bothered to keep the valuations up to date. There have been only four revaluations in the past 50 years. In the first revaluation after the war, in 1956, the values were based on pre-war, 1939 rentals. In 1963 there was another revaluation and in 1973 the values were raised again. Domestic valuations increased by about 160 per cent. There they have stuck ever since. The valuations in the rating books today are the same as were put there in 1973. It is anybody's guess what one would have to do to them to bring them into line with anything resembling the current letting value of living accommodation.
The poll tax was aimed at moving away from the property base, with its problems of revaluation, appeals and the process of changing the basis of assessment. However, it has been a flop. It has become so unpopular that anything resembling it seems only to offer further scope for political discord.
What then will the Government consider? They say that their inclination is to look at a property tax together with an addition based on the number of persons living in a house. The tax would be levied on the head of the house—the owner or the occupier—and it would be up to him to apportion any part of the burden to the other people living in the house. That seems to be the basis of what the Government have in mind. For the valuation for the property tax, they appear to favour capital value rather than annual value. That seems to be where we are. There is nothing more definite than that. I suggest that some thinking has to be done very quickly as to which scheme is to be examined in depth. The options are narrowing all the time.
I would rule out the possibility of a local income tax 1110 for a number of reasons. We are too small a country to have 333 separate bodies levying income tax for local government purposes alongside the national taxation scheme. The more one examines the idea of a local income tax the more horrifying the complexities become.
I turn next to a revival of the rating system. Should we reinstate the 1973 values and operate them for a time while preparing a new scheme of valuation based on property values? That is an idea that has been canvassed a good deal. To go back to the old rating system at 1973 values would be an admission of defeat. It would be an admission that the problem is beyond solution and that we have to revert to what we had before for a while until we can think of something better. If we go back to the old rating system we shall never get away from it again. No government would have the courage to lift the property values to anything like current values. It will be politically undesirable to consider another alternative. If dogs will sleep, governments will let them sleep. That scheme would be a confession of complete failure. Something better and more up to date should be put in its place.
We are left with some measure of capital taxation. Here we run into fresh difficulties. Is a capital valuation to be based on market values at the present time? Is it to be based on what it would cost to replace the property, ignoring site value? Is it to be a combination of factors to give a unit scale for taxation? How is it to be done? In their further studies the Government will have to apply their mind to the practical side of such a proposal.
They will discover that it will be difficult to decide the basis of valuation of the capital value of a house at the present time. Does one ignore the site value? If it is to be based on market value and that value is put on a taxation paper for the elector to see he will have to send for a doctor. He will be told that he is living in a house worth £85,000 and that his payment to the local authority will be based on that valuation. Or he may be told that his house is worth £85,000 but for taxation purposes it will be discounted to £40,000. Any manipulation would be possible in those circumstances. If it was based on the cost of replacement, a house in Mayfair might cost no more to replace than a house in Hackney. Another idea to reduce the valuation for rating purposes is to take the insurance value. That would be the amount for which people insure their houses in case of fire, which ignores the site value.
All of those are possibilities which have to be studied. However, they have to be studied quickly if the Government are to sort the matter out and tell the electors pretty soon what local government finance is going to look like. There may be a temptation to rush into something else and take the wrong decision. That would be a great pity.
Is there anything that anybody can do to help the Government in those further studies? There are plenty of noble Lords who have experience in the field. Would the Government welcome the views of Members of the House of Lords? Who will help them make up their minds? They have floundered about 1111 until now. Can we take their arm and see them through? We do not mind, probably, if they are re-elected in consequence so long as we get some stable government and settlement of this long-standing and difficult problem. There is plenty of good will around, at any rate in some quarters. My noble friend Lord Barnett and I are oozing with good will toward the Government to help them out of their difficulties.
I offer those words as a humble gesture toward finding answers to some of the questions. The matter is becoming very urgent. Of course we have to pass this Bill, but from tomorrow the study of the next stage must begin in earnest.
§ 5.51 p.m.
§ Baroness Fisher of Rednal
My Lords, as other noble Lords have said, the poll tax was introduced as a means to curb extravagance and misuse of public money by some local councils—very few local councils in fact. As has already been said, the burdens of the changes that we are discussing this evening have caused tremendous chaos inside local authorities. The new registration, collection and non-payment difficulties have all piled up to make it much harder for a local authority to collect its local revenue now than it was under the rating system.
It is unfortunate that one sees on television screens a shredder machine destroying poll tax bills. As the leader of Birmingham City Council said when watching the process, "There goes a rain forest". It is a complete waste of taxpayers' money. It is the taxpayers' money that is being used for this late reorganisation.
The noble Lord, Lord Bonham-Carter, used the word "moderately". He said that one could describe it moderately as a hash of a problem. The Government's performance in using taxpayers' money to rejig what was called the poll tax should give the National Audit Office a coronary—a complete heart attack—and a funeral. Billions of pounds of taxpayers' money have been and continue to be thrown down the drain because the Government got the whole thing catastrophically wrong in the first place.
We on these Benches are justified in saying, "We told you so". Time and again, day after day when the community charge Bill was being discussed, we put forward the argument that the tax would be difficult to collect. We pointed out that there would be people who would not be able to afford to pay it. We pointed to all the problems that would arise but the Government would not listen. They thought that they knew best. It was quite obvious that the voters in the Ribble Valley did not think that the Government knew best.
The noble Lord says "Hear, hear". I thank him very much. Everything has now been changed. Local government is being reduced to chaos. Parliament itself has been treated with cynical contempt in the way in which this legislation is being rushed through today. For what reason is that being done? In my view the Bill is being used to lubricate the system ready for the local elections in May so that the Government can decide when to come forward with a date for the General Election. I ask the Government whether this 1112 Bill is the first of the U-turns of a post-Thatcher government. It is a complete change from Thatcherism. We thought that the Prime Minister intended to continue in that vein because we see today that the Government are not only shifting the goal posts but are digging up the whole pitch.
My noble friend Lord Stoddart mentioned Wandsworth. To be quite truthful, I have never understood Wandsworth's actions. I was a member of the Birmingham City Council for 15 years and I am an honorary Alderman of that great city. I cannot understand why one local authority is different from every other local authority in the whole of the country.
The noble Lord, Lord Strathclyde, interjects "Westminster". Yes, Westminster is an example. We all know Westminster. That is the council which sells its churchyards for 6p. That was good housekeeping, was it not? If I were a government Minister I should ask why Wandsworth's poll tax is so different from the others. The others are fairly even: many of them are in the £300 or £400 bands and a few come into the £500 band. But there is only one local authority in the country which is not asking for a poll tax. I think that the Government ought clearly to state, so that the general public know, why one local authority does not have to levy a poll tax.
I speak from my experience in Birmingham. The poll tax there, which includes charges for the police, the fire brigade and a levy for the PTA, comes to £108. Does Wandsworth not have to pay for all those services? Does it get let off the hook? Does Wandsworth's residents have their fires put out free gratis? I do not know. It is a question that ought to be answered.
Birmingham is by far the largest poll tax collector in the country. It is far bigger than any other. It processes 700,000 bills and has a new computer built and programmed for the community charge. So it is very up-to-date. When Birmingham puts through its bills, the computer processes them for seven days in a row and runs for 24 hours in the day. It works continuously for 24 hours a day, seven days a week. I know that will also be done on a similar scale in smaller authorities.
A real problem that now arises in Birmingham is that the council has to find more paper —a tremendous amount of paper. It also has to find printers who are willing to get the printing done in time. That is not a small task. If a printer accepts a contract he wants to overcharge in order to pay for putting on one side his other clients. That is a problem. The software suppliers have to know as soon as possible the government regulations so that they can start programming. Until that is done, they cannot start.
At present Birmingham has a timetable. It expects that the first payments will be received in June and it will have to ask for nine payments instead of 10. It has worked out its timetable and reckons that the first demands will not be ready for poll taxpayers to pay until June.
Ministers may not consider it so, but people who work for local authorities have a certain amount of loyalty. Since the community charge has been in operation, work has been more difficult for the staff in 1113 the relevant department. Day after day they change the computer software because someone has moved house, someone has died or someone has reached the age when they have to pay the charge. The staff have worked under pressure since the community charge began. Having worked so hard to get the poll tax demands out on time, that work is now abortive and they have to start all over again. The Government owe an apology not only to the poll tax payers but also to the local authority staff who have had an endless and abortive task.
Birmingham City Council has to pay for the abortive work undertaken by its staff, and the replacement work. The cost of the administration of the community charge reduction scheme and amendments will be £640,000 and £2.5 million in lost interest. I accept those figures because I well know that the local authority officers and the chief executives who work for the Birmingham local authority would not give me misleading or mischievous figures. Those are reliable figures. It is important to ask the Government: what will they do to reimburse such costs?
I listened with interest to how the repayment will be paid. Mr. Portillo at another stage stated that reasonable costs would be reimbursed. It is not fair that local authorities should be repaid only "reasonable" costs. They should be paid the full costs. It is not fair that the poll tax payer should indirectly pay for the mistakes of the Government. Someone has to pay. I believe that the Government should undertake full payment to local authorities.
I understand that at present that is not the case. The Association of Municipal Authorities believes that the Department of the Environment may introduce some new proposals next week. It is important that the Government recognise that the money should be on the table as quickly as possible. Local authorities will be in deficit anyway.
In future consultations the Government must be persuaded to base their grant on a realistic expenditure level which reflects the true cost of providing local services. They must recognise that many of those services are statutory obligations for local authorities. The Government must then undertake a proper share of local authority expenditure through the revenue support grant. I accept that locally raised revenue must continue because it forms a significant proportion of local spending and leads to accountability. However, when the Government give money to local authorities perhaps they will consider inflation rates. At present, costs for next year are estimated at an inflation rate of 4.7 per cent. Local authorities on average have worked the costs out at a rate of 8.2 per cent. Therefore the difference is substantial when interpreted in thousands of pounds.
I ask the Government two questions. In the future how will they deal with regional variations? Any government will know that there are substantially different regional variations. Will the Government in their review consider the existing unjust and inaccurate system of standard spending assessments? 1114 We might then be able to understand why Wandsworth receives a better assessment than anyone else.
Many noble Lords have said that the community charge is an unpopular tax. It is perceived to be unfair and difficult to collect. Its introduction was a culmination of worsening relations between central and local government. I feel sad about this decade of deterioration in relations between local and national government. The two structures should be able to work together.
The Bill does nothing to create a better partnership with local councils or a recognition that they have a partnership with local government. As a local councillor of long standing, I appreciate the good work that local authorities do. They are often innovators of schemes which are translated into government legislation. I think of many welfare services which were started by local authorities and are now part of the social services legislation. We need a local government structure which engenders civic pride. It can act as an innovator. Local government is much closer to the public than national government. It is necessary for that closeness to continue because that is democracy in practice. The Government should recognise clearly the job of local government and should make sure that they give it the necessary resources for the future.
§ 6.9 p.m.
§ Lord Nugent of Guildford
My Lords, I begin by expressing sympathy to the noble Baroness, Lady Fisher, for the problems of Birmingham, which I know she takes closely to heart. The people of Birmingham would be proud to have heard her speech; she put their case extremely well. I have had a few contacts with Birmingham in the past. I know its civic pride. I agree entirely that that is the prime objective of any local government. To achieve civic pride is half-way home to being an efficient and able administrator of local services. That is certainly the case in Birmingham. I am sure that the noble Baroness's plea that Birmingham should be fairly treated financially with regard to its expenses has fallen on the sympathetic ears of my noble friend.
I wish to say a few words in support of the Bill. Its purpose is good: it is to enable the Government to make payments to local authorities sufficient to reduce every community charge by £140; or, where a rebate is made, a proportionate sum. Of one thing there is no doubt: every family in the land will welcome the provision. No doubt the noble Lord, Lord McIntosh, (who has retired for a moment from his place on the Bench) tempered his powerful dialectic attack on the Government to allow for that factor. The Bill was agreed in another place in principle and no doubt will be agreed in this Chamber.
Underlying the debate is the Government's problem—the need for extreme haste and the taking of all the proceedings on this important Bill in one day. The speech of the noble Baroness, Lady Fisher, underlined the fact that the need is to enable local authorities to begin the new work involved as soon as possible at the beginning of the financial year. It has 1115 been agreed in principle to reimburse the cost of the extra administration. The noble Baroness will have to ensure that in practice that is interpreted to cover everything involved.
My noble friend Lord Boyd-Carpenter made a powerful point condemning the Government for telescoping our normal procedure and taking all these proceedings in one day. He also fairly made the point that during the past 25 years many respectable precedents have been set by governments of both parties. In this case there is great urgency. The time factor arises because the increase in VAT, which will finance the reduction in the community charge, was necessarily part of the Budget. Therefore, it could not have been indicated in advance of the Budget speech. I was a little surprised to hear my noble friend Lord Boyd-Carpenter suggest that the House of Commons could have cut down its Budget speech by a couple of days. If my noble friend, who was a distinguished Chief Secretary, had been in office I can imagine his comment had your Lordships made such a suggestion.
§ Lord Boyd-Carpenter
My Lords, my noble friend may have misunderstood me. I did not suggest reducing the length of the Budget debate in another place. I merely suggested adjusting its timetable so as to take this Bill on one of the days on which the Budget debate should have taken place and then carry on with the Budget debate on a further day. Therefore I made no suggestion of cutting down the enjoyment of another place in its Budget debate.
§ Lord Nugent of Guildford
My Lords, that is an ingenious suggestion and it would be interesting to hear how it would be received in another place. I can guess!
In my view it is justified to suspend Standing Order No. 44 because public interest is at stake. These payments must be made—generally they are welcomed—and we must reduce the further hassle for local authorities. It is part of the convention that arrangements are made through the usual channels to cater as far as is possible for the interests and convenience of noble Lords opposite. I hope that that was done, but I realise that it could not have been easy. We must be grateful in so far as noble Lords opposite have met the general need.
This introduction in respect of the community charge is only a paving measure in the reform of local government both in structure and in finance. Your Lordships heard a most interesting analysis from the noble Lord, Lord Houghton of Sowerby, about the problems which the Government now face. The rating system was generally acknowledged to be unfair not only between ratepayers but also between local authorities. No one appeared to be able to find a way of making the system fairer even between local authorities, much less between individual ratepayers. Any idea of a revaluation for England and Wales after the experience in Scotland would have discouraged even the bravest government.
The Government faced a major dilemma and were brave to try a measure such as the community charge. In the event their arithmetic went sadly wrong; their original forecast of an average charge of £150 turned 1116 out to be completely wrong; it was more than double that at £350. A flat-rate tax at that level is not acceptable to anybody. We are now plunged into a reform of local government in which my right honourable and noble friends are involved. They are beginning by setting up a local government commission to consult with representatives about the future structure.
I see that Ministers have been taken to task for not making their decisions now and inviting Parliament to endorse them. As an old local government man I cannot imagine a more fatal course for the future structure and operation of local government. Constitutionally local government bodies are elected and are therefore entitled to a voice in their future. Practically, local government representatives carry out the local government administration and its functions. Therefore, they have an expert knowledge of what their electors want and how the machinery works.
All precedents confirm that consultation with local government is the proper course of action. In the light of that consultation the Government will have difficult decisions to make about the future structure. The noble Lord, Lord Houghton, referred to them most lucidly. It is certain that we shall not achieve perfection; there will always be compromises. We can be sure only that the community charge must go. It is obviously unfair at an average charge of £390. The probability is that we must return to a property-based tax which will also pose problems. What about the problems that will arise if one opts for a capital valuation? What about those that will arise if one opts for a rental valuation based on 1973 levels? The reform must be accompanied by a substantial shift of expenditure from local government budgets to central government. My noble friend Lord Boyd-Carpenter made a cogent point when saying: for heavens sake, do not let government take a short cut and make the shift by increasing grants. The change must be achieved by functions, which will not be easy. I should be sad to see local education removed from the counties to the centre. I know of the work of the Surrey Education Committee and I know what a good and sensible job it does. A great deal will be lost and the change will not be easy.
Shifting expenditure from local government to central government may not resolve all the anomalies but at least it will reduce their incidence. The goal of universal accountability in the local electorate still looks to be a long way off. I hope that it may be possible to achieve it to some extent. It is interesting to recall a point not mentioned by the noble Lord, Lord Houghton. The old, pre-war electoral structure of suffrage limited to householders had a certain logic which worked reasonably well. However, after the war when universal suffrage for local government was introduced, and rightly so, accountability for local government spending had disappeared. That is the dilemma that we have faced ever since and we have not found a way out of it through any of the public inquiries, Royal Commissions and so forth.
Those are thoughts relating to the future. This interim measure will reduce the community charge to 1117 a more acceptable level—to approximately £250, which is more than enough. It is a great improvement on the average charge of £390 and I have much pleasure in supporting the Bill.
§ 6.20 p.m.
§ Lord Jenkins of Putney
My Lords, the noble Lord quite often gives voice to sentiments which I find myself entirely able to accept. I sometimes wonder whether he might move a trifle towards the Cross-Bench that he is leaning on, and sit down on it on some future occasion. We shall have to see whether that happens, but it would be entirely appropriate.
The way in which the Bill has been handled has been trenchantly attacked, and not only from this side of the House. One recognises the difficulties that the Government are in, difficulties that are of their own making. But having made them, they are in a mess and the Bill ought to be possibly entitled,A Bill to get the Government out of the mess that they are inWe have recognised, such is the nature of that mess, that it would affect local government all over the country if we went through the usual procedure, so we are forced to accept this unusual procedure, rather than go through the motions that we are normally used to doing.
But there is one aspect which I have not heard mentioned and which worries me a little. The Bill we have before us is not a House of Lords Bill. So far as I am aware, this is the only occasion on which a House of Commons Bill has been presented and accepted by the Lords. Not one of the persons who are responsible for the Bill is a Member of this House. The normal procedure when a Bill comes up from the Commons is that it is reprinted, it is adopted by Members of this House and presented to this House by Members of this House.
This is an extraordinary procedure that we now have. If your Lordships do not recognise the extraordinary nature of it, I ask you to imagine what would happen if the procedure were reversed. If we decided that we would send to the Commons a Bill in our name, and tried to get them to discuss a House of Lords Bill, they would not give it house room. They would not entertain it, they would not put in on the agenda, they would not discuss it at all, and they would be right.
There is something to be said for separation of these two Houses. This is a procedure which we ought not to accept, and although I recognise why it has been adopted and there may have been no alternative, it ought not to be done again. Otherwise it could lead us into the most strange waters.
As I said, the problem before us has been trenchantly dealt with on all sides of the House, and one curious thing is that it has the effect of excusing me from paying my proper share of local taxation. The Bill should therefore be subtitled:A Bill to present Lord Jenkins of Putney and other residents in the London Borough of Wandsworth with privileged financial treatment beyond the bounds of what is reasonable and proper and in return to deprive them of services they have hitherto enjoyed and for related purposes.1118 That would be a description of the Bill.
In introducing the Bill, it might have been said from the Government Front Bench:This Bill provides, inter alia, that whereas before the Budget the Government paid 90.4 per cent. of the expenditure of our well-beloved and faithful London Borough of Wandsworth, it will now be our privilege to pay 100.8 per cent. By prudent cuts in social services, according to the tenets laid down by the Blessed Margaret, our well-beloved Borough has spent only £261 million and this, as a special mark of our esteem, will be rewarded with a grant of £263 million thus presenting our favourite borough with £2 million beyond its needs.That is great generosity, matchless generosity, and perhaps my noble friend is beginning to understand what is rather special about the London Borough of Wandsworth. To continue:This money will come from savings arising from reduced grants to needy Boroughs which have been careless enough to get themselves located among the poor whom they have been profligately endeavouring to assist".Surely it should have been said from the Government Front Bench, in what was otherwise a good speech advocating an almost impossible task, that the money came from a grants system designed to channel most money to councils in the greatest need. But since when, the Government spokesman might have asked, has poverty been the hallmark of need? We are proud to point out that Tunbridge Wells receives a higher percentage grant than Haringey, and Bournemouth gets 17.6 per cent. compared with Lambeth's 5.5. It is central to our policy, the Government might say, that wealth has greater needs than poverty. Those who doubt this—and, for the moment, 1 am still speaking in the voice of the Government—should consider the socialist millionaire, Mr. Robert Maxwell, whose needs grow with his wealth, as do the needs of all the increasing numbers of millionaires who have benefited, and who will continue to benefit, from our far-sighted policies.
Our complex formula of 28 indices of need means that it is impossible to disentangle what we are up to; and as we do not know ourselves, it is clear that the ratepayers, as they used to be called in the glad—I mean bad—old days, can have no cause for complaint or if they have, it can be diverted onto the local authorities, which we have by the short and curlies.
Another advantage of the Conservative Government's system is that the figures on which our grants are based are drawn from the 1981 census, and our old favourite, Wandsworth, has conducted housing policies which have improved its demography by encouraging the poor to leave and to bring about their replacement by a richer class of citizen. By this clever move the Thatcherite council is getting a needs grant far and away above its current requirements. That we should add to this to the extent of taking Wandsworth right out of local taxation has had them rolling in the aisles at the Marsham Street circus.
I shall not continue further with this introduction to the Bill, except to say that many Wandsworth and Putney citizens are conscious that, far from benefiting from efficiency, as claimed by Wandsworth Thatcherite councillors, they are the temporary beneficiaries of a combination of muddle and fiddle which cannot be allowed to last.
1119 I have taken this a little lightly, but fundamentally I think that this is what has been going on and the measures that we are taking now can only be regarded as temporary to get the Government out of their mess. As soon as that has been done, it will be time for a change of government and for a government to get into office which does know what it is doing.
§ 6.28 p.m.
§ Lord Hatch of Lusby
My Lords, the noble Lord, the Lord Privy Seal, in introducing the Second Reading debate, referred to the peculiar circumstances in which this Bill is being forced through the two Houses, and he said that this method should be limited in scope. This method is showing a contempt for Parliament. It is a method by which the Conservative Party, and its Government, is using the constitutional means of having an elected dictatorship, and it is using this method in an unprecedented way.
I do not know whether the noble Lord is aware of the fact, but it was admitted yesterday in the other House, that this is totally unprecedented. There has never been another occasion on which a Bill has been forced through Parliament in this time with the use of a guillotine.
The guillotine seems to me to be fundamental to any assessment of the Government's tactics in these circumstances. The other place was prevented from having a full, open and unlimited discussion on an issue of importance to this country. The Bill was then passed on to us, as has been pointed out by noble friend Lord Jenkins of Putney, with the names of Members of another place on the back of it, but no Member of this House. What is more, the names that are on the Bill, as my right honourable friend the Member for Blaenau Gwent pointed out yesterday, do not include the name that is most appropriate, which is that of Mr. Christopher Patten, the Chairman of the Conservative Party. If ever there has been an occasion on which party political advantage has been taken, again, of the elected dictatorship and the misuse of the constitution, this is it.
The Conservative Government, in introducing this Bill and these methods, seem to have torn up all their principles which have been expressed over the past 12 years. Where is accountability in this Bill? How can you have accountability when first the rates and then the poll tax—are capped? Where is the principle of not throwing money at a problem? If ever there was a problem that the Government have thrown money at, this is it. Where is the principle of not squandering public money? As has been pointed out by several of your Lordships, there has never been an occasion on which more public money has been poured down more drains with fewer results. Also, where is the Conservative practice of managerial efficiency? Is any Member of the Government prepared to stand up and say that this is an example of managerial efficiency? What would have happened had this been a nationalised industry? What is the Auditor General's office doing about the waste of public money that has occurred over the past three years and which will occur over the next three years?
1120 Even this is not the major danger that arises from this Bill and from the attitude taken by the Government both last week and this week. It seems to me that the fundamental danger is being demonstrated by the way in which this Government are misusing the constitution and misusing the taxation system. This is the latest instalment of a constant move towards centralisation that has characterised the actions of this Government ever since 1979. They have progressively removed responsibility from local authorities and they are now drastically reducing the proportion of local incomes that local authorities are able to raise themselves.
This is not just a question of accountancy. It is much more fundamental than that. Surely your Lordships recognise that our democratic system depends upon a variety of democratic forms. It must not depend on the diktat of a centralised national government. The whole history of the growth of democracy in this country has been based on local initiatives, local responsibilities and a pluralism in our forms of representation which not only represent people but also encourage and stimulate them throughout the nation to participate in local initiatives and to take responsibility by their participation in the democratic process. Anything that weakens local government weakens democracy.
I would ask your Lordships, and particularly noble Lords opposite, who have shown some sensitivity towards this—and I put this to the noble Lord, Lord Nugent, who did make some criticism—how many Members on the opposite Benches voted against the poll tax when it came before this House. How is it that their fears are expressed today and they can say from the other side that it has been proved to be unfair? It was just as unfair when it was before this House and we voiced our opinion of that unfairness; but how much support did we get from the other side? Noble Lords are prepared to say it has now been proved to be unfair because the country has told them it is unfair; but the unfairness was just as obvious when the poll tax Bill was first before this House.
I return finally to what I believe is a grave fundamental issue which will not go away today, but which we should observe today. We should observe also the attack that has been made upon it today, because of the dangers of how this situation may very well develop over the next few years. Our democratic system, including our parliamentary democratic system, depends on local activity, not just at times of elections but between elections. That is only healthy and will only be stimulated when local government is lively, when it has responsibility and when that responsibility is matched by its ability—it is a necessity indeed—to raise the funds which it is responsible for using.
It is just as bad to have lack of accountability in spending funds as it is to have taxation without consent. This Bill, in my view, and the whole attitude it represents, is very close to a direct attack on the fundamentals of our democratic system. That goes back hundreds of years and we believe that should be extended rather than diminished. We also believe that it should give greater health, greater spirit and greater 1121 activity to local initiatives and responsibilities than has been done in the past. This is a mark that the Government do not understand the roots of democracy and are prepared in their blind panic to cut those roots, despite the danger to our whole democratic system.
§ 6.39 p.m.
§ Lord Monkswell
My Lords, I should like, but time prevents me from doing so, to talk about the constitutional improprieties that are under discussion here tonight. One of the matters that was raised by the noble Lord, Lord Hatch,—an interesting point—was the misuse and waste of public funds. When we have an incoming Labour Government, something we might consider is whether we could bring a surcharge against Members of the Government in this House and in the other place to pay for the misuse of public funds for which they have been responsible. Given the experience of some Labour councils, that would be an interesting exercise. But that is a digression.
We all welcome the fundamental principle that all community charge payers (the poll tax payers) should receive £140. That is why we will give the Bill an unopposed Second Reading. I want to develop the idea that there are unfairnesses in the Bill and that its detail is unreasonable. I shall identify the need for amendments to be made in Committee. Whenever Parliament legislates in haste the whole country repents at its leisure. The Bill highlights the unfairness of the current poll tax arrangements. A number of speakers have referred to the position in Wandsworth where the poll tax payers will effectively have to pay nothing towards their local services.
I shall touch upon a drafting problem. That is one of the difficulties we face when a Bill such as this is rushed through Parliament precipitately. Clause 1 is succinct and its intentions are clear. It relates to the reduction of community charge in England and Wales. However, in Clause 3, which relates to the statutory reduction of community charges in Scotland, the wording is different. Clause 1 provides for a reduction of £140 before rebates, transitional relief and benefits; but there is an interpretation of Clause 3 which might suggest that the £140 comes off after rebates, transitional relief and benefit. It all depends upon the interpretation of "their" in line 15. Does "their" mean the local authority or the poll tax payer? It is an interesting point that will probably only be resolved in court. I wonder whether the Government intend that the Bill should be challenged so quickly if it goes through unamended. Perhaps our Scottish friends will draw that point to the attention of their legal colleagues to see whether there is a case to be made. No doubt the Government will reply in due course. When we rush through a Bill, drafting errors may cause difficulties.
The theme of the Bill is to give the £140 rebate before rather than after benefit. That is where the Bill is unfair. It is unfair to the less well off—those people who find difficulty in paying the poll tax will receive the least benefit. That is a point that has been mentioned by other speakers. My question is: how 1122 many people will receive less than £140 off their poll tax bill? How many people will receive a final bill reduction of £140? How many people who were due to pay their poll tax in full will not receive the full £140 rebate? That relates to the position in Wandsworth, and there may be some other authorities in the same position. The last line of Clause 1(1) provides:or such lesser sum as will reduce the amount to £0".There will be a significant number of people who do not receive £140.
The Bill is unreasonable because of the extra burden it places upon local authority staff and the public. In Manchester, from where I come, we had approximately 600 people working for a month this year to produce the poll tax bills. I received my poll tax bill a couple of weeks ago. The bills were sent out early to help people know what they would have to pay so that they could budget throughout the year. While those poll tax bills were being generated. the computer system was off line. It could not process the normal up-dating data. It could not be used to make inquiries of the records and the records could not be updated. There was effectively a month during which our clients —if I may so call them—(the poll tax payers) could not obtain the information they needed about their poll tax payments.
The Bill's implications, together with the recent announcement of yet another change in the transitional relief arrangements, are that an extra 50-person years' work will need to be done. That is an interesting figure because the Government have estimated that £60 million will be spent on administration. There have been some questions about the explanatory and financial memorandum where it says:The Bill has no significant manpower effects".It' we are to spend £60 million on administration, by my calculations of average earnings, that seems to imply that the equivalent of 5,000 people will he working for a year. That is a significant manpower effect. It is interesting to note that Manchester has about 1 per cent. of the country's population and the 50-person years that I have mentioned represents about 1 per cent. of the 5,000-person years. So the Government may have the figures right but they have not put them on the front of the Bill They have not come clean. Local authorities have estimated that the cost will be £100 million. I suspect that that figure will be right because the £60 million may pay for local authority manpower but it will not pay for the software for the computer programs, stationery and postage.
The computer system may be down for another month, during which time poll tax payers, benefit claimants, people who have moved and those whose circumstances have changed so that their poll tax liabilities have changed, will not be able to obtain up-to-date information. That all causes uncertainty, delay and complications for poll tax payers in general. What arc the implications for the people who have to work and administer the system? The poll tax was supposed to be simple and fair. It is now recognised to be unfair. It sounds fair that everyone should make some contribution to their local services, but we never 1123 hear of the corollary: that if everyone is to pay the same, then they should be paid the same. We do not hear anyone suggest that everyone receiving benefit should receive £200 a week —roughly the national average. The poll tax is unfair, and it is far from simple. To call it an administrative nightmare is probably the English understatement of the year. The Government seem to be totally incapable of understanding the reality of their actions in terms of the people affected.
I shall not quote all the examples which I have in terms of the administrative nightmare which this Government have created. However, let us look at the introduction of the poll tax. During the autumn of 1989 local authorities were being advised almost weekly of changes to the poll tax regime. It is no wonder that bills went out late in 1990. This year city treasurers, local authority treasurers, benefit departments and computer sections have worked flat out and have done a terrific job in getting the bills out quickly in most cases. I wish to pay tribute to the city treasurer in Manchester, Jim Brooks, and his staff for doing a magnificent job over the past few weeks. That must now be done all over again.
My local authority has already sent out the bills. Other authorities may not have done so and therefore will not lose the costs incurred by production, postage and so on. What assurance can we be given that those authorities which have been efficient will be properly reimbursed for the extra costs incurred? Will the Government pay tribute to the very effective work carried out by local authority staff?
What needs to be done? First, we must get rid of the poll tax. Son of poll tax must not be allowed to ride the range of Great Britain. Given that 75 per cent. of the population are worse off under the poll tax compared with the old rating system, I believe it is fairly logical to go back very quickly to the old rating system. By definition 75 per cent. of the population will be better off. The old rating system needs modernisation but that can be done with due consideration. We should not rush into precipitate action.
We can take a number of steps to amend the Bill before us. In particular, we should make the £140 contribution to the poll tax payers of this country after rather than before benefit. In that way we target the support to those who need it most. By doing that we shall reduce the administrative burden faced by local authority staff in dealing with the change which will occur as a result of the Bill.
I hope that Members of this House on the government side will recognise that practical steps can be taken to amend the Bill without destroying its intentions. I hope that it is not the intention to pay more money to the rich and less to the poor or to create more administrative difficulties for local authority staff. If that is the Government's intention, they must stand up and say so. I hope that Members on the other side of the House will support us in our amendments to make the Bill more sensible and workable for the people of this country.
§ 6.55 p.m.
§ Lord Tordoff
My Lords, it is my task to begin the summation of this debate. There was a convention in your Lordships' House at one time that speakers in debates returned to the House for the winding up speeches. It is unfortunate that that has not happened because it makes it difficult to comment on speeches which have been made if those noble Lords are not present when those comments are made.
I do not intend to follow the noble Lord, Lord Monkswell, along the road of the old rating system which may have the support of his Front Bench. Nor do I intend to follow him in his suggestion that there should be an annual wage for everybody, which I suspect his Front Bench will not support.
On the face of it, this is a very simple Bill. In fact, it is not a Bill but a lollipop disguised as a Bill and a lollipop to be handed out to the electors in the local elections in May. All I can say to them is, "Do not take sweets from strangers" and of course they will not. It is typical of the contempt with which this Government hold the electorate. It constantly expresses itself, usually after a bad by-election result. The electors of Ribble Valley were accused of putting their votes in a dustbin. That phrase may well come back to haunt the Prime Minister in due course.
I well remember the noble Lord, Lord Deedes, at the time of the well-known by-election in Orpington. When asked about what he thought of that election in 1962 he said: "All I can say is I think that 22,846 people have gone off their heads".
Not only have the Government treated the electorate with contempt but, as we have heard from many sides of the House today, Parliament is being treated with contempt. There is no need to go through all the remarks which have been made on that. The Bill was rushed through the other place and is being rushed through this House. We are not being allowed to do our proper job.
That is underlined by what my noble friend Lord Bonham-Carter alluded to; namely, yesterday's Order Paper in another place. On the Business Motion it stated:The proceedings on Consideration of Lords Amendments shall be completed in one day's sitting and shall, if not previously brought to a conclusion, he brought to a conclusion one hour after their commencement".That is the kind of contempt in which this House is held by the Government in another place.
Strangely, the Government believe that this Bill is perfect. They must believe that. When I think of the number of Bills which the Government have taken back from this place to another place with 200, 300 or 400 government amendments attached to them, I wonder why they believe that this is such a perfect Bill. I cannot remember for a long time a Bill which has no government amendments. However, we know that it must be forced through before the Recess and that is a travesty of the procedures of this House.
The Government have indicated that it is a simple straight forward Bill, but it is not. As we have heard on several occasions today, this has serious implications for the future of local government. This is a paving Bill in reverse because, as my noble friend 1125 Lord Holme of Cheltenham said in a debate last week, and my noble friend Lord Bonham-Carter and the noble Lord, Lord Barnett, have said, the cart is being put before the horse. First, we should debate the structures and powers of local government and after that determine how those structures and powers are to be financed.
In fact it undermines the whole structure of local government. We are asked to damage the democracy of local government in a single afternoon. The noble Lord the Lord Privy Seal accepted in his opening speech that this Bill goes further than a simple dishing out of £140 to the grateful poll tax payers.
Last night Mr. Lang, who I am assured is the Secretary of State for Scotland, although not many people may know that, said:It is essential that the measure should not be regarded simply as a means of reducing charges for the coming year. It should instead be viewed in the much wider context of our review of the future funding of local government. The Bill provides for the initial implementation of a permanent change in the balance of the funding of local services from local taxation to national taxation. In future, the balance will remain broadly the same as it will he following the enactment of the Bill".—[Official Report, Commons, 26/3/91; col. 873.]That is what it is all about. It is very sad that this Bill has to be dealt with in such a rush. We on these Benches resist, as far as we can, the move towards centralisation of local government because, as has been said, it is a danger to the democratic process. Much as we welcome the Lord Privy Seal to our considerations in this House—I say that quite genuinely—from these Benches we doubly welcome him because he was good enough to make room for someone else in his former seat. But he must recognise that because of the fundamental importance of the Bill, this is a shabby way of going through the proceedings of this House.
As has been said by many people, the Government are in a panic. Their attitudes have been turned completely on their heads. The community charge was going to be the answer to all local government problems. It has been interesting to hear speakers on the Government Benches in an unusually hesitant mood this afternoon. I remember that the noble Baroness, Lady Carnegy of Lour, was a tremendous exponent of the community charge to the extent of wanting people in cardboard boxes to pay 20p per night lest they be considered second-class citizens.
I have one or two quite interesting quotes from government speakers in the past. For example, people will remember Mr. Nicholas Ridley as being something in the Government when, in introducing the Local Government Finance Bill, he said:I believe that the Bill provides the best system—the community charge. It is fair, workable and, above all, accountable".—[Official Report, Commons, 16/12/87; col. 1117.]At col. 1118 he went on to admit that,The community charge will probably be twice as expensive to administer as the rates, and I have no doubt there will be some evasion. But many chief officers are confident that they can manage".At Third Reading he said:I believe that in time the community charge will come to be seen as a watershed in terms of the strengthening of local democracy".1126 It was indeed a watershed, but in terms not of strengthening but rather of weakening local democracy. Mr. Michael Heseltine was not a Minister at the time so I cannot quote directly what he said. He spoke to the amendment tabled by Mr. Michael Mates about the banding of the community charge. He indicated that he would be voting for the new clause and that he would be doing it not from any sense of enthusiasm for the detail, but because he apparently had an unswerving allegiance to the principles upon which it was based. Mr. Michael Howard, in summing up on the same amendment, said:But if they want a new and improved system of paying for local government that will provide the British people with the advantages of fairness and accountability, without the anomalies, uncertainties and, yes, injustices of all other proposals …; the only way forward is that enshrined in our manifesto".—[Official Report, Commons, 18/4/88; col. 640.]More recently; namely, last year, we find Mr. David Hunt, the Minister for Local Government, saying,I believe the community charge will come to be accepted for what it is: simple, straightforward and above all fair. But it will also do local government a power of good. Better times for local government are ahead—centred on simple values like value for money, financial prudence, integrity, dedication to service. That is the vision behind which all Conservatives can unite. The community charge is central to it".One asks what he is saying today. As recently as 19th October 1990, Mr. Portillo said:Taxes on people's homes are unfair. Property values bear little relation to people's ability to pay. Capital value rating … would throw a tremendous burden on millions of households, particularly those in the South East whose house prices are high".Again, one wonders what comment he will make when the new proposals finally emerge. At the Tory Conference in October he said:The community charge is a courageous, fair and sensible solution … let us go out from this hall together and proclaim its advantages. The community charge makes local government accountable. The community charge revives local democracy. The community charge puts power into the hands of local people. That is an achievement to be proud of".Well, well. Then suddenly, in a matter of days, we find that this is turned around completely and we have this squalid little Bill which is trying to put matters right. It is a temporary piece of scaffolding to shore up the crumbling facade of a rotten edifice.
Perhaps I may now come to the Bill itself. Most things have been said about the Bill, but I shall quickly go through them again to remind noble Lords what we have been discussing. There is no doubt that those who benefit least will still have to contribute by paying VAT. I join with the noble Lord, Lord Monkswell, in having no doubt that council staff have been working flat out to get the bills done in time. There will be enormous costs involved—not simply the actual costs but costs in morale and the actual cost of the amount of overtime to be worked.
Many people may have noted that the uniform reduction across the country brings the system further into disrepute. Everybody is supposed to pay something except in Wandsworth where they pay nothing. As has been shown today, that will cause a huge amount of resentment. The reduction will leave many councils having to collect amounts that are not cost-effective to collect. One still waits to hear the Government's attitude to that. That situation arises either because the headline amounts are too small or 1127 because most councils will have to collect the 20 per cent. contribution. That introduces a level of chronic inefficiency into the whole system.
Another matter which has not been stressed enough today is that most people believe that the poll tax is being abolished. Already there are enormous problems concerned with the non-collection of the tax and these will increase during the intervening period. The confusion that will be caused is putting councils into a very serious situation. Yet there is to be no further compensation for councils because of the confusion which has been caused entirely by the Government. I hope that sooner or later the Government will announce some form of compensation which results from their activities.
I pick up the point made by the noble Lord, Lord Boyd-Carpenter, who accused the Labour Party of not putting its position clearly. All these matters could have been avoided by the introduction of local income tax. The noble Lord is entitled to shake his head. He may not agree, but the party I speak for from these Benches believes that the simple way out of this problem is to go for local income tax. That was a view which Mr. Layfield took up some time ago. Apart from anything else, it would not then have been necessary to increase VAT. Even with the Bill as it stands, the increase could have been put on income tax and not on VAT. That would have been a much fairer way of doing it.
There was an interesting little cameo during the aftermath of the Ribble Valley by-election. A local person was interviewed after the poll. Noble Lords will remember that the Government put considerable stress on the fact that the exit poll suggested that a large number of people would vote for the Government afterwards. I forget the exact percentage, but it was something like a 40 per cent. poll. It was not taken into consideration that that significant drop in the Conservative vote from 1987 would have been sufficient to lose the Government most of the seats in Devon, Cornwall and Somerset to the Liberal Democrats. However, be that as it may.
There was an interesting comment from a person who was interviewed on television. The interviewer said: "Well, Mr. So-and-so, I expect that now you have voted for the Liberal Democrats, next time you will go back and vote for the Conservatives as you did before?" "Oh no", he said. "You see, I did not just vote against the poll tax; I voted for the Liberal Democrats because they believe in local income tax. That means"—and he was saying it simply so that the reporter would understand—"that those as can pay, as those as can afford to pay, will pay. Those as can't afford to pay, don't have to pay. That's fair". At the moment the system is certainly unfair.
§ 7.10 p.m.
§ Lord Peston
My Lords, this has been an interesting debate. I must admit that I did not expect it to be so. I started off in an extremely bad mood, unable to forgive the Government for arranging this business today so that neither I nor my noble friend Lord 1128 Carter have been able to watch England play Ireland at Wembley. When we come to count the cost of all this, I hope that that will be weighed in the balance.
I felt too that there was nothing new to say on the subject of the poll tax. That has certainly been borne out by the speeches. Perhaps I may say a word on the question of precedent. I understood the noble Lords, Lord Boyd-Carpenter and Lord Nugent of Guildford, to say that there were ample precedents. Perhaps I may quote Mr. MacGregor the Leader of the House of Commons, speaking on 26th March. He said:As to the question of a precedent, yes I acknowledge ... that there are no precedents for guillotining in the way that we are doing today".—[Official Report, Commons, 26/3/91; col. 823.]But that is the Bill. That is the procedure that brings the Bill to us. One must see it as a whole. Mr MacGregor said there are no precedents for doing it in this way.
§ Lord Boyd-Carpenter
My Lords, my reference and that of my noble friend Lord Nugent was not to the guillotining in another place but to the procedure in this House of compelling the House to go through all stages of the Bill in one day. That is a totally separate point relating to this House, not, as the noble Lord is doing, to the other place.
§ Lord Peston
My Lords, I beg to differ. We must see the procedure as a whole. We are discussing a Bill which will become an Act of Parliament over two days. Indeed, I would go further. Given the admission of Mr. MacGregor, the responsibility of this House grows rather than declines. If the other place has guillotined it and dealt with the Bill so quickly, we ought to be taking more time on it, not less. Therefore I believe that the question of precedent arises in the way that we ought to have more time. The noble Lord, Lord Boyd-Carpenter, agrees with me on that.
Perhaps I may say that there is a practical reason for that. It is the point raised by the noble Lord, Lord Tordoff. We have to ask whether the Bill is perfect. We cannot assume —certainly on the Government's record, but I shall plead on my own party's record —that the Bill is perfect. One does not tend to pass perfect Acts of Parliament, certainly if one devotes the limited amount of time that we are devoting to this Bill. I ask myself what would happen if next week someone—perhaps one of the officials in the Department of the Environment—finds a new problem with the Bill or a new problem which the Bill does not tackle. As there seems to be no Henry VIII clause, to use that expression, one wonders what will happen if an official discovers some minor disaster.
My view is that, despite our desire to take a burden off poll tax payers, we should not have gone along with this game that we are playing. I shall have a few more remarks to make on that subject when I reach the end of my speech but I thought I would make that point now.
Perhaps I may say a few words on the question of not opposing Second Readings. I have not been here as long as some noble Lords but my experience is that normally we do not oppose Second Readings of Bills. It is not particularly a concession on the part of my 1129 noble friend not to oppose the Bill's Second Reading. The House will discover, perhaps in an hour's time, that we will oppose the Bill fairly vigorously by means of amendments. We are really conceding nothing by not voting on Second Reading.
Another point has interested me. I refer to the argument or lack of argument put forward to justify the expenditure of more than £4 billion, which, even after inflation, does not strike me as a trivial sum of money, and to do it so rapidly. The context I place this in—other noble Lords have referred to it—is that remarkable occasion some three years ago when we debated the original poll tax Bill. Noble Lords will remember it well. It was the day that all those Peers that we had never seen before turned up. They were the ones who did not know where the usual offices were or how to get a cup of tea. I have not seen many of them since, although, for all I know, lurking around the precincts there are a few of them. The Chamber is not quite as crowded tonight as it was on that occasion when, as the noble Lord, Lord Bonham-Carter, pointed out, 387 Peers —I shall never forget that—voted for what we are debating today. That is not a small number. It is the largest number for a Division certainly in my experience in your Lordships' House. I shall never forget what happened that night.
Noble Lords will also recall that during the Committee stage many Peers—chiefly Tory Peers—pointed out all the deficiencies of the poll tax. All of them were pointed out. Not least of the deficiencies in their eyes—I shall not embarrass noble Lords: not all of them are here was the damage they said it would do to their own Government. A number of Lords said that this would damage their Party and their Government. They were hardly treated seriously by their colleagues. Even now I have yet to hear any Minister apologise to them. I do not ask them to apologise to me and my noble friends. I do not even ask them to apologise to the people of this country. But I think they might apologise to their own noble friends who tried to stop all this happening. Perhaps that will be the first item on the Minister's brief when she comes to reply.
§ Lord Peston
My Lords, I am not a betting man. When we discussed amendments at that time I remember it being suggested that a helpful move would be to increase the number of those who would not be liable for the tax and that equally helpful would be a simple scheme to band the tax so that the poor would pay less and the rich more. We would then have had something like like a crude local income tax. But all that was rejected as a matter of principle. It was also rejected because it was too expensive. Now it seems that we can afford £4 billion. Perhaps even more will be needed next year.
I might add points that have not been raised this evening but were raised then and are quite fundamental. It was pointed out very clearly how hard the tax would be to collect and what the administrative expenses would be. The civil liberties 1130 point and the question of registers were emphasised. Above all—I am speaking of Conservative fears—they pointed out how regressive and unjust this tax was. How right they were. On the question of administrative expense, the figures quoted by my noble friend Lord Taylor on what has happened in Scotland, which I did not know, are quite devastating.
I am annoyed with the noble Lord, Lord Tordoff. He chose all the best quotations. I had several of them. I have only one left but it is another from Mr. Howard. He said:it is reform that will be good for local communities, good for local government, and good for the people of this country". [Official Report, Commons. 25/4/88; col. 149.]He does not have to resign but he might at least say,Well, perhaps it is not quite like that".Perhaps I may say a few words—I cannot really say more—on what we think we may be offered by the current Secretary of State for the Environment. I understand that we may be offered a new system based both on the number of adults—namely, a retention of the poll tax—and on the value of the property, which is also a retention the rates. I occasionally used to earn a little of my living as a forecaster, but I would never have guessed three years ago that what we would be offered by this very same government was, "Well we will retain the poll tax just a little bit, but we will also bring back the rates despite everything". I cannot go into detail on any of that but that is not my fault. We have not been offered any detail. We have the spectacle of the Prime Minister, the Chancellor of the Exchequer and the Secretary of State for the Environment all saying different things. What they are saying is different from what is being said by a great many former Ministers who also feel obliged to speak on these matters.
As noble Lords will know, I am a great believer in freedom of thought and expression. But what is going on is absurd. The three leading Ministers of whom I have spoken ought to find the time to meet together and get their stories straight. If I may be forgiven the old cliche, "If they do not hang together, the public will surely hang them separately", figuratively of course.
What are the Government up to? In broad terms, until recently some 20 per cent. of local expenditure —I know there are arguments on the technicalities here —has been financed locally by the poll tax. When this Bill becomes enacted—I am sure that it will be —I gather that only 10 per cent. will be financed in that way. It looks as if this is the kind of ratio which is the Government's long-term objective. But, if that is so, then we have the Government's usual approach; namely, that their method of reform is actually to destroy. We shall have little or no local government worthy of the name. Instead, we shall have local agencies of central Government.
In that connection I must emphasise one price which we would have to pay. In many areas—as other noble Lords have pointed out—local government has been the great innovator and central government has not. Of course, sometimes the innovation does not work, but that is in the nature of things. Nevertheless, they often do. A very good example was mentioned by my noble friend Lady David only last week. The 1131 Government sought to justify moving further education to the centre by denigrating local achievements. My noble friend pointed out how mistaken they were. Local government has been responsible for many great achievements. In fact, it has done all the great things in further education. None of that can be guaranteed by the new system.
Local management of schools, on which the Government are so keen, is another example. It was pioneered by local authorities. The list is endless. Indeed, the noble Lord, Lord Nugent of Guildford, took issue with the idea of centralisation. He said that he would not like to see education brought to the centre—I take it that he meant precisely on those grounds.
I do not doubt the fact that local authorities left with power will take some actions which central government will not like. However, that is the nature of local democracy. But, if one or two authorities go too far, that is no case for destroying all of them. It is certainly not a proper foundation for devising a rational approach to local finance. Having said that, I must say that I entirely agree with the noble Lord, Lord Tordoff, that the right way to do this is to think about what we want to do at the local level and then work out how we want to finance it; in other words, it should be done the other way around.
However, if it is the case that this Government's intention is that only 10 per cent. of local expenditure is to be raised by local taxation, one begins to wonder what the fuss is all about. That is really the point that the right honourable Member for Blaby, Mr. Nigel Lawson, made. He may be right or he may be wrong; but logically he has a good point. He deserves an answer. He certainly does not deserve vulgar abuse from his honourable friends—perhaps I should say his former friends.
I should like to say a few words about the economic technicalities of the matter. First, is what has happened here, especially the increase in VAT, permanent or temporary? Further, is the increase, as my noble friend Lord Barnett said, a new kind of hypothecated tax? If we read through the Secretary of State's remarks again, it will be seen that he referred to the Bill as being important. He said:It shifts the burden from local to central taxation. It is a constructive and decisive product of our local government review".—[0fficral Report, Commons, 26/3/91; col. 836.]I suggest he means that it is a permanent part of what is about to happen. It means that the increase in VAT is permanent. On that issue, can the noble Baroness say whether the department or the Treasury have made any of the relevant calculations? Broadly speaking, the increase in VAT finances the reduction in the poll tax. In other words, roughly speaking, it is meant to pay for it. These days we do not need to worry about the odd few millions which may be involved. If the total on one side, as it were, equals the total on the other side, and if there are individual gainers or groups which gain, that means that there must be losers. Can the noble Baroness say whether her department has made the calculations so that we may know who are the gainers and who are the losers?
One group of people which looks as if it is a candidate to be a loser involves those people who will 1132 only receive a refund of £28. I say that because, at a rough guess, the 2.5 per cent. increase in VAT means that, so long as they spend more than £1,100 on goods which are subject to VAT, they will be net losers. I should point out that I have calculated that 2.5 per cent. of £1,100 is approximately £28. Therefore, if those people spent anything like a normal amount of money on goods which attract VAT, they would clearly be losers. Therefore, one can immediately see at least one group which will be on the losing side.
As regards VAT, I should like to make a few remarks on general economic policy. The first possibility is that the increased tax will be passed on wholly in higher prices; that is, that the complete burden will fall on consumers. The inflation rate will rise for that reason but it will be offset by the reduction in the poll tax. One view about which I read states that the net effect will be zero. As an economist, I have to say that that is not obvious to me. These are rather complex matters. However, as the VAT is a proportionate tax on some but not on all expenditure, and as the poll tax alleviation is a lump sum rebate on most but not on all adults, I believe that the effects on the RPI will be rather problematic. It is all rather arcane. But it is possible that the noble Baroness will be able to enlighten us on the matter in her reply. I ask again: has her department or the Treasury made all the necessary calculations?
More serious, however, is the second possibility; namely, that, given the depressed state of the market, retailers will be obliged to absorb some or all of the tax increase. That looks good from the RPI standpoint, but it would be disastrous for the retail sector. Lack of business and poor cashflow are already creating many bankruptcies. It can hardly be desirable that more of them should be in the offing.
In reflecting upon the history of the matter, there are two errors which the Government made which are worthy of comment. The first was to call the poll tax "the community charge". To refer to it as a charge was to say that it was avoidable. It was to suggest that one could opt out of local community services and then say, "I will not pay the charge". Indeed, nothing was further from being a charge; and nothing was more of a tax than the alleged community charge. For the normal law-abiding citizen it was quite unavoidable, more so than was the case with VAT, income tax or Customs and Excise duties. It was precisely that unavoidable character of the charge that led to its downfall.
The suggestion was also made that under the poll tax for the first time all citizens would contribute to local expenditure. That was, and continues to be, pure nonsense. My noble friend Lord McIntosh has pointed out ad nauseam that the overwhelming majority of citizens paid rates. I beg my noble friend's pardon. I should have said that he has pointed out both cogently and continuously that the overwhelming majority of citizens paid rates. But, in addition, pretty well all citizens paid taxes of one form or another. Moreover, even if they paid no national insurance, no income tax or no Customs and Excise duties, it is difficult to choose a spending pattern which is entirely free of VAT.
1133 It follows that with any amount of central government support for local authorities—we are perfectly well aware of its scale—it is practically impossible for anyone to receive local services for free. Of course it could be said that the point of the poll tax was to bring home to everyone the cost of local services. But given the fact that well over half of all local services are paid for by central government, even that proposition does not stand up to critical scrutiny at present.
Perhaps I may refer now to the question of the sum of £140 which the noble Lord, Lord Boyd-Carpenter, raised. I must admit that I could kick myself; I had not thought to ask why the amount had been fixed at £140. It is a very good question. My noble friend Lord Barnett said that the noble Lord, Lord Boyd-Carpenter, had got it the wrong way round. It was decided that a 2.5 per cent. increase on VAT would equal £140. However, I have a further question. If they had decided upon a 7 per cent. increase on VAT, they could have abolished the poll tax. Therefore, why is the figure not about £300 instead of £140? Why have the Government bungled the matter yet again? I ask those questions because, if we are to carry out this manipulation of VAT, we may as well go the whole hog and abolish the poll tax. I believe that we should think about that aspect of the matter.
As regards the speed with which all this has happened, I must say that I am still not convinced that we had to do it today in this way. Of course I understand the point of the noble Lord, Lord Boyd-Carpenter, about the other place rearranging its affairs. However, I must tell the House—although no one has asked me about this; indeed, no one ever asks me anything—that I was ready to do a full day's work tomorrow. I am perfectly happy to come back to this place next Tuesday, Wednesday and Thursday. I am afraid that we must take these matters seriously. We could have found more time for reflection and I am not persuaded by the speed argument.
I must press the noble Baroness on this when she replies: what is the hurry? If the tax was such a good idea to begin with, if the level of expenditure was to be controlled by local democracy, why has it become necessary to spend over £4 billion now without proper debate? I do not mean a lack of proper debate here in your Lordships' House, although we have not had a debate on the scale I should have wished. I refer to the other place. We must agree that what the Government are doing is controversial. If we can raise £4 billion in VAT, if there is that much money to spend, should not its disposition be discussed at a more reasonable pace and in more detail?
Can the noble Baroness tell us whether there is a national emergency? Are we going through today's procedural charade to save the nation? Or is there some other crisis which I have failed to discern? This has been and continues to be an unhappy occasion. As the noble Lord, Lord Bonham-Carter, said, it does nothing good for the reputation of parliamentary democracy. I am especially saddened by the paucity of contributions from the Benches opposite.
1134 My noble friend Lord McIntosh of Haringey said, "What the Government can do, we can do". I know that he meant that sardonically. So far as we are concerned, we would not act in that way on a matter of this kind. We would not. We would not be in this mess and we certainly would not deal with a matter of finance on this scale in such a way. In my view it is being dealt with in a less than prudential manner.
In the end, I hope that the lesson is learnt, especially by noble Lords opposite. I realise that they may not be in power for much longer but I hope that it is recognised that we cannot go through all this again.
§ 7.32 p.m.
§ The Parliamentary Under-Secretary of State, Department of the Environment (Baroness Blatch)
My Lords, this is a short and single-purpose Bill but it has been a very long Second Reading. Therefore I shall move straightaway to address some of the points raised in the course of the debate. The noble Lord, Lord McIntosh, raised the issue of the explanatory and financial memorandum. He also referred to the Bill as being controversial. My noble friend the Lord Privy Seal explained in his opening speech that yesterday in another place the Bill received an unopposed Second Reading, was unamended in Committee and thereafter received an unopposed Third Reading. The Bill has therefore been brought to your Lordships' House without any changes. As to the financial circumstances underlying the Bill, they are as follows.
In reducing headline community charges by £140, we planned to reduce the gross revenue from the community charge by £5.6 billion. We also expect to make savings of £1.3 billion on community charge benefit and the community charge reduction scheme taken together. The net cost of the £4.3 billion is to be financed from central taxation.
Consistent with this £4.3 billion net reduction in the local tax burden that my right honourable friend the Chancellor set out in the Budget, it is now clear that we can extend the community charge reduction scheme to bring in more people and to increase the amount of relief. This we have done, as announced by my honourable friend the Minister for Local Government and Inner Cities in another place. These are the circumstances which my honourable friend set out in his remarks on Monday evening. My honourable friend said that the explanatory and financial memorandum needed to be read in the light of those remarks.
§ Lord McIntosh of Haringey
My Lords, will the Minister allow me to intervene? This is clearly a matter of great importance. Two issues arise under the explanatory and financial memorandum. One is whether the £4.3 billion is still correct. We have been assured that the extra money which has now been made available for the community charge reduction scheme means that the £4.3 billion is not changed. I accept that. I accept that it is no longer a change.
However, the other issue which arises is the figure given in the financial memorandum of £60 million for the costs. The announcement made by Mr. Portillo on 1135 the money resolution on Monday night has very grave effects on the £60 million. It may have no effect on the £4.3 billion, but it certainly has effects on the £60 million. Any local authority treasurer will tell the Government that the changes announced in the community charge reduction scheme do not simply involve changing the figures in the existing computer program. They do so in some cases when the minimum is reduced from £2 per week to £1 per week. But when all adults are now to be included, that affects the entire software for the calculation of the rebate. It will cost a lot more money and take a lot longer. That is what affects the financial memorandum, even if the £4.3 billion is unaffected.
§ Baroness Blatch
My Lords, I can assure the House that all the points referred to by the noble Lord have been taken into account and that the equation adds up. He referred to Gloucestershire and the abortive cost of anticipating the detail of the charges. It was made clear to Gloucestershire and other authorities that there was a risk in jumping the gun, particularly since we made it clear that our intention was to see that the necessary measures were put in place as quickly as possible. Therefore, it was a risk that they took and, sadly, it did not pay off.
Perhaps I may also state that the Bill is not without precedent. It is true that the Finance (Income Tax Reliefs) Bill 1977 was put through in one day by the Labour Party. The only difference was that the guillotine was used yesterday, for obvious reasons, because there were Members in the other place, as indeed there will be in this place, who would have done their utmost to make sure that the Bill did not reach the statute book.
§ Lord Tordoff
My Lords, I think that that is an unfortunate slur on your Lordships' House. It is not our practice to refuse to put Bills on the statute book. The use of the guillotine in another place represents a major difference. There has been no chance to have proper discussions on this Bill either in another place or here.
§ Baroness Blatch
My Lords, I was present for most of the day in another place and there were considerable discussions on what is a very short Bill with five clauses. The guillotine Motion was used in another place, it has not been used in this House, nor is there any intention to use it here.
I see noble Lords rising but I have only just started and already five minutes have passed. The noble Lord, Lord McIntosh, referred to the favourable treatment of standard chargepayers as opposed to those paying only 20 per cent. of the charge. There is no unfairness or anomaly here. The position is that chargepayers benefit from the £140 reduction in the headline charge in proportion to what they pay. If a chargepayer pays only a proportion of the headline charge, the reduction in the amount he pays will be a proportion of the £140. So, for example, if a chargepayer on income support pays only 20 per cent. of the charge, the reduction will be 20 per cent. of the £140. As the noble Lord pointed out, that is £28.
1136 It would not be right for the amount which that chargepayer pays—on average £50—to be reduced by the full £140. Conversely, if a standard chargepayer pays, for example, twice the amount of the personal community charge, it is right that he should receive a proportionate reduction in what he pays.
The noble Lord, Lord McIntosh, also said that local government funding from central government had declined. As my right honourable friend said yesterday in another place in response to a similar point, the fact is that in 1976 the proportion was 66 per cent. It went down by 2 per cent. a year until the present Government were elected. Broadly speaking, it did not decrease much more than that throughout the whole of the 1980s. The noble Lord, Lord Barnett, is not in his place but, as he pointed out, the switch was begun by the Labour Party in 1976.
The noble Lord, Lord Taylor of Gryfe, referred to the problems of non-payment. Perhaps I may say to him in regard to non-payment that Members of Parliament in particular and local councillors are people who should know better. The incidence of non-payment would have been considerably lower if people in such places of influence had not led the non-payment campaign.
§ Lord Taylor of Gryfe
My Lords, if I may intervene, no attempt was made on my part to justify non-payment. I hope that that is abundantly clear.
§ Baroness Blatch
My Lords, I understand that and I believe that the noble Lord said so. I was trying to explain that the high incidence of non-payment has not helped. It has exacerbated the position, led by people in key places who ought to have known better.
The noble Earl, Lord Russell, suggested that perhaps we should have had the Budget a week earlier. Perhaps I may say to him that it displays enormous ignorance on his part of the lead time needed for the work that goes into preparing a Budget. It is extremely easy to speak with hindsight. There has been a Gulf War. No one quite knew how that war was going to end. Therefore to have pre-empted £4.25 billion of taxpayers' money in the timescale referred to by the noble Earl would have been particularly difficult.
I shall not apologise for the fact that there has been no change in the uniform business rate. We welcomed the comments made by John Banham of the CBI who, on behalf of business and commerce, welcomed the announcement of my right honourable friend in another place. He welcomed the fact that there were to be no changes to the uniform business rate.
The noble Baroness, Lady Fisher, was concerned about Birmingham losing £2.5 million in cash flow. We are advancing the schedule of payments from the business rates pool to offset the cash flow loss which might otherwise occur. We intend to make a first payment on 5th April instead of 15th April as previously intended.
§ Lord McIntosh of Haringey
My Lords, I am sorry to intervene, but these are exceptional circumstances and we have little chance to get the facts clear. Does the response which the Minister is making to my noble friend Lady Fisher apply also to the additional costs 1137 caused by the announcement of Mr Portillo on Monday night? In other words, does that cover Birmingham's additional £100,000 of administrative costs—that is a 20 per cent. increase—and its £1.25 million extra cash flow over and above that which had been anticipated when the Bill was published?
§ Baroness Blatch
; My Lords, I was referring specifically to cash flow. I shall come to the matter of administrative costs. However, administrative costs will also be reimbursed. The Department of the Environment has already held preliminary discussions with the local authority associations on the basis for paying grant to compensate for additional administrative costs. The associations were not able to give a unanimous response in those preliminary discussions, but we hope to agree with them on a sound basis for the grant in further discussions. I must make it clear that we intend to compensate authorities in full for those reasonable additional costs.
The noble Earl, Lord Russell, asked about the estimate of £60 million for administrative costs. That is our estimate of the reasonable additional administrative costs that authorities may incur as a result of the Bill's provisions. Underlying that estimate is the expectation that the cost of rebilling would be in the range of £1.50 to £2 per charge payer. That is consistent with the experience of the more efficient of the charge-capped authorities this year.
The noble Earl, Lord Russell, was also worried about the wording of Clause 4. He reads far more into the wording than is there. The Government fully intend to compensate authorities for 100 per cent. of the community charge income that they would otherwise have received but for the reduction prescribed by the Bill. We also intend to reimburse authorities for their reasonable administrative costs.
The noble Lord, Lord Carmichael of Kelvingrove, was forthcoming about the Labour Party's alternative to the community charge which is a property tax linked to ability to pay. However, I have some questions on that provision which may become clear at some time during the course of this general debate on a way forward for local government. If the alternative is to be linked to ability to pay, would we have to have a register of incomes? How would we assess the incomes of individuals? Will all individuals pay or will only some of them pay? Will all members of a household pay, or only one? Will the rebate scheme help more people more generously—that would cost those who pay more—or will it help fewer people more generously? What are we to deduce from the scant information we have about the proposals from noble Lords opposite?
My noble friend Lord Boyd-Carpenter and the noble Lord, Lord Barnett, were concerned about the balance between local and national taxation. This is a matter for my right honourable friend the Chancellor of the Exchequer and his successors in that Office. As regards the future pattern of taxation, I should make it clear that the balance which we have established between local and national taxation, following the 1138 provisions of this Bill, is what we believe to be right and appropriate and to be a balance which can be sustained in future years.
My noble friend Lord Boyd-Carpenter also asked how the figure of £140 was arrived at. My noble friend posed the question; but the noble Lord, Lord Peston, assumed the answer, and he was wrong. My right honourable friend the Chancellor made it clear in his Budget speech that it is the Government's intention that the average community charge paid next year in Great Britain should be less than £175. That was the starting point.
§ Lord Peston
My Lords, he may have said that; but the noble Lord, Lord Boyd-Carpenter, and I want to be told the principles that lie behind the figure. One cannot just say that the Chancellor thought the figure would be less than £175, and £140 is less than £175, and therefore that is the answer. We were asking for some analysis.
§ Baroness Blatch
My Lords, I hope the noble Lord will exercise some patience. It was the judgment of the Government, through the Chancellor of the Exchequer, that the volume of taxes raised at local level was too high and that a figure of £175, or something below that, was the right figure. Therefore that represents the level of local taxation—that local taxation offers a yield of about £7 billion—which we believe is the correct, sustainable level in the long-term. It is to achieve that objective that we arrived at, and are introducing, this measure: the £140 reduction in headline charges and the further improvements in the community charge reduction scheme—
§ Lord McIntosh of Haringey
My Lords, I am sorry to interrupt, but is there not a very clear reason why the £140 figure was arrived at? It is just above the figure that applies in Wandsworth. That is why the Government arrived at that figure. They calculated that Wandsworth would only end up losing £4 a head and everyone else would gain. Therefore the Government moved from the Wandsworth figure to the 17.5 per cent. VAT.
§ Baroness Blatch
My Lords, the imagination of the noble Lord is positively gymnastic on this affair. The level we have arrived at is about the level of rates that applied in 1989. In fact my noble friend beside me has reminded me that the figure is slightly lower than that.
The noble Lord, Lord Taylor of Gryfe, asked why there was no proposal to offer consultation on a local government commission in Scotland. The noble Lord correctly noted that there are no plans to consult on a proposal to set up a local government commission to review structure in Scotland, as it is intended to do for England. The reason for that is that the existing structure in Scotland is much less diverse than it is in England. The Government believe it is therefore reasonable to move directly to consult on the introduction of a single-tier structure throughout Scotland.
I was asked about social security issues and any possible changes to the regulations. The community charge benefit will be assessed on the basis of 1139 community charge liability, net of reductions arising from this Bill. My right honourable friend the Secretary of State for Social Security will be bringing forward regulations shortly to ensure that the regulations governing the assessment of benefits take account of the new general reduction scheme.
My noble friend Lord Brocket was robust in his condemnation of the Government not making changes in the uniform business rate. However, as my noble friend is not present, I shall pass on. Many noble Lords were positively obsessed with Wandsworth. The truth about Wandsworth is that it is a well-managed, prudent authority providing good services at a cost of £116 per person below the standard spending assessment. The system which determines the external support for individual authorities works on the same basis for all authorities. The grant is based on SSAs which seek to measure needs. Wandsworth should be compared with other local authorities in its own class. The noble Lord, Lord Stoddart, is looking anxious, but I can provide figures. For example, Reading—
§ Lord Stoddart of Swindon
My Lords, I am most obliged to the noble Baroness for giving way, but she referred once again to Wandsworth being so well off because it is highly efficient. Reading Borough Council has just won an award for efficiency, yet the people in Reading will have to pay—after the £140 rebate awarded by the Bill—£336. In Wandsworth people will pay nothing. It cannot be right that people in Wandsworth should pay nothing for their local services whereas people in Reading and in other areas pay so much.
§ Baroness Blatch
My Lords, Berkshire, which is the county council within which Reading is situated, is spending £7 above its SSA. Reading, to which the noble Lord referred, is spending £28 above its SSA. Therefore, for each person in that part of the world it is paying £35 above SSA. Birmingham is spending at the level of SSA. Lambeth is spending £112 above SSA. Wandsworth is spending £116 below SSA. All of its services compare very favourably with those of many other local authorities.
The noble Lord, Lord Jenkins, criticised the use of the census figures. It is true that many indicators in the SSAs are based on the 1981 census data; that is the case for all authorities. Our principle is to use the best available and latest data and we are constantly seeking new sources. Obviously at this stage in the census cycle some of the data are fairly old. However, in two or three years' time we shall have new data from the 1991 census. They will be incorporated as soon as possible.
The noble Lord, Lord Monkswell, went on about the principle that everybody should pay the same. He put forward the craziest notion that if everybody should pay the same then everybody should be paid the same. He omitted to say that everybody should pay a contribution. That is the situation; it is not that everyone should pay the same. Millions of people are not paying the same amount because the Government are sensitive to the needs of individuals.
I shall not miss this opportunity of paying tribute, as I was invited to do by the noble Lord, Lord Monkswell, to the work of local authority staff. I do 1140 not pretend that this is an easy time for them. They have done a great job so far and face a challenge in the next few weeks. I am sure that they will meet it.
The noble Lord, Lord Monk swell, asked a specific question about the word "their" in Clause 3. The amount determined by a local authority is "their" charge and must be the headline charge. That is the figure that the authority determines as the amount or the amounts of the charge, so that "their" in that context cannot refer to the charge payers.
The noble Lord, Lord Peston, asked, why hurry? Having made the Statement the Government believe that we should minimise disruption to local authorities as far as possible. We also believe that it is desirable to get the bills out as soon as possible. The noble Lord also referred to VAT and gainers and losers and whether we had done our sums. The overall sum has been done with respect to the overall assumption as to the amount that will come in via the 2½ per cent. increase in VAT. The effect on individuals will depend on their pattern of spending. We know that with the incidence of zero rating the impact will be much greater on those who spend on more luxury items.
The noble Lord, Lord Peston, appeared to criticise the balance of approximately 11 per cent. raised at local level saying that that would lead to the destruction of local government. Can we deduce from that comment that a Labour Government would shift the balance back to local level? If so, that would be an interesting revelation to those of us who are interested in such things.
§ Baroness Blatch: It was rhetorical.
§ Lord Peston: I am delighted to hear that.
§ Baroness Blatch
My Lords, if time had been on my side I should have been interested in the answer.
The noble Lord, Lord Tordoff, said that this is not a Bill; it is a lollipop dressed up as a Bill. He then advised people not to take sweets from strangers. On the basis of that advice it would be consistent for him and his colleagues to oppose the Bill, but I suspect that he will not because he cannot deny that this is a good measure which will benefit a great many people.
The balance of local and national taxation is a definitive conclusion that we have drawn on the basis of what has emerged from the review so far. Noble Lords have argued in favour of resisting the change to centralisation. I must ask the noble Lord on behalf of his party—yes, the question is entirely rhetorical—whether that means that his party would also intend to shift the balance back towards local charge payers.
This is a short but most important Bill. It is an essential part of our strategy, as announced by my right honourable friend the Chancellor in his Budget speech, to make a new and major change in the balance between local and national taxation in relation to paying for local services. It will bring substantial benefits to charge payers, reducing headline charges everywhere by £140. It will mean that after allowing for community charge benefits and the 1141 community charge reduction scheme the amount that charge payers will pay on average next year will be less than £175.
It is also a matter of great urgency. There can be no question that a matter such as this should be dealt with other than in the context of the Budget. It is also very important that the new arrangements should be in place and bills issued as early as possible in the new financial year. We do not hide the fact that inevitably there will be some inconvenience for local authorities. Our aim is to keep it to the minimum by seeking to ensure that local authorities will know before the start of the financial year all that they need to know to begin collecting their charges. But it would be indefensible not to give the very substantial extra assistance we are now able to provide for charge payers.
The Bill is a short but crucially important measure. It is one of the first fruits of our fundamental and constructive review of local government finance, structure and functions. It shows the Government acting firmly and decisively for the benefit of charge payers. I commend the Bill to the House.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.
My Lords, I beg to move that the House do adjourn during pleasure until a quarter-past eight.
§ Moved accordingly, and, on Question, Motion agreed to.
§ [The Sitting was suspended from 7.56 to 8.15 p.m.].
§ Baroness Blatch
My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
§ Moved, That the House do now resolve itself into a Committee.—(Baroness Blatch.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The LORD HAYTER in the Chair.]
§ Clause 1 [Statutory reduction of community charges: England and Wales]:
§ Lord McIntosh of Haringey moved Amendment No. 1:
Page 1, line 5, at beginning insert:
("Subject to the making of an order under subsection (1A) below").
§ The noble Lord said: In moving this amendment I should like to speak also to Amendment No. 8. It may not seem obvious from the printed version that they are related because unfortunately Amendment No. 8 should have been introduced as:
"Page 1, line 9, at end insert—
('(1A) The Secretary of State shall'".
§ That did not occur in the printing. It may have been the fault of the version that we provided to the Public Bill Office. The grouping that has been supplied to the Committee makes it clear that the two are deliberately related. As is obvious, Amendment No. 1 is a paving amendment for the important amendment, which is Amendment No. 8.
§ A few minutes ago this measure was described by the Minister as a definitive statement on local 1142 government finance. She described the arrangements which have been arrived at and the balance between central and local government contributions to local government expenditure as definitive. I find that a somewhat extraordinary statement since the Bill makes absolutely clear that it refers only to the year 1991–92. Any attempt which has been made by any of us in tabling amendments to extend the application of the Bill beyond 1991–92 or beyond the very strict limits set out in the Long Title has been rejected—rightly, in terms of the Long Title.
§ We have been told that our amendments must relate only to the Bill as drafted. Under those circumstances it can hardly be said that the Bill is a definitive statement of anything. Clearly it is a stop-gap. We have before us a way of giving the Government a breathing space in which to work out, as best they can, the future shape of Conservative policy toward local government finance. It has been made clear by the Secretary of State that it is a policy which will not be implemented before 1994 or, if the Government are lucky, by the year 1993–94, but in any case not until well after a general election. It is also plain that there will be no significant legislation until after a general election.
§ Let us suppose that the Government are forced, as they may well be. to postpone a general election until the last possible minute. Let us suppose that we arrive at this time next year with the same Government and no proposals for changes to the poll tax. What will happen? Shall we have another Bill along these lines? Shall we have a finance Bill for the continuation of value added tax at 17.5 per cent. and a further reduction in the poll tax for 1992–93? It is absurd to suggest that what is proposed in the Bill is in any way definitive. It is a face saver; it is a cover for the lack of decision which is now endemic in Cabinet circles. Members of the Cabinet cannot make up their minds about anything. They expect us to hang around while they fight among themselves.
§ It is not even a matter of consultation. At the beginning of this so-called review exercise, consultation papers were to be issued in January of this year. Not a single consultation paper has appeared, yet some of the most important possibilities have been pre-empted by the statements that have already been made. I shall not dignify any of the statements by saying that they are positive decisions. Certainly there are negative decisions. The Bill is clearly a negative decision. We have a decision that the people of this country will be saddled with the poll tax for many years to come.
§ We on these Benches do not believe that that is necessary. We believe that it is perfectly possible to take immediate action to abolish the poll tax and to replace it by something better. I believe that the Liberal Democrat party thinks the same. Let me say immediately that I do not believe we agree on a better solution. The Liberal Democrats consider that a local income tax is better; we say that pending a fairer rates system we can, should and must return to the rates system from 1st April 1992. That has been the clear position of the Labour Party ever since the so-called review started. Nevertheless, although we disagree 1143 about what the system should be—that is a matter for the electors to decide—we cannot allow this Bill to go through as a stop-gap for 1991–92 without any commitment from the Government to replace the poll tax by a fairer tax.
§ The people of this country can see very well what is going on. It is already clear to them that the so-called abolition of the poll tax is no such thing. It is already clear that the property plus poll tax which was proposed in the Statement by the Secretary of State last Thursday involves all of the worst elements of the poll tax for a lower return. It will involve—the Secretary of State has made clear that he cannot rule it out—a register of individuals, with all the difficulties that that has brought about with the poll tax. Yet the return from such a tax will be substantially less. Unless some completely new administrative machinery is set up, it will have to be collected by making some person —the head of household—the involuntary collector of revenue from all the other members of the household on behalf of the Government. That will involve all the difficulties with regard to movements of address which have been seen in the past.
§ Nothing is solved by the proposal put forward by the Secretary of State. We simply have all the undeniable difficulties of introducing a new property tax added on to the undeniable difficulties of carrying on with the poll tax procedures. That is not an acceptable alternative. We ought not to pass the Bill without stating that it is cut short: it needs a commitment for the future if it is to be acceptable to the people of this country.
Amendment No. 8 provides that the Secretary of State,
shall before making any Order under subsection (1) … lay before Parliament a statement containing a proposed date not later than 1st April 1992 by which the community charge is to be abolished".
§ The Government have already claimed that they have abolished the poll tax. That is an opportunity for them to give effect to that claim. I beg to move.
§ Earl Russell
The Government have stated that they have abolished the poll tax. But do they understand what is meant by abolishing the poll tax? It means abolishing a flat rate payment. It means abolishing the principle that everyone has to pay. More generally it means abandoning the principle of setting out to tax people. That principle has been tried at other times and in other places. It has a 100 per cent. record of failure. People, as opposed to property or income, have a nasty habit of moving about. One can never find them where one wants them. One tends to find that they do not have the money when one wants it. One ends up with a great deal of injustice, creating a great deal of hardship, and a vast apparatus of administrative cost for not very much return.
Another difficulty of taxing people which has not been dwelt upon sufficiently is the reaction that we create by setting out to tax foreigners while they are in this country. I made the parallel with ship-money earlier today. Late last night I was reading a concession by Charles I in 1635 that he would not attempt to levy ship-money on merchant strangers inside this country because of the danger of upsetting 1144 innumerable reciprocal arrangements. That is a precedent that I believe we might take into account. This tax on foreigners is very deeply resented. It is likely to lead to retaliation. If we retain a tax on people we risk keeping that provision.
There must also be a better arrangement for standard spending assessments. Perhaps I may ask the noble Baroness for her attention for a moment. I did not intervene when she dealt in her speech with Wandsworth. However, I have in my hand a press release issued yesterday by Frank Field MP. It compares the Exchequer support for the local authorities in Wandsworth and the Wirral. It states that in Wirral each poll tax payer is allocated £351 per person. In Wandsworth the sum is £843 per resident. If one leaves out of the calculation the ILEA grant, which Mr. Field has conceded may involve separate issues, if the Wirral were supported at the same level as Wandsworth its poll tax would not be £476 but £24. Let us hear no more about the efficiency of Wandsworth. It is not the efficiency of Wandsworth; it is the efficiency of the Exchequer.
Under the heading of the poll tax, we are concerned with the capping principle. One of the factors that has gone wrong is the spending limit. When the Local Government Finance Bill was before the House we were told that local revenue should contribute 25 per cent. According to the Secretary of State, the correct figure is 34 per cent. The Lord Privy Seal suggested at Question Time on the 14th that that represented a measure of profligate overspending by local authorities. Comparing the figure with what has happened in the remainder of the public services, I should be more inclined to suggest that it means excessive under-calculation of spending limits by the Government. On no occasion on which the Government have had to calculate a spending limit for a public service have they got it right. If that statement is incorrect, if there is an exception, I shall be grateful to hear of it.
Finally, I wish to answer the noble Lord, Lord Boyd-Carpenter. I listened to his speech with a great deal of interest. I gave him notice that I would raise the issue on this amendment. The points need answering even if the noble Lord is not present. He was concerned about non-taxpayers voting. If they had no interest in the tax, they might vote to increase it. The noble Lord was elaborating an argument with a long history. It goes back to Cromwell and Ireton at the Putney debates; that no one should vote except those who, as Ireton put it, had a permanent fixed interest in this kingdom. The difficulty with that argument is that, throughout its history, it has been an argument against universal suffrage.
I take the noble Lord's point that everyone pays indirect taxes. However, it has always been the case that direct taxes have not been paid by a large proportion of the population. If we are to introduce the idea that there must be a direct link between tax paying and voting we must abandon universal suffrage. The proposals made by Mr. Norman Tebbit on the Walden interview a few weeks ago provoked the comment from Mr. Walden, "That sounds like the South African pass laws, Norman". That is the danger into which one will fall.
1145 The noble Lord must think again about the issue. Paying taxes is not the only interest that we have in this kingdom. John Locke was right in saying that we have an interest in the kingdom by as much as breathing and by as much as being on the highway. Colonel Rainborough was right when in 1647 he said:I think that the poorest he that is in England hath a life to live as the greatest he; and therefore truly, sir, I think it's clear that every man that is to live under a government ought first by his own consent to put himself under that government;…;I should doubt whether he was an Englishman or no, that should doubt of these things".That applies whether he pays taxes or not.
§ 8.30 p.m.
§ Baroness Blatch
These amendments represent a heavy-handed attempt by Members opposite to delay the coming into effect of the reduction in the personal charge required by the Bill by linking it to a statement of plans for the future of the local government finance system. The amendments are wholly unnecessary and wholly undesirable.
They contrive to put a series of hurdles in the path of the Secretary of State. Whereas the Bill as drafted requires the reductions to take effect the day after it is passed the amendments require the Secretary of State to make an order to give effect to the reductions. And before he can do that we gather that he has to lay before Parliament statements relating to the timing of the abolition of the community charge. The only practical effect of these amendments would be to deprive chargepayers of the substantial reductions in their charges which we are proposing and cause the maximum disruption for both authorities and their chargepayers.
But, of course, in reality these amendments represent nothing more than a red herring. As the noble Lord is aware, my right honourable friend the Secretary of State made a statement in another place on 21st March outlining progress on our comprehensive and fundamental review of local government. He made it clear that we have decided that from the earliest possible moment the community charge will be replaced by a new system of local taxation. He went on to say that after a careful reappraisal of the options we have decided in principle to bring forward a new local tax under which there will be a single bill for each household comprising two essential elements: the number of adults living there and the value of the property.
I do not propose to repeat my right honourable friend's statement. Suffice it to say that we propose to consult on the new local tax as we do on local government structure and internal management. We shall do so on the basis that the new tax could be in place in 1993–94; that is by 1st April 1993. Perhaps the noble Lord would care to join in the consultation process. We have heard several suggestions. The noble Baroness, Lady Fisher, said that she had some ideas in which we might be interested. We should certainly be interested in the participation in the review of Members opposite.
It would clearly be unrealistic to have the new tax in place by 1st April 1992. Major reform takes time. 1146 The worst of all possible worlds would be to have the old rates system as a stop-gap as the Labour Party apparently wants to do. We certainly do not want to have two upheavals for local authorities. Or perhaps the truth is that if Labour went back to the discredited rates system it would never get away from it.
What is clear is that the community charge will continue in 1991–92 and 1992–93. There is no prospect of its replacement before 1st April 1992. But the fundamental shift in the balance between central and local taxation for paying for local services announced by my right honourable friend the Chancellor of the Exchequer on 19th March is a permanent one. That does not preclude the review in relation to the structure nor the review in relation to functions. I pose this question to both parties opposite: do they intend to shift that balance back to raising greater sums of revenue at local level?
The noble Earl, Lord Russell, referred to comparisons with Wirral. That was an interesting comparison. Wirral has increased its budget by 20 per cent. and its spending above its SSA by£46 per adult as compared with Wandsworth, which has reduced its budget and is spending below its SSA by£116. The noble Earl should be comparing like with like; that is, like authorities in the same class—
§ Earl Russell
I was concerned about how the SSAs are arrived at. There is a good deal of curiosity about the matter.
§ Baroness Blatch
The SSAs are a way of determining the need for local authorities. The noble Earl is welcome to come into my department to discuss in more detail how they are arrived at. Wirral is treated on the same basis as other local authorities but it has chosen to spend well above its SSA whereas Wandsworth has chosen to spend well below it—
§ Lord McIntosh of Haringey
I am grateful to the Minister for giving way. She talks about Wandsworth spending below its SSA. Of course that is the case because the SSA has been rigged in such a way that it is possible for some boroughs to do that. However, nobody can get away from the fact that Wandsworth is receiving free police and fire services which are not under its control. Who is paying for the police and fire services in Wandsworth? It is not the people of Wandsworth but people in other parts of London who have had the grant system rigged against them, the VAT payers and tax payers. It cannot be claimed that the efficiency of Sir Paul Beresford is so great that he has achieved a police and fire service which costs nothing to his electors.
§ Baroness Blatch
I challenge the noble Lord, Lord McIntosh, to come with me and make detailed comparisons between the external finance received, for example, by Lambeth, Hackney, Tower Hamlets or Southwark and Wandsworth. That is comparing like with like not only in respect of levels of expenditure but also the quality of the services that those authorities provide.
1147 The Bill seeks to effect that change with the utmost speed for 1991–92. These amendments are unnecessary for that purpose. They seek to frustrate it. I urge the Committee to reject them.
§ Lord McIntosh of Haringey
The Minister talked as though our amendments would cause a delay in the implementation of the procedures of the Bill. The delay could be at most five minutes. All that is required is for the Government to get out of the internal fighting which is characteristic at the present time, make up their minds and say that in truth they will get rid of the poll tax and do so straight-away. It is possible to do that; various alternatives can be implemented within a period of 12 months. They may not be the final solution but they will be better than the poll tax. To argue that the amendments will delay the implementation of the Bill, the increase in VAT or the reduction in the community charge is a complete nonsense. The Minister has misinterpreted and misrepresented the purpose and impact of the amendments. I invite the Committee to take an opinion on them.
§ 8.39 p.m.
§ On Question, Whether the said amendment (No. 1) shall be agreed to?
§ Their Lordships divided: Contents, 70; Not-Contents, 117.1148
|Division No. 1|
|Addington, L.||Kennet, L.|
|Ardwick, L.||Llewelyn-Davies of Hastoe, B.|
|Birk, B.||Lovell-Davis, L.|
|Blackstone, B.||Macaulay of Bragar, L.|
|Bonham-Carter, L.||McCarthy, L.|
|Boston of Faversham, L.||McIntosh of Haringey, L.|
|Bottomley, L.||McNair, L.|
|Briginshaw, L.||Molloy, L.|
|Brooks of Tremorfa, L.||Monkswell, L.|
|Buckmaster, V.||Morris of Castle Morris, L.|
|Carmichael of Kelvingrove, L.||Murray of Epping Forest, L.|
|Carter, L.||Nicol, B.|
|Castle of Blackburn, B.||Ogmore, L.|
|Clinton-Davis, L.||Oram, L.|
|Cocks of Hartcliffe, L.||Peston, L.|
|David, B.||Pitt of Hampstead, L.|
|Dean of Beswick, L.||Prys-Davies, L.|
|Donoughue, L.||Richard, L.|
|Dormand of Easington, L.||Robson of Kiddington, B.|
|Ewart-Biggs, B.||Rochester, L.|
|Falkender, B.||Russell, E. [Teller.]|
|Falkland, V.||Sefton of Garston, L.|
|Fisher of Rednal, B.||Serota, B.|
|Gallacher, L.||Stallard, L.|
|Galpern, L.||Stoddart of Swindon, L.|
|Graham of Edmonton, L. [Teller.]||Strabolgi, L.|
|Taylor of Gryfe, L.|
|Grey, E.||Tordoff, L.|
|Hampton, L.||Underhill, L.|
|Hatch of Lusby, L.||Varley, L.|
|Houghton of Sowerby, L.||Walston, L.|
|Howie of Troon, L.||Wedderburn of Charlton, L.|
|Hughes, L.||White, B.|
|Irvine of Lairg, L.||Williams of Elvel, L.|
|Jenkins of Putney, L.||Winchilsea and Nottingham, E.|
|Abinger, L.||Barber, L.|
|Ashbourne, L.||Beloff, L.|
|Astor, V.||Belstead, L.|
|Auckland, L.||Blatch, B.|
|Blyth, L.||Long, V.|
|Boardman, L.||Lucas of Chilworth, L.|
|Boyd-Carpenter, L.||Lyell, L.|
|Brabazon of Tara, L.||McColl of Dulwich, L.|
|Brougham and Vaux, L.||Mackay of Clashfern, L.|
|Caithness, E.||Macleod of Borve, B.|
|Caldecote, V.||Margadale, L.|
|Campbell of Alloway, L.||Massereene and Ferrard, V.|
|Carlisle of Bucklow, L.||Merrivale, L.|
|Carnegy of Lour, B.||Mersey, V.|
|Carnock, L.||Montgomery of Alamein, V.|
|Cavendish of Furness, L.||Mottistone, L.|
|Clanwilliam, E.||Mountevans, L.|
|Clinton, L.||Munster, E.|
|Cochrane of Cults, L.||Murton of Lindisfarne, L.|
|Colnbrook, L.||Nelson of Stafford, L.|
|Cork and Orrery, E.||Norfolk, D.|
|Craigavon, V.||Norrie, L.|
|Craigmyle, L.||Nugent of Guildford, L.|
|Crickhowell, L.||Oppenheim-Barnes, B.|
|Cullen of Ashbourne, L.||Orr-Ewing, L.|
|Davidson, V. [Teller.]||Oxfuird, V.|
|Denham, L. [Teller.]||Park of Monmouth, B.|
|Downshire, M.||Pearson of Rannoch, L.|
|Dudley, B.||Pender, L.|
|Eccles, V.||Plumb, L.|
|Eccles of Moulton, B||Plummer of St. Marylebone, L.|
|Ellenborough, L.||Radnor, E.|
|Elliot of Harwood, B.||Rankeillour, L.|
|Elphinstone, L.||Reay, L.|
|Elton, L.||Renton, L.|
|Faithfull, B.||Renwick, L.|
|Fortescue, E.||Rochdale, V.|
|Fraser of Carmyllie, L.||Saint Oswald, L.|
|Gainsborough, E.||Saltoun of Abernethy, Ly.|
|Gisborough, L.||Seccombe, B.|
|Greenway, L.||Selkirk, E.|
|Gridley, L.||Sharples, B.|
|Grimston of Westbury, L.||Skelmersdale, L.|
|Harmar-Nicholls, L.||Soulsby of Swaffham Prior, L.|
|Harmsworth, L.||Southborough, L.|
|Haslam, L.||Strange, B.|
|Hayter, L.||Strathcarron, L.|
|Henley, L||Strathclyde, L.|
|Hesketh, L.||Suffield, L.|
|Hooper, B.||Teviot, L.|
|Huntly, M.||Tollemache, L.|
|Hylton-Foster, B.||Trumpington, B.|
|Jeffreys, L.||Ullswater, V.|
|Jenkin of Roding, L.||Vaux of Harrowden, L.|
|Johnston of Rockport, L.||Waddington, L.|
|Kinloss, Ly.||Wade of Chorlton, L.|
|Kintore, E.||Wigram, L.|
|Lauderdale, E.||Wise, L.|
|Lindsey and Abingdon, E.|
§ Resolved in the negative and amendment disagreed to accordingly.
§ 8.48 p.m.
§ The Deputy Chairman of Committees (Lord Hayter)
In calling Amendment No. 2, I have to tell the Committee that if it is agreed to I cannot call Amendments Nos. 3, 4, 5, 6 or 10.
§ [Amendment No. 2 not moved.]
§ Lord McIntosh of Haringey moved Amendment No. 3:
§ Page 1, line 5, leave out from ("amount") to second ("for") in line 7 and insert ("payable by any person after allowance for any rebate or other reduction in respect of a personal community charge".).
§ The noble Lord said: In moving Amendment No. 3, I should like to speak also to four Scottish amendments. I do not quite know why we get more 1149 complicated when we get north of the Border, but we seem to do so. The amendments are Nos. 16, 20, 21 and 22.
§ These amendments are as simple as they could be. They simply provide for the£140, which has been widely bruited around as being the benefit which the average, or even the typical, poll tax payer will be getting from this munificent Bill. Nothing could be further from the case. The£140 applies only to those personal community charge payers who are not in receipt either of rebates or reductions in respect of the community charge reduction scheme, and it does not apply to anybody who has a second home which is subject to the standard community charge.
§ I do not want anybody to misunderstand me. Let us agree that those who are in need are the ones who are getting the rebates. Let us also agree that, on the whole, those who are least in need are the ones who have second homes and are paying standard community charges. So one would therefore think it right that the benefit of this munificence is given more to the people in greater need—therefore, to the people getting rebates—and less to the people who are paying the standard community charge.
§ No, what is happening is that the so-called£140 is being paid less to the people more in need, because they are still paying 20 per cent. of the reduced amount rather than being relieved of the amount altogether, and those who are least in need—that is, those with second homes—are getting more benefit because they are being relieved of the£140 not once, not even twice, but, where the standard community charge is double, three times. Such is the view of this Government of fairness in our taxation system.
§ We simply say. because we think it is right, that this£140 should be made available for the people most in need and not calculated on the headline amount—that is the new jargon phrase—before the calculation of rebate or any reduction under transitional relief. It could not be simpler or clearer or more just. Also it accords with what Ministers have allowed the people of this country to understand, from the way in which they have presented the Bill in the press. This is a very unfair Bill indeed, and this is a simple way of dealing with one of the sources of unfairness. I beg to move.
§ Lord Hayter
I have to tell the Committee that if Amendment No. 3 is agreed to, I cannot call Amendments Nos. 4 or 5.
§ Earl Russell
When I first took up my job, I had a colleague whose father at the end of the last century had been a Scottish railway worker. He told me that his father constantly said right through into the 1960s, "Why did we never get our three acres and a cow?". I believe that if this amendment is not accepted we shall be finding in 60 years' time people saying, "Why did I never get my£140?"
It has been spelt out very widely that this Bill is offering a rebate of £140 to each payer. It is, as we know, a lot more complicated than that but the Government have firmly established this idea in 1150 people's minds. If they do not live up to it, I think they will pay for it. If they would like to do it, I suppose that is their business, but I would advise them not to.
§ Baroness Blatch
Our purpose in this Bill is to reduce headline community charges. It follows from our decision to shift a substantial part of the burden at present borne by the community charge payer to the national tax payer. It is not the aim of the Bill to ensure that all charge payers should pay£140 less than would otherwise have been the case. After all, we have already provided generous relief under the community care reduction scheme for former rate payers, who have been specially affected by the move to the community charge. Substantial improvements to that scheme have already been announced, and for those charge payers on low incomes we have also provided community charge benefit.
It is perfectly reasonable that eligibility for relief under the reduction scheme and for benefit should be calculated after and not before the deduction of£140 from headline charges. The approach advocated by the Opposition would involve a substantially greater reduction in community charge income than my right honourable friend has planned for in his Budget. Accordingly, further increases in taxation would be necessary to finance it. In addressing these amendments, noble Lords opposite have not suggested where the resources should come from to meet the extra costs of the amendments.
The noble Earl, Lord Russell, was particularly anxious—as indeed he always is—for those people at the bottom end of the income scale. It needs to be remembered that these particular people we are talking about at the moment have enjoyed a subsidy of 80 per cent. of the community charge. It follows that if they are paying 20 per cent., then they are receiving 80 per cent. in subsidy, and what we are doing is reducing the charge for them by 20 per cent. Of£140. It will be a pro ratareduction. For the very poorest, the net cost is nothing, in that there is a supplement paid into benefit and indeed into students' support grant so that the actual amount in practice is almost nil in some cases and actually nil in others.
§ Lord Stallard
Before the noble Baroness leaves that point, she said they are enjoying an 80 per cent. rebate. Those people enjoyed a 100 per cent. rebate before the poll tax.
§ Baroness Blatch
If the noble Lord finds offence in the word "enjoy" I shall withdraw it; but they do experience or receive a subsidy from the Government of 80 per cent., which is met by tax payers at large.
§ Lord Stallard
What I am saying is that they received a subsidy of 100 per cent. under the old rating system.
§ Baroness Blatch
Many of them receive a subsidy of 100 per cent. now, in that the money is paid into benefit, which is comparable to the amount many people on that income actually pay.
§ Lord McIntosh of Haringey
The noble Baroness has withdrawn the word "enjoy", and that was wise. Would she now consider withdrawing the word 1151 "subsidy"? Is it a subsidy when people who are most in need and cannot afford to pay these charges are being given a rebate of 80 per cent.? This is the most offensive possible way of looking at the finances of people in need. To tell them that they are receiving a subsidy is exactly the way to ensure that we do not get a proper take-up of people's rights under the law.
§ Baroness Blatch
I said earlier this afternoon that the noble Lord's imagination is positively gymnastic, and I say that again. It is wrong to criticise the Government by saying that they do not care when they have taken the view that there are some people who cannot meet the full charge—that is 100 per cent.—and many of them will pay only 20 per cent. so that for some the cost in reality is almost nothing, and for others it is nothing. That is because the Government are anxious and wish to be sensitive to the needs of people and their ability to pay, despite what noble Lords opposite say. Therefore, as I have said, if the use of the word "enjoy" was injudicious, I withdraw it; but I am making the point that some people receive 80 per cent., and others receive almost 100 per cent. in practice, and that the reduction of£140 is pro ratato that.
Amendments Nos. 20, 21 and 22 appear to be drafting amendments. I remain of the view that Clause 3(1), as drafted, is correct and that the changes proposed by these amendments would make it incorrect.
Changes in Scotland are determined by local authorities and in respect of them. The word "authority" in Clause 3(1) (a), (b) and (c) refers directly back to the reference to "a local authority" in Line I of the clause and, I would submit, should not be changed. I would therefore ask noble Lords to withdraw that amendment.
These amendments have the effect of requiring the reduction of£140 to be applied after, rather than before, the application of the reduction scheme and benefit. I remind the Committee that the additional cost would be£3.3 billion in England, and the result would be that 9.25 million charge payers would pay nothing at all. That is a substantial sum; and, as I said earlier, noble Lords have said nothing about where this money should come from.
§ Lord McIntosh of Haringey
The implication of those last remarks is that there is something sacrosanct about the figure of£140, and of course there is nothing sacrosanct about the figure of£140. As I have already pointed out, it was clearly designed to be rounded off to the nearest 10 above the Wandsworth figure so that Wandsworth poll tax payers would come out about even; in other words, they would get nearly£140 benefit and only lose£4. I notice that some people in Wandsworth are asking "when am I going to get my£4 back?", and then everybody else would still be paying something. That leaves open the absurdities that we have reached in Westminster and in Shetland, and perhaps in other places, where the cost of collection is going to be greater than the amount received. However, that is a matter for later amendments and I shall not intrude on those now.
1152 If the Government are complaining about this attempt to bring justice into the distribution of receipts from increased VAT, and if they are saying that the proposal will cost£3.3 billion more, there is a simple solution: they can agree to the amendment. They can do their sums again between now and Report, and they can change the£140 after that. That would meet the case entirely. It is a simple sum. If they cannot do it, I shall do it for them and put down a suitable amendment on Report. What is clearly necessary is that the amount of money available, whatever it may be, should be made available primarily to those most in need. That is the purpose of the amendment. That has not been contradicted in any way by the Minister's response. The Committee should take a decision on this matter.
§ 9 p.m.
§ On Question, Whether the said amendment (No.3) shall be agreed to?
§ Their Lordships divided: Contents, 64; Not-Contents, 116.1153
|Division No. 2|
|Addington, L.||Macaulay of Bragar, L.|
|Ardwick, L.||McCarthy, L.|
|Birk, B.||McIntosh of Haringey, L.|
|Blackstone, B.||McNair, L.|
|Bonham-Carter, L.||Molloy, L.|
|Boston of Faversham, L.||Monkswell, L.|
|Briginshaw, L.||Morris of Castle Morris, L.|
|Buckmaster, V.||Murray of Epping Forest, L.|
|Carmichael of Kelvingrove, L.||Nicol, B.|
|Carter, L.||Ogmore, L.|
|Clinton-Davis, L.||Oram, L.|
|Cocks of Hartcliffe, L.||Peston, L.|
|David, B.||Pitt of Hampstead, L.|
|Dean of Beswick, L.||Prys-Davies, L.|
|Donoughue, L.||Richard, L.|
|Ewart-Biggs, B.||Robson of Kiddington, B. [Teller.]|
|Falkland, V.||Rochester, L.|
|Fisher of Rednal, B.||Russell, E.|
|Gallacher, L. [Teller.]||Sefton of Garston, L.|
|Galpern, L.||Serota, B.|
|Graham of Edmonton, L.||Stallard, L.|
|Grey, E.||Stoddart of Swindon, L.|
|Hampton, L.||Strabolgi, L.|
|Hatch of Lusby, L.||Taylor of Gryfe, L.|
|Houghton of Sowerby, L.||Tordoff, L.|
|Howie of Troon, L.||Underhill, L.|
|Hughes, L.||Varley, L.|
|Irvine of Lairg, L.||Walston, L.|
|Jenkins of Putney, L.||Wedderburn of Charlton, L.|
|John-Mackie, L.||White, B.|
|Llewelyn-Davies of Hastoe, B.||Winchilsea and Nottingham, E.|
|Abinger, L.||Caldecote, V.|
|Ashbourne, L||Campbell of Alloway, L.|
|Astor, V.||Carlisle of Bucklow, L.|
|Astor of Hever, L.||Carnegy of Lour, B.|
|Auckland, L.||Carnock, L.|
|Barber, L.||Cavendish of Furness, L.|
|Beloff, L.||Clanwilliam, E.|
|Belstead, L||Clinton, L.|
|Blatch, B.||Cochrane of Cults, L.|
|Blyth, L.||Colnbrook, L.|
|Boardman, L.||Cork and Orrery, E.|
|Boyd-Carpenter, L.||Craigavon, V.|
|Brabazon of Tara, L||Craigmyle, L.|
|Brougham and Vaux, L.||Crickhowell, L.|
|Caithness, E.||Cullen of Ashbourne, L.|
|Davidson, V. [Teller.]||Montgomery of Alamein, V.|
|Denham, L. [Teller.]||Mottistone, L.|
|Downshire, M.||Mountevans, L.|
|Dudley, B||Munster, E.|
|Eccles, V.||Murton of Lindisfarne, L.|
|Eccles of Moulton, B.||Nelson of Stafford, L.|
|Ellenborough, L||Norfolk, D.|
|Elliot of Harwood, B.||Norrie, L.|
|Elphinstone, L||Nugent of Guildford, L.|
|Elton, L||Oppenheim-Barnes, B.|
|Faithfull, B.||Orr-Ewing, L.|
|Fortescue, E.||Oxfuird, V.|
|Fraser of Carmyllie, L.||Park of Monmouth, B.|
|Gainsborough, E.||Pearson of Rannoch, L.|
|Gisborough, L.||Pender, L.|
|Grantchester, L.||Plumb, L.|
|Gridley, L.||Plummer of St. Marylebone, L.|
|Grimston of Westbury, L.||Radnor, E.|
|Harmar-Nicholls, L.||Rankeillour, L.|
|Harmsworth, L.||Reay, L.|
|Haslam, L.||Renton, L.|
|Henley, L.||Renwick, L.|
|Hesketh, L||Rochdale, V.|
|Hooper, B.||Saint Oswald, L.|
|Huntly, M.||Saltoun of Abernethy, Ly.|
|Hylton-Foster, B.||Seccombe, B.|
|Jeffreys, L.||Selkirk, E.|
|Jenkin of Roding, L.||Sharples, B.|
|Johnston of Rockport, L.||Skelmersdale, L.|
|Kinloss, Ly.||Soulsby of Swaffham Prior, L.|
|Kintore, E.||Southborough, L.|
|Lauderdale, E.||Strange, B.|
|Lindsey and Abingdon, E.||Strathcarron, L.|
|Long, V.||Strathclyde, L.|
|Lucas of Chilworth, L.||Suffield, L.|
|Lyell, L.||Teviot, L.|
|McColl of Dulwich, L.||Tollemache, L.|
|Mackay of Clashfern, L.||Trumpington, B.|
|Macleod of Borve, B.||Ullswater, V.|
|Margadale, L.||Vaux of Harrowden, L.|
|Merrivale, L.||Waddington, L.|
|Mersey, V.||Wade of Chorlton, L.|
|Monson, L.||Wigram, L.|
§ Resolved in the negative, and amendment disagreed to accordingly.
§ 9.8 p.m.
§ Lord McIntosh of Haringey moved Amendment No. 4:
§ Page 1, line 5, after ("amount") insert ("payable by any person liable either to pay in full a personal community charge, or to pay a charge reduced from such an amount under the community charge reduction scheme".).
§ The noble Lord said: In moving Amendment No. 4, I should like to speak also to Amendments Nos. 6, 9, 13, 15, 18, 23, 27 and 28, and I shall not move Amendment No. 11.
§ In its wisdom the Committee has decided that it is not appropriate to calculate the rebate or the transitional benefit first before deducting the£140 or whatever that figure may be. Therefore, as an alternative we have tabled a series of amendments which will seek to provide that the full£140 is calculated after the community charge reduction scheme and after the calculation of rebates.
§ The significant amendments in this group are Amendments Nos. 4 and 9. Amendment No. 4 is concerned with the community charge reduction scheme and Amendment No. 9 is concerned with rebates.
§ In simple terms, with respect to rebates that means that instead of having to pay the 20 per cent. of the reduced figure, those who are paying a rebated figure 1154 and enjoying—in the Minister's charming words—the benefit of a subsidy would no longer have to pay that 20 per cent., but in the words of Amendment No. 9 that figure would be reduced to£0.
§ Those who took part in the lengthy debates on the poll tax Bill in 1988 will recall only too well the amount of time taken in discussing the rebate system. We achieved many changes in that system. With all-party support we achieved agreement on an extension to the rebate system. I remember lengthy and valuable debates about different categories of disabled people, students, student nurses and many groups of people in need whose plight was recognised by Members of this Chamber in all parties and in none.
§ Therefore, the rebate system which resulted from the Bill as it left this Chamber was substantially better than the rebate system in the Bill which arrived here from the Commons. I notice that Ministers have never ceased to congratulate themselves on how generous and effective is the rebate system. However, they do not recall that virtually every single change in the rebate system which we put forward was resisted by the Government Front Bench. It was only through a combination of strength of argument and sometimes strength of numbers in the Division Lobby that we achieved a rebate system that was in any way representative of the wide range of financial as well as physical needs. I know that many Members of the Committee this evening will recall those debates.
§ However, changes to the rebate system which left it as a minimum 20 per cent. attacked some of the worst ancillary evils of the poll tax system but did not attack the root of the problem. The root of the problem still is and has been all the time—and this has become self-evident since the poll tax was introduced—that many millions of people who simply cannot afford to pay taxes and do not pay direct taxes in any other way, with no question of them ever being assessed for income tax, are being asked to pay 20 per cent. in addition to what they are paying in indirect taxes. That was the injustice which we did not recognise. That was why, with all the other failings of the poll tax, this failing still stuck in people's throats after the legislation was introduced and implemented.
§ The Secretary of State admitted for the first time last Thursday that the public have not been persuaded that the poll tax is fair. He is certainly right about that. It would have been better if he had recognised that we were right in saying that when the idea of the poll tax was first introduced. One of the principal reasons why people feel that the poll tax is not fair is because people who patently cannot afford it are still being asked to pay 20 per cent. in the so-called interests of accountability.
§ I turn to the issue of accountability again because it is absolutely critical to our understanding of the nature of the poll tax legislation which we are being asked to amend in this Bill. The idea of accountability is that local authorities are only accountable to people who actually sign the cheques or hand over the money for the taxation which goes towards local government finances. That is not an argument which is ever used about central government finance. Nobody ever says 1155 that, as voters in a general or parliamentary election, people who are too poor to pay income tax deserve less accountability. It may be suggested, but if it is, no one ever dares to say so in public. There are many who would like to go back to the 40 shillings freeholder basis of central government taxation. At least we have achieved a certain amount in democracy in that it is understood that one's right to vote is not determined by one's ability to pay income tax.
§ As always, we learn a great deal on these occasions from the noble Earl, Lord Russell, particularly about 17th century history. I am sorry that he is not here to join in this discussion. I am always fascinated by the ship tax, John Hampden, and all the other insights which the noble Earl gives us into the history of taxation in this country. The fundamental principle in central government and parliamentary elections—or elections for another place, at any rate—is that the basis is one person one vote. The Government are prepared to accept that regardless of income tax payments for their own activities, but in this peculiar way they are somehow unwilling to accept the same principle for local authorities. They are unwilling to accept that it is possible for people who do not hand over the cash or pay the cheques themselves to feel responsible for what their local authority does.
§ In point of fact it is well recognised that those who pay their rates together with their rent to the local authority, the two sums being lumped together, perfectly well understand that they are paying rates as well as rent and that the local authority is just as accountable as when they are paying the poll tax. Similarly, there are not many households where it is not understood that the family budget for the household includes all the adults in that household. If the householder is paying over the cheque for the rates he is doing that on behalf of all the others who can pay. Clearly that does not apply to those who have no income of their own. It is well understood in every household that I have come across just as it is understood in every council house that I have ever known.
§ My noble friend Lord Peston, says that I do this ad nauseam, but I am going to do it once more. The perceived incidence of the rates was 75 per cent. in the sense that, when you asked adults the question, "Do you pay rates?" 75 per cent. said, "Yes". That is the conclusive argument that the rates are understood to bear more widely than the number of ratepayers would indicate and that they achieve accountability.
§ The challenge to the Government is that the poll tax has failed in two ways to achieve accountability. The relationships between the amount that people pay for the poll tax and the service which they get, and the budgets of local authorities, are patently totally wild. They are completely out of kilter. There is no relationship that anyone can see between what a local authority pays, the quality of the service it gives and the level of poll tax demanded. It is all done by way of the standard spending assessment, which is based on statistics which have been getting progressively less accurate since the 1981 census. In addition, major elements of local authority expenditure are completely ignored.1156
§ For example, in my part of North London the standard spending assessment completely ignores the issue of homelessness. Haringey is a reception area for immigrants and refugees from all over the world, and has always been so, whether the refugees were from Cyprus after 1974 or Somalia now, but none of the expenditure which bears on our homelessness budget is ever recognised in our standard spending assessment. The point is that for every penny that we go above the standard spending assessment, the gearing is such that the withdrawal of government grant is enormously more severe. Therefore our poll tax increases by far more than the amount by which our expenditure has increased. That is the truth of the matter. The local government finance system following the introduction of the poll tax is by every possible definition less accountable than it was before.
§ What is to be done about this? The Committee has taken the view that we should not now be announcing our alternatives to the poll tax. The Committee was given an opportunity to do so on the first Division but it decided not to. So I shall not pursue that particular line of argument. But I certainly do pursue the view that the Government would do themselves a great deal of good now if they recognised that renouncing the false pursuit of accountability sought through making everybody pay something would be a very major step, not in restoring confidence in the Government's political judgment, wisdom or sense of justice, but in correcting one of the worst defects of the poll tax system as it exists at the moment.
§ As we proceed with the Bill it becomes more and more clear that the 20 per cent. collection from people most in need is not only unjust, and is perceived to be unjust, but is wildly inefficient. It costs very many local authorities much more to collect the 20 per cent. than it brings them in receipts. Very often the people who are most in need are the people who move most often and who are most difficult to find. They are people who are of no fixed abode, as it may be, and who are in and out of hospital, as it may be. All of these are people who suffer most severely from the 20 per cent. rule. What we are proposing, particularly in Amendment No. 9, is that the 20 per cent. rule should now be abolished. We are proposing in Amendment No. 4 that the same should apply to those who benefit from the transitional relief.
§ I am sorry to have taken some time on this matter but it is fundamental to our understanding of the way in which the worst injustices of the poll tax are being continued in the present Bill. It is not just that the amount of the poll tax is so high. That is not the reason why people are not persuaded of its fairness. It is because the fundamental principles of the poll tax are wrong. That is what people are persuaded of. We could not deal with all of them but we could deal with one of the issues of principle by adopting these amendments. I beg to move.
§ Lord Waddington
I have listened attentively to all that the noble Lord had to say. I have to say that the scope of this Bill is very narrow, as we now all know after some hours of debating it. There will no doubt come a time when we shall debate a measure to provide for a new way of financing local government 1157 services, but that is certainly not what we are doing tonight. Tonight it is certainly not the purpose of this Bill to alter the community charge system: rather, it seeks to make as many people as possible liable to contribute something towards the cost of local services.
The noble Lord, Lord McIntosh, referred to the inefficiency of trying to recover moneys from people who received an 80 per cent. rebate. As the Audit Commission has shown, however, the average unit collection cost of£14 per chargepayer, much lower than some are suggesting, means that, even for authorities with low charges as a result of the£140 reduction, it will still be cost effective to collect from students and people receiving maximum community charge benefit.
My honourable friend Mr. Portillo announced in another place on 25th March three particular improvements to the community charge reduction scheme in England. Any relief to which a charge payer is entitled under that scheme and under charge benefit will be calculated using the new charge as reduced by this Bill. Not all people who will benefit from the community charge reduction scheme, or benefit or both, will receive the full benefit of the£140 charge reduction. It would indeed be odd if the CCRS beneficiaries were, so to speak, to benefit twice over.
So far as concerns those who are required to pay 20 per cent. of the charge, when an authority sets its initial charges for the year it has to set them at a level which is sufficient to cover its estimated outgoings from the collection fund taking into account other sources of income—basically revenue support grant and non-domestic rates. In deciding the level of charges it needs to set, the authority will take a view about income from people who do not pay the full amount of the charge.
If at the stroke of a pen the liability of the 20 per cent. contributors were to cease at the same time as the personal charge is reduced by£140, that would leave authorities with a shortfall of income. The grants payable under the Bill are confined to charge income forgone by virtue of the£140 reduction requirement. Those grants thus prevent a collection fund deficit in respect of the charge reductions required by the Bill. However, there will be nothing to stop the collection fund going into deficit as a result of these amendments. I therefore invite the Committee to reject them.
§ Lord Monkswell
Perhaps I may question the noble Lord on two specific points. The first is his mention of the figure of£14 as being the average cost of collection. If we use that figure it creates an immediate problem. I say that because the cost of collection of the smaller amounts relating to the 20 per cent. charge payers is more likely to be higher than the cost of collection at the other end of the scale. For example, a wealthy person with a comparatively small community charge in relation to his normal outgoings may sign a direct debit form at the beginning of the year. That is a cheap administrative mechanism for collection. The average cost of collection will range between the very cheap at one end—I suspect that it 1158 will be about a few pounds—to a higher cost at the other end of the scale. It would be most useful if the Lord Privy Seal could give us some figures for the cost of collection as regards all the bureaucratic paraphernalia involved in collecting what can sometimes be very small amounts from people who do not have the ability to pay. Further, can he give us an idea of the cost involved when, for example, the local authority has to go through the courts to get an attachment of earnings order?
Secondly, the noble Lord said that the community charge is calculated on the basis of expenditure and if local authorities did not collect that proportion of the community charge they would be out of pocket. But that is exactly what we are talking about; we are talking about a situation where it costs local authorities more to collect the charge. In other words, they are losing more than they are raising in income. Therefore, there were two discrepancies in the answer given by the noble Lord. I would welcome further elucidation as regards those two points.
§ Lord Waddington
The simple answer is that the system is already set up to collect not only from those who are liable to pay the full personal charge but also from those who have to pay only 20 per cent. of it. Bearing in mind the fact that in each local authority area money will sometimes be collected from those liable to pay the full charge and those liable to pay only 20 per cent., the Audit Commission has calculated that the average cost of collection should be about£14. That was the point I was making during my earlier remarks. One cannot avoid the fact that in making the calculation of£14 provision is already made for collection from those who pay only 20 per cent. of the charge.
§ 9.30 p.m.
§ Baroness Nicol
The figure of£14 which the noble Lord quoted is very much at variance with the figure quoted by the leader of Westminster City Council the day after the announcement. On the radio she quoted a figure of£44, I think—it was certainly in excess of£40. I imagine that in Westminster most people pay by direct debit or cheque, therefore costs of collection would be less than anywhere else. I find it surprising that the noble Lord should now come up with the figure of £14. Is he saying that the leader of Westminster City Council was completely wrong?
§ Lord Waddington
That remark did not come from the leader of the council; I understand that it came from the chief executive. No matter; it came from Westminster City Council. The figure seems entirely unreasonable in the light of the figure which has been put forward by the Audit Commission. I can see no reason whatever why the costs of collection in Westminster should be so far out of line with what are believed to be the average costs in the country as a whole.
§ Lord McIntosh of Haringey
It is in the nature of averages that some figures will be higher and some will be lower. It may well he that the noble Lord the Lord Privy Seal is right and that the Westminster figures are 1159 out of line. Perhaps Westminster is extraordinarily inefficient in collecting its poll tax. That is the conclusion to be drawn from what the noble Lord the Lord Privy Seal says.
He has not answered the point of my noble friend Lord Monkswell. Is it not the case that with some figures being higher and some lower than the average, the poll tax which is likely to be the easiest to collect will come from those who are better off, more stable, who live in houses for longer and pay by direct debit? The people from whom it will cost more to collect the poll tax are those with less money, who cannot be forced to pay by direct debit, who are more likely to move and more difficult to follow when they do move. They are also the most in need. Is not the point which my noble friend makes valid; namely, that in this case the average is not the important figure? We need to know the costs of collection from those who are in receipt of rebates. If the noble Lord can give us those figures, we shall listen with great attention.
§ Lord Monkswell
Perhaps I may help the noble Lord on one point. Last year we were told that the post office would charge us 50p per activity. With a community charge payer who is paying on a weekly basis through the post office the cost will effectively be£25, which knocks the£14 average out of the window straightaway. That is before the other administrative costs involved in the collection of the poll tax are added, apart from the costs charged by the post office.
How does the figure of£14 relate to the reality of the costs of collecting the community charge from those people who are assessed as being eligible to pay only 20 per cent. of the community charge? It just does not bear sensible scrutiny.
§ Lord Waddington
Out of courtesy to the noble Lord, I shall repeat what I said previously. The system has already been set up on the basis that some people will pay the full charge and some are required to pay only 20 per cent. of the charge. The system therefore sometimes has more difficulty in obtaining payment from those who have a smaller liability than those who have a greater liability. Bearing all those factors in mind, the conclusion which was reached by the Audit Commission was that the average collection cost was£14.
With the greatest respect, the argument advanced by the noble Lord cannot possibly be an argument for now suddenly exempting many people when the system was devised in order to obtain payment from them.
§ Lord Stoddart of Swindon
The noble Lord the Lord Privy Seal said that the scope of the Bill was narrow. That may be his opinion. He said it a moment ago, and I wrote it down. I have been reading the Long Title of the Bill. It says that it is:A Bill to Make provision for, and in connection with, a reduction in the amounts of community charges for the financial year beginning on 1st April 1991 and the payment of grants to charging authorities in England and Wales and local authorities in Scotland".There is no provision in that Long Title which is so narrow as to prevent Members of the Committee tabling amendments to seek to bring about further 1160 exemptions. It is certainly perfectly in order for my noble friend to table an amendment to try to exempt completely from the community charge those people who do not have the resources to pay and who are already given a rebate of 80 per cent. which leaves them having to pay 20 per cent of the charge. In many cases that may be a very small amount of money. My noble friends Lord Monkswell, Lady Nicol and Lord McIntosh have already taxed the Leader of the House on this question. He has not yet given a satisfactory answer.
The fact is that there is a lot of money chasing very little money and the taxpayer is not getting a fair reward. But the position is even worse than that because if after everything has been done the charge payer or the poll tax payer—call him what you will—still does not pay, local authorities will take people to court for an amount perhaps as low as£28. Will that not look ridiculous? Of course it will. I do not want to help this Government as that is not part of my job. But when the newspapers record that some poor little person on perhaps£50 a week is being chased through the courts for£28, will that be good propaganda for the Government? The Government should think about that. However, I am being helpful to the Government and I did not intend to do that. But perhaps they will take that factor into account.
We are talking about a once and for all payment. It would never have to occur again. If the amendment were accepted and we abolished the 20 per cent. payment and reverted to the former position where local taxation was paid totally and the individual did not have any further involvement, the Government would only lose the sum once and for As the noble Baroness told us earlier, these people we are discussing do not really have to pay because the social security system pays them benefit so they can in turn pay the Government. Is it not ridiculous that we are spending all this money trying to collect money which is difficult to collect anyway and which the Government have in any event already paid? Nothing could be more foolish than that. My noble friend was trying to help the Government administratively if not politically.
The Government would not listen to us when we tried to help during the passage of the community charge legislation. I think they probably wish they had listened to us now. So why do they not listen to us on this occasion? Why do they not learn something from their past mistakes? If they did that, I feel quite sure they would come to the conclusion that we were right after all, that the provision is much more trouble than it is worth, and they would gain some benefit, perhaps even political benefit, by accepting our amendment tonight.
§ Lord Sefton of Garston
I listened yesterday in another place to a speech made by a Left-wing Member in which he boasted that the reason the Government have retreated on the poll tax was that a campaign of non-payment had been initiated. I do not agree with non-payment of the tax. However, I must admit that the argument that some credit should be given to those campaigners for the fact that the Government have retreated is valid, even to one who 1161 believes that the poll tax should be paid. The argument is certainly valid to millions of people in our community.
There are a great many people in our community who believe that the Government should take heed. When the Government refuse to accept a small amendment which is not very important, which does not strike at the root of the Bill they are trying to put through and which seeks to assist the lower paid and deprived people in our community, as they are now resisting this amendment, that adds strength to the case that our Parliament does not help the poorer people in our community. The case that I heard made in the other place yesterday becomes stronger every minute. It is worse than that. If the Government fail to appreciate the effect that their action has on ordinary people the faith of those ordinary people in our parliamentary system will be weakened considerably.
Those of us who were here yesterday heard the noble Lord, Lord Brocket, talk about the militants on Merseyside. I have some experience of Merseyside. I was the leader of Liverpool City Council and the first chairman of the Merseyside County Council, another organisation which was abolished at the whim of a certain lady for no other reason than that she felt a certain pique and did not like the Greater London Council. It was abolished. There were no militants in Liverpool or Merseyside.
If the noble Lord would take time to give consideration to a really important point, that would at least indicate that he had some knowledge of the political situation which obtains in this country as a result of the poll tax. An elected government of this country are now going out of office simply because they would not understand the social implications of what this House did in whipping in the backwoodsmen, who had never even heard the debate about the poll tax, to vote in order that their own pockets should benefit.
There were no militants in Liverpool. Liverpool and Merseyside were doing extremely well. The Government did not appreciate the social consequences of some of their policies for ordinary people in Liverpool who had already suffered enough due to the recession occasioned by their policies.
I appeal to the Government to consider the people who have suffered under the poll tax to the extent that the Government have been forced to change their tune so that some of the faith that those people had in our parliamentary system can be restored. When they refuse to listen to the economic reasons for the abolition of this charge and to any of the social reasons why this assistance should go to the poorer members of our community they are not only damaging the Tory Party and removing it from office; they are damaging our parliamentary system.
§ Lord McIntosh of Haringey
It is clear that we shall not receive any more answers from Ministers to the very cogent points that have been made. There are two gaping holes in the arguments being put forward by the Government in favour of the continuation of the 20 per cent. minimum rebate scheme. The first has 1162 been fully explored in the debate. It is that the£14 which the Audit Commission has identified as the cost of collection of the poll tax is the average. But that is not the important figure. The important figure, which the Government appear to be unable to give us, is the cost of collection from those who receive the rebates. It is evident—the noble Lord the Lord Privy Seal did not attempt to deny it—that the costs will be higher for those who are most in need, those who move most often and those who are not able to sign direct debits. That must be clear. It is probable that the costs will be substantially higher.
Let us try to make an estimate of what the average poll tax will be should this Bill be passed unamended at the£140 figure. Let us guess that the average poll tax will be of the order of£260. Twenty per cent. Of£260 is£52. It is not stretching the imagination very far to suggest that for the average of£52 to be collected from those who gain the rebates—again, some authorities will have a higher figure and some a lower one—the cost of collection at substantially more than£14 will approach 30 per cent., 40 per cent., 50 per cent. or even more of the receipts from the poll tax payers.
The noble Earl, Lord Russell, has tabled Amendments Nos. 7 and 26 which deal with the extreme case in which the costs of collection are greater than the receipts. They are valuable amendments and I was happy to put my name to them. But I can see that that will not occur in other than the minority of cases and in a minority of charging authorities in England and Wales and local authorities in Scotland.
What is absolutely clear is that in every authority in this country collection of the reduced rebate from the people most in need—those in receipt of rebates—will be wildly inefficient as a way of collecting tax revenue. Anything above 10 per cent. of the receipts is already extremely inefficient, as any tax expert will say. But when one approaches 30 per cent., 40 per cent., 50 per cent. or even more one comes to something which is not only unjust but unbusinesslike in the highest degree.
The second gaping hole in the Government's argument is the pretence, which has been made on a number of occasions, that there is something magical about the figure of£140 and that to change the conditions on which the reduced community charge is to be granted—those are the kinds of words that we now find ourselves using—will affect public expenditure because the compensatory grants will not be enough to cover it. The noble Baroness, Lady Blatch, made that point in response to an original amendment.
Turning to Clause 4, we should look at the provisions for compensatory grants and at the extent to which they are tied to the£140 figure. We find that they are not. Clause 4(1) states that:For the 1991 financial year, the Secretary of State shall pay to each charging authority and to each local authority a grant of such amount as he may with the consent of the Treasury determine".I have always thought that the environment legislation could be boiled down to the provision that the Secretary of State may do what he likes. I modify that 1163 belief slightly to say that the Secretary of State, with the consent of the Treasury, may do what he likes. Clearly that is what we are moving toward.
But the significant point comes in subsection (4) of that clause:In determining the amount of a grant under this section, the Secretary of State shall have regard to"—not "observe" but "have regard to"—his estimate of the aggregate of…;any amount which by virtue of section 1 or section 3 abovethat is England and Wales in the one case and Scotland in the other case—the authority might reasonably be expected to lose, or to have lost, by way of payments in respect of community charges for the 1991 financial year: and…;any administrative expenses which the authority might reasonably"—the Committee should note the word "reasonably" because "reasonably" is what the Secretary of State thinks is reasonable and not what is in fact the case—be expected to incur in consequence of the provisions of this Act".That means that the Secretary of State may do what he likes. It means that we could improve this Bill, make it more just and provide for an end to the nonsense of collection of' 20 per cent. from those most in need without endangering the Bill in any way. The Secretary of State will exercise his judgment as to the amount of compensatory grant which is required under Clause 4 of the Bill. Indeed, before the Bill even started its passage through the Commons, the Secretary of State—or rather, the Minister, Mr. Portillo—did just that. lie did his sums again. Clearly the sums are being done on a continuous basis. I have no doubt that the multiple regression analysis computer is running at this moment in Marsham Street and that there are people coming up with new wheezes every hour on the hour and probably through the night as well. However, having done his sums again, he decided in his wisdom, or that of his advisers, that with the co-ordination of the community charge reduction scheme—the Bill—and the rebate system they could be more generous with the community charge reduction scheme. In the debate on the money resolution, without warning, consultation or discussion with the local authority associations, and with no indication that this major change to the Bill was going to take place, the Government introduced a completely new system for the community charge reduction scheme. They introduced a new rule which says that the community charge reduction scheme shall now apply to all adults in the household. That profoundly changes the way in which local authorities have to collect the community charge.
If the Government can do that at 11 o'clock on a Monday night, only 15 hours before the Bill starts its passage in another place, they can do so now. They can think again. They have an opportunity to do themselves a lot of good by removing an injustice and a source of gross inefficiency and administrative extravagance. They can do so by adopting the amendment. I invite the Committee to take a decision on the amendment.
§ 9.52 p.m.
§ On Question, Whether the said amendment (No. 4) shall be agreed to?
§ Their Lordships divided: Contents, 39; Not-Contents, 108.1165
|Division No. 3|
|Addington, L.||Macaulay of Bragar, L.|
|Blackstone, B.||McCarthy, L.|
|Bonham-Carter, L.||McIntosh of Haringey, L.|
|Carmichael of Kelvingrove, L.||McNair, L.|
|Carter, L.||Monkswell, L.|
|Clinton-Davis, L.||Morris of Castle Morris, L.|
|Donoughue, L.||Nicol, B.|
|Dormand of Easington, L.||Ogmore, L.|
|Falkland, V.||Peston, L.|
|Fisher of Rednal, B.||Pitt of Hampstead, L.|
|Gallacher, L.||Prys-Davies, L.|
|Galpern, L.||Richard, L.|
|Graham of Edmonton, L. (Teller.)||Rochester, L.|
|Grey, E.||Sefton of Garston, L.|
|Hatch of Lusby, L.||Stoddart of Swindon, L.|
|Houghton of Sowerby, L.||Taylor of Gryfe, L.|
|Howie of Troon, L.||Tordoff, L. [Teller.]|
|Hughes, L.||Underhill, L.|
|John-Mackie, L.||White, B.|
|Abinger, L.||Huntly, M.|
|Astor, V.||Hylton-Foster, B.|
|Astor of Hever, L.||Jeffreys, L.|
|Barber, L.||Jenkin of Roding. L.|
|Beloff, L.||Johnston of Rockport, L.|
|Belstead, L.||Kinloss, Ly.|
|Blatch, B.||Kintore, E.|
|Blyth, L||Lauderdale, E.|
|Boardman, L.||Lindsey and Abingdon, E.|
|Boyd-Carpenter, L.||Long, V.|
|Brabazon of Tara, L.||Lucas of Chilworth, L.|
|Brougham and Vaux, L.||Lyell, L.|
|Byron, L.||McColl of Dulwich, L.|
|Caithness, E.||Mackay of Clashfern, L.|
|Caldecote, V.||Macleod of Borve, B.|
|Campbell of Alloway, L.||Margadale, L.|
|Carlisle of Bucklow, L.||Merrivale, L.|
|Carnegy of Lour, B.||Mersey, V.|
|Carnock, L.||Monson, L.|
|Cavendish of Furness, L.||Montgomery of Alamein, V.|
|Clanwilliam, E.||Mottistone, L.|
|Clinton, L.||Mountevans, L.|
|Cochrane of Cults, L.||Munster, E.|
|Colnbrook, L.||Murton of Lindisfarne, L.|
|Cork and Orrery, E.||Nelson of Stafford, L.|
|Craigavon, V.||Norfolk, D.|
|Craigmyle, L.||Norrie, L.|
|Crickhowell, L.||Nugent of Guildford, L.|
|Davidson, V. [Teller.]||Oppenheim-Barnes, B.|
|Denham, L. [Teller.]||Orr-Ewing, L.|
|Derwent, L.||Oxfuird, V.|
|Downshire, M.||Park of Monmouth, B.|
|Dudley, B.||Pearson of Rannoch, L.|
|Eccles, V.||Pender, L.|
|Eccles of Moulton, B.||Plumb, L.|
|Elliot of Harwood, B.||Plummer of St. Marylebone, L.|
|Elton, L.||Radnor, E.|
|Faithfull, B.||Rankeillour, L.|
|Fortescue, E.||Reay, L.|
|Fraser of Carmyllie, L.||Renton, L.|
|Gainsborough, E.||Rochdale, V.|
|Gisborough, L.||Saint Oswald, L.|
|Grimston of Westbury, L.||Saltoun of Abernethy, Ly.|
|Harmar-Nicholls, L.||Seccombe, B.|
|Harmsworth, L.||Sharples, B.|
|Haslam, L.||Skelmersdale, L.|
|Henley, L.||Soulsby of Swaffham Prior, L.|
|Hesketh, L||Southborough. L.|
|Hooper, B.||Strange, B.|
|Strathcarron, L.||Ullswater, V.|
|Strathclyde, L||Vaux of Harrowden, L|
|Suffield, L.||Waddington, L.|
|Teviot, L.||Wade of Chorlton, L|
|Trumpington, B.||Wigram, L.|
§ Resolved in the negative, and amendment disagreed to accordingly.1167
§ 10 p.m.
§ Earl Russell moved Amendment No. 5:
§ Page 1, line 6, after ("personal") insert ("or standard").
§ The noble Earl said: I rise to move Amendment No. 5, which is grouped with Amendments Nos. 10, 12, 17, 24, 25 and 29. They all deal with the issue relating to the personal and standard community charges. All Members of the Committee are in difficulties because we do not have a copy of Hansard giving last night's proceedings in another place. It is my understanding that last night or early this morning my honourable friend Mr. Beith received an assurance from the Secretary of State that he was prepared to accept the amendments. In the belief that that is correct, and in the hope of saving the Committee's time, I shall simply beg to move.
§ Lord Waddington
The amendments are designed to ensure, by inserting express reference to the standard charge, that standard charge payers also benefit from the prescribed statutory reduction in the amount of the personal community charge. But the position is this. The level of the standard charge is set by an authority as a multiple of its personal charge between zero and two. So that the levels of the personal and standard charges in an authority's area go hand in hand. If the amount of the personal charge is reduced for any reason, that reduction will automatically flow through to standard charges under the existing statutory provisions. That is why it is unnecessary to make any mention of standard charges in this Bill. Standard charge payers will automatically benefit from the reduction in personal charges which the Bill requires.
But these amendments are not simply unnecessary; they are actually undesirable. First, they seek to cut across the existing statutory provisions for calculation of standard charges by imposing an across the board reduction in the amount of the standard charge. This means that the cut in the standard charge would be the same as that in the personal charge, regardless of the multiplier. Thus where the multiplier was more than one, the standard charge payer would under these amendments be denied the full amount of the reduction due. Conversely, where the multiplier was less than one, the standard charge payer would be getting too big a cut in his charge.
For example, if the applicable standard charge multiplier were two, the charge reduction flowing from the provisions of this Bill would be two times £140—that is, £280—and not £140 as suggested in the amendments. Similarly, if the multiplier were one-half, the standard charge reduction would be £70. But under the amendments, the person concerned would get the full reduction of £140, although only liable to half the personal charge. So it does not seem to me to be logical to add the references proposed in the amendments.
I have just had an opportunity of checking and there was no undertaking to accept these amendments in the Commons. They were withdrawn following the sort of explanation which I have now given to the noble Earl. I hope that in those circumstances he will not press the matter.
§ Lord McIntosh of Haringey
Before the noble Earl decides what to do, it is very interesting to have those two logical extremes explained to us by the noble Lord the Lord Privy Seal. It is certainly the case, as he said, that if the standard charge is set by a local authority at twice the personal charge, the individual who has a second home will benefit more. Conversely, it is clearly correct that where the standard charge is set lower, he will benefit less.
In order to evaluate that statement. what we now need to know is how many local authorities charge at twice the personal charge and how many charge at less than the personal charge. If, as I suspect, the vast majority charge at above the personal community charge, then the point that the noble Lord the Lord Privy Seal is making has very little force indeed. This is not a rhetorical question. It is something which the Committee ought to know.
§ Lord Waddington
The answer is perfectly simple. The noble Lord was conceding that there will be some cases where local authorities will not be all saying that the standard charge is twice the personal charge. There will he cases where less than twice the personal charge is set as the standard charge. In those circumstances, with respect to the noble Lord, there is nothing in the point made by him. What would be illogical would be the link which has been established by law between the personal charge and the standard charge.
§ Lord McIntosh of Haringey
The Government's defence against these amendments rests on the case that some are above and some are below. In order to evaluate the strength of that defence, we need to know how many are above and how many are below. If I cannot get any figures, are the Government denying that the vast majority of local authorities actually charge more than the personal community charge for the standard charge, and that very few indeed charge less?
§ Lord Waddington
If some are set above and some are set below there is nothing, with respect, in the point made by the noble Lord. The amount which is set above and that which is set below is entirely irrelevant for the purposes of this argument.
§ Earl Russell
We are all operating under difficulties tonight and I hope we shall be sympathetic to each other. It sounds as if the reply I have tonight is a little more like the reply that my honourable friend received from the Welsh Office than the reply that my honourable friend had from the Secretary of State. Since it is going to take a little while to get this straight, and since I do not want to take up the Commitee's time I hope your Lordships will forgive me if I beg leave to withdraw the amendment, on the understanding that if we can get our communications straight with another place, I may bring it back on Report. In the meantime, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 6 not moved. ]1169
§ Lord Monkswell moved manuscript Amendment No. 6A:
§ Page 1, line 8, leave out from ("£140") to end of line 9.
§ The noble Lord said: The effect of this is to remove the bar of the rebating of £140 to the figure of £0. The implication of that is that if in fact the community charge is set at less than £140 the poll tax payer would actually receive a credit or cash sum from the local authority.
§ The original intention of the amendment was to make much more sense of Amendment No. 3. I felt it was not necessarily going to be useful to the Committee to move this amendment at that time because we were discussing the principle then of whether to give the £140 before or after the benefits, rebates and transitional allowances. I am moving the amendment now in order to elucidate from the Government a little more in terms of the financial figures.
§ We were advised during the Committee stage following the debate on previous amendments that the original proposal would have cost £5.6 billion but the loss of benefit rebated to charge payers brought that down to £4.3 billion, which was equivalent to the 2½ per cent. increase in VAT. Later in the debate at Committee stage we learnt that if the £140 contribution was to be made after rather than before benefit, it would cost an extra £3.3 billion. I am not sure exactly how those figures stack up because the implication is that less than 50 per cent. of the money that is being spent is going to higher rate poll tax payers. Little of it will go to poll tax payers who are currently receiving benefit. I hope that the Government can give some figures in respect of two elements relating to the amendment. First, as it stands, the benefit would accrue only to the Wandsworth charge payers. It will be interesting to know how much that would cost the Exchequer. The second element—I crave the Government's indulgence—is what the impact on the Exchequer would be if we were to consider this amendment with Amendment No. 3, which admittedly has already been lost. I hope that the Government can give us some figures because they would be of use to the Committee and may give us guidance as to the way to go in further stages of the Bill. I beg to move.
§ Baroness Blatch
The noble Lord's interest in saving Wandsworth community charge payers more money is touching in view of what has been said for most of the day. The amendment appears to be designed to ensure that where an authority's initial charge for 1991–92 is below £140, it would still benefit from the full £140 reduction provided under the Bill rather than have the figure reduced to zero, as the Bill currently provides. That would seem to imply a negative charge—repaying money to the charge payers. Clearly, it would not be appropriate to reduce an authority's charge by more than the amount it set in the first place. No doubt the noble Lord has the efficient borough of Wandsworth in mind. Noble Lords have been positively obsessional about Wandsworth all day.
1170 Wandsworth set a charge for 1991–92 of £136—the lowest in England. Under the Bill, the charge will be reduced to zero. The noble Lord would like not merely to expunge the charge in Wandsworth but to give its charge payers £4 each. No doubt he would also like us to compensate the authority for the extra amount. That would not be an appropriate use of resources. The objective is to compensate authorities for income forgone as a result of the Bill, not to enable them to give money back to the charge payers. I ask the Committee to reject the amendment.
§ Lord Monkswell
I find that response curious. I was going to talk about income tax, but it is probably not relevant. One matter that is relevant is the way that the Government treated local authorities some years ago in respect of rate capping. I am thinking especially of Edinburgh, where the local authority levied a rate which the Government considered excessive. They capped the local authority and required it to pay back to the ratepayers money that they had already paid. That calls into question a degree of double standards.
§ Baroness Blatch
The noble Lord is wholly muddled on this issue. He is suggesting that we not merely give back to people what they have paid but go beyond that and give them money that they have not paid; in other words, pay them a supplement in addition to repaying them what they have paid. It is a strange turn of events after what we have had all afternoon. There is no question of the Government going beyond giving back charge payers up to £140 of moneys they have paid to local authorities.
§ 10.15 p.m.
§ Lord Monkswell
I appreciate what the Government are saying. However, it would appear to be unfair and illogical.
§ Lord Monkswell
It is unfair to the people of Wandsworth. The people of Wandsworth have elected an authority which spends a certain amount of money on provision of services. That is right. Elected members of that authority make a decision as to what services are to be provided. The electorate within Wandsworth has the ability to hold those elected representatives accountable for that. Effectively in Wandsworth people have forgone services.
§ Lord Monkswell
Yes. The Government have determined a standard spending assessment for Wandsworth which, as I understand it, is based on a set standard of services to the people in that local authority. The elected members have decided to supply fewer services than the Government expect. As a result, expenditure has been saved. It is only reasonable that that saving of expenditure should go to the people of Wandsworth.
§ Baroness Blatch
The savings go back to the people of Wandsworth. The noble Lord confuses money spent on services and the quality of those services. He 1171 is confusing input of money with quality and output of service. This Bill is about a reduction of charges to the charge payer. Charge payers in Wandsworth are paying £136 and will receive the benefit of the whole of that £136. That cannot be reduced further because there is no charge beyond £136. The noble Lord is entirely muddled on the issue.
§ Lord Monkswell
I am sorry that I cannot explain the situation in a way that the Government can understand. I cannot think of other ways to explain it and I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Earl Russell moved Amendment No. 7:
Page 1, line 9, at end insert:
("( ) Where the reduction has taken place by virtue of this section, a charging authority shall have the discretion to issue no demands if, in its judgment, the total amount to be collected from the charge payers as a whole is likely to be exceeded by the cost of collecting the charge.").
§ The noble Earl said: It is a good legislative rule that where a legislative provision offends against common sense we should think twice about it. If that were not a good rule for our own convenience, it would certainly be a good rule for electoral purposes in a democracy.
§ The purpose of this amendment is to ensure that it is not necessary for a local authority to send out bills if the cost of sending them out is more than will be recovered from the charge collected. The sending out of bills is an immensely complex operation. Anyone who looks at this morning's Independent will see that the Government's decision has enormously increased the demand for envelopes in this country. Indeed, it is an ill wind that blows nobody any good. We cannot see why in a local authority such as Shetland, where the outstanding community charge is 93p, it is necessary to make the local authority go through all the complications and labour of collecting that 93p.
§ I appreciate the point made by the noble Baroness, Lady Blatch, at Question Time when she said that the charge payers of Shetland would be very glad to pay only 93p. We are not arguing about that. We are arguing as to whether the local authority of Shetland will be glad to have to send out bills simply for the sake of recovering 93p.
§ I know that there has been a great deal of argument about the costs of billing. As happens quite often, those costs appear to be lower to the Government than they do to anybody else. But we do not need to decide who is right because if the local authority decides not to send out bills it actually forfeits income. The local authority will not decide to forfeit income unless that income is genuinely less than the expense it would incur. This amendment is simply in line with common sense. I beg to move.
§ Baroness Blatch
I have to tell the Committee that these amendments are unnecessary because the existing legislation already permits an authority, in effect, to achieve what they are seeking. The amendments could also, as drafted, lead to a deficit on an authority's collection fund. If an authority's charges, after allowing for the reduction required by this Bill, were comparatively small—possibly only a 1172 few pounds—it might consider that it was not worth collecting the amounts concerned, thereby saving the administrative expense of so doing. In that situation the correct course for the authority would not be simply not to issue bills for the reduced amount as the amendments propose. That would run the risk of creating a deficit on the collection fund because estimated income and outgoings were out of kilter. I might add that there is no question of paying grant under this Bill to make up the difference by compensating for income foregone of greater than £140 per personal community charge payer.
What such an authority may do, once the Bill has received Royal Assent, is to make an appropriate reduction in its budget—that is, its demand on the collection fund. It should then set a further substitute charge under Section 35 of the Local Government Finance Act 1988, passing that reduction on and replacing the amount set under the provisions of this Bill. In an appropriate case, the charge may in this way be reduced to zero. If an authority had not yet issued its charge bills it would have saved the costs of sending them out and collecting the charge. I must therefore ask the Committee to reject these amendments.
§ Lord Monkswell
Before the noble Earl responds, can I have some clarification from the Government? The noble Baroness made a statement to the effect that it was possible for a local authority not to issue a demand for the poll tax if it felt that the amount to be collected would not cover the cost of issuing the demand. That advice is at variance with the information that I have been given, as a member of a local authority, by the city treasurer's department. It has advised me and our authority that there is no legal facility for a local authority not to pursue the charge.
In practice what is happening is that where a charge is very small and it is being levied on, for example, the widow of someone who has recently died, effectively the charge is dropped. We have no legal authority to do that. Effectively, we in the local authority in that situation are operating ultra vires. If the Government have a different opinion, I and my city treasurer's department will be glad to hear it. My authority is not sure where the boundary is in terms of levying a charge which may be quite a small amount in some cases. I would like clarification because the amendment moved by the noble Earl, Lord Russell, will give the discretion to waive charges where the cost of collection will not cover the amount of income generated. That will legalise what is effectively being done under the counter. Clarification would help public administration as regards the community charge.
§ Baroness Blatch
While a local authority does not have the power simply to set aside the: liability for paying, it has the discretion to waive collection where it really makes no sense to make the collection. The authority that most comes to mind is Shetland, where the charge has been reduced to 93p. For the purposes of this debate I shall use the example of Shetland. Shetland is slightly complicated because it includes water charges, which takes the collective charge up to £45. The other point is that, while Scottish authorities 1173 do not have, as I have just said, the power to extinguish a liability for a small amount, they nevertheless have the administrative discretion, as they have always had, to decide whether they are justified in collecting small amounts. This is not the first time that the situation has arisen. Indeed even under the rating system authorities will have had to make decisions on whether to send out small bills.
§ Lord Monkswell
As I understand it, the legislation under which rates were collected gave local authorities the power to waive collection of rates in certain circumstances.
§ Baroness Blatch
I have just said that to the Committee. I said that local authorities do not have the power to extinguish the liability. They do, nevertheless, where it makes absolutely no sense to send out a bill, have the power to waive sending out the Bill. The liability exists.
§ Lord Hughes
The noble Baroness said that Scottish authorities have the power to do this. Does she mean that only Scottish authorities have that power, or do English and Welsh authorities have the same power? If the answer to that question is yes, what she suggested should take place sounded eminently reasonable to me. If an authority had to spend more money in collecting a charge it could reduce the charge by the amount that would extinguish the need to go for collection.
How does this take place? Does the authority just take a decision that it is revising its charge from x to x minus whatever is necessary? If having done so, is that the end of the matter, or does it have to write to every charge payer telling them, "We are very sorry, but we are not able to collect this money. It is not worth our while, so you are not going to have to pay anything"? Can it assume that the charge payers concerned will be quite happy just to hear nothing about it?
§ Baroness Blatch
Local authorities do not have the power to extinguish the liability for the charge. What they do have the power to is to make a judgment about whether it makes sense to incur a cost which is greater than the amount to be collected. Therefore local authorities have the power to waive the charge but not to extinguish the liability.
§ Earl Russell
I listened with great care to the noble Baroness. It is the kind of situation when I would normally have told her that I would read very carefully what she said in Hansard and return to the matter on Report. That option is not open to us tonight. She seemed to be giving with one hand what she took away with another. On the one hand, the noble Baroness told me that it is within the local authority's discretion not to send out a bill. I was very pleased to hear that. On the other hand, the noble Baroness said that, if this should get the local authority into deficit, it could cause it considerable trouble. This is, as I understand it, the same point that was made by her honourable friend Mr. Portillo in another place late on Monday night. Mr. Portillo was 1174 considering the same possibility of the local authority not sending out a bill and running into a deficit. He said that in that case the local authority would have to convince its auditor on that point. That is a somewhat menacing form of words.
If we have these two obligations together we are pushing the local authority into a contradiction. We are pushing the local authority to send out a bill, to waste a great deal of money, because two of the Government's principles happened to have clashed with each other. Principles do clash with each other from time to time but usually one arrives at some sort of adjustment. If we cannot arrive at some sort of adjustment we have a very unsatisfactory situation. Obviously we need in all these cases a little more time to try to arrive at compromises. Therefore, I shall for the time being withdraw the amendment. I hope that we shall be able to resolve the matter. But if the noble Baroness wishes to say something before I withdraw the amendment I should be most happy to hear it.
§ 10.30 p.m.
§ Lord Hughes
I should like to bring the matter a little nearer home than Shetland. There is another authority which has said that the cost of collection would be greater than the amount to be collected. I refer to Westminster Council. Its charge is £176, but now it is left with the possibility of collecting £36. According to its finance officer or Lady Porter—I am not sure which; indeed, sometimes they are interchangeable—the cost of collection would be £42.
If I understood the Minister correctly, it is open to Westminster Council to take a decision and say, "We are not fixing a charge of £176; we are fixing a charge of £140. This means that there is nothing to collect". But, having taken that decision, does the council have to take any further action? For example, does the matter rest there and can the charge payers rest happy in the knowledge that no further correspondence will be sent to them by the council? If that is not the case, Westminster Council will have to spend money in order to inform people that no payment is required from them.
§ Baroness Blatch
First, we have said more than once today that in our view the estimate made by Westminster Council for rebilling is much exaggerated. Secondly, the general point still remains that, where the cost of billing is excessive and makes no sense in that it is uneconomic, and so long as the auditor—I do not find those words threatening—is convinced that the decision has been made on economic grounds, the collection need not be made.
§ Earl Russell
The Minister's response helps us considerably. The issues will arise again when we come to Amendment No. 33 which deals with reimbursing the local authority for reasonable costs. If we are given further information on the matter at that time, I shall listen to it with a great deal of interest. In the meantime, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 8 and 9 not moved.]
§ Earl Russell moved Amendment No. 10:
§ Page 1, line 10, after ("personal") insert ("or standard").
§ The noble Earl said: It may be for the convenience of the Committee if I were to raise certain matters while we consider this amendment rather than doing so, as previously suggested, on clause stand part.
§ We have managed to establish communication with another place. I understand the point of this group of amendments. It concerns the issue of whether the local authority is to be reimbursed over the standard charge in proportion to the multiplier or simply by a factor of 1. For example, if the multiplier is more than 1, will the local authority be reimbursed by a factor of more than 1? I understand that my honourable friend received three different answers on that during last night's proceedings in another place. I also understand that the final answer was yes. I would be very glad to receive confirmation that that final answer stands. I beg to move.
§ Lord Waddington
I can assure the noble Earl that the last answer really does stand. There was some misunderstanding as to the purport of the question being put to the Minister by Mr. Beith. However, there is no doubt whatever that if, for example, the multiplier is 2 and that attracts a reduction of twice £140, there will be complete reimbursement for the local authority of that amount.
§ Earl Russell
I am deeply grateful to the noble Lord for that answer. I believe that it entirely meets the point about which I was concerned. I am also grateful to Members of the Committee for their patience and forbearance in regard to resolving the matter. It is with great satisfaction that I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 11 to 13 not moved.]
§ Earl Russell moved manuscript Amendment No. 13A:
Page 1, line 26, after ("Act") insert
("and with the provisions of subsection (5A) below)")
§ The noble Earl said: The purpose of this amendment is to deal with those itemised lists of expenses that the local authority puts on the statement it sends out with its demands. I always read them with great interest. They are very useful; they have the effect of rebutting a good deal of mythology about where the money goes.
§ The purpose of this group of amendments is to ask that that itemised list of expenses should include a statement of the amount of money spent on extra billing as a consequence of the Bill. So if the local authority says, as certain local authorities which I shall not name might do in error, that their charge is so high because of this Bill and the confusion it creates, it would be possible to pin that down and verify it. That could be in the Government's interests, as well as those of the public and local authorities.
§ The amendment also asks that the bill should contain a statement of how far these costs that are caused by extra billing have been met by grants 1176 coming from the Secretary of State. Again, I think this would tend to clarify debate. Having gone as far as we have with the Bill, I think that we appreciate that this subject is capable of causing a good deal of confusion. It is capable of giving rise to misrepresentation on all sides of the political fence. If accurate information set out on the bill can help to dispel that, it would be worth doing. I beg to move.
§ Lord Strathclyde
Clauses 1(5) and 3(4) of the Bill provide as regards England and Wales and Scotland respectively that charge payers will not be liable to pay the charge in respect of 1991–1992 until they have received a demand notice which takes account of the Bill. These amendments add the further requirement that the demand notices must state what are the authorities' costs of re-billing as a result of the Bill and whether the grant paid by the Secretary of State adequately covers these costs. I imagine that the noble Lord does not expect us to take these amendments entirely at face value, but he is rather seeking to make the point which comes up later on in further amendments, that authorities will have incurred substantial abortive costs and they need to he compensated adequately for that.
We do not apologise for introducing this legislation very late in local authorities' billing cycles because, as my right honourable friends the Chancellor of the Exchequer and the Secretary of State for the Environment explained in another place, the decision to reduce charges substantially could only be taken in the context of the Budget.
However, we accept that authorities will incur additional expenditure and that their reasonable additional costs should be met by grant. We have included provision in the Bill to facilitate this. DoE officials have already had preliminary discussions with the local authority associations in England about the basis on which the grant should be paid.
I said earlier that I did not think that the noble Earl would expect us to take the amendments at face value simply on the grounds of practicality, it for no other reason. At the point at which an authority sends out revised demand notices, it is unlikely to know the full extent of the additional cost which was incurred and therefore how much grant it is to receive. So it would be almost impossible for the local authority to comply with these amendments. At worst, and most seriously, these amendments would delay the re-billing. Therefore, I think that they are impractical and I hope that in the light of what I have said, the noble Earl will withdraw his amendment.
§ Earl Russell
I intended these amendments seriously. I take the point that there may be difficulties as regards some of the costs, but some at least can be calculated. One knows, for example, the rate of postage. All through this evening I have had running through my head one of those Ruthless Rhymes:I've written to my Aunt MaudWho was on a trip abroad,When I learnt she'd died of cramp,Just too late to save the stamp".If it is a case such as the noble Baroness, Lady Fisher of Rednal, outlined of 770,000 stamps; that represents a considerable cost. I am serious about this provision, 1177 but I do not think it is a matter of sufficient importance to warrant dividing the Committee at this time of night as there may be other matters which are of sufficient importance to do so. In those circumstances, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 13B not moved.]
§ Clause 1 agreed to.
§ Clause 2 agreed to.
§ Earl Russell moved Amendment No. 14:
§ After Clause 2, insert the following new clause:
§ ("The 20 per cent contribution in England and Wales
§ . The charging authority shall, from the relevant date, no longer seek payments from those who would otherwise be required to pay 20 per cent of the personal community charge.").
§ The noble Earl said: This is a serious amendment. It deals with those who are at present paying 20 per cent. of the personal charge. The intention of the amendment is that they should pay nothing. The two chief categories involved here are those on social security benefit and students. Until recently those two categories might have come under a single category as the income of most students is below social security benefit level. But as a result of legislation passed last year they are now two separate categories and will have to be discussed separately. I have already dwelt on the attempt to make everyone pay, and I shall not repeat any arguments I have developed on that.
§ Recently we discussed in this Chamber on the child support legislation evidence which suggests that social security benefit rates, and in particular income support rates, are too low and are below subsistence level. A piece of research has been recently published by Dr Sean Stitt of Newcastle upon Tyne Polytechnic which seems to me to argue that case powerfully. It is not the only piece of research that argues that case. Another piece was given to me this morning but I must confess I have not yet had time to read it.
§ Where people are below subsistence level, it may be very difficult indeed to get them to pay. The default level may be high. We are told that 70 per cent. of those who are facing court action in Scotland for non-payment of the community charge are people who are on the 20 per cent. level.
§ I sympathise with what the noble Lord the Lord Privy Seal has said about wilful refusal to pay. I said on Second Reading of the community charge legislation and I repeat now that those who can pay should do so. However, a high proportion of the failure to pay reflects cases of people who cannot pay. Here we are suffering a great deal of hardship and unnecessary effort and unnecessary use of the courts' time in order to achieve something which I believe has never been achieved in the history of England. The Government might think about that, particularly as the costs of collection at the lower end of the scale are particularly high. There is a high level of mobility and a high likelihood of court proceedings. The Audit Commission has suggested that it gets out of these 1178 people an average of £6 each, net, and that the cost of collection is £15 each. The Audit Commission suggests that this amendment would more than pay for itself.
§ It is unusual, when asked to cost an amendment, to be able to say that it is possible to make a concession and for the Government to gain money out of it. That, I believe, really is the case here. It would be worth the Government's while accepting this provision.
§ In speaking of students, I must, as a university teacher, declare an interest. Whenever the subject has come up in discussion with my pupils, I have endeavoured to persuade them to pay. I do not know how successful I have been. There is a particular difficulty because of the frequency with which they move about. As my noble friend Lady Seear put it when the local government finance legislation was going through the Chamber, they hop about like fleas.
§ There is a particular difficulty with students in their final year because the academic year and the local authority financial year do not coincide. From April onwards many students are in their place for only one term, then they take their final exams and leave. So all third-year students move during the year. That means a great deal of expense is involved in keeping track of them, and there is a great deal of difficulty in keeping the register up to date. It has been estimated that in Oxford the community charge register changes by 85 per cent. each year. When one thinks of the administrative problems involved in keeping up with that, one can understand why some charging officers feel that the system is in danger of breaking down altogether. I shall not repeat the points that I made about the taxing of foreigners, which also apply to the amendment. We have here people who cannot afford to pay. It costs more than it is worth to get the money out of them. Why spend a vast amount of money in order to do injustice? I beg to move.
§ 10.45 p.m.
§ Baroness Blatch
The basic assumption in all that the noble Earl, Lord Russell, said is that income support is simply not adequate. He made specific reference to the Stitt Report. Perhaps I can jog the noble Earl's memory by telling him that my noble friend Lord Henley responded in detail on this very point about the adequacy of income support levels when he addressed a similar point on the Child Support Bill.
The noble Earl also made reference to students. I have to repeat what has been said a number of times today. The 20 per cent. that students are required to pay is paid into grant in the first place and therefore the net cost to many students is nil and for many others is very much reduced.
When an authority sets its initial charges for the year it has to set them at a level which is sufficient to cover its estimated outgoings from the collection fund, taking account of other sources of income—basically, revenue support grant and non-domestic rates. In deciding the level of charges it needs to set, the authority will take a view about income from people who do not themselves pay the full amount of the charge. If, at the stroke of a pen, the liability of 20 per cent. contributors were to cease at the same time as the 1179 personal charge is reduced by £140 authorities would be left with a shortfall of income. The grants payable under this Bill are confined to charge income forgone by virtue of the £140 reduction requirement. Those grants thus prevent a collection fund deficit in respect of the charge reductions required by the Bill. However, there would be nothing under the Bill to stop the collection fund going into deficit as a result of these new clauses, which are financially irresponsible.
It remains a fundamental principle of the community charge that everyone should contribute something to the cost of local services. The Audit Commission has recently estimated that it will cost £500 million in England and Wales to collect the charge and that gives an average unit collection cost of £14 per chargepayer, as has already been said this afternoon. That is considerably lower than the figures being quoted in some quarters and suggests that even for authorities with low charges as a result of the £140 reduction it will be cost effective to collect from students or those receiving maximum community charge benefit.
I ask the Committee to reject the amendment.
§ Lord Tordoff
It seems to me that the noble Baroness has missed the point. My noble friend Lord Russell said that the cost of collection of these particular items was higher than the money being collected. The noble Baroness relied on the average figure from the Audit Commission. We have already heard in the course of this evening that the cost of collecting those smaller amounts is higher than the average. In that particular case it approaches the £20 that we are talking about. The point that my noble friend made was that it is very stupid to lay out more money than one is collecting.
§ Baroness Blatch
There is no reason why the collection charges should be greater, except in the case of evasion. There is no question that the Government intend to compensate for moneys forgone as a result of evasion.
§ Earl Russell
I really cannot let that go by. The noble Baroness said that there is no reason why the amount of non-payment: should be greater. I gave one reason, which is much higher mobility. I gave another, which is absence of the money—they do not have the money to pay. Both of those are common. Difficulties in compiling the register are also common. It is extremely common for students to move around. Those are all perfectly good reasons. I see no reason to believe that unwillingness to pay on principle is any greater in that group than it is in the rest of the population. They are not people of lower morals; they are people of lower income. I cannot understand the noble Baroness's argument.
§ Baroness Blatch
The first point I addressed on this amendment was the point to which the noble Earl keeps returning, which is the adequacy of income support. One is talking about the ability of these particular people to pay. That point was dealt with in detail in the Child Support Bill. As for the other point about the mobility of students, the liability of students to register wherever they are resident is an obligation 1180 on the part of the students. With regard to the money that students pay, I have already made the point that that money is paid into grant and given to students to pay the 20 per cent. There is no reason whatever why those people who are charged only 20 per cent. of the cost should not pay up in the same way as everybody else. As I said, the Government do not have in mind to compensate for moneys forgone as a result of evasion.
§ Lord Stoddart of Swindon
I simply cannot understand why the noble Baroness so adamantly opposes this amendment. It seems to me to be an eminently reasonable amendment, for reasons which the noble Earl has just outlined and which many other Members of the Committee also outlined when a previous amendment was discussed. The noble Baroness continues to talk about accountability. She continues to state that everyone should pay something toward the local services; yet we know that under the Bill the people who live in Wandsworth will not pay anything toward their local services. That is not because Wandsworth Borough Council is more efficient than any other council.
§ Lord Stoddart of Swindon
I shall not agree to that. It is not so. It is because it is receiving grants on a disproportionate basis. The noble Baroness simply cannot get away with that argument. That is a local authority under which the people will not pay a cent toward their local services. The noble Baroness wishes to intervene and I am pleased to give way.
§ Baroness Blatch
I shall throw down the challenge once more today. Wandsworth is spending £116 per adult below SSA. Its services are comparable with all its neighbouring authorities which are spending well above SSA. I personally challenge the noble Lord to prove to me that Wandsworth is being treated more generously than its neighbouring authorities.
§ Lord Stoddart of Swindon
I am not concerned with the neighbouring authorities only. There are authorities other than in London, if I may say so. Earlier on, I gave some figures relating to Reading and other places in Berkshire, where there are problems similar to Wandsworth and where perhaps the people are not as rich as many of those in Wandsworth. Those figures showed quite clearly that if those areas were treated in the same favourable way as Wandsworth, they would be doing very well indeed and Wandsworth would be doing quite badly. It is not a matter of efficiency. It is about the maldistribution of grants in favour of certain Tory authorities.
The other problem with which the Government have to get to grips is that this is a Bill which will reduce quite considerably the amount of local taxation raised by the local people. Therefore the argument of accountability reduces proportionately. That means that the Government are making far too much of the 20 per cent. The noble Baroness said earlier that it did not matter; that it would not hurt those poor people because they were paid that amount in the first place anyway. The Government pay students and poor 1181 people this 20 per cent. and then have to bend over backwards to take punitive measures to recover it from the people to whom they have already given it but who have not paid it over to the local authority. Nothing could be more stupid.
It would be only for this year that the Government would have to provide extra funds. From then on it would be a self-balancing item. I cannot understand why the Government will not accept the simple suggestion contained in the amendment. It is administratively sound and would help the Government to mitigate the problems of local authorities in collecting the money. It might even gain them some popularity. For God's sake, why do they not accept it?
§ Earl Russell
Perhaps I may ask the noble Baroness a question before I finally reply. It concerns the element in the student grant for meeting the community charge. We were given an assurance by the noble Earl, Lord Caithness, that there would be such an element when he replied to the noble Lord, Lord Flowers, during the Local Government Finance Bill debate. The noble Lord asked how large that element would be. We have not yet had an answer to that question. Perhaps we may have it now.
§ Baroness Blatch
I am not sure that I can be absolutely specific. My understanding was that 20 per cent. of the average charge across the country was paid as a global sum. I shall write to the noble Earl in detail. The noble Earl is aware that the grant this year in real terms is higher than it has ever been for students.
§ Earl Russell
I am not aware that student support in real terms is higher than it has ever been. I shall not take the noble Baroness through the exchanges that we had last summer about student social security level. I am sure that she remembers them as well as I do.
I have never before been called financially irresponsible when trying to save the Government money. It is not encouraging. My noble kinsman did not call me financially irresponsible but stated that I was in error. It is a matter of opinion who is in error.
I do not understand the point made by the noble Baroness that this proposal will cause the local authority a shortfall of income. I believe that my noble friend Lord Tordoff answered that point entirely conclusively. The costs of collection are a great deal higher for people at the bottom of the scale. I am also aware that my noble kinsman answered points about Dr. Stitt's study on social security benefit levels. However, I am sure that my noble kinsman is equally aware that he did not convince me. I believe that we have a real, serious and urgent problem. I should like to test the opinion of the Committee.
§ 10.57 p.m.
§ On Question, Whether the said amendment (No. 14) shall be agreed to?
§ Their Lordships divided Contents, 28; Not-Contents, 90.1182
|Division No. 4|
|Addington, L.||McIntosh of Haringey, L.|
|Bonham-Carter, L.||McNair, L.|
|Carmichael of Kelvingrove, L.||Monkswell, L.|
|Carter, L. [Teller.]||Morris of Castle Morris, L.|
|Clinton, Davis, L.||Nicol, B.|
|Dormand of Easington, L.||Pitt of Hampstead, L.|
|Falkland, V.||Richard, L.|
|Gallacher, L.||Rochester, L.|
|Graham of Edmonton, L.||Russell, E. [Teller.]|
|Hatch of Lusby, L.||Sefton of Garston, L.|
|Hughes, L.||Stoddart of Swindon, L.|
|John-Mackie, L.||Tordoff, L.|
|Macaulay of Bragar, L.||Underhill, L.|
|McCarthy, L.||White, B.|
|Abinger, L.||Lindsey and Abingdon, E.|
|Astor, V.||Long, V.|
|Astor of Hever, L.||Lucas of Chilworth, L.|
|Beloff, L.||Lyell, L.|
|Belstead, L.||McColl of Dulwich, L.|
|Blatch, B.||Mackay of Clashfern, L.|
|Blyth, L.||Margadale, L.|
|Brabazon of Tara, L.||Mersey, V.|
|Brougham and Vaux, L.||Monson, L.|
|Byron, L.||Montgomery of Alamein, V.|
|Caithness, E.||Mountevans, L.|
|Caldecote, V.||Murton of Lindisfarne, L.|
|Campbell of Alloway, L.||Nelson of Stafford, L.|
|Carlisle of Bucklow, L.||Norfolk, D.|
|Carnegy of Lour, B.||Norrie, L.|
|Carnock, L.||Nugent of Guildford, L.|
|Cavendish of Furness, L.||Oppenheim-Barnes, B.|
|Clanwilliam, E.||Orr-Ewing, L.|
|Clinton, L.||Oxfuird, V.|
|Cochrane of Cults, L.||Park of Monmouth, B.|
|Colnbrook, L.||Pearson of Rannoch, L.|
|Craigavon, V.||Pender, L.|
|Craigmyle, L.||Platt of Writtle, B.|
|Crickhowell, L.||Plumb, L.|
|Davidson, V. [Teller.]||Plummer of St. Marylebone, L.|
|Denham, L. [Teller.]||Radnor, E.|
|Downshire, M.||Rankeillour, L.|
|Dudley, E.||Reay, L.|
|Eccles of Moulton, B.||St. John of Bletso, L.|
|Elliot of Harwood, B.||Saltoun of Abernethy, Ly.|
|Elliott of Morpeth, L.||Seccombe, B.|
|Elton, L.||Sharples, B.|
|Faithfull, B.||Skelmersdale, L.|
|Fortescue, E.||Soulsby of Swaffham Prior, L.|
|Fraser of Carmyllie, L.||Southborough, L.|
|Gisborough, L.||Strange, B.|
|Harmar-Nicholls, L.||Strathcarron, L.|
|Harmsworth, L.||Strathclyde, L.|
|Haslam, L.||Suffield, L.|
|Henley, L.||Teviot, L.|
|Hesketh, L.||Trumpington, B.|
|Hooper, B.||Ullswater, V.|
|Huntly, M.||Waddington, L.|
|Jenkin of Roding, L.||Wade of Chorlton, L.|
|Johnston of Rockport, L.||Wigram, L.|
§ Resolved in the negative, and amendment disagreed to accordingly.
§ 11.6 p.m.
§ Clause 3 [Statutory reduction of community charges: Scotland]:
§ [Amendments Nos. 15 to 18 not moved.]
§ Lord Carmichael of Kelvingrove moved Amendment No. 19:
- (b) £220, where the authority is a regional council, and
- (c) £60, where the authority is a district council.").
§ The noble Lord said: My noble friend Lord Taylor has had to leave, but my name is down to this amendment, as is the name of the noble Lord, Lord Mackie of Benshie. This is an amendment which may seem rather strange, although I referred to it earlier, if anyone remembers. We believe that because the poll tax has been in Scotland for two years there should be a doubling of the £140. An islands authority, which is an all-purpose authority, should get £280; a regional authority, which has only certain major functions, should get £220, and a district council, which has the least expensive functions, should get £60.
§ There is an extremely strong feeling in Scotland, as I am sure the noble Lord, Lord Strathclyde, will be aware, about the fact that Scotland had the poll tax a year earlier. Therefore it is not enough to say, "But you did not have rates", because a household would have one set of rates based on the rental available on the house, whereas the poll tax was based on the number of people in the house.
§ Therefore, for two years people in Scotland have been paying a much higher total sum than was likely with the rates. There could be two, three or four people in a house, which would cost a great deal more than the rates. In terms of winners and losers, there is no doubt that the person in Scotland, who has been a poll tax or community chargepayer for one year longer than his English or Welsh equivalent, has been paying extra.
§ We have had a fair amount of general discussion about this matter in Scotland, and everywhere people feel annoyed that when the slate is wiped clean there will be £140 for people in England, while people in Scotland will still get only £140. I am sure that if the noble Lord, Lord Mackie of Benshie, had been here, he would certainly have supported this amendment with his usual originality and punch. I beg to move.
The Deputy Chairman of Committees (The Viscount of Oxfuird)
If this amendment is agreed to, I cannot call Amendments Nos. 20 to 22 inclusive, because of pre-emption.
§ Lord Strathclyde
The noble Lord, Lord Carmichael of Kelvingrove, is obviously having a bit of fun here and I do not blame him. I have no wish to dispute the ingenuity of his amendments, which by doubling the reduction in the personal community charge for Scotland would make a sort of retrospective gesture to reflect the earlier introduction of the community charge to replace domestic rates there. I am sorry that the other two proposers of this amendment were not here so that we could also have enjoyed their representations. We have of course introduced arrangements retrospectively in Scotland where this was appropriate: for example, the transitional relief scheme. This scheme was specifically related to the introduction of the community charge and there was a case for making the scheme itself retrospective in Scotland.
As I hope was made clear during the debate on Second Reading earlier today, the purpose of the Bill is to achieve a fundamental change in the balance 1184 between the funding of local government from central and local government taxation. This Bill is not specifically related to the introduction of the community charge, as is clear from the fact that the new arrangements apply equally to Northern Ireland. The change in the level of grant funding might therefore have applied under their domestic rates. Noble Lords should also bear in mind that community charges in Scotland last year were on average £50 below those in England, reflecting inter alia the fact that Scottish charge payers benefit from 30 per cent. more central support per capita. As my noble friend Lady Carnegy said in debate earlier today, the time for action to reduce the burden of local taxation in Scotland is now, when charges have been increased by 30 per cent. simply by local authorities' unwillingness to adjust their budgets in line with their capacity to tax at reasonable levels.
I noticed also during the Second Reading debate that the noble Lord, Lord Taylor, supported the Bill, as did the noble Lord, Lord Carmichael. But the amendment would increase the favourable differential already enjoyed by Scottish charge payers and would thus be most unfair rather than fair. It is in effect an attempt to get two for the price of one. While as a Scot I am tempted to admire a brass neck when I see one, I have to say that there are limits to what the United Kingdom taxpayer can be expected to stand.
Like the noble Lord, Lord Carmichael, I have an interest in this amendment because I could significantly benefit from it, and therefore a part of me is tempted to accept. However, we believe that the balance achieved by the Bill for the coming financial year is about right and we have made it clear that it should be the norm for future years as well. The noble Lord's amendment would significantly alter that balance to the extent that many charge payers would have no liability at all. For those reasons, I ask the Committee not to accept these amendments.
§ Lord Macaulay of Bragar
I find it rather strange to hear the Minister accusing the noble Lord, Lord Carmichael, of having a bit of fun at l0 minutes past 11. I am sure that if he wanted a bit of fun he could be in another place—not necessarily nearby. No doubt the noble Lord can speak for himself when he comes to answer. I may say that the people of Strathclyde would not regard the repayments as a bit of fun were the Government to concede the matters set out in this amendment.
I am sure it has been said more than once in your Lordships' Chamber that this charge has been regarded throughout Scotland as an iniquitous charge imposed upon the people of Scotland for two years. Of course there was no squealing in the South while Scotland suffered. The operation of this tax has caused considerable anguish, argument and resentment throughout Scotland. Friends and families have fallen out over it. There have been serious disagreements. The recovery process, when applied to the exercise of warrant sales in Scotland, has caused fear among the people who can least afford to fend for themselves and has diverted attention from the real issue of how to raise local funds to cover local taxation. The "new" Government, if I can call them that, have told us that 1185 we are going to live in a fair and classless society. The amendment is one step which would help them to achieve that. In these days some compensation is due to the people of Scotland for the agony they have suffered.
When the Chancellor of the Exchequer produced his rabbit out of the hat at the end of his Budget speech, he was compared in one newspaper to Paul Daniels. I prefer to compare him to the late Tommy Cooper, who said, "Just like that!" Well, just like that, the Chancellor added 2.5 per cent. to VAT. Perhaps the time has come to play the game "Double your money" and give the people of Scotland back their money.
§ 11.15 p.m.
§ Lord McIntosh of Haringey
Before my noble friend decides what to do about this group of amendments, perhaps I may say that I was interested in one point made by the Minister. He said - I hope that I heard him correctly - that the balance is about right for future years. It is important for us to know whether he means that the balance as between central and local contributions to local authority finance is about right or that the level of the poll tax burden is about right. Those are different things. I shall be fascinated to know which of the two commitments for future years the Minister means.
§ Baroness Carnegy of Lour
Before my noble friend replies, I find this an odd amendment. What about the many people who lived alone and paid rates in the year before the institution of the community charge in Scotland who gained enormously when the community charge was instituted? Why should they get back double the community charge? They should be paying out, not receiving extra money. I am shocked by the amendment.
§ Lord Hughes
When I read the amendment my inclination was to say to my noble friend Lord Carmichael, "If the Government accept this one they will have already accepted every one before it". I was surprised at the enjoyment with which the Minister rejected the amendment. There is a good deal of logic in what the people of Scotland think about this matter. It may not be good from the Government's point of view that an amendment of this kind should be carried, but I cannot help feeling that if the boot had been on the other foot - if England had paid the community charge a year before Scotland - the Government would have found some way of ensuring that Scotland received only £70 instead of £140.
§ Lord Strathclyde
The noble Lord, Lord Hughes, hypothesises in an unfortunate way. I demonstrated how favourably Scotland is already treated in the provision of the social grant, and Members on all sides of the Committee and Members of another place know that that is so. The point my noble friend Lady Carnegy made is correct. What about people who were paying vast rates before the introduction of the community charge? That is the point.
1186 The noble Lord, Lord McIntosh, asked about the balance between the charge and central government finance. We have made it clear that what we have proposed today should be the norm for future years. I am not sure that I can explain that point any more fully. That is what I said. That is what I meant. The noble Lord is looking for an answer that does not exist.
§ Lord McIntosh of Haringey
I am looking for some meaning in the statement. There are two ways of interpreting "the norm for future years". Is the Minister saying that the balance between central and local contributions to local authority expenditure is the norm and should be same for future years, or is he saying that the poll tax level is the norm and should be the same for future years? They are very different things.
§ Lord Strathclyde
I am sorry. I misunderstood the noble Lord. I am talking about the relationship between central government expenditure and the level of poll tax as a proportion of each other.
§ Lord Monkswell
Perhaps I may question something which the Government have said and also the statement made by the noble Baroness, Lady Carnegy of Lour. The rate revaluation in Scotland - and this is fundamental to the whole development of the poll tax - produced some very startling increases for some people. However, there were gainers as well as losers. We never heard about the numbers of people whose rate bill went down as a result of rate revaluation.
We receive no indication or realisation by the Government that some people will have lost out with the introduction of the poll tax as compared to the old system of rates.
§ Lord Strathclyde
I have no idea what is the point that the noble Lord is trying to make. I have no idea as to whether there were gainers as a result of the rate revaluation in Scotland. The point about the community charge was that it was a much fairer system on which to raise local government expenditure.
§ Lord Carmichael of Kelvingrove
I am disappointed by the Minister's answer. Some of the points which he raised were, to say the least, dubious. He used the same point earlier about Scotland receiving 30 per cent. more than England. That is always a dangerous argument to use, particularly when one considers the enormous additions and the drag which the South East and, in particular, the London area is on the rest of the country. Huge additional sums must be spent there on transport and so on. I am not sure whether it is fashionable to talk about the Goschen formula. However, when Scotland and England originally started to discuss these matters in relationship with each other, it was decided that Scotland needed a higher percentage because of the greater distances between centres of population.
I am disappointed also that the noble Baroness, Lady Carnegy, raised the question of the one person living alone. She spoke also of the man who was working, his wife who was working and their four sons 1187 who were all working and earning a great deal of money. Three years ago that family was living in a house which was considered suitable for a family and paying rates, which was perfectly acceptable. The following year that family had to pay six poll tax bills; a great deal more than they had been paying. As my noble friend Lord Hughes said, had that happened in England, there would have been a riot and it would have been argued that a balance should be achieved. If the Minister thinks that the poll tax is fairer than the rates, why are we presented with this Bill? Why do we not continue with the poll tax?
§ Lord Carmichael of Kelvingrove
We did not. We believed that the application of the rates was unfair, as was the way in which the Government cut back on the money for local authorities. That was unfair.
I wish that Members of the Committee would stop saying that we support the Bill. In this Chamber, the Second Reading of a Bill is never opposed. We are trying to improve Bill. On this amendment, a number of good points have been made and the people of Scotland will be able to read what has been said. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 20 to 30 not moved.]
§ Clause 3 agreed to.
§ Clause 4 [Compensatory grants]:
§ Earl Russell moved Amendment No. 31:
§ Page 4, line 18, leave out from ("as") to end and insert ("shall be sufficient to discharge its obligations under sections 1 and 3 above, and to meet any administrative expenses which the authority might reasonably be expected to incur in consequence of the provisions of this Act.")
The noble Earl said: I wish to move this amendment. At the same time I shall be speaking to Amendment No. 35 which is consequential. I shall be as brief as possible. I am not certain whether it is a policy or a drafting amendment, but either way it is an amendment that I care about. Amendment No. 31 takes up Clause 4(2) in the Bill about the amount of grant and,
such amounts …; as the Secretary of State may with the consent of the Treasury determine".
The Bill, as worded, says at Clause 4(4):
In determining the amount of a grant…; the Secretary of State shall have regard to—
- (a) any amount which …; the authority might reasonably be expected to lose, or to have lost, as a consequence" of this Bill.
§ I heard what the noble Baroness said when she replied to the Second Reading debate and I was very glad indeed to hear it. She said that it is the Government's intention to meet the expense in full. That delighted me. If that is the Government's intention I do not understand why they have not spelt it out in the Bill. That seems to be the kind of point which the noble and learned Lord, Lord Simon of Glaisdale, taught us to look for; namely, drafting from the bureaucratic point of view, giving too much discretion to the Executive and allowing the Secretary of State to do whatever he likes. If it is the 1188 Government's intention to pay the expenses in full, can they tell me why they have not put that provision in the Bill? I beg to move.
§ Baroness Blatch
There is a difficulty here. Amendment No. 31 as drafted refers to the grant being "sufficient" for an authority to discharge its obligations, and to the administrative expenses which the authority might "reasonably he expected to incur". Those words "sufficient" and "reasonably" give the game away. Someone has to judge what is "sufficient" and "reasonable". I hope (I presume) that the noble Lord does not intend the amounts of grant payable to be determined by the local authorities which are due to receive them. To put it another way, removing the references to the Secretary of State and the Treasury does not remove the difficulty. On the contrary; it takes away a framework which clearly places the responsibility for the disbursement of public funds on those who must account to Parliament for them, and leaves us with an uncomfortable void.
Perhaps, however, I may offer the noble Earl some reassurance. It is the Government's firm intention to pay grant to compensate authorities for 100 per cent. of the community charge income; that is, from personal, standard and collective charges, which authorities would otherwise have received but for the reduction prescribed by the Bill. And equally, it is the Government's firm intention to reimburse authorities for their reasonable administrative costs incurred as a result of the Bill. We have already had a preliminary discussion, as we said earlier today, with the local authority associations on whether the reimbursement of administrative costs should be on the basis of actual claims, or in accordance with a formula. The associations' preliminary response was not unanimous. But we hope to resolve these differences and agree on an appropriate system of reimbursement very soon.
I have to pose a question to the noble Earl: is he actually saying that he would advocate paying any costs, however reasonable or unreasonable, and that there should be no judgment; and that the Treasury, which has to pay the bill, and the Secretary of State, should have no say in making a judgment about what is reasonable?
§ Lord Hatch of Lusby
Before the noble Earl responds to that question, there is a matter which the noble Baroness should make clear to the Committee. It has been raised several times and, as far as I am concerned, she has not made it clear. At one point she spoke about reasonable costs incurred because of re-billing and administrative costs; on another occasion she referred to all the costs, if I heard her aright. Now she is saying that these costs are to be estimated by the Treasury and the Secretary of State.
Which is the case? Surely she accepts that it is the Government who have caused these extra costs to be incurred. I should like to hear that she admits that. If the Government have caused extra costs to local authorities, surely it is the responsibility of the Government to reimburse those costs in total. After all, if a local authority had been wasting public money in this way over the past few months, it would have 1189 been panned. We would have been hearing from the other side about the wasteful way in which authorities were spending public money. On this occasion it is the Government who are forcing local authorities to spend money which otherwise they would not have to spend.
Let us have it clear from the Government. Do they accept responsibility for the extra costs? Are they willing to reimburse them totally? Do they now realise that they have been wasting public money because of the way they have handled this matter over the past few months?
§ 11.30 p.m.
§ Lord McIntosh of Haringey
As is so often the case, my noble friend is too kind to the Government. It is not just that the councils concerned would be capped; the councillors would be surcharged if they behaved with the degree of financial irresponsibility which the Government are displaying now.
§ Baroness Blatch
There has been a great deal of repetition during the course of the debate today. I am pleased to say yet again that the Government will meet all reasonable costs in full. There have been some wild allegations about how much these costs could be. We have already heard talk of one local authority that has deemed re-billing to cost between £42 and £44 per bill. It is our judgment that that is too high a cost. We wish to reserve the right to make a judgment about what is and what is not a reasonable cost. But the genuine costs of local authorities incurred as a result of these changes will be met. We will honour that obligation to them. But the Secretary of State reserves the right to make a judgment about reasonable costs, which will exclude gross inefficiency or gross waste.
§ Lord Hatch of Lusby
Surely it is the Government, not the local authorities, who have shown gross irresponsibility. Is the noble Baroness now saying that it is the Government who will determine the definition of "reasonable"? Surely an independent audit could be used to take the matter out of the hands of both the local authority and the Government. Quite frankly, after this shambles, no one will trust the Government even to define the word "reasonable".
§ Baroness Blatch
I shall repeat just once more that we are talking to the local authorities about the ways in which these costs will be reimbursed. We hope to come to an agreement with the local authorities about how that will be done. In the meantime, the Secretary of State must at the end of the day reserve the right to make a judgment about what is or is not reasonable.
§ Lord Hatch of Lusby
I am sorry to come back on this point. Surely the noble Baroness recognises that we are talking about a Bill. It is not good enough to say that the Government are having talks. The noble Baroness and the Government are asking us to pass a Bill which contains this provision. Are we then to go away and say, "We will leave it to the Government to carry on with their talks"? That is surely not legislation.
§ Earl Russell
I thank the noble Baroness for her reply, which I found extremely interesting. I take the point that she is making. No one is asking the Government to meet unreasonable costs. I entirely understand that the Secretary of State is answerable for public funds. He cannot leave the assessment of costs entirely to the local authority because the local authority in this case is judge and party in its own cause. But has it not occurred to the Government that, from the local authority's point of view, it may be equally true that the Secretary of State appears to be judge and party in his own cause?
Local authority estimates of costs do not always command confidence in government quarters; but, similarly, government assessments of costs do not always command confidence in local authority quarters. As this problem is bound to arise in connection with future legislation, is there not something to be said for the introduction of some system of independent assessment of what "reasonable costs" actually are in a given situation? I believe that that is an issue about which we need to think at a different time of day. In the meantime, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord McIntosh of Haringey moved Amendment No. 32:
§ Page 4, line 19, at beginning insert ("Subject to the requirements of subsection (2A) below.").
§ The noble Lord said: In moving this amendment I shall, with the leave of the Committee, speak also to Amendment No. 33. We have in fact already started the discussion on the administrative costs of local authorities resulting from the Bill. However, I do not think that we have by any means had an adequate debate on the issue because I do not believe that the enormity of what is going on has been fully exposed, despite the very valuable contributions made on the last debate.
§ I must remind Members of the Committee that we are not concerned only about the changes brought arising under the Bill; we are also concerned about the many changes which have been brought about by the alterations in the community charge reduction scheme —the transitional relief. The Secretary of State announced a new version of transitional relief on 17th January of this year. That was the fourth major change in the community charge reduction scheme since its introduction in the autumn of 1989. Therefore, the history of the Government making up their mind what they want to do with the poll tax system is not very good.
§ Further, on Monday—which is only two days ago —the Minister, Mr. Portillo, put forward very wide-ranging amendments. They were, however, noticeably too late to appear in Hansard the following day and that meant that many local authorities did not hear about them until today. They simply did not have access to the information. I believe that a circular was issued yesterday by the Department of the Environment purporting to explain Mr. Portillo's statement. But if I were to begin quoting the complicated formulae contained in the fourth page of 1191 that letter, I think that Members of the Committee would justifiably complain that I was seeking to confuse the issue rather than to shed light upon it.
§ It certainly seems that, with the best will in the world, the Government have not succeeded in settling upon a community charge reduction scheme which they are prepared to justify and with which they are prepared to stick. Under those circumstances, the task of local authorities in trying to settle a community charge and prepare the bills for this year is virtually impossible.
§ During the course of today I met some of the treasurers involved. I can testify to the fact that treasurers—especially the most efficient—are in despair. That is because they went to great lengths to send out their bills by 1st April so that the first payment date of 15th April could be adhered to. They are also in despair because they know from their experience of one year of the poll tax in England and Wales, and two years in Scotland, that the later the demand is sent out the more difficult it is to achieve an adequate collection rate. Losses arise not only to the cashflow because of people not responding, but also because of the number of people with whom contact is lost and who in the end refuse to pay because of the lateness of the bills.
§ The treasurers are especially in despair because the amendments which were put forward in another place by Mr. Portillo on Monday night involve more than simple changes in the figures—those are easy enough if you say that the minimum rebate to be recognised is now £1 per week instead of £2 per week; you simply change £104 to £52, and that is fine. However, they also involve the inclusion of all the adults in the household in the community charge reduction scheme, and that is an enormously different change. It involves rewriting the entire program for the calculation of rebates. It involves going back to the suppliers of the software. I promise the Government that this will be the case in Conservative as well as Labour authorities. It will involve delays of weeks in the production of the poll tax demands.
§ There can be few local authorities which will not find themselves still preparing their poll tax demands late in May and perhaps even into June. It will not be the same in all local authorities because the degree of complexity of the transitional relief is different in different local authorities, just as the number of poll tax payers on rebate is different in different authorities.
§ The size of the problem cannot be overestimated. Its complexity has only been scratched in the consideration of the matter so far. It is no good Ministers shaking their heads. What they have been looking at is the position before Monday night. That is just about comprehensible. We know which local authorities have sent out their demands and will have to be compensated for sending out new ones and which authorities have to be compensated less because they have not yet sent out their demands. That is relatively simple.
§ However, to re-calculate all the details of the community charge reduction scheme, as is now required, is an enormous task. I do not believe that the 1192 Government have yet started to realise what is involved. Therefore it is necessary that we should adopt these two amendments which reflect the additional expenditure which will be necessary on bills which have been rendered void by virtue of Clauses 1 and 3 of the Bill. It is necessary for us to add to the Bill an amendment which makes it clear that the Secretary of State must be satisfied that the resources made available to the authority under this provision are or will be sufficient to enable it to fulfil the requirements of the Act without loss. That is not a wrecking amendment. It is a severely practical amendment which reflects the difficulties which local authorities face now and will face in the weeks and months to come. I beg to move.
§ Lord Waddington
I have read these amendments with care and I believe that they have a dual purpose. First, the object is to make sure that local authorities are compensated for the additional costs which they incur in carrying out the provisions of the Bill. Secondly, it is to ensure that those costs are properly identified and therefore properly reimbursed by the Exchequer.
I can reassure the noble Lord on both points. It is our intention to pay a grant under the provisions of this clause specifically to reimburse authorities for their reasonable costs incurred as a result of the Bill. There are two possible routes we could follow. We could pay grant on claims for actual spending or we could use a formula. We have already had a preliminary discussion with the local authority associations on this point. Different representations from the associations expressed different preliminary views. We hope to resolve these differences and agree on an appropriate system of reimbursement in further discussions very soon. My right honourable friend the Secretary of State for Wales is already discussing these matters with the local authority associations.
We intend the grant which we pay to be sufficient to enable authorities to fulfil the requirements of the Bill, and its cost will be clearly and separately identified. In those circumstances, I invite the noble Lord to withdraw the amendment.
§ Earl Russell
Perhaps I may ask for a little clarification. I gave the Government Front Bench notice that I would return under this amendment to the question of the local authority which incurs a deficit because it decides not to send out a bill because the amount it would recover would be less than the cost of collection.
Is there any more that either the noble Lord or the noble Baroness can say to me about how the Government would look on such a case? I shall wait if they need to obtain an answer because we are in difficulties at the moment. The case seems to me to be one which is worth thinking hard about. It is not reasonable to require a local authority to send out a bill and go to a lot of expense if it is not going to recover what it costs. I appreciate that in general local authorities should not go into deficit. I appreciate that the Government care a good deal about that. But 1193 when we have a situation where one government principle clashes with another government principle, we might have a little room for adjustment.
§ 11.45 p.m.
§ Lord Waddington
I do not think there is much difficulty here. Clearly if a local authority declines to recover money which is due to it when economically it could recover those costs, it should not expect to be reimbursed by the Government for the loss it sustains as a result of failing to collect that which it should collect. What we are really debating here is whether there is a proper system for identifying what are the reasonable costs incurred by a local authority as a result of implementing the Bill. I said that discussions are taking place with local authorities on the best way of reimbursing them, but there is no doubt whatsoever about the Government's intention, which is to see that local authorities are properly reimbursed.
§ Lord McIntosh of Haringey
I am sure that is intended to be helpful and I find it helpful. I do not intend to pursue this matter to a Division. The Lord Privy Seal has in many ways gone as far as he possibly could to reassure the Committee of the Government's good intentions. When he added the words "properly reimbursed", I take it that the gap between "properly" and "in full" is not all that great.
However, in the debate on the previous amendment the noble Baroness insisted on the point—I can understand that—that in the end there has to be an ultimate discretion other than with the local authority. But she was insisting on the point that the ultimate discretion should lie with the Secretary of State. She resisted the suggestion from these Benches that there should be the possibility of some kind of independent arbitration on what are or are not reasonable costs. I put it to the Government that there is a recent and good precedent for having this kind of independent arbitration. It is to be found in Clause 92(3) of the New Roads and Street Works Bill. That subsection states:Where under any provision of this Part a person is entitled in certain circumstances to recover costs or expenses incurred by him in executing works or taking other steps, any dispute as to the existence of those circumstances or as to the amount recoverable shall be determined by arbitration".One cannot doubt the good faith of all Secretaries of State under all circumstances, but there clearly is the possibility of a conflict of interest between individual local authorities. All the cases will be different, as will the Secretaries of State. Would it not be a helpful extension to the helpful assurances already given if the Government were to accept that there could be circumstances in which arbitration would be the right way to proceed in the case of dispute?
§ Lord Waddington
I am no expert on these matters but clearly if there was a dispute one would hope to resolve it by agreement. This is really what I was saying earlier. There may initially be a disagreement, but one hopes eventually that agreement will be reached. That is why discussions are taking place with the local authority associations now. I do not think one should anticipate trouble when discussions are 1194 taking place and when it is certainly the intention of the local authorities and the Government to reach an amicable agreement on how these matters should be resolved if initially they do not arrive at the same figure.
§ Lord McIntosh of Haringey
It may sound strange but this is the kind of case where I shall have to consider what the noble Lord has said and decide whether to table amendments on Report. That is exactly the position. It seems to me that the precedent I have cited of the New Roads and Street Works Bill is a precise precedent. Despite the evident good will of the Lord Privy Seal in responding, there is the possibility that a more modest amendment on our side would achieve further progress.
§ Lord Waddington
I have now received some guidance, which may be of some help in clarifying what I said earlier. Quite clearly, if one were to apply a formula it would be as a result of agreement between the Government and the local authorities as to what kind of formula should be operated. If one did not have a formula and payment was to be on the basis of the actual costs incurred, then there is no doubt whatever that an independent check could be made by the auditor if there was any dispute between the local authority and the Government.
§ Lord McIntosh of Haringey
That is helpful, but I want to reserve my position on the matter. I believe that the analogy with the other Bill is still valid. In order to make progress - and we have been making progress - I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 33 not moved.]
§ Earl Russell moved Amendment No. 34:
§ Page 4, line 22, leave out subsection (3).
The noble Earl said: The amendment seeks to delete Clause 4(3), which provides that:
"In making any payment of grant under this section, the Secretary of State may impose such conditions as he may with the consent of the Treasury determine; and the conditions may relate to the repayment in specified circumstances of all or part of the amount paid, or any other matter".
§ I am not quite clear what is meant by that clause and should be grateful for an explanation. It is rather widely drawn. It gives the Secretary of State power to impose any conditions he likes and does not seem to spell out any particular type of conditions. Allowing the conditions to relate to "any other matter" seems to be a case of allowing the Secretary of State to do whatever he likes.
§ If I could be told the precise intention behind the clause I should find it helpful. I beg to move.
§ Baroness Blatch
I think that I can help the noble Earl. A similar provision exists in relation to other grants—notably grant payable under the community charge reduction scheme. The noble Earl evidently regards it as sinister. That is not the case.
The proposed power would have two principal functions. First, it would enable us to require properly documented information from authorities to support their claims. Without that power we would have to be much more cautious in our payment regime in order to 1195 protect the interests of the Exchequer and the national taxpayer. Secondly, the repayment provision enables us to make on-account payments during the year on the basis of unaudited information supplied by the authorities themselves. We could not do that - or, at least, could do it only on a much less generous basis -if we did not know that overpayment on account would be subject to recovery.
In other words, the provisions of the subsection are not overbearing or sinister. On the contrary, they are required in order to permit the payment of grant on a fair basis without unreasonable delay while protecting the interests of both the local authorities and the Exchequer. I hope the noble Earl is content with that explanation and will not press the amendment.
§ Earl Russell
I find that a very reassuring reply. So far as concerns the Government's intentions, that is a very sensible justification of that form of words. However, the subsection raises drafting points. I am not sure that the Government's intentions could not have been achieved by a slightly more tightly drafted form of words.
There is a point about the amount of discretion which is being given to the Crown by the drafting of statutes which we need to think about. Of course I entirely trust the reassurances that I have been given, and I welcome them, but we are giving powers to future governments as well. The noble Baroness, as well as I, might look with some doubt on the way in which they might be exercised in future. Does the noble Baroness wish to reply?
§ Baroness Blatch
Only to say that it may be optimistic on the part of the noble Earl to assume that there may be another government in the next 12 months because the Bill has a life of only 12 months.
§ Earl Russell
In politics all things are possible. Nevertheless, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 35 and 36 not moved.]
§ Clause 4 agreed to.
§ Remaining clause agreed to.
§ [Amendment No. 37 not moved.]
§ House resumed; Bill reported without amendment.