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Lord Dixon-Smith moved Amendment No. 6:

("( ) A local authority, in considering expenditure relating to section 2(1), may only spend money, whether raised by precept, borrowing or otherwise, up to a sum limited in any one year by the amount that would be raised if the level of the Council Tax precept on a Band D house within its area were increased by £2.").

The noble Lord said: My Lords, as the Bill is drafted, local authorities are provided with a new, pretty general power. However, as a consequence of having that power, they may not raise money, whether by precepts, borrowing or otherwise. That seems to me somewhat illogical. In Committee I tried to excise that particular part of the Bill, but that was not acceptable to the Government. What we are dealing with here, of course, is government control over local authorities. The only reason that I can see for having that restriction in the Bill is because the Government are afraid that local authorities will let their hearts run away with their heads, and, more importantly, let their members "run away" with their council taxpayers' funds, with unpleasant results.

Those who feel that local authorities will run away with public funds have, all too often, had their fears borne out. However, I have always argued that if local authority members wish to run away with local taxpayers' funds, they should be allowed to do so on the reasonable ground that the local electorate will learn to behave responsibly and not to elect those who are rash enough to behave in such an unreasonable way. One of the biggest problems that local government have had for many years has been the increasing tendency of government to wet nurse local government and not treat its members as responsible individuals. They are hopelessly over-restricted as a result.

I think that some expenditure is necessary, but the Government clearly think that it should be limited. In the good old, bad old days one might have thought of the product of a penny rate as being perhaps an appropriate way of dealing with this matter. The product of a penny rate was a sum of money which had what I would call a good provenance. It permitted local authorities to expend money up to that limit in ways which were otherwise not normally acceptable within the local government legislation that was then in place. Should an emergency arise, it was judged to be the appropriate level at which the national government would begin to look at the consequences of, let us say, a natural disaster in a local authority's area. If the expenditure went above the product of a penny rate, it was then possible that assistance might be made available.

We do not have the product of a penny rate and so I had to think of a reasonable way of going forward in the new environment of council tax and banded properties. As I understand it now, the normal way in which one assesses the impact of a particular increase in costs on a local authority is by the impact that it has on a Band D house, that band being about the middle of the range. If one has a much smaller property,

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one goes down to band A and the impact is commensurately less; if one goes up to band G or band H, the impact is commensurately more.

I have hit on the figure of £2 for a band D house within an authority's area for the simple reason that it would not produce a completely unreasonable impost, but it would produce a sum of money which would enable authorities to do something useful under the power given to them in this legislation. If one takes a fairly typical London borough with about 100,000 houses, £2 on a band D house would produce £200,000. That is not a large sum of money but most local authorities would find it extremely useful. It would increase a council tax payer's burden by about one-third of 1 per cent, so we are looking at a very marginal amount.

This seems a sensible way forward. While I am not optimistic that the Minister will say "What a frightfully good idea", I invite him to consider the amendment; otherwise we shall be in some difficulties and in a position of inconsistency. We shall be giving local authorities a power on the one hand and, at the same time, putting in place what I have called in other places an "anti-power", which restricts their ability to do anything about it, on the other. I beg to move.

Baroness Hamwee: My Lords, we share the view of the noble Lord, Lord Dixon-Smith, about local authorities being allowed to make their own decisions because local taxpayers, wearing their hats as electors, will give their own views in due course. I am not sure that I would use the term "run away with the council tax payers' money", but I take his general point.

However, we cannot support the amendment. The Minister may correct me, but I understand that Clause 2 allows local authorities overarching powers; it is not that they are being provided with one detailed additional power. Whatever the situation--even were this to be one extra detailed power--I think that the £2 limit is unambitious. As the noble Lord said, it is a matter for the electors. I am not enthusiastic about the Bill applying yet another restriction on local authorities as regards their tax raising and spending.

4.15 p.m.

Lord Peyton of Yeovil: My Lords, my noble friend is to be congratulated on his persistence. He may be erring on the side of optimism in hoping to persuade the Government to do something, but he deserves support and commendation from behind him.

On first sight, this part of the Bill puzzled me. It seemed to me that the Government were being quite lavish in the promises to local government in Clause 2, where it states:

    "Every local authority is to have power to do anything which they consider is likely to achieve any one or more of the following objects".

I shall not read out the rest of the clause. That seemed as though the Government were in a very generous state of mind towards local authorities.

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But then we get to Clause 3, which states:

    "(1) The power under section 2(1) does not enable a local authority to do anything which they are unable to do by virtue of any prohibition".

It continues:

    "(2) The power under section 2(1) does not enable a local authority to raise money

    (3) The Secretary of State may by order make provision preventing local authorities from doing, by virtue of section 2(1), anything which is specified, or is of a description specified, in the order".

Then Clause 3(4) subjects local authorities to guidance from the Secretary of State after due consultation.

I do not wish to pretend for a moment--it would open the door to the Minister--that the previous administration had an immaculate record so far as concerns local government. It deluged local authorities regularly in a mass of legislation, to a point which must have been exceedingly discouraging to those who felt inclined to enter their ranks. Indeed, if any over-confident candidate for local government had ever consulted me--which would be a foolish thing to do, I admit--I would have advised him or her that whatever they did, do not. The one thing they could rely on was the mistrust of the central government, of whatever party, and of being hedged around by a whole lot of regulations.

The first clause that I quoted is a classic case. I will not quote it again. It states that local authorities can do anything that they like or think appropriate; and then the next clause states that they cannot. It hedges restrictions around them.

I do not believe that people worth their salt will continue to want to go into local government as long as they are hamstrung by central government. At some time or other, another government must take a different line. My noble friend is entirely right to move his amendment.

Baroness Young: My Lords, I support the amendment of my noble friend Lord Dixon-Smith. It is an important amendment on a very important issue of principle--that is, how much freedom a local authority can have.

I recall very well that when the present Government were in opposition they were very much against the then policy of the Conservative government on rate capping. I lived in an authority which was rate capped. I remember it very clearly, not only from the debates which took place in your Lordships' House but from personal experience of its effects. The argument against it was that it denied local authorities the freedom to do what elected representatives thought right for their particular community, it was too expensive and people did not want to pay the rates, or the council tax as it would be now.

It may come as a surprise to the Government to know that, within the party, I argued against this policy. I thought that if one wished to have effective local government it should be able to spend and, if necessary, to go bankrupt. That would be a salutary lesson all round if people behaved in what is really a

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totally irresponsible fashion. That is the consequence; and the consequence should come down firmly on the heads of those responsible. I am not advocating that as a policy in any sense, but it seems that what lies behind the amendment is a similar principle to that debated previously: how much freedom should a local authority have? As my noble friend made quite clear, and in my local government days--a long time ago now--there was the freedom to spend the money which could be raised from an increase of a penny rate. That was a long time ago, but it was a measure of freedom which, if they wished to, local authorities could exercise and use for particular areas. It may not have been the right sum of money, but it was at least a sum of money. If I have understood my noble friend correctly, his amendment aims to find a rather similar kind of money to offer a similar kind of freedom.

That should not be at all incompatible with the rest of the Bill. Such a provision would be valued by local authorities. If it is considered that local authorities cannot be trusted to raise the sums of money for things which, at the beginning of the Bill, they are to be allowed to do, the amendment will at least give them a measure of freedom. Even if the Government cannot accept it today, I hope that they will take it away and consider it seriously.

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