Rate Support Grant

HC Deb 24 July 1984 vol 64 cc828-50 3.52 pm

The Secretary of State for the Environment (Mr. Patrick Jenkin)

With permission, Mr. Speaker, I should like to make a statement about local government finance for 1985–86. It contains my proposals for the rate support grant settlement in England, and my decisions on selective rate limitation under the Rates Act 1984.

I am today issuing to local authorities proposals for the main features of the RSG settlement for next year. Copies of the material sent to them are in the Libraries and the Vote Office. This early announcement should give authorities plenty of time to budget sensibly in 1985–86. It is the first time that I have been able to set out so much of the framework of the settlement so early in the year. I hope that this is welcomed. It is also the first time that the Rates Act provisions for constraining the rates — and hence the expenditure — of high-spending authorities have been available to the Government. They have strongly affected the overall shape of the settlement. This year's budgets show a continuing real terms increase in the level of local authority current expenditure. The Government remain committed to the constraint of public expenditure. This is essential if we are to put the economy on to a sound footing for the longer term. We must continue to seek economies.

For 1985–86, for the first time, the Rates Act enables me to start curbing the worst excesses of the highest spenders. Until now, even the lowest spenders have had to be asked to make significant savings because of the irresponsible behaviour of the minority of high spenders. The Rates Act makes it possible for me to begin to change that. As I promised at last year's settlement, it gives me the scope — within the overall continuing need for restraint—to set fairer targets for low spenders. At the same time, the Government are determined to ensure that these realistic targets are not overspent, and the holdback proposals reflect that determination.

First, rate limitation. The new powers given me by the Rates Act enable me to set rate limits for the worst overspenders and thus protect their ratepayers. I am today laying before the House a report describing the basis of selection of authorities for rate limitation. I will select for rate capping those authorities spending more than £10 million whose budgets for the current year are more than 4 per cent. above their targets, and more than 20 per cent. above their grant-related expenditure assessment. On the basis of these criteria, the following 18 authorities are designated: Basildon, Brent, Camden, the GLC, Greenwich, Hackney, Haringey, the Inner London education authority, Islington, Lambeth, Leicester, Lewisham, Merseyside, Portsmouth, Sheffield, Southwark, south Yorkshire, and Thamesdown.

I am setting expenditure levels for these authorities which will form the basis of their rate limits. In most cases they will have to contain their expenditure at the same level in cash terms as their budget for 1984–85. In the case of the three authorities which are budgeting to spend more than 70 per cent. above GRE this year and which have increased their budgets by more than 30 per cent. since 1981–82 I am setting expenditure levels 1.5 per cent. below their effective 1984–85 budgets. These authorities are the Greater London council, the Inner London education authority and the London borough of Greenwich. The 18 designated authorities are being formally notified of their expenditure levels. I shall of course consider any representations which they may wish to make to me asking for a redetermination of their expenditure level.

This announcement is good news for ratepayers. The 18 highest spending authorities will have their spending levels controlled. Furthermore, as I said during the passage of the Bill, because the Rates Act 1984 enables me to control the expenditure of the highest spenders, I can set fairer targets for the low spenders, as I promised earlier this year. For the current year, the maximum cash increase over 1983–84 budget is 3 per cent. For next year, I am proposing to allow most low spenders to increase their spending by 4.25 per cent. over budget this year. On the best estimate of the rate of inflation over the period—the GDP deflater— this should require no further real terms cuts from those authorities. This has been made possible only by the headroom provided by rate limitation. High spenders will have tougher targets, but no authority is asked for more than a 1.5 per cent. cash reduction on its 1984–85 budget.

Those targets add up to about £21.8 billion, which implies an increase in current expenditure provision in excess of £800 million. This takes account of the setting up of London Regional Transport—on last year's basis, the increase would be nearer £900 million. The equivalent increase for 1984–85 was some £500 million. The increase in the 1985–86 provision will be contained within the established aggregate public expenditure plans.

Those targets are therefore realistic, and must not be seen as an invitation to increase spending. For that reason, I am proposing a much tougher holdback tariff for the first percentage points of overspend. The tariff will entail reductions in block grant equivalent to 7p at ratepayer level for the first 1 per cent. of overspend, another 8p for the second percentage overspend, and another 9p which will be added for each 1 per cent. of spending after that. That is a strong deterrent to overspending, but I think there will be a wide recognition—at least on this side of the House—of the fairness of this proposal. I am proposing reasonable, realistic targets. It is only fair in return to expect that they will be met, and to take a firm line with anyone who sees this as an opportunity to boost spending.

The effect of these proposals on services provided by local authorities will depend on their ability to use resources efficiently. The Government look to local authorities to do their utmost to contain their pay and other costs and to manage their resources in a way that ensures that the best possible value for money is obtained.

Aggregate Exchequer grant will be £11.7 billion, about the same amount after adjustments as the corresponding figure for 1984–85. This represents a grant percentage of about 48.8 per cent. for 1985–86, compared with 51.9 per cent. this year. This continues the trend we have set over recent years of shifting the burden of local authority expenditure away from the taxpayer and towards the ratepayer, thereby increasing local authorities' accountability to the local electorate.

I am now consulting local government on my proposals for targets, holdback and aggregate Exchequer grant before presenting a rate support grant settlement to Parliament at the end of the year. Consultation on grant distribution will take place in the autumn.

The Government remain determined to restrain the level of current expenditure of local government. We are now seeing the benefits of the Rates Act. Because it allows us at last to get to grips with the excesses of the highest spenders, responsible low-spending authorities will no longer have to carry the can for them. As I promised, I am proposing fairer targets for them. My proposals mean that if authorities spend within their targets — the capped authorities will have to stay below their spending levels —the average rate increase in England should be lower than this year's average increase. This will be welcomed by hard-pressed ratepayers everywhere. I commend my proposals to the House.

Dr. John Cunningham (Copeland)

Is the right hon. Gentleman aware that he has just announced an unprecedented and giant stride along the authoritarian path to central control and one that he will almost certainly live to regret? That is from a Government who came to office committed to rolling back the frontiers of the state. Is the right hon. Gentleman aware that it is not true to say that the Rates Act 1984 makes it easier for other authorities because of the magnitude of the cuts that he is expecting in 1985–86 which remain at something like £800 million, and the gap in 1986–87 between spending plans and his attitude, which is about £2.3 billion or 11 per cent. of what local authorities are spending? Is not his figure of 4.25 per cent. for inflation made nonsense of by recent interest rate rises? Will not that mean real cuts for local authorities?

How can the right hon. Gentleman say that this is good news for the ratepayers when every council spending at target next year will receive less grant and, therefore, have to raise rates and cut services just to avoid paying the harshest penalties that the Government have ever imposed upon local authorities? The Secretary of State said: This continues the trend we have set over recent years of shifting the burden of local authority expenditure away from the taxpayer and towards the ratepayer, thereby increasing local authorities' accountability". What nonsense from a Government who fought an election campaign on a pledge to abolish the rates.

Is the right hon. Gentleman aware that the best way to help ratepayers would be to maintain the real value of grant and to scrap the penalty system, and not, as he is doing, by cutting the RSG in real terms by about £590 million?

Dealing with the list of rate-capped authorities, does the right hon. Gentleman recall our correspondence during the Portsmouth by-election? Does he remember writing to me on 11 June and, in the first paragraph, saying, following the announcements I had made about his list: The information given to you is incorrect in virtually every detail. I am surprised that you should make such accusations on the basis of inaccurate hearsay.''? May I remind the right hon. Gentleman that the list he has just announced is identical to the list that I announced, plus one authority—the London borough of Hackney? May I also remind him that the tests he has applied are exactly those tests which I said he intended to apply? Does not the statement make the letter of 11 June in his name completely dishonest? Does it not also mean that the Secretary of State for Trade and Industry and the Conservative candidate in Portsmouth, Mr. Patrick Rock, told deliberate lies to the electors of Portsmouth in a desperate attempt to salvage votes for a discredited Government?

Is the right hon. Gentleman further aware that four authorities he has designated today — Haringey, Portsmouth, Sheffield and Thamesdown — have increased expenditure by less than the average for local authorities as a whole? Why are they included when the City of London is not included, spending 274 per cent. above its 1979 expenditure level and 247 per cent. above its GRE—the worst overspender by both tests?

Does the Secretary of State understand that his announcement will place authorities in an impossible position, as was acknowledged recently in a letter to The Times from Councillor Norman Hawkins, the Conservative leader of the London borough of Hillingdon, who said that if authorities obeyed Whitehall they would end up breaking the law requiring them to provide proper services to their areas? The Secretary of State's statement will provoke resistance from all councils committed to maintaining essential jobs and services.

Far from saving public expenditure overall, this exercise will cost the Exchequer an extra £600 million because the claimed savings of about £200 million from the controlled and designated authorities will have to be set against the extra £850 million the Treasury has had to cough up to buy off some of the right hon. Gentleman's Tory friends.

Does the Secretary of State recognise that cutting rate support grant and forcing councils to provide a larger share of their own expenditure is not increasing their freedom or choice, nor is it improving responsibility or accountability to ratepayers and to voters? In reality, under this system the more responsibility a council takes for a greater percentage of its expenditure, the more likely it is to come under Whitehall domination. Does not that make the whole exercise nonsense?

Mr. Jenkin

That is an astonishing tally of criticisms against what is a fair and realistic settlement. The hon. Gentleman took no account of the aggregate targets which I have just announced—some 6 per cent. higher than the targets that I announced at this time last year; that it allows a 4.25 per cent. uplift for low spenders compared with 3 per cent. last year when inflation last year was due to be 5 per cent. compared with the estimate of 4.25 per cent. this year. That is for authorities——

Dr. Cunningham

It is a cut in real services.

Mr. Jenkin

It is not a cut. Authorities last year which were above their GREs faced a 2.5 per cent. uplift of target only, against a 5 per cent. inflation. This year it is a 3.75 per cent. uplift against a 4.25 per cent. estimate of inflation. The hon. Gentleman seems to have forgotten that the Government of whom he was a member reduced the proportion of the aggregate Exchequer grant from 1976 to 1979, whereas we are merely maintaining — [Interruption.] That makes authorities, as I am sure the hon. Gentleman would like, more accountable to their ratepayers.

The hon. Gentleman made great play about Portsmouth. He will remember that the letter he wrote to me — he has quoted my reply to it— accused me of deliberately manipulating to try to secure political purposes. He accused me of using the Civil Service to politically gerrymander legislation; and he said that officials had been told to look for special circumstances to exclude that council. All those accusations were false, and that is what I said in my reply.

The hon. Gentleman mentioned four authorities whose spending is less in excess than the GRE of the City. The City has consistently hit its spending target. None of the designated councils has come within 4 per cent. of its target. The hon. Gentleman has the figures wrong when he talks about the extra costs of £600 million. What matters is what is spent, not what appears in the public expenditure White Paper.

The hon. Gentleman will know that year by year we have had to add back into the public expenditure White Paper substantial sums because of substantial overspending. This next year, if the 18 capped authorities had continued increasing spending at the same rate that they have over the past three years, the aggregate spending would be £400 million higher than the limits I have now set for those 18 authorities. The result is that I am able to offer fairer targets to the low-spending authorities—the authorities whose spending is below the level of their GRE. This is a fair settlement.

Mr. Francis Pym (Cambridgeshire, South-East)

The extent to which my right hon. Friend has been able to provide a fairer settlement for the low-spending authorities will be greatly appreciated. The figures will require careful study, but he has made a move to ease the share of the burden falling on those authorities.

However, how does my right hon. Friend justify what appears to be a U-turn from trying to abolish the rates and ease the burden on the ratepayer to a situation in which the burden on the ratepayer appears to be going to increase without limit? Will not whatever assistance he may feel that he has obtained out of the Rates Bill be more than offset for all ratepayers by a reduction from 51.9 per cent. to 48.8 per cent. in the overall contribution of the rate support grant, and is that not bad news for the ratepayer?

Mr. Jenkin

I thank my right hon. Friend for his appreciation. As he will know, it was very much in response to representations from him and others of my right hon. and hon. Friends that we adopted this new method of setting targets.

I have merely announced the percentage of aggregate Exchequer grant for 1985–86. No assumptions should be made about the pattern of grant in ensuing years. This is not a U-turn. We are continuing a trend followed by successive Governments since 1976 who have sought to reduce the percentage of local authority current spending met by the taxpayer and to increase the accountability to the local ratepayer.

I can assure my right hon. Friend that if authorities spend within their targets next year the average level of rate increase should be lower than the average level this year, which at 5.5 per cent., is the lowest for 10 years.

Mr. Peter Hardy (Wentworth)

Will the right hon. Gentleman accept that the cut in the share of local authority expenditure which he has announced today is bad news for the areas which are already suffering hardship as a consequence of Government policy? Will he accept that people in south Yorkshire are puzzled because it is only a few days since the Secretary of State for Transport announced that it was Government policy to have lower fares and better services, and that the ratepayers should provide a subsidy to promote the bus services? Since that is the policy that we have been trying to pursue in south Yorkshire in the face of considerable opposition from the right hon. Gentleman, will he consult the Secretary of State for Transport and try to decide in which Department the illogicality lies?

Mr. Jenkin

My right hon. Friend—to whom this question is primarily addressed — would be able to assure the hon. Gentleman that in south Yorkshire as in many other metropolitan transport authorities there is certainly scope for massive improvements in efficiency, and that furthermore adjustments are being made in targets this year because of the capital-only transport supplementary grant. The hon. Gentleman will know that my right hon. Friend and I work closely together. We believe that the combined package that we have put before the country on rate support grant and transport supplementary grant will be fair to authorities such as his.

Sir Hugh Rossi (Hornsey and Wood Green)

Is my right hon. Friend aware that his announcement will be welcomed by the hard-pressed ratepayers of Haringey who enjoy the unenviable distinction of being among the most heavily charged and least well served in the country, as was evidenced a few days ago by the HMI report on local education? Will my right hon. Friend do all that he can to ensure that the economies will be found from the waste and the top-heavy administration of an ever-burgeoning bureaucracy and not from the essential services?

Mr. Jenkin

The borough of Haringey also has the unenviable distinction of having increased its manpower by over 5 per cent. between 1979 and 1983, when the average outer London authority was able to reduce manpower by 3.5 per cent. Haringey will be well able to meet the necessary economies by cutting out overheads and bureaucracy among the town hall staff.

Mr. Guy Barnett (Greenwich)

The right hon. Gentleman may believe that he is being fair, but can he really believe that he is being fair to Greenwich? There is a mountain of evidence to demonstrate that, in terms of value for money and the size of the social problems faced by the council, the right hon. Gentleman's figures are completely and utterly wrong.

Will the right hon. Gentleman bear in mind during the coming months that the report of the Audit Commission will demonstrate that the result of this absurd system is that, far from being better off, the ratepayer is worse off to the extent of £1.5 billion a year?

Mr. Jenkin

The London borough of Greenwich is among those which have increased their spending by the largest amounts over the past two years. It is now spending 114 per cent. more than its 1978–79 figure, compared with an average increase among local authorities of 79 per cent. Such an authority should clearly be able to make the modest savings in expenditure which capping will necessitate next year.

The hon. Gentleman would be wise to wait until he sees the final report of the Audit Commission before he comments on that report.

Mr. Geoffrey Rippon (Hexham)

Will my right hon. Friend be warned that his proposals will prove arbitrary, dangerous, ineffective, and ultimately costly? Will he accept that there is no possibility of good news for ratepayers as long as we continue to transfer the burden from taxes to rates—the tax which is least able to bear it? Does not my right hon. Friend understand that there is not the slightest possibility of keeping the lid on this boiling saucepan unless we have a financial structure which is comprehensible—which this certainly is not—and a system which is fair to all ratepayers in all parts of the country?

Mr. Jenkin

If my right hon. and learned Friend will give me a blueprint of the system which he would like to see, I shall study it carefully. My right hon. and learned Friend makes no secret of his dislike for the rate-capping legislation, but it would have been impossible for me this year to offer fairer targets to those spending below their GRE if I had not started to make savings from the highest spenders. Those authorities have been for too long able to pass on the burden of their higher spending to authorities which have budgeted and spent responsibly year after year. I am glad to have been able to start a trend in the other direction.

Mr. Simon Hughes (Southwark and Bermondsey)

Does the right hon. Gentleman accept that these proposals have no basis in principle? If we go on in this direction, there will soon be no central Government support at all and everything will be funded from the rates, and that will be quite contrary to the only policy on the matter which the Government have ever claimed to espouse. The proposals are also contrary to logic, because most of the expenses are determined by debt repayment, interest chargers, nationally fixed employment agreements, and housing benefit amounts.

Above all, is the right hon. Gentleman aware that the proposals show no compassion? Most people in the inner-city constituencies such as mine have their rates paid for them because they do not have the money to pay. What will the effect be on the homeless, the unemployed, children in nurseries, the people who need the health services, and the old? If the right hon. Gentleman cannot give us the figures, is that because he does not know or because he does not care?

Mr. Jenkin

The last time there was a 3 per cent. cut in aggregate Exchequer grant, inflation was higher, there was no rate capping and there was a very high overspend by local authorities. Despite all that, the average rate increase in 1983–84 was only 6.5 per cent. Now that we have lower inflation and rate capping, and as we expect a much lower overspend next year, I stand by the view that if authorities budget to spend within the target there will be a lower rate increase next year than there has been this year. The exemption of some of the hon. Gentleman's constituents from rate payments is part of the Government's policy to ease the burden on those least able to bear that. I hope that the hon. Gentleman supports that policy.

Mr. Peter Griffiths (Portsmouth, North)

Whatever the merits of the general principle of applying controls on authorities which use political measures to flout the general will of the people as expressed through Parliament, does my right hon. Friend agree that slavish adherence to a formula means that cities such as Portsmouth, of which I seem to be the only representative present, with a reputation for good housekeeping but with social and economic problems stemming not least from the loss of employment caused by the rundown of the naval dockyards under the Government's policies, are artificially caught within a category from which, according to all the principles of equity and justice, they should be excluded?

Mr. Jenkin

It would have been quite indefensible to manipulate the principles so as to exclude Portsmouth, which is now spending more than 5 per cent. above its target and nearly 35 per cent. above GRE. Moreover, its budgeted expenditure for 1984–85 represents about £88.75 per head compared with £71 per head for the 10 largest shire disricts and £51 per head for the shire districts as a whole. It is not as though Portsmouth is unfairly treated in terms of GRE, which is £66 per head—the eighth highest of all the shire districts — compared with an average of less than £50 per head for the shire districts as a whole. It may well be trying to budget responsibly, but it has repeatedly spent in excess of its target, so I am afraid that it is caught by the principles, although it is entitled, like any other authority, to seek derogations under the Rates Act.

Mr. Martin Flannery (Sheffield, Hillsborough)

Why is the Secretary of State pursuing such a wicked vendetta against the people of Sheffield when increases have been more than 2 per cent. below the national average since 1978–79 and 8 per cent. below the national average since 1981–82? Is it because the people of Sheffield have consistently increased their Labour vote throughout that period due to the good local government provided in that city?

Mr. Jenkin

I suggest that the hon. Gentleman should talk to the commercial and business ratepayers who pay the overwhelming proportion of rates in Sheffield. They will be able to tell him a thing or two about rate payments in Sheffield.

Mr. David Howell (Guildford)

Is my right hon. Friend aware that the small potential relative improvement in the position of low-spending counties will be welcome, as far as it goes, after the unrealistic and unfair position that previously prevailed? Does he agree, however, that the whole paraphernalia of holdback, clawback, penalties and targets is reaching the end of its useful life, if it ever had one, and that the time will very soon be here for a major reform to establish relations between local and central government on a fairer basis and to define more clearly the distribution of functions between them?

Mr. Jenkin

On many occasions, speaking before local authority audiences and elsewhere, I have made no secret of my wish to see an end to the target and holdback provisions and I hope that we shall be able to move in that direction in the next year or two. In the meantime, however, there is considerable overspend on local authority current expenditure. That was one of the reasons for my announcement about overspending on capital expenditure, which I would rather not have made. Until local authority expenditure as a whole is closer to the Government guidelines, the measures will remain necessary, but I take careful note of my hon. Friend's wish for a long-term solution to the difficult problem of the financial relations between central and local government and I share his ambitions in that respect.

Mr. Greville Janner (Leicester, West)

Is the Secretary of State aware that the city of Leicester has managed to retain its excellent services while keeping rate increases below inflation at 3.106 per cent. last year and 4.253 per cent. this year? In his campaign for taxation without local representation, will he at least exclude decent, responsible, hard-working Labour authorities which are doing a first-class job for the citizens of areas such as Leicester?

Mr. Jenkin

Leicester's budget is more than 27 per cent. above GRE and nearly 5 per cent. above target. In the past five years, Leicester has increased its spending by 134 per cent. compared with an average of 79 per cent. While the average shire district has managed to reduce manpower by 6.2 per cent. since 1979, Leicester has increased its manpower by 6.9 per cent.

Mr. Charles Morrison (Devizes)

I thank my right hon. Friend for his early statement, which will undoubtedly help local authorities in their financial planning. I also welcome what he is doing for the lower spenders. Does he accept, however, that the increase for low spenders will at best be at the level of inflation? Is he aware that those authorities have already cut services to the bone and that there has been a progressive deterioration in roads, the provision of school books, and so on? Is it not likely, therefore, that the rate increase in the lowest spending areas will be a good deal higher than the average?

Mr. Jenkin

It is impossible to estimate the rate increase in any individual authority or class of authority as this will depend on the way in which they prepare their budgets next year and the extent to which they use balances or put money to balances.

I am grateful for my hon. Friend's comments about the more realistic targets that we are setting for low spenders. The advantage of the proposals that I have announced is that if an authority can make savings through greater efficiency it can then put the savings into improved services without incurring any holdback penalty. The great majority of authorities could still run their services more efficiently. The low-spending authorities will be able to use that greater efficiency to provide better services.

Mr. Robert N. Wareing (Liverpool, West Derby)

Is the Secretary of State aware that 80 per cent. of the budget of Merseyside county council goes on police and fire services and public transport and that the council has managed to turn the tide with regard to passenger transport use? Which statutory obligations does he expect the council to renege on? Is it to be the police or the fire service when in both cases the pay settlements are nationally agreed? Is he aware that in a deprived area such as Merseyside, where more than 50 per cent. of households do not own a car, people rely on an efficient passenger transport service such as that which has become increasingly available under the Labour-controlled council? Is he also aware from his recent visits that the people of Merseyside will never succumb to his gauleiter policies?

Mr. Jenkin

The Merseyside county council and some other authorities would do well to stop spending ratepayers' money on free handouts to the miners. The hon. Gentleman's language is grossly exaggerated. I am asking no more of the three highest spenders than for them to spend the same cash next year as they are budgeting to spend this year. They should then manage to provide all services without coming within a mile of breaching any of their statutory obligations.

Mr. Mark Carlisle (Warrington, South)

If the Government intend to reduce by 3 per cent. the share of local authority expenditure which they pay, how will that assist in reducing the level of rate rises to which the Government are committed?

Mr. Jenkin

We are enhancing the accountability of local authorities — [Interruption.] That is exactly the argument which the Opposition used when they did the same. By enhancing their accountability local authorities will be made responsive to their ratepayers' desire for more economic and effective services. That is a continuation of a trend followed by successive Governments since 1976.

Ms. Harriet Harman (Peckham)

How can the Secretary of State say that Southwark is an overspending authority when its increase in expenditure in the last five years has been less than the increase in expenditure by the Ministry of Defence? Will the right hon. Gentleman face up to the fact that if he rate-caps Southwark it will mean fewer home helps, fewer meals on wheels and fewer nursery places? Is he aware that that is bound to mean that more elderly people and more children will be forced into institutions, which is in direct contradiction to what his friends in the DHSS say they want? Should the right hon. Gentleman not be pursuing authorities such as Gloucestershire, which refused a home help to a woman of 104 and the Isle of Wight which provides not one nursery place, instead of Southwark which tries to provide decent services?

Mr. Jenkin

Southwark is spending nearly 52 per cent. above its GRE and nearly 17 per cent. above its target. It has increased its expenditure by 100 per cent. in the last five years compared with the average of 79 per cent. Southwark simply must recognise that the burden that it has imposed upon its ratepayers is intolerable. The purpose of the Rates Act is to protect ratepayers in high-spending areas. I am glad that we have been able to make a start this year.

Sir Bernard Braine (Castle Point)

Is my right hon. Friend aware that, despite the strictures of right hon. and hon. Members who know the size of the problem, those of us who represent low-spending, prudently managed counties such as Essex are pleased that he listened to our plea earlier this year that good management should not be penalised by the profligate spending of the few? Can my right hon. Friend confirm that Essex is likely to receive 4 per cent. or more above this year's budget? Does that figure take account of any likely movement of inflation between now and then?

Mr. Jenkin

I am grateful to my hon. Friend for his generous remarks. Essex has been spending below its GRE. Notwithstanding that it was marginally over target this year, its target will be uplifted by the full and maximum 4.25 per cent., which is the present estimate of the gross domestic product deflater. The Essex spending target should be protected against inflation.

Mr. A. E. P. Duffy (Sheffield, Attercliffe)

Is the Secretary of State aware that his statement will be received with anger by the Sheffield city and south Yorkshire councils which have pursued reasonable and realistic targets, have deployed their resources efficiently—given the nature and burden of their responsibilities — and whose records have been endorsed time and again at the polls? Where does the scope for improvement in Sheffield lie without crippling its services and creating job losses? Perhaps the right hon. Gentleman was venting his political spleen on what is, after all, a Labour citadel.

Mr. Jenkin

Politics does not enter into the issue. We have applied fair and reasonable criteria, without fear or favour, against all authorities. Ratepayers in Sheffield and south Yorkshire have been groaning under the burden of rates. During the passage of the Rates Act the nexus between rates and votes in the two areas broke down. The Government fought the election on a pledge to protect ratepayers against high-spending councils. This is the first step to that end.

Sir John Osborn (Sheffield, Hallam)

Is my right hon. Friend aware that, unlike the hon. Members for Sheffield, Attercliffe (Mr. Duffy) and Sheffield, Hillsborough (Mr. Flannery), the residents of Hallam, who find the rates burden too heavy, will welcome his statement? Is my right hon. Friend further aware that industry, trade and commerce in Sheffield and south Yorkshire have seen extravagance in the city and county councils for five and perhaps 10 years and therefore will welcome a measure that will control the burden on their businesses so that they can stay in business and do not have to make more people unemployed?

Can my right hon. Friend assure me that defiance can be mitigated by constructive proposals by the Auditor-General and his Department so that at last we may have more efficient town and county halls?

Mr. Jenkin

I am grateful to my hon. Friend. On the question of the proposed defiance of the Rates Act, it comes ill from the Opposition to say that they will not heed legislation passed by the House. However, councils are not led by one man — [Interruption.] — however notorious he may be. Every councillor who faces the responsibility of complying with the Government's legislation will have to recognise his legal obligations. I have no doubt that, as in Liverpool this year, when authorities face decisions next year they will recognise that the law has to be obeyed.

Mr. Eddie Loyden (Liverpool, Garston)

Does the Secretary of State recognise that many of the problems faced by local authorities stem from this Government's policy of rising unemployment and all its social consequences? Instead of regurgitating figures, the right hon. Gentleman should pay full regard to the human problems in the cities to which only local authorities can react. Will the right hon. Gentleman turn his mind to that, instead of telling us constantly about the overspending and wastefulness of local authorities which spend their money on housing people, on home helps and on providing social services? Does he agree that such services are needed more in times of high unemployment?

Mr. Jenkin

Of course local authorities have a duty to those whom they serve. The needs of an area which is deprived are recognised in the GRE assessments. However, that does not excuse local authorities which do not seek to provide services in the most efficient and effective way possible. In areas where there is a great need for local authority services the incentive and obligation to achieve the maximum efficiency is higher. I hope that the hon. Member will use his influence to try to secure that result in Liverpool.

Mr. William Shelton (Streatham)

Is my right hon. Friend aware that the ratepayers of Streatham and Lambeth will present him with a vote of thanks because they have been hammered by high rates and little improvement in services? Does my right hon. Friend have any plans to impose personal penalties on councillors who introduce illegal rates, or no rates at all?

Mr. Jenkin

On the latter point, the ordinary provisions of the law will apply. As we have seen this year, there is an obligation on an authority to make a rate, and the auditor, although allowing reasonable time for that process, is not powerless where an authority refuses to do so.

On the first point, compared with the London borough of Wandsworth, which in 1983–84 spent £202 per head, Lambeth spent £315 per head, which is half as high again. Who will put his hand on his heart and say that Lambeth services are half as good again as those of Wandsworth?

Mr. John Fraser (Norwood)

Will not the Secretary of State recognise that in Lambeth he has achieved a moronic double? He will be cutting local authority services there by 10 per cent. in real terms—taking into account the increase in interest rates and inflation—and cutting the services of ILEA and the GLC by about 10 per cent. in real terms. At the same time, he is forcing up rates by cutting rate support grant by about 6p in the pound and by increasing penalties so that, for instance, in Lambeth every extra pound spent on improvement grants or the administration of the housing benefit system, because of holdback, will cost the ratepayers £10.

The Secretary of State has announced a prospectus for poverty, redundancy and cuts. Does he not realise that he is pushing local authorities to the very limits of legality and breaching the convention of general municipal obedience to central Government? Let me warn the Secretary of State that he had better start making preparations to nationalise local government.

Mr. Jenkin

I might reasonably ask the hon. Gentleman why it costs Lambeth £15 a head to empty dustbins when neighbouring Wandsworth does it for £9. That can be repeated in service after service. The hon. Gentleman is doing no service to his constituents by trying to pretend that his authority is so efficient that it cannot make even the savings necessary for a cash standstill this year over next year.

Sir Dudley Smith (Warwick and Leamington)

Given the situation which has arisen, is my right hon. Friend aware that it is essential to reward low-spending authorities for their efforts, which he has gone some way towards doing this afternoon? Is he also aware that the vast majority of ratepayers—I mean ratepayers—will regard the package that he has announced as being fair and a measure that will begin to curb some of the excesses about which we have learnt? Does not this show yet again that there is an essential need to revise the whole rating system?

Mr. Jenkin

My hon. Friend knows that the Government engaged in as wide a consultation as any of their predecessors in trying to find an alternative to the rating system for financing local authorities. This was the subject of a study by the Select Committee on the Environment. The conclusion both of the Government and the Committee was that there appeared to be no acceptable alternative to the local rates. The real problem is that rates in some areas are rising too high and the burden was too great. The announcement that I made was the first step towards implementation of the manifesto pledge that we would deal with that problem.

Mr. Allan Roberts (Bootle)

Is it not ironic that the Secretary of State and his hon. Friends, such as the hon. Member for Crosby (Mr. Thornton), when Liverpool did not want to cut services and make people redundant and so that Liverpool would stay within the law, urged the Liverpool Labour group to put up rates? Now they are making that legal action illegal for these rate-capped authorities. Does not the Secretary of State realise that he is likely to turn into lawbreakers and criminals those in our society who have spent a lifetime protecting the elderly, the disabled and our education services, whereas the heroin pushers and dealers of Merseyside will be left alone?

Mr. Jenkin

The hon. Gentleman is engaging in mad exaggeration. I am asking the highest spending authorities to do no more than to keep their spending in cash terms next year level with that of this year. They are, by definition, authorities that are spending well above the GRE level and well above targets. They should look about and use the Audit Commission report to see where their services are so much less economical and efficient. Many other authorities are well able to provide good services at much lower cost. That is the way to get value for money in local government.

Mr. Peter Bruinvels (Leicester, East)

Is my right hon. Friend aware that, as the Member for Leicester, East, I speak with authority when I say that the news that Leicester is to be rate capped will be welcome to both local and commercial ratepayers alike? Is he further aware that up to £60,000 has already been spent by the grossly extravagant Labour-controlled Leicester city council when its spending rate is 55 per cent. above the national spending rate in this year alone? It has a policy of no redundancies under any circumstances, which is why its employment rate is 6.9 per cent. above the national average. This is the best news that my right hon. Friend could have given us this afternoon.

Mr. Jenkin

I thank my hon. Friend.

Mr. Norman Atkinson (Tottenham)

If the average increase in spend of all authorities since 1979 has been 92 per cent., and the London borough of Haringey has increased its spend by 88 per cent. on what basis does the right hon. Gentleman justify rate capping that authority? If he again uses the argument about increased manpower in that authority, how does he square it with the Home Secretary's recent boast about the increased number of policemen who have been employed in London? Does that mean that the Secretary of State is rate capping all these authorities to make a reduction in real terms next year by the equivalent of the rise in the retail price index, and will that include a cut in the police force for London?

Mr. Jenkin

The Metropolitan police force is not covered by this statement. In 1983–84, Haringey spent £555 per head, which is 37 per cent. over GRE compared with neighbouring Enfield, which spent £328 per head, which is 2 per cent. above the GRE. Why does Haringey employ 64.4 staff per 1,000 population when other outer London boroughs manage with 43 staff per 1,000 population? By any standards, Haringey is a grossly overspending authority. As my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi) said, many of the ratepayers there will welcome my announcement this afternoon.

Mr. Simon Coombs (Swindon)

Is my right hon. Friend aware that the ratepayers of Swindon and Thamesdown will welcome this news? Is he also aware that the Audit Commission report for Thamesdown showed that the bulk of the overspending by that authority was in the development of new houses and new factories in the new parts of the borough so as to help to create employment and prosperity? Will he recognise that fact when, as I think is likely, the local authority's representatives come to talk to him soon?

Mr. Jenkin

As my hon. Friend knows, the Rates Act makes provision for authorities to seek derogations from the expenditure limits that I have announced. I have no doubt that a number of authorities will be beating a path to my door to put their particular circumstances to me. We shall no doubt look carefully at factors such as those that my hon. Friend has mentioned.

Mr. John Cartwright (Woolwich)

Will the Secretary of State accept that the best way to get value for money from local council spending is not to create an ever more complex and bureaucratic system of central Government control but to give local people a better chance to influence what goes on in their town halls? Has he seen the threat made by a number of rate-capped authorities that they will dissipate their reserves during the current financial year, and will therefore have to levy a substantial rate rise even to fund the reduced expenditure that he is approving for next year? How will that be good news for the ratepayers in those authorities?

Mr. Jenkin

I am not clear whether the hon. Gentleman is applauding the actions of authorities which wish to do that. A number of authorities, in making their budget and rate this year, drew heavily on balances. One can only spend a balance once. It may be that some authorities will make high rate increases next year. However, I can tell the hon. Gentleman categorically that their expenditure will be lower than it otherwise would have been as a result of the operation of the Rates Act that I have announced this afternoon.

Mr. Cranley Onslow (Woking)

My right hon. Friend is well aware that some authorities protected their ratepayers by prudent budgeting and expenditure economy before the Government returned to office in 1979. How does he defend a formula that seems to penalise such authorities for so doing, and seems to ignore the substantial discrepancies in rating valuation which affect Surrey as opposed to, say, Kent or Hampshire? Can he tell me, for the benefit of my constituents, where he expects Surrey to come in the order of priorities of beneficiaries from his statement today?

Mr. Jenkin

Surrey will have a maximum increase of 4.25 per cent., which is equivalent to the estimate of inflation next year. Surrey is a high-resource authority. As my hon. Friend knows, the principle of equalisation of rate poundage is fair. Because high-resource authorities have a broad resource base, they should be able to keep rate increases down to reasonable levels next year if they spend within their targets, as I am sure that Surrey will wish to do.

Mr. Laurie Pavitt (Brent, South)

The right hon. Gentleman must have a heart of flint, or an implanted calculating machine, when he puts inner city areas like Brent into his scheme. Does he recall that under our statutory obligations we are paying £30,000 a week for the homeless, and that we have a crisis in housing with 15,000 people on the waiting list?

More important, does he recall that when he was Secretary of State for Social Services he persuaded local authorities to bring people out of the institutions of psychiatric hospitals and into the community? As a result in Brent we are bringing 60 patients from Shenley into the community by arrangement with the DHSS. The right hon. Gentleman's cuts in Brent will mean that the support and back-up services for those people will not be available. How can he justify that?

Mr. Jenkin

The hon. Gentleman is aware that GREs take account of the special needs of inner cities. Perhaps I may quote some of the figures. Camden has a GRE of £360 per head, Islington of £353 and Hackney £321. The average GRE for inner London is £286.

If the GRE average, excluding education, is compared with that in the outer London boroughs, to put it on a comparable basis, the average GRE is £140 per head in outer London boroughs. Several inner-city areas undoubtedly have inner-city problems, which is recognised in our formula.

The fact that an inner-city authority has inner-city problems is not a reason for not making its services as effective and efficient as possible. I know that the local authorities in Brent and many other areas could certainly make economies in the way that they deliver services for their ratepayers.

Mr. Michael Shersby (Uxbridge)

Is my right hon. Friend aware that the increase is welcome as far as it goes, although I should like it to go much further. For example, in the London borough of Hillingdon it seems that the target will be just under £90 million, whereas Hillingdon's forecast target budget for this year is £90.363 million.

Will my right hon. Friend accept that, unless there is an improvement in the rate support grant settlement in December, the high-resource outer London authorities like Hillingdon will continue to face considerable difficulties?

Mr. Jenkin

I ask my hon. Friend to recognise that the target for an outer London authority such as Hillingdon, which is spending above its GRE, will be 3.75 per cent. higher than its budget for this year. Last year, the equivalent figure was only 2.5 per cent. against a 5 per cent. inflation forecast, whereas this year the proposed target is only 0.5 per cent. below the estimate of inflation. I do not think that that should prove an impossible target to meet, even in Hillingdon, which I know faces considerable problems.

Mr. Chris Smith (Islington, South and Finsbury)

Does the Secretary of State realise that the expenditure level that he set in his statement for the London borough of Islington will effectively mean a cut of 8 per cent. in Islington's services in the next financial year?

Will the right hon. Gentleman accept an invitation to come with me to Islington—it is not far from the House —to meet some of the elderly people, the families with children and those with disabilities who will be severely harmed by the effect of his statement? He would learn at first hand not that they welcome the statement — far from it—but that they react with anger and resentment at the loss of those services. Will the right hon. Gentleman come with me and talk to my constituents to find out what they really think?

Mr. Jenkin

I was in Islington three weeks ago addressing a meeting. There was warm support for the Government's legislation and a strong demand that Islington should be on the list of rate-capped authorities. Islington has become notorious for spending money on wild fringe activities and it could certainly run many services more economically. All that we ask is that Islington should hold its cash spending next year at the same level as this year—against an inflation forecast of 4.25 per cent. which I do not think is unreasonable.

Sir Anthony Grant (Cambridgeshire, South-West)

Is my right hon. Friend aware that we are grateful to him for sincerely trying to rectify the injustices of his predecessors to low spenders and that all ratepayers and sensible people welcome his attempt to curb the activities of some lunatic authorities? Assuming that Cambridgeshire will receive its 4.25 per cent. is it not being hit less firmly than other authorities rather than having the injustices of many years rectified?

Will my right hon. Friend bear in mind that Cambridgeshire is one of the fastest growing counties in the country? That is causing special problems. Is he also aware that all this is no substitute for proper reform of the silly rating system and that decisions are needed rather than more consultations?

Mr. Jenkin

My hon. Friend is referring to our attempts to meet the case last year for low-spending authorities, for which I thank him. Cambridgeshire, like most low spenders, will be allowed an increase of 4.25 per cent. on this year's budget compared with a maximum of 3 per cent. for the current year against an inflation estimate of 5 per cent.

Under the public expenditure constraints, it would be wrong for me to disregard spending above target, even if it is below GRE. Supposing that I had allowed a disregard for spending between target and GRE, that would give an additional headroom of about £500 million. We were already adding more than £800 million to local authority current spending. Given the constraints, the announcement is fair.

Mr. Kevin Barron (Rother Valley)

Does the Secretary of State accept that what he calls the excesses of high-spending authorities arise because many areas provide services that they are not statutorily obliged to do, such as nursery education or care for the elderly, for which all authorities must provide increasingly? Does he accept that councils might be running something like south Yorkshire's passenger transport service, which has much popular support? Although the Secretary of State claims to protect ratepayers, the ratepayers of south Yorkshire ought to be protected against him, his Rates Act and his rate capping rather than ratepayers being protected from the authorities?

In the past 12 months, since I came to the House, I have not received any letters from ratepayers complaining about the level of South Yorkshire county council's rates. My local authority, which I consulted recently, has not received letters from local business men complaining about the rates in south Yorkshire. How can the Secretary of State justify saying that he needs protection when we need protection from Whitehall, not the other way round?

Mr. Jenkin

I assure the hon. Gentleman that I have received many letters from ratepayers in south Yorkshire who have complained about the burden of rates. Indeed, they have made it abundantly clear that they look to the Government to protect them against the persistently high rate demands that that authority has made over the years.

I am confident that south Yorkshire will be able to live within the expenditure limit that I have set, which requires no more than that it should keep its cash spending in line with its spending for this year.

Mr. Piers Merchant (Newcastle upon Tyne, Central)

In view of the doubts expressed about the exact nature of the criteria used in selecting those authorities that are the so-called victims of rate limitation, will my right hon. Friend consider reviewing those criteria at an early opportunity? Will he also examine the financial situation of Newcastle city council? According to his announcement, that authority is not to be rate limited, although it is well-known for its extravagence and high rates. Although my right hon. Friend's statement will be good news to many ratepayers throughout the country, does he accept that it will not help those ratepayers in Newcastle who were last year faced with the highest rates in the country?

Mr. Jenkin

If I remember rightly, it was my hon. Friend who drew the attention of the Standing Committee on the Rates Bill to the fact that, even before that Bill had reached the statute book, Newcastle city council was taking account of its provisions. It has clearly made efforts to come closer to the targets that it was set and so to reduce the burden on its ratepayers, and it does not come within the criteria that I have set out. I hope that many other authorities will do their best to avoid coming within the criteria set under the Rates Act. That is the best way of keeping local authority spending within limits.

Mr. Allen McKay (Barnsley, West and Penistone)

Does the right hon. Gentleman accept that the only groaning to be heard in south Yorkshire has come from the weight of Labour votes in the ballot box, which have returned Labour councillors to south Yorkshire in overwhelming numbers time and again? Would he care to publish the letters that he has received, as I suspect that some of them come from people who do not live in south Yorkshire but who have probably visited it? Does the right hon. Gentleman accept that the people themselves want to determine the sort of area in which they live, the services that they want, and the amount of money that they should pay? It is not the Secretary of State's job to tell them what to do.

Mr. Jenkin

The hon. Gentleman sat through all our proceedings on the Rates Bill, and he should know that that is not a proposition that either this Government or their predecessors could accept. Local authorities derive their powers, including their powers to tax, from Parliament, and for many years they have abided by the convention that their total expenditure should remain within the guidelines set by central Government and approved by the House. Like any other authority, south Yorkshire is not entirely free to spend and rate up as far as it would wish. As part of the general body politic in this country, it is expected to he guided by the guidelines laid down by this House.

Mr. W. Benyon (Milton Keynes)

My right hon. Friend will recall that I was no particular friend of the Rates Bill. Nevertheless, it is the law of the land. Will he make it crystal clear that the Government will not hesitate to use the full resources of the law against any council that goes against that law?

Mr. Jenkin

So far as it lies within my power, I give my hon. Friend that assurance. Of course, some of the legal provisions lie at the instance of the district auditor.

Mr. Frank Dobson (Holborn and St. Pancras)

Will the Secretary of State confirm that the proposals that he has announced will lop about £60 million off the budget of the Inner London educational authority? Will he also confirm that he has not obtained a mandate so to damage London's education service from a borough election, an ILEA/GLC election or a parliamentary election? Will he take it from me that the people of inner London will not be prepared to put up with a £60 million cut in provision for their education service, which they want to see improved, not damaged?

Mr. Jenkin

Compared with ILEA's budget — national insurance surcharge adjusted—for the current year of £917 million, ILEA's provisional target for next year is £900 million, which is nowhere near the reduction that the hon. Gentleman suggested.

Mr. Jack Straw (Blackburn)

The right hon. Gentleman should take account of inflation.

Mr. Jenkin

We can take account of inflation, but the fact remains that ILEA spends far more on many of its services than other education authorities. I have no doubt whatever that it can make the savings sought this year without seriously damaging its services.

Mr. Richard Tracey (Surbiton)

I am sure that my right hon. Friend knows that those businesses within the local authority areas that he has named will welcome his proposals, as it is they that pay most of the rates and have to provide the jobs. What percentage of householders and those within the local authorities that he has named actually pay the full rate?

Mr. Jenkin

As my hon. Friend knows, the percentage varies from authority to authority. However, over the country as a whole, only £1 in £5 is paid by the domestic ratepayer. Indeed, £4 out of every £5 comes from other sources, including the rate support grant. In many of the areas affected by rate capping, the percentage of those paying rates is even lower than that. In those circumstances, the ratepayers turn to the Government for protection. I welcome my hon. Friend's remarks.

Mr. Dennis Skinner (Bolsover)

Is it not bordering on the hypocritical of the Government to tell local authorities that are striving manfully to provide services for the young, the old, the disabled, and so on, to make cuts while at the same time the Government are giving increased grants to the Common Market in 1984–85 so that French farmers can be subsidised, the Italian Mafia can be propped up and another 60,000 tonnes of cheap butter can be provided for Russia while unemployment rises as a result? Is it not apparent that the Labour-controlled authorities can fight this measure only by joining together and defying this obnoxious law?

Mr. Jenkin

I know that the Gentleman has been away for a little while, but I think that he may have strayed into the wrong debate.

Mr. John Powley (Norwich, South)

At first sight, the settlement for Norfolk seems to be along the right lines. But does my right hon. Friend agree that whatever the settlement for any local authority is, authorities will be better able to keep within their targets during the forthcoming financial year if wage and salary settlements—which account for 60 to 65 per cent. of all expenditure—are kept to low single figures and if, in particular, the current dispute with the teachers is settled at the announced rate of 4.5 per cent.?

Mr. Jenkin

I entirely agree with my hon. Friend. It is important that local authorities should look to their pay and manpower levels if they are to keep within their targets and provide efficient services. I note what he has said about the teachers' pay arbitration. That matter is currently in hand, and it would be quite wrong of me to express any view about it.

Mr. Tony Banks (Newham, North-west)

The Secretary of State belongs to a Government who glory in confrontation and are continually trying to recreate domestically the Falklands war. They are doing it with the miners and now they are going to do it with local government. Is the right hon. Gentleman aware that if the GLC were to cut £54 million off its budget for 1985–86, it would mean terminating all grants to organisations—no doubt the Secretary of State would be glad of that—stopping funding to the Greater London training board, adding £5 a week to housing rents, sacking 1,000 firemen, reducing the operation of the Thames barrier, ending all repairs, removing the GLC mobility scheme, and so on? Does he really believe that members of the GLC will carry out such cuts? I can assure him that we shall not. The Secretary of State is writing a prescription for confrontation, because that is the style of his Government, that is what his political mistress wants, and that is precisely what they will get this year. The only thing that concerns me is that it will not be this Secretary of State who will see the confrontation. However, his announcement is a prescription for confrontation, and he should know it.

Mr. Jenkin

I am bound to say that the hon. Gentleman's speech might have been better received on the other side of the Thames.

Mr. Tony Marlow (Northampton, North)

I congratulate my right hon. Friend on the action he has taken today. He will realise that the vast majority of people outside this House cannot understand the bleating that is taking place here on behalf of a few power-hungry, empire-building local authorities which, if they half put their houses in order and were half as efficient as industry —which has recently put itself in order, and pays over half the rates received—would have no problem at all in maintaining their services. Is my right hon. Friend confident that the knife will at last be taken to the collection of free-loading lesbians, gabbling left-wing Goebbels and—as we saw last night on television—the headquarters of the alternative Labour party, which is currently funded by the GLC?

Mr. Jenkin

My hon. Friend expresses the views of a large number of ratepayers.

Mr. Jeremy Corbyn (Islington, North)

Is the Secretary of State aware that his statement amounts to nothing more than a vendetta by the Government against the poorest people in the poorest parts of the country and against the public sector trade unions which are doing their best to defend the public interest? Is he further aware that many authorities will refuse to go on bended knee and ask for derogation and to co-operate by making a rate at the end of the year and that their electors will strongly support their declaration of war on the Government for trying to destroy their local services?

Is the right hon. Gentleman aware that in the borough of Islington the proposed cuts amount to more than £8 million? Is he further aware that 10 per cent. of all council jobs will be lost — for example, 80 staff will be dismissed from the housing repair section, 100 from the closure of six libraries, 71 from the closure of two old people's homes and 120 from the closure of six children's day nurseries? That means that 751 staff would be dismissed if these policies were carried out. Is he also aware that these policies mean that council workers will be thrown on the dole and that life will be made more miserable for the poor, the sick and the elderly? Has his Department calculated the on-cost in terms of misery and unemployment benefits that these policies will cause?

Mr. Jenkin

Nothing whatever will be gained by such wild scaremongering. Islington will be asked to do no more than to keep spending next year in line with spending this year. I have no doubt that, like other city authorities, it will be able to achieve that if it sets its mind to it.

Mr. K. Harvey Proctor (Billericay)

While waiting for the fundamental reform of the rating system, is my right hon. Friend aware that the vast majority of ratepayers in Basildon, Billericay and Wickford will be delighted by these proposals? It may put an end to such things as tenpin bowling alleys being run at a loss on the rates, party political propaganda on the rates, nuclear-free zones and CND flowerbeds in our recreation parks and, worst of all, the driving out of real, meaningful jobs from our districts.

Mr. Jenkin

I am grateful to my hon. Friend for those comments. The Basildon authority is spending more than 70 per cent. above its GRE in the current year and, by any standards, it is a grossly extravagant authority.

Mr. Bill Michie (Sheffield, Heeley)

Is the Secretary of State aware that I received a letter from a large engineering company, which set out how much the rates had affected its profits? I sent a letter back explaining how much the cuts in Government grants to Sheffield had affected profits, and asking whether I should take the matter further. The firm has since been silent. I advise other hon. Members to answer similar letters in the same vein so that firms understand what is going on.

Is the Secretary of State fully aware—he did not answer my hon. Friend the Member for Islington, North (Mr. Corbyn)—of the effect that these proposals will have on jobs and services? His spiteful remarks earlier show that he is fully aware of local authorities which have helped to keep miners' families from starving. He should be more aware of the effect that the proposals will have on jobs and services in caring authorities. Does he realise that hitting so spitefully all authorities which put caring before profit will only strengthen their resolve to fight to the bitter end? Is the right hon. Gentleman aware that we had a MORI poll in Sheffield in which the people were asked their opinions about standing firm against Government cuts, and the answer was——

Mr. Speaker

Order. I must stop the hon. Member. He must put a question to the Secretary of State and not discuss the MORI poll, which has nothing to do with the Secretary of State.

Mr. Michie

Finally, is the Secretary of State aware that if he got a bloody nose from the cock-up in Liverpool, it would be like a vicars' tea party throughout the country?

Mr. Jenkin

I have nothing to add to what I have already said.

Mr. Patrick Thompson (Norwich, North)

Does my right hon. Friend agree that the hysterical outbursts from Opposition Members are put into context when one considers the way in which many Labour-controlled authorities have responded to Government policies? Is he aware that in spite of many political misdemeanours, for which the Norwich city council is responsible, its prudent reaction to sensible Government policy has led to a 4.25 per cent. increase in target and, therefore, to a reasonably satisfactory outcome for the citizens of Norwich?

Mr. Jenkin

I am grateful to my hon. Friend for what he said. If local authorities budget and spend prudently, they will be able to provide a perfectly adequate level of services at reasonable cost to ratepayers.

Mr. John Heddle (Mid-Staffordshire)

Does my right hon. Friend accept that it is difficult to find an original question? In view of the fact that more than half of the councils to be rate-capped are in Greater London, will he acknowledge that his announcement today will be welcomed by industry and commerce which, through profligate spending by local councils and punitive rates, have had to lay off jobs? Will he undertake to cap Mr. Livingstone and his profligate and extravagant spending of £10 million on party political propaganda and make a statement at an early date about the revaluation, at least, of commercial and industrial properties?

Mr. Jenkin

I have sympathy with my hon. Friend's problem. The same is true of finding answers. I answered a written question today about extravagant spending by abolition authorities.

As my hon. Friend knows, the Government have been considering the question of commercial revaluation. I hope that we shall be able to come forward with proposals in due course. Regarding domestic revaluation, the Government are still considering the position. I cannot offer any prospect of an early statement about it.

Mr. Straw

Is the Secretary of State aware that virtually no hon. Member on either side of the House has categorised his announcement as good news for ratepayers? [Interruption.] Those who understand the issue certainly did not. Will the Secretary of State explain why he continues to shelter behind weasel words and does not have the courage of his convictions, such as they are, and admit that the target of 4.5 per cent., because it is less than the rate of inflation and taking account of the rise in interest rates, is bound to involve a cut in the real level of spending for authorities which are not to be rate capped and a cut of between 5 and 7 per cent. for authorities which are to be rate capped?

What is the Secretary of State's estimate for inflation following that recent rise in interest rates? Does he understand and accept that the reduction in the rate support grant of £590 million in real terms will force rates up in every area or force further cuts in services? Is he aware that he will be responsible for the rate rises, just as the Association of County Councils said that over the past five years the Government have been responsible for all rate rises above the level of inflation?

Will the Secretary of State confirm that if rate capping were to bring down the rate levels of the rate-capped authorities, there would be less rate support grant from the pool for the non-rate-capped authorities and therefore rate capping would force up the rates in lower spending Conservative-controlled authorities? Does he agree that that is the truth, as the director of the Chartered Institute of Public Finance and Accountancy claimed only last week?

When the Secretary of State talks about using the Audit Commission report, does he have in mind the report leaked last week, which showed that local authority expenditure has not increased above target, but that the apparent increase of £1,500 million during the past three years is entirely attributable to the bizarre and disgraceful system of local government finance over which he presides? He is responsible for overspending, not local authorities.

Lastly, does the Secretary of State believe that it is disgraceful that no provision has been made for a debate on such a major announcement? Does he agree that there should be the fullest possible debate on this report and announcement as soon as the House returns in the autumn?

Mr. Jenkin

The latter point should be addressed to my right hon. Friend the Leader of the House.

The hon. Gentleman should know that my statement relates to the provisional arrangements for the rate support grant settlement, and that we shall now be consulting local authority associations on my announcement.

The hon. Gentleman said, as we have heard previously, that rate capping is bound to be to the disbenefit of authorities that are not rate-capped. I must tell him that, overwhelmingly, the effects of the reduction in spending of rate-capped authorities will be to reduce the amount of holdback which they suffer, which has no impact on other authorities. When the holdback is levied, it goes to Me Treasury. When it is reduced, it comes back from the Treasury. If some changes have an effect on the block grant, which is the cash-limited amount, the effect will be no more than marginal. It will be far less important than the fact that we have prevented about £400 million of excess spending, and so have been able to set much more reasonable targets for low-spending authorities.

I do not know where the hon Gentleman has been for the past one and a half hours. Many of my hon. Friends welcomed my statement and recognised that it is in the interests of ratepayers——

Mr. Tony Banks

Only three.

Mr. Jenkin

I have the list here, and it is many more than three.

As to interest rates, these are provisional statements and no doubt we can consult the authorities on the figures that I have announced before I announce the final rate support grant in December.

Mr. Corbyn

On a point of order, Mr. Speaker. in view of the serious statement of the Secretary of State, will you advise me by what means the House can urgently debate this matter and divide on it?

Mr. Speaker

I have no doubt that the House will return to this subject again.

Mr. Ian Mikardo (Bow and Poplar)

On a point of order, Mr. Speaker. In view of the rough time that the Secretary of State has had during the past one and a half hours, could you, as the friend of all of us, say a word of comfort to him before he goes on his last walk to the gallows?

Mr. Speaker

The Secretary of State would have expected to answer all the questions that were put to him this afternoon. I will leave it at that.