Local Government Finance (England)

HC Deb 23 July 1991 vol 195 cc1048-61 4.34 pm

The Secretary of State for the Environment (Mr. Michael Heseltine)

With permission, Mr. Speaker, I should like to make a statement about the Government's proposals for the local authority finance settlement for England for 1992–93, and about our proposals for local government in the years ahead.

Two years ago, local authorities in England spent £32.3 billion. This year they have budgeted to spend £39.9 billion. That is an increase of 23.5 per cent. in just two years. In anyone's terms it is a very substantial increase.

Over the same period, the external support distributed by Government to local authorities has increased by even more: this year alone, it has increased by a third. We are paying an extra grant to enable councils to cut their community charges by £140. We are also providing more than £2.5 billion of support this year to individual charge payers through the community charge reduction and community charge benefit schemes. Overall, the net contribution from local people to local expenditure now stands at just 15 per cent.

We have made it possible for councils to provide decent levels of service at lower community charges. The councils have to play their part, too. Local government is not immune from the pressures and restraints faced by everyone else. Central Government, businesses and individuals must all plan to spend only what they can afford. Local government must do the same.

Against that background, the Government believe that local authorities in England together ought to spend no more in 1992–93 than £41.8 billion. That would be 7.2 per cent. more than the corresponding figure for total standard spending this year. With inflation falling even before next year to 4 per cent., that is a realistic increase: it takes account of the pressures on local authority budgets, and of the opportunities which they have to improve the efficiency and value for money of the services which they provide.

I propose to set the level of external support distributed by the Government to councils next year at £33.1 billion. That also is 7.2 per cent. more than this year, including the extra amount which we paid to cut the community charge by £140. That should ensure that next year, overall, local people will again not have to contribute more than 15 per cent. of council spending through the community charge. As in previous years, I shall announce our proposals for distribution of the Government grant in the autumn.

There are still too many authorities that budget each year to increase their spending regardless of the consequences for charge payers. We have protected many community charge payers by capping, and many councils were persuaded this year to moderate their increases to avoid being capped. Next year, if authorities budget excessively or for an excessive increase in their budget, I intend, as this year, to use my capping powers to ensure that the extra grants from Government are translated into lower community charges and not frittered away in extravagant spending.

As I did last year, I intend to announce provisional capping criteria for 1992–93 in the autumn, so that local authorities can take them into account in their budgets. My intention is that those criteria should be expressed in the same sort of format as those adopted for 1991–92. Authorities will thus know what to expect well in advance. We hope that all authorities will choose to budget sensibly, but if they do not we shall not hesitate to cap them.

The settlement that I have proposed is fair and realistic. The community charge for standard spending next year will be about £256. The actual charges set by authorities will depend on the budgets which they make and their determination to collect the charge. Millions of people will, of course, pay substantially less than £256 because of rebates and the community charge reduction scheme.

I now turn to our proposals for years after 1992–93. In April the Government published a consultation paper, "A New Tax for Local Government". We have received over 800 responses. The great majority have welcomed our proposals to replace the community charge with a new council tax. The consultation process has, of course, produced a great number of useful comments, which we are still considering and will take into account in framing the new legislation. There is one matter which I must, however, deal with now.

I am glad to confirm to the House that the Government intend to proceed with legislation along the lines proposed, with a view to bringing the council tax into operation by 1 April 1993—the earliest feasible date. Subject to enactment of the Local Government Finance and Valuation Bill, the task of putting properties into bands will start in the autumn. We will introduce legislation next Session to set up the new council tax regime.

Many responses have queried whether the seven council tax bands we proposed in April extend far enough up the range of house prices. We have considered this carefully and have concluded that there should be one additional band, taking in properties worth more than £320,000 in England. Houses in this new band H will be subject to a council tax of twice the amount for a dwelling in band D.

The response to the consultation paper, "The Structure of Local Government in England", has been very positive. Nearly 1,900 individuals and organisations have written in with their views, overwhelmingly in support of our proposals. There have been some useful suggestions for minor improvements. We intend therefore to introduce legislation in the autumn to set up a new Local Government Commission to review the structure of local government in England area by area.

I shall publish a consultation paper on the internal management of local authorities next week. It will invite comments by the end of November.

I believe that my proposals represent the right way forward for local government in 1992–93 and in the years ahead.

Mr. Brian Gould (Dagenham)

It has taken just 24 hours for the illusions created by the citizens charter yesterday to be punctured by the harsh reality of the Secretary of State's statement today. Yesterday, the Prime Minister talked of helping the citizen and raising the level of public services. Today the Secretary of State revealed the true face of the Government—the face of a Government who cut public services, undermine local government and harm the citizen. The Government's priorities are clear: saving their political skins takes precedence, at whatever cost to local government services and those who depend on them.

As the Secretary of State accepts that what local authorities will actually spend this year is £39.9 billion, why will he not also accept that his proposed increase in spending is worth only 4.8 per cent.? How can he justify the denial to local government of £2 billion which they need simply to maintain services even at their present level? What account has he taken of the new commitments imposed on local government by measures such as the Education Reform Act 1988 and the Environmental Protection Act 1990, the demographic changes which push up the cost of education and social services, and preparations for new measures such as community care?

Does the Secretary of State dispute the local authority associations calculations that those new service pressures will cost an additional £1.7 billion? Does he dispute their assertion that an inflation rate allowance of 4..5 per cent. will be far too low to cover pay increases for teachers, police and fire staff, which will mean that the true inflation rate for local authorities will be 7.3 per cent.?

How are those factors to be taken into account without making cuts in already hard-pressed services elsewhere? The Secretary of State said in his statement that he had taken account of the pressures on local authorities' budgets, but they assess the pressures as meaning a total spending of £44 billion, not £41.8 billion. What pressures has he chosen to ignore, and in what other way does he suggest that they are to be met?

What account has been taken of the ever-increasing costs of collecting the poll tax, which have been conservatively estimated by the Audit Commission at £800 million per year? How can we rely on the right hon. Gentleman's average poll tax prediction, which presumably assumes a 100 per cent. collection rate? Why did he not ease the collection problem by abolishing the 20 per cent. contribution rule? Is not his figure for next year just as likely to be a fairy-tale figure as those produced for the past two years, particularly when the gearing effect of any shortfall in demand will be no less than 5:1? Has the Secretary of State learnt nothing from the experience of his predecessors? Does he not recognise that wishful thinking about the level of local government spending, the inflation rate and the collection level of the poll tax is a recipe for disaster, for local authorities, the Government and poll tax payers?

Does not the announcement of another band of council tax, while welcome in itself, provide further evidence of the battle that still rages in a divided and dithering Cabinet? Were we not assured in April that the one issue on which the Government were not to be moved was the number and range of bands? In April we were told that the number and range of bands was set in concrete, so does not this late change reveal a reluctant and late admission that the original seven-band proposal was fatally flawed, and also an equally damaging failure to do anything effective about it?

Is it not the case that the fundamental unfairness of the poll tax survives and persists with the council tax? Those living in top-band properties will pay just three times more tax than those in the bottom band, while enjoying properties of at least eight times greater value. Is this not a classic case of a leopard which cannot change its spots?

It is perhaps too much to expect that a Government who have shown an unremitting hostility to local government and committed themselves consistently to loading an unfair burden on those least able to pay, should experience a change of heart at this late stage. The only consolation for the majority of us is that this is the last such statement that the right hon. Gentleman will make.

Mr. Heseltine

This House and an expectant world will note with interest that the Labour party has managed to summon up 14 Back Benchers to listen to the synthetic hysteria of its spokesman. It is a pity that there are so few Labour Members here today because they have heard yet one more pledge of an extra 1p on income tax from their spokesman. So naive and far removed from power is the Labour party that all that local government has to do is say, "We'd like some more," and the hon. Member for Dagenham (Mr. Gould) is on his feet promising that, without any understanding of the fact that, if there is one thing that is certain, it is that, the higher the level of expenditure in local authorities, the worse the service delivery.

The essential difference between the Conservative party and the Labour party is that the Prime Minister stood at the Dispatch Box yesterday and promised value for money for our citizens, while the Labour party is here today offering money to the trade union-dominated services of local authorities. The Labour party has learnt nothing, and so long as it learns nothing its Members will continue to sit in opposition—indeed, it seems that they do not even have the energy left to come and sit there.

Miss Emma Nicholson (Torridge and Devon, West)

I offer my right hon. Friend the Secretary of State my warm congratulations on a tight settlement, which is none the less almost double the rate of next year's projected inflation level. Is not the mealy-mouthed and mean-minded response of Her Majesty's Opposition due to the fact that they cannot come up with anything which offers public sector organisations the ability both to control their own budgets and to raise new money from outside sources which do not pull down the organisations' core funding?

Mr. Heseltine

I thank my hon. Friend and I agree with everything that she said. It is, however, a slight exaggeration to say that the Labour party has come up with nothing at all. It has come up with two different systems for local government finance in two years, and four different means of valuing the properties within that system, which will simply add yet further to the extravagance of its proposals.

Mr. David Bellotti (Eastbourne)

The Secretary of State must be aware that local government will be bitterly disappointed at the announcement of today's financial settlement. It must face an 8.5 per cent. increase in police pay this September and teachers' pay will increase by a similar sum next year. It is clear that the Government's settlement will not help local authorities to meet those pay increases. The legislation that the Government have passed in recent years will add a further burden on local government spending. Local authorities have assessed that, in the coming year, that burden will add a further 4.3 per cent. to their costs. Is the Secretary of State aware of that figure and does he agree with it? In the light of yesterday's announcement by the Prime Minister of a major citizens charter, how can we be faced with such a major cut today?

Mr. Heseltine

It is obvious that the Liberal party is even less enthusiastic for its spokesman than the Labour party, as it has only one member here. Let me help the hon. Member with the basic arithmetic. I have just announced an increase in cash of 7.2 per cent. By any standard that is a generous settlement. All that is required of local authorities is to face up to the fact that they must accept the same pressures to which everyone else is subject, including the hon. Gentleman's constituents.

Sir Geoffrey Finsberg (Hampstead and Highgate)

Does my right hon. Friend accept that the hard-pressed community charge payers will greatly welcome what he has announced, especially in places such as the London borough of Camden, which is closing a branch library to save £38,000? Through my right hon. Friend's efforts, that borough is being forced to put out to tender for the second time the refuse collection service, which will now be a better one at a cheaper price.

Mr. Heseltine

My hon. Friend is absolutely right. If only local government took competitive tendering seriously, the economies that they would achieve would cover a substantial part of the extra costs of next year.

Mr. James Lamond (Oldham, Central and Royton)

Those of us who remember the Secretary of State's record in previous Governments will not be taken in by his conversion to helping local government now. With his Government's record on the poll tax, he should be ashamed to come here and attack any other political party. If the promises made in the citizens charter are to be kept, will not compensation have to be sought from local councils, which can only mean more pressure on the already hard-pressed local poll tax payers?

Mr. Heseltine

The hon. Gentleman has obviously not grasped the essence of the citizens charter. People should deliver a better service for the money they are already spending and better value for money for those services. Although I take leave to disagree with the hon. Gentleman, I have not been the strongest supporter of the community charge in the past. However, compared with the Labour party proposals, the community charge is a model of financial rectitude in local government.

Mr. John Lee (Pendle)

My right hon. Friend is aware that I take a certain interest in the replacement of the community charge by the council tax. I believe that the new higher band is morally right. Will my right hon. Friend also consider whether a new lower starting band would be more realistic for low-value areas of the country such as Pendle and north-east Lancashire, a subject on which I have written to my hon. Friend?

Mr. Heseltine

I know that my hon. Friend has taken a deep interest in the issue of low-value property areas. I must report to my hon. Friend that we have considered this matter. We must make progress with the valuations and we have decided that the new arrangements, including the H band that I have announced today, are, according to the Government's judgment, the way in which we should proceed.

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

Is the Secretary of State proud of the fact that, alone among European Community Environment Ministers he has told democratically-elected local authorities that if they decide to raise funds to implement fully section 2 of the Chronically Sick and Disabled Persons Act 1970—I also have the citizens charter in mind—he will cap them if he feels like it? Is he proud to be the nearest to a gauleiter of any of the EC Environment Ministers?

Mr. Heseltine

I probably spend as much time as the hon. Gentleman walking around the deprived areas of our urban communities. The standards of service delivery that I see for the money spent are a scandal. I have not the slightest doubt that what the Government are doing to raise the hopes and the opportunities of those citizens who live in such squalour, largely under Labour authorities, is one of the best initiatives that the Government have taken.

Mr. David Wilshire (Spelthorne)

My right hon. Friend predicted that the community charge will be £256 next year, but said that that would depend on the budget set by councils and on the efforts made by them to collect the tax. Will my right hon. Friend also confirm that that target will be severely affected by the number of people who refuse to pay their community charge? Does he therefore agree that the example set by Labour Members who refuse to pay is a disgraceful one? It means that other people have to pay for the services that those Members enjoy. Does my right hon. Friend agree that, despite the Labour Members who have bothered to turn up today, if there are such members in that party, they are not fit to run the country?

Mr. Heseltine

My hon. Friend is absolutely right that the failure to collect produces a league table of shame on which the worst 15 have one thing in common—they are all run by the Labour party. Before anyone starts arguing that that is a feature of the community charge, they should start looking at the failure of those authorities to collect rents in the same circumstances.

Mr. Allen McKay (Barnsley, West and Penistone)

Will the Secretary of State look at the letters that I have sent to him asking him to meet Barnsley, Sheffield and the other five local authorities to discuss their standard spending assessments and other matters affecting local government? Their SSAs have led to the desecration at their education services, social services and all their other local services.

Several Hon. Members

rose—

Mr. McKay

I have not finished yet.

Although I accept that the right hon. Gentleman has replied that I should meet the Minister for Local Government and Inner Cities, the authorities want to meet the Secretary of State, as is their right. They will meet him any day of the week in seven, at any time of the day and anywhere he chooses. Will he now stop hiding and meet those authorities?

Mr. Heseltine

The news that I have for the hon. Gentleman is excellent, even better than if I were to offer to meet those authorities myself—my hon. Friend the Minister of State has already written to say that he will meet them.

Mr. Richard Tracey (Surbiton)

My right hon. Friend will receive the gratitude and the congratulations of the people of London on his announcement today of the extra band in the collection of the council tax. That shows that this is a listening Government. My hon. Friend the Member for Spelthorne (Mr. Wilshire) spoke about those who have not paid the community charge. Will my right hon. Friend give the people his pledge that those non-payers will be pursued relentlessly?

Mr. Heseltine

I appreciate my hon. Friend's kind remarks. We listened carefully to what my hon. Friend and many others said to us about the need for another band. I can confirm that we have no intention other than of insisting that the community charge is collected.

Mr. Peter Hardy (Wentworth)

Does the Secretary of State accept that, to some extent, he ignored the question posed by my hon. Friend the Member for Dagenham (Mr. Gould) about the fact that the Government continued to pile additional duties and obligations on local authorities? Reference has already been made to some of those additional obligations, which include those contained in the Children Act 1989 and the obligation and need to enhance the environment, where the role of the local authorities is absolutely essential. Those additional obligations are not necessarily covered by the total package that the right hon. Gentleman announced today.

Does the right hon. Gentleman also accept that it is not just a question of the totality of the package but a matter of how that money will be distributed? As my hon. Friend the Member for Barnsley, West and Penistone (Mr. McKay) has said, the industrial areas of the north of England have come out badly from the apportionment of the total grant in the past two years. May we have an assurance that the work that the right hon. Gentleman does in the next few months will ensure that that corruption is not repeated?

Mr. Heseltine

The hon. Gentleman has raised two important points. The assessment of SSAs is the key to the distribution process and we take carefully into account the representations we receive, particularly those from local authority associations. We shall do so again on this occasion, although I am aware that there is a significant demand for stability without change. The moment one brings about change there are losers as well as winners and most hon. Members on both sides of the House believe that the one authority that loses under the system is their own. We shall take all representations carefully into account.

The hon. Gentleman's first point, which is important, was about the duties that have been placed on local authorities and the demographic changes that have taken place since the last settlement. The figure that I have announced today, which is the Government's view of what is a realistic expenditure target, takes account not just of the levels of pay increases but of all other aspects of demographic change and statutory duties. That is an important statement, as I must make clear. My right hon. and hon. Friends and I have considered these matters carefully and it is now up to local authorities to take into account the totality of their spending plans, but to have regard to the overriding priority of meeting the Government's expenditure targets.

Mr. Martin M. Brandon-Bravo (Nottingham, South)

I stress my thanks and those of the majority of my constituents to the Secretary of State and his ministerial colleagues for the genuine consultation exercise in which, as the statement has shown, he heeded the representations made to him. From the many hundreds of letters that I have had from my constituents, I know how welcome the extra band of £320,000 will be. I believe that that will underpin the equity and justice of the proposals and be welcomed throughout the country.

Mr. Heseltine

I am grateful to my hon. Friend. I can only apologise—I know that he will understand—for the fact that when he made his urgent representations on this matter to me last night I was only able to give him such a non-committal response.

Mr. D. N. Campbell-Savours (Workington)

Given what the Secretary of State has just said to my hon. Friend the Member for Wentworth (Mr. Hardy), is it not true that the new responsibilities to be placed on local authorities will be funded by cuts in existing services? Will not the same be true of the citizens charter?

Mr. Heseltine

I have dealt with that question several times. The Labour party is incapable of understanding that we are spending many millions of pounds but not giving an adequate quality of service to the customers who depend upon those services. One has only to visit a large number of urban authorities to realise that the quality of service to the customer seems to be the last consideration on the agenda of those distributing the money. It is critical that local authorities when reaching their judgments about their budgets, take account of the availability of balances, of economies and of the additional 7 per cent. cash, and then budget to remain within the levels that the Government have set out as appropriate for next year.

Mr. Nigel Forman (Carshalton and Wallington)

Is my right hon. Friend aware that some Conservative Members are somewhat concerned at the fact that, under the arrangements for the community charge, only 15 per cent. of local government expenditure will come as a net contribution from locally determined tax? If that situation becomes worse under the new council tax, will my hon. Friend consider, before it is too late, the argument for introducing some flexibility into the so-called uniform business rate, so that there is at least a possibility of injecting greater accountability into future arrangements after 1993?

Mr. Heseltine

My hon. Friend raises an important point, which a number of people have put to us. We have no present intention to change the existing arrangements. When my right hon. Friend the Chancellor announced significant improvements in Government support for local authorities this year, he made it clear that we had it in mind to preserve the new balance of, approximately, 15 per cent. locally determined and raised finance in future arrangements.

Mr. Harry Barnes (Derbyshire, North-East)

Why do we have to wait until autumn for what are only provisional capping criteria? A host of new authorities are liable to face capping—all those with budgets of under £15 million. In those circumstances, the provisional criteria should have been produced at a much earlier stage. My authority of North-East Derbyshire is one of the worst funded per poll tax payer, next only to North Dorset. If we have to wait until autumn before the figures are available, could we at least have a meeting with the appropriate Minister? We would settle for the Minister of State.

Mr. Heseltine

The hon. Gentleman would get a good bargain there. We are not in a position to determine the composites of the standard spending assessments in this public expenditure round. There is a normal pattern in the way in which these things are done. The House will appreciate that the public expenditure round does not unfold to a point at which we can make these judgments until later in the autumn. At that point, we can reach judgments about the service composition within the SSAs, and it will be possible to give the clear sign then that I have promised the House.

Mr. Richard Holt (Langbaurgh)

My right hon. Friend is to be congratulated, particularly by the north of England, which has much appreciated the work that he has done. As ever, we are tempted, but we do not always receive. I draw to his attention Cleveland county council, which recently put out a contract for a private cleaner, under competitive tendering, which led to a reduction of £1.3 million in spending. However, it has now decided to spend every penny of that on job creation by retraining a large number of the cleaners as social workers. Can we not do something to stop this? Cleveland county council is about to abandon its so-called supertram system, on which it has so far spent £1 million, yet it is still not rate-capped. The criteria must be looked at again or this sort of squandering will go on and on.

Mr. Heseltine

I heard clearly what my hon. Friend said. The House will be appalled to hear that, when there was an opportunity to secure genuine value for money with a service delivered at lower cost, the consequences were frittered away. That is one of the considerations that we shall have in mind when reaching judgments on capping.

Mr. Nicholas Brown (Newcastle upon Tyne, East)

The only point that will be even more unwelcome in the north than the meanness of today's announcement is the unpleasant rhetoric about charge capping that accompanied it. When the Secretary of State considers capping, will he allow local authorities in the north and elsewhere exceptional disregards where they have got into trouble as a result of such events as the collapse of the Bank of Credit and Commerce International, local authority swaps and late commercial rating reviews? The latter is a problem specific to Newcastle. All these issues are outside the control of local authorities when they deal with their budgets on an annual basis.

Mr. Heseltine

The hon. Gentleman will realise that at this stage we do not have sufficient information to know what the effects will be on the revenue budget and community charge payers. We do not even know whether revenue deposits have been put with BCCI. A whole range of facts are not available and I would not want to give the impression that we have any intention to take action that would make it more likely that local authorities will indulge in the sort of practices to which the hon. Gentleman referred.

Mr. Robin Squire (Hornchurch)

The settlement of more than a 7 per cent. cash increase will not strike most people as savage when set against a likely inflation rate of less than 4 per cent. I congratulate my right hon. Friend on his announcement on the council tax, which makes a good tax better. Will he publish exemplifications replacing the ones previously circulated, so that many people in my constituency and elsewhere in London can see how much they are saving against the new higher band of tax?

Mr. Heseltine

I am grateful for my hon. Friend's support. However, it would not be valuable to produce another range of exemplifications. The amount of extra money raised by the additional band that I announced today is not of great substance and, spread among the 20 million homes that are within the broad remit of our plans, the effect on any one person or household would be small. It is a psychological matter, with which we are seeking to make the tax appear more fair, rather than a determination greatly to increase the amount of revenue.

Ms. Joan Walley (Stoke-on-Trent, North)

The Secretary of State must review area by area. When he comes to look at the finances of Staffordshire, will he take particular account of the problems identified in the pindown report, and make allowances for the additional resources that need to be found to bring social services up to standard and which are not truly reflected in the SSA for Staffordshire?

Mr. Heseltine

The hon. Lady will know that this is a matter for my right hon. Friend the Secretary of State for Health. However, I must make it clear that this, and all other similar matters, were taken into account in the settlement.

Mr. Michael Latham (Rutland and Melton)

Is my right hon. Friend aware that his radical approach to the issue is widely appreciated on this side of the House? If, however, the £256 is to be held, as it must be, will it not require widespread capping and also further progress to be made on the transfer of services to the Exchequer, such as sixth form colleges and colleges of further education, as the Government have already promised?

Mr. Heseltine

I am most grateful to my hon. Friend. All Government policy that has been put into effect has been taken into account in the settlement that we have announced today. To clarify what my hon. Friend said about the £256, I should make the point that that is an arithmetical calculation. The community charge level that is set will depend both on the budgets of individual local authorities and on the level of collection. I imagine that they will vary widely.

Mr. Dennis Skinner (Bolsover)

The Secretary of State has a cheek to come here and talk about an empty House of Commons when, after he left the Cabinet for the first time, his voting record and attendance in this place were among the worst that there have ever been.

Mr. Speaker

Order. These seem to be party political points. Does the hon. Gentleman have a question on the statement?

Mr. Skinner

He started this ball rolling. He was the man who was running round the constituencies—

Mr. Speaker

Let us stop the ball rolling. Ask a question please.

Mr. Skinner

Ain't it strange that he can get away with—

Mr. Speaker

Order. The hon. Gentleman has already had two questions today. Ask a question, please.

Mr. Skinner

Why does not the Secretary of State for the Environment treat this matter in the same way as the Government treated the water authorities? They allowed those authorities a 5 per cent. increase over and above inflation. He now tells the local authorities that they have to take a cut when the realistic increase ought to be more than 10 per cent. Treat them both the same.

Mr. Heseltine

We have established that the Labour party wants to spend £44 billion and that that will add another 1p to income tax, which means that my party's forecast that a vote for the Labour party will raise tax by 15p has now been overtaken by a new commitment to raise tax by 16p. If the hon. Gentleman wants to understand my view about taking this matter seriously, this side of the House obviously takes it seriously because my hon. Friends come here. That side of the House does not take it seriously, because Labour Members of Parliament do not come here.

Several Hon. Members

rose—

Mr. Speaker

If hon. Members who are rising will ask brief questions, I shall endeavour to call all of them.

Mr. Kenneth Hind (Lancashire, West)

My right hon. Friend will be aware that many of my constituents in West Lancashire, and in other authorities, will find it difficult to understand, when inflation is going to be well below 4 per cent., why the Labour party complains that 7.2 per cent. is not a realistic increase in local government expenditure. We fully appreciate what my hon. Friend is doing. Will my right hon. Friend make clear in all his statements what the cost of Labour local government and national Government would be in these circumstances?

Mr. Heseltine

My hon. Friend is extremely careful and very helpful, but the difficulty of keeping to a figure for how much Labour local authorities or a Labour Government would cost is that the figure is constantly changing. It is always going up.

Mr. David Sumberg (Bury, South)

My right hon. Friend is aware that a number of local councils have made disastrous investments in BCCI, including my own in Bury, to the tune of £6.5 million. When my right hon. Friend looks at individual councils, will he try his best to relieve the burden on innocent poll tax payers who have been put in this position, either by allowing the councils to spread the making good over a number of years, rather than over a single year, or alternatively by ensuring that those repayments do not infringe the capping regulations?

Mr. Heseltine

My hon. Friend, whose concern I fully understand, will appreciate that this is not the appropriate moment for me to say anything other than that which I have already said in answer to this question.

Mr. Barry Field (Isle of Wight)

My right hon. Friend will be aware that unanimity on the Isle of Wight is about as rare as bicycles on the Solent. However, there seems to be a consensus among all parties and all factions on the island that we should have a unitary authority. I welcome my right hon. Friend's statement that he will introduce legislation in the autumn. Can he recognise the great amount of effort that the Member of Parliament for the Isle of Wight has put into this effort and tell the House today that he intends to reward my Conservative colleagues on the island with the announcement that we shall be the first unitary authority, as the Boundary Commission has already recommended?

Mr. Heseltine

I admire my hon. Friend's enthusiasm for this cause. I have heard him advocate it in the House and I have heard it advocated on the Isle of Wight. I cannot tell him whether I can be influenced by it, but I have certainly heard it.

Sir John Wheeler (Westminster, North)

Does my right hon. Friend agree that his proposed higher tax band will be welcomed in the City of Westminster and regarded as fair and equitable? Can he confirm that the local government tax in support of the police is now only 10 per cent., and that what matters is value for money?

Mr. Heseltine

My hon. Friend makes an absolutely essential point. The particular element of local government support that affects police authorities is a matter for my right hon. Friend the Home Secretary, but in all services the question of value for money is critical.

Mr. Robert Hayward (Kingswood)

May I ask my right hon. Friend to take little note of the bleeding hearts on the Opposition Benches in the light of the pay settlement that was agreed last week between the local authorities and the manual workers, which was 6 per cent., in terms of pay, and an extra two hours off the working week over the next three years, which represents another 6 per cent? The local authority negotiators said that they could find the efficiencies to pay for the deal out of the inefficiencies that remain. That is the key to controlling local government finance.

Mr. Heseltine

My hon. Friend is right. He can take heart from the announcement that my right hon. Friend the Prime Minister made yesterday, that we intend to introduce yet further compulsory competitive tendering, not just for manual workers but for white collar workers as well.

Mr. Simon Burns (Chelmsford)

When my right hon. Friend considers the capping criteria, may I ask him to bear in mind the position of some local authorities, such as Chelmsford borough council? When the Conservatives drove out the Liberals at the last election, they inherited a record of massive, profligate overspending in the previous three years. They are doing everything that they can to reduce their spending next year, but because of the scale of the overspend they may be faced with problems, vis-a-vis the removal of the £15 million threshold. Will my right hon. Friend bear in mind those boroughs that have been caught and should not be punished because of the activities of a previous administration?

Mr. Heseltine

I fully understand my hon. Friend's point. He will be aware that we have to set general rules, but before the rules finally apply there is an exhaustive consultative process, during which individual authorities are met and their cases considered by Department of the Environment Ministers.

Mr. James Pawsey (Rugby and Kenilworth)

My right hon. Friend has received a considerable number of representations from all the Warwickshire Members about the level of revenue support grant during the last two years. There is a widely held view that the standard spending assessments are not fair to Warwickshire. Is my right hon. Friend able to hold out any hope in the statement that he has made for a fairer shape for the county of Warwick?

Mr. Heseltine

No one more than my hon. Friend has made that point to me and my colleagues. I hope that he will bear with me if I repeat what I have already said about the standard spending assessments—that they will be unable to be firmed up until we have been through the public expenditure round later this year, when we shall make our annoumncements within the same sort of time scale as we did last year. I cannot undertake to make transfers, but I shall certainly consider very carefully the case that my hon. Friend has put to us.

Mr. Paul Channon (Southend, West)

Does my right hon. Friend agree that with an increase in expenditure of more than 30 per cent. in three years, what he has announced today is a very real increase in local authority expenditure, which is much to be welcomed by Conservative Members? When he is considering the drafting of his local government Bill in the autumn, will my right hon. Friend take steps within it to allow the Local Government Commission, for areas where there is virtually no controversy and virtual unanimity on the need to have a unitary authority, to report back as quickly as possible so that unitary authorities can be put into effect as quickly as possible? Then we shall be able to follow my hon. Friend the Member for the Isle of Wight (Mr. Field) and be the second unitary authority.

Mr. Heseltine

I am most grateful to my right hon. Friend. I wholly agree with him that a 7.2 per cent. increase in cash is a settlement that makes it possible to continue to deliver the real services that matter and also to recognise the Government's counter-inflationary policies. When we look at the work programme for the Local Government Commission we shall take into account the likely response in the areas and the likely complexity of the issues that will have to be addressed.

Mr. David Blunkett (Sheffield, Brightside)

Does the Secretary of State accept that the difference between £39.9 billion and £41.8 billion is 4.8 per cent.? Even those who have difficulty with arithmetic understand that. Some disgraceful remarks have been made about local government.

Will the Secretary of State confirm that he lost his battle with the Treasury to abolish the 20 per cent. contribution, which would have aided collection enormously and helped local government to cope with the remaining lifetime of the poll tax? Will he also confirm that, having been told that there would be first 14, then seven, then nine and now eight bands, we are currently being told that this is a psychological move to make the system, as the right hon. Gentleman put it "appear fairer"? Is this not a chameleon tax, introduced by a chameleon party whose colour depends entirely on the colour of the stone from underneath which it creeps?

Mr. Heseltine

If the hon. Gentleman studies his party's document, "Fair Rates", he will find that it is full of phrases that refer to a system that is seen to be fair. However, it then goes into a range of alternative means of valuing properties, which are likely to be not only unfair and expensive but extremely complex.

The reason why neither Opposition spokesmen appears to understand the significance of my announcement is their failure to take account of the fact that part of next year's expenditure increases will come from local authority balances. [Laughter.] In most years, local authorities spend £500 million from balances. It is extraordinary how, whenever that is mentioned in the House, Labour Members laugh as though it had never happened. That is just another indication of how far removed they are from the real world.

Similarly, in most years, local authorities achieve economies of between £200 million and £300 million. That, of course, helps to fund their spending levels. Both those elements can be added to the extra cash that I have announced.