§ 10.56 p.m.
§ The Under-Secretary of State for the Environment (Mr. Gordon Oakes)
I beg to move,That the Rate Support Grant (Increase) Order 1975, a copy of which was laid before this House on 11th July, be approved.Many hon. Members will no doubt find it unusual to be debating a rate support grant increase order just before the Summer Recess. Indeed, it is unusual. In previous years it has become customary to consider increase orders which are intended to compensate local authorities for the effects of past inflation, at the same time as the main rate support grant order for the next financial year, but—and today in particular I do not need to remind the House of this—these are indeed very unusual times.
718 The order now before the House increases the amount of rate support grants to be paid to local authorities for the financial year 1974–75. This is necessary to take account of pay and price increases occurring since the amount of the grants was last determined. Before coming to the order itself, I would briefly remind hon. Members of the background.
As I have already said, the order relates only to the financial year 1974–75. Under the terms of the Local Government Act 1974, my right hon. Friend the Secretary of State for the Environment initially determined the amount of Exchequer assistance to local authorities for 1974–75 at the level of prices obtaining in November 1973. In November of last year the amount of grant was increased by order to the level of prices obtaining at that time. In the normal course, it would have been further increased this coming autumn to take account of pay and price increases arising between November 1974 and the end of the financial year. But, as I have already said, these are not normal times.
Because of the nature of the services they provide, local authority budgets are particularly susceptible to the effects of inflation and, for reasons which I shall come to, the problems facing local authorities because of inflation were given particular emphasis during 1974–75.
First, the advice which authorities were given on likely future levels of inflation by the previous administration proved, in the event, to be considerably understated. As a result of this advice many authorities set their rate calls at a level which was later found to be inadequate. In making the first increase order for 1974–75, last November, my right hon. Friend recognised these special difficulties by including in the order an additional sum of£350 million over and above the amount required to compensate for specific increases in costs. As he told the House then, the additional£350 million was intended to wipe the slate clean for the whole of 1974–75. He made it clear—I emphasise this again—that a second increase order for that year would not include any similar form of special payment. He accepted, however, that a second increase order for 1974–75 would be made earlier than usual.
719 My right hon. Friend gave this undertaking in response to representations from the local authorities that, until a second increase order was made, they would have to bear the full cost for 1974–75 of the then forthcoming settlement on teachers' pay, which was expected to be substantial. My right hon. Friend has therefore made the order four months earlier than usual.
Given the need to take account of pay and price increases arising up to the end of March, 1975, this was the earliest the order could sensibly have been made. As it is, local authorities would receive the additional grant during August.
Turning to the order, under the terms of the 1974 Act my right hon. Friend is required to lay before the House a report of the considerations leading to the provisions of the order, together with detailed calculations of the increase grants. Accordingly, in view of the lateness of the hour, I shall confine myself to the salient points.
After consulting local authority associations, as he is required to do by the Act, my right hon. Friend decided to accept for grant purposes increases in costs totalling some£395 million. On two matters concerning increased costs my right hon. Friend felt unable to accept the full amounts claimed by the associations. These matters are referred to in detail in paragraph 6 of the report.
The effect of the increased costs was to raise the total of expenditure eligible for Exchequer assistance to£7,283 million. On this sum by right hon. Friend proposes to pay grant at the same rate as for the main order and the first increase order, namely, 60.5 per cent. This produces an aggregate of Exchequer assistance for 1974–75 of£4,406 million, to which has been added the special provision of£350 million which was made at first increase order stage and which must be carried forward. From the resulting total of£4,756 million, a deduction of£429 million has been made, this being the revised estimate of the specific and supplementary grants. The revised total of rate support grants in respect of 1974–75 thus becomes£4,327 million, to which has been added the sum of£57 million, being the increase in rate support grants in respect of the year 1973–74 720 which has been carried forward from the first increase order.
The increased aggregate of rate support grants included in the order now before the House is thus£4,384 million. My right hon. Friend proposes that the original ratio between the needs and resources elements of the grants, namely 72½per cent. to 27½per cent., should be maintained. Accordingly, he has increased the aggregate amount of the resources element by£167 million and has specified the actual aggregate amount of resources element as£1,083 million, an increase of£64 million.
No increase is required in the domestic element which meets the full cost to authorities of levying lower rate pound-ages on domestic properties than on non-domestic properties. This is fixed for the full year from the outset.
My right hon. Friend proposes that the formula for distributing the revised aggregate of the needs element should be the same as for the first increase order, and the order now before the House increases the per capita amount and the weightings for the additional factors so as to maintain the proportions determined for the first increase order. The weighting for the London boroughs and for the City of London remains at 12 per cent.
The order was made by my right hon. Friend on 8th July. All statutory requirements have been complied with, and it now requires the affirmative resolution of the House before it can take effect.
§ 11.5 p.m.
§ Mr. Keith Speed (Ashford)
I thank the Under-Secretary for taking us through this slightly esoteric maze. Even at this late hour, we are talking about considerable sums of money. As the hon. Gentleman said, this is an unusual time of year to have the order, but we are living in unusual times, with our present inflation.
I do not apportion blame, but these are difficult sums to cope with. I know that there is a report as well as the order, but the uninitiated may find some difficulty in relating the two. I have found this in my researches recently. In the Treasury Red Book on local authority expenditure, for example, I found totally different figures from those produced by the hon. Gentleman's Department. I do not blame the present 721 or previous Government. The situation has been going on for some time. But perhaps we could try to tie matters up, so that the growing interest in local government expenditure may be shared by more people.
The hon. Gentleman glossed over, by just referring to paragraph 6 of the report, the differences between the local authorities and the Government. My understanding is that the difference of about£24½million relating to teachers' pay was because the Department of Education and Science, which is not a responsibility of the hon. Gentleman, relied on a statistical model, whereas the local education authorities relied on returns from each authority. That being so, it could be argued that the local education authorities might have more accurate figures. The true situation will probably be revealed in two months' time, when we receive the outturn figures. What will happen if those figures show that the local education authorities are right and the Department of Education and Science is wrong?
I understand that the difference on transport is considerably more—about£80 million. The original forecast was£23.9 million. It was updated last November, on the increased GDP prices, to£28.9 million, and the local authorities claim an outturn of£115¼million. The difference, they claim, is not a cash subsidy but operating expenditure. They think that this should be updated by the pay and price increases.
I believe that some of the difference is due to deliberate decisions by the local authorities not to raise fares, and that some is due to their inability to get them raised because of the various blocks in the system to any quick increase. I have more sympathy with the latter case than with the former. Local authorities believe that the pay and prices increases between November 1974 and March 1975, which I think are about£17 million, should be met. Can the Minister say a little more about those two differences?
I should like to say a word about the whole concept of increase orders, and to probe the Government's mind. In inflationary times like the present, it could be argued that increase orders of themselves are inflationary, that they are inflation feeding upon inflation, and that they give 722 a guarantee to local authorities that they will be insulated to a certain extent from the effects of pay and price increases. With inflation running at 26 per cent., if we are talking of an increase in real terms it must by definition be more than 26 per cent.
Cash limits are all the vogue. I shall not repeat all that the Chancellor of the Exchequer said on Monday at the end of his speech, but I wish to quote the following passage:The general presumption will be that the expenditure of Government money, whether directly or in the form of grant, will be within the scope of cash limits rather than the other way round, and I shall need a lot of convincing if it is argued that cash limits should not apply in a particular case."—[Official Report, 21st July 1975; Vol. 896, c. 66.]I do not necessarily disagree with that view, but it raises some fundamental questions about increase orders of the kind that we are discussing tonight.
The Chancellor also talked about the possibility of cutting the capital allocations of local authorities if they spent more on wages and salaries for their employees. Again, this order, as can be seen from the tables, represents extra money to pay for considerable increases in salaries.
One thing that is certainly needed, in all the problems that we are discussing tonight, is a more corporate approach from the Government. I do not criticise just this Government. This happened in the past as well. It is no use trying to have economies in local authority expenditure and the Secretary of State for the Environment urging them to save money in every possible way if, at the same time, for example, the Department of Education and Science is hawking round the country spare items of cash which it has because local authorities have not spent them. That has been going on for a long time. If we mean what we say about curbing expenditure, these big Departments must get together and start getting to grips with the problem.
I should like to say a word about the rate support grant formula. There are some examples in the order. I appreciate that the Government are awaiting the report of the Layfield Committee. The Opposition will have something to say about local authority expenditure when that committee has reported.
723 I hope that, whatever differences there may be between the two sides of the House about rates, it will be possible in future to devise a simpler formula. I believe that the present one is getting so complex that very few people in this country understand it. My right hon. Friend the Member for Crosby (Mr. Page) is certainly one who does, but there are not many others in any part of the House who do.
As a Kent ratepayer I was delighted to read in the order that the population multiplier is to be£10.62 rather than£10. However, I am not sure that I am much the wiser. I do not know whether the Under-Secretary is either. This is a matter at which we shall be able to look in the months ahead. I hope that we shall be able to get some simplicity into this maze of complexity.
We see from Appendix I that manpower costs are the major item. Local authorities have been criticised recently by ratepayers associations, by Members of Parliament and, indeed, by the Press, for junketing and what I call the "strawberries and cream" syndrome. At the moment for any local authority to spend money in that way is insensitive, untimely, and bad for public relations. However, its effect on expenditure is absolutely minimal. People who think that they will save vast sums of money and cut the rates by taking something out of councillors' allowances or cutting out the mayor's annual tea party are deluding themselves. We come to the heart of the matter in this kind of order in which we can see how much extra expenditure is involved in pay increases.
I do not know whether it is in order to refer to the announcement which was made by the Secretary of State for Education and Science this afternoon, but the 22½per cent. teachers' pay award will have a considerable effect and will no doubt bring about a rate support grant increase order next time round, just as the Houghton award has led to this order. If there are large pay awards to local government staff and if the numbers of staff increase, as they have been doing, there will be considerable expenditure problems for local authorities. If, at the same time, not only the Government—though they are guilty—but this House 724 adds to the burdens of local authorities in one way or another, the situation will be even more difficult.
It is wrong to blame all these problems on reorganisation, as has been done from time to time, not least because inflation and the kind of matters that we are discussing tonight affect London as badly as anywhere else in the country. London was reorganised 12 years ago, so we cannot call that in aid as an excuse.
On the other hand, if the House accepts the order, as I am sure it will, we must look further ahead. I believe that whatever differences there may be between the parties, there must be a new régime for local authority finance which, in the years ahead, will have to be tougher and more realistic with regard to the resources which are there than the resources which the natural ambitions and aspirations of the great British public feel ought to be there.
This is something which will hurt all of us. The Government and the House will have to curb their appetite for pressing through more and more legislation and throwing a bigger burden on local authorities, so that they are constantly looking for more money from their ratepayers and the Government. We must face this problem, and the fact that local authorities are very labour-intensive, with 60 per cent. of their costs being represented by wages and salaries. Unless they have to start a major shedding of their manpower, which none of us wants, they must control very tightly the extra money they will be paying out.
We shall be discussing these matters again later this week, but clearly the order is affected by the Government's lack of control over incomes over the past year. Inflation must be curbed and, as local authorities account for 30 per cent. of public expenditure, we must insist on a new, tougher régime, probably with cash limits, without the sort of order we are discussing now, so that local authorities can play their full part in adding to the financial stability of this country and conquering inflation.
We shall support the order, but I hope that the hon. Gentleman will give us his views on some of these fundamental questions.
§ 11.17 p.m.
§ Dr. Edmund Marshall (Goole)
The hon. Member for Ashford (Mr. Speed) has referred to the major complexities that are now part of the formula in calculating the rate support grant. I would like to draw attention to some details in the structure of the needs element in Article 6 of the order, in particular in the table given in that article. In 1(b) of the table the additional factor involved is the acreage of the area of the local authority in excess of 1.5 per head of the population of the area.
I recognise that this factor is worthy of inclusion because of the problems of local authorities with extreme sparsity of population in their areas. However, I wonder whether the words in column (3) of 1(b) really mean what they say. I understand "that acreage" to mean the acreage in excess of 1.5 per head of the population. In column (3) it talks of:Multiplying that acreage by—(a)£1.80 if it exceeds 1.5 but does not exceed 3".I am not sure that "it" is intended to mean the excess acreage. I think "it" refers to the ratio of acres to population. There is something wrong with the wording in this part of the table. I would be grateful if the Minister could comment on it and correct me if I am wrong.
Also in this part of the table, there is a strange point where the ratio of acreage to population is close to the figure 3.0. Why should there be such a sudden jump from£1.80 per acre to£4.60 per acre when this magical figure of 3.0 is exceeded? Let me take a particular example. The county of Lincolnshire, to which this provision applies, has an acreage of about 1,400,000. Its estimated population in June 1973 was 512,900, which gives a ratio of acreage to population of 2.84. But if it had 30,000 fewer inhabitants the ratio of acreage to population would just pass the figure of 3.0 and the county council would then receive an extra grant of £2 million. Following that, in the table in 1(c), there is a further factor whereby reduction in population helps to increase the needs element of the rate support grant.
Perhaps here I may take up the point raised by the hon. Member for Ashford in respect of the rate support grant which goes to a county like Kent. I am sure that I should have been able to pick up 726 the reasons in the discussions on the original increase order, but, as someone representing a constituency in Yorkshire and Humberside, I should like to know why the non-metropolitan counties listed under 2, 3 and 4 in column (1) of the table should qualify for the extra rate support grant which the table specifies.
§ 11.21 p.m.
§ Mr. Graham Page (Crosby)
I have the greatest sympathy for the Under-Secretary in having to face the sort of figures problems that have been presented to him by the hon. Member for Goole (Dr. Marshall). They were very pertinent figures and queries, because what did not appear on the face of the order, but what I think the Under-Secretary sought to explain, was that the ratio between the needs element and the resources element remains the same. I think that was what the hon. Gentleman said. One has to juggle with figures in order to get that same ratio. I have a hearty distrust of computer figures, having found on one or two occasions when I had to work out the rate support grant that when I tried to get a sparsity factor for Wales it benefited the Greater London Council.
This was an extraordinary result and it came from the computer. Therefore, I look at such figures, as does the hon. Member for Goole, with some suspicion. However, if I have the Minister's assurance that the intention through all these figures under Article 6 is to keep the ratio of the resources element to the needs element as it is in the main order, I shall accept that without going into the details of the figures.
I notice that in 1(d) in column (1) of the table in Article 6 thatThe number of personal social services units in their areais multiplied up so that a fairly substantial figure results. I am glad that this is maintained. The social services unit is perhaps the most important in the needs element, particularly since it is in forecasting the social services expenditure by a local authority that local councils have the greatest difficulty. It is very difficult to estimate what the expenditure will be in the following year, particularly when the estimates are being made in the autumn and the year starts in the following spring. Councils have great difficulty knowing how many problem families 727 there will be in any particular area. Perhaps that is the most difficult figure to estimate. The result is that many local authorities put too high a figure, while others set it too low.
As the Under-Secretary said, there is no change in the domestic element. I should have thought that that fact could have been set down in the Explanatory Note in order that the order would have been better understood. People would then have known that they did not have to read all the later articles—that those articles were there only to juggle the figures in order to get some ratio of needs to resources.
I am worried about the two matters at issue between the Government and the local authorities. First, about£100 million is in dispute between the Government and local government. Local government feels that it is short of£100 million, which must borne by the ratepayer. I assume that the£395 million will not meet all the price and pay increases. The extra cost must be met by the ratepayer, as the increase order does not cope with all the price and pay increases over the period. The figure of£395 million is substantial and indicates the measure of inflation in the period.
The Minister said that the advice on inflation given by the previous Government did not put the figure high enough. I agree. However, it is difficult to forecast inflation in this period. The difference between the Government and local government figures was not very great. I recollect that the local authorities asked for an inflation figure of 13 per cent., although the inflation rate turned out to be 26 per cent. The Government figure was 9 per cent.
In view of the previous debate on the Remuneration, Charges and Grants Bill, we may conclude that there will never be another rate support grant order, as local authorities must not increase their employees' remuneration by more than the specified amount. Local government is labour-intensive. However, there will be a need for the further order. If the local authorities conform to the£6 limit there will be an increase of about£900 million in their expenditure, That must be dealt with later this year and next year. We should not run away with the 728 idea that we shall never see another rate support grant increase order. We shall see another such order, but I hope that its amount will be reduced as a result of the legislation which we discussed earlier today.
I have referred to the amounts to be borne by the ratepayer and the Government. I do not think it follows that if either the rate support grant or the increase order is cut, the local authorities should maintain their anticipated expenditure and throw the cost on to the shoulders of the ratepayers. The independence of the local authority to fix the rates which it shall collect is not sacrosanct. It provides goods and services like anyone else, and I do not see why it should not exercise some restraint and come within the Price Code, which has never been applied to local authorities. In the present inflationary period I see no reason why the local authority should not obey the Price Code, as does anyone else who has to provide services and goods. Perhaps that is a revolutionary idea, but local authorities should not be insulated and isolated entirely from inflation.
§ 11.30 p.m.
§ Mr. George Cunningham (Islington, South and Finsbury)
The order, by any standards, provides a huge amount of money in total, and the amounts going to individual local authorities are similarly huge in relation to the resources of the local authority. I find it odd—and something which should be changed as quickly as the House can get round to doing so—that we should discuss these enormous amounts of money without the House having the benefit of the matter's first having been examined by one of the Committees of the House.
We have a Sub-Committee of the Expenditure Committee which scrutinises the Department of the Environment and its expenditure. The sensible course would be for that Committee regularly to look at such orders as this. The orders could then come to the House with such comments and guidance as the Committee might wish to proffer. We shall get round to doing that in the end, and the sooner the better. It is what other legislatures do, and have done for a long time, to their great benefit.
In the past, local authorities have tended to be too independent of central 729 Government with regard to the level of their expenditure. Local authority expenditure is now a very large part of public expenditure and, with the need for the control of expenditure for macroeconomic reasons, local authorities cannot be allowed to let rip to the degree they have been allowed to do in the past. In particular, the number of staff and the level of salaries of local authority staff must he subject to greater central Government control. Exhortation from central Government is not enough; there must be something tighter.
I hope that we shall not select certain areas of local authority expenditure which are in general desirable and exempt the totality of items within those areas from the possible axe. We are all in favour of expenditure upon social services by local authorities, but much expenditure within the social services is wasted, and we should not allow our attachment to the need for social work to blind us to that fact. The pruning knife needs to be used within the social services departments just as much as anywhere else.
London tends to be left behind the rest of the country when it comes to the rate support grant. Despite recent improvements, the factors for determining the allocation and distribution of the needs element tend still to favour those areas of the country which do not have inner city problems. We need to recognise that the extra cost of inner city problems both in the social work sector and in housing is much greater than it is in non-urban areas.
London is still not included within the regression analysis, which is the basis of the distribution of the grant and, instead, that distribution which London's inclusion in the regression analysis would normally effect is done by means of a rough, rule-of-thumb percentage which is added to the allocation for the London local authorities. That rough, rule-of-thumb percentage has been increased, but it still plucked out of the air. No one can justify it as a figure, but everyone is agreed that the distribution is lower than it would be if London were included in the regression analysis.
§ Mr. Graham Page
Surely for 1974–75, about which we are talking, London did very well compared with the rest of the country. My recollection is that London 730 was very pleased with the result of this and kept very quiet.
§ Mr. Cunningham
The trouble is that in the past London has suffered enormously. Therefore, if one gets a settlement which makes that suffering a bit less great, one tends to be pleased. I do not think anyone—neither the right hon. Gentleman nor the statisticians involved—would deny that London would benefit if the regression analysis included the London local authorities. What London gets is a substitute for that and not the real thing.
If the enormous amounts of money being paid out in rate support grant do not go in fully deserved measure to the inner urban area of London, we are asking for the inner city problems of the United States in a few decades' time.
I should like to see more of the rate support grant used for the needs element and less for the resources element, only because that would tend to favour the inner city areas which have high resources but whose excess of needs is even greater than their excess of resources.
I wonder whether the Minister would say something about the future of the London rate equalisation scheme. It is monstrous that inner London boroughs should at present pay over—in the case of my own borough of Islington—approximately£1 million to a pool to be distributed among the outer London boroughs. I know all the justification which is advanced in support of it—for example, that the inner London boroughs get a concealed subsidy from the City of London, from Westminster and from Camden because our education costs are pooled with theirs, and this does not apply to the outer London boroughs. I understand that superficial justification for it. It is, however, preposterous that a borough like mine, even though it has considerably above-average resources for London, having needs far in excess, social problems far in excess and housing problems far in excess of anything that the outer London boroughs have to cope with—
§ Mr. Deputy Speaker (Sir Myer Galpern)
Order. I have allowed the hon. Member a great deal of latitude, far more than he is entitled to within the ambit of what is under consideration. I ask him to address himself to the order. 731 He has been well out of order during most of his speech.
§ Mr. Cunningham
I think we are discussing, Mr. Deputy Speaker, the distribution of the rate support of grant—
§ Mr. Deputy Speaker
No. We are discussing the factors which increased local authority expenditure in 1974–75, not the future.
§ Mr. Cunningham
I think I am talking, Mr. Deputy Speaker, about the distribution of this expenditure and this revenue in the past as well as the future. Exactly the same factors apply. I was about to come to a conclusion a moment ago, and I shall probably still do so.
It is, however, an important factor to bear in mind that the London boroughs within the inner city areas at present pay over these huge sums to outer London boroughs which do not have those problems and which, though they have lower resources than some of the inner London boroughs, still have adequate resources for their purpose.
I know that this matter is being looked at by Ministers in the Department of the Environment. I hope that this will result next year in the inner London boroughs not automatically having to contribute irrespective of their needs and resources to a pool to be distributed among better-off boroughs with lower needs.
§ 11.40 p.m.
§ Mr. Oakes
I am grateful to the right hon. Member for Crosby (Mr. Page), who himself had to handle these matters, for offering me his sympathy. We have spent many productive hours together in Standing Committee and on the Floor of the House discussing such matters as non-designated relevant development. That is nursery talk compared with discussions on rate support grant increase orders.
The hon. Member for Ashford (Mr. Speed) raised a number of matters. First, he talked about the difficulty he found in understanding the order. I am with him on that. In the White Paper on public expenditure that was published in November last year we included for this year a new table to set out public expenditure by local authorities. This is the first time that local authority expenditure has been brought together in such a comprehensive manner. To some extent 732 that meets the hon. Gentleman's point, but I still take the force of his remarks.
Both the hon. Member for Ashford and the right hon. Gentleman dealt with Article 6. In opening I did not go into the details of Article 6, so as to save the time of the House, but in view of what has been said I owe it to the House to offer some explanation of the matter, despite the time.
As regards education and the£24½million in teachers' pay, the hon. Gentleman is right in suggesting that the disagreement was between the model figures produced by the Department of Education and Science and the figures given by the local authorities, which they said were based on actual expenditure for the period. The disagreement has been discussed fully by officials on both sides in a cordial atmosphere. Both sides have been able to make some amendment to their first figures so as to bridge the gap. The Department's method of calculation was explained in detail to the association's advisers. They were given the opportunity to identify any source of error in the calculations but they found no substantial fault. The allowance made in the increase order corresponds with the Department's estimate. When I refer to the Department I mean, of course, the Department of Education and Science.
There is a much greater difference as regards the transport element.
§ Mr. Oakes
I do not know the answer to the hon. Gentleman's question, off the cuff. I shall write to him on that matter.
As regards transport, as both the right hon. Gentleman and the hon. Gentleman have said, there is a much greater difference. The hon. Gentleman puts his finger on much of the difference when he referred to rate support for fares. We made it clear at the time of the order that it was not the Government's policy to give increased support for fares.
There was a full discussion of the increase order with the local authorities' 733 officials and the Department's officials. Taking October 1973 prices into account, but not that part of the increase that the authorities suffered because of continuing subsidisation of fare support from the rates, the amount was originally£24 million. That was uprated to produce£29 million for the purpose of the first increase order. That took account of price movements to the end of the financial year.
There was some disagreement between the local authority associations and the Government. As the right hon. Gentleman said, it was a policy matter. I think he was good enough to say that he did not fundamentally disagree with what my right hon. Friend did. There were some other slight differences, but basically the difference of opinion concerned the two sets of figures that were produced. The hon. Gentleman mentioned some of the difficulties we have had in the past with Departments hawking round sums that they have found to be surplus. It is a deplorable practice and we are doing our best to eliminate it.
We are also doing our best, through the consultative council, which is working very well indeed, and between local authorities and the Department of the Environment, to iron out many of these irritations for local authorities whose efforts are set at naught in seeking to save public expenditure when they discover that neighbouring authorities are having money thrust upon them, or find money being offered when they are trying to cut down. It is not the fault of the Labour Government or of the previous Government. The same type of thing happened when I was a councillor, years ago. I repeat that we are trying to eliminate the practice.
I appreciate the point that this House should not seek to put any extra burdens on local authorities. The House well knows that every Minister from the Department of the Environment at the Government Dispatch Box spends most of his time warding off such demands, whether from his own hon. Friends or from the Opposition.
I also appreciate what was said about junketings. In a recent parliamentary reply I made the point that the amount of money involved is small, but I said 734 that the psychological damage inflicted is enormous in the present situation.
My hon. Friend the Member for Goole (Dr. Marshall) raised some detailed points on the schedule. What the schedule does is to uprate the sparsity factor because of inflation. The word "it" referred to by my hon. Friend is governed by column 1. Incidentally, the point about the sparsity factor is raised on both sides of the fence. Some authorities say that the sparsity factor is too low, and others seem to think that it is too great. In this year's rate support grant, and in the year following, we have introduced not only a sparsity factor but a special sparsity factor for limited areas. If there is a limit, the differences on either side of the limit appear to be great. The limit of three appears to be more above than below. If the ratio is high and exceeds a figure of three, it can grow almost as a pyramid in much greater proportion because that number has been exceeded.
That was the basis on which the figure was fixed.
I agree that there are difficulties about the presentation of an order and as to some of the ways in which the formula is arrived at. The formula is reached after intensive discussions ranging over a whole year with the local authority associations. Every year we try to improve the situation. Each time that we think we have cracked the problem, we find that the computer coughs up an enormous increase for one authority rather than another. We are working on the matter and seeking to improve the formula this year.
I assure the right hon. Member for Crosby that the needs-to-resources element as a proportion remains the same. We have operated on a formula of 72.5 per cent. and 27.5 per cent.
I agree with the right hon Gentleman's remarks about social service units. We have tried to be more precise and more selective in respect of the formula. There have been some bizarre results, but I agree that this is an important item of expenditure. I was not criticising the right hon. Gentleman in previous speeches, nor did my right hon. Friend the Secretary of State for the Environment criticise the right hon. Gentleman in dealing with the 9 per cent. mentioned by the former Conservative Secretary of 735 State for the Environment just before the General Election. In fact, the figure turns out to be somewhere around 29 per cent. We can all make mistakes on inflationary figures, and I shall not try to rub the Opposition's nose in it—the same sort of thing could be done to me in return—but we gave the£250 million to local authorities to offset something they really could not have expected of envisaged.
My hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) mentioned London. Although I cannot reply, for obvious reasons, in regard to any future rate support grant, or even this year's—it would be wholly out of order for me to attempt to do so —I can say that for the year in question the weighting for London remained at 12 per cent., and for the year that we are talking about, as was indicated, London on balance—not all of it; there were pockets that still faced very severe increases—came out much better than did the rest of the country. The wave of resentment at rate increases was very much outside London.
Many of the points raised by my hon. Friend are under serious consideration by the Department at the present time, and by the Layfield Committee, which is specifically considering both the relationship of the needs and resources element and the actual distribution of the needs element. Evidence has been received from the Greater London Council about both of these. It is a matter that both the Department and the Layfield Committee have in mind.
The equalisation scheme depends upon that factor. It cannot go into it further, because the future of the equalisation scheme clearly has no relationship to this order, which must confine itself, as must the debate, to the expenditure of local authorities up to 1st April 1975.
I hope that I have dealt satisfactorily with the points that hon. Members have made and that they will approve this order, which is a second increase order for local authorities in regard to the difficulties they have suffered in a very difficult year.
§ Question put and agreed to.
That the Rate Support Grant (Increase) Order 1975, a copy of which was laid before this House on 11 th July, be approved.