RATE SUPPORT GRANT

HC Deb 22 December 1976 vol 923 cc755-849

Question again proposed.

7.6 p.m.

Mr. Michael Heseltine (Henley)

Many hon. Gentlemen who listened to the Secretary of State's rather cosy description of the reaction of the local authority associations to his recent settlement will wonder whether something has not gone wrong with the communication channels between local and national government. Certainly the representations that have been made to me, and reports in the Press, paint a very different picture from the one that the Secretary of State painted this afternoon.

One overall generalisation that increasingly struck me as I listened to the Secretary of State explaining the growing complexities of finance in the rate support grant considerations, and the growing concern about the way in which the whole system operates, was that the commitment of my party to abolish the domestic rating system was one of the wisest political commitments that we have ever made.

The reality, which the Secretary of State and hon. Members opposite must understand, is that the rating system is now an arbitrary system. It is an arbitrary system of allocating resources, locally, and, as has been made perfectly clear today, it is made with the minimum of information about the impact on local communities and with the need to resort to broad brush approaches which must be unfair in their impact on local people depending on which community they live in. It is no longer a system that we as national politicians should tolerate.

Mr. George Cunningham (Islington, South and Finsbury)

If rates were abolished, central Government would have to provide more to local authorities. Surely that would increase the arbitrariness of the distribution arrangements?

Mr. Heseltine

It would not increase the arbitrariness, but there would have to be some form of revenue-producing activities to replace the rates. That is the commitment that must follow. I see members of the Government Front Bench jumping all over the place with glee as though the thought had never occurred to them. I think they set up the Layfield Committee to look into these matters. They must be as aware as I am that other alternatives exist. It is certainly a commitment that my party has entered into and we will announce our proposals for alternative means of dealing with this local funding in the future.

Mr. Peter Hardy (Rother Valley)

I do not know whether the hon. Gentleman has had the chance to read the Layfield Report. I hope that he will, because he will find that the Conservative commitment may not be so easily achieved as he supposes. Would the hon. Gentleman reconsider the assumption in his remark about the growing share of personal budgets that the rates require? Is it not the case that the rates burden is the same today as it was 20, 30 or 40 years ago?

Mr. Heseltine

The amount that has to be found in terms of post-tax incomes is extremely serious for large numbers in the community.

To an extent the Government have done what I believe to be necessary in approaching the question of local government expenditure. They have moved in the direction of reducing the proportion of funding that comes from the central taxpayer. I believe that is a step in the right direction.

The Government have failed to grasp the overall need to reduce public expenditure on a more significant scale than they have achieved. They have ended up by reducing net expenditure by 1.6 per cent. and the proportion of support from the national exchequer by 4.5 per cent. The effect has been to leave the responsibility for carrying the consequences of the decisions that the Government should have taken in the hands of local authorities and the private sector. The dirty work that flows from this rate support grant will be done by people other than the Government. The Government should have done their own dirty work which inevitably they will be forced to do.

It was interesting to hear the Secretary of State again rehearse the argument that anything more severe would have caused a great deal of unpleasantness and harshness and that the consequences would have been hard to bear. We have heard that argument, not only by the Secretary of State, but by the Chancellor of the Exchequer for the past two years. Every three to four months after that argument is put forward, one of them comes back to the Dispatch Box to explain that all the things which were impossible three to four months ago have now to be done because of the worsening financial crisis.

That is the dilemma. I believe that I put the position clearly and in much franker language than that used by the Secretary of State today in my speech on the Loyal Address to which the right hon. Gentleman referred. I then made it clear that there was a need for a harsher approach to local government expenditure. I understand clearly the consequences that I spelled out on that occasion, some of which the Secretary of State quoted, as flowing from such a decision. I believe that, faced with the choice between reducing staff levels and services in local authorities and increasing rates, the vast majority of people would prefer rates to be held at lower levels than the Secretary of State suggested. That is a harsh judgment, but, if I read the situation correctly, that is precisely the judgment that this country knows must be taken sooner or later.

As I see it, there are four reasons why the Secretary of State's proposals are wrong. First, I do not believe that the reductions in local authority expenditure are sufficiently large to meet the economic crisis facing this country.

Secondly, I believe that the responsibility for doing what has to be done is being transferred from central Government to the local authorities. The main cause of the agonising reappraisal in local government is inflation. The burst of inflationary pressures which gave rise to the crisis with which the Government are now grappling began some time in the early months of 1974 in consequence of policies pursued by the Government after they were first elected. That led to dramatic increases in the staffing costs of local authorities. That has been a major inflationary factor the consequences of which the Government are only now being forced to cope with.

Thirdly, the cuts have been engineered to cause the minimum impact upon people's daily lives. They have been designed to cut capital projects, as opposed to ongoing consumption, in the hope that the painful consequences that everyone knows follow from public expenditure reductions can somehow be delayed a little longer on the offchance that something will turn up—preferably North Sea oil. The fact is that, where it has been possible to abandon a road scheme, to cut house building and to reduce educational construction, that option has been chosen as opposed to reducing the numbers employed by local authorities. That is another misjudgment by the Government.

Fourthly, the changes are unfairly spread. They are unfairly spread for two reasons, both of which were inadequately dealt with by the Secretary of State. First, the right hon. Gentleman made no attempt to try to grapple with the difficult problem of those authorities which have tried to co-operate with the Government's economies and those authorities which have taken not a blind bit of notice.

Secondly, within the unfairness of the spread, there is no justification for suggesting that the genuine problems within inner cities, which I recognise, should be financed to an increasing extent by ratepayers who do not live in those areas and whose problems they cannot conceivably be.

The Secretary of State was at pains to suggest that he was not doing anything that my right hon. and learned Friend the Member for Hexham (Mr. Rippon) or myself a few days ago had advocated. But that is to misrepresent the situation. I do not have the figures before me, but I believe that my right hon. and learned Friend certainly moved in the direction of increasing support for the inner city areas. But my right hon. and learned Friend was administering a rising budget and, within the context of a rising budget and a rising proportion of central Government support, he was moving in the direction of helping the inner city areas. The Secretary of State is dealing with a different situation. The right hon. Gentleman is dealing with a smaller proportion of central Government support and a reducing budget. In those circumstances, it is particularly harsh to try to continue to move in the direction in which my right hon. and learned Friend was able to move, because the action taken by my right hon. and learned Friend was in the context of an expanding situation.

When I spoke about much the same kind of problem, I made it clear that, to find the resources for the inner city crisis, the Secretary of State would do better to seek to enter into partnership with the private sector and to attract the savings of the institutions and pension funds into investment in land and other developments in those areas, if only the economic climate were conducive to profitable investment in those areas. I specifically precluded any suggestion that the Secretary of State should seek to inveigle ratepayers outside those areas to take on tasks which could not be considered to be their responsibility.

The Secretary of State made it clear that he had what I would describe as inadequate information to try to distinguish between those authorities which have conformed to the general pattern of economic behaviour that he wanted to see them adopt and those authorities which have not. In that event, his decisions must be arbitrary. On the basis of inadequate information, the Secretary of State must take decisions the implications of which he cannot fully understand in their local impact. It would have been better to face the real difficulties with which the right hon. Gentleman undoubtedly has to deal and to ensure that he had the information upon which better judgments were capable of being made.

Many authorities have had great pressures put upon them because they have tried to do what the Government asked them to do. They have cut their expenditure to the bone and run down their balances to help their ratepayers. They have done what the Secretary of State wanted them to do. However, those authorities have seen other authorities that not only have done none of those things, but have publicly flaunted their refusal to do so. Those authorities are now able to turn to the authorities which co-operated and say "What fools you were. We told you that under this Government there was nothing to gain from co-operating. All you had to do was to go on with your profligate expenditure and business would be precisely as before in terms of Government support"

What conceivable incentive is there this time round for those authorities which co-operated so well and to which the Secretary of State paid tribute to go on co-operating knowing that their only benefit will be more aggro in the local election results and the local Press?

Mr. William Wilson (Coventry, South-East)

Speaking as a member of the Warwickshire County Council, I should point out that its budget for a year is £69 million, that as a result of the present arrangements it will be short by £8 million, and that it has complied right up to the hilt with the Government's requirements.

Mr. Heseltine

The hon. Member for Coventry, South-East (Mr. Wilson) is quite right. His ratepayers are to be asked to pay not the additional 15 per cent. which is the convenient average which the Secretary of State produced, but 24 per cent. because they co-operated with the Labour Government who then stabbed them in the back because other Labour authorities had not co-operated in the same way.

It is encouraging to speak from the Opposition Dispatch Box nowadays. Yesterday, the right hon. Member for Newham, North-East (Mr. Prentice) explained the workings of the Cabinet. Today, the hon. Member for Coventry, South-East has explained the harshness which follows from the activities of the Secretary of State for the Environment. One begins to wonder about the survival capability of this Government as we listen to the stories that are beginning to flow from their supporters.

I believe that it would have been right for the Secretary of State to face the fact that there is a crisis of expenditure in local government and that it is his duty to find out the details of the figures. Only then could he have a dialogue with those authorities that are persistently flaunting their independence of him at the expense of those who have co-operated with him. It is not good enough for him to say that it is too difficult, that he does not know how to go about it, or that it will cause him great agony. He would have been more widely praised if he had got on with the job.

Mr. George Cunningham

Are we to take it that the sentence in the Conservative Party manifesto for one of the 1974 General Elections about "setting local government free" is null and void now?

Mr. Heseltine

The hon. Gentleman apparently assumes that if people use their freedom to overspend grossly and, therefore, prejudice the freedom of those who do not overspend, it is right to hitch one's wagon to those who abuse the freedom given to them. I do not see that argument. In order to protect the freedom of those who have helped the Government, the Secretary of State should at least have some conversation with those who have abused the Government.

I believe that my hon. Friend the Member for Northampton, South (Mr. Morris) was right to increase the pressure that has come from the Opposition by asking the Secretary of State to find out and to publish a list of those authorities that indulged in the overspending. But I do not understand how the Secretary of State can produce a wealth of detail about individual local authorities and not know those which have overspent from one year to another.

Mr. Shore

That is the difficulty. There will not be any great problem in revealing what is the percentage expenditure of individual local authorities, taking the current year over last year. The Department will be producing those figures for all to study in the coming month. The difficulty is, having got the figures, how to interpret them. All that they show is how much, against the previous year, an authority has spent in aggregate. The hon. Gentleman must understand that that in itself will not show whether an individual authority has overspent. That in itself reflects all the changing circumstances of each individual authority.

Mr. Heseltine

I do not want to tell the Secretary of State how to control budgeting, but I should have thought that, if he started with that aggregate figure, it did not require great ingenuity on his part to say how he added up what figures to get that aggregate. The calculations have all to be done. Someone has produced a detailed budget to get to the total. Those figures should be available to the Secretary of State.

I believe that the mood of the nation is that people want to see an end to the inflationary spiral. That means that people at all levels, as we heard yesterday from the right hon. Member for Newham, North-East, have to adopt a different approach, and it should start with the Secretary of State for the Environment.

I want to draw attention to some of the representations which have been received from various authorities across the country. I have before me a Telex message from Stockport explaining how the authority had used up all its balances and therefore had none left to keep down rates but that it would now be penalised as if it had not done so. The London borough of Havering wrote saying that its calculations now showed that it would receive some £700,000 less than it had assumed that it would receive in earlier calculations. In all those circumstances, we must sympathise with authorities that tried to behave as the Government wished only to find at the last moment their assumptions changed dramatically.

The second aspect of the unfair spread comes back to a point raised by the Secretary of State. It is that we now see a situation where, because of the crisis in our city centres, county ratepayers will have to pay over and above the average rate increases of 15 per cent. mentioned by the Secretary of State.

I have heard no argument from the Secretary of State explaining why the ratepayers of Avon face an 18 per cent. increase, those of Cambridgeshire a 23 per cent. increase, those of Cumbria a 25 per cent. increase, those of Northumberland a 25 per cent. increase, those of my own county of Oxfordshire a 25 per cent. increase, and those of Stafford-shire a 20 per cent. increase in order to cope with crises in some inner city areas whose ratepayers will not be asked to pay any addition at all.

I could understand the argument if it was that all ratepayers would have to pay more and that the Government intended to spend it on the inner city areas because of the dramatic crises there. But I cannot understand an argument which says "We have a crisis in many of our inner city areas, and we shall so arrange the rate support grant that the ratepayers in those areas in many cases will pay no addition, but the ratepayers in other areas will pay an additional 30 per cent." How can there be any justification for that?

The Secretary of State has made no attempt to justify his proposals. However, it is interesting to look to see which of the Parties controls many of these areas. It may be only coincidence that many are Labour-controlled and that the Labour Party will be on the defensive in the spring elections. Those are the areas where in the main a considerable degree of additional support appears to be going.

Mr. Shore

Not at all.

Mr. Heseltine

The Secretary of State says that that is not the case. But I notice that he did not produce any evidence. He did not quote any of the authorities. I have before me a list of all the authorities, all the increases in rates and all the controls politically. It is difficult to avoid the conclusion, although there are one or two exceptions—

Mr. George Cunningham

They voted Labour. That is the conclusion.

Mr. Heseltine

The hon. Member for Islington, South and Finsbury (Mr. Cunningham) says it for me. I was not expecting so helpful an intervention. The conclusion is "You have no problems if you vote Labour." But that is not strictly true, of course. There are problems, but they take longer to manifest themselves and they are always much more expensive to resolve in the end.

The Secretary of State made no attempt to explain the fundamental injustice of treating ratepayers in one part of the country differently from those in another part.

Mr. George Cunningham

I want to clear up any misunderstanding that there may be. I am saying that the inner city areas, with all their social problems, naturally look to the Labour Party to help to solve those problems. That is why they are, and should be, in receipt of the largest amount of assistance, according to the philosophy of the Labour Party and according to the philosophy which, at its best, the Conservative Party has also enunciated. Those areas happen to be represented by the Labour Party most of the time. There is nothing odd about that.

Mr. Heseltine

I understand the delusions under which members of the Labour Party operate. I am sure that the hon. Member for Islington, South and Finsbury believes quite genuinely that, despite all the evidence, the growing poverty, the growing crime rate, the growing homelessness and all the other tensions of our cities which are worsening rapidly under a Labour Government somehow have nothing to do with this Government.

One of the most interesting features in the speech of the Secretary of State was that, for the first time, a new factor had been introduced into the needs element of the rate support grant—unemployment. For the first time, under a Labour Government, unemployment has become the factor to decide where to put the needs element in local government because, for the first time, under a Labour Government, unemployment is so serious in the city areas that it has to become a factor. The evidence is overwhelmingly against the hon. Member for Islington, South and Finsbury when we look at what is happening in our inner cities. To believe that a Labour Government protect them is to spit in the face of reality.

Mrs. Millie Miller (Ilford, North)

The hon. Gentleman has drawn attention to a factor which belies his earlier statement that these arrangements were drawn with such a broad brush that they could not take account of individual changes in circumstances. But the fact that unemployment is a factor shows that needs are being recognised.

Mr. Heseltine

Unemployment is a factor, but it is not restricted to the big cities. There is no bonus in being unemployed in the shire counties as opposed to being unemployed in the cities. Under a Labour Government, unemployment has become a disaster. It is now so high that it has been introduced in a separate element in the rate support grant.

Sir David Renton

In any event, since 1929 unemployment has been a national responsibility, and not a responsibility of local authorities.

Mr. Heseltine

My right hon. and learned Friend is undoubtedly right. He chooses a particularly apposite year, because 1929 was the last time that unemployment began to soar under a Labour Government. It rose to 3 million by 1931. I know that Labour Members do not like being reminded of these facts. They have some way to go before they break their previous record. Unemployment records are always broken under Labour Governments, but these things never have anything to do with the Government so long as the Government are a Labour Government.

The Secretary of State said that he had done everything possible in the current economic situation to cut rigorously, and that anything more would have caused hardship. I understand from the Cabinet leaks and from the right hon. Member for Newham, North-East yesterday that the latest round of public expenditure constraints have had to be introduced without legislation. The last thing that the Government want is for their back benchers to get near these issues. The trade unions, it seems, must not be allowed to feel any hardship under these circumstances. The rate support grant is part of the overall package. That is the most that the Government can do.

The Secretary of State estimates that 25,000 people in local government will lose their jobs, but that this will cause the minimum of hardship. I challenge the right hon. Gentleman's fundamental assumption about the whole issue of job losses in local government. What has actually happened is a consequence of the rate support grant calculations. The effects of the changes introduced by the Government will be higher unemployment, lower levels of production, and a perpetuation of the malaise which afflicts our manufacturing industry. I am prepared to accept that the right hon. Gentleman may have saved some jobs in local government for a short time. But the price for doing that is to destroy more jobs outside local government.

To preserve the public expenditure levels associated with the rate support grant we have to tolerate crisis rates of interest. These rates of interest are adding to the burden of local authorities and are destroying jobs in the private sector. They are driving small companies and shop keepers out of the city centres. There are record levels of bankruptcy, and the link between public expenditure levels and the mounting destruction of the private sector is absolute. That is why the Secretary of State's analogy is wholly wrong.

We have to break out from the position that prevents the private sector from raising or investing money. As long as the right hon. Gentleman has his way, and as long as the arguments he put forward in Cabinet hold sway there will not be an alternative growth of employment in the private sector.

We have reached the situation where the private sector can no longer carry the burden which the Secretary of State believes it should. Nowhere is this clearer than in the Government's housing programme. When they came to power the Government wanted a surge forward in local authority housing. This was to be secured in partnership with the provisions of the Community Land Act and all the centralised power associated with it.

With the burden that was placed on the private sector in the form of rising rates of interest small property developers and builders were unable to maintain the momentum. The Government believed that the public sector would pick it up and carry it on, but the price for that has been even higher rates of interest and an economic squeeze that has strained the public sector's ability to maintain the momentum. The result is that next year will see the worst housing record for decades. The Government will go down in history for having destroyed the country's housing programme.

The hon. Member for Bolsover (Mr. Skinner)—I do not often quote him—said only a week ago that the housing crisis was the failure of the Government and of no one else. I believe that the Government have failed to secure a viable long-term economic policy because of the attitudes which underlie the concept of maintaining high levels of public expenditure associated with crisis rates of interest. It would have been better for the Secretary of State to make clear that he was intending to bite into the vicious cycle of inflation, but for him to accept an average increase in rates of 15 per cent. next year is to contribute to the vicious inflationary cycle which other Ministers are trying to halt.

To avoid that would mean telling local authority employees that they would not have a job, and they expected that. They must be told that; because, unless we condition people to that attitude, which is what I presume the Government mean when they say they want to switch resources from the public sector to the private sector, we will not succeed. How can the Secretary of State argue that these policies will have no real consequence when public sector employment is to be maintained at its present level? That is the last thing that the country expects to hear. The country expects to be told how much local government expenditure is to be reduced, and the Secretary of State has missed the opportunity of doing that.

The Government claim that they want to give a new sense of purpose to the private sector, and that is all right as long as their words are never translated into practice. But we know that they will be seeking powers to extend the scale of direct labour organisations. That is what we now come to expect. All of the Government's arguments are in favour of giving greater strength to the private sector, but when it comes to taking a decision they act in precisely the opposite direction. We shall resist the powers to be given to direct labour organisations with all our constitutional strength. That legislation will represent a further diversion of effort and the misuse of resources. It represents yet another appalling prospect for our economic revival.

We know the Government's attitude on public expenditure. We now face the prospect of inflation of 15 per cent. on a year-on-year basis starting next April. In spite of what we have been promised consistently by the Chancellor in his repeated Budget statements, we know that we face reductions in the levels of services, and the Secretary of State knows that that is the prospect.

It is no use saying that rates will not continue rising and that they will be reduced. In fact, we shall have rising unemployment in both the public sector and the private sector as a consequence of the policies that are being pursued. We shall have soaring rate increases. The increases will be up to 30 per cent. in many parts of the country. There is no prospect yet of any of these trends being reversed or of any change in direction.

The Secretary of State has missed an opportunity. He could have matched the mood of the country if he had put forward a very different approach—namely, the one that the country wants to adopt and the policy it wants to follow. However, he has missed the opportunity. That is his responsibility, and as things worsen next year—we all know on both sides of the House that they will—the responsibility will come home to roost.

7.41 p.m.

Mr. John Forrester (Stoke-on-Trent, North)

The hon. Member for Henley (Mr. Heseltine) made a typically vigorous speech, although he did not carry with him everyone on both sides of the House. I was surprised to hear the hon. Gentleman talk about the harshness of the Labour Government. In debate after debate we have been told how harsh the Government should be about public expenditure and how lax they have been. It seems that the words of Opposition Front Bench spokesmen do not always quite fit.

This is a time of year when the Secretary of State for the Environment is urged to play Santa Claus. It seems that it does not matter whether he comes before us in a red cloak or a blue cloak, as he usually resists the invitations that are put to him. One of the many sins of local government reform has been to shift some of our loyalties into directions that we did not think possible before. I believe that there is a general acceptance in local government circles that there must be some curtailment of public expenditure in the present economic climate. There are those who still resist that idea, and they are entitled so to do provided that they accept the consequences of unacceptable rate increases.

We have reached the stage at which everyone accepts that we cannot make further cuts without hurting someone. There may be a little fat left in local government that could be trimmed but I do not think that there is sufficient to avoid taking unpleasant decisions. We must face the prospect that we shall have to learn to live with lower standards.

What usually happens in these debates is that each of us puts forward differing priorities. We cannot agree on what should be cut and by how much, and in the end it appears that the Government are the only party to come out on the side of the angels.

I cannot resist the temptation to say that local government reform has left us with a number of people surplus to requirements in some departments of local government. Perhaps it would be possible to include them among those who will lose their jobs. That is not to say that they are now under-worked, because I have always been taught that Satan finds work for idle hands. Certainly some of the work that has been found has led us into avenues of increasing expenditure. I rather suspect that that is something that happens in central Government as well. That can be the only explanation for some of the schemes and ideas that are put before the House.

I accept that the Government must reduce public expenditure, but surely it was not unreasonable for the shire counties to expect to receive the same amount of money for next year as they received this year. I understand that the shire counties will receive less cash next year than they received this year. They feel strongly that next year's total should at least have been the same as this year's. They feel that this year's total should have been the minimum thresh-hold for grant next year.

As a result of the changes in the formula and the percentage, Stafford-shire will receive £14 million less in 1977–78 than it would have received under the present rules. When we are refining the formula, especially in times of great difficulty, we should not do so in such a way as to add unfairly to the burdens of those who are the losers. That sort of refinement should be saved for better times. It is not possible to believe that in a time of high inflation we can contemplate paying less money than we paid out last year. I ask my right hon. Friend to give serious consideration to that point and the need for real transitional adjustments when a case may have been proved for alterations in the formula.

My right hon. Friend will know that many local authorities have to make plans years in advance for many of their services. It is unfair to inflict on them alterations in grants and formulae at the eleventh hour. If we are to expect good government from local authorities, we must avoid wild fluctuations in rate support grant from year to year. It would take a comparatively small sum to maintain last year's grant to the shire counties. If that sum were raised by taxation, it would cause hardly a ripple on the taxation scene, but if it is to be raised from taxpayers that could be the last straw for some. However, whether it is raised from taxation or from rates, it does not make any difference to the sum total of public expenditure, except that raising it by taxation may be less painful for some people.

Many local authorities have unavoidable commitments. Even if the average rate of inflation can be kept to 8½ per cent. over the year, it is a fact that many authorities, including Staffordshire, will face tremendous rate increases. Indeed, the figure of 30 per cent. has been mentioned to me.

Mr. Ivan Lawrence (Burton)

The hon. Gentleman speaks for the same county as I represent. Will he confirm that the Labour leader of Stafford-shire County Council has indicated that the rates that the East Staffordshire District might have to face—it is a Conservative Council—might be as high as 35 per cent.?

Mr. Forrester

I cannot confirm that, but I shall take the hon. Gentleman's word for it. There has been talk in the county of rate increases well above 15 per cent. I wonder whether some authorities are crying "Wolf!" in anticipation of being able to say next May that they have kept the rates down. Certainly the increases will be quite substantial in many areas. I know that authorities with balances are being encouraged to spend them to keep the rates down, but we must look forward to what the situation will be in 1978–79 if all the money is spent in one year.

The alternative in many cases seems to be to attack the fabric of the social services, but I believe that in all spheres of our national life we need a period of stability. Violent fluctuations in rates will do nothing for the climate for the social contract.

I accept that London and the metropolitan districts have stress problems, but the same problems of social deprivation occur in many areas, including many of the old county boroughs that are now part of the shire counties. The theme now is that the problems are diluted when spread over their respective counties. However, it is just as traumatic to be homeless in Stoke, Nottingham or Derby as in London, Manchester or Merseyside. I hope that successive Ministers will not overlook that. I hope that they will in some way revise the formula, or give some special assistance which will take account of the dilemma.

We cannot but come to the conclusion that the Department, in refining the formula in favour of the large conurbation, has perhaps overlooked the effect on some of the other authorities.

I am not quite as happy as my right hon. Friend about the rebel councils. I know that there may be the practical problems that he mentioned. But if the effect of the changes in the formula is that some local authorities which publicly declared that they would not co-operate with the Government's economies can then levy a smaller rate increase than most others, or have a standstill rate, there could be a traumatic effect on the morale of the rest of the country. Nor do I think that the grant should be distributed in such a way that some authorities can maintain or perhaps substantially increase their services whilst others must drastically cut back.

The main popular victim of the cuts now seems to be the road programme. I suppose that that is an easy choice for a Government. It certainly has no impact on individuals. But we must remember that the roads are the main arteries of this country and must be maintained in a reasonable state, especially if we are to improve our productivity and the distribution of manufactured goods, which are supposed to be the basis of our economic recovery. We should not contemplate running down our roads to a dangerous extent or to the point at which they will eventually require more to put right than if they were under normal maintenance.

If we are to reduce capital expenditure on car parks, will my right hon. Friend call a moratorium on the painting of yellow lines? I have the impression that in many areas traffic management engineers are a bit brush-happy. I once wondered whether there was a national competition to see who could paint the most yellow lines.

Will my right hon. Friend also abandon any further consideration of the consultative document on the parking of non-residential vehicles in city centres? If the proposed policy were adopted it would not only be yet another reversal of past policies but an extremely expensive innovation.

I should like to repeat a plea I made last year. If there is to be no alteration in concessionary fares, can the opportunity be taken to consider introducing a national scheme to be brought into force when times are better? The matter is a source of great resentment throughout the country.

Mr. Nicholas Winterton

The hon. Gentleman's knowledge of local government is well known and respected. Does he agree that if his Government introduced a scheme of concessionary fares it would be a great injustice to the many people in rural areas who do not live on a bus route or anywhere near a public service route? Would it not be sensible for authorities that run the existing concessionary fares schemes to enable the tokens to be used for taxi transport, which would at least enable people to take advantage of the system which exists for many others in urban areas?

Mr. Forrester

That is an interesting suggestion. Perhaps the Department will, in its full-scale review this year, consider whether that would be possible in the light of the public expenditure restrictions.

Mr. Nicholas Winterton

It is a matter of social justice.

Mr. Forrester

Social justice is sometimes rough justice. I understand the hon. Gentleman's concern and why he makes that point, knowing the district from which he comes.

The document says that local authorities may want to have their own priorities on other environmental services. I wish to plead for the continuation of the grants for land reclamation, the only form of special assistance that Stoke has received. In some areas derelict land can quickly be converted to good ground for housing and industry, without special treatment, but in areas such as Stoke, with a long history of mining, in addition to the spoil heaps it is not unusual to come across half a dozen pit shafts that nobody knew anything about, and to have unstable ground which will take years of settlement before it can be used commercially. The only hope for places such as Stoke attracting new industry is to improve the environment. That is our insurance policy for the future. As with roads, it would be a tragedy if the design teams and skilled workers were dispersed so that we had to start again in a few years' time.

Many local authorities will co-operate with the Government to achieve acceptable levels of public expenditure that are within our means. If there is any spare cash, they have ample services on which they can spend it. The plea from the local authorities to the Government is "Please pass no more laws which will add to our expenditure burdens, but if you feel compelled so to do, provide 100 per cent. of the cash to save us more expense."

7.56 p.m.

Sir Derek Walker-Smith (Hertfordshire, East)

I am grateful for the opportunity to make a brief contribution to the debate and to follow the thoughtful and temperate speech by the hon. Member for Stoke-on-Trent, North (Mr. Forrester), to which we all listened with much interest.

As I propose to express some criticism of the orders and of the Government's policies in regard to the mechanism of the rate support grant, it is proper that I start by defining the limits of my criticism and identifying its substance. I do not join issue on the principle of economy on the public service or constraints on public expenditure. It is not a question of my admitting their relevance. Indeed, I assert it. I do not need to learn these economic lessons from the present Government. I certainly do not need to learn the basic truth that expenditure on social and local services is inherently, inescapably and ineluctably dependent on the economic strength of the nation. I promulgated this doctrine consistently for the three years in which I had the responsibility for one of the great social service Departments.

My criticism is that the Government's approach is ill-suited to serve the ends and promote the object of economy in public spending, that the methods selected and embodied in the orders are illogical and unfair, that they press too hardly on some, and that with others they even contain a positive inducement to further higher spending.

My criticism is that the Government have failed to distinguish between the sheep and the goats, the savers and the spenders, the prudent and the prodigal, the saints and the sinners. In so far as their policies do distinguish between those categories, they favour the spenders, not the savers, the prodigal, not the prudent.

Mr. Nicholas Winterton

And the sinners.

Sir D. Walker-Smith

I was not going through the whole catalogue. I understand my hon. Friend's preoccupation with sin, but as we are approaching the season of good will to all men I thought that I need not repeat that.

Mr. Nicholas Winterton

Very unkind.

Sir D. Walker-Smith

I am always kind to my hon. Friend.

I propose to make good these general criticisms by reference to the particular case of the county of Hertfordshire, part of which I have the honour to represent. But it is a general criticism, with a firm foundation of general support. I shall cite two declarations in support of that statement. The first is by the Association of County Councils, which says that it considers that these proposals are grossly inequitable and therefore unacceptable. The second is the opinion of the Association of District Councils, of which I am a Vice-President, though I hasten to say that I did not draft the declaration that I am about to quote. It says: the distribution of grant will, in our opinion, be counter-productive and will mean that large towns receiving higher amounts in grant aid will have less incentive to keep expenditure down, and those authorities receiving less will not only have to cut services but be forced to put up rates above the average". These criticisms apply generally in the case of the shire counties and with very strong force in the case of Hertfordshire. That being so, I, supported by other of my hon. Friends representing the county, tabled Early-Day Motion No. 38, which criticises the inequity deriving from these proposals.

To assess the degree of inequity and hardship inflicted on the citizens and ratepayers of Hertfordshire, we have first to look at recent history. In the years 1973–74 to 1976–77, Hertfordshire has suffered a clear and sustained reduction of rate support grant in terms of the percentage of the national total, from 1.82 per cent. to 1.44 per cent. Looking ahead to the effect of this order, Hertfordshire's loss for 1977–78 will be £11.7 million, and of this £8 million is due to adverse changes in the formula proposed.

Of course, the problem of Hertford-shire is exacerbated by its high level of domestic rateable values. Because of the way the resources grant is calculated, Hertfordshire receives only a small proportion of grant as against areas with low domestic rateable values. It is, in my submission, wholly inequitable that highly-assessed areas should have to bear more of the strain while areas with low rateable values should get extra Government help.

Mr. Ronald Bell (Beaconsfield)

That point is valid. Is there not contained in it the further point that in Hertfordshire, just as much as in any city centre, there are poor as well as rich people, and that the effect of this formula is that the poor people of Hertfordshire are subsidising the rich people in London?

Sir D. Walker-Smith

I am grateful to my hon. and learned Friend who, with his customary perspicacity and prognosis, has identified the very point to which I was about to come. The result of the figures I have given is a massive disparity between the range of rates paid for similar properties in Hertfordshire and elsewhere. For 1975–76, the figures showed the range of domestic rates for the Hertfordshire ratepayer as £118 to £144. His counterpart in a similar property in Staffordshire paid, I understand, between £82 and £108, and in Leeds—I do not think that we have the benefit of the presence of a Leeds Members here—only between £59 and £83.

This was because the rateable value for the standard house in Hertfordshire is £277, in Staffordshire £216, and in Leeds only £96. That situation will worsen because, as the rate support grant is cut in 1977–78, the burden of the cuts will fall on those with high domestic rateable values. The principle is clear—there should be parity of treatment. Comparable hereditaments should be rated alike, which indeed, as I understand it, was the object of the switch from local to central valuation under the Local Government Act 1948. On the contrary, however, there is disparity and inequity from which my constituents and the ratepayers of Hertfordshire generally suffer. Obviously, I say, revaluation is essential in the interests of fairness and parity.

Mr. Ronald Bell

There is surely a point here. My right hon. and learned Friend said that, under the Inland Revenue assessments and the revaluation, similar hereditaments should be rated alike. We would need to change the law on net annual value. Does not my right hon. and learned Friend think that a house in a constituency represented by a Labour Member is bound to have a lower net annual value than one represented by a Tory?

Sir D. Walker-Smith

If that last proposition is true, it is something that should be corrected in a great many areas within the coming months. One would think and hope so. However, on the first point raised by my hon. and learned Friend, I think that the situation results from the method of valuation of the net annual value paid by the hypothetical tenant. But my hon. and learned Friend was perhaps less preoccupied with the 1948 Act than I was, owing to his enviable youthfulness.

Mr. Ronald Bell

Temporary absence.

Sir D. Walker- Smith

My hon. and learned Friend's temporary absence, then. Had he been here at the time, he would have heard that this was a central proclaimed objective for that legislation.

Although these disparities of valuation aggravate the effects of the Government's treatment of the rate support grant, there is, in addition, the central illogicality and inequity of the discrimination against those authorities which have managed their finances prudently and have hearkened to the exhortations of the Government. Hertfordshire has consistently kept within the Government's expenditure guidelines. During the past four years, and as projected for 1977–78, Hertfordshire's growth has been minimal even where Government policy permitted an increase. Hertfordshire has not contributed to the overspending. That is admitted by Ministers, who, however, unfortunately have not been able to reward such cooperation by an appropriate shaping of the formula of grant distribution.

The result is that adherence to Government policy has been penalised. The upright and the wayward have been punished alike. Hertfordshire has suffered because of the profligacy of other authorities, profligacy which has caused the Government to cut the grant by £50 million in the current year. If the profligates alone had their rate support grant cut, it might be considered fair, although perhaps still harsh; but a county like Hertfordshire, which has tailored its budget so rigorously, now has to pay for the massive overspending of other authorities.

What mitigation is proposed by the Government? The Secretary of State says that rate increases can be cushioned next year by dipping into balances. That is perhaps a natural reaction from a Government so dependent on the International Monetary Fund. The right hon. Gentleman quoted a figure of £175 million, but of course he admitted that it was an overall figure and with some authorities balances do not exist. That is cold comfort to Hertfordshire. Because of Government policy the cupboard is bare, and once again the long-suffering ratepayers of Hertfordshire will have to bear the burden.

For some of our ratepayers in Hertfordshire there will be added poignancy and irony in the situation. I refer to those who have recently moved into the county from London—and there are many of them. Had they stayed in London, they might have benefited both from the profligate spending of some London authorities and from the preferential treatment given by the Government to urban areas generally. As it is, they join the ranks of the hard-pressed ratepayers of Hertfordshire.

The impact of the rate support grant proposal on the Hertfordshire rates is calculated to bring about an increase of domestic rates 6 per cent. above the average national increase—6 per cent above in Hertfordshire and 10 per cent. below in Liverpool and South Tyneside. For what? Next year, the citizens of Hertfordshire will pay higher rates and enjoy reduced services, although perhaps the word "enjoy" is hardly the mot juste having regard to what they get. This is inequitable, unreasonable and undeservedly burdensome on deserving people.

Amongst the services which will or may well be prejudiced are nursery schools, old people's homes, and services for the mentally handicapped—the last a particularly deserving and demanding category for which much needs to be done and much should be done as a priority in Hertfordshire, as indeed in the county as a whole.

In conclusion, it is small wonder that these proposals and their impact find the citizens of Hertfordshire critical and resentful—not of the basic object that the Government seek to pursue, but of the clumsiness of their chosen methods and the unfairness and the illogicality that will result.

Clearly, the situation calls for two lines of action to promote fairness and efficiency in economy: first, the urgent revaluation of hereditaments throughout the country, of which I have spoken; secondly, a close and vigilant control of expenditure so that the proper stewardship of resources is rewarded and overspending discouraged.

Clearly, the Government have much to learn in this context, as appears all the more forcefully from yesterday's criticism by the right hon. Member for Newham, North-East (Mr. Prentice), who could not find it in conscience or reason to continue to share collective responsibility for the actions of Ministers.

Hopefully, by the time we consider these matters next autumn, other Ministers will occupy the Treasury Bench. But if, unfortunately, the present Government are still in office, I trust that it is not too much to hope that they will by then have learned from their mistakes and profited from the constructive criticisms that we seek to make.

8.12 p.m.

Mrs. Millie Miller (Ilford, North)

I am sorry that my right hon. Friend the Secretary of State is not present at the moment, because I was hoping to start by dispelling one of his illusions. In his speech he paid tribute to the Opposition for having introduced in 1973 a scheme which was foreshadowing the kind of redistribution about which we are talking today. It is true that such a scheme was discussed. What my right hon. Friend might not have realised was that when Opposition Members, notably the right hon. and learned Member for Hex-ham (Mr. Rippon), realised that redistribution of the type about which we are talking today would have had the disadvantage, from the Tory point of view, of putting increased burdens on the largely residential suburbs, particularly in the Home Counties, they immediately dropped the formula and we were back to Square One again, except that those very areas received considerable benefit from the scheme which was eventually introduced to the detriment of the urban areas that are being helped today.

In spite of the criticisms that have been made about the way in which the Government are handling this matter, it is very interesting that although many local authorities are extremely distressed about the way that redistribution is affecting them and although many of their services will be affected, the discussions that have been taking place between the Government and local authorities have been on a basis that has produced a formula that has been acceptable, particularly to those with the greatest needs.

I have no doubt—I have said this previously—that the changed approach of the Government to their discussions with local government has been greatly to the benefit of all those people who use local government services.

I want to make another point before turning to my main theme. We have heard so much about cutting local government expenditure from the Opposition, as we hear almost every day of the week, but they completely neglect to mention the part that their Government played in the disastrous reorganisations. Those reorganisations meant that local ratepayers now bear heavy burdens. They also meant increases in staff in order to cope with the reorganisations. I should like to repeat a figure that I have quoted previously on this subject. Between 1972–73, when local government reorgantion took place, and the following year, in the whole country the cost of administration to local authorities rose from £835 million to £982 million. That is something that we cannot overlook.

Mr. Raison

I accept the point that there was a very big increase in the cost of administration and so on, but surely the point is that it is quite clear that the increase was just as great in London, which was not reorganised at that time, as it was in other parts of the country that were reorganised. That shows that, fundamentally it was not reorganisation that added this heavy cost.

Mrs. Miller

There are factors in London, however, which we are now trying to redress—factors which had been developing over the years as the imbalance in population became more marked. Let us remember that during the period of the previous Conservative Government, heavy pressure was put on the poorest people in the poorest London boroughs and in some of the richest London boroughs, by the depredations of the property speculators and their activities in housing. We should not forget that. It had a great effect on local government in the inner London boroughs. This is borne out by the fact that in the London Boroughs Association proposals, which have been mentioned by the Minister, all 32 boroughs have agreed that the three main central boroughs should have special treatment because of the special problems that they have over and above those of the rest of Greater London.

That is a very telling fact. After all, within the London area there are 32 boroughs. A number of them are Conservative-controlled, but this year, for the first time, there has been unanimity on the formula to redistribute rates within the London area, and that unanimity has included giving extra help to the very boroughs which Opposition Members talk of as being profligate but which have some of the most terrible burdens of, for instance, old age, immigration into the borough, the separation of families, and a hundred and one other social elements. That is something of which people ought to be reminded in the discussion of local government expenditure.

It is interesting that in spite of the constant campaign being waged in the House and the media about the overspending in local government, the Minister said tonight that for the current year overspending will be less than 2 per cent. Moreover, I understand from the London Boroughs Association that if the offset in savings in capital expenditure of £90 million is taken into account, it will bring the overspending to about 1 per cent.

Perhaps there are those of us who wish that some of the Government's estimates could get as near as that to fact when we hear some of the massive figures that are put before the House.

I am very relieved at the way that the rate support grant is working out, although a number of problems still remain. Thank goodness that, in line with the policies announced by the Prime Minister, resources will be concentrated on the depressed inner city areas and that the rate support grant will be distributed in their favour. However, this may well not be sufficient in the London area. It is my duty as a London Member to point out that factor.

I think that the Department has established an Inner City Directorate, which is to bring together information on which strategic discussions can be held so that all agencies operating public services will be able to consider the needs of the inner London area. I hope that the day will come when this will work down to local levels so that all those operators of public services, whether they be local government, the nationalised industries, the National Health Service, or the fire service, will link together in considering the problems of their local districts.

There is a great deal that can be achieved in economy and satisfaction with services by that kind of movement. Structure plans could be developed, and possibly by the very fact that such organisations worked together we would see a great improvement.

Within the last few days I have been shown a cutting from the local government journal of Majorca. There a law has been passed which says that when roads are to be dug consultations have to take place with all the services, such as gas, water and electricity, and that roads may not be opened unless they have co-ordinated the plans to do all the necessary work while there is still a hole in the ground, after which it can be filled up and there will be no further trouble to the surface of the road. What a saving it would be if we could achieve that small amount of co-ordination on the number of roads with which we are concerned compared with the number in Majorca.

Mr. Ronald Brown (Hackney, South and Shoreditch)

It happened in a borough in inner London with which I was associated. A road was like a battlefield for nearly 14 months, at the end of which time it was beautifully resurfaced, but the Post Office decided that it wanted to lay some transformers under the road, so the process started all over again.

Mrs. Miller

My hon. Friend makes a valid point. If we had a regular, ongoing relationship between the services, we might be able to achieve our aim in 14 days, four months—who knows?

The Government have promised that cuts in housing and capital expenditure will not affect stress areas, but there is an urgent need to deal with many of the housing problems which concern not simply people in the queue for housing accommodation from the local authority but the poorest people, many of them in privately rented properties, who are suffering severely.

So much has been said about equity in this debate that I should draw the attention of hon. Members opposite to the fact that the London Boroughs Association informs me that the average amount paid in rates by householders in the London area is about 70 per cent. above the amount paid elsewhere in the country and that, although Londoners were assisted this year, it is probable that the amount will be between 72 per cent. and 73 per cent. in the coming financial year.

Mr. George Cunningham

Say it again.

Mrs. Miller

I will say it again: the average amount paid in rates by householders in London is 70 per cent. more than the average paid elsewhere in the country, and in the coming year it will probably be between 72 per cent. and 73 per cent. more.

However much redistribution takes place, it is noticeable that the Minister has said that it must be done gradually, and so it has been acknowledged this year in the rate support grant settlement by giving an extra ½ per cent. to London. I am not very good at mathematics, but on my calculations, taking the figure at between 72 per cent. and 73 per cent. next year, at the rate of ½ per cent. it will be about 150 years before London gets its fair share of the needs element, and the gradual change will have taken place.

Great efforts have been made by the London Boroughs Association, and it is to be congratulated on having achieved a formula which satisfies inner and outer London boroughs alike. If this kind of co-operation continues, as the needs element is recognised more effectively there may be a general improvement in relationships between local authorities. The trouble is that the people of London are hard pressed. Cost limits have been imposed on the National Health Service, with the consequent closure of an unknown number of hospitals. No consideration has been given to the serious health problems and the problems of morbidity in the London area. A new word has been coined in our language in the last few months—RAWP—the allocation of resources in the health service. This has not even been reflected in the cuts in services to Londoners, who face the prospect of even more serious cuts in their health services. This is serious in an area with such severe social problems.

Another threat is in wait for Londoners of which I hope the Minister will take particular notice. There is a seemingly innocuous Bill entitled the Water Charges Equalisation Bill. The Government should be warned that the careful work done by the local authority-controlled Metropolitan Water Board to provide good and adequate services for London could well be undermined. Londoners could be severely disadvantaged by the Bill's proposals. It would be most unfair if they had to carry the burden for authorities which have been so concerned with saving rates that they have overlooked the provision of proper services to their residents.

Mr. Ronald Brown

Will my hon. Friend underline the fact that only a small proportion of Londoners in the inner city areas will have to pay the extra 7 per cent?

Mrs. Miller

I agree. The root of the problem is that in all the inner urban areas it is the poor people who carry the lion's share of the burdens. For this to be even contemplated when there is a consultative document before the House on the future of the water industry seems to be beyond the imagination.

I refer briefly to the general problems of local authorities. I realise that throughout the country they have severe problems to tackle. The cuts in social services amounting to £26 million will bear very heavily and tragically on the elderly and the disabled. For example, the Government have given guidance to protect field and domiciliary social services at the expense of residential care. That is terrible. It is incredible that any Government claiming to have a conscience, particularly a social conscience, should say, when local government cannot take on more social workers because it has not the means, that residential care should be cut in favour of domiciliary care and not provide the funds for domiciliary care to be made available.

However sympathetic the Government may have been in the rate support grant discussions, there are still many faults, and unfortunately it is too late for us to rectify them this year. I hope that thought will be given to this matter in the coming year. As one who has served in local government and is proud of the local government system, I hope that the Government will not go too far in undermining the right of local government to make its own decisions, to choose how to spend the money it raises and how to use its balances.

As the Secretary of State said, local government is, in the main, responsible and responsive and has shown itself to be so—far more, perhaps, than some of the people who produce to the House non-estimates of public expenditure, and it is difficult to get to the root of the reasons for them. I hope that this debate, which, in the main, has not been party political, will be of help to the Government in their future discussions with local authorities.

8.28 p.m.

Mr. Timothy Raison (Aylesbury)

The hon. Member for Ilford, North (Mrs. Miller) has spoken up for London, and I do not blame her. She spoke as much for her old local authority as for her present constituency, and again I do not blame her for that. The only point I would query was when she spoke about health provision in London. London seems to be suffering from the problem of over-provision in that respect. In Buckinghamshire we suffer from a sheer lack of provision due to our expanding needs and because of the fact that resources are not keeping up with those requirements.

I speak primarily in this debate as a Buckinghamshire Member of Parliament, but I shall seek to make a number of general points about the order. I regard the Rate Support Grant Order as a shabby set of provisions. I do not grumble at the reduction, because I believe that the Government are right to reduce the percentage from 65½ per cent. to 61 per cent., and I make no complaint about that. I grumble at the method of distribution used in the order. I also grumble at the fact that the Government's policy will damage thrifty local authorities.

The Government are not looking seriously enough at the possibility that something can be done about this problem. The Secretary of State for the Environment said blandly that we cannot do anything about the situation without interfering in great detail in the local authorities. But Schedule 1 of the order sets out in enormous detail the "additional factors" so-called. It lists all the things such as number of acres, number of children and other elements. I cannot understand, and I hope that the Minister will explain, why it is possible to set out these factors in the schedule and yet not to move to a genuine assessment of needs.

I believe the right way to approach the matter is not as is done at present. I believe that the base rate of support grant should not be related to what local authorities spent in the previous year, with something added on top. The right way to go about the matter is to have a genuine needs element and a genuine assessment of local needs, and to concentrate on that and forget what local authorities spent in the previous year. I hope that the Government will explain why it is not possible to do this. This does not seem to be interfering in any sense with local democracy.

The hon. Member for Stoke-on-Trent, North (Mr. Forrester) and others have made it clear that the main objection to the order is in its excessive unfairness to the shire counties. My right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) also set out this matter eloquently. This policy has been presented by the Government in a way that conceals the toughness of the decisions that will have to be taken by some local authorities. The Government in the last few months have tried to shift the blame for the inevitable repercussions from their own shoulders to the shoulders of local authorities. I have principally in mind Conservative local authorities.

Let us examine the impact of the order on Buckinghamshire. Buckinghamshire ratepayers have had a tough time in the last few years. The prospects for next year are grim. I have already said that I do not grumble at the reduction in the overall total of rate support grant. If the Government had not changed the formula from last year, the effect of the reduction would have been to leave the county £5.4 million worse off. Because they have changed the formula, we shall lose much more than that amount compared with the previous year. As a result of the new bias in the formula, no less than £9.7 million is the figure by which the county will be worse off as compared with last year's formula. We are talking about a total expenditure of nearly £100 million and that is a heavy burden.

What rankles in my county, and indeed in others, is that we have toed the line. We have already economised sharply, yet we have obtained no reward whatever. The situation now is that if the Government's advice is followed and we run down the balances to 5 per cent. of gross spending, and reduce earlier expenditure forecasts by £5 million and at the same time take up all the options for reductions, it might be found possible to hold the general rate rise to 20 per cent. and the domestic rate to 30 per cent. These are steep figures of rate increases and they are accompanied by the inevitably severe reductions in services.

The most appalling moment in the Secretary's speech today was when he said, "If you do not like it, all you have to do is to put up the rates". It seemed a particularly cynical remark coming from a Government who are allegedly anxious about the social contract. We have a grim picture before us.

The rate of inflation is soaring while the incomes policy has the effect of holding down the pay of a vast number of my constituents. There will inevitably be a big and damaging effect on services.

What makes us bitter—as I said in an earlier intervention—is the bland way in which the Government keep talking about averages and then slide over the fact that there are bound to be big variations in those averages. For example, in the Secretary of State's rate support grant speech to the Consultative Council, he said: We have also taken the view that the average domestic ratepayer should not have to face rate increases greater than the expected increase of cuts through general inflation. Later in that speech he said: The national average increase in domestic rates should not be greater than 15 per cent. But in Buckinghamshire the figures will be way above that. I believe that other hon. Members from other counties will say that in their counties there are still greater increases.

We are faced with cuts, and the question is: what do we cut? We can fairly say that we get precious little help from the Government on this, but the cuts we have to contemplate are grave. I am as deeply concerned as the hon. Member for Ilford, North about the impact on the social services. One cannot help but be concerned. In the neighbouring constituency to mine—Buckingham—the local authority is apparently unable to provide the fire engines necessary for the new town of Milton Keynes.

Above all there is bound to be a heavy cut in education. It may be that one can save a bit by cutting down on administrative expenses, and I welcome that. It may be that one can save a bit on school meals and so on. That is a perfectly sensible thing to do. But the fact remains that the size of the cuts—about £5 million—likely to be borne by education can be achieved only by shifting teachers around and by making them redundant. It worries me that the Government will not accept responsibility for the fact that redundancies will be caused. It is the failure of the Government's economic policy which is bringing about those redundancies.

It is disgraceful that the Secretary of State should be trying to shift all the blame for this on to the local authorities. It is regrettable that the Chancellor of the Exchequer tried to give the same impression in the debate yesterday. The House may recall that on 22nd July the Prime Minister, at Question Time, acknowledged that there would have to be redundancies. Indeed, he made it clear that he believed that there should be redundancies. Ever since then the Secretary of State has been trying to duck the issue. In correspondence with me he refused to say that he endorses what the Prime Minister said. I believe that he has behaved very badly. As my hon. Friend the Member for Henley (Mr. Heseltine) said in his spirited speech, the upshot of all this is quite simply that the already discredited rating system is becoming more and more discredited.

We all know that one of the great difficulties here is the incredible complexity of the rate support grant system. I do not know why the Buckinghamshire rate support grant has dropped by quite as much as it has. I doubt if anyone can explain in detail—perhaps one or two boffins in the Department of the Environment could—what is the impact of the rate support grant. I doubt whether they can explain the equally great disparities in other parts of the country. But I am sure that too little allowance is made for a growing population.

So there is a formula which nobody understands, and its very incomprehensibility makes it easier for the Government to manipulate the rate support grant system. This constant manipulation is undermining confidence in the rating system as a whole.

We have from the Government a policy which sounds constructive and sensible, that is, a policy of trying to help inner city areas. I agree with my hon. Friend the Member for Henley and other hon. Members on both sides that inner city areas have very grave problems, but I seriously question whether the rate support grant, used in the present fashion, is the right means of redistributing income to help the inner city areas. In some respects the inner city areas are already much better off in the provision of services. They are not having to skimp on services in the same way as areas such as my own county are having to skimp.

When I recently went to a conference attended by local government representatives, I could not help being struck by the fact that north-eastern authorities sent large delegations. It was the sort of conference at which representatives could get their local authorities to pay for the cost of their travel, their hotel bills and so on. The north-eastern local authorities were able to send large delegations, but the rural counties were conspicuously absent because they are having to scrutinise every penny in a way that does not apply to some urban areas.

Even if the Secretary of State is trying to push more money into urban areas because they need more services, it seems rather paradoxical that the money is then used to keep rates down rather than to provide those services. Perhaps it is sensible and helps people more if they have money in their pockets and less in the way of services—one could argue that—but, although the object is to try to produce additional services in these areas, that is not what happens. The money goes towards keeping down the rates.

Of course, rates overall are bound to be part of the system of redistribution, but I believe that the rate support grant is a peculiarly arbitrary way of doing this. For example, if one is a rich person living in, shall we say, Sutton Coldfield or some other salubrious city suburb one will do well out of the Government's system, but if one is a poor person living in Buckinghamshire or some other county one does badly. This seems grossly inequitable. It shows that the rate support grant is not a good method of redistributing income in that sort of way.

Councils cannot redistribute income and wealth in their own areas. If a council had the money it could effect a major transfer of income from the rich people in its area to the poorer, and, although one could argue about that, it would at least be some kind of justification for this particular mechanism for redistribution, but because of the nature of the rating system the money goes to everyone in, say, the city of Birmingham, whether rich or poor, and does not go in the same way to everyone in rural areas.

The Under-Secretary of State for Wales (Mr. Alec Jones)

I am sure that the hon. Gentleman will realise that, if one is trying to compare the position of a rich person in one area and a poor person in another, no one suggests that the rate support grant is the right method. But, surely, that is why successive Governments have supported the idea of rate rebate schemes.

Mr. Raison

I agree that rate rebate schemes come into it, but they affect only a limited number of people. What the hon. Gentleman said does not meet my point that the rich residents of authorities that contain inner city areas do well out of the system but poorer people elsewhere do badly. That seems quite incontrovertible and is a serious criticism of the present system.

What is the relevance of the unemployment factor? My hon. Friend the Member for Henley made some pertinent points about what has been happening to unemployment in the past year or two. It is questionable whether the unemployment factor is a valid element, because unemployment produces few extra burdens on local authorities. It produces huge burdens in other ways—I do not seek to decry that—but the actual amount of extra spending entailed for local authorities as a result of unemployment is minimal. There may be a little in the careers advisory services and so on, but it is not a genuine factor in local authority spending, and the elements in the rate support grant should all be directly related to local authority spending.

The truth about this Rate Support Grant Order is that it is a highly political order, with next year's elections very much in mind. The Secretary of State was thoroughly disingenuous about this. The political facts of the matter are that the Government are desperate to hold on to some of the metropolitan counties where there will be elections next year, but they will fail. We shall win at least a majority of them. It is quite evident that in constructing this year's rate support grant the Government have decided to pour money into those areas in order to try to hang on to seats. At the same time they are reducing the money to be sent to the counties that are largely Tory-controlled and that they know they cannot win anyway. They hope that the Tory authorities will carry the blame for the big rate increases.

There is no doubt that the Government are manipulating the Rate Support Grant Order for directly political ends. If the Secretary of State had been honest, he would have included in the rate support grant formula the needs element, the resources element, the domestic element and the new electoral element.

8.46 p.m.

Mr. George Cunningham (Islington, South and Finsbury)

I have enough respect for the hon. Member for Aylesbury (Mr. Raison) to know that he does not really believe the last part of his speech.

I am at least the third hon. Member from an English constituency who has so far spoken in this debate while there has been no Minister from the Department of the Environment present on the Treasury Bench. I know that a Minister from the Welsh Office will wind up tonight, but looking round the Chamber now, among those wishing to speak, I can see no Welsh hon. Member apart from the Minister. The other hon. Members who will speak will, presumably, be those who represent English constituencies. It is therefore necessary that there should be a Minister from the Department of the Environment on the Treasury Bench.

Mr. Raison

Another odd thing about this is that, although the order covers the transport supplementary grant as well as the rate support grant, no Minister responsible for transport has appeared in the Chamber today.

Mr. Cunningham

I will not comment on that. One has to draw the line somewhere, and I am not sure whether I agree on that point. I hope that my message will get through. When there is a debate in the House that largely concerns the Department of the Environment—no matter what reasons there may be for Ministers being elsewhere—at least one Environmental Minister must appear on the Treasury Bench, even if he has to starve for seven hours to do it.

I do not believe in asking Ministers for favours. They have committed a grievous affront to me and to other hon. Members. My practice is to wreak my own vengeance in my own way, and I will do that. I hope that the message will be received by Ministers that this behaviour must not be repeated. I hope that you, Mr. Speaker, will use your influence to ensure that when the House is debating a matter of this sort a Minister from the relevant Department appears on the Treasury Bench to listen to it.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

Perhaps I can help the hon. Member for Islington, South and Finsbury (Mr. Cunningham) in this matter. The question of which Ministers should be present, if any, has nothing to do with the Chair.

Mr. Cunningham

I know that that is technically correct, but I can recall occasions when the Chair has intervened on such matters in order to ensure that debates take place with the relevant Ministers present. I do not accept that debates in this Chamber are not a dialogue between hon. Members and the Government and that in many cases the Government are irrelevant because we should be talking to each other and trying to win each other's votes.

I am glad to say that my highly respected colleague, the Minister who is responsible for housing, has now appeared on the Treasury Bench, but I still wonder why his Department was not represented there for between 20 minutes and half an hour. It had better not happen again.

The hon. Member for Henley (Mr. Heseltine) made a great deal of the point that authorities that have exceeded the base line for expenditure in the previous year are not in this rate support grant being specially penalised. I know the resentment that that causes to some people, but I wish that he and others who make this point would recognise the practical difficulties that any Minister from any party would face in attempting to impose such a penalty. [Interruption.] I am embarrassed by the number of Department of the Environment Ministers now present, but it is no more than right.

It should be recognised that if it is possible to have a base line for the crude control of expenditure that takes account only of past expenditure it is not possible to have a system that imposes a penalty on authorities that overstep that line. It would be like saying that the relative expenditure of various authorities must be frozen for all time at what it stood at a year or two back. If the Government are trying to help, for example, inner city areas there will be higher expenditure by those authorities than there was in the past. If the Government try to hold down that expenditure to a base level related to past expenditure, no flow of expenditure between one kind of authority and another will ever be possible.

Overspending above the base line of the past is not by definition wrong, and, if my right hon. Friend did what he was urged to do, there would be no substitute for his having to say, for example, that Birmingham could spend so much and Islington could spend so much, and having a figure settled for every authority in the country.

Mr. Ronald Bell

I understand what the hon. Gentleman means, but what my hon. Friends have been saying is that no regard is had in the formula to the spending of the authority in the past year as an indication of its needs and resources. The counties were asked to run down their balances to approximately 5 per cent. of their gross spending. Those that have done that in response to the Government's request are now in a very thin position. Authorities that have not done that—mainly the inner city authorities—are sitting in a nice position. No account is taken of that in the present formula.

Mr. Cunningham

I understand that. It is sometimes extremely hard for an authority that has laid itself out to pare away to see another authority that has been irresponsible going ahead. But the fact that an authority has increased its expenditure is not in itself a sign of irresponsibility. One authority that has increased its expenditure might be irresponsible, and another might be behaving responsibly in having done so. Therefore, it is necessary to have a tremendously sophisticated base line—as sophisticated perhaps as the needs element, which is complicated enough—or something close to it. It is not as easy as the hon. Member for Henley suggested.

We should recognise that central Government now bear two-thirds of the cost of the most massive element in local authority expenditure—staff salaries. The time is coming, if it has not already come, when central Government cannot remain as detached as they have been in the past from the settlement of the levels of local government staff salaries and numbers. God knows, if central Government get into that business it will be extremely difficult and embarrassing, and the question of local government independence will certainly arise.

I cannot see how it is possible for us at national level to continue to be responsible for bearing 60 per cent. of the cost of salaries—and bearing the costs of the increase in numbers of local authority personnel—when we say that we shall not directly influence the levels at which those salaries are set.

My hon. Friend the Member for Ilford. North (Mrs. Miller) drew attention to the relationship between the amount spent in rates outside London and in London. Having listened to the debate, apart from my hon. Friend's remarks, one would have thought that London ratepayers were spending much less on rates than those outside London. The figures bear repetition. Those that I have taken are probably drawn from a different year than the one to which my hon. Friend's figures relate, but my figures are bad enough.

Outside London the average domestic ratepayer pays £94 a year actual cash. Inside London the average domestic ratepayer pays £148 in cash. That is 57 per cent. more than outside London. The expectation is that, if all the authorities in the country were to have an average 15 per cent. rise, the London rise—because of the arrangement in this rate support grant—might be about 11 per cent. in this coming year.

If we applied that sort of increase in London, there would be a very slight coming together of the figures. But on this year's showing the London cash figure would still be 54 per cent. higher than expenditure outside London. No one can argue that London has in the past been, or will be next year, massively sub-sidised by areas outside London.

In the past London has had far less than its proper share of the needs element. I know that it has its so-called excess resources some large part of which we are permitted to keep by this order, but our problems are excessive compared with those of most other areas and the needs element distribution in the past has not reflected that.

I want to mention the proposed water charge equalisation scheme. There will be great resentment about that in the areas that have to pay for it. The only good thing about it is that it attempts to equalise the cash incidence—not rates in the pound, but cash incidence—of the charge. That is a concept that some of us in London have been trying to get accepted as a legitimate one for a considerable period. It is one that the Secretary of State has gone some way towards recognising and accepting in this order. Here is another little precedent that we shall use in future.

Mr. D. E. Thomas (Merioneth)

With regard to the water charges equalisation scheme, the hon. Gentleman should be aware that he has got away lightly because many of us would have liked to have seen a realistic economic charge made for water taken out of the areas of the Welsh Water Authority and used in other water authorities. The equalisation scheme will ensure that a far lower rate of return is made for water impounded in Wales than there would have been if some of us had been making the charge.

Mr. Cunningham

I hope that the hon. Gentleman will understand when I say that he knows better than most that Wales is not a natural water area. Some parts have a water surplus and some have not. The hon. Gentleman should remember that the whole of Wales receives a domestic rate subsidy virtually twice as great as the domestic rate subsidy that England receives and that England receives only two-thirds as much as Scotland. If we were not to go ahead with that scheme, there would be a slight offset with the advantage which Wales possesses.

The needs element coming to London next year is extremely modest—a rise from 19 per cent. to 19½ per cent. It is so modest that the Secretary of State preferred not to mention the figure in his speech. As he said, it confirms the shift of last year. It does not increase it, except to an insignificant degree. It will be necessary in future years to proceed with the rectification of past errors which have denied to London the amounts which it ought to receive in the needs element.

The Secretary of State is entitled to my congratulations and thanks because in this rate support grant he has abolished the old London rate equalisation scheme. There will still be one, but nothing like the old one. I am glad to throw some dust on the coffin of the old scheme. I thought that it might take another year to get rid of it. I am as pleased as I am surprised that those who were so bitterly opposed to the change 12 months ago now seem to find themselves strongly in support of it and will no doubt be supporting it tonight. That goes for some of the people in the London Boroughs Association and in the Department of the Environment.

One of the features of the new arrangements which is particularly welcome is that the London boroughs will be treated on a more individual basis. I have always taken the line that in local government financial matters London does not exist. The boroughs exist. The amount of local authority expenditure which is managed on an all-London basis is about 25 per cent. to 30 per cent. The rest is controlled by individual boroughs. The arrangements in this rate support grant base themselves more on the separate needs of the boroughs and the separate excess resources, if that is the word, of the individual boroughs. That is to be welcomed.

However, in this new order there are elements from the old régime. I understand that it will take time to get rid of them. But I make the plea that work should start now to ensure that the removal of the illogically based equalisation arrangements continues in next year's rate support grant. The indications are that what we are doing tonight will benefit outer London more than inner London. No one knows the exact figures, because they will depend on the rates levied and how much additional expenditure particular authorities care to indulge in. But, making the same assumptions about each authority, outer London seems likely to be better than the national average by about 4 per cent., whereas inner London will be better than the national average by about 2 per cent.

Regarding the intra-London situation, we have not done anything of enormous advantage to inner London compared with outer London. That is the argument for proceeding with the eradication of the intra-London equalisation arrangements which remain in the present rate support grant.

However, this is a good basis for the future. I think that there has been a great breakthrough in recognising that London is a collection of boroughs rather than one local authority. I see in the rate support grant this year a perfectly good basis for proceeding with even better arrangements next year.

9.5 p.m.

Sir David Renton (Huntingdonshire)

The hon. Member for Islington, South and Finsbury (Mr. Cunningham) gave the House a vivid view of the needs of his own constituency. But I ask him to bear in mind that the problems of his borough would be even greater but for the fact that many people who formerly resided in it have over the last 15 years or so come to my constituency—and very welcome they are. But their coming has added to the financial problem of the local authorities of my constituency, and I ask the hon. Member to bear with me while, by way of contrast with what he said, I describe some of the difficulties that we are experiencing so that he and other hon. Members may judge whether the Government's attitude in this matter is equitable.

My main complaint is about the preference given to urban authorities at the expense of the non-metropolitan counties. When this rate support grant comes into operation next year, the result will be that Cambridgeshire will find itself deprived of £10 million which it might otherwise have had and that the Government's proposals could involve an increase in rates of up to 23 per cent.

It so happens that the county of Cambridgeshire is the fastest growing in the United Kingdom. In that county, I represent Huntingdonshire—still called that as a parliamentary constituency although no longer an administrative county—which contains the whole of Huntingdon District plus part of Peterborough. Those two parts of Cambridgeshire are the fastest-growing parts of Cambridgeshire and of the whole country.

The fast growth is due partly to immigration as a result of the Town Development Act and, in the case of Peterborough, the New Towns Act. It is due also, to an extent, to ordinary growth, which I can only call "magnetic" growth because this is an attractive area, which is expanding rapidly. It is also due to our having about the highest birth rate in England. The combination of these factors produces great social and financial problems for the local authorities, especially in education, as my hon. Friend the Member for Aylesbury (Mr. Raison) pointed out.

The other side of the coin is that those developments under the Town Development Act and the New Towns Act are intended to ease the problems of the metropolitan authorities by passing them on to the receiving authorities. That sort of development is the main cause of our problems.

Under the Town Development Act and the New Towns Act some financial help is given towards housing and infrastructure but not towards education. This enormous education burden has been increasing rapidly for some years and is still increasing fast. It is largely in relation to that burden that the rate support grant is so important for us.

It is most unfair that even those cities, including London, which shift their problems on to the counties should be better treated than us for the purposes of the rate support grant. It is not disputed by anyone that there are problems, and sometimes very acute ones, for the urban areas but the rate support grant is not the best way of solving these problems financially, especially when it means helping them at the expense of those authorities which are already trying to help solve part of the problems.

Cambridgeshire spends less per person than the average non-metropolitan county. I do not have a comparative figure for the metropolitan authorities. Our assessed needs increase, as they are bound to do, through the large number of children of school age. The net result of the method of calculation chosen by the Secretary of State is, therefore, that the fastest growing county appears to be suffering the greatest reduction of grant, and that is because, without going into all the complicated matters involved, a statistical quirk which has a flavour of gerrymandering is taking pride of place and is pushing both equity and logic into the background.

Mr. Shore

The right hon. and learned Gentleman used the phrase "a flavour of gerrymandering". Would he care to substantiate that? It is not the language that is normally used.

Sir D. Renton

I do not want to repeat what my hon. Friends have already said with great force and clarity about the remarkable coincidence of the help given to those constituencies which are represented by Labour Members compared to those which are represented by Members of other parties. Are we asked to assume that there is nothing whatever in this?

Mr. Shore

Yes. All the facts are fed into a computer. I do not know whether the right hon. and learned Gentleman has any idea what a computer does with these massive loads of facts—

Mr. Nicholas Winterton

What is the programme?

Mr. Shore

Come, come!

Sir D. Renton

If a computer has produced this remarkable coincidence—

Mr. Sainsbury

Is my right hon. and learned Friend familiar with one of the best-known expressions of the computer world—GIGO? It means "garbage in, garbage out".

Sir D. Renton

I do not have the experience of or the faith in computers that some people possess. I was about to suggest that instead of putting his trust in computers which produce the most extraordinary statistics which financial statistics experts and the local authorities find it exceedingly difficult to fathom, the Secretary of State should act in accordance with a simple assessment in accordance with equity and social justice applied to the needs of different areas.

If the inner city areas need special treatment of a quite different character from that given to the counties, there should be other ways of helping them. After all, those areas which are particularly affected by the rapid Commonwealth immigration of the last 12 years or so are entitled to special financial provisions. That is the right way to handle those sorts of problems. It is done through us all as taxpayers but to afflict innocent ratepayers in the non-metropolitan counties in the way that is proposed, especially when they have problems of rapid growth, seems to me to be quite wrong. If that is the answer that the computer is giving, I suggest that the right hon. Gentleman tries another method.

Another factor but of a felicitous nature—I agree that it is marginal and not as important as education—is that we tend to be very long-lived people in Huntingdonshire—indeed, that applies throughout East Anglia. We have to spend plenty of money in caring for the aged. I should not like to see a reduction in the services that are provided for them.

There are many matters that require increased expenditure in these hard years of inflation. The local authorities are faced with a choice of three evils, plus one option that I do not regard as an evil. They can increase the rates up to 23 per cent. I gather that is the figure that has been given by the Government. Alternatively, they can raid their dwindling balances, not ignoring what the Government may order them to do by way of maintaining them. In fact, their balances have dwindled since the reorganisation of local government. Thirdly, they can cut services, or slash them, if "slash" is preferred. I must point out that the county police forces have already been slashed to the bone, including the Cambridgeshire force.

There are therefore the three options, each of them involving a choice of evils. Perhaps a bit of each of them will have to be chosen. The further option is one that I should not like to discourage. The Secretary of State would not wish it to be discouraged, either. It is the option of the authorities trying to look for further economies. They will be forced to do that if salaries in local government are to be controlled, negotiated and imposed from the centre. If salaries increase sharply—we know that there are pressures in spite of the Government's wages policies—the authorities will have to make further economies and certain personnel redundant. I should not wish to discourage the Cambridgeshire County Council or other authorities operating in my constituency from making whatever economies they have to make to try to prevent great increases in rates. Whatever they do, they will eventually incur the displeasure of the ratepayers.

The people should be told where the blame lies. It lies not with the local authorities, which are doing their best to provide the services that Parliament requires them to provide and which the people need. The blame lies with the Government, who have made inflation worse by overspending at the centre and have diverted to the cities too large a share of the rate support grant. That is most discouraging for the counties.

This is an unsatisfactory method of procedure. I know that the rate support grant system has continued for a long time and that it is purported to have been negotiated by all concerned, but the process takes place a long way from Parliament. We are presented with a fait accompli of a most complicated sort in an order which, in effect, alters the law. We have no control over it. We have no opportunity of amending. Those of us who are involved in the interesting work of the Select Committee on Practice and Procedure—as is the hon. Member for Islington, South and Finsbury—should in due course come to consider whether it is right that the law should be changed in this way, and whether it is right that Parliament should be presented with this sort of fait accompli, especially the sort that we have on this occasion.

9.20 p.m.

Mr. Ronald Brown (Hackney, South and Shoreditch)

The usual standard of courtesy of the right hon. and learned Member for Huntingdonshire (Sir D. Renton) fell a little when he accused my right hon. Friend the Secretary of State for the Environment of gerrymandering. The right hon. and learned Gentleman followed a little too closely his hon. Friend the Member for Henley (Mr. Heseltine), who is a past master at that sort of thing. We remember his having to apologise for misleading the House. Therefore, I urge the right hon. and learned Gentleman not to follow the hon. Gentleman's practice, which is not nice.

I join in congratulating my right hon. Friend on the rate support grant that he has produced in the documents that we are considering. We have been fighting to secure London's rightful share of the grant for many years. In the early days we did not have so many eager beavers supporting us. We fought hard, but nothing happened until my right hon. Friend the Member for Grimsby (Mr. Crosland) took the point and introduced the London needs element into the analysis, thus producing the first fair result for London. Equalisation between the London boroughs, which had been carried out because of the inequities, was then no longer necessary. This year my right hon. Friend the Secretary of State has been able to make the decision towards which we were all working.

My hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) referred to the absence of my right hon. Friend at one point. What intrigues me is that all the London Conservative Members are absent. Where are the hon. Members for Hampstead (Mr. Finsberg) and St. Marylebone (Mr. Baker)? One would have expected them to be here, commending my right hon. Friend on his work for the London boroughs, which has received the support of Labour and Conservative boroughs. We do not even have with us the London Front Bench spokesman for the Opposition, the hon. Member for Hornsey (Mr. Rossi), who could give his colleagues help and guidance about the importance of London.

Apart from my hon. Friends the Members for Islington, South and Finsbury, and Ilford, North (Mrs. Miller), we have heard from no London Member. London Conservative Members recognise the value of the order, but have chosen to stay away and leave it to their hon. Friends to pretend that London is being given an unfair advantage. The right hon. and learned Gentleman spoke of the rich people of London gaining, but my hon. Friends pointed out the facts.

I should like to take the matter a stage further. Opposition Members were able to have the figures that they gave because my right hon. Friend has continued the clawback principle of 1975–76 and 1976–77. In 1976–77 he will have clawed back £210 million and in 1977–78 he is to claw back £403 million. Whereas in 1976–77 the figure was only 33⅓ per cent. of the so-called resource advantage, by 1977–78 it will be 62½ per cent.

Sir David Renton

Perhaps the hon. Gentleman would wish to make sure whether he should give credit to his right hon. Friend or his right hon. Friend's computer.

Mr. Brown

I am not concerned with discussing the question whether my right hon. Friend did it with his matches, which was the 1963 method of doing these things, or with up-to-date machinery. The right hon. and learned Gentleman must remember that London is still not receiving what it is entitled to. All that the rate support grant has done is to show London what it should have. What London is getting is very much less than that.

Some tribute could have been paid by Opposition Members to the fact that London is not to get what it is entitled to, for the third year running. It is a little unusual to hear hon. Members opposite constantly referring to rich London and profligacy and overspending by London when I have shown that London is not getting what it is entitled to. My hon. Friends have shown that the amount of rates paid in London is far greater—twice as much in some cases—than that paid in areas for which hon. Members opposite have spoken.

Mr. Stephen Ross

This is the second time we have heard that statement. Surely the situation is a reflection of the fact that there are higher rateable values in London. The people there do not have commuter fares to pay, and the cost of living is higher in London than in my constituency.

Mr. Brown

The hon. Gentleman's assumption is not correct. Very many of my constituents do not work in London. London is losing work. Many of my constituents have to travel to outer areas. The person living in a two-bedroomed flat in my constituency is paying more rates than hon. Members living in the shire counties in their mansions. I have been through this story many times, and I would be happy to give the figures. I can show them that a council flat in my constituency pays far more in rates. That must be taken into account.

In paragraph 45, the order gives the impression that the London boroughs are happy to accept that there is justification for the clawback in their case. But the London Boroughs Association has informed me that it does not accept that the clawback is justified. It says that it appreciates that there has to be some gradualness in the matter and that it is prepared to co-operate in the exercise, but it would not like it to be thought that it believed the situation to be just. It believes it to be unjust to the people of London.

I pay tribute to the local government people who have worked so hard on this matter, including Sir Robert Thomas, of Manchester, and Sir Lou Sherman, of London. They have worked very hard with the Department to get a Rate Support Grant Order which is as reasonably just as possible to everyone. However, the rate support grant will never be absolutely just to everyone.

Over the years, my hon. Friends and I have complained bitterly about London's situation, but we never heard from hon. Members opposite in those days when we were unable to get justice for London. We did not hear then the arguments which they have adduced tonight. It was we who were adducing them then. Hon. Members opposite did not care because it was not happening to them. They were not suffering in the sense that London was and still is suffering. Now they are grumbling because they think they are not getting everything that they think they should have.

The hon. Member for Henley said that the London borough of Havering assumed that it was going to get £700,000 more than it is getting. That was an odd piece of accountancy. It started off in September with an assumption for the following April. Those of us with experience would not have made the fundamental error of assuming in September, long before the grant had been determined, that one would get £700,000 more for the year beginning the following March.

We understand the reason for the claw-back, but the important thing for us is the so-called excess resources of London, which are quoted frequently. But if we in London were to exploit our rateable resources, we would have such an intolerable rate burden—which is already much higher than in the rest of the country—that we could not possibly contemplate such action.

Therefore, the resources in London are purely paper resources. They can never be used. The rates being paid in my constituency by ordinary working-class people are already far too high. To try to exploit rateable values would make things impossible for them. I hope that the House will understand that the resources in London can be only a guide. They cannot be used to try to prove that there is a reservoir of financial opportunity of which local government in London is not taking advantage.

I do not wish to delay the House for much longer. I am satisfied that for this year my right hon. Friend has attempted to be just. I resent the imputations from Opposition Members. I have had my rows with my right hon. Friend. We shall be having another row on the Water Charges Equalisation Bill. I, too, dissent from it. Once again, we have heard not a word from the Opposition about that, not a sound about what is unfair in that Bill. In my constituency—and in my right hon. Friend's constituency—which is already burdened with the increased costs of this industry, people will have to bear very much higher rates in the pound than they bore last year, and soon they will be asked to suffer a further burden—but only those who happen not to have a metered supply and who are in the old Metropolitan Water Board area. All the private companies within London are being exempted. Industries that are metered are being exempted. All the commercial premises that are being metered are being exempted. Therefore, the burden will fall on only a very limited number of people. In my view, they are not able to bear it.

In conclusion, I put my right hon. Friend on notice that although I congratulate him very much on the way in which he has attempted to be fair in this rate support grant, I must tell him that I hope that he has second thoughts about bringing forward the Water Charges Equalisation Bill and will not put many of us in the difficult position of having to challenge him on the Floor of the House in that respect when we realise that he has worked very hard to help us in this respect.

Several Hon. Members

rose——

Mr. Speaker

Order. Perhaps I may explain my difficulty to the House. Thirteen hon. Members and one right hon. Member wish to speak in the debate. I presume that the winding-up speeches will probably begin at 11 o'clock. I have just indicated to the Front Benches a quarter of an hour each for them. Even so, it will be exceedingly difficult to call everyone who still wishes to speak, so I appeal for shorter speeches if possible.

9.33 p.m.

Sir John Hall (Wycombe)

I hope that the hon. Member for Hackney, South and Shoreditch (Mr. Brown) will understand if, in view of Mr. Speaker's request, I do not follow what he has said, except to comment on the Water Charges Equalisation Bill and to say that many Members who have constituencies in the Thames Water Board area will be happy to join him in any opposition that he Wishes to put forward against that Bill when it comes before the House.

I support the Secretary of State in his efforts to reduce and control local authority expenditure. I agree at once that one cannot do that without it causing some pain. I remember that when I made my maiden speech I quoted from Colbert. The art of taxation is like the art of plucking a goose. One has to try to pluck it with the minimum number of squawks from the goose. One gets many squawks if one increases taxation.

I am sure that the Secretary of State would agree with the old maxim that taxation, to be acceptable, must be seen to be fair. That is a maxim that is honoured more often in the breach than in the observance, as can be seen by the protests and the avoidance of taxation which occur in this country, which is a commentary on the fairness or unfairness of the fiscal system, to which we take exception. But the unfairness of the income tax system is as nothing compared with the unfairness of the rating system. The rating system takes very little account of ability to pay. It falls with different ferocity on various areas depending on the way in which the rate support grant is to operate, and except on very limited occasions it is almost impossible to avoid.

I make no excuse for returning to a point that I made earlier in an intervention when I referred to the effect on local authorities of the Government's penalisation of the "just and the unjust fellow", to quote an old poem, to which several Opposition Members have referred already.

I wonder whether the Secretary of State understands the effect upon councillors of what seems to them this very unjust reaction of the Government. Buckinghamshire and other councillors have tried hard to meet the Government's demands and to keep their expenditure within the guidelines laid down. They have had agonising conferences with other councillors and officials. In many cases, they have incurred a great deal of local unpopularity following the cuts in essential services which they have had to make. Now they find that they need not have bothered. It would have been much better if they had done nothing of the kind and had gone on, not spending extravangantly but maintaining their services as they were without incurring the odium involved in trying to restrict and economise, because they find councils and authorities which have done nothing are penalised no more than they are. That is the kind of injustice which creates bitterness.

The Secretary of State has said time and again that he expects the average increase in rates throughout the country to be about 15 per cent. We understand, indeed anybody who stops to think about it understands, that an average means that some will pay less and others will pay more. However, the average ratepayer, when he finds that the increase in his rates is not 15 per cent. but 30 per cent., will condemn not the Government but the local authority forced to impose the additional rate. The unpopularity will fall not where it belongs, on the Government, but on the local authority, which has little or no option, unless it drastically reduces its social services and the other services for which it is responsible, although in many cases it may have already reduced them to a point where, to reduce them further, will have the most serious effect.

Mr. Nicholas Winterton

Surely local authorities, just like private employers, cannot afford to do this because of redundancy and employment protection measures.

Sir J. Hall

My hon. Friend has a point.

The Government have attempted to justify the variations between the authorities by claiming that the formula which they use takes account of spending or expenditure needs. I refer the Secretary of State to the wise words addressed by the March Hare to Alice. The March Hare pointed out "To say what you mean is not the same as to mean what you say". The March Hare could have gone on to point out to Alice "To spend what you need is not the same as needing what you spend". The present formula is an invitation to local authorities to spend more this year so that they can get a bigger grant next year. It is a curious way of encouraging economy in local authorities.

The effect upon Buckinghamshire has already been clearly explained by my hon. Friend the Member for Aylesbury (Mr. Raison). Buckinghamshire, taking heed of the Government's request, has already cut back quite severely on many services—educational provision, administration, highway maintenance, which is giving hostage to fortune to the future, building maintenance and social services. With the cut-back of £9.7 million in the rate support grant, it faces the prospect of making savage and, to many people, unthinkable further cuts in the services for which it is responsible, or facing the ratepayers of the county with the kind of swingeing increase to which we have, unfortunately, become accustomed in the past few years.

Mr. Ronald Bell

My hon. Friend has mentioned the question of economies. Does he agree that when he refers to Buckinghamshire he means the county council? I believe that the balances maintained by the counties are, on average, 5 per cent. of gross spending, whereas the balances currently maintained by district councils are about 23 per cent. of gross spending. Therefore, the Government, through their formula, have forced the cuts and economies in county services, namely, education, welfare and highways, not merely last year, but this year.

Sir J. Hall

My hon. and learned Friend the Member for Beaconsfield (Mr. Bell) is correct. The cuts forced on the county council in the extremely important service of education are by far the most important. I am bitterly opposed to a reduction in the basic essentials of education. If we cut back drastically on educational expenditure, we shall pay dearly for it. This is the choice that will face the county, which must take such steps, or impose an increased domestic rate of between 25 per cent. and 30 per cent. on ratepayers.

My constituents ask me "How do the Government arrive at these extraordinary variations between metropolitan boroughs and English and Welsh counties? What is the formula?" One tries to explain the situation, but it is impossible. Even the experts in local authorities, such as the county treasurers and others, are unable to understand the situation. One can only come to the conclusion that the formula adopted is to think of a number and double it. Some of the variations appear to be incomprehensible. This is not a question that I have been able to examine carefully because the formula is beyond me. I have tried to find out how it works from those who are so-called experts in this area of activity, but so far without success.

My constituents also say "Are the Government imposing these heavy burdens on us because they think that Buckinghamshire is a rich county?" If this was suggested to the workers of High Wycombe, a manufacturing town, they would laugh in your face.

Many commuters in the Wycombe area have had to bear the brunt of the mortgage increases and have faced a number of savage rail fare rises in recent years. Many are finding it impossible to make ends meet since their incomes have been almost frozen and their tax burdens appear to increase all the time. This order will comprise another form of tax and the worst feature of this particular tax is that it has little relation to the income of the person affected.

Mr. George Cunningham

The average cash payment for rates in regard to domestic ratepayers in my constituency is £148 a year. What is the figure in the hon. Gentleman's constituency?

Sir J. Hall

If the hon. Gentleman is referring to the average amount of rates payable per household I would have to search my memory for the figure, but I think that the average in my constituency as a whole would be in excess of the figure mentioned by him, namely, about £150.

Mr. George Cunningham

It is much more than that.

Sir J. Hall

I may be wrong. I am quoting from memory. Apart from the effect of the rate increase on the individuals, the effect on small businesses is considerable. Many small businesses have been existing on the margins for a long time. This additional rate will push many of them over the edge. Small businesses are finding it impossible to meet continuing rising costs and this order will make the situation even more difficult.

To summarise the situation, it can be said that the vast majority of metropolitan districts are below and some well below the national average. The vast majority of English and Welsh counties are above the national average. The people of the shires will think they are being grossly discriminated against, and they will be right. The more cynical of my constituents will believe that the formula has been adjusted for political reasons. Nobody who knows the Secretary of State will think that such a thought would enter his head.

I am sure that I can tell my constituents with authority that this has not been done for any political reason. It has been done as a result of a formula, carefully worked out, which I do not understand but perhaps someone else does. But it is not for political reasons and I would not accuse the Secretary of State of that.

I shall speak finally of my constituents in Buckinghamshire, who want to impress on the Secretary of State, if he needs impressing, that they feel unjustly treated. An illustrious son of Buckinghamshire, John Hampden raised the flag of revolt against the Government of the day because he objected to the ship tax. In common with other citizens he thought that a pernicious tax.

Today, we do not rise in armed revolt when we do not like a tax although we have far more reason to do so than had our ancestors. We try to adopt a more rational, reasonable approach and we try to convince the Government by argument that the taxes are unjust and burdensome. I hope that the Secretary of State will take these arguments into account and not force us one day to repeat past history.

9.47 p.m.

Mr. Arthur Blenkinsop (South Shields)

This is a natural opportunity for everyone in the House to raise his constituency problems. Rightly, hon. Members put before the House the way in which the rate support grant affects their constituents. What I find offensive is the way in which Conservative Members cloak their constituency concern in the enunciation of great principles when we are discussing practical problems. I should have thought that it was beneath at least some hon. Members to raise such cynical issues. Naturally, Conservative Members have expressed their dissatisfaction with the elements of the proposals that have been disadvantageous to their constituents. That is a perfectly natural and normal situation, but it is by no means exclusive to those on the Opposition Benches. As was pointed out, Conservative Members representing London constituencies, who are noticeably absent tonight, benefited as much as Labour Members representing constituencies in London.

Sir Anthony Royle (Richmond, Surrey)

Perhaps the hon. Member has not noticed that the hon. Member for Richmond, Surrey is present.

Mr. Blenkinsop

Naturally one welcomes late arrivals, however late. The general point stands, however. Some ridiculous points were made by Conservative Members about the element provided for in the unemployment grant, as though that was benefiting only Labour-held constituencies. On the contrary, this applies throughout the country. The provision is not peculiar to one area.

The hon. Member for Henley (Mr. Heseltine) opened the debate in his usual superficial and swashbuckling style. He is not yet sufficiently run-in on this subject to understand some of the problems. I do not know how some Conservative Members have the neck to object to the complications of these grant proposals. They are always complex and difficult to follow, but at least these were presented in decent time. Our experience of the last Conservative Government was that they were not even available at the end of the ordinary financial year in March, and that the new authorities that were taking over still did not know in February or March of that year how they stood. They were faced with a problem of trying to calculate what to do with proposals as complicated as—or, in my view, more complicated than—the proposals that we have here.

Mr. Ronald Brown

In terms of cynical political decisions, I remind my hon. Friend that in those days those of us who were chairmen of finance committees were unable to find out from the then Department of Housing and Local Government what the rate support grant was likely to be so that we could make our estimates correctly. We genuinely believed then that it was being held back for political reasons.

Mr. Blenkinsop

That is absolutely true. The utter incompetence of the Administration of that time put an impossible strain on local authority staff and elected councillors. I am glad that, since we have had a change of Administration, this has never been repeated, and we have had proposals brought forward in good time to give Members of Parliament and local authorities proper opportunity to prepare their proposals.

The orders impose a harsh but not insupportable discipline on local authorities. Any Opposition Member who imagines urban areas, such as my constituency, are receiving some measure of largesse from the Government is wildly mistaken. It is misleading for hon. Members to give the size of rate increases that may have to be imposed without taking account of the level from which the increases start. We are concerned with the total payment that has to be made. Urban areas, by their very nature and the nature of their problems, alas, start from a very much higher level of rate payments than do most of the areas represented by Opposition Members present. No one should imagine that urban areas are being favourably treated so as to encourage a vast new spending spree, or anything of that nature.

As my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) pointed out, it is very unwise not to recognise the real problems that any Government would face in trying to differentiate between local authorities which, it is said, have taken a responsible attitude towards their spending commitments and have attempted more than others to hold down the level of spending as against those which, as some hon. Members say, have been profligate. How does one determine profligacy? Over what period should it be determined? It would be unreal to take one year out of context with other years.

Sir Anthony Royle

rose——

Mr. Blenkinsop

No, I shall not give way. I want to make sure that other hon. Members have an opportunity to speak, and the hon. Gentleman came into the Chamber only very recently.

It is essential to recognise the complexity of trying to examine each local authority's case. It would ultimately require the imposition of some diktat from the centre. That would perhaps be attractive to some, but it is unwise for Opposition Members to try to maintain that there is some principle here that is being disregarded by my right hon. Friend which would be perfectly practicable to carry through.

Some of us who read accounts of speeches made by my right hon Friend about the needs of inner urban areas were concerned lest he interpret inner urban areas to narrowly. Some of us have felt that in the long term their serious problems, such as loss of population and many others, can be solved only within a wider context.

I am glad that this rate support grant can be taken as some indication of the view of the Secretary of State, and I am glad that he is looking at urban problems in a wider sense. Although the Secretary of State is imposing a real and hard burden on urban authorities, it is one that is accepted by most of them as a reasonable burden in the current situation.

I agree with the Secretary of State that some of those who have criticised cuts and restrictions in local authority spending have begun complaining before their own areas have even been touched. After all, the position now is that there have been several years of considerable expansion in the employment of local authority staff and the development of services. It is therefore reasonable that with the current pressures on the country we should accept the restrictions imposed by the Government. Most of us recognise that although the solution is not ideal it is reasonable and fair.

9.56 p.m.

Mr. Arthur Jones (Daventry)

I listened to the hon. Member for South Shields (Mr. Blenkinsop) with considerable interest. I hope that I shall carry him with me in some of the comments that I wish to make on the subject before the House tonight.

It is generally recognised that standards of services are essentially determined and controlled by central Government and not by local authorities. This applies at least to major services. Therefore councils have requirements placed upon them for increasingly high levels and more costly standards of service. For example, there has been an increase in the school leaving age from 15 years to 16 years, the expansion of nursery education, the creation of social service departments, and higher standards required in public protection services.

But there has not been an adequate admission by the Government of their responsibility. The Government cannot claim to have been unaware of the effects of their legislation. Evidence leads us to the conclusion that they have not been prepared to recognise the financial effects of their policy decisions. The lack of co-ordination, indeed what appears almost to be a spirit of competition to expand services by central Government departments, has been a continuing feature of the post-war period, unchecked and almost unmonitored by the Treasury.

In assessing the problems of local authorities since the introduction of the rate support grant arrangements by the 1966 Local Government Act—the arrangements have been operative since 1966–68—it is interesting to look at the outturn of budgeted and actual expenditure. That can be done by examining comparative figures based on negotiated settlements for the rate support grant. The information which I shall give was prepared from the report on the Rate Support Grant Order 1975, and was published jointly by the local authority associations last January.

On approved expenditure, which was £2,619 million in the first year, 1967–68, and which has risen to £11,717 million for 1977–78, it is interesting to see the overspending and under-spending figures over an eight-year period up to 1974–75. The figures I give include the increases under the Rate Support Grant (Increase) Orders.

During 1974–75 approved expenditure was £7,283 million. During the eight-year period from 1967–68 to 1974–75 there were five years in which there was over-spending and three years in which the local authorities under-spent the figure used in the rate support grant arrangements. In the first year there was over-spending of £44 million, which represented 1.7 per cent. of the total. In 1968–69 there was £49 million overspending, representing 1.8 per cent. In 1969–70 there was £31 million under-spending and a similar figure for 1970–71, representing 1 per cent. and 0.9 per cent. respectively. In 1971–72 there was overspending of £51 million, representing 1.2 per cent. In 1972–73 there was overspending of £77 million—1.6 per cent. In 1973–74 there was under-spending of £31 million—0.5 per cent. In 1974–75— the year of local government reform—there was over-spending of £396 million, representing 5.4 per cent. of the total.

The 1975–76 and 1976–77 figures are not available. The latest information indicates that in both years the outturn is likely to be about 2 per cent. above the settlement figures. The year of reorganization —1974–75—presented peculiar difficulties for the negotiators on both sides, in that figures had to be agreed before the new authorities were formed and before the division of functions and responsibilities was determined.

The year 1974–75 apart, it is a remarkably competent achievement that the aggregate net expenditure of more than 400 authorities—and prior to reorganisation more than 1,200 authorities —should have conformed so closely to the guidelines set by central Government. That is a remarkable tribute to the average local government outturn. Would that Westminster and Whitehall had an equally good record.

Turning to a particular question in the grant arrangement for next year, paragraph 14 of the statement made by the Secretary of State for the Environment, following a meeting of the Consultative Council on Local Government Finance in London on 22nd November, is as follows: The formula should therefore help those areas with severe social problems such as the major urban areas. There has been considerable comment on that subject today.

The shift of grant aid to inner city areas has led to widespread comment and criticism that ratepayers as a whole throughout England and Wales will be required to make a significant cash contribution. Is that equitable? Ratepayers who are in no way responsible for the problems of inner cities and who derive no direct benefit from their rehabilitation should not in my judgment be required to contribute to a possible solution.

The disastrous situation in some inner city areas stems from misdirected policies by the councils concerned. Some have undertaken schemes of redevelopment involving vast clearance areas without ensuring that the necessary funds were available for their rehabilitation. That has happened in one city and town after another and has permitted a rundown of areas awaiting development.

The issue is now of such great urgency, and resources within local government are so limited, that in my view central Government funds on a vast scale will be required if there is to be any likelihood of progress being made. The cost should not be laid at the door of the ratepayers. Capital resources should be made available by a roll-over of existing Government investment, for example, in the new towns. For 17 new towns, by way of example, expenditure on industrial premises totals £78.75 million and on commercial premises £45.6 million. Investments of a similar character for which the New Towns Commission is responsible in respect of Crawley, Hatfield, Hemel Hempstead and Welwyn Garden City amount to £91.7 million and £53.3 million respectively. These figures are at historic values and these investments could well realise between £500 million and £750 million.

It is only ideological considerations and a determination to extend State Socialism at all costs that prevents the enlightened use of these vast resources which could be utilised to revitalise desolate inner city areas including the London docklands. I support what my hon. Friend the Member for Henley (Mr. Heseltine) said in this respect—that the Government should look for ways and means to encourage the private involvement of institutional funds in these inner city areas.

I turn to the Secretary of State's prediction that the support grant arrangements this year will have the effect of raising rates on average by only some 15 per cent. We have had examples in one county after another. I would quote my own constituency county, Northamptonshire. The estimate there is that the increase cannot be less than 20 per cent., at the same time combined with a reduction in the standard of some services.

Mr. George Cunningham

Would the hon. Gentleman tell the House what the average domestic ratepayer in his constituency pays now in actual cash terms?

Mr. Jones

I estimate that in cash terms the average domestic ratepayer in my constituency is paying between £175 and £225 a year.

Mr. George Cunningham

That is rubbish.

Mr. Jones

Apart from the particular direction of resources to the inner city areas, the general effect of the proposals for next year is to shift the burden from central Government funds and the taxpayer to local government funds and the ratepayer. The Association of District Councils, in a recent letter which I think other hon. Members received, commented: the reduction of 4½ per cent. is, in our view, grossly unfair to ratepayers and is in effect no more than a book-keeping exercise which will do nothing to reduce the totality of public expenditure. It is in effect central government transferring more of the financial liabilities for local services from the taxpayer to the ratepayer". The proposals in the Rate Support Grant Order 1976 are to some extent a cover-up exercise—further manifestations of the Government's policy of shifting around the burden of central Government expenditure. In turn the burden has fallen on private industry with two massive increases in social security payments; the extension of nationalisation, on the one hand, in the aircraft and shipbuilding and repair industries and its reduction, on the other, by the proposed sale of British Petroleum shares.

We have a further example in the order before the House this evening—a material burden of expenditure being removed from central Government funds on to local government and the ratepayer.

I predict that this Government, determined to stay in office at any cost whoever foots the bill, will not be saved by manipulations of this character.

10.9 p.m.

Mr. Stephen Ross (Isle of Wight)

Until the hon. Member for South Shields (Mr. Blenkinsop) spoke I thought that we were having a battle royal between the London boroughts and the Home Counties.

I am grateful that I have been called to speak. I would reminisce with the hon. Member for South Shields because I was Chairman of the Policy and Resources Committee when we tried to find out from the Government early in 1974 what money we would get. I well remember the great difficulties that we faced. I agree with the hon. Gentleman that it is a good thing that the rate support grant is known in good time. It is something in the Government's favour.

I assure the hon. Member for Hackney, South and Shoreditch (Mr. Brown) that I interrupted the Secretary of State during his speech on the very point about water charges in Wales. I assure the hon. Gentleman that as a representative of a constituency in the Southern Water Authority catchment area I am virtually certain that we shall be going along with him in opposition to the Water Charges Equalisation Bill.

I join the hon. Member for Aylesbury (Mr. Raison) in openly admitting that I find rate support grants a complete mystery, despite the fact that I was supposed to present the accounts to my local council and constituents at one time. The order starts by referring to acres and then goes immediately on to hectares. Therefore, I wonder whether the calculations are soundly based.

I do not seek to challenge the Government's decision to reduce the rate support grant by 4½ per cent., but I strongly object to the method of distribution. One has only to look at the information provided by the Association of County Councils, which is based on mation provided by the Association of the Environment, to illustrate how unfairly the proposed needs element settlement has fallen on different authorities. We are told: If the average rate rise were 15 per cent. … ratepayers in Cumbria, Oxfordshire and Wiltshire would face rises of the order of 25 per cent. caused by the grant distribution whilst Knowsley, Liverpool, South Tyneside and Wolverhampton would not have to raise their rates by more than 4 per cent. to 5 per cent. These are the anomalies which come from the settlement.

As one county council treasurer put it to me recently, the concept of past expenditure as a measure of need is thoroughly discredited. The fact that each new needs element formula is 'damped' by the part-use of previous formulae makes the whole process pretty wet anyway. A service industry called "The Rate Support Grant Industry' has been created which only serves authorities who (by sheer accident) find they receive a larger share of total grant under each year's new formula. My authority, which I think is the smallest in England—it did not actually ask to be a separate county; it wanted to be a county borough—has lost over £1 million due to the combination of the new needs element formula and the reduction in grant. The county has an increasing school population—over 18,000—and still rising slightly—and an above average number of pensioners—between 23 per cent. to 25 per cent. of the population. The problem can be resolved only by an increase in the domestic rate of over 15 per cent., more savage cuts than average—we are having plenty of them already—or a bigger reduction in our balances, which are dangerously low now. Having been a member of the county council for seven years between 1967–68 and 1973–74, I regret that the county did not have a massive spending spree in those years. It should have spent as much as it could. It would certainly have been better off had it done so.

We have a ridiculous, insulting situation. The Isle of Wight does not have an indoor heated swimming pool. However, £315,000 is now being spent on the provision of a recreational complex at Camp Hill Prison, to which my constituents do not have access. We should have spent the money in the past. We have not a hope in Hell of ever getting our pool now.

I remind London Members that the Isle of Wight has taken pensioners from the London area. The Greater London Council has permission to put up some 200 homes on the island, and many are there now. Those pensioners' needs will fall on the social services in some respects, so we face increasing difficulties.

No one has yet referred to the North. For example, North Yorkshire faces a probable rate increase of 25 per cent., although it has already made cuts of £5.6 million. The West Yorkshire County Council has already gobbled up £5 million of a special reserve. Only £414,500 is left in the contingency fund.

I am sorry that the Secretary of State is not in his place, because I wish to refer to his constituency—Stepney and Poplar. I do not wish to be party political. The right hon. Gentleman asked why some of us got worked up over differences between the allocations to the inner urban areas and the shire counties and provincial towns.

Yesterday I was in the London borough of Tower Hamlets. Whilst there, I picked up a leaflet with the heading Have a holiday with the Council. I do not object to the fact that Tower Hamlets owns holiday homes or hotels in Sandgate, Kent, Southsea, Hampshire, and St. Leonards, Sussex, but not in the Isle of Wight. It offers elderly people reduced price holidays. I live in a holiday area, but many of my constituents want to go on holiday and a great many elderly people in my part of the world would like reduced price holidays. That may be one reason why rates are higher in Tower Hamlets.

Then we read in the Press that 20 councillors from Tower Hamlets have spent about £1,000 on a holiday in their hotel at Hastings deciding their future policies. Perhaps that is another reason why rates are higher in London.

Another question which I am asked more and more often by elderly people is "Why cannot we travel free on buses during the day? Why do we not have concessionary fares as they do in London and other cities?" Many people have retired to my constituency, and this is a sore point with them. But we are likely to have to wipe out concessionary fares altogether. We do little enough as it is. We set aside only £23,000, and I think that this time it will have to go. We cannot go on doing it, and this is yet another reason why people are getting extremely worked up about the rate increases in many of our rural areas. We cannot even staff adequately our new short-stay home.

I wish to put two specific questions to the Minister. The first is to ask him why the Isle of Wight, together with East and West Sussex, is excluded from the £2.24 per head above-average allocation for labour costs added to the needs element. We understand that the Isle of Wight is out because, apparently, there is an absence of suitable statistics. I can tell the Minister that we shall soon provide them, because this is costing us £250,000 and we want to get back into the act.

My second question is to ask what happens in the resources element, which includes an allowance for parishes, paid to districts which do not have parish councils? Is it included, or is a deduction made for districts without parish councils?

There are problems enough for local authorities, and we ought already to be facing the inevitability of further local government reform. It has to come. I had hoped to see the Government actively encouraging the amalgamation of authorities, where it made sense to do it, to the single-tier county borough status. They should be encouraged to get together to see whether they can make reductions. I am sure that staff reductions could be made in that way. I agree that reductions must come in administration. These problems must be faced. There have to be cuts in some of the top tier where people are not fully employed. However, the unfairness of the spread of the settlement could and should have been avoided. I feel that this RSG settlement should be opposed by the House.

10.18 p.m.

Mr. D. E. Thomas (Merioneth)

I am sure that the House will understand if most of my remarks are directed to the Under-Secretary of State for Wales.

I wish to make a number of general comments and to endorse some of the criticisms that have been made about the way in which the rate support grant is allocated from year to year. I think it is fair to describe the grant allocation itself as a blunt instrument whose edges are carefully refined every year. That is how the system seems to operate.

We have a system based on existing patterns of spending to which additional weightings by means of different formulae are set annually. This cannot hope to reflect the real needs if those are to be defined in objective terms.

One can criticise in this way and then reply by saying that at least in this area there is an attempt to an objective allocation of resources, whereas there are many other areas of social policy where we are not doing this. For example, the Government have only recently started to reallocate resources between the various health authorities and various health districts, and working parties in the DHSS, the Welsh Office and the Scottish Office have been looking at the balance of resources and searching for objective criteria. Here at least some objective criteria exist in terms of a variation on the basis of historic patterns of spending.

Although I can criticise the general way in which the RSG formula operates, I do not want to argue tonight that additional resources should not be allocated to the inner city areas. I want to stress instead that I do not believe that resources for the inner city areas, such as London, should be obtained from the low-income counties, such as all the Welsh counties except one.

If there is to be a reallocation of public expenditure to the inner cities, that should not have to come from within local government spending but should be reallocated from elsewhere. I have opposed public expenditure cuts in all areas of social policy, and I am, therefore, at least being consistent. We have heard some hon. Members on the Opposition Benches who are keen advocates of public expenditure cuts in the broader sense suddenly standing up as keen advocates for not reducing public expenditure when it affects the ratepayers in their constituencies.

The Welsh counties next year will face increases greater than the 15 per cent. average rise in England and Wales. Starting from the bottom, we see that Mid-Glamorgan, which will be under the control of Plaid Cymru after next May, will have a 16 per cent. increase. Clwyd will have a 17 per cent. increase.

Mr. Colin Shepherd (Hereford)

Does the hon. Member recall that in March 1974 the Welsh received a very substantial flat-rate rate support grant which substantially changes the basis of comparison with the English counties?

Mr. Thomas

I am not talking about the domestic element in the relief. I will come to that later. I am talking about the percentage increase in each of the Welsh counties. The increase for South Glamorgan will be 17 per cent., for Powis 18 per cent., for West Glamorgan 20 per cent., for Gwynedd 21 per cent., for Gwent 21 per cent., and for Dyfed 24 per cent.

I am concerned that every Welsh ratepayer has to face an increase greater than the England and Wales average next year, and that ratepayers in the counties which have a lower level of income and a lower rating base, because of the scarcity of manufacturing industry and large commercial enterprises, will have to bear most of the increase in rates.

Earlier the Secretary of State stressed that the rate rebate scheme was available in order to mitigate the effects of rate increases, particularly in low-income areas. However, I should like Ministers to look again at their figures of the take-up of the rate rebate schemes. A substantial proportion of those eligible for rate rebates—I believe it is now in excess of 30 per cent. or 40 per cent. of those eligible—do not take up those benefits. The Under-Secretary will be familiar with this state of affairs from his experience in the Department of Health and Social Security.

I am concerned that low-income families and pensioners in Gwynedd and Dafyd will be faced with massive rate increases but will be unwilling or unable to claim rate rebate or simply will not know about the scheme. Some of them will be pushed about between the DHSS local office and the rates office of the district council, and at the end of that the difference in benefit could be no more than 50p either way.

The average increase will, therefore, be greater than in England and Wales, and, in spite of the substantial need for services, services will be curtailed. I was at a school in Dyfed on Monday. That part of the county has to go comprehensive, but I was told that it cannot hope to go comprehensive for at least five or six years because the necessary resources were not available.

In Clwyd we have seen threats of withdrawal of labour and other industrial action by teacher unions because of the extremely high pupil-teacher ratios. We are seeing a reduction in the net amount of Government resources available to the counties at a time when demand is increasing due to the modernisation of the education service involved in going comprehensive and the more efficient level of service in education arising from reduced teacher-pupil ratios. We are finding ourselves in an impossible situation.

I am also concerned about the inevitable strain and decline in the level of personal social services that we are bound to see as a result of the cuts. As is indicated in the Government circular and in the commentary on the rate support grant order, the Government anticipated that residential accommodation will suffer—in other words, the provision made for that type of accommodation. However, the Government demand of local authorities that they limit the increase of unit costs in personal social services, find more efficient ways of delivering services and cut back on the less essential services.

We know what is meant by "less essential services"—telephones for the disabled and adaptations under the Chronically Sick and Disabled Persons Act. At our surgeries we shall have to correspond with and meet local authorities to press them to introduce services that are provided for by Act of Parliament although the authorities will be prevented from implementing them because of the cost.

I stress the problem of the delivery of social services in rural areas and point to a basic fallacy that always emerges in these debates—namely, that social deprivation exists only in urban areas and stress areas in the inner cities. I shall quote from an excellent introductory paper that was prepared by the research officer of the Gwynedd County Council social services department. When writing about the surveys now taking place in Gwynedd he states that it is clear that social deprivation is a phenomenon not strictly confined to more urbanised environments. He continues, in assessing the information that has come from the surveys undertaken in Gwynedd: there is evidence to suggest that sparsely populated areas present proportionately as many demands on social services as do more urban areas. What is true of the personal social services is true throughout the whole range of social services provided. If we consider the indicators of social deprivation in the National Health Service, in housing and in education and the incidence of low income and dependence on supplementary benefit, we find that in rural areas and mixed areas—those are the partly urbanised areas that are found in parts of South Wales, which are not like the cities but are urbanised in the Welsh sense—there is as great an incidence of social deprivation as in inner city areas. Perhaps it is not on the scale that we would find in inner London, but certainly it is present in depth. The extent of the deprivation is as great.

When considering social indicators it is important to try to use them to allocate resources. It is important that we do so sensitively and realise that we do not have large pockets of deprivation only in urban areas. There is equally serious and deep social deprivation in the rural areas.

I should like to know how it will be possible, faced with the escalating costs of petrol and travel, to cut the unit cost of the delivery of social services in rural areas. I do not see how it is possible. The paper talks about a reduction in the unit cost of services. What do the Government mean by reducing unit costs? In most of the rural areas of Wales—

Mr. Dafydd Wigley (Caernarvon)

Does my hon. Friend agree that in these circumstances it would be regrettable if the Secretary of State were to transfer resources from rural areas to inner city areas—that is what has been suggested recently—without being sensitive to the indicators to which my hon. Friend has referred?

Mr. Nicholas Winterton

The right hon. Gentleman has done it two years running.

Mr. Thomas

That is the basic issue that we have been highlighting. We are seeing negotiations and transfers taking place throughout England and Wales without sensitivity being shown to the problems of rural Wales.

I must say something about the transport supplementary grant, which has not been sufficiently discussed so far. It is of vital concern to large parts of Wales, because we have a very thin transport service. We shall have very serious transport problems connected with the need to develop the road network. The Welsh Office has decided to give priority to the extension of the M4, and trunk roads are being directed accordingly. We are also told that some time in the next 10 to 20 years we shall need a North Wales trunk road, and moneys are being directed towards the dualling of the A55. If that is happening, it is very important that county finance for road building and the maintenance of the transport network ensures that the road network in the rural areas is adequate.

This is where the transport supplementary grant is so important when we talk about the structure of our transport system. In Gwynedd and Dyfed there have been severe problems over the bus services. There has been a massive reduction in the services, which causes problems for the elderly and those who have to travel to work by public transport.

In England and Wales there has been a reduction in the overall transport supplementary grant from £286 million in 1975–76 to £255 million. Can the Minister give us some of the figures for individual Welsh counties? I appreciate that the calculations are complicated. I have not yet obtained figures on the effect of distribution for the Welsh counties, but I can say that important areas such as Gwynedd and Dyfed, which have had serious problems with their bus network and maintaining the public transport system, should not have to suffer a further reduction.

We have seen redundancies because of the impact of the transport supplementary grant in Gwynedd. There has already been a reduction in the number employed by the county council's highways and transportation department. There will be further reductions in bus services and the numbers directly employed in maintaining the communications network if the transport supplementary grant is substantially reduced. We have received many representations from the National Bus Company and the branch which operates in Gwynedd and Clwyd that it becomes more and more nearly impossible to operate anything like an adequate transport system because the grant, as it is allocated to Gwynedd and Clwyd, is not sufficient to maintain the bus system.

Many of us, particularly those who represent areas with national parks, believe that there is an argument for a bigger transfer of resources from the urban to the rural areas for national parks than for any other service. They are a recreational service that we in the rural areas provide—though perhaps not the kind of recreation to which the hon. Member for the Isle of Wight (Mr. Ross) referred. Many of the additional burdens of rural areas are imposed because in the summer the areas must cater for a population five or six times the normal size. I am well aware that the salaries of officers of local authorities in such areas are decided according to a notional summer population. I should like other matters to be decided on the same basis.

I turn next to the rôle of the Welsh Office in the rate support grant negotiations. I do not believe everything I read in the Western Mail, but I should like to quote the following report from the edition of 23rd November: Yesterday a Welsh Office Press officer attend a Press briefing given by the Department of the Environment in London to find out what next year's rate support grant level would be. I do not accept that story in its entirety.

Will the Under-Secretary of State tell us what rôle the Welsh Office plays at the various stages of the negotiations. I suspect that there are no direct negotiations between the Welsh counties and the Welsh Office but that the matter is settled by inter-departmental committees, and that perhaps at Cabinet level the Secretary of State is forced to acquiesce. Tonight, I suspect that the Under-Secretary of State is carrying the can for an England and Wales settlement not made in the interests of Welsh ratepayers on low incomes who will have to pay more next year.

Several Hon. Members

rose——

Mr. Deputy Speaker

Order. I understand that Mr. Speaker has mentioned that brevity would be appreciated. I still have eight hon. Members who wish to catch my eye between now and eleven o'clock.

10.36 p.m.

Mr. Graham Page (Crosby)

Having regard to what you have said, Mr. Deputy Speaker, I will refrain from trespassing into the problems of Wales which the hon. Member for Merioneth (Mr. Thomas) has put before the House so ably.

Someone should have the enterprise to issue an old boy's tie for the rate support grant club. We have this reunion in this utterly frustrating debate every year. The orders are presented to us as fait accompli, and the best we can do is try to express public concern as we know it from our constituents. Public concern centres not on the services of local government but on the cost of them. That may be a measure of the success of local government. It functions pretty well and produces goods and services. But at what cost? That is what we are debating.

For the current year, the cost of the last rate support grant was £10,461 million; it is estimated that next year it will be £11,707 million. It is what that means in rate poundage and rates paid after the Government have made their grant that concerns the individual member of the public. He asks "What will that mean to me in the rate poundage fixed by the local authority? What do I pay?"

When the ratepayer sees the rate poundage and the rates rising relentlessly every year, he asks "Why don't they do something about it?"—"they" meaning the Government. Let us be frank. Under our present system of financial local government, despite the formulae which hon. Members have been talking about, the Government are practically impotent, both in law and in convention, to do anything at all about the amount of rates demanded by the local authority.

These orders do practically nothing to control the expenditure of local authorities and, therefore the rates to be collected and the rate poundage to be imposed by any particular local authority. To give a smaller percentage by way of rate support grant this year than last year really has little or no effect on the rate poundage of local authorities.

The Chancellor of the Exchequer was far too optimistic on 15th December when he said: Local authority current expenditure is now more strictly influenced by the central Government through the recent reduction of the main rate support grant for England and Wales from 65½ per cent. to 61 per cent. in 1977–78 and the corresponding reduction for Scotland.—[Official Report, 15th December 1976; Vol. 922, c. 1527.] If the Chancellor really thinks that reducing the rate support grant percentage will have an effect on the rates charged he is far too optimistic. I remind the House of the basis on which the grant is decided. First and foremost, the relevant expenditure is decided. That is decided by haggling between civil servants and local government servants over a long period of weeks or even months. It is a pity that we have nothing whatever to do with that in this House before the order is presented to us here, but that is how it happens.

I should have thought that once that figure of the relevant expenditure is agreed, as it is this year—I would rather call it the necessary expenditure—at £11,717 million, that it what the local authorities will have to pay out. There is no question about whether they can cut that down. I should have thought that the haggling over it had got it down to that stage, so unless the duties of the local authorities are in some way cut down, there is little hope of cutting down the balance which has to be found by rates. What a local council does not receive by way of grant it is obliged to raise by rates or by drawing on its balance.

The figures for next year work out in this way. The relevant expenditure is increased by £1,256 million. This year the Government contributed, by the 65½ per cent. of the relevant expenditure, £6,852 million. Next year, according to the rate support grant that we are debating, they will contribute £7,147 million. It is true that that is an increase of £295 million, so that is a contribution by the Government towards the overall increase of £1,256 million.

That leaves the local authorities throughout the land to find £961 million out of rates or out of drawing on reserves. The Secretary of State has told us this evening that he expects them to draw on reserves £175 million. Therefore, as the law stands, there is no way out of their having to raise £786 million—nearly £800 million—out of rates. Compared with what they have raised out of rates this year—£3,609 million—it looks as though they will have to get about 22 per cent. more next year out of the ratepayer even after drawing on reserves.

That is the average. The Secretary of State has talked about a 15 per cent. increase overall. I think that he is putting it far too low.

Of course, if we scrapped rates altogether and relied upon local income tax, that burden of the extra amount of rates would be spread much more evenly over those who have to pay. Instead of one-third of the public having to pay the sum—that is about the figure for the ratepayers—it would be spread over the taxpaying public. I shall refrain from arguing tonight that we should go straight to local income tax. However, what I must argue is that until we abandon the rating system it is intolerable that the increase in local government expenditure and the percentage decrease in the rate support grant should be borne entirely by the ratepayer. Some of this burden of a 22 per cent. increase in rates this year, as I work it out, must surely in future be raised out of other sources of revenue.

The Government ought to have looked at other sources of revenue before presenting the rate support grant to the House this year, because one of the easiest sources of local revenue is that out of which the Chancellor of the Exchequer last week pinched a 10 per cent. increase—alcohol and tobacco. Certainly a beer tax is the easiest tax to collect locally and one that is less noticeable, as the penny on the pint. The Chancellor told us that his 10 per cent. increase in alcohol and tobacco tax would produce £280 million.

One of such sources of further revenue which really should have been used by the Government before presenting this order was approved by Parliament nearly 17 months ago. Nearly 17 months ago the Lotteries Bill received the Royal Assent. It is absolutely scandalous that the Government have delayed bringing the Act into operation and prevented local authorities from obtaining the benefits which could be gained from the proceeds of lotteries. I am aware that Layfield classed local authority lotteries as low-yielding revenue sources. That may be right, as the law stands. But with the Lotteries Act the amount which could be gained from lotteries could be increased by a stroke of the pen. The Secretary of State has only to make an order to that effect.

Again, to quote Layfield, local lotteries would arouse some local interest in council affairs". The proceeds could provide those services in areas, such as amenities, sport, culture and so on, the cutting of which incenses the local people. It is a scandal that the Government have failed to bring that Act into operation over a period of 17 months. The Government ought to be considering other sources of revenue. They have been discussed so many times. There are, for example, a local sales tax, motor vehicle licence fees and motor vehicle fuel duties. All these are possible candidates to help prevent the continual increase in rate poundage and the amount of rates which can be collected.

I know that Layfield brushed those suggestions aside. But until local authorities are permitted to look to sources other than the taxpayer for their revenue the Government are powerless to control in any way the burden of rates, voluntarily or compulsorily. If there were such other sources of revenue this order could have been accompanied by something which would have been extremely popular with the public—an agreement to freeze rates at last year's figure. We could say to the local authorities "Here are other sources of revenue. If you want to spend more, look to them for the extra money." At present this order says to local authorities "We know that you will have to spend £11,717 million next year. We know that this is £1,256 million above last year's figure. We know that we are contributing only £295 million towards that increase, but you will not get the balance in any other way than from the ratepayers or by drawing on your reserves". This is becoming an impossible situation.

10.48 p.m.

Mr. Dudley Smith (Warwick and Leamington)

One of the disadvantages in being almost the last Back Bencher to be called in a debate is that most of the runs have already been made—some at inordinate length. I will try to be brief, Mr. Deputy Speaker, because I know that some of my hon. Friends still hope to catch your eye.

Perhaps the best policy in these circumstances is to hit out. Underlying every speech we have heard on this subject has been the paramount need for rating reform. The more we go down the road the more evident it becomes to reasonable and sensible people that the system has to be changed because of its great unfairnesses and because, at a time of rampant inflation, it becomes more and more discriminatory.

I was delighted that in his strong speech my hon. Friend the Member for Henley (Mr. Heseltine) reaffirmed the pledge of the Conservative Party to reform the rating system after the next General Election. If we had won the last General Election such a reform would be well under way. We know that we cannot rely on the Labour Party. It will never change the rating system because it likes to perpetuate some of the unfairnesses in it.

I do not want to mince words about this legislation. It is a vicious piece of political discrimination against certain areas, which are regarded by the Government as Tory areas, in favour of those areas which are Socialist. I do not agree with my hon. Friend the Member for Aylesbury (Mr. Raison) that some element in all this is due to the fact that the county council elections are due. It is all part and parcel of the grand design against middle-income people who are being oppressed so strongly by the Government.

This is another move in that direction. It is not a lost issue, because many are begining to rumble what is happening. My county of Warwickshire is by no means a rich country, or a county flowing over with rich people. When one bears in mind the effects of these proposals on Warwickshire, one realises how bad an order it is. As a result of local government reorganisation, Warwickshire is one of the smallect counties in the country. Under these proposals we shall face a rate increase of about 25 per cent. The alternatives are severe cuts or a substantial rate increase.

I asked the chief executive of the county council what he felt about the situation. He is a sober realistic judge, and non-political. He said that the cuts would be disastrous to the county. If Warwickshire was able to hold the rate to 15 per cent., it would mean that about 200 whole-time jobs and 1,300 part-time jobs would go. It would also mean that buildings would be left uncleaned and residential establishments closed, and still further maintenance cuts—a long list which underlines how at present many of the standards in Warwickshire are below the national average because of the incidence of the penalties that flow from the rate burdens of the past.

Under the present proposals Warwickshire will receive £8½ million less than it would have received if grant arrangements had remained unchanged. In those circumstances it is impossible for the county to do its job properly. The county is aware why this has happened. It has been penalised because the Secretary of State refuses to discriminate between good and bad authorities. This point has been put to the right hon. Gentleman time and time again, but all he says is that it is something to do with computers. I do not know a great deal about computers, but I know that they produce only what they are programmed to produce. I believe that in this instance the computer was programmed to produce the result the Government wanted.

The Government need not think that they will get away with this. The so-called shire counties will not just bear this burden. I think the Government underestimate what is felt by many members of the public. The Government think that people will grin and bear it, but they must realise that in rating terms people are getting near breaking point. There will be rebellions against the system in due course if we go on with the same ideas.

We have reached the stage of gerrymandering over rate support grant. If I can obtain support, I shall certainly divide the Houe against the order as a gesture of protest.

10.53 p.m.

Mr. Nicholas Winterton (Macclesfield)

I shall be brief, in order to allow at least one further colleague an opportunity to take part in the debate.

I am delighted to be called to speak following the remarks of my hon. Friend the Member for Warwick and Leamington (Mr. Smith) because he represents a constituency in Warwickshire, a county which I served for six years as a councillor. It is an efficient county and a county that has carried out Government requests by pruning expenditure, and dipping into balances to keep down rates, in the last two or three years. My own county of Cheshire—which is not to suffer quite as much as Warwickshire—has in recent years pruned its expenditure to the very bone. It has also dipped into its balances in heeding the Government's request and to keep the burden to the ratepayers as low as possible.

Various local government associations have said some unkind things about this rate support grant settlement. The Association of District Councils described it as a severe body blow to local authorities". The Association of County Councils described the settlement as "grossly inequitable". Even the Association of Metropolitan Authorities, whose members come out of the situation best, describe it as "a very tough settlement". It is clear that it is a very tough settlement. I endorse the view of my hon. Friend the Member for Warwick and Leamington that it is biased against the shire areas, which predominantly, but not exclusively, are represented by Conservative authorities and Conservative Members of Parliament.

The Secretary of State must realise that some of the rural areas do not have all the facilities which urban areas possess, whether it be in the form of libraries, sporting facilities, recreation grounds, footpaths, street lighting, kerbing or regular patrols by police. That is an advantage which rural areas and shire counties do not have. Therefore, we would expect the rates to be lower, not higher, but this is not the case.

The cost which people living in rural areas incur in getting to their employment has dramatically increased.

Mr. Shepherd

Hear, hear.

Mr. Winterton

Many of the constituents of my hon. Friend the Member for Hereford (Mr. Shepherd), who says "Hear, hear", must travel many miles to work. The cost of owning, maintaining and licensing a car has dramatically increased in recent years.

The Government, who certainly have a problem of urban deprivation to deal with, will stand indicted of producing rural destruction and rural deprivation in addition to the problems which they already face. There are rural areas, market towns and areas such as that represented by the hon. Member for Stoke-on-Trent, North (Mr. Forrester), which is not an urban area but is in a shire county where great deprivation has, for reasons of industrial and commercial change, occurred in recent years. I support the speech of the hon. Gentleman, which was a breath of fresh air from the Benches opposite.

The hon. Member for Stoke-on-Trent, North mentioned briefly concessionary fares. I hope that I shall be permitted for about 20 seconds to raise that matter. If concessionary fares are to be available, they must be available to all old people, whether they live on bus routes or on public service routes or not. I have a parish council, the Henbury Parish Council, near Macclesfield, which is campaigning to get the Department of the Environment to allow the concessionary tokens issued to old-age pensioners who apply for them to be used for taxi fares. I must acknowledge that if this were taken up on a wide scale it could well increase public expenditure, but at this moment local authorities are not permitted to grant this right to the people who cannot use public transport. I hope that the Department will be very sensitive and receptive to this campaign.

The Under-Secretary of State for the Environment (Mr. Kenneth Marks)

Concessionary fares are given entirely at the discretion of the local authority. They have nothing to do with the rate support grant or with any other grant. If there are no concessionary fares in an area, it is because the local council has decided not to grant them.

Mr. Winterton

The Minister has misunderstood. There are concessionary fares in my area, but the local authority is not permitted to allow the tokens to be used by old-age pensioners as part-payment for taxi fares to get them from where they live, which is not where public service vehicles operate, into the town to do their shopping or whatever they have to do. Therefore, I hope that the Secretary of State will be very sympathetic to this campaign.

In my area, the county council, on account of the burdens and restrictions being placed on it, is being forced to close in the near future the Mount old people's home in the town in which I live, Congleton, in Cheshire, because it can no longer maintain it. I hope that a campaign will be mounted to persuade the Cheshire County Council to change its mind. But if this sort of action has to take place, if this is the sort of decision which county councils must take because of the discrimination which is shown against them in the rate support grant, it is a very sad and serious situation.

I wish to refer to the question of voluntary organisations whose grants from local authorities are being drastically reduced by the local authorities because they no longer have the money to make grants. This is a tragedy, because I am sure that the Secretary of State will agree that such organisations provide very good value for money, in fact, cost-wise they are probably better value than the maintained bodies. If this Government remain in office until the next rate support grant negotiations, and I have grave doubts about that, I hope that they will be more sensitive and understanding towards the problems of the shire counties, which have problems just as great as those of the urban areas.

11.0 p.m.

Mr. Nicholas Edwards (Pembroke)

My right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) and my right hon. Friend the Member for Crosby (Mr. Page) spoke for many hon. Members, I am sure, when they expressed dissatisfaction with the way in which, over many years, we have had to deal with this enormously important and complex matter. I fear that it will not be until the House of Commons takes its courage in its hands one year and actually throws out one of these orders instead of engaging in the usual ritual dance that we shall force a reconsideration of the way in which these matters are handled.

The Opposition do not deny that savings have to be made, but we are entitled to ask for three responses from the Government. First, the Government should be absolutely honest in their approach. Second, they should not expect local authorities to do what they themselves are not prepared to do. Third, the burdens should be applied equitably. The truth is that the Government have failed on all three counts.

The Government are being less than honest because they are seeking to obscure the reality of what they are doing. For example, they have been playing with words about cash limits. Last year, they promised that the cash limits would be reviewed if the pace of inflation generally or the rate of cost increases affecting local authorities' expenditure was substantially higher than allowed for in the cash limits. The implication of that statement was clear—"Here are cuts of so much, but if we, the Government, fail in our job of reducing inflation, we shall not clobber you still more." Yet that is precisely what they then proceeded to do.

The Secretary of State talked about balances in justification of his decision, but many local authorities do not have those balances. The truth is that the Government have passed the buck to the local authorities for the whole of the additional cost which has arisen because they themselves have not met their own inflation targets.

Second, the Government should not ask the local authorities to do what they themselves are not prepared to do. It seems to me that they are seeking to cut local government expenditure more severely than they are prepared to cut their own. As my right hon. and learned Friend the Shadow Chancellor pointed out yesterday, the Government talk of making reductions of about 8,000 in the Government Civil Service as a consequence of their latest round of expenditure cuts, while on the Secretary of State's own estimate today they are looking for reductions in local authority staffs of 20,000 to 30,000, and many think that that figure will be exceeded. The local authorities should be given a better example by the Government and their agencies.

I give just one example. A letter received from a member of the West Sussex County Council draws attention in eloquent terms to the string of advertisements which have appeared offering highly paid posts with the Land Authority for Wales. This West Sussex counciilor points out that the English local authorities have been told by the Government that they should operate the Community Land Act with very few, if any, additional staff, and he speaks of a recent survey which shows that only one county council in England has appointed additional staff for this purpose. If those advertisements have had any success, there must be a considerable number of staff now gathering in Wales.

Mr. D. E. Thomas

rose—

Mr. Edwards

No, I shall not give way. We have limited time, and I have curtailed what I have to say in order to give other hon. Members a chance to speak. Perhaps the Under-Secretary of State for Wales will tell us how many are currently employed by the Land Authority for Wales, at what cost, how much land they have acquired, and at what price.

The central point of the debate has been that distribution must be equitable. Speaker after speaker has indicated just how unfairly and uneven distribution has been, starting with the hon. Member for Stoke-on-Trent, North. The complaint was also made, in the speech of my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith), that the Government seem to be helping the sinners at the expense of the saints.

In the Government's initial set of figures there are enormous and unexplained discrepancies. Further calculations on the loss of the needs element for individual non-metropolitan counties indicate even wilder swings in the figures than appear in the original table. Last year, the Secretary of State spoke about protecting remote rural areas. That statement looks pretty sick against the background of the increases that have been described in tonight's debate. Not for the first time, a Labour Government have decided to clobber the countryside. It is hardly surprising that some of my hon. Friends have questioned the Government's real motives for concentrating resources on areas that are necessary to them for their political survival.

No explanation has been given for some of the more extraordinary discrepancies. Residents in Dudley will be keenly interested to know why they will suffer the largest increases in rates, of 11 per cent. above the average, while Wolverhampton will have increases of 10 per cent. below average. We who live in Cornwall do not envy the good fortune those in Dyfed who, we thought, had problems and needs comparable to those of Cornwall. We are distinctly puzzled why that council should be as far on the right side of the national average as we are on the wrong side. It is hard to believe that the reasons are fairness, social justice and political principle—unless that principle is defined in purely party political terms.

My hon. Friend the Member for Aylesbury (Mr. Raison) pointed out that rural areas are not immune to social pressures. He said that rates are the wrong instrument for redistribution. My right hon. and learned Friend the Member for Huntingdonshire spoke about the problems of a rising population for which this system caters inadequately. The Secretary of State, in an extraordinary intervention, disclaimed responsibility for the arbitrary nature of these arrangements by blaming it on his computer. That is the level to which Ministers' excuses have sunk.

As to the Welsh position, the hon. Member for Merioneth (Mr. Thomas) pointed out that, on the basis of the Government's own figures, Wales has done badly. Every county there is on the wrong side of the national average. It is true that Wales maintains its previous share of the needs element, but I should hope so, because a number of Welsh counties—and Mid-Glamorgan is an obvious example—have more in common with the metropolitan districts than with the shires. In terms of social need and stress, problems are as severe in some Welsh counties as in some metropolitan districts.

The rural areas have fared particularly badly. Dyfed and Gwynedd suffer from low incomes, poverty and high unemployment. In my constituency, for example, the unemployment rate is the highest in the United Kingdom. They also suffer from sparsity of population and have to cater for an annual influx of tourists for which sufficient allowance is not made in the present formula. Yet these counties are among the worst sufferers under the system of distribution that the Government have imposed.

One thing that we do not yet know is the Welsh share of the transport supplementary grant of £255 million. I hope that the Under-Secretary will be able to tell us tonight that the percentage will not be less than that of last year. The Secretary of State has pointed out that the Welsh domestic ratepayer is helped by a higher rate of relief and that his actual cash increase may, therefore, be rather less severe than the percentage figures indicate. But those higher rates of relief are given for good reasons, among them the higher water charges suffered in Wales.

Mr. Shepherd

Does my hon. Friend recollect that Herefordshire comes under the Welsh Water Authority but does not benefit by that extra support grant?

Mr. Edwards

I agree that Herefordshire did badly in that respect. That was the prime reason for which the grant was given, and it is as valid this year as it was originally. The proportionate aid given to the Welsh domestic ratepayers has fallen each year because the actual cash assistance has been maintained. The domestic rate relief offers no consolation to the small businesses of the area.

My impression is that the Welsh settlement is a good deal worse than the Secretary of State tried to make out. Welsh industrial regions have missed out on the switch of resources obtained by their English counterparts, and the rural areas have been particularly hard hit.

My hon. Friend the Member for Wycombe (Sir J. Hall) had some wise words to say on the subject of small businesses. It is impossible to over-emphasise the importance of small businesses to the economy, particularly in rural areas. Over much of the country they are the main providers of jobs, and their decline is the principal cause of the present unemployment levels. To many, this further imposition of rates will come as the final straw, and they will go out of business.

I wonder whether, in calculating the unemployment effects of their proposals, the Government have taken into account the impact of the rate burden. The Secretary of State referred only to direct job losses within the local authorities. I am bound to be critical of the Governmen when they continue housing subsidies indiscriminately to those with incomes of £100 a week and more, rely more on direct than on indirect taxation and add to the rate burden of small businesses at a time when they are uniquely depressed.

Last year my hon. Friend the Member for Ashford (Mr. Speed) said that the next to be hit would be rural transport, the old, the disabled, the handicapped and, of course, education. He was right. Those are the sectors that have taken the biggest hammering.

Nothing is more pressing than the paragraph in the report on the orders that refers to personal social services. This was referred to by the hon. Member for Ilford, North (Mrs. Miller) and my hon. Friend the Member for Aylesbury. I know that if he had been called it was the matter to which my hon. Friend the Member for Exeter (Mr. Hannam) particularly wished to draw the attention of the House. Is it necessary that it should be so? Cuts have to be made, and they are bound to be painful. People will either have to pay or go without things they have come to expect, but I am not clear why education and the social services are cut before rent subsidies.

The central question that has emerged from the debate is whether the Secretary of State has distributed the resources and the burdens fairly. In my judgment, the distribution has been grossly inequitable. Cuts in services can be acceptable only if justice is seen to be done. Nothing that the Secretary of State said this afternoon and nothing that has been said by Govenrment supporters dissuades me from the belief that a primary factor has been the electoral fortunes of the Labour Party.

11.14 p.m.

The Under-Secretary of State for Wales (Mr. Alec Jones)

In opening the debate my right hon. Friend the Secretary of State for the Environment said that he had tried to produce a rate support grant settlement for 1977–78 which would be both fair to local authorities and ratepayers and right for the difficult economic conditions of our times.

I suppose that it is true that everyone taking part in the debate has tended to accept those as valid objectives, but many hon. Members have cast considerable doubt on whether my right hon. Friend has achieved them. I suspect that it was ever thus.

Reading through a few rate support grant debates over recent years, having taken part in some from both sides of the House, I find a great similarity between the kind of complaints made then and today. It was clear tonight that, representing the many different areas of the country, we have understandably tended to view the settlement as it affects our own constituencies. A precis of the debate would be the shires versus the inner cities or even the shires versus London.

Similarly, we have all expressed our special interests and sought to leave our favourite services, our priority services, completely untouched. I believe that having endorsed the Government's economic strategy yesterday, the House will at least concede that my right hon. Friend has sought, with some success, to meet his objectives.

My right hon. Friend paid tribute to the work of the local authorities and local authority associations over past years. In that he was joined by the hon. Member for Daventry (Mr. Jones), who reminded us of the good work of the local authorities. The hon. Gentleman said that local authorities were better at keeping more accurate figures of estimates than the Government. I do not essentially disagree. However, taking the figures given by the hon. Gentleman, I suggest that he is at fault as the average rate payment in his constituency is £91, not £175.

Mr. Arthur Jones

I think that the Minister may be taking the figure for the country as a whole, not my constituency.

Mr. Alec Jones

I do not propose to make a great issue of this matter. If I am wrong I shall write and apologise to the hon. Gentleman, as I am sure he will do the same to me.

I should like to join my right hon. Friend in thanking the local authorities, especially Welsh local authorities and their associations, for what they have accomplished in the past year.

I fully appreciate the difficulties which keeping expenditure within the limits imposed present to local authorities. This year Welsh local authorities have made commendable efforts and have succeeded in cutting their original expenditure plans by about 1.7 per cent. Next year's requirement is for authorities in Wales, as in England, to reduce expenditure by 1.6 per cent. on this year's estimated out-turn figures. Services will inevitably need to be trimmed, and this will involve a rundown in staff numbers, which, as my right hon. Friend explained, can in the main be dealt with through natural wastage.

I think that the hon. Member for Aylesbury (Mr. Raison) was somewhat unfair when he suggested that my right hon. Friend had ducked that issue. My right hon. Friend clearly indicated that in particular areas there may have to be some redundancies, and he went on to spell out in detail how they could be taken up by natural wastage. My right hon. Friend did not seek to pretend that he was giving an absolute guarantee that there would not be any redundancies anywhere.

The hon. Member for Pembroke (Mr. Edwards) kept up his perpetual harping about Wales being dealt with unfairly. In percentage terms the average increase in domestic rates in Wales is likely to be some points higher than in England—Wales approximately 19 per cent.; England 15 per cent. But I do not think that people in my constituency—Rhondda—or in Pembroke spend percentages. Because of the lower rateable values in Wales, the average increase in the actual rate bills is likely to be lower. The 15 per cent. increase in average rate bills in England will add £15 to the year's average domestic rate bill. The 19 per cent. increase in Wales will add only about £11 to the year's average rate bill.

One reason for the higher percentage increase in Wales is the gearing effect of the domestic element which subsidises the domestic ratepayer. Welsh domestic ratepayers currently receive 36p in the pound compared with 18.5p in the pound in England and, despite difficulties and the tough nature of the settlement, these levels are to be retained for 1977–78.

Another contributing factor to the high percentage increases in Wales is the reduction in the standard rateable value on the basis of which the resources element is calculated. Although, generally speaking, the effect of the formula for distributing the needs element is to favour the metropolitan areas, the share of the Welsh shire counties as a whole will not be changed significantly from this year's level of 5.8 per cent. The actual figures are 5.815 per cent. reducing to 5.807 per cent. It is a reduction, but a very small one, of 0.008 per cent., amounting to about £300,000. Within that, the share of some counties will increase and that of others will decrease. Four counties will gain by the settlement and four will lose by it. The initial distribtion of the needs element to Welsh authorities for this year totals £207 million. For next year it will be about £215 million.

I must tell the hon. Member for Merioneth (Mr. Thomas) that the RSG system is currently operated on an English and Welsh system. It is one system, and Welsh Office officials and Ministers played a full part in all the decisions in arriving at this settlement. But it is not possible under the system to distribute grant between authorities in Wales other than according to the principles which apply to the distribution generally. However, I am sure that the hon. Gentleman will be pleased to know that we have already set up a working party to report on how a separate Welsh RSG system can be operated when the Welsh Assembly comes into being.

Many hon. Members said a great deal about the Government's decision to use the regression-based formula. The choice was either this or the no-change formula. I accept that the no-change formula was advocated by a number of local authorities and some of the associations. But if we had accepted no change, it would have meant abandoning any attempt to recognise that there are differences in local authority expenditure needs and that some of those needs are increasing in some areas faster than in others. If we had done as some hon. Members suggested and left the shires as they were, it would have meant ignoring and forgetting the problems of the inner cities.

We believe that there are two reasons why were right to accept the regression-based formula, as difficult as the hon. Member for the Isle of Wight (Mr. Ross) may find it. I sympathise with him in his difficulty. One reason is that, despite any defects, it is still considered the most objective method currently available for assesing differences between the expenditure needs of local authorities. The other reason is that this formula recognises that areas whose needs are found to be greatest, notably the inner urban areas, should have those needs supported by grant distribution.

One of the major changes that we have carried out this year is to include the new factor of unemployment. The hon. Member for Henley (Mr. Heseltine) got himself into a great tangle about whether the use of unemployment was justified. He seemed to be suggesting that we might have left it out. If we had left it out, we would have made the distribution far less sensitive to the needs of certain areas. The evidence is that there is a direct relationship between the level of local authority expenditure and the level of unemployment in any given area, and it is because the evidence showed conclusively that there was that relationship that the unemployment factor was included in the formula.

Mr. Heseltine

I was not trying to suggest that it should not be taken into account. I was only making the point that it was under Labour Governments that there were such levels of unemployment.

Mr. Jones

That simply is not true. I have been in this House for 10 years, for a great deal of that time under Conservative Governments. During those periods, unemployment levels in my constituency were particularly high, and never once did a Conservative Government consider including unemployment in any rate support grant settlement.

I have listened with sympathy to the complaints that the local authorities hardest hit will be those with no balances to act as a cushion against high rate increases and/or where expenditure has been restricted within the Government's guidelines. On balance it must be said that ratepayers in the areas of local authorities with low balances will have been spared from the over-rating that is sometimes used to build up these balances. The money has to be found somewhere, but the decision must rest with the local authority.

As to the allegation that individual authorities are being penalised by keeping to the Government's guidelines, let me clear up one or two misconceptions. The present basis of needs assessment relies in part on past expenditure to determine the entitlement. It also relies on nearly 40 needs indicators which are completely unaffected by expenditure patterns. It is only if a significant number of authorities rities with the same characteristics are excessive spenders that more grant will go to them. There is no evidence of such a group.

The shire counties as a whole are increasing their expenditure in 1976–77 at a faster rate than the metropolitan districts. The behaviour of an individual local authority should, therefore, make no difference at all to its own needs assessment, which is determined by the data for all the indicators. For instance, the more old people living in the authority area, the greater the grant paid.

I listened with little sympathy to Opposition Members who, in spite of the best efforts of my right hon. Friend, persisted in making what at best were innuendoes and at worst were accusations that the distribution of the package was motivated by political chicanery. It was based on the belief that we should channel more money into the inner cities. Many Conservative Members expressed sympathy for that idea, but when it came to putting their money where their sympathy lay they were reluctant to oblige.

I do not represent an inner city, but in the course of my travels to London, Liverpool, Wolverhampton, and so on I have been satisfied that many of these areas have special needs which do not exist even in many of our problem areas in Wales.

Mr. Nicholas Winterton

What are they?

Mr. Jones

If the hon. Gentleman believes that there are no additional difficulties

in London he can borrow my spectacles and go and have a look. I cannot give way any more; I only have a few minutes left to me—there is an appropriate Welsh phrase "Chwarae teg"—be fair.

If hon. Gentlemen suspect political motivation, let them look at the famous list and consider the effect that the settlement is likely to have on the county of Cornwall. I do not think that Cornwall considers itself a Labour stronghold. We are accused of political chicanery. But we have used a method which was introduced by the Conservatives and was enshrined in a Tory Act. Our approach was based on the 1974 Tory policy which required a more effective recognition of the needs of the inner cities. The Tories are now saying that this policy and this legislation should be abandoned.

I can assure my hon. Friends that the Water Charges Equalisation Bill has nothing to do with the rate support grant. That Bill does not propose to give domestic water consumers in Wales a financial advantage over consumers in England.

No one can disguise the fact that this has been a tough settlement. We believe that it had to be tough to reflect the Government's determination to get Government expenditure, local as well as central, under control.

It being half-past Eleven o'clock MR. DEPUTY SPEAKER put the Question pursuant to Standing Order No. 3 (Exempted Business):—

The House divided: Ayes 90, Noes 15.

Division No.25.]	AYES	[11.30 p.m.
Archer, Peter	Cryer, Bob	Kerr, Russell
Armstrong, Ernest	Cunningham, G. (lslington S)	Lamble, David
Ashton, Joe	Dalyell, Tam	Leadbitter, Ted
Atkinson, Norman	Deakins, Eric	Litterick, Tom
Barnett, Guy (Greenwich)	de Freitas, Rt Hon Sir Geoffrey	Lyons, Edward (Bradford W)
Bates, Alf	Dormand, J.D.	McElhone, Frank
Benn, Rt Hon Anthony Wedgwood	Duffy, A.E.P.	MacFarquhar, Roderick
Bishop, E.S.	Eadie, Alex	MacKenzie, Gregor
Blenkinsop, Arthur	Ewing, Harry (Stirling)	Magee, Bryan
Booth, Rt Hon Albert	Foot, Rt Hon Michael	Marks, Kenneth
Brown, Hugh D. (Provan)	Forrester, John	Marshall, Dr Edmund (Goole)
Brown, Robert C.(Newcastle W)	Fowler, Gerald (The Wrekin)	Mendelson, John
Brown, Ronald (Hackney S)	Freeson, Reginald	Millan, Rt Hon Bruce
Buchan, Norman	Golding, John	Miller, Dr M. S. (E Kilbride)
Buchanan, Richard	Gourlay, Harry	Morris, Alfred (Wythenshawe)
Campbell, lan	Grant, George (Morpeth)	Moyle, Roland
Canavan, Dennis	Hamilton, James (Bothwell)	Mulley, Rt Hon Frederlck
Carmichael, Neil	Harper, Joseph	Murray, Rt Hon Ronald King
Cocks, Rt Hon Michael	Harrison, Walter (Wakefield)	Orme, Rt Hon Stanley
Cohen, Stanley	Hughes, Robert (Aberdeen N)	Palmer, Arthur
Coleman, Donald	Jackson, Miss Margaret (Lincoln)	Roper, John
Cook, Robin F. (Edin C)	John, Brynmor	Ross, Rt Hon W. (KilmarnocK)
Cowans, Harry	Jones, Alec (Rhondda)	Rowlands, Ted
Cox, Thomas (Tooting)	Judd, Frank	Shore, Rt Hon Peter
Craigen, Jim (Maryhill)	Kaufman, Gerald	Silkin, Rt Hon S.C. (Dulwich)
Smith, John (N Lanarkshire)	Wainwright, Edwin (Dearne V)	Woodall, Alec
Stallard, A.W.	Ward, Michael	Wool, Robert
Stoddart, David	White, James (Pollok)
Strang, Gavin	Whitlock, William	TELLERS FOR THE AYES:
Tinn, James	Williams, Alan (Swansea W)	Mr. Peter Snape and
Tomlinson, John	Wilson, Rt Hon Sir Harold (Huyton)	Mr. Ted Graham.
Urwin, T.W.
NOES
Beith, A.J.	Raison, Timothy	Thomas, Dafydd (Merioneth)
Brotherton, Michael	Rees, Peter (Dover & Deal)	Winterton, Nicholas
Hannam, John	Rippon, Rt Hon Geoffrey
James, R. Rhodes (Cambridge)	Ross, Stephen (Isle of Wight)	TELLERS FOR THE NOES:
Johnston, Russell (Inverness)	Sproat, lain	Mr. Dudley Smith and
Jopling, Michael	Steel, David (Roxburgh)	Mr. Colin Shepherd.
Newton, Tony

Question accordingly agreed to.

Resolved, That the Rate Support Grant Order 1976, a copy of which was laid before this House on 6th December, be approved.

Resolved, That the Rate Support Grant (Increase) Order 1976, a copy of which was laid before this House on 6th December, be approved.—[Mr. Shore.]

Resolved, That the Rate Support Grant (Increase) (No. 2) Order 1976, a copy of which was laid before this House on 6th December, be approved.—[Mr. Shore.]