RATE SUPPORT GRANT ORDER

HC Deb 15 December 1977 vol 941 cc927-1089

3.59 p.m.

The Secretary of State for the Environment (Mr. Peter Shore)

I beg to move, That the Rate Support Grant Order 1977, a copy of which was laid before this House on 30th November, be approved.

Mr. Speaker

The House heard me say earlier that more than 40 right hon. and hon. Members had indicated that they hoped to be called. I shall take it in the spirit of Christmas if no one comes to the Chair to ask me to be called. The matter is exceedingly difficult. What I have tried to do is to work it out on a geographical basis to see that we cover, as best we, can, the whole of the country.

I understand that we shall take the four orders together. I have not selected the amendment to the Scottish motion.

Mr. Shore

As you have said, Mr. Speaker, we are to discuss at the same time the three other motions: That the Rate Support Grant (Increase) Order 1977, a copy of which was laid before this House on 30th November, be approved. That the Rate Support Grant (Increase) (No. 2) Order 1977, a copy of which was laid before this House on 30th November, be approved. That the Rate Support Grant (Scotland) Order 1977, a copy of which was laid before this House on 1st December, be approved. I understand, Mr. Speaker, that my right hon. Friend the Secretary of State for Scotland hopes to catch your eye during the debate in order to deal with the Scottish order.

Before I deal with the specific subject matter of these orders the House may find it useful if I make a brief survey of local government expenditure in the light of our present economic situation, compared with that which existed a year ago.

There are two major differences; first, the economic situation has been greatly improved—inflation has eased, the balance of payments is now in surplus and unemployment, although very high, is no longer increasing; secondly, local authority expenditure is demonstrably under control. Excessive growth in local authority expenditure, which has been a serious burden in recent years, has been halted. We therefore do not need to take any preventive action against it, and local authority expenditure is well on target.

So I approach this settlement quite differently from last year's. Then, I was seeking for cuts in expenditure; now I am not. Then, I was reducing the grant; now I am not. Then, I was contemplating reductions in manpower; now I am not.

Dr. Oonagh McDonald (Thurrock)

With reference to cash limits on local authority expenditure, can my right hon. Friend say what level of rise in earnings is presupposed for 1978–79?

Mr. Shore

"Within the Government's guidelines" has been our estimate for the increase in earnings. My hon. Friend has, I think, been a little early in her intervention, because I mean to say something about this and other matters as I proceed.

I now turn to the orders. The main order relates to the RSG settlement for 1978–79. The increase orders relate to 1976–77 and 1977–78 respectively. I shall deal first with the increase orders.

The first of the increase orders is essentially a tidying-up exercise in respect of the 1976–77 settlement. The 1976–77 settlement was originally determined at November 1975 prices and updated last year to take account of changes in costs since then. The House will recall that the additional grant then made available was cash limited, and further abated by £50 million. I said then that local authorities should plan on the basis that a second increase order would not be made unless necessary to deal with the variable items. Accordingly, to take account of those variables, the additional grant being made available through this increase order is £9 million. I have, of course, taken full account of the consequences of this decision for local authorities' finances in formulating my proposals for the 1978–79 settlement.

I turn now to 1977–78. The settlement for this year, approved by the House last December, was, of course, at November 1976 prices. Grant at 61 per cent. on the agreed increases in local authority costs would not exhaust the cash limit. The Government accordingly propose a first increase order of £337 million. The cash limit has been adjusted to take account of changes in the variable items and to take account of the decision fully to reimburse authorities for the extra costs they will incur as a result of the extension of the free school meals scheme.

I turn now to the main Rate Support Grant Order, which is the meat of today's debate and which deals with the forthcoming financial year 1978–79.

Though the need for restraint has not disappeared, overall cuts in services should not be necessary in 1978–79. This is partly a reflection of the improvement in the economy, but the other factor which has made my task this year much less difficult is the way in which local authorities have continued to co-operate with us in keeping their expenditure to planned limits.

The settlement every year involves a number of factors. There is the level of current expenditure, for instance, for which local authorities should plan, and the extent to which this expenditure should be financed by the taxpayer or the ratepayer; there is also the requirement that grant be distributed with proper regard to the expenditure needs of areas and the ways in which those needs may be changing. In treading a path between the force of all these different and sometimes conflicting considerations—and it is not easy—and in attempting to strike a balance between them, judgment as well as arithmetic is involved. This year I thought it right to aim for a greater degree of stability than we have been able to enjoy during the past few years.

The first aspect is expenditure. I am proposing a level of relevant expenditure of £12,531 million, which is, of course, in accordance with the Government's expenditure plans, which have themselves undergone some modification in recent months. Expenditure on free school meals has been increased, extra provision has been made for the urban programme, and there have been further increases in current expenditure for education, personal social services and Home Office services, as announced by the Chancellor on 26th October. On the same day he announced the £400 million construction package, the revenue effects of which have also been taken into account in calculating relevant expenditure. The significance of all these changes is that the planned level of local authority current expenditure will be broadly the same in 1978–79 as in 1977–78. This is not, of course, to say that it will be easy for every local authority to meet the target figure—far from it. We are well aware of the difficulties with individual services which local authorities have experienced and will continue to experience. But it is at least a welcome change from the cuts which were foreshadowed last year.

Manpower is, of course, closely affected by expenditure.

Mr. Michael Marshall (Arundel)

When the Secretary of State speaks of the difficulties of particular authorities. I know he recognises that in the case of West Sussex his 2p safety net is a 3p loss. Will he confirm to the House that his hon. Friend the Under-Secretary, when we go to meet him next year will look again with some degree of flexibility at the way in which the rate support grant works in the worst-affected authorities?

Mr. Shore

I am coming to the question of distribution, but I think that the hon. Gentleman will allow that we have at least on this occasion, tried hard to meet the excessive impositions that the rate support grant inflicts from year to year on individual authorities. That is a matter that we will come to in the later part of my speech.

As I have said, manpower is closely affected by expenditure. Last year, because we had to cut expenditure, we had to advise local authorities that some reduction of manpower would be necessary I said then that with few exceptions any such reduction could be met by natural wastage. All the evidence I have is that my expectation then has been fulfilled This year, because we are not seeking cuts in expenditure, we no longer need to seek cuts in manpower. Although obviously individual authorities may reduce staff in particular areas and in pal titular services, I see no reason overall why there should be cuts in local authority manpower because of the expenditure proposals in the settlement.

The figures for relevant expenditure which we accept for the purposes of making the RSG settlement are discussed every year in the Consultative Council for Local Government Finance. All our discussions have been conducted in a most constructive and friendly way and I should like to take this opportunity to express thanks to all those who have taken part.

I turn to the grant percentage. In arriving at 61 per cent.—the same figure as for last year—I had in mind, above all, as I have indicated, the need to give greater stability to local authorities' finances, particularly after two years of change—indeed, of reduction. I was also very conscious of the need to keep rate rises down as far as possible. I was therefore doubly keen on retaining the figure of 61 per cent. because this, by our calculation, would allow local authorities taken together to propose average rate increases within single figures. This would accord with our counter-inflation policy and would give local authorities flexibility in dealing with their finances.

As in previous years, there will be a cash limit on the amounts that may be paid in due course by way of grant in increase orders in respect of pay and price increases after November 1977. This limit has been set at £525 million. It is based on estimated increases in a range of costs corresponding to increases in grant at 61 per cent. of £320 million to £573 million.

The assumptions made are wholly compatible with the Government's pay and anti-inflation policies. Excluding the exceptional reduction in national insurance contributions, the cash limit corresponds to an increase between 1977–78 and 1978–79 in the underlying costs affecting local authority current expenditure of just under 9 per cent. Estimated increases in specific grant—which are not subject to a cash limit—account for £54 million of the £525 million that I mentioned, leaving a cash limit of £471 millions on the rate support grant and supplementary grant.

Mr. Michael Alison (Barkston Ash)

The Secretary of State must be expecting wages and salaries to rise more this year, now that we have moved out of phase 2, with its strict 4 per cent. limit. Why is it, therefore, that the right hon. Gentleman is having a cash limit less this year than last year?

Mr. Shore

I am talking about the year 1978–79. As the hon. Gentleman will recall, we are in phase 3 now and, as I say, it is perfectly consistent with the maintenance of the Government's guidelines on pay and our estimate of the other costs that will affect local authorities.

As in previous years the cash limit on rate support grant in 1978–79 will be adjusted for the effects of certain variations in costs which are particularly uncertain. These are, as the House knows, loan charges and certain elements in the housing revenue account which affect the rate fund contribution.

The cash limits on grants to local authorities in 1978–79 will be reviewed if new legislation is enacted, or brought into operation, or if changes are made in Government policy which entail changes in local authority expenditure. The Government would also be prepared to review the position in the light of all the circumstances of the time if the pace of pay and price increases generally, or of those which affect local authority expenditure, were substantially higher, taken as a whole, than those implied in the cash limits.

I now want to consider the arrangements for distribution of rate support grant. First, I draw attention to decisions of general effect. We propose to maintain the 67½ per cent./32½ per cent. needs element-resources element ratio. This was a point on which the associations were all agreed. We propose to maintain the present levels of domestic rate relief at 18½p in the pound for England and 36p in the pound for Wales. The House will recognise that one of the main themes running through the settlement for this year is the quest for greater stability, and the Government consider that to make changes in this area would have run counter to this need and increased ratepayers' burdens. We have also decided—in agreement with the authorities, which want to know where they stand when they set their rates—that changes in data after November 1977 will not alter the distribution of grant for 1978–79. There are some divided views on this matter, but I believe that this will give a greater degree of certainty for local authorities when they are trying to draw up their budgets later this year.

Mr. T. W. Urwin (Houghton-le-Spring)

My right hon. Friend will be aware that his optimistic comments earlier about the facility provided for councils and local authorities to maintain labour forces and manpower at existing levels without affecting services in any deleterious way are not universally accepted. However, he will also be aware of the deeply held reservations of many of the shire counties, including Durham, where a claim is made that on the needs element they will be losing, on their calculations, £2.4 million. That is a substantial sum to find from rate balances which were already substantially raided last year. Is it not possible even now for my right hon. Friend to readdress himself to this question in order that counties such as Durham, with high rates of unemployment, come out a little better than they so far appear likely to do?

Mr. Shore

I always pay great attention to my hon. Frend, who, I know, follows the affairs of his county with close attention and concern. However, I ask him to be patient a little longer, because I have a lot to say about the matter, in which I believe hon. Members on both sides of the House are particularly interested at this time—that is, the actual method of the case for the particular pattern of needs distribution which we have adopted. I was actually trying to get established the more neutral aspects of the rate support grant settlement and get them out of the way before we turn to the more interesting question and argument about needs distribution.

Mr. Tim Sainsbury (Hove)

The Secretary of State referred to the retention of the disparity in the domestic element between Wales and England. Will he tell the House why, when that disparity was originally introduced to deal with the alleged extra costs in Wales of water before equalisation, it is being continued long after those extra costs have been absorbed?

Mr. Shore

That is a point which we obviously considered, but I believe that we should see what is the outcome—certainly in the first year—of the new, very partial equalisation scheme before we look again at the Welsh case. But I should rather not anticipate what I think will be a more full treatment of the matter that my hon. Friend will give it when he comes to wind up the debate.

I should like to get through these relatively uncontroversial matters first. I remind the House that we propose to use the resources element to give authorities compensation for the mandatory rate relief that they give to charities. That is a change which many have asked for and which I am glad to be able to announce. All of these, of course, affect the overall distribution.

I am afraid that I must now weary the House with two rather technical but very important points that I must mention right away, as they could lead—and are leading—to some misunderstandings.

We have made some adjustment to the education and labour-cost data as they will apply in 1978–79. The educational data have been resorted, that is, the numbers of students being educated by an authority have been reattributed to the authorities where they live. This is only fair, because the authorities where the students live make a payment to the authorities where they are educated. Unless, therefore, the reattribution—technically known as resorting—is done, the educating authority gets two payments—one via the RSG and one from the authority where the students live. We thought that had to be changed. On labour costs the point is simply that we now have better data—it covers two years, not one and now includes women and their earnings as well as men.

I was reluctant, because of my wish to achieve greater stability, to make any changes of this sort. But in both cases the changes were intended to correct what were clearly anomalies and were strongly recommended by the local authority associations. The changes are once-andfor-all adjustments. I mention them here only because in some cases they could give the impression that the changes arising from the new distribution formula are larger than they really are. For example, of Bury's gain this year of 7.9p, 6.2p arises from the resorting of education data.

The resorting of educational data and the changed labour cost factor account for a substantial part of the total changes in this settlement. It is a point that is not frankly brought out by the ACC in the document that I know has been widely circulated to hon. Members on both sides of the House.

The crucial issue—perhaps the only one this year that might lead to some controversy—is how the rate support grant, and particularly the needs element, is to be distributed between authorities.

Discussion of needs element distribution is always detailed and technical, and there is much scope for misunderstanding and confusion. Before we get too far into the subject, I think that it is worth reminding ourselves what needs element is for. We can judge the acceptability of the distribution only against what we are trying to achieve.

Let me begin with the obvious. All local authorities have needs. At their simplest, they arise from the numbers of people living in the area. Indeed, nearly half of the needs element goes to authorities in proportion to their population. But, of course, not every member of the population places the same demands on the services provided by local authorities. Schoolchildren, elderly people and one-parent families, for example, place greater demands on the services of local authorities than do fit adult workers. These demands lead to greater expenditure, and the other half of the needs element goes to evening out the differences in expenditure between authorities that the needs generated by these factors create.

We are not, moreover, dealing, as hon. Gentlemen well know, with a static situation. Needs, and therefore variations in expenditure, change year by year—to a surprising extent, considering that we are quite a small country. There is a continuing movements of people and a continuing change, as a result, in the distribution of needs. Any system of grant that tries to deal fairly with needs must recognise changing needs and provide for them.

How do we measure these variations in need under the present system? First, we look at factors such as the number of schoolchildren, which anyone might think would be evidence of additional need. We then, using a statistical technique, see whether there is any correlation between these factors and the actual expenditure of local authorities. Where there is such correlation, it provides for us a weighting for such a factor. We then use a package of such tested and weighted factors to distribute the grant.

I know that there are criticisms of this system. The biggest question mark, perhaps, hangs over the assumption that the pattern of expenditure is the best test of need. I understand that. But what is the alternative? We all know that need is a highly subjective concept. It would, I suppose, be possible for me to substitute my own judgment in place of the pattern of expenditure which results from the totality of decisions by individual local authorities, but that would not seem to me to be sensible or democratic. I should hate my task of coming before the House and trying to justify my reasons for reaching the decisions that I did.

Let us look at the systems of need assessment proposed for this year as an alternative by those who do not like the present system of regression analysis. First, there was the so-called "simple system" of the Association of County Councils. As presently developed, it will not do. It proposes that the bulk of the grant should be distributed on the basis of population, divided into defined age groups—for example, ones to 4s, 5s to 18s, over 65s. The remainder would then be distributed on the basis, for example, of population sparsity and population density.

The trouble with this system is, I believe, that there is no evidence provided to judge the appropriate weighting or the choice of these particular factors. Certainly the other local authority associations would disagree with the ACC's choice and, indeed, its weightings. Therefore, to try to use such a system, without any agreement on what the calculation should be or the choice of factors and the weightings to be given to them, would lead us into a Bedlam of conflicting value judgments.

The other system—or, rather, nonsystem—put forward is to give the same share of grant to authorities as they got last year.

Mr. Michael Heseltine (Henley)

When the Secretary of State says that we would move to a system of Bedlam, with competing and conflicting value judgments, how does he square that with the statement that he has repeated time and again from that Dispatch Box—that he has deliberately set out to shift resources from the shire counties to the urban areas?

Mr. Shore

I am able to do this, quite frankly, because the needs indicators enable me to justify the direction in which the resources are moved. I say in all sincerity to the hon. Gentleman that if the needs factors were to indicate that there were parts of the country outside major cities and towns—I think that last year Cornwall was rather well served because of the particular needs formula that emerged—whose needs clearly justified their having extra resources, of course I should be in favour of their receiving them. Otherwise, there would be a total inconsistency in the approach.

Mr. Heseltine

But the essence of the calculation that the right hon. Gentleman reaches is that he selects the formulae that are fed into the calculation. There is no automatic emergence of needs solutions. It is his decision.

Mr. Shore

What happens is that there is a technical committee, consisting mainly of representatives of the different local authority associations. They look at particular formulae and recommend the one which they think is the best. Of course, in the end it is my job, as Minister, to decide. But I have explained to the hon. Gentleman, and I have tried to explain to the House, why I believe that the alternative put forward is not one that I can reasonably adopt or that the House would wish me to adopt at the present time.

Mr. Arthur Palmer (Bristol, North-East)

I have here a letter from the Chairman of the Avon County Council in which he alleges that for three years now money that could be well spent in Avon has been diverted for the benefit of London. Is that an accurate view?

Mr. Shore

I shall deal with the London part of the settlement a little later. It is certainly true that both London and the metropolitan districts generally have gained over the past three or four years. That is entirely true. I shall come to that point and try to explain it.

Mr. Hugh Fraser (Stafford and Stone)

On this matter of need, which is a sort of philosophical point, surely, the problem is that the Secretary of State is asking himself the wrong question, trying to assess need in terms of current expenditure. These needs frequently occur because of basic lack of capital expenditure, which a change in current expenditure simply cannot begin to meet. That is why there is such injustice to the counties.

Mr. Shore

My position is very straightforward. I am trying to find as acceptable a system of needs assessment as possible. My mind is not closed to any serious proposals that are put forward. But I believe that we have quite a long way to go before we can find an alternative system which does not have some of the admitted defects of the present one but which at the same time has superior advantages. I am afraid that we are a good way from that.

Mr. Arthur Jones (Daventry)

rose—

Mr. Shore

I feel that it would not be right for me to turn this into an extended Question Time, as I should be poaching and encroaching upon the very limited time available.

Mr. Jones

The right hon. Gentleman mentioned population. In past years decline of population has been taken into account in the analysis. How is it that we have never seen increased population taken into account in the rate support grant calculation?

Mr. Shore

Increased population is taken into account. There is a per capita basis for a substantial part—about half—of the needs grant element.

I was dealing with the proposal—I could not describe it as a system—to give the same share of grant to authorities as they had last year. In other words, those who advocate this say that we should ignore all changing needs and resources. In my view, that would be to throw away our responsibility for trying to help the needy and to substitute the past for the present.

I come back, therefore, to regression analysis. For all its faults, it is the best system that we have for ensuring that authorities with the most serious social and other problems need pay no more in proportion to their population than do those with the least serious problems. That is the only basis on which to judge the distribution. The amount of grant, or the share of the total that an authority received last year, is not the right test: the former is wrong because it ignores inflation, and the latter because it ignores changes in authorities' circumstances.

The crucial question is whether those authorities whose needs are growing in proportion to their population are getting a sufficiently enhanced share of the total needs element to reflect that change. This will automatically mean that authorities with falling needs in proportion to their population will be getting a reduced share. In short, there will, and should be, changes in grant where the needs assessment shows that an authority's needs per head of population are changing in relation to those of other authorities. The policy of concentrating resources in those areas with the most pressing social and economic problems is, therefore, to be continued in 1978–79.

Apart from the offset made by the agreed technical changes in the use of resorted educational data, which I mentioned earlier, those areas with partnership schemes and inner city programmes will all benefit from extra resources. The ACC has claimed that this will not happen. It is wrong. The formula allocates additional grant to all the partnership authorities. I have no doubt that this policy is the right one, and if more resources had been available, I should have wanted to do even more to help such areas combat the extensive social and economic deprivation that they have to face. It would be absurd to deny that the areas that face heavier pressures need more resources to meet them.

I remind the House, as I did last year, that this is not a major new departure and innovation by this Government. The right hon. and learned Member for Hexham (Mr. Rippon), when he was Secretary of State for the Environment, had this to say when he presented his RSG on 22nd January 1974: If the House considers what was said last year about the problems of inner cities it will realise that it is not unreasonable to redistribute the grant this time so as to give greater benefit to them to meet their needs. Indeed, he went further. He spelt out to the House the consequences of this concentration on the needs of our great cities. He said: We have to bear in mind that if—as we believe we should—we are to help the cities with their special problems both with general expenditure and housing, the counties must accept that that will to some extent throw a greater burden upon them, giving the same total expenditure."—[Official Report, 22nd January 1974; Vol. 867, c. 1472–4.]

Mr. Eldon Griffiths (Bury St. Edmunds)

May I, as one who has always supported what the Minister has done and what my right hon. and learned Friend did to shift some of the resources to the big city areas, ask the right hon. Gentleman whether he will accept that the real problem is that he has now gone too far? Is it not a fact that he has now reached a situation where London, with one-seventh of the population, is to get well over one-fifth of the needs grant, and that that is no longer acceptable?

Mr. Shore

I shall shortly be coming to the example of London if the hon. Gentleman will be patient for a moment. It is something that the general principle of the shift of resources—I accept that this is often at the expense of the counties—in favour of the hard-pressed urban areas and inner cities appears to be a shared objective and that what we are now arguing about is not the principle and the direction, but merely the extent. The hon. Gentleman has established an important point.

Mr. Reginald Eyre (Birmingham, Hall Green)

Just so that the right hon. Gentleman should not think that the other metropolitan areas in the country outside London are benefiting under this system, let me tell him that if the pluses under partnership and rate support grant are taken into account, and if one then takes into account the minuses, having regard to the reduction of improvement grants, council house improvement schemes, local authority home loans, and so on, one finds that those metropolitan authorities are worse off.

Mr. Shore

If the hon. Gentleman is inviting me to increase the distribution in favour of urban areas because he believes they are not getting enough, I am certainly prepared to consider that, too. [Interruption.] I should like to get on with my speech in spite of the excitement of the hon. Gentleman.

Mr. Anthony Steen (Liverpool, Wavertree)

rose—

Mr. Shore

No. I will not give way for another moment because I believe that the House will get very testy with me if I do not move on.

The second feature of the 1978–79—[Interruption.] The House is obviously enjoying the rate support grant debate! The second feature of the 1978–79 rate support grant distribution arrangements is our attempt to ensure a greater measure of stability in authorities' finances. A number of deputations from local authorities made very effective representations about their problems in the light of last year's 1977–78 settlement. I pay tribute, incidentally, to the many hon. Members, on both sides of the House, who reinforced their local authorities in putting forward a very cogent case on their behalf.

I well recognise that the 1977–78 settlement was a tough one. With both a reduction and a redistribution of grant, it bore heavily on certain authorities These authorities were faced with a sharp dilemma betwen large rate increases or cuts in services. I shall not labour the point, but even large rate increases would not have brought rate bills in some areas up to the national average. However, I recognise that the pace of increase in rate bills can be almost as important as absolute levels. But I have decided to moderate the increases that otherwise would flow this year. I do not want cuts in services in 1978–79.

Stability is not just a matter of overall grant totals, as I have already said. It is also a matter of changes in the amount of grant paid to individual local authorities. I am, therefore, taking two important steps to limit changes in the distribution of RSG to authorities in 1978–79. First, year-on-year changes in the pattern of grant distribution will be flattened out, or "damped". This will be achieved by combining the 1978–79 needs assessment with those for 1975–76, 1976–77 and 1977–78, and using the average for all four as the basis for needs element distribution. That is "four-year damping", and, obviously, it is a very welcome feature for those who would be otherwise adversely affected.

Secondly, the authorities which would otherwise lose most will be protected by a safety net.

Mr. Stephen Ross (Isle of Wight)

Would the Secretary of State accept that, if the settlements of the four years from the base of 1974–75 have been disastrous anyway, damping the figures is of no use whatsoever to counties like mine?

Mr. Shore

I can only say that if there were no damping, I believe that many counties—I would have to check the hon. Gentleman's area in detail—would be adversely affected and, indeed, very seriously so, but for the—

Mr. Steen

rose—

Mr. Shore

No, I will not give way. The hon. Gentleman was concerned with a matter that arose earlier, and I think I dealt with that.

I am trying to deal with the safety-net concept, which is a new, and, I think, an interesting one. I must tell the House here again that the ACC, which has put its memorandum widely around, has got it wrong. For reasons which baffle me, it has assumed that a safety net should be calculated not on the basis of the 1977–78 distribution arrangements brought up to date, and the 1978–79 arrangements, but on the actual shares of grant between the two years. This assumes that I should ignore a major factor of the 1977–78 settlement—the need to mitigate the rise in London's rate bills—which was specifically approved last December by this House. Nevertheless, there has been a lot of misunderstanding, and I think it is worth spelling out the arrangements.

The first stage is to work out the needs element that an authority would have received if the 1977–78 distribution arrangements had been used again for 1978–79. Naturally, this will not be the same amount as last year, because the size of the total needs element in cash terms and, to a small extent, in real terms, has grown. Nor will it be the same share of the total of last year, because there would have been changes in the intervening period, and account has to be taken of the further relative decline in London's rateable resources. It would obviously be quite wrong, and inconsistent with the principles of needs element payments, to take no account of such changes.

The second stage is to calculate what each authority would receive under the new distribution arrangements if there were no safety net—that is, including the four-year damping.

Where these calculations show that an authority would lose as a result of the change to the new arrangements, any loss greater than the equivalent of a 2p rate will be met by a specific safety net payment. I think that will be welcome and beneficial to a considerable number of countries, as well as to some metropolitan districts.

Mr. Tim Renton (Mid-Sussex)

In the light of what the Secretary of State said, the 2p safety net would seem to be ineffective for many county councils because of what appears to be an automatic increase this year in the amount of London grant. The West Sussex County Council, which has been hit worse than others, with an estimated 9½ per cent. reduction in its rate support grant, calculates that this year it will lose £3.3 million in rate support grant, which is equal to a 3p rate. But the Government say that this is a 2p reduction, and the only justification appears to be an automatic increase in the amount of rate support grant in London.

Mr. Shore

That lengthy comment greatly discourages me from giving way to other hon. Members. The hon. Gentleman obviously has not followed closely the immediately preceding part of my speech. I said that the ACC was comparing like with unlike. We have not set out to achieve a 2p limitation on all the possible changes that might occur in 1978–79. I have had no intention of doing that, and the local authority associations have had no reason to believe otherwise. We set out to limit the changes that would have occurred, if we had used the 1977–78 formula in 1978–79, with a 2p safety net. It was entirely sensible to do that. There were a number of changes, some of which were beneficial, including the four-year damping.

I should now like to turn to London. We propose to repeat the scheme for grant distribution and rate equalisation within London which was first introduced last year and was widely welcomed by the London authorities.

The arrangements for London are rather more complicated than for the rest of the country. London's grant depends not only on the regression analysis but on the size of the London adjustment. This is an arrangement that reduces London's entitlement—to the benefit of the rest of the country—because London has in general higher rateable resources than elsewhere.

We have to weigh up the merits of taking money away from London to help other authorities or of allowing London authorities, which face some of the most difficult social and economic problems in the country and where residents face exceptionally high rate bills, to benefit from their higher resources. What adjustment is to be made and how it is to be made for London has always faced every Minister with responsibility for rate support grant.

I think that it is a great loss to the House today that those two admirable and balanced students and advocates of London's needs—the hon. Members for Hampstead (Mr. Finsberg) and Hornsey (Mr. Rossi), who frequently speak from the Opposition Front Bench—are not with us on this occasion.—[HON. MEMBERS: "Yes, he is."] I am sorry. I am sure that the whole House will give a warm welcome to the hon. Member for Hornsey. Indeed, I feel it only right to quote his wise words in the debate on 12th December 1974, again on the rate support grant. The hon. Gentleman said: It would therefore seem to be right that London ratepayers, having to bear the burdens of others, should receive a more generous distribution of the rate support grant than the Secretary of State proposes to give in these orders. If it is too late now for him to do anything about this, may I urge him to ask for some rethinking within his Department as to the peculiar and difficult position of London and the burden upon the London ratepayers?"—[Official Report, 12th December 1974; Vol. 883, c. 884.] I am not suggesting that this is an easy matter. It is not. We have to try to get the balance right. We have set London's grant entitlement in 1978–79 to secure that, if our guidelines are adhered to, the average London domestic rate bill will go up by the same cash amount as the national average. London's domestic rate bills are over 50 per cent. higher than those elsewhere. There is a gap of over £50. I thought it quite wrong in present economic circumstances for this gap to widen any further. I should make it clear that does not mean that other authorities will be giving anything to London. London will simply be allowed to keep more of the benefits of its own rateable resources. As it is, London will still lose £270 million in clawback, which will benefit the rest of the country.

This is the distribution package that I propose for 1978–79. I recommend it to the House as striking the best balance between continuing to recognise the pressures on those areas with concentrations of social and economic deprivation and avoiding excessive losses of grant for individual authorities.

Mr. Eldon Griffiths

I think that the Secretary of State has been generous in giving way. Regarding London, is it not also the case that the calculation of the formula has reduced the amount that is generally available for children, particularly in the receiving areas from the London overspill, while at the same time it has increased the relative amounts for elderly people living alone in those parts of London which are losing population? Does the right hon. Gentleman agree that this shift in the complex balance of the position has caused those areas which are receiving population from London to have a grievance against those areas of London which are decanting population?

Mr. Shore

I am not suggesting that other areas of the country have not got problems; they have. Indeed, some areas are trying to meet them in particular ways. I remind the hon. Gentleman of new town problems in certain areas. We have made a specific move to help such areas.

The net effect of the difference between this year's formula for London and last year's formula carried forward this year is the equivalent of a 0.15p rate against the rest of the country. I believe that has to be borne in mind and seen in the context of all the other changes which bear upon the changed distribution of the rate support grant in 1978–79.

Mr. Giles Radice (Chester-le-Street)

I accept my right hon. Friend's general strategy and the shift of resources to London and the inner cities. But will he tell the House why he removed unemployment from the needs assessment for 1978–79?

Mr. Shore

Specifically because, when we tested the use of the unemployment indicator across the country, we could not find any serious correlation between expenditure needs and the actual incidence of unemployment. Because it was, as it were, an unsatisfactory indicator of particular need, it was withdrawn from the 1978–79 formula, although it is still there because of the carry-forward from 1977–78.

Mr. Steen

Will the right hon. Gentleman give way?

Mr. Shore

No. To sum up—

Mr. Deputy Speaker (Sir Myer Galpern)

Order. The mere fact that the hon. Member for Liverpool, Wavertree (Mr. Steen) has shifted his position does not alter the fact that he remains the hon. Member for Wavertree.

Mr. Shore

To sum up, the keynote of this year's settlement is, I believe, greater stability. We have maintained the grant percentage and have taken steps to limit the effect of changes in distribution.

I believe that local authorities will be able to maintain their standards of service in 1978–79 with rate rises, on average, in single figures. When we talk about averages, we know that very roughly half the authorities will be below the average and that very roughly half of them will be above the average; that is a characteristic of averages. However under the settlement the great majority of authorities will be able to maintain their standard of services without imposing unmanageable burdens on their ratepayers. I recognise that some authorities towards the extreme edge of the range may face real problems—that will not apply to all of them. I hope that they will resist the temptation to cut services. What I want to make as clear as I can is that if authorities decide to make cuts, the decision is entirely and solely theirs. There is nothing in this settlement and rate support grant order which requires them to do so.

Having excited right hon. and hon. Members on the Opposition Benches, I must say that if there are still Opposition Members who think that I have been harsh I ask them to reflect on what they would have faced last year as well as this year if the hon. Member for Henley (Mr. Heseltine) had been sitting on the Government side of the House. Anyone who looks back at last year's rate support grant settlement will recall that the hon. Gentleman said that the Government had failed to grasp the overall need to reduce public expenditure on a more significant scale than they had achieved. He went on to say that I had missed a great chance. He said that the cuts that I had made had been engineered to cause the minimum impact upon people's daily lives. I do not believe that anyone on the Opposition Benches should have imagined that he would obtain a better and easier settlement if the hon. Gentleman had been sitting on the Government Benches this year.

I believe that this is a fair and sensible settlement, and I accordingly recommend the orders to the House.

4.53 p.m.

Mr. Michael Heseltine (Henley)

Like the Secretary of State, I shall start with the relatively uncontroversial parts of my speech. I thank the right hon. Gentleman for his kind remarks about the present situation in which the spending of local authorities is now under control, the authorities co-operating with the Government in bringing that about. As the local authorities are in the main controlled by the Conservative Party, I was not the least surprised to hear what the right hon. Gentleman had to say. However, it is good that he has put on record that it is Conservatives in office who in practice have secured so much of the improvement.

I shall concentrate on the 1978–79 order as, quite rightly, the right hon. Gentleman seems to have done. There are three false assumptions that I shall talk about in connection with the order.

The first false assumption is that it is right to deprive systematically large sections of the country in order to help specifically other parts. That is the one quarrel that I have with the quotation that the right hon. Gentleman took from the speech that I made from the Opposition Dispatch Box during the equivalent debate last year. At that time I believed that there was a public expenditure crisis. I believe that the mood of the country at that time would have responded to a clear Government initiative to reduce public expenditure. If I had been at the Government Dispatch Box, that would not have meant my seeking to impose a wholly discriminatory settlement upon the people of Britain, expecting one part to suffer and the others hardly to bear the burden. That was the substance of my complaint to the right hon. Gentleman last year, and I do not withdraw a word of it.

The second false assumption is that which is inherent in the order—namely, that the cost increase can be contained within the figure of 9 per cent. that the Secretary of State has put forward.

The third false assumption is that the present system of regression analysis still reflects an objective and accurate assessment of local need.

First, let us consider the whole question—this I would accept, as my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) and the right hon. Gentleman were implying—of deciding upon the scale of switching resources rather than upon the principle of making allocations, which is bound to be inherent in any judgments about the priorities of the rate support grant. In considering the scale of the switch I believe that my hon. Friends are right in expressing grave anger and resentment at what the right hon. Gentleman has been doing over the past two to three years.

In 1974–75 London and the metropolitan districts received £1,140 million, which amounted to 42.5 per cent. of the needs element of the settlement. By 1977–78 their percentage had risen to 46.6 per cent., which gave them £1,727 million, an increase of £587 million—in other words, an increase of 51.5 per cent. over the three years. If anyone happened to believe that a 50 per cent. increase was in some way a bonanza for those areas, it is fair to point out that under the Government prices rose by 80 per cent. in the equivalent period. However, at least the Government recognised that some measure of compensation was due by increasing their support for the urban areas by about 51.5 per cent.

In 1974–75 the shire counties received 57.5 per cent. of the needs element, which amounted to £1,546 million. If they had been treated exactly as the urban areas, they would have received in the 1978–79 settlement, which we are now discussing, £2,342 million. However, in practice they are to receive only £1,980 million. In other words, there is a shortfall on an equity basis of £350 million in the shire counties for one financial year.

When I first pointed out the shortfall to the right hon. Gentleman during Question Time, it was apparent that he had never heard the figure calculated before. He has never realised that in all the minutiae of the detailed calculations the totality meant that the shire counties received £350 million less than they would have received if they had been treated in the same way as the urban areas.

If hon. Members who represent shire county constituencies want to know why there are such vastly greater increases in domestic rates in the shire counties than in the urban areas, it is precisely because the local authorities in the shire counties are having to find the equivalent of £350 million a year that they would have had found from the rate support grant if they had been treated on an equity basis.

Mr. Stanley Newens (Harlow)

If the cuts in public expenditure that the hon. Gentleman advocated had been carried out, would the shire counties have received more or less than they are at present receiving? If he had been able to impose the cuts about which he was talking, is it not the case that the shire counties would have received less?

Mr. Heseltine

The hon. Gentleman is missing the point. The complaint of my hon. Friends is not directed to questioning the constraint on public expenditure, which we all expect and understand, but that certain parts of the country have been significantly discriminated against in the allocation of the burden. The measurement of the discrimination against the shire counties is £350 million in one financial year. If we borrow the argument that in part the right hon. Gentleman was advancing—namely, that population is a major factor in reaching these calculatiom the anomalies are even wider than they appear from the simple figures that I have given.

By 1974 approximately 62 per cent. of the population lived in the shire counties and received approximately 62 per cent. of the needs element. Today, only three years later, more people actually live in the shire counties, but their share of the needs element is down from 62 per cent. to 52 per cent., and one cannot persuade them that this reflects a fair and independent assessment of what local government need is all about.

That is the national position—what the Secretary of State describes as the average position. But when one gets down to individual local authorities and the problems that they face, the anomalies are often a great deal more flagrant. Under the Secretary of State's calculations 14 shire counties in 1978–79 will actually receive much less cash than they got two years ago, although there has been a dramatic increase in costs and prices since then. The most glaring examples are as follows. Cambridgeshire will get £3.4 million less compared with two years ago. Essex will get £2.8 million less. Hertfordshire will get £3.5 million less. My county of Oxfordshire will get £2.8 million less. Surrey will get £6.7 million less, and West Sussex £4.9 million less.

Mr. Newens

But would the hon. Gentleman have given them more?

Mr. Heseltine

The hon. Member must understand that there is a willingness to accept contraint on public expenditure if it is fairly balanced, but one cannot say to the electors in these counties that there is any justice in this arrangement and convince them that they should bear a disproportionate share of the economies that are necessary.

The Secretary of State and his hon. Friends now apparently share the view, in spite of these ever-growing injustices in the allocation of resources, that there is no need for any harsh consequences to arise. The authorities that I have listed apparently do not have to cut any services, make any redundancies or do anything beastly like that. The cut will simply be absorbed. But the Secretary of State does not say how it must be absorbed or what sort of rate increases are necessary to permit that. What calculations has he made, on the assumption that there is to be no cut in services or reduction in manpower, of the rate increases that will be necessary in those counties?

Mr. Shore

I hope that the hon. Member will make it plain that I am placing no limitation on the kind of rate increases which individual authorities may wish or have to make. It is for them to decide in the light of the value they place upon their services.

Mr. Heseltine

The Secretary of State is saying that there will be no constraints on rate increases, which is a strange state of affairs under a Government who are constraining every other index of industrial activity. The one thing he does not care about is how much rates go up. There can be price and wage constraint and massive taxes, but the Secretary of State has no interest whatever in the matter of rates. That statement takes a lot of beating for sheer abdication of responsibility by the man who holds the responsibility for local government. I have no doubt that when the local authority representatives announce their rate increases, the electors in those constituencies will remember the advice given today by the right hon. Gentleman.

So far we have dealt only with the Secretary of State's figures, and they are bad enough. The figures produced by the Association of County Councils are dramatically worse. I have those figures before me, but I do not intend to go through them because the right hon. Gentleman believes that they are wrong. It would have been much better if he had actually countered those figures in advance of the debate so that we could have been properly briefed and could have seen the discrepancies between the two sets of calculations.

It would have been simple for the Secretary of State to have given an undertaking that the shire counties would not be treated in the disparate way that he has chosen. I am not in the least impressed with the argument that somehow the "damping" process will come to the rescue of the ratepayers. The logic of that process is simple. The Government simply say that each year they have made things a little bit worse, and that this year it will be the worst of all possible positions. Therefore, in order to avoid the ultimate logic of what they have done they are to aggregate the worst excesses of earlier years with the worst excesses of this year to produce a moderately bad settlement.

The right hon. Gentleman has given an assurance this year in respect of the 2p limitation of effect, but the underlying calculations ride on. Next year, if the Secretary of State is still making the rate support grant settlement in collaboration with the sole survivor of last night's storms of the Lib-Lab pact, who is with us today—the hon. Member for Isle of Wight (Mr. Ross)—although we shall seek to ensure that this is not then the responsibility of the right hon. Gentleman, the underlying calculations will remain. The 2p limitation, as I understand it, will operate for only one year. I do not believe, therefore, that the damping palliative will commend itself to the ratepayers concerned.

Mr. William Molloy (Ealing, North)

Does the hon. Gentleman not agree that what he is saying will command the collective support of his right hon. and hon. Friends, but that when the Conservatives make their demands at Question Time for increased public expenditure they ignore the fact that this would lead to a massive rise in both taxation and the rates throughout the country, and not merely in London? Does he not agree, in the light of what London has been paying in the past half decade, that my right hon. Friend is proposing only to bring that into balance and to provide some respite for millions of Londoners?

Mr. Heseltine

The logic of that argument must appeal to the hon. Member since he represents a London constituency. But a large number of people do not live in London, and they cannot understand why, at the height of the economic crisis, their situation should deteriorate so much more than that of the people who live in London.

Mr. Molloy

It has not.

Mr. Heseltine

As I have shown, there is a considerable worsening in the relative position of the ratepayers outside London over the past three years, and there can be no argument about that.

This is not only a question of the harshness arising from the Secretary of State's assumptions about the allocation of rate support grant. There is an implied assumption that authorities should use the balances that they have accumulated and that this will in some way ease the impact of his decision.

But the fact is that the prudent authorities which have accumulated balances have been living on those balances for recent years, and it is now becoming increasingly difficult to rely on the resources which have been saved in the past. As we have seen from the evidence submitted by Kent, it is difficult for that county to contain rate increases because it has used up the balances which were hitherto available for that purpose.

Mr. Eldon Griffiths

Is it not a fact that within London it is generally the high-spending Labour boroughs which have been given more and it is the prudent boroughs which have acted in accordance with the Government's call for constraint in public expenditure which are to be given proportionately less?

Mr. Heseltine

My hon. Friend is perfectly right. I shall deal with this when we come to the basis for the regression analysis system.

Mr. Ronald Brown (Hackney, South and Shoreditch)

The hon. Gentleman says that the Labour boroughs have received most. Is he not aware that Bromley, Sutton and Richmond are not Labour controlled? Will he get his facts right before he comes to the Dispatch Box?

Mr. Heseltine

I am sorry that the hon. Member's representations on these detailed calculations did not apparently get through to the Secretary of State. No doubt when the hon. Gentleman is giving advice to the electors of those boroughs in the May elections next year he will know what to tell them to do.

There is one other special case which merits attention from the Secretary of State in the deliberations on the rate support grant. That is the case which has been put to him and to me by the representatives from the Isle of Wight. We all know that there are many involved calculations and considerations, and I shall certainly not stand here and say that it is possible on the Opposition Benches to work out the intricacies of the particular claims of the Isle of Wight, but I believe that the representatives hale put forward one special claim in their memorandum which merits the consideration of the Secretary of State. I hope that it will be dealt with in the reply to the debate. It is the fact that there are certain costs associated with being an island which are different from those which prevail on the mainland.

The Secretary of State will see that on page 6 of the memorandum submitted by the Isle of Wight there is a list of the sorts of costs incurred by local government and reflecting the distance and the special travelling problems associated with the island status of that authority. Although I would give no personal commitment, I believe that it is something that in Government we would look at without any hesitation at all.

Mr. Shore

I assure the hon. Gentleman that we are very much alive to the problems affecting the Isle of Wight and perhaps one or two other such places as well. The difficulty, as he well knows, is to identify and isolate particular factors which could be taken into account in a rate support grant settlement. But, like him, we are also anxious to be as fair as we can to any authority which can establish need.

Mr. Heseltine

The Isle of Wight has put forward a list of detailed factors, and there was a special factor of severance to be fed into the rate support grant settlement.

The Secretary of State referred during the course of the afternoon to the problems of the urban areas, and my hon. Friend the Member for Birmingham, Hall Green (Mr. Eyre), in an intervention, made what I thought was an immensely damaging point. It was that, despite the fact that we now have urban partnerships and an urban programme, when we add up the degree of Government support and the calculations implicit in the rate support grant, it is apparent that the degree of national support for the crisis areas—to use the terminology of the Secretary of State—is suffering as well.

I understand that Liverpool is to lose 1.3 million, Leeds £1.6 million and Birmingham £0.5 million in the calculations. In that concept, the only justification to which the Secretary of State could have recourse is to argue that all the programmes for the partnership arrangements will then be brought in to add to that situation.

Mr. Shore

All the areas that the hon. Gentleman has mentioned are gainers as a result of the basic rate support grant settlement that we have made. To some degree the extent of their gain has been offset by the resorting of educational data to which I referred earlier. By far the biggest single element of change in this settlement is due to the resorting of educational data, because Birmingham, Liverpool and Manchester are all major centres of education and have suffered this year because of that. The whole thrust of the needs element is working in their favour.

Mr. Heseltine

As the question of reallocation in regard to education was well known to the people who looked at this in detail, I should have thought they would be able to make that calculation for themselves. I believe that the Secretary of State does not recognise that he is tending to withdraw support from urban areas to spend money as they think is right, and concentrating more national support on selective national intervention, with all the bureaucratic process that goes with it, and therefore tending to use the same people and the same system which has done so much to create the crisis in the inner urban areas in the first place.

Mr. Steen

Is my hon. Friend aware that a few days ago in Liverpool the Secretary of State declared the partnership arrangement for the inner area and that part of that area is about five miles away from the inner city area? Is he aware that that is what the Secretary of State means by the inner city?

Mr. Heseltine

As my hon. Friend knows, I have just visited Liverpool to look at the extraordinary crisis which faces the people there. There is no way in which it could conceivably be misunderstood. The wider the partnership area is spread, the less impact and the more the resources are dissipated, thereby achieving little of the new momentum which is so obviously and patently necessary.

The second false assumption that the Secretary of State has taken into his calculations is that the underlying rate of inflation can be contained within the 9 per cent. calculations that he has put forward. When we remember that there are five settlements—including two with manual workers, craftsmen and firemen, where both employers and unions have cast doubt on the ability of the cash limit to meet the resources needed—we realise the scale of risk that is built into the Secretary of State's calculation. I should be very interested to hear him say whether he still believes that the 6 to 10 per cent. range that the Government have set out as their target for setlements in order to achieve their overall strategy, is realistic in the light of, for example, the offer that they have made to the firemen.

Within this settlement that we are discussing, there will now be two settlements with the firemen. Even with a settlement of the firemen's strike, there will have to be two additional increases as a result of the basis of the deal that the Government have put forward. How many local authority unions, noting this as the basis for settlement with the firemen, will say that they also want so much now and a guaranteed increment built into the system for the autumn of next year? Does the Secretary of State really believe that all this, starting at a top level of 10 per cent. and working from there up, will genuinely be held within a 9 per cent. inflation figure for local government over the period of time in question?

A suspicion remains that the Secretary of State is actually calculating not on levels of this sort but on being able to adjust the position sometime towards the tail end of next year, when the electoral climate might look very different from what it is at present.

Mrs. Coker of the ACC has written an eloquent and persuasive letter indicating her anxiety about the likelihood of settlements. The evidence coming from local government is that it is not convinced by the optimism of the Secretary of State in this matter.

There is a further assumption, and that is the one to which my hon. Friend the Member for Bury St. Edmunds referred. It is whether regression analysis is now capable of genuinely reflecting the needs of different areas. From talking to people in local government, I believe that the consensus is that, for various practical reasons, the system is no longer reflecting needs accurately. This is largely for one reason—that much of the statistical information upon which it is based goes back to 1971 and is therefore often very significantly out of date. As a consequence of these changes, the judgments which the Secretary of State increasingly has to make are being substituted for the factual, objective and independent assessment which would give credibility to the system. That is the real and perhaps the most significant challenge that I make to the Secretary of State on this particular matter.

The Secretary of State says that it is all worked out by experts coming together to analyse the situation and that they then put forward some agreed commonsense objective conclusion. But it is not like that. They come together and look at all the options and they brief the Secretary of State on what will happen if this statistic or that factor is fed in, or if one or other factors are taken out. The Secretary of State, with that range of options before him, then makes a calculation.

The Secretary of State will perhaps not wince from the charge that the suspicion is that there is at least as much politics as need in the judgment that is made. How can he expect that charge not to be made when we recall his reply a few seconds ago to the very important question why unemployment has been taken out this year when last year it was fed into the calculation for the first time, as part of some brave new world? One would have thought that if unemployment had gone down and was less of a problem, it would be possible this year to take it out, having used it in the special circumstances of last year. But in reality, in September 1976, when the Secretary of State was making last year's judgments, unemployment was 1¼ million, and this September, at the time of this year's judgments, it had risen by over 100,000. How can it be less of a factor this year than it was last year?

There is a single interpretation—that last year it was the shire counties and the metropolitan counties in which the great elections of the spring of the following year were to be fought. The Labour strongholds there were put at risk, and therefore unemployment, which was the more important the further one went away from London, was fed into the rate support grant calculation. This year, in the spring elections in the London boroughs, unemployment will not be of the same significance; therefore this factor has been conveniently removed. In the London boroughs in which the Labour marginal constituencies are at risk it is not such an important factor as it was in the shire counties last year.

I have heard of marginal accountancy, but I had never heard of marginal constituency accoutnancy until the Secre- tary of State introduced it into these rate support grant calculations. It is necessary for the Secretary of State, who now has responsibility, to bring up to date the basic information upon which calculations are made. The facts are clearly understood. He should now make clear the implications that follow changing any of the ingredients in the initial calculation so that the House can understand what the effects will be, comparing one area from another, of the political judgments which have to be made.

All this should happen in advance of the settlement of the rate support grant so that the House can make an informed judgment before arbitrary decisions are reached behind closed doors. Until that happens, the suspicion will remain that there is only one consistent factor running through the rate support grant settlement in each year and how the Secretary of State makes it—which is, sadly, the political expediency of the Labour Party.

5.21 p.m.

Mr. Cledwyn Hughes (Anglesey)

The hon. Member for Henley (Mr. Heseltine) will forgive me if I do not immediately take up any of the detailed matters that he raised. I shall touch on some of them as I proceed with my own remarks. I wish to deal more specifically with these orders as they affect the county of Gwynedd, which includes Anglesey, the constituency which I represent.

I am glad to understand that my hon. Friend the Under-Secretary is to wind up this debate and will, therefore, have the opportunity to remove some of the undoubted apprehensions which my constituents and I feel about the possible effect of these orders. Anyone who seeks to read and to understand the orders must realise at once that we are dealing with difficult and complex matters. There can be no argument about this.

I received a letter, for example, from the Welsh Counties Committee on 7th November criticising the present method of distribution of the rate support grant needs element (regression analysis) as being so obscure and complex that it is difficult to pin down exactly how the results are achieved. The Welsh Counties Committee argues that a more simple method should be established under which grant is paid according to certain basic factors such as the number of people in an authority's area, such as schoolchildren, for example, who require local authority services.

I tend to disagree with my right hon. Friend the Secretary of State, who does not think that that would be a satisfactory alternative criterion. But if this formula cannot be introduced this year, the Welsh Counties Committee says that the authorities' share of the needs grant should be frozen at the 1977–78 pattern of distribution. I hope that my right hon. Friends can be persuaded to look again at the serious position which is developing in counties such as Gwynedd.

We have accepted, and local authorities have agreed, that some financial discipline has been very necessary over the last few years. But I think that we are now being asked to bear more than our fair share of the misery. The total share of local authority expenditure borne by the Exchequer is to remain the same in 1978–79 as it is in the current year, which is to say, 61 per cent. As my right hon. Friend has pointed out already, a much bigger share of the same overall sum is to go to London. This necessarily means less for other authorities. I understand fully the attitude of many of my right hon. and hon. Friends who represent London constituencies, but I ask them to look at our problems with a good deal more sympathy, because they are very real ones.

The first impression that I had was that the effect of the changes would not be too harsh, with a gain to London of 0.6 of a penny rate, to the metropolitan counties a gain of 0.4p, and to the shire counties a loss of 0.4 of a penny rate. My right hon. Friend referred to the "safety net". I was given to understand that the new "safety net" device would protect us from too drastic a fall. My right hon. Friend said on 18th November to the Consultative Council on Local Government Finance that we could assume that No single authority would lose a greater amount in needs element as a result of the 1978–79 rate support grant arrangements than would be equivalent to a 2p rate poundage That is the position as I understood it. My right hon. Friend gave me the impression this afternoon that he was modifying this to some extent.

We in Gwynedd thought that we would benefit from this protective device. It is on this that we need some clarification from my hon. Friend the Under-Secretary of State for Wales. It has now been calculated that there will be a gain to London of 5.3 of a penny rate and a loss to the shire counties of 1.5p. In these circumstances our loss in Gwynedd will be 2.5p, which is considerable.

I am told that the consequences in cash terms are that Gwynedd will receive about £1¾ million less next year than it would have done on last year's formula. In a county of comparative poverty and high unemployment, this is a substantial loss.

I remind the House that the level of personal incomes in Gwynedd is the lowest of any area in England and Wales.

Mr. George Cunningham (Islington, South and Finsbury)

So are the rates.

Mr. Hughes

I have the good fortune of having to stay in London for some part of the year when this House is sitting. If my hon. Friends had the good fortune to spend an equivalent time in Anglesey, they would take a very different view. I am in a position to see both sides of this argument. Some hon. Gentlemen seem to be blinkered to the London scene alone. If my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) represented Anglesey or a comparable Scottish constituency, he would be singing a different tune today.

Mr. George Cunningham

Of course we all defend our own areas, and it is absolutely right that we should do so. But so that we get not a London point or an Anglesey point right but a comparison between the two, does my right hon. Friend agree that in Anglesey the average cash payment for each domestic ratepayer this year is £65, which is one-third of the London average?

Mr. Hughes

I shall make a number of comparisons later which will help my hon. Friend to see the position more clearly. But I was at that moment dealing with the level of personal income in the Gwynedd area. The House must appreciate that this level has a significant effect on the number of free school meals, free domestic help and other services which I find provided without question in areas such as Greater London and without the same kind of financial difficult that we experience. I accept fully that there are acute difficulties in some parts of London and in inner urban areas.

I am happy to support any measures which the Government and the House propose to deal with them. But there would be only one justification for this policy which my right hon. Friend is now pursuing and that would be that the problems and hardships of the London area are much greater than those in my area of Gwynedd. Please bear in mind what we have already heard about the "safety net". We were certainly prepared to bear some sacrifice, but there are factors operating in our area which are beyond our control.

Let me give some examples of these. First, we have a large influx of holidaymakers in the summer, which greatly increases our population over a period of three or four months. Second, we have to pay more than the average for materials and commodities, mainly on account of transportation costs from the centres of production. Third, there are the geographical factors. We have a long coastline and much mountainous terrain. No county in England and Wales has such a formidable combination of both. Fourth, because of the retirement of many people to parts of the county along the North Wales coast, places such as Llandudno, Llanfairfechan and the Anglesey resorts, we have a high ratio of elderly people. Fifth, our population is sparse. The acreage per head is 4.3. The needs distribution formula, however, takes no account of the first four factors I have mentioned. As for sparsity, we think that the sparsity grant is inadequate to meet the needs of an area such as ours.

I wish to refer briefly to the regression analysis method which has been mentioned by my right hon. Friend and by other hon. Members. It does not ensure an equitable distribution of the needs grant. It penalises those authorities that have done the Government's bidding and striven for efficiency and economy. In Gwynedd the population is only 225,000. It is a large area yet the effective product of a penny rate is less than £200,000. Taking all of this into account, it has been very hard going for us. We are not a big spender but we are a big sufferer under this developing policy.

I make a plea that the Government should look again at the present method, which is pretty well discredited. The various data used are out of date. I am sure that the Government would not wish to operate deliberately against the rural areas in favour of the urban areas. In this context I reject most emphatically the blatant political point made by the hon. Member for Henley. I believe also that the formula needs reappraising urgently.

The Government are operating an overall standstill for local authority spending in 1978–79. So be it. But this should be followed by a sharing of the needs grant pro rata to the 1977–78 distribution. It would not give Gwynedd a completely fair deal, but it would help to safeguard our present position and save our ratepayers from the extra burden of the £11 million being used to assist areas which are—this is their good fortune—much wealthier than ours. I am deeply concerned about the consequences for Gwynedd if action along the lines proposed is taken. I ask the Government most sincerely to heed my appeal.

5.45 p.m.

Sir Derek Walker-Smith (Hertfordshire, East)

The right hon. Member for Anglesey (Mr. Hughes) has made some telling points in a clear and cogent way. I shall resist any temptation to follow him in an excursion to Anglesey, agreeable though I believe it to be. Last year, in the corresponding debate, I criticised the Government for what I called: the clumsiness of their chosen methods and the unfairness and the illogicality that will result. I went on to say: 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 it is not too much to hope that they will by then have learned from their mistakes and profited from the constructive criticism that we seek to make. It is appropriate now to ask whether the Government have learned from their mistakes. In fairness, one must say that they have at least appreciated and acknowledged a degree of imperfection and inequity in their previous arrangements. The Secretary of State has kindly accepted an invitation from my hon. Friend the Member for Hertfordshire, South-West (Mr. Dodsworth), who has worked untiringly, and to good effect in this matter, to receive a Hertfordshire deputation in January to discuss the considerations arising in respect of the 1979–80 settlement, assuming that it is he who will be shaping its pattern. For that we are genuinely grateful.

The Government have even, primarily by their introduction of the safety net, sought to mitigate some of the most flagrant and hurtful injustices and for that, too, we must be grateful. That having been said, it is a case of being thankful for small mercies, because many aspects of the basic inequity and illogicality still remain. The indictment of the Government is two-fold. First, the formulae which are applied have been found to lead inescapably to inequity. Second, the opportunity, after full warning and many representations, to introduce appropriate mitigating measures, or still better to review and revise the whole system with a view to its rationalisation and improvement, has been missed.

The Government said that a safety net would be provided to prevent losses, in respect of the needs element, of grant which exceed a 2p rate. This assurance brought some comfort to hard-pressed ratepayers and councils, but it has turned out to be cold comfort, because the figure of 2p in many cases has been only a theoretical maximum which, in practice, has been exceeded, certainly in the case of Hertfordshire.

The efficacy and value of a safety net depend on the tightness of its structure. The Government's structure was not tightly drawn, partly or primarily because the method of calculating the base for the net ensures that additional grant is given to London before the safety net begins to operate for the benefit of others. The result, in the case of Hertfordshire, has been that a loss will be incurred in 1978–79 almost double the theoretical maximum, that is, there will be almost a 4p additional rate burden as against a 2p figure which was said, wrongly, to be the maximum increased burden beyond which the safety net would protect counties such as Hertfordshire.

Nor, as I understand it, is this level of loss exceptional. In her letter to the Secretary of State of 1st December, the Chairman of the Executive Council of the Association of County Councils said: We take the view that any authority has lost grant if its 1978–79 grant entitlement has risen by less than the overall average increase in the grant. In other words, any authority whose grant rises in cash terms by less than 7.3 per cent. is losing … Using this as our basis, we calculate that many authorities will suffer losses of more than a 2p rate, ranging up to over 4p. It may sound Gilbertian to say that an authority has lost grant if its monetary receipt has numerically increased. That is not so in an inflationary age. We live in a Gilbertian situation because of the perpetual and unwelcome necessity to discount for inflation.

The shire counties as a whole are being forced to continue in a pattern of accumulating loss which has established itself over the past few years. They have suffered successive reductions in their share of the needs element of grant ever since 1974–75 with a fall of 16 per cent. over five years. Certainly the decline of Hertfordshire conforms to these figures. In the years 1973–74 to 1977–78 our receipts in Hertfordshire, as a proportion of the national total, decline from 2.12 per cent. to 1.75 per cent.—a percentage decline very close to the 16 per cent. for the counties overall. Projecting this forward to 1978–79, the Hertfordshire total needs grant loss, compared with the share received last year, is likely to be more than £6 million, rather than the £3.3 million implied by the safety net. This is a loss of almost 4p rather than the 2p rate put forward.

Mr. Molloy

rose—

Sir D. Walker-Smith

I should like to give way, but I shall follow the good example set by the right hon. Member for Anglesey.

Mr. Molloy

He gave way.

Sir D. Walker-Smith

If I may say so with great affection, the right hon. Member for Anglesey rather reflected the general conduct of the party to which he belongs—he said he would not give way and then he did. Regretfully, I shall not give way, because I shall reflect the normal pattern of conduct of my party and do what I say I will do.

Althought the concept of a needs element is well intentioned and is based on the reasonable desire to relate the grant received to the services required, it is based on a fluctuating formula resulting over the years in progressively less grant being paid to Hertfordshire and the shire counties in general because of distribution elsewhere. The shift has been largely to the metropolitan areas whose needs, the Government argue, are greater.

There is a considerable degree of inequity attached to the distribution of grant, which arises from a fallacy that the Government have accepted without proper and sufficient scrutiny. That fallacy is that domestic rate payments in the large conurbations, particularly London, are much higher than those in the rest of the country. As a generalisation it might seem prima facie to have some substance—

Mr. Molloy

It is true.

Sir D. Walker-Smith

It may well be true, but I am not so dogmatic in my propositions as the hon. Member for Ealing, North (Mr. Molloy). I like to have very good evidence for any proposition that I put forward, as becomes a member of my profession. The hon. Member might do well to do the same.

However, that assumption about higher rates in the conurbations does not always apply. It certainly does not apply in Hertfordshire, where rateable values are high and rate payments are also high in respect both of comparable hereditaments elsewhere and of the value and quality of the services obtained.

For example, residents in Hackney or Islington in 1973–74 paid about £20 more a year in rates than they would have done had they been living in similar houses in Stevenage or Oxhey. By 1977–78 the position was almost exactly reversed. The rate payments in Stevenage and Oxhey were £20 a year higher than for comparable premises in Hackney or Islington.

The average domestic rate payment in Hertfordshire in 1977–78 was approximately £13 a year more than the average in London. In 1978–79 the formula changes will virtually double that difference, representing a total of £7 million more to be paid by ratepayers resident in Hertfordshire compared with what they would pay if they were resident in London. For 1978–79 the difference between the positions of Stevenage and Oxhey on the one hand and Hackney and Islington on the other probably will rise from £20 a year to between £50 and £60 a year.

Hertfordshire receives a low level of resources element simply because rateable values in the area are high, and consequently domestic rate payments are high. All this constitutes a continuance and accentuation of the inequity to which I referred last year in these terms: 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."—[Official Report, 2nd December 1976; Vol. 923, c. 776–9.]. The overall result is that Hertfordshire and any other counties similarly placed suffer a double disadvantage and a cumulative injustice. First they receive an unduly low receipt of grant under the resources element because of high rateable values and, secondly, they suffer a reduction in the needs element of grant despite a national increase of 9 per cent. to cover inflation. The consequence of this is that the burden of inflation will have to be covered by rate increases or a reduction in services. Either course is unwelcome and is heaping Pelion on Ossa as far as my constituents are concerned.

Many of my constituents have not only high rateable values and high rate payments but, as commuters, they have high rail fares, which are about to go even higher and in respect of which the Chancellor of the Exchequer consistently refuses to grant tax relief as a necessary expense for work.

Now my constituents will face a further reduction in services if rate increases are to be kept within tolerable limits. While large urban areas like London, which receive more grant, will spend more on services—that is the clear expectation and perhaps the implied exhortation in the Secretary of State's statement of 18th November—the counties, which will be the losers of grant, will spend less. This will constitute an aggravation of a process from which they are already suffering.

For example, I have just received from the county education officer a letter about the provision of transport to secondary schools from Sawbridgeworth to Bishop's Stortford Boys High School. He says: Thank you for the your letter about transport from Sawbridgeworth to Bishop's Stortford Boys High School. You will know the difficulties which the County Council have had over the last five years as a result of loss of rate support grant and indeed I know that you have been yourself actively involved in representing the views of the County in this matter. One of the economies which have had to be made as a result of these losses is in the provision of transport to secondary schools. I quote this particularly because of its topicality, but it is only one example.

There are a variety of services that may be prejudicially affected, such as old people's homes, nursery schools and services for the mentally handicapped, which are so indispensable and important, to name only a few.

Although the Government have tried to improve things and they have arrived at a position that is rather less bad than some people apprehended, nevertheless the situation is basically unsatisfactory and will remain unsatisfactory and unjust until the Government resolve to review and revise their formulae in such a way as to relieve the counties of the unequal and unmerited burden imposed upon their ratepayers.

At the end of the day it may be that, having regard to this position, some of my right hon. and hon. Friends may feel that it is necessary to record their dissatisfaction in the Division Lobbies. I understand from inquiries that I have made that I am not allowed properly to vote today because I am notionally in Strasbourg. However, I thought that I could serve my constituents better by being here to speak on the rate support grant. I am, in the inelegant idiom of the Whips' Office, part of a "block pair". I shall not be guilty of a breach of faith to the prejudice of an hon. Member opposite who is physically in Strasbourg—but if the Division takes place I hope that my right hon. and hon. Friends will understand that, although my feet will not go through the Lobby with them, my heart certainly will.

Mr. Deputy Speaker

I wish to remind the House that even if the debate lasts its full length until 11.30 p.m., it will be impossible, unless we have some drastic brevity, to accommodate more than a fraction of the number of Members who wish to take part in this debate.

Mr. John Wells (Maidstone)

On a point of order, Mr. Deputy Speaker. If the debate goes the full time until 11.30 this evening, does it mean that the two Social Security Orders, the Church of England (General Synod) Measure and the House of Commons (Services) motion automatically fall?

Mr. Deputy Speaker

No. The orders to which the hon. Gentleman refers last for one-and-a-half hours after the time at which they have been entered upon.

5.52 p.m.

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

The right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) has given another example of his detailed knowledge of this subject, but, in response to the appeal from the Chair, I shall not follow what he said about the presence of hon. Members in Strasbourg, although a visit there may be very pleasant, indeed.

The hon. Member for Henley (Mr. Heseltine) failed to convince the Labour Benches that if he were now sitting on the Government Benches he would deliver anything but misery. He confirmed that the only thing we can expect from the Tories is equal shares of misery, if nothing else. The right hon. and learned Member for Hertfordshire, East said that the Conservatives carry out their promises to the letter, but I shall not proceed on that line of argument.

I welcome the fact that my right hon. Friend the Secretary of State for the Environment made concessions on four-year damping and also made the right noises about cash limits. We hope that this will cover points regarding wage settlements, education costs and all the rest of it. We in Staffordshire asked the Department to examine grants-in-aid for employment, because Staffordshire's unemployed were going over the border and signing on in county boroughs. In that way they were receiving more money than that to which they were entitled. However, we are grateful for small mercies and look forward to more concessions from the Government. I hope that my right hon. Friend will be making announcements on the lines of suggestions which we have put to him for consideration.

There is a continuing dismay in the shire counties at the shift of resources to the larger conurbations. There are considerable hard feelings, especially in areas which contain large cities within their boundaries. If my right hon. Friend intends to bring in legislation in the near future to shift power back to the large cities, perhaps that bone of contention will remain with us for a great deal longer. We in Staffordshire recognise that there are great problems in the inner cities, but we think these should be regarded as special projects outside rate support grant. We believe that all areas with such problems should be treated similarly and should not be subject to the present disparities.

I welcome the Bill published today which will deal with the problems of inner cities, and I hope that its provisions will go far enough to solve their problems. Unless there is a new approach to the allocation of industrial development certificates, it seems to me that we shall never achieve our targets by tampering with the rate support grant. We all hope to see a regeneration of urban areas, but with ever-increasing costs and diminishing public transport services, we must still take account of the fact that many people wish to live near their work, and, indeed, need to do so. Therefore, we need to relate the needs of people who go to work with the needs for homes in the inner city areas, and we must have the means to achieve that end.

In some structure plans the Secretary of State has been urging development away from green field sites—and this is happening in North Staffordshire—in order to bring about regeneration and new industry in the inner city cores. We support this commendable development, but we hope that the Government will be able to provide the extra resources that will be necessary if that is to be done. If the Government in their wisdom direct local authorities to change structure plans, the Government should provide the resources to achieve those objectives.

We are concerned in Staffordshire that the formulae of the needs element and its distribution leave something to be desired. It has been repeatedly pointed out that the percentage of this element in the shire counties has fallen in the last few years. This does not lead to good housekeeping. If we encourage local authorities to spend and spend again and then a few years later deny them the cash to maintain their ambitions, problems are bound to arise. That is a fault displayed by both major parties. However, I am not accusing my right hon. Friend the Secretary of State for the Environment of encouraging irresponsible expenditure in that respect. Certainly the right hon. Member for Leeds, North-East (Sir K. Joseph) has seen the error of his ways and repented. If local authorities were led to believe that a new Jerusalem were round the corner, one can now understand their dismay when they are unable to keep that idea glowing.

Councillors appear to have a touching faith in their Whitehall masters. Perhaps they should be more prudent, but certainly the needs element has shifted away from the shire counties towards London The percentage share of needs element in the shire counties has fallen by 16 per cent., while that in London has risen by 54 per cent. in the past few years. Although the needs element in relation to rate support grant has risen by 7.3 per cent., the figure in London has risen by 20.4 per cent. The shire counties as a whole have increased their figures by 3.5 per cent., and the figure in Staffordshire is up by only 3.2 per cent. That does not make for happiness in Staffordshire.

Mr. George Cunningham

Nevertheless, is it not true that the average domestic rate payment in Stoke-on-Trent is only £97 a year, whereas in London the average figure is £160.

Mr. Gwilym Roberts (Cannock)

They are smaller houses.

Mr. Forrester

I do not know whether my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) has a reference book with him or a computer brain that enables him to carry the differences in his head, but I shall come to that point in a moment.

What makes the situation even more difficult is the confusion in the figures between the Department of the Environment and the Association of County Councils. It would help mere mortals like me—although not perhaps my hon. Friend the Member for Islington, South and Finsbury—if the two major parties could get together and produce the right figures so that we may all have a realistic assessment of the position.

Confidence is not restored when we are told that all this is handled by regression analysis. When one asks what that analysis is, one is told by the Department that it is virtually an authorised rake's progress. If that means that the more one spends, the more one succeeds with the Department of the Environment, I am beginning to wonder why there have been so many calls for economy. That does not seem to match up with the actions which have been taken.

Mr. Gwilym Roberts

Since my hon. Friend has mentioned regression analysis, does he not agree that there is a strange type of calculation put forward by the Department in respect of single-parent families, who are given a high weighting in the formula? Does he not share my surprise that when I query these matters I am told that there is a high correlation with a group of other needs factors? Does he not agree that such a correlation is spurious?

Mr. Forrester

If I go on answering such matters, the Chair will chastise me for taking too long in my remarks. I shall not argue with my hon. Friend, who is one of that select band who belong to the Statistical Association.

If the extra money that is going to London will generate future expenditure, and if the other authorities have to slim their spending in order to avoid large rate increases, on the basis of our old friend the regression analysis this could end up with the London percentage going through the roof of the graph and the other poor areas slipping down to the trap-door at the bottom.

The point has already been made about how one can have confidence in the figures of the 1971 census that are so widely used in the calculations and believe that they are relevant in 1978–79. While the Secretary of State said that the simple formula that had been put forward did not seem to be the answer, at least one would have thought that we could arrive at a much simpler formula to make these calculations that would give us up-to-date figures and projections.

Last year Staffordshire imposed a 25 per cent. rate increase. There may be too much pre-Christmas pessimism in speculating on what the increase will be this time but it must be substantial and I cannot imagine that it will be less than 10 per cent. Like most county councils, Staffordshire is having to cut services to keep within limits—sometimes cuts in services that will inflict burdens on district councils. I hope that the Minister will take account of that point.

The county council is in the process of removing a large number of amenity sites to save money, which will no doubt mean that there will be considerable increases in dumping, and in order to maintain the environment somebody must pay to have that rubbish collected. The economy may be a false one, because someone still has to pick up the rubbish.

I have been challenged by the hon. Member for Islington, South and Finsbury who says that Londoners pay more in rates. I pay rates in both London and Staffordshire and I would not necessarily argue with him on that point. However, the disparities in the rates are reflected in wages in different parts of the country and therefore for many occupations in London there is a London allowance that I had thought was intended to cover the differences in the cost of living for those in London.

Mr. Cunningham

It is not 50 per cent.

Mr. Forrester

A £300-a-year London allowance still leaves a bit to spare for other extras in the cost of living in London. It seems reasonable that if the rates differential is to be abolished the London wage allowances should be reduced at some stage to counteract what Londoners do not have to pay out in extra rates.

I accept that the Secretary of State has an impossible job in trying to satisfy everyone. However, such is the magnitude of the problems in the inner cities that we are only scratching the surface with the rate support grant. Urban decay and renewal will be with us for as long as man continues to live in large communities. Crime, vandalism and hooliganism may all be products of living in large towns and cities. The message that I want the Minister to understand is that outside London and the favoured conurbations these problems exist in just the same way. We ask the Government to recognise that misery and deprivation are just the same whether in London, Staffordshire, the West Midlands or, dare I say it, West Lothian.

6.5 p.m.

Mr. John Stanley (Tonbridge and Malling)

The Secretary of State claimed in his statement that the rate support grant settlement was "fair and not unfavourable". I regard it as far from fair and thoroughly unfavourable, because it is of most help to London constituencies. I must agree with my hon. Friend the Member for Henley (Mr. Heseltine) that this is perhaps not unrelated to the fact that there will be London elections in the spring. Certainly during the past three years there has been a substantial switch of resources away from shire counties and into the metropolitan areas and for the fourth year we are now going to suffer the same loss.

The justification for this that has been put forward year after year is increasingly difficult to uphold. It is that the urban areas, particularly London, have much greater needs, but, as the hon. Member for Stoke-on-Trent, North (Mr. Forrester) said, it is about time that we began to recognise that the non-metropolitan areas also have great financial needs and that, in some cases, the non-metropolitan areas have needs in excess of those of the metropolitan areas.

For example, the Government have not begun to reflect at all the fact that the non-metropolitan areas are suffering from major population expansion. In spite of what the Secretary of State has said, the per capita element is simply not being sufficiently reflected financially in the needs element of the rate support grant. I do not believe that the Government are sufficiently reflecting the fact that it is inherently more expensive in many cases to administer and to provide services for an extended geographical area than to carry out the same operations in the compact areas of a city.

In particular, the Government have not begun to recognise the enormous finan- cial implication of providing a system of public transport in an extended geographical area that can begin to match the systems that can be provided in compact city areas. In short, we have substantial financial problems in the shire counties and we do not believe that it is right that we should go on being deprived of resources.

It is particularly difficult for us because this is not the first year that we are facing a prospective loss. In Kent, during the past three years we have suffered a loss of £25 million, and that is a massive amount of resources to lose. I can give the House illustrations of what this has meant. With schools we have had to suffer a loss in terms of expenditure on books, stationery and apparatus to the value of £2.8 million. We suffered a loss on book purchasing for our libraries of £133,000. In the social services, we have had to close seven residential homes. We have had to cut police overtime to make savings of about £500,000. Even in the streets we have had to make substantial cuts in lighting and to make some £200,000 of savings in that way. The Government will not therefore be surprised to learn that there is great feeling among hon. Members on both sides of the House who represent the shire counties and that, having suffered such cuts during the past three years, we face the prospect of further cuts for a fourth year with alarm and dismay.

The greatest difficulty of all is to try to combine cuts with the expansion of those areas that are facing substantial population increases. That is the case in many Kent constituencies where, as in many areas on the perimeter of Greater London, we are facing continuous population expansion. In Kent, during the past three years alone the population has grown by 56,000. We have had to accommodate an additional 8,000 schoolchildren. In that time we have had the equivalent of half an additional parliamentary constituency accommodated in the county. Every one of those schoolchildren generates additional pressure on resources. We need classrooms, teachers and equipment. It seems to be extraordinarily unfair and unjust that such counties should face additional pressure on expenditure as a result of the population growth and at the same time face the greatest reductions in the amount that they receive through the rate support grant.

If I may be slightly parochial, the contradictory nature of the policy is starkly shown in my constituency, part of which is in a medium-growth area. I wonder whether the Secretary of State is familiar with the village of Leybourne. He looks as though he does not know it. I am sorry about that, because he is in the process of destroying it. He has given planning consent on appeal to build an additional 1,000 houses in a little hamlet of about 150 or 200 houses—in the name of growth. He has approved another major development in the village of Hilden-borough with a massive sand and gravel development on the edge of the village—in the name of growth.

There is a wholly contradictory position within the Department of the Environment. Its right hand is giving sanction on appeal to development applications which are opposed locally and that development has been going ahead as a result of the Secretary of State's planning consents, but the left hand of the Department is reducing the amount of rate support grant available to us and is thus making certain that when the growth comes we shall not be able to provide the proper level of local government services.

Mr. Molloy

Will the hon. Gentleman give way?

Mr. Stanley

I hope that the hon. Gentleman will not mind, but I shall not give way. There are a number of hon. Members who wish to speak and I shall be brief.

The Government claim that the loss of rate support grant is limited to the equivalent of a 2p rate. Having listened carefully to the Secretary of State, it seemed clear to me that he was not disputing the figures put forward by the Association of County Councils but was merely saying that they were put forward on a different basis. Everything that the right hon. Gentleman said confirms that there is no firm safety net at the 2p equivalent, that the safety net has an enormous hole in it, that the ACC figures are correct and that those counties that claim that they will be losing needs element in excess of a 2p rate poundage will suffer exactly that loss.

Our calculations in Kent are that we shall lose the equivalent of a 3.1p rate next year. That represents a total loss of £7.9 million. The 2p safety net is not a safety net at all. The nine shire counties which are prospectively suffering losses in excess of 2p—Cambridgeshire, Essex, Kent, Northamptonshire, Warwickshire, West Sussex, Wiltshire, Hertfordshire and Northumberland—will be suffering a loss in excess of a 2p rate. It is highly misleading for the Secretary of State to give the impression, perhaps unwittingly, that he has created a firm safety net equivalent to the loss of a 2p rate.

The suggestion that it should be possible for all county councils to contain their domestic rate increases to single figures is wholly unrealistic in respect of many counties. We have been doing our calculations in Kent and we reckon that to make up the £7.9 million loss would mean an increase in domestic rates of 14 per cent. next year. So much for single figures.

We do not complain that cuts have taken place over the last few years. They were inevitable after the highly irresponsible economic policies pursued in 1974–75. We complain that, although we are prepared to take our fair share of the burden in the shire counties, we are not prepared to take more than our fair share. We are not prepared to see our school-children being deprived of books and apparatus when no such deprivation is being suffered elsewhere. We do not see why we should take our police off the beat in order to save on overtime when this is not happening elsewhere. We see no reason for our councillors to go round and round the treadmill of trying to establish satisfactory local government services for an ever-growing population with ever-reducing financial resources.

We are not prepared to suffer a fourth year of continuing discrimination against us. Because this appears to be the clear intention of the Government, I shall be voting against the orders.

6.15 p.m.

Mr. David Stoddart (Swindon)

We have received a good many figures and I do not intend to bandy figures around, but I support the plea of my hon. Friend the Member for Stoke-on-Trent, North (Mr. Forrester) for the Secretary of State to help hon. Members during the next few days by putting out his own estimates of what he thinks the effect of these orders will be.

I represent a constituency that is in a shire county. I understand and sympathise about the desperate problems of inner city areas which have been allowed to run down over a long period. We must all be concerned about the urban wastelands where people feel frustrated, ignored and isolated from the mainstream of humanity. It is a problem that has to be dealt with, and I therefore support all the measures that the Government are taking to tackle and solve these problems. However, they must beware of ignoring the facts of rural deprivation in the meantime.

These facts must be taken into account. For example, there is much bad housing in rural areas. We should not imagine that, because a cottage has a thatched roof and looks very nice, it is a good place to live in. That is not necessarily so. There is bad housing in rural areas as well as in urban areas.

There are also grave transportation difficulties. The costs of transport in rural areas are high. I represent a constituency that is part of the Thamesdown district. We have seen recently that fares in the urban part of the area are only half the level of those in the rural area. There are questions of cost as well as of the level of transport services.

People living in rural areas are isolated from shopping facilities and services. This deprivation is not suffered by people living in urban areas. In addition, in many cases the public services on which people in rural areas have a call are at a relatively low level. Let us take, for example, the situation in the South-West. The region has the lowest but one wage levels in the country. They may even be the lowest, because the South-West and East Anglia are always competing in this respect. In addition to being almost the lowest-paid region, in many cases we also have a low level of local authority services. In that respect people are losing both ways; they are getting neither high wages nor the services which, in part, would make up for the lack of high wages.

Consider the position of my county of Wiltshire. Its social services expenditure is at the bottom of the league table. To make it up would cost £717,000. The result is that £200,000 a year less than the national average is being spent on children in care, while £166,000 less than the national average is spent on residential care for the elderly.

For the current year, the Wiltshire County Council made cuts of over £1 million in education expenditure. This has resulted in the deprivation of schooling and activities in Wiltshire and my constituency. This year, despite my right hon. Friend's statement that he was not looking for cuts in expenditure, the county council intends, apparently, although I hope that it will have second and, if necessary, even third thoughts, to cut education expenditure by a further £834,000 in 1978–79. That will mean even further deprivation for the children in my constituency and in other constituencies throughout the county.

Mr. Charles Morrison (Devizes)

Does not the hon. Gentleman agree that even if the county council has to undertake these cuts a very considerable increase in the rates will still be involved?

Mr. Stoddart

That is a matter of conjecture. This is where I take issue with the county council. It announces that there will be cuts of £834,000 in education expenditure at the same time that it announces that it will be putting £2 million to balance. The two things do not tie up.

Mr. Charles Morrison

indicated dissent.

Mr. Stoddart

It is no good the hon. Gentleman shaking his head. That is the fact, and he knows it. He cannot have it both ways. On the one hand, the county council is to put £2 million into balance and, on the other, it says that education expenditure must be cut by a further £834,000. That is not accepted by my electorate, or by the hon. Gentleman's electorate, or by any of the electorate throughout Wiltshire. I do not wish to be unkind to the county council, but I hope that it will have further thoughts about these additional cuts.

It can be argued with justice that this situation and these cuts have not happened merely over the last two or three years, although that is the charge that the Opposition seek to hang on my right hon. Friend. It is not so. The shire counties, including Wiltshire, have held the social services at a low level over a long period—indeed, for decades—so one cannot merely say that the low level of services in the rural areas is a 11 my right hon. Friend's fault. It is not so. Indeed, the shire counties may be said to be suffering because of their own failure in the past to make progress and to spend sufficient money on their services. That is a factor that the shire counties ought to be considering.

Nevertheless, I have to say that the Government have a duty to try to raise standards in the rural areas. That cannot be achieved by continually weighting the rate support grant against the shire counties. I think that my right hon. Friend accepts that, and I hope that he will consider it. Unfortunately, the Labour Party tends to be thought of as an urban-oriented party. That is not so. We shall ignore the needs of the rural dwellers at our own long-term political peril.

Mr. Hugh Fraser

Hear, hear.

Mr. Stoddart

At its last annual conference, the Labour Party recognised that the needs of the rural areas must be studied and met. It is now up to the Government to give the question urgent attention, and I sincerely trust that they will do so.

My constituency, which is within a shire county, is an expanded town. As an expanded town it was supported and given encouragement by the Government. The expansion was a highly successful operation, which has been admired by many people throughout the country. But a town cannot expand and then suddenly stop expanding. It does not happen that way. One cannot say "So many, so much, and no further." Because the influx of population included a very high proportion of young people, self-generating expansion becomes built-in. For this reason house building has to continue at a high level, but with housing comes the demand for all the other associated services, such as education, health, highways, libraries, and social services.

Since these services depend on the willingness of the county council to provide them, the pace at which my constituency can deal with its ongoing pro- blems of expansion depends on the county council, which in turn is dependent to a large extent on the support that it receives from the Government, although it has, through its own rateable value and the raising of the rates, a certain amount within its own hands.

Mr. Bruce Grocott (Lichfield and Tamworth)

Does my hon. Friend agree that under the present system of local government finance expanding towns which undertook their expansion for the benefit of a region as a whole and not just for their own benefit have to reconvince their fellow district councils within the county area every year in order to get essential services, such as housing development?

Mr. Stoddart

I accept that. It is extremely difficult to be convincing about it. There is no doubt that other district councils feel that an expanded town is getting the lion's share and that they are doing badly. I understand the problem.

I believe that in this rate support grant settlement the Government have gone some way towards recognising some of these difficulties, but the question requires a good deal of further thought and research between now and next year's settlement. I sincerely hope that the Government will give that thought and do that research, and take into account the points that have been and will be raised in the debate.

6.28 p.m.

Mr. Hugh Fraser (Stafford and Stone)

I am sure that the thoughts that are going through the mind of the hon. Member for Swindon (Mr. Stoddart) about the political impact of the attitude of the Labour Party towards the rates will be carefully dealt with when the next General Election comes.

I want to follow the speech made by the hon. Member for Stoke-on-Trent, North (Mr. Forrester), who is one of my colleagues in North Staffordshire. I hope that the Under-Secretary of State will carefully weigh up the hon. Gentleman's statement that the question of urban deprivation cannot be dealt with by rates collected from other parts of the community. This is clearly shown by the figures already quoted, demonstrating that under both Governments the share of the shire counties has fallen from about 62 per cent. in 1973 to 51 per cent. in 1978. If this process goes on, as the hon. Member for Stoke-on-Trent, North pointed out, it will often be simply throwing good money after bad. In London, with all the help that it receives, the share has gone up to nearly 64 per cent. in this period.

Staffordshire is as badly treated as any county council by the Government. In fact, we are worse off than any other on percentage grounds. We shall be receiving about £2 million more this year in cash on a budget running to well over £200 million, with the cost of inflation alone running at about £14 million—that is, if we accept the 10 per cent. wage norm laid down by the Government. I think that the inflation rate of 6.9 per cent. contained in the Government statement is a bit of Cloud-cuckoo land. Assuming an inflation rate of 10 per cent., this means that we shall either have to cut services or increase rates, probably—although all budgets have not been worked out yet—by around 20 per cent. in the coming year.

Mr. George Cunningham

What level of average cash payment does the average domestic ratepayer in Staffordshire pay compared with the London figure of £160?

Mr. Fraser

The people of Staffordshire are not rich like people in London. Londoners are rich and get special allowances and sell their homes for £5 million. There is a great deal of talk about London being broke, but I have not seen as many Rolls-Royces in any other city in the world.

Mr. George Cunningham

What is the figure?

Mr. Fraser

The hon. Gentleman can work it out for himself. The point remains that in Staffordshire we are faced with a 20 per cent. increase in rates in the coming year. What the Secretary of State said about an average of 8 per cent., or well below 10 per cent., puts him almost in the class of the Chancellor of the Exchequer in terms of misleading the public. The public has been rather misled and people will be rightly angry. Nothing is more touchy than the question of rates. Rates are a forced cross-payment between a few in the community to the community as a whole, but in addition the rate support grant is made up not only by Government beneficence but by taxpayers' money. That policy can be wasteful and hostile to the real interests of the shire counties—certainly to Staffordshire. The Government will have a reckoning coming to them. They should not forget that. I shall be pleased to inflict the maximum defeat on them.

Mr. George Cunningham

The figure is £118.

6.33 p.m.

Mr. Stan Crowther (Rotherham)

In view of the lack of time, I shall not attempt to follow the speech of the right hon. Member for Stafford and Stone (Mr. Fraser). I used to think that I knew something about local government finance, but now I am wondering not only whether I know anything about it but whether anyone else does, either. If this set of results is derived from the best formula that can be found from a wide range of options, I am convinced that we are joining Alice in Wonderland.

My right hon. Friend the Secretary of State refered to a misunderstanding. I am sorry that he is not here to hear me say this, but that misunderstanding was largely due to his own speech, in which he said that no authority would lose more than 2p in the pound as a result of the change in this year's distribution compared with last year's. As a result, someone in the Department of the Environment had to send out a letter to the Association of County Councils saying that my right hon. Friend was talking not about last year's share but about last year's distribution arrangements. But my right hon. Friend did not say "distribution arrangements". He said "distribution", which created this completely false impression. He used the word "arrangement" today, so at least he has learned of the mistake that he made.

The Department of the Environment claims that my borough is losing an amount equal to 1.3p in the pound. In fact, our loss will amount to 2.5p—a total of well over £1 million. I hope that no one will have the impression that only the non-metropolitan counties are doing badly. Many metropolitan districts are doing badly as well, and this should be understood. The authorities are not interested in what they are hypothetically losing. They are interested in what they are actually losing. That cannot be over-emphasised.

The County Councils Association is able to be forthright in its criticisms because all its members are losing something. The Association of Metropolitan Authorities has to adopt a rather more ambivalent position, because one section of its members is gaining at the expense of another. Frankly, the AMA does not know whether to laugh or cry, but I do, because where I live we are losing considerably, and I can see no justification whatever for the way in which many metropolitan districts with severe and well acknowledged urban problems are now being penalised to provide this great improvement for the London boroughs.

I may well be upsetting some of my hon. Friends when I say that, but it must be said. People less charitable than I am might be tempted to draw certain conclusions from the fact that the three Ministers principally concerned with local government all represent London constituencies. I attribute no such unworthy motive; I say that others might think that. But when the ratepayers of the country as a whole are subsidising London to the point at which 14.3 per cent. of the population will be getting 21.6 per cent. of the needs grant, it is time to draw the line.

I have no doubt that my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) will jump in soon to ask how much people in Rotherham pay in rates. I have to tell him frankly that I do not know, but I do not doubt that it is less than people are paying in Islington, and the reason for that is that rateable values are so much higher in Islington, and those higher rateable values apply not only to houses but to shops, offices and factories, so that the total benefit from rateable value has to be taken into account. Let us be clear about that. [An HON. MEMBER: "Any factories there?"] There may not be a factory there, but in my area we have factories, and as a result of the presence of those factories we also have smoke pollution, which we have to deal with out of the rate fund.

I accept that there are problems in London. My goodness—we know that. Many of them are peculiar to the capital, and many of them—or at least some—have been created or exacerbated by the policies adopted by the local authorities of London over the past 30 years.

Mr. Peter Hardy (Rother Valley)

Hear, hear.

Mr. Crowther

I thought that that might be contradicted, but apparently it is accepted. I am glad to hear that. Certainly London's problems were not created by the ratepayers of Rotherham, Sheffield or Doncaster.

Among the metropolitan districts themselves there is no consistency in this order. Frankly, it is nonsense that within the four districts of South Yorkshire, Sheffield, Rotherham and Doncaster are all losing and Barnsley is coming out better. Anyone who knows the area could not possibly conceive of any sensible set of criteria which would produce that result, which says that Barnsley's needs have increased and those of Sheffield, Rotherham and Doncaster have all become smaller. It is absolute nonsense.

Having got ourselves into the realms of comic opera through this incredibly complicated system, with its weighted factors and what is called damping—that is a silly word, anyway—and its alleged safety net, which nobody really believes in, making confusion worse confounded, we must recognise that it is time to scrap the whole thing and start again.

I look back with great nostalgia to the days before most specific grants were abolished and replaced by the general grant system. I have never understood why so many of my former colleagues in local government now joyfully embrace a system that they bitterly opposed when the Conservative Government introduced it at the beginning of the 1960s. At least specific grants mean that the authority that does the job actually gets the money, whereas the general grant does not. It is said that the general grant gives local authorities a lot more freedom. It gives them freedom to decide which service they will cut, and that is the only freedom that they have had in the past three years.

I suggest that the time has come for a radical reform of local government finance. We have had enough studies, inquiries and reports. It is time we started getting something done.

I accept that rates and grant—drastically reformed, I hope—would still form a large part of local government income, but the one thing that nobody is talking about any more is the abolition of the principle of ultra vires, which was strongly urged upon the Redcliffe-Maud Commission by the old Association of Municipal Corporations 10 years ago. There was only one dissenting voice, and I can tell anyone interested that that was the voice of Birmingham. Every other authority in the old AMC at that time voted in favour of abolishing the ultra vires principle.

I believe that if in the past local authorities had been free to engage in profitable commercial enterprises, many of the problems that they face today would have disappeared. I see no reason why a public authority should not be allowed to make money and why the profit-making should be confined to private enterprise. I agree that proper safeguards would have to be built into the accounting system, but the principle of allowing freedom to local authorities to take an active role in industry and commerce ought to be accepted.

From long experience I realise how frustrating are the restrictions that constrain people in local government. It is time to stop treating local authorities as though they were backward children needing to be fussed over, lectured and smacked from time to time to encourage good behaviour. They are responsible bodies and they should be treated as such. If they go wrong, the remedy is in the hands of the voters.

6.42 p.m.

Mr. Stephen Ross (Isle of Wight)

I greatly enjoyed the speech of the hon. Member for Rotherham (Mr. Crowther), with the possible exception of his closing sentences. I have looked up the settlement for Rotherham, and I see that the hon. Gentleman is at least on the plus side of the paper. Rotherham has gone up 1.8 per cent., and that is something which a great many of the shire counties and such constituencies as mine have not managed to achieve under this settlement.

It will be no surprise to the Secretary of State to hear that I do not like this settlement one bit. I acknowledge his overall 61 per cent. I think that that was fair, and no one has criticised it. I shall not criticise it today. I realise that there were pressures and suggestions at one time that the figure should go as low as 58 per cent., and I congratulate the right hon. Gentleman at least on sticking to the 61 per cent. and keeping in accord with what he fixed last year.

However, I entirely agree with the hon. Member for Rotherham in thinking that the regression analysis formula, which, regrettably, is still with us, is throwing up some substantial distortions. He referred to some of them, and there are others.

I understand some of the reasons for that. The Secretary of State dealt with the education point, and that, presumably, is why we see such wide variations in Bury and Oldham as well as in Rochdale—I may add, a fairly heavy variation there on the wrong side, in my view. But I should be interested to know why other factors have been left out this time.

I think that the hon. Member for Henley (Mr. Heseltine) referred to the unemployment factor. That is out this time. The factor for pensioners living alone has been dropped. Also, we have had a change in the sparsity factor. This affects such constituencies as that of my hon. and learned Friend the Member for Montgomery (Mr. Hooson), where, with a sparsity of 11½ acres per person, it has had a detrimental effect on the settlement for his county. No fewer than 20 counties will be worse off in real terms from the needs element than they were last year.

If one considers Cambridge, one realises that last year it had a shockingly bad settlement, and once again it is on the losing end. I do not see how county treasurers and officials can plan when they are going up and down in this way like a yo-yo.

The chief executive officer of Northumberland has written to say: We expect to lose some £1.3 million in grant, equal to a rate of 2½p. But that is only part of the story. Our actual grant in cash terms is estimated at £24.3 million for 1978–79 compared with £24 million for the current year. The result is that we are effectively left to bear from the rate the full impact of inflation. On the basis of a budget providing for no growth, it is estimated that our rate will have to be increased by some 13p or 20 per cent.

Mr. Clement Freud (Isle of Ely)

Does my hon. Friend admit that one of the problems is that, by and large, county treasurers are more accurate in forecasting the extent of inflation than was the Chancellor of the Exchequer?

Mr. Ross

I think that that is the case, and the forecasts coming from county treasurers are, unfortunately, likely to be proved correct again.

I do not deny the claims of the inner urban areas, but I support the comments that have been made today on this side of the House that the pendulum has swung too far. We have today had published the Bill to provide help for the inner cities. This measure will provide for substantial loans and grants, and I support it, but, as has also been said, from both sides of the House, there are real problems of rural deprivation. The Secretary of State either has to provide more overall or a little less to London and, perhaps, some of the other urban areas. The ACC submission, whatever its faults—and they have not been spelt out—shows the need to change the formula to something which I and others called for last year.

Hon. Members will not be surprised if I deal now with my own constituency. I think that it is unique to represent a whole county. We have suffered continually from this regression analysis formula which was first introduced by the Conservative Administration in 1974. It has been a nightmare. Ever since we have suffered from that base. The settlement in 1974 was the most disastrous that we had had until this year. We went down, in money terms, from £7.675 million in 1974–75 to £6.735 million. I was chairman of our policy resources committee at the time, and I had to bring in a budget which many will remember had to come in very late because we did not know the figure until well into the new year.

I listened with interest to the hon. Member for Henley, whose concern for our troubles I warmly welcome and have been reading about in my local Press. I am sure that it has nothing to do with the political situation in my constituency. I had hoped that the hon. Gentleman would offer rather more than a promise to look at our difficulties should he come to office. I have to tell him that promises of that sort have been made to my constituents and to my local authority since 1964. They have been made even by the present Administration. The Secretary of State and his Under-Secretary of State have seen two deputations this year from my county, one in February and another in the autumn. We have presented an almost unanswerable case, but so far we have failed to convince the boffins who work out this formula for us.

If the hon. Member for Henley comes to office, he will have to be firm with the professionals, some of whom are in the Box at the end of the Chamber, if he is to achieve a special factor for our severance problem. I welcome the hon. Gentleman's suggestion for a more open approach to the construction and distribution of rate support grant, but I was surprised that he had no comment to make about what the Conservative Party would do about replacing the present domestic rating system. He has gone very quiet on that subject.

In the Isle of Wight we had a slight improvement in the years of high inflation of 1975–76 and 1976–77, but this year we are going up only from £6.8 million to about £6.9 million, and all the time our needs have been getting worse. The hon. Member for Henley referred to a submission from my council to the Secretary of State. He quoted a page, but not some of the contents, and therefore I hope the House will bear with me if I give some facts.

First, those hon. Members who visit my constituency—and many do—know that we do not get the benefit of any cut-price petrol. The average price for four-star petrol is 83p a gallon. Someone did knock off a halfpenny, but he was sat on very hard.

These are the figures which the county surveyor has to pay on the Isle of Wight for materials as opposed to what is paid by other counties. For bitumen, we pay £10.30 per ton. Most southern counties pay between £4.95 and £5.90 For common LBC bricks we pay £38 per 1,000, while others pay £26 per 1,000. For plaster we pay £50 a ton, while on the mainland it is £34. For steel we pay £371 as opposed to £351 elsewhere. One can go on with the list.

One also has to consider ferry charges. School furniture costs £80 more because it comes over on a boat, and fares are to rise again in January. On 20 geriatric chairs a surcharge of £22 had to be paid. Constituents often ask why they have to pay extra postage because they live on the Isle of Wight as opposed to the rest of England and Wales. It is true that some suppliers charge an extra sum. People know the cost of the car ferries. The sum can be anything from £5 or £6 to £13 or £14.

Our food costs have been worked out. The cost of food on the Isle of Wight is 2 per cent. above that in the rest of the country.

We have all those charges to face and it is very disappointing when one cannot get that fact over to successive Governments and have it written into the rata support grant element. The award this year must inevitably mean a 10p increase in the rates, or at least 16 per cent., and further cuts in already severely curtailed services.

The population in our county, as in others, has been increasing rapidly. I think that our percentage increase has been second only to that of Hertfordshire. About 15 years ago the population of the Isle of Wight was decreasing and we used to suffer from the old RSG formula because of that. The population was down to 92,000, but it is now about 112,000, and some think that it is, as high as 115,000. There has been a substantial increase, and we now have more old people coming to the island and more young people at school. About 22 per cent. of the population is now retired. The figures have gone up by more than 40 per cent. in both cases over the past 10 years and yet we are not receiving any more money to help provide services for these people.

What we need at 1977–78 prices is an increase of £2¼ million in our rate support grant, and not a derisory £100,000. We have 9 per cent. unemployment. I know that other areas have higher unemployment, but our figure is 3 per cent. or 4 per cent. higher than that in Southampton or Portsmouth. We are now in a desperate situation.

To add insult to injury—and this was the point made by the hon. Member for Hove (Mr. Sainsbury)—we are to pay more for our water this year because of equalisation. We were happy when we had our own water authority, but now that we are in the area of the Southern Water Authority we have to pay as much as anyone else because we are to equalise, and because Wales has to pay less we shall have to pay more. We are still to make a domestic rate element payment to Wales of 36p in spite of the fact that we do not have the benefit of any improvements this year. How can I explain to my constituents that we do not get any new drainage schemes or have any additional plant put in by the Southern Water Authority and yet pay more? When I met the chairman, the other day, I learnt that we are not on the next five years' programme so far as any essential sewerage schemes in the island are concerned.

What can be done? First, we want a firm promise from the Secretary of State that there will be an alteration in this formula, or at least that he will find out some special factors that will recognise our situation. If we cannot have that, can we have a direct subsidy? London seems to have got that. Outside this settlement London seems to have got a direct subsidy.

I ask the Secretary of State to confirm—I think he will accept this and has already agreed it—that he will receive a further deputation from my council early in the new year. We must get some satisfaction. If we cannot have it this year, we must have a firm promise that we shall have it next year.

Further, the Development Commission comes under the Secretary of State's jurisdiction. Can we have a little more help from COSIRA? We have had some help. We have had over £ ½ million. So I recognise that COSIRA has been very good to us. If he can do a little more for us, that will be greatly appreciated.

More importantly we could save money if we reorganised our local government structure. If the hon. Lady had her way and there were a referendum on the Isle of Wight, overwhelmingly the population would vote for an all-purpose authority. That is what we want. I am concerned to read that the two district councils are now talking about building new office blocks. South Wight says that it wants to build a new office block and Medina says that it is going to build a new office block. This is absolutely crazy. For goodness sake, let us get our local government structure right and then we can go on and save a little more money. Let us have successor councils back in our main island towns.

We have always been a responsible authority. Whichever party has been in power we have honoured its restrictions and policies. We have never gone on a spending spree. The Isle of Wight still has not got a public indoor swimming pool, yet such pools are to be seen all over the country. We have not got one because in 1974 we cancelled the orders for it in accord with central Government dictat. The Isle of Wight is not a wealthy county. It has one of the lower wage rates in the country. Other counties in the South-West claim that we are on a par with them. People who come yachting will know that the Isle of Wight is a county with a low wage rate. In all equity we deserve better. For this reason I must oppose the order tonight.

I want to make one other point on the increase orders, which we have hardly discussed. Will the Secretary of State confirm what the Home Secretary told the House recently, that any future pay awards—say, for the firemen, local government officers or others—will be the subject of a further payment? I do not think that it is covered in these increase orders.

6.58 p.m.

Mr. Robin F. Cook (Edinburgh, Central

At the severe risk of losing my audience I must make it clear at the outset that I do not intend to address myself to the Rate Support Grant (Increase) Order for England. I shall address myself to the Rate Support Grant (Scotland) Order, which is also before the House.

I begin with an observation that is common to both orders, namely, that I am struck with the thought that once again, as last year, we are debating both orders on the last day—other than the day of the Adjournment—before the Christmas Recess. It is a very odd way to treat an order which makes the biggest single allocation of public expenditure in the course of the year by leaving it to the fag end just before the Christmas Recess.

Mr. Sainsbury

Does not the hon. Gentleman agree, in addition, that it was on 22nd December last year that we debated this subject, which was even worse? In addition, we debate the order after the decisions have been taken in- stead of the House being able to influence the manner in which the decisions are taken.

Mr. Cook

The hon. Member has made a very pertinent point, to which I shall return. The reason why this debate can be left so late until only a comparatively few Members remain behind after many other Members have gone to their pressing constituency engagements is that there is nothing that we can do about it, anyway. We cannot amend the order. We can table a motion asking the House to approve the order, but by a curious quirk of the Standing Orders an amendment cannot be called.

The only way in which we can influence the decision and the order is to try to impress the Secretary of State with the vigour and the eloquence of our argument, which I am about to try to do.

I begin by ingratiating myself with the Secretary of State by saying that I welcome the order as a big improvement on the efforts of the past two years. Last year's order had to play its part in the restraint on public expenditure and was designed to help to reduce the public service borrowing requirement for the current year. The Chancellor has now discovered that his estimate of that requirement was so grievously out that twice in the past 12 months he has had to return to the House with packages designed to increase the requirement to bring it nearer his target.

In retrospect, perhaps it would have made for a more stable and a more healthy local government system, not to mention a better service for those whom that local government system is supposed to serve, if calmer counsels had prevailed last year and we had not had the severe cuts that were made to the money available last year and which have since been replaced with equal abruptness by the restoration of the capital amounts available to local authorities. However, that is water under the bridge. This order is a big improvement on last year's order.

I want to make two remarks concerning the order. The first I shall make relatively briefly, but the other I shall have to dwell on at greater length. First, I wish to draw my right hon. Friend's attention to the concern that has been expressed about the figure of cash limits. This figure is, as I understand it, 9.15 per cent. and has been worked out by COSLA as the figure for wage and salary increases over the coming year. However, the report on the order before the House says that this figure was drawn up "on the assumption that the Government's policies for pay are observed." The Government's pay policy norm is not 9.15 per cent. but 10 per cent. We know that that 10 per cent. is intended as a maximum norm and not a minimum norm. We are all acutely aware of how quickly a maximum norm set out in a pay policy turns out to be a minimum norm. The figure that COSLA is currently negotiating with the local authority manual workers is not 9–15 per cent. but 10.7 per cent.

Moreover, we are debating an order which will not only last through this current pay policy but presumably topple into the next phase, whatever it may be. The Government have already proposed a settlement to the police and a settlement to the firemen, although it has not yet been accepted, which will clearly generate settlements of more than 10 per cent. in the subsequent year. One can only presume that the Government hope for 9.15 per cent., on the basis that others will settle for less and that the settlements will thus average out. I doubt whether this is a realistic assessment. It is a doubt shared by COSLA. I ask my right hon. Friend to re-consider whether, given the trend of present pay settlements and the proposed reviews to which he has committed himself for the future year, it is realistic to propose a cash limit of 9.15 per cent. for 1978–79.

The second matter is one that weighs with me, and with my constituents rather more heavily. I was interested, listening to some of the preceding speeches, to hear a number of hon. Members complain that money was taken out of the comparatively rural areas and channelled to the inner city areas of England and Wales. It may come as a surprise to hon. Members when I say that I represent what is undeniably an inner city area. I represent the central area of Edinburgh, which has all the problems which are to be found in any other inner city area of 500,000 souls.

The effects of our rate support grant order, because of the effects of the rating revaluation that preceded it, will be to take £1.2 million away from Edinburgh and £5 million away from the greater part of Lothian and give it to Strathclyde. My constituents, because of the effect of revaluation, will come out of the order with rather less money than they did last year, because they are not within Strathclyde. One might add that the consequences for public expenditure of not being within Strathclyde are becoming so grievous that we may be well advised to petition to become included within that region before the next order is drawn up.

I emphasise that revaluation is not something that the Government do. We cannot blame my right hon. Friend for it. Neither is it an act of God which my right hon. Friend is incapable of overturning or compensating for. It is an act of man. It is an act of several different men who arrived at different conclusions. The man who has been in charge of revaluation in Strathclyde has concluded that rateable values in Strathclyde have in real terms reduced by 12 per cent. in the five years covered by revaluation, which has the delightful consequence for those in Strathclyde that they get 12 per cent. more from the rate support grant.

On the other hand, the man responsible for carrying out the revaluation in Fife has come to the conclusion that rateable values there have increased by 20 per cent., and the man for Lothian has stuck on 7 per cent. That has had the disastrous consequence for the residents of those areas that their rate support grant correspondingly decreases.

It may be necessary to explain to hon. Members from England and Wales how such a situation arises. When the Act was passed in 1948 for England and Wales, and when a correlation was made between rateable values and the amount of rate support grant received as a result of that valuation, steps were taken in England and Wales to put revaluation on a uniform basis by putting it all under the valuation office of the Inland Revenue. That step was not taken in Scotland. We linked rateable valuation to the rate support grant but we did not create the uniform method of assessing revaluation. That was left to independent assessors in each region, who this time round have come independently to quite different judgments as to how property values have moved. The judgments bear no relationship to any real index of economic needs or economic prosperity.

My right hon. Friend will be aware that the Layfield Committee recommended that a new base should be found for revaluation after the 1978 revaluation. It suggested that one way in which it could be done was by "some measure of personal income". It is difficult to find statistics to measure personal income movements over the past five years in the different regions of Scotland. I have tried, but I have been unable to do so. The figures are not available for 1973 and they are not yet available for 1977. However, we have the figures for 1974, 1975 and 1976.

How have personal incomes moved in the regions over the years 1974, 1975 and 1976, which are the three years within the five years covered by revaluation? We find that the movement bears no relation to the supposed move in rateable valuation that has emerged from revaluation. For instance, Strathclyde, which is one of the two regions in which rateable value has fallen, had the third highest increase in personal income over the three years. Lothian, the Borders and Galloway will all lose money as a result of the order following on revaluation. The money will be channelled towards Strathclyde, yet each of the three areas has had an increase in wage income less than the increase in Strathclyde in the same period. There is no relation between the economic prosperity of the area and the shift in notional rental values.

There is exactly the same absence of a correlation in unemployment. Strathclyde now, as in 1973, has the second highest rate of unemployment in the whole of Scotland. However, its increase in the past five years has been no more marked than in other areas of Scotland. The Highlands and Borders have had a higher increase in unemployment over the past five years, but they will lose out in terms of the rate support grant while Strathclyde benefits. The most curious example of all—perhaps it is the most savage—is that the Western Isles, which had in 1973 and has now the highest level of unemployment in the whole of Scotland, is to lose 8.7 per cent. of its rate support grant as a result of revaluation, while Strathclyde benefits.

I can see no conceivable objective or impartial standard of economic measurement that could come to the conclusion that over the past five years the Western Isles have developed 20 per cent. faster than the Strathclyde Region. However, that is precisely the conclusion that has been arrived at in the course of the revaluation exercise.

The truth is that notional rented property values are now so notional that in no way do they reflect real economic prosperity. They are an exceedingly false basis on which to calculate the disbursement of rate support grant.

There are two ways in which the Secretary of State may respond to this problem. First, as he will be aware, the Layfield Committee recommended a review of the method after the 1978 revaluation. I am bound to say that when rateable notices pass through the letter boxes in Lothian, in the Western Isles and, most of all, in Fife, where there has been a 20 per cent. increase in valuation—

Mr. Ian McCormick (Argyll)

And Aberdour.

Mr. Cook

Yes, including Aberdour.

When the rateable notices pass through the letter boxes, there will be such an upsurge of indignation, incomprehension and bewilderment about the rateable system and the revaluation exercise that my right hon. Friend will be well advised, at an early date—and preferably before that happens—to announce how he proposes to work out the next revaluation exercise so that it is plain that we shall not have a repetition of this completely arbitrary judgment.

Secondly, and more to the point, I hope that my right hon. Friend will take some step to compensate in the rate support grant disbursement for the effect of revaluation. I have attempted by tabling an amendment to the motion approving the order to point to the way in which that might be done.

At present the Secretary of State applies a straight population multiplier to the resources element. I understand that he could if he wished—it is a matter of his own discretion and it could be done even if we approved the order—apply a weighted population figure as the multiplier. I urge him to consider taking that course. I remind my right hon. Friend that there is no requirement that that should be a permanent measure. However, we require a transitional arrangement to cope with the impact of the revaluation, which is founded on a wholly arbitrary base. My right hon. Friend will appreciate—this is unusual for the demands that I make of him—that there would be no additional public expenditure. It would merely affect the way in which the global amount is disbursed. It would not mean my right hon. Friend having to write a larger cheque at the end.

There is one final consideration that I hope will weigh with my right hon. Friend when he considers how he can respond to my recommendation. He will be aware that we had a debate only two days ago on the Housing (Financial Provisions) (Scotland) Bill, which proposes to extend to housing subsidies precisely the exercise that we are now going through in respect of the rate support grant. He will be answerable to the House for housing subsidies, which will become housing support grants, as he is answerable to us for the rate support grant.

As my right hon. Friend will be aware, some Labour Members, including myself, doubt whether there will be adequate parliamentary control over the way in which the money will be disbursed. We shall not be able to table amendments. We shall be able only to plead with the Secretary of State and to use the vigour of our arguments and our eloquence. I draw it to my right hon. Friend's attention that it is inevitable that in Committee, in making our judgment on the Housing (Financial Provisions) (Scotland) Bill, on the question whether it will give us enough control over the Executive's expenditure, we shall reflect on the weight that he has attached to the views put forward in this debate and the recommendations and representations made to him outside the Chamber on the effect of revaluation.

7.12 p.m.

Mr. Iain MacCormick (Argyll)

It is necessary to be careful about the debate on the Scottish order. I am glad to be following the hon. Member for Edinburgh, Central (Mr. Cook) as I believe that very much of what he said is correct. I am astonished to look to my right and to see on the Opposition Front Bench those who have created the situation in Scotland that is now having its effect in exactly what we are debating tonight.

I am convinced that the one thing that we do not need in Scotland is too much centralisation of local government. It is odd that Conservative Members—especially those from Scotland—should be able to come to the House to debate another measure largely on the issue of whether Scottish Members should be able to vote on English measures when it was the Conservative Government who railroaded through the Local Government (Scotland) Bill with a majority of English Members.

Mr. Teddy Taylor (Glasgow, Cathcart)

Does the hon. Gentleman appreciate that he is talking a load of rubbish? Is he aware that the local government reform Bill for Scotland was approved by the Scottish Grand Committee without one voice of complaint from a Labour Member, a Liberal Member or from the SNP Member who was present? The local government reform of which the hon. Gentleman is making such a meal in his constituency and elsewhere was not objected to in principle by the representative of his own party or by any other.

Mr. MacCormick

If the hon. Gentleman is saying that he is proud that the Conservative Government put on to the statute book the Local Government (Scotland) Act 1975, fair enough. If I had had any part in putting that measure on the statute book, I should be ashamed. The people of Scotland will be interested to know that the hon. Gentleman is so proud of it.

I return to the issues that are before us. Although one cannot quarrel totally with what the Government are doing, there are certain elements to which we must object. In considering the debate that has taken place so far on the resources element, I must echo to some extent the remarks made by the hon. Member for Edinburgh, Central. I agree with much of what he said about the revaluation that has taken place in Scotland this year. The people of Argyll, whom I represent, will be hit far too hard. The people of Argyll face a three-fold increase in their rates, and that is something that we cannot put up with. I should like to ask the Secretary of State for Scotland to take another look at the whole effect of this order on the people who live in rural areas—not just in Argyll, but in places such as Ayrshire and Fife—who seem to be suffering in the same way as my constituents.

I often wonder exactly why we are voting these huge sums of money to local authorities in Scotland. It is not just that the people of Argyll will suffer from the implementation of the order. They are suffering enough already. I received the other day the massive report called the Strathclyde Structural Plan. As far as I can gather it makes two statements. First, it says that the population of Argyll will decline by 20,000 people over the next 20 years, and it says that the people of Argyll do not want houses over that period. That is hardly a sensible argument.

In view of the situation which already exists in rural Scotland, does the Secretary of State think that the present rate support grant order is a sensible and fair measure for spreading the load which we all know we must bear? Does he think, bearing in mind what is being done, that the people who live in rural parts of Scotland are having to face not only a punitive level of rating but punitive pressure on life?

7.17 p.m.

The Secretary of State for Scotland (Mr. Bruce Millan)

When it was arranged that these debates would be taken together—largely because the Opposition wanted it that way—it was arranged that at a convenient opportunity I should intervene to deal with the Scottish order, and I suggest that this might be such an opportunity.

My right hon. Friend the Secretary of State for the Environment mentioned something of the general economic background and the Government's approach to the rate support grant settlement for next year. It is not necessary for me to cover that ground again, but I will run over some of the major considerations and aspects.

First, on relevant expenditure, I agreed to an increase of about £16 million in the provision for 1978–79 compared with what was in the last White Paper for that year. That means that, although total expenditure is not substantially above what the White Paper indicated, there has been a certain reduction of pressure on local authorities, and that means that, in certain services, they will be able to do a number of highly desirable things, and I was happy to be able to make that increase in expenditure. It brings total relevant expenditure to £1,517 million.

Secondly, I decided to maintain the percentage rate of grant at the same figure as for last year—namely, 68.5 per cent.—for reasons similar to those explained by my right hon. Friend when he dealt with England and Wales. This has very much to do with the question of stability and keeping any increase in rates for next year down to modest levels.

Within the relevant expenditure, I have made provision in education for continuation of the scheme for the employment of teachers in areas of urban deprivation, and also within the educational figures I have allowed for expenditure rather above the levels that we would have produced if we had maintained strictly the pupil-teacher ratios which we have agreed with the local authorities. So there is a certain margin available for the authorities to take account, for example, of the problem of declining pupil numbers in terms of getting educational expenditure reduced proportionately to them.

Again, I have made extra provision for the urban programme, and in general the additional provision in relevant expenditure will enable local authorities in a modest way to do one or two things that the very tight constraint on local authority expenditure over recent years has not allowed them to do.

When in our debate last year I dealt with actual expenditure in 1976–77 I said that I thought that local authorities would be able to achieve more savings than they had declared at that time. Local authority expenditure in 1976–77 was within about £4 million of the estimate on which the order for that year was based. In 1977–78 the budgets of local authorities are again within £2 million of the relevant expenditure on which the rate support grant order was based. I believe, therefore, that we can say that, after considerable difficulty the local authorities have managed to get their expenditure under control and within limits that are very much the same as the limits that have been laid down in successive rate support grant orders. I simply pay tribute to the Scottish local authorities for what I believe in that respect to have been a very considerable achievement.

The most marked change in the rata support grant for 1978–79 is in the domestic element, because relief to domestic ratepayers has been reduced to 3p in the £. I want to explain why that is so.

It takes account of the 1978–79 rating revaluation, which has had two particular relevant effects. In the first place, domestic valuation will be increased overall—I emphasise "overall" because an individual valuation may be very much outside the general pattern—for next year to a considerably lesser extent than non-domestic valuations. The total rateable value represented by the domestic category therefore falls from 18 per cent. in 1977–78 to 39 per cent., with, of course, corresponding increases in the other categories—for example, industrial commercial and miscellaneous.

Last year's domestic element was 31p in the £, and, taking account of the revaluation factor, the equivalent figure for 1978–79 would have been lip in the £, but I have reduced that to 3p in the £ so that the full benefit of revaluation will not go to the domestic ratepayer in 1978–79. I have tried to shield the non-domestic ratepayer from some of the increases in rates that he would otherwise have to pay because of the effect on him of the revaluation.

I decided that the appropriate figure was a reduction to 3p in the £, but even with that domestic rate payments in Scotland overall in 1978–79 should be significantly less than they have been in the current year. The total rate payments in Scotland in 1978–79, as in England and Wales, will increase by an amount which will be within single figures.

Mr. Robin F. Cook

My right hon. Friend is, no doubt, correct to refer to the average for the whole of Scotland, but because of the effect of revaluation—I accept that that is not entirely his responsibility—the increase in the areas outside Strathclyde is likely to be well in excess of 10 per cent.

Mr. Millan

I do not accept that, but if my hon. Friend will be patient I shall deal with the points he has made about revaluation.

Mr. MacCormick

I want to echo what has been said by the hon. Member for Edinburgh, Central (Mr. Cook) and to add that it is not just ratepayers outside Strathclyde who will suffer. There are those in Strathclyde who will suffer from this approach. Ratepayers in Argyll and Ayrshire, for example, will suffer very badly because of this approach.

Mr. Millan

I do not know what the hon. Gentleman means when he says "because of this approach". He is talking of the effects of revaluation. I have said that I shall deal with that in a moment if I am allowed to do so. It follows logically that if the overall increase is within single figures, and assuming that local authorities keep within the expenditure guidelines, as I believe they will, overall domestic ratepayers will pay less than in 1977–78. Some domestic ratepayers in particular areas will pay more. Other domestic ratepayers elsewhere will have very considerable reductions indeed in the domestic rate payments in 1978–79.

Mr. MacCormick

rose—

Mr. Millan

Let me first deal with the question of revaluation, if I may.

Obviously, anyone from an area where revaluation produces higher than average increases of rateable values will not like it. On the other hand, those of us who come from areas where the increases in rateable values have been less than the average—this happens by chance to be the case in my own constituency—will find that the rateable burdens will be very considerably reduced in 1978–79.

I was asked why we should not make transitional arrangements. I discussed this matter quite extensively with the Convention of Scottish Local Authorities, and we had a working party of officials whose unanimous recommendation, which, again, was accepted by COSLA itself, was that there should be no transitional arrangements. This was agreed at a meeting that I had with COSLA, when I put the matter specifically. As I recollect, at that meeting it was agreed by the COSLA representatives, including representatives from areas which have suffered from revaluation—

Mr. MacCormick

rose—

Mr. Millan

Will the hon. Gentleman allow me first to finish this little bit of the argument?

At the meeting with COSLA it was unanimously agreed that there should not be transitional arrangements. There were two reasons for that. First, there are practical and administrative reasons. Some transitional arrangements would require legislation, but there were also practical reasons against the transitional arrangements. The view was also taken that the new valuation figures would in principle—and, I believe, also in practice—represent a fairer deal in terms of the impact on the distribution of rate support grant than the present arrangement.

It can be argued, and the representatives from the areas which have gained from revaluation argue very vigorously, that all the revaluation for next year will do is to bring them long delayed justice in terms of distribution of Government rate support grant. The revaluation has been delayed. It ought to have been in 1976. I think the areas that will gain from revaluation are perfectly entitled to argue, with very considerable merit, that they have been, as it were, left out of the additional Government support in the last two years. All that will happen from 1978–79 onwards is that they will receive something that they ought to have received at least two years ago. I believe that in principle—

Mr. MacCormick

rose—

Mr. Millan

Will the hon. Gentleman wait a little longer?

I believe that in principle it would be wrong to make transitional arrangements for revaluation, but I repeat that, whatever I feel about this, it was unanimously agreed with COSLA. When the matter was discussed with COSLA at my final meeting with those concerned, when the rate support grant settlement was finalised, and when the effects of revaluation were known to the representatives of the different authorities, I did not have representations from COSLA that I should make transitional arrangements. It is not, therefore, a question of my imposing this particular pattern, because it is something that I have agreed with COSLA, and I do not believe that I should change it now.

Mr. MacCormick

I have no intention of representing COSLA. My only intention is to represent my constituents in Argyll. Is the Secretary of State really saying that we are somehow to be punished in order to benefit people who live in a great conurbation as opposed to a country area?

Mr. Millan

There is no question of the hon. Gentleman's constituents being punished. [Interruption.] Will the hon. Gentleman allow me to finish what I am saying? There is no bias written into the revaluation against rural areas or in favour of them. The valuation principles are consistent between, one area and another, between one part of Scotland and another, and between rural and urban areas. There are many rural areas in Scotland where the valuations have traditionally been very low, and there are some urban areas—even areas of deprivation—where the valuations have been traditionally very high. I am not making a value judgment on that. I am simply saying that the principles have been applied everywhere in the same way, and it has turned out that in some areas revaluation has meant higher increases than in other areas. But, as I say, the view that I would basically accept is that that is retrospective justice and that there is no argument in principle for a transitional arrangement.

Mr. Robin F. Cook

I am surprised at my right hon. Friend's observation concerning the unanimity of COSLA, as only last Friday I and the hon. Member for Midlothian (Mr. Eadie) were present at a meeting of councillors and officials of Lothian Region when they expressed precisely the view about transitional arrangements that I have put in my amendment. May I, therefore, urge my right hon. Friend to clarify whether the weighting of population element is a matter within his discretion once the order is approved? If so, will he bear in mind the representations of the Lothian Region, which appear not to have been reflected by its delegates on the COSLA working party?

Mr. Millan

The convener of the Lothian Region is on the COSLA finance committee, which negotiates with me on the rate support grant. Therefore, it just will not do for any hon. Gentleman to talk about representations in that sense. The representations were in the other direction—that we should maintain the revaluation without transitional arrangements. The COSLA finance committee, which meets me on these matters, is, in my view, representative of the whole of Scotland, and certainly includes the Lothian Region and the Fife Region, which is the other region concerned. The convener of COSLA is Sir George Sharp, who is also the convener of the Fife Region.

Mr. Teddy Taylor

rose—

Mr. Millan

I must press on, because other hon. Members want to make speeches about England and Wales.

I think I have dealt with the particular matter that was raised. Of course, I could make adjustments. I suppose that, technically, there would be possibilities, but I do not believe that there is a case for it. In regard to the needs element—

Mr. Teddy Taylor

I am grateful to the Secretary of State for giving way. In view of the change in the balance of the rates, with more on the East of Scotland and less on the West, and with the big increase in the valuations of industry, has the Secretary of State given any consideration to the impact of what will be a very big rise for some industries in some places where there is very high unemployment? Does he not think that this could be a severe problem in Scotland, with 180,000 unemployed?

Mr. Millan

I was about to go on to say that I am maintaining the industrial derating at 50 per cent., and was about to announce that in a couple of minutes. What I have done with the domestic element, by reducing it very substantially in real terms, helps to cushion the impact of increased rates on industrial and other ratepayers in Scotland. I have done it in that particular way and I am maintaining the element of industrial derating at 50 per cent.

I will now pass from the needs element to the resources element and say that the distribution of that is determined by the rate poundage in the area concerned, and by the difference between the penny rate product and the standard penny rate product, which, in turn, is determined by the national standard amount. We had difficulty last year because the preliminary calculation turned out not as accurately as we should have liked, and I am doing it in a different way this year for the better convenience of local authorities. My current expectation is that the national standard amount for 1978–79 will be of the order of £2.81.

The cash limits have been calculated for Scotland on the same basis as for England and Wales. They take account respectively of the whole period up to 31st March 1979. For example, in respect of wages the period goes beyond the period of the current pay guidelines, which run for approximately 12 months, into a period beyond that. In general they take account of the reducing rate of inflation and the Government's expectation that inflation will continue to be reduced during 1978. I believe that the cash limits, calculated on that basis, are fair to the local authorities

I sum up by saying that in current circumstances, looking at the economic circumstances, at the need to maintain local authority services at a sufficient but not an extravagant level, and at the need for economy in local authority expenditure, the 1978–79 settlement for Scotland is fair and reasonable. Whatever the argument may be about the effect of revaluation, that is also the assessment of this order made by most local authorities in Scotland.

7.37 p.m.

Sir Bernard Braine (Essex, South-East)

As this debate proceeds, there is a growing tide of protest reflecting frustration and even controlled anger against the rate support settlement set out in the orders. It is quite remarkable that that protest comes not merely from the shire counties, from the North to the South and from the East to the West of the kingdom, but from both sides of the House.

As the Secretary of State for the Environment was not here at the time—[HON. MEMBERS: "Where is he?"] He is not here now, either. But as he was not here during the speech of his hon. Friend the Member for Rotherham (Mr. Crowther), I suggest as politely as possible that even if he does not heed what is said by shire Members on the Opposition side of the House, perhaps he will read and reread the robust, refreshing and sensible speech of his hon. Friend. I hope, too, that he will study the extraordinary anomalies brought out by the hon. Member for Edinburgh, Central (Mr. Cook) and by the hon. Member for Isle of Wight (Mr. Ross).

In Essex, all constituency Members, both Conservative and Labour, joined in a protest to the Secretary of State about what was envisaged for our county. We asked for a meeting with him. As yet, we have had no reply to our request. I must, therefore, protest strongly against the settlement as it affects my county. I listened very carefully to the Secretary of State. On occasions, he can be very persuasive, but he was not today. He said nothing that changed my view that the settlement is unfair and inequitable for all the shire counties.

My hon. Friend the Member for Henley (Mr. Heseltine), in a very vigorous and telling speech, was right. The British people are generally prepared to accept sacrifices when it can be demonstrated to them that these are necessary, just and fair, but they are also rightly suspicious of the use of political power to favour one section of the community at the expense of another. It is not lost on the ratepayers of Essex—our local Press takes a deep interest in any matters touching on the rates—nor on other disadvantaged ratepayers that a cynical exercise is being carried out at their expense. Moreover, this is not the first time that this has happened. It follows on from the savage cuts in grant that we and other shire counties experienced last year.

As a consequence, our ratepayers face bills substantially in excess of the national average because of the high rateable value of their proporties. Over and over again, hon. Members have had to remind the Secretary of State that in counties with properties with high rateable values the burden can be very heavy. It is not right that our ratepayers, after the burden that they had to assume last year and the year before, should be asked to bear further increases above the national average in order to offset continued withdrawal of grant.

Before considering the effect of the arrangements for 1978–79, it is relevant to mention the effect of last year's arrangements. Essex then sustained a cut of £8.5 million. The brunt of that was felt by our education service. It is to the tremendous credit of the Essex Education Committee that it managed to avoid making economies which affected the quality of education. The teacher-pupil ratio was preserved. But the cut meant that capitation allowances were slashed, college staffs were reduced, the lighting and the cleaning of schools were cut, and library services were reduced. Evening class fees had to be increased and school meals charges had to be enforced.

There were reductions, too, in our road maintenance and in supporting staff for the police at a time when every county in the land, including our own, faces a rising tide of crime. Two new homes for the elderly were used to replace three older homes which had to be phased out. There were reductions in the administration and maintenance of services for the elderly. But the main point in all this is that ours is not a static community; it is an expanding one.

Mr. Julian Ridsdale (Harwich)

Is my hon. Friend aware that in North-East Essex alone, in one district the number of people over 65 years of age is 33,000, and that the district's share in the rate support grant over the past four years, under the Labour Government, has meant a 20p in the pound increase in rates? This year there will have to be a 3p increase in the pound rate. Is that fair?

Sir B. Braine

I am aware of the situation in my hon. Friend's constituency. I see my hon. Friend the Member for Braintree (Mr. Newton) here. He and I are closely concerned with the services for the elderly in the county. We can testify to the truth of what my hon. Friend the Member for Harwich (Mr. Ridsdale) says. The situation that he describes is unfair. It must be an intolerable burden on the local authorities in his constituency.

My hon. Friend represents a constituency with a very high proportion of elderly people. Indeed, Essex as a whole is a county bursting at the seams. That is not only because it attracts a very large number of elderly folk of slender means who come to spend their last years in our county. It also attracts young families, incidentally coming mainly from London, buying their first homes. In short, it is one of the fastest growing areas in the country. The pressure on our existing services is at its maximum. My hon. Friend the Member for Harwich rightly reminded the House of the situation of counties with expanding populations. I imagine that this is true also of Kent, Hertfordshire and Surrey.

In passing, I might say that we are talking about a county which is singularly deprived in other respects. Essex has roughly the same population as Kent—1.4 million—yet it has £20 million a year less to spend on its health services than Kent. God knows why, but that is a fact. Are the people of Essex any less in need of doctors or hospital services than are the people of Kent?

Mr. A. P. Costain (Folkestone and Hythe)

They could not be much more in need than the people of Kent?

Sir B. Braine

I am aware of that. My hon. Friend will know that poverty is relative. The plain fact is that, badly-off though Kent may be, Essex, which has the same population, receives £20 million a year less for its health services. In addition, my constituents and those of every Essex Member present in the Chamber are having to pay a swingeing increase, about the fourth in the past four years, in rail fares, beginning next year. But, unlike other commuter areas, there is to be no improvement in our services. This is the background against which the proposals envisaged in these orders will be judged by the ratepayers in our county.

Mr. Tony Newton (Braintree)

Does my hon. Friend agree that not only is Essex £20 million under-funded on the health services but that one of the clues to the political nature of what is being done is that, whereas on the rate support grant the Government are happy to redistribute resources to London, on the resources allocation exercise in the health service they have drawn back from the recommendation of reallocating resources from London to Essex?

Sir B. Braine

My hon. Friend is absolutely right. My hon. Friends the Members for Southend, West (Mr. Chan-non), Southend, East (Sir S. McAdden) and Maldon (Mr. Wakeham), who were associated with me recently in making representations to the Secretary of State for Social Services about ward closures, can testify to that. The plain fact is that, look where one will, whether in the administration of the health services or the allocation of resources for local government services, there is no principle. Perhaps it can be said that only one principle is applied to this administration, and that is that there shall be no principles at all other than those which serve to ensure the survival of the Government.

When we look at the rate support grant settlement for 1978–79 we are driven to the same conclusion. The settlement is based on the notion that it is politically feasible to milk taxpayers and authorities in one part of the country and subsidise others. It substantially ignores population growth and decline and is based on a view of our capacity to control inflation held by the Chancellor of the Exchequer but with which no county treasurer in the country agrees.

Let me take one practical example of how these proposals will affect ratepayers in Essex. I take the example of two ratepayers living in virtually identical properties close to each other. Their incomes are roughly the same. One property is on the Greater London side of the border, in Redbridge, while the other is in the adjacent area of Epping Forest, in Essex. Let us see how these two house owners fare under the changes which the Government are manipulating. I am dealing with actual examples here. The rateable value of the Redbridge house is £250, while that of the Epping Forest house is £245. In 1976–77 the rate bill for the Redbridge property was £6 higher than that of the Epping Forest house. In 1977–78 both rate bills were tip but the Redbridge bill was £13 lower.

This year, making certain assumptions about the level of the rate, and according to the best calculations that our county treasurer can make, the Epping Forest house owner will pay £42 more in rates. Where is the logic in this? Where is the equity? Where is the justice? There is no rhyme or reason in it. All the calculations may have been made and fed into the computer, but if what comes out is vicious nonsense of this kind, setting man against man—[Interruption.] This is no laughing matter, as the hon. Member for Ince (Mr. McGuire) should know. It is what people pay in rates which will very much determine—

Mr. Michael McGuire (Ince)

rose—

Sir B. Braine

Let me finish. The hon. Member should not have laughed in the wrong place. What people pay in rates concerns them very much. It makes a mockery of any tax reductions that are to come, particularly when we bear in mind that the people of Essex will have to pay through the nose for the privilege of travelling to work—if there is any work for them next year.

Mr. Michael McGuire

May I make two comments? First, we are not yet being televised. Second, if I am lucky enough to catch Mr. Deputy Speaker's eye I shall make out a stronger case than the hon. Member is making for his area for an area which I believe has a better claim than any to receive extra help but has not received it. The hon. Gentleman does not represent the only deprived area.

Sir B. Braine

That is why I was surprised to hear the hon. Gentleman laughing. I have great respect for him and I am delighted to hear that he will be joining the swelling tide of protest.

The fact is that so far we have heard absolutely nothing about the protests made to the Secretary of State by hon. Members representing Essex constituencies. That is uncharacteristic of him. It may be that we shall get no reversal of this inequitable arrangement. The least, and certainly the fairest thing, that the right hon. Gentleman could do would be to distribute the 1978–79 needs element pro rata to the 1977–78 distribution. This standstill in grant distribution would be consistent, I suggest, with the overall standstill envisaged by the Government for local government spending next year. Here at least is a principle. I beg the Secretary of State, in his welter of non-principle, to grasp at a straw and to give some comfort to our people—to give them a glimmering of hope that the Government can at least base their policy upon a principle that is consistent and easily understood.

I shall be interested to know whether we shall hear tonight that the Under-Secretary, who is to reply to our debate, is instructed to say that this suggestion will be considered. If no hope of that kind is given to us I, for one, shall vote against the orders.

7.52 p.m.

Mr. John Cartwright (Woolwich, East)

Apart from what I might call the Scottish interlude, this debate has evolved as a sustained attack on London and I am grateful for the opportunity to begin to put the case for the defence. Before doing so, there are two general comments I wish to make. First, I very much welcome what my right hon. Friend said about the co-operation that he has received from local government over the past difficult two years. Too often councillors have been the whipping boys of national politicians. We should remember that councillors do not get themselves elected to preside over standstills and cuts in services. The fact that they have done so in the past couple of years is something that reflects great credit upon them.

Second, I endorse what my right hon. Friend said about the regression analysis. It is certainly not the ideal way of distributing the rate support grant needs element. Simple it is not. Its complexity seems to be increasing year by year. There was a time when I thought that I almost understood it. Those days are long gone. My right hon. Friend is right when he says that no one has yet produced any better basis for determining the needs of local authorities to spend to meet the problems they face. What is worrying is that some of the information, perhaps a good deal of it, on which the regression formulae are based is getting rapidly out of date. Much of it is based on the 1971 census. There is a need to get the information more up to date.

Mr. Ronald Brown

Would my hon. Friend not agree that many of us have been arguing that for a long time yet we did not hear the chorus of voices from the Conservative Benches complaining about the situation? My hon. Friend might ask Conservative Members who have been shouting why they were not shouting long ago.

Mr. Cartwright

I am grateful to my hon. Friend. Some of the comments we have heard suggest that this position began with this rate grant distribution. That is not so. It goes back a long way.

I find it a little hard to recognise the picture that some Conservatives paint of London. They suggest that the streets of London are paved with gold and that Londoners are living in £500,000 or £1 million houses and driving Rolls-Royces. That is not a picture that my constituents would recognise.

We should look at the history of the rate support grant as it has affected London. London has never received its full entitlement. Until 1975 London's spending was never even involved in the regression analysis. It was argued that because London had large rateable resources its spending should not be involved in the analysis. Ordinary Londoners are hit in two ways by this thinking. They have high rateable values, which mean that they end up paying high rates. In the current situation if one takes comparable properties, the average London rate for a three-bedroomed house is £191 a year. The average rate for the same house anywhere else in the country is £128. Therefore, Londoners are paying an extra £63 for identical property.

Secondly, Londoners were hit tremendously by the large rate income that is paid to local authorities and the assumption that this means that those local authorities need less help. A smaller proportion of local government spending in London has been met by the rate support grant than in the rest of the country and this has been the situation for a long time now. It is time that these matters were put right.

The campaign to put it right has been a joint one involving both political parties and London Members on both sides of the House. But as I survey the Benches opposite it seems that London Conservatives have their heads so far below the parapet as to be absolutely invisible.

In 1975 we had London spending included in the regression analysis. Unfortunately that was not the total factor. The Department of the Environment dreamed up the claw-back. It meant that London was entitled to inclusion but there was a claw-back of benefit to the rest of the country. This meant that the rest of the country was entitled to a slice of the benefit that came from including London in the analysis. In the current year the claw-back is of the order of £403 million. Next year it will be reduced to £270 million, but it is still a claw-back away from London. The Secretary of State has made it clear that he has based his assessment of claw-back on factors that will ensure that Londoners pay the same rate increases as other parts of the country. But, by his not narrowing the gap, Londoners will still be paying higher rates than the rest of the country. This means that London is forgoing £270 mil- lion of its entitlement under the rate support grant, and the benefits will go to other parts of the country whose ratepayers are paying less anyway.

It is worthwhile looking at the actual rates paid by a number of local authority areas. I have figures for nine counties about which the Association of County Councils made a great song and dance. Only Hertfordshire is in any way comparable, in terms of rates paid, with London. If we look at the highest of the remaining eight counties we find that the average in Buckinghamshire is £151 for a three-bedroomed house. In Essex it is £148, in Northumberland £108 and in Wiltshire £102. If we look at the identical house in London we find the average rate is £191. In some areas the rates are of the order of £424 a year. This is so in Camden and Westminster. Some people may say that these areas are not typical of London because they have some very salubrious areas within their boundaries.

For the sake of argument, let us look at Southwark where the average rate is £212. This borough includes areas that certainly could not be called salubrious. We also find that in Tower Hamlets—hardly the most desirable place in London—the average rate is £210. Therefore, the ratepayers in Tower Hamlets are paying twice as much as those in Wiltshire and they are living in an environment that is very much less pleasant.

We must consider the argument that while the rates are higher in London the services are very much better. A representative of the ACC claimed that London enjoyed very much higher standards of services than other parts of the country. While it is true that standards are, in some cases, higher, it is also true that the problem; are very much worse. The teacher ratio in Hackney might be better than that in Leamington Spa, but this does not mean that the standard of education is any better in Hackney. It simply reflects the fact that the problems are worse in Hackney and more teachers are needed.

The DHSS recently undertook a study using 23 indices of social deprivation and it placed eight inner London boroughs among the 10 most deprived administrative areas in the whole of England. Another six had similar problems on a smaller scale. Those eight boroughs contain 4.2 per cent. of the population of England—more than the population of the whole of Merseyside.

Sometimes we forget the problems of unemployment. There are more people unemployed in Greater London than in Scotland and twice as many unemployed in Greater London than in the whole of Wales.

It is claimed that great benefits come to London from industrial development and large numbers of factories. That is a great laugh in my constituency where we used to have factories, but they have all gone to places like Rotherham and The Hartlepools. They are certainly not in my constituency any longer. Between 1961 and 1974 industrial employment in London fell by one-third, with a loss of half a million jobs.

London has 12 per cent. of the total industrial floor space in England and Wales and of that 30 million square feet is vacant. This represents one-quarter to one-third of all vacant industrial space in England and Wales.

Mr. Ronald Brown

Can my hon. Friend give the corresponding figures for office employment and development?

Mr. Cartwright

I can tell my hon. Friend that office employment tends to concentrate in the inner core of central London. It is not of great benefit to many of my constituents in Greenwich, nor to many of his constituents in Hackney. Also, the office issue is not quite the bonanza that it was once. Many valuations for commercial properties were made in 1973 at the height of the boom, and big business is very adept at appealing against these estimates. There is a backlog of appeals to be heard and rate income has been cut.

Mr. Ronald Brown

Does my hon. Friend not agree that the people who are taking those jobs come from Essex, Surrey, Kent and all the way round the country, and therefore his argument that they are all filled by people living in Hackney and Tower Hamlets is nonsense.

Mr. Cartwright

One of the problems of inner London is that we have not provided a balance of opportunity. The office jobs which are provided do not meet the immediate needs of the unskilled worker who visits the employment exchanges.

Mr. Steen

Does the hon. Gentleman not agree that there are 14,139 acres of land vacant in London and that the majority of it is in the ownership of local authorities or nationalised industries?

Mr. Cartwright

I do not dispute that figure. A good deal of vacant land in London is dockland. We all know the problems involved in developing those docklands and the difficulties that have stood in the way of progress. This underlines the point I was trying to make—namely, that that kind of area at one time yielded a substantial rate income but no longer yields it because those areas are empty and unused.

Let us examine other social issues and the problems of social deprivation in local authorities. Let us look first at the situation in regard to homelessness. I have examined the incidence of homelessness in the nine boroughs over which the Association of County Councils has wept such bitter tears and compared it with the situation in inner London. Taking the families accepted as homeless for the six months ending December 1976, expressed as a proportion per thou-said households, we find that in Wiltshire 272 families became homeless in that period, representing 1.7 per thousand households in the country. In Northants the figure was 192 homeless families, 0.2 per thousand households; in Essex the figure was 316 families, 0.7 per thousand households. If we take the situation in inner London we see that in Tower Hamlets there were 279 homeless families in that same period representing 4.8 per thousand population; in Lambeth 403 homeless families, 3.6 per thousand; in Hackney 326 homeless families, 4.1 per thousand; and so on, in that area. That indicates the difference in scale when one examines the problems in inner London

When we examine the numbers of families in homeless accommodation at the end of 1976, we find in Kent a figure of 148—a high figure for a county. At the other end of the scale, the figure in Northumberland is only six and in Buckinghamshire only eight. However, in inner London the number of families in homeless accommodation in that period in Tower Hamlets was 277, Lambeth 252 and Camden 183. London's proportion of the total population of England is 15 per cent., and the London area has 30 per cent. of the nation's total of homelessness and 55 per cent. of those who are in homeless accommodation, compared with the rest of England. That illustrates the problem with which we are dealing in London.

Let us take the children in residential care expressed per thousand of population under 18. In Northants the figure is 6.6 per cent., Wiltshire 5.6 per cent., Essex—and I see that its champion, the hon. Member for Essex, South-East (Sir B. Braine), has departed—4.4 per cent., and Buckinghamshire 4 per cent. The situation in inner London is very different. The figure of children in residential care per thousand population under 18 in Tower Hamlets is 31.5 per cent., Kensington and Chelsea 26.3 per cent., and even in Westminster, the area in which we are now meeting, the figure is 23 per cent. That again points to the problems which we face in inner London.

Mr. Ronald Brown

Will my hon. Friend also confirm that many of the homeless families come from other parts of the country to London, and include homeless families from Rotherham. Wales and other places?

Mr. Cartwright

What worries me is that when people read all these stories of million-pound houses, Rolls-Royces and London streets paved with gold, it might lead them to come in even greater numbers to London.

We must face the fact that in London we have all the ingredients of the problems which for years have beset big cities in the United States. We have a picture of considerable deprivation and growing social problems. At the same time, London's rate base is declining. This has happened because the population is falling and the resources are declining because of the departure of industry from the area and the decline in commercial operations.

The situation more than justifies the fact that London's share of rate support grant should rise from 19.6 per cent. to 21.6 per cent. Having listened to this debate, I am a little worried that we may be drifting into the New York syndrome. Many areas in the United States have for years ignored the problems of New York City. It would be a tragedy if similar barriers were raised between London and the rest of the country.

Bearing in mind what the Government have said about inner city problems, I believe that this must mean that more of the rate support grant to which London is entitled must go to London. I look forward to hearing what the London Boroughs Association and the Association of Metropolitan Authorities will say when a claw-back is needed and when London gets its full entitlement. In the meantime, I very much welcome the Government's action in this sphere.

8.7 p.m.

Mr. Wyn Roberts (Conway)

The hon. Member for Woolwich, East (Mr. Cartwright) was eloquent in his defence of London's share of the rate support grant but he seemed to be setting out to prove that all parts of the country are becoming poorer and more needy under a Labour Government.

I disagree with the hon. Gentleman in his argument about the varying rate payments in different parts of the country. We cannot simply make a straight comparison between one area and another without considering the level of increase in average incomes in those areas. The rate support grant settlement for the coming years is causing great concern to local authorities and ratepayers in Wales, despite the fact that we have a higher rate in terms of domestic rate relief.

However, I shall leave to the Under-Secretary of State for Wales the arguments in justification of the higher rate of relief if he feels that justification is necessary.

I wish to express the strong concern of local authorities at the present situation. The Association of County Councils considers these proposals to be grossly inequitable and totally unacceptable". Those are strong words for a normally restrained body, as the association undoubtedly is. The Welsh Counties Committee tell me that all their worst fears have been realised, yet again we see London benefiting at the expense of the county councils, including those in Wales.

As we have heard, the basis of this charge is that although London's share of the needs grant next year will rise, by 12.2 per cent. the overall share of Welsh counties will fall by 3 per cent. London and other large conurbations have major problems, but so do other areas with far fewer rateable resources. London's share of the total needs grant next year will be 21.6 per cent., yet London's share of the total population of England and Wales is only 14.3 per cent. I share the view of the Association of County Councils that this difference is far larger than can be justified on the ground of need.

The hon. Member for Woolwich, East referred to the problem of homeless persons, and we all know that London has a high proportion of such people. The hon. Gentleman will also know that the legislation on homeless persons provides that those who are made homeless in London but who come from other areas should be returned to their areas of origin and local connection.

The decision to pay London extra grant means a reduction in the grant that is otherwise payable to the counties. In Wales this means that every county will suffer to a greater or lesser extent. According to the Association of County Councils the total loss of grant amounts to £7.5 million in Wales, the equivalent of a 1.8p rate.

The highest loss, of £1.3 million, will be suffered by the county of Clywd, which has one of the highest unemployment rates in the kingdom, and by my own county of Gwynedd, which was referred to by the right hon. Member for Anglesey (Mr. Hughes) and which has the lowest average of personal income in the country and the highest population of elderly people. It will also suffer a loss of about £1.3 million. The loss in Powys will be the equivalent of a 4.2p rate, and that will be the highest loss of any county in England and Wales.

I am extremely disturbed that throughout this debate we have found that there is a difference of view between the Department of the Environment and the Association of County Councils about these figures. We have heard the Government's comments on the ACC figures—which are rather more pessimistic than the Government's figures—but it is only fair to read the ACC's comments on the Department's figures. It said: It is an artificial figure and in particular does not include most of the gain in grant shared by the London authorities. These figures understate the real size of the grant loss outside London and overstate the size of grant gains outside London, and overall they understate the gains of the London authorities. The 2p safety net has been applied to these figures.

Mr. George Cunningham

If one wants to obtain as accurate and comprehensive a picture as possible of the difference between, say, Powys and London, should not the hon. Gentleman tell the House that the average domestic ratepayer in Powys pays the highest rate to the local authority, which is £40.16 a year—and that is a quarter of the average London figure? In fact, it is less than a quarter.

Mr. Roberts

The hon. Member for Islington, South and Finsbury (Mr. Cunningham) has been making that point throughout the debate. I can add to his knowledge by pointing out that the average domestic rate payment in Wales is about £62 compared with the sort of payments of which we have been hearing, of £113 in the non-metropolitan counties and £190 in London. However, I remind the House of what I have said before about my own county of Gwynedd—that it has the lowest average personal income in the entire country; so we cannot compare areas simply on the basis of rate payment.

Of course, it will be argued by the Government that all the counties will receive an increased allocation compared with last year, but the increase on 1977–78 amounts to 1.2 per cent. for Gwynedd, 3 per cent. for Powys, and 4.1 per cent. for South Glamorgan. When these figures are compared with the current rate of inflation, it is clear that ratepayers in those areas will face significantly larger than average increases.

The Welsh Counties Committee tells me that each of the Welsh counties will be faced with the choice of cutting services or increasing rates. Services have already been cut and cut again, and there will be little choice but to put up rates beyond the Government's 10 per cent. guideline. This is at a time when people's financial resources are not keeping pace with such increases.

I hope that local authorities will exercise the utmost restraint, because our people really cannot stand the sort of rate increases that are in prospect. I accept that we receive a high level of domestic rate relief, but there is no relief for the commercial ratepayer, who is undoubtedly suffering badly. Shops are closing and bankruptcies abound in all parts of Wales. This has an effect on the employment situation, and we all know how bad that is in Wales.

I was extremely sorry to hear the Secretary of State say today that he did not intend to impose any limit on the rate increases that might be made by local authorities. I hope that the Government will do their utmost to restrain the authorities from raising rates, at least beyond the 10 per cent. guideline, even though that will probably mean cutting services to the bone, because I am sure that the harm caused by rate increases will be greater than that caused by cutbacks in services.

As the Minister knows, the Government's severe restrictions on local government spending has had a disastrous effect on the house building programme in Wales. It is hard to understand why the Government are so ready to spend millions on devolution, which nobody wants. If I had a suspicious mind, I would wonder whether the cutback in local authority spending was not in some way preparatory to the establishment of the Welsh Assembly, the first task of which will be to review the local government structure in Wales. With the local authorities desperately short of resources and forced to reduce services, the Assembly reviewers will not be short of adverse criticism on the part of the public. We can be sure of that. Yet I cannot believe that the public will be so gullible as to believe that the shortcomings and defects of local government in Wales are due to its structure rather than the state of penury to which central Government seem determined to reduce it.

I am not sure that we can do much about the order. There is little possibility of the Government's changing the shape of the settlement, unless, perhaps, my right hon. and hon. Friends are victorious in the Lobbies tonight. However, there is one thing that we can do, and that is to make it as clear as possible to the public that the Government are deliberately robbing the rural Peter to pay the urban Paul and that areas of great need such as Wales are being deprived of assistance that is truly due to them.

I hope that the people of Wales will realise that this is the sort of thing that will happen when we discuss the block grant for the Welsh Assembly and that there will be little chance of changing it. The Assembly will have to get on with its allocation as best it can, just as local authorities will have to get on as best they can with the allocation for the coming year unless the Government can be persuaded—as my hon. Friend the Member for Essex, South-East (Sir B. Baine) suggested—to return to the 1977–78 distribution.

8.24 p.m.

Mr. Peter Hardy (Rother Valley)

We have heard some astonishing speeches tonight from the Opposition, particularly from the hon. Member for Conway (Mr. Roberts)—in spite of his attractive accent—who referred to housing in Wales during the period of this Government in office. The hon. Gentleman should look back to the situation in 1973–74 which this Government inherited and which was frightening. The hon. Gentleman's inaccuracies are dwarfed by his astonishing speeches about principle.

I heard most of the speech of the hon. Member for Henley (Mr. Heseltine) and the whole speech of the hon. Member for Essex, South-East (Sir B. Braine). They were astonishing speeches because the hon. Gentlemen seemed to be suggesting that the Government's rating policy was based upon the outlook for the local elections in London next year. I do not believe that these are relevant factors and, if we are talking about principles hon. Members opposite should note that some of my hon. Friends have longer memories than they enjoy.

In the debate on the rate support grant order on 22nd January 1974, the then Secretary of State—who has not been here for an environment debate since this Government took office—told the House that rate increases for the following year were likely to average 3 per cent. with a maximum of 9 per cent. That was just two or three weeks before the General Election and the House did not have the opportunity to subject his figures to the searching examination that these orders have received.

It is disgraceful for any hon. Member opposite to talk about principle when the Secretary of State responsible for the Rate Support Grant Order 1974 told the House that the average rate increase would be 3 per cent. and it turned out, as we discovered immediately after winning that election, to be an average of 30 per cent. The House was gravely misled on that occasion and it does not become hon. Members opposite to indulge in talk about principle.

Mr. Ronald Brown

Is my hon. Friend aware that one document that we did not receive in 1974 was a submission from the ACC? The Association, which is working so hard on these orders, was apparently asleep in 1974.

Mr. Hardy

I am most grateful for my hon. Friend's observation. The ACC was asleep then despite the fact that the rate increases in county council areas were larger than those that will result from the current grant settlement. The 1974 order was received with a quiescent and tolerant attitude which the association has not displayed over the much less severe increases that will take place next year.

The arrangements made for county councils in 1974 were very much more helpful to them than to the areas where the need was really acute, especially the inner city areas. There are areas of need and stress in inner cities apart from London, and although my hon. Friends in London have defended the city with diligence and enthusiasm, we who live in the northern industrial towns and in the areas affected by the first stages of the Industrial Revolution are right to be suspicious and concerned and right to remind the Secretary of State that we want a fair share, too.

The hon. Member for Henley compared the situation in April 1978 with that of three years ago. He should have gone back four years to that watershed of local government finance, the first day after local government reorganisation. If the hon. Gentleman compares April 1978 with April 1974, he will discover that the sort of increases about which hon. Members opposite have been screaming are dwarfed by the immensity of the demands placed upon people in most parts of England. For example, parts of my constituency are very similar in character to the shire counties. Some parts are almost rural in appearance and certainly not obviously urban in character. Yet we are included in a metropolitan area, and the result in 1974 was that villages and small towns in my constituency faced rates demands that brought them up to the city levels. When the hon. Member for Essex, South-East and any other hon. Member complain about rates, they should remember that the 5 per cent. or 7 per cent. that they are talking about now is dwarfed by the demands of 100 per cent. and 108 per cent. which faced parts of my constituency in April 1974.

Conservative Members kept a very low profile at that time. Indeed, so low was their profile that they have begun to emerge in recent months to suggest that responsibility for that change rested not with their Government but with the present Administration. We should not allow that sort of inaccuracy and hypocrisy to be tolerated.

Having defended the Government, it is reasonable for me to say that I am not enthusiastically happy about the rate support grant this time. There has been criticism of the safety net. Even in my deserving and progressive area we shall suffer a little more than we might be expected to suffer under the operation of the safety net. I want the Secretary of State to look at the matter again and ensure that, whether or not we have a safety net, the formula adopted and applied next year will ensure that those authorities which do seek to serve the public and the needs of their area are encouraged to do so.

I have been disturbed to hear hon. Members opposite talking about the savage way in which, they say, services have had to be cut. They know that the services about which they are complaining need not have been cut as much as they have been. We heard the hon. Member for Tonbridge and Mailing (Mr. Stanley) talking about the appalling reductions in education expenditure in Kent. There is a great deal to be said for local government freedom and the block grant system, but if local authorities in parts of Tory-controlled England are not prepared to provide the services and face the need to increase rates moderately in order to provide them and if their electors will not turn them out and ensure that responsibility reigns, the Secretary of State will sooner or later have to give consideration to specific grants. I would not be very keen on that, because I believe that local government should be free, but it must also be prepared to act responsibly.

It must be said to the ACC that, for all its squealing about the deal given to city areas, the fact remains that three of the four metropolitan districts in South Yorkshire have done worse out of this package than most of the county councils. I would have to go a long way from my home in South Yorkshire before I found a shire county worse placed. Norfolk, Lincolnshire, North Yorkshire, Nottinghamshire and Derbyshire—shire counties all—have all done better than three of the four metropolitan districts in the county of South Yorkshire.

Given that situation, although I can defend my right hon. Friend and say that his settlement is immeasureably more honest than and superior to that inflicted on us by the Conservative Government, it is not perfect. It cannot be perfect unless South Yorkshire has its needs recognised and its policies supported. Its needs are not as adequately recognised and its policies are not as fully supported as we should like. Until they are, my right hon. Friend will have to accept that my enthusiastic support for this settlement will be a trifle qualified. But at least I can acquit the Government of the charge of hypocrisy and dishonesty which came with such odious unction—"unction" is not a bad word to describe the hon. Member for Essex, South-East—from hon. Members opposite. Since they live in an easily recognisable glasshouse, they should be very careful before they throw stones.

8.34 p.m.

Mr. D. E. Thomas (Merioneth)

I hope that the Minister will explain, particularly to Welsh Members, why we are still talking about a rate support grant to the Welsh counties in the context of one unitary Welsh settlement. We are moving rapidly towards devolution. The Government have made important announcements about decentralisation of policy in other sectors, but they have not yet made clear their intention to decentralise the negotiations for the allocation of resources to local authorities in Wales, although I understand that, if and when the Wales Bill is enacted, it is the intention that the negotiations for funding local authorities, which now take place through the rate support grant settlement for England and Wales, will take place between the Welsh counties and the Welsh Assembly. Therefore the Welsh rate support grant will be worked through the block grant.

I hope that the Minister will explain why the Government have not taken the first step towards that situation by paralleling the situation for Scotland and haying separate negotiations with the Welsh authorities and the Welsh counties in settling the rate support grant level for Wales. Until that happens the Government will always be open to the charge that they are not only transferring resources within England away from the shire counties to the inner cities but are transferring resources out of Wales.

I firmly believe in a geographical distribution of resources, if that can be justified objectively. We have had attempts tonight to justify the resource needs and the realistic demands of inner city areas, particularly London. I do not quarrel with the arguments that have been advanced. When the figures indicate a transfer of resources out of Wales, a reduction and loss compared with last year for all the Welsh counties, one is bound to ask on what kind of objective criteria the Government are operating. Can their formulae for distribution and redistribution be accurate?

We are talking about a situation in which income levels in Wales are substantially below the average for the rest of the United Kingdom. The average level of personal income in the United Kingdom was £53 per head in 1975 while the average for Wales was as low as £46.

Other major indicators of income levels of families are given in the booklet "Poverty: the facts in Wales" produced by the Child Poverty Action Group. The booklet refers to a recent Parliamentary Question in which I asked for information on the numbers of families per thousand families living at different levels of income. Income was expressed as a percentage of supplementary benefit levels. The booklet states: At every level of poverty income up to 140 per cent. of supplementary benefit, the proportion of families in poverty in Wales exceeds the proportion in England, Scotland, Britain or any English region—with two exceptions. The only exceptions are that the Greater London Council area and South-West region have the same proportion of families not on supplementary benefit but below supplementary benefit level. That gives us an indication of deprivation in Wales, when 180 families per thousand are at or below supplementary benefit level. In the North-West the comparable figure is 150 families per thousand. Wales has 210 families per thousand with incomes below 110 per cent. of supplementary benefit level.

If we go through all the indicators we find that a third of the families in Wales are living at or below the official definition of poverty level, despite what local authorities in Wales are spending, particularly on their social policies. Overall expenditure on personal social services in Wales in 1974–75 was £11,732 per thousand population, and the figure for the English counties was £9,876. The range of spending in Wales is considerable. Thus, despite the low level of income and despite the poverty in the population, and despite the fact that rateable resources are low, Welsh counties are spending well above average on personal social services.

We have a picture of a high level of social deprivation, taking the income indicators as our main indicators, and a high level of spending by the county authorities on personal social services, with that spending taking place on the basis of very small rateable values and rate poundages. The right hon. Member for Anglesey (Mr. Hughes) referred to Gwynedd, where the product of a penny rate is less than £200,000. That reflects the kind of rate base from which our authorities are trying to work.

As I have said, the right hon. Member for Anglesey has spoken about the position in Gwynedd, so I shall not go into detail about that, but I wish to say a word about the other county part of which falls within my constituency, the County of Clwyd. Clwyd is the county with the highest unemployment rate in Wales, at over 12 per cent. Indeed, it competes only with its near neighbour over the border, the Merseyside Region, for having the highest percentage of unemployment in the whole of Great Britain. Yet, despite that, Clwyd is to have a substantial loss of resources. According to the calculation made by the Association of County Councils, the loss is to be £1.3 million. However, according to Clwyd County Council's own calculation, the total loss of resources is to be about £1.7 million as compared with last year.

I should like confirmation of those figures, because, when I raised the matter by Question soon after the settlement was announced, the Welsh Office was not prepared to confirm that there would be this loss to Clwyd.

Because the county has such a high level of unemployment, with the deep structural problems of the textile industry and the aircraft industry as well as the decline of the coal industry and the uncertain future of the steel industry, Clwyd County Council is itself undertaking a large number of short-term programmes to combat unemployment. But these programmes cannot be undertaken if total resources to the county are to be reduced in this way. In fact, the effect of the change in total resources coming to Clwyd has already put in jeopardy a number of programmes which the county was initiating to combat unemployment.

Not only do we have Clwyd with a loss on its calculation of £1.7 million compared with last year and Gwynedd similarly affected to the extent of £1.3 million, but there is a loss for all the counties in Wales. This is where my charge stands that there is a net transfer of resources out of Wales. Unless we have a justification for that, my hon. Friends and I will oppose the order. We are not satisfied that the reallocation of resources made in the order is a reallocation based on objective need. If it were, we should support it, because we believe in the geographical allocation of resources. But without that justification we shall oppose the order, and we shall demand that the Government move to a separate rate support grant negotiation for Wales.

8.42 p.m.

Mr. John MacGregor (Norfolk, South)

I am glad to have an opportunity to express the views of the people of Norfolk and since the number of speeches is obviously restricted, may I say at the outset that the views that I am about to express are shared by all my hon. Friends on the Opposition Benches who represent Norfolk constituencies?

It is true that Norfolk has not fared as badly as many other shire counties have this year. However, that is no cause for comfort to the people of Norfolk and no cause for satisfaction on the part of the Government. I give three reasons for that. First, we are again losing. We are losing 0.3p in rate poundage equivalent compared with last year. I know that the Department of the Environment's figures suggest that we are up by 0.9p, but I believe that that is based on a somewhat disingenuous formula, because the Department does not count a substantial part of the extra needs grant being given to London under the distribution proposals in its table. Thus, in company with other counties, we have lost because of the redistribution to London.

Second, one must take the position over the past four years as a whole. It is certainly true that over that period Norfolk has lost many millions compared with what the position would have been if the formula had not been so substantially changed to benefit London and the other urban areas.

Third, the fact that we have not done so badly as some other shire counties have this year is due, for some extraordinary reason, to the two matters referred to by the Secretary of State today—the reordering of the education position and the labour costs—which quite fortuitously have worked out slightly in Norfolk's favour.

The point is that this does not come about because of any genuine change on the part of the Government to deal with the real problems facing shire counties, and there is no acceptance of the argument that we have consistently put forward about the effects on the shire counties because of this switch in Government grant.

The little bit of extra comfort that Norfolk has this year is due to the technical changes that have been made and has nothing to do with the real problems of the shire counties. Norfolk feels just as strongly as do all the other counties about the size and persistence of the switch of the grant away from ourselves, and yet again it will face painful decisions this year.

It is clear from the debate that the core of the problem is the regression analysis. I know it has often been said that no one understands how the analysis is done except for one individual in the Department of the Environment, and even he does not know what he is doing, and that would appear to be the case from the debate today.

The Secretary of State's defence was very interesting. He asked what the needs element was for and answered by saying that it was to recognise changing needs. Many of us would feel that the present way in which the formula works out means that it does not recognise changing needs—certainly not fast enough.

The right hon. Gentleman then said that the pattern of expenditure was the best test of need. I quarrel strongly with that view, on two grounds: first, because the pattern of expenditure itself is not an objective judgment. It reflects the decisions taken by councils themselves in the past, and does not reflect future needs or, in many cases, even existing needs on the ground. I accept the difficulties of working out an objective system for recognising existing and future needs, but I think we must agree that the pattern of past expenditure that does not differentiate between spendthrift and prudent authorities is not an objective test.

My second ground follows from that. Unfortunately, despite some of the tinkering changes, the present system still encourages and helps those authorities that wish to engage in much greater expenditure, whether they are spendthrift or just go on spending heavily to meet what they see as needs, as compared with the prudent ones. The prudent and responsible authorities, including at the present time those responding to the Government's demand to cut back on expenditure, are being penalised by the present system. There is therefore obviously something very wrong with the present regression analysis.

My conclusion is that, recognising all the difficulties, there cannot be much doubt that we need a better formula, and not least because we need one that is understood by councillors, by council officials and by Members of Parliament, let alone the general public. Many suspicions will remain until that point is cleared up.

I said that I wished to be brief, and I shall refer next to two of the main problems facing counties such as Norfolk. These are, first, rural deprivation and, secondly, the fact that we are a substantially growing county. I can be brief, because these points have been made by other speakers who face similar problems.

I hope that those who represent London constituencies will recognise that widespread rural counties such as my own, which have many scattered villages—I have 160 towns and villages in my constituency—have real deprivation problems. Travel is a significant burden and normally much greater than in the inner city areas. Travel to work is a problem, as is travelling to essential services such as doctors, dentists and many others. It comes heavily out of the pockets of individuals, or, if the service is provided by the county council, it throws a particularly heavy burden on that element of costs in the county council's budget. School transport alone features most significantly in the Norfolk County Council education budget, whereas in London there is little requirement for expenditure on school transport.

In the villages the services are particularly sparse. I am not thinking just of local authority services, which are inevitably sparse. I must say to the hon. Member for Islington, South and Finsbury (Mr. Cunningham), who talks about different rateable values, that people in the villages are bound to be concerned and to complain when they see how little they get in return for their rate contribution. There is also the problem about shops. Not only are fewer shops available, but the goods are inevitably more expensive. Isolation itself, for many people—particularly older people—is a real source of rural deprivation that does not feature in any statistics.

The point that also should be stressed is the cost to local authorities, and particularly county councils, of dealing with this kind of rural deprivation problem. I have in mind the cost of getting social service help to people who live over a very scattered area, the cost of road maintenance, with an enormous number of roads to be covered, of police patrolling and many other things that have been referred to.

I know that the sparsity factor in the rate support grant formula is meant to cope with some of these things, but, because I am still at a loss to understand exactly how it is worked out and because the heavy cost of dealing with these matters, I do not believe that the formula deals properly with the problems of rural deprivation.

Next there is the question of the growing counties. Norfolk happens to be one of the fastest growing in population. We resent the fact that because of the terrific switch of central Government grant away from ourselves we now face the difficulty of providing even static services for a fast-growing poulation. It may be said that we can increase the rates to cope with it. The difficulty about that is that in areas like mine the people have below-average incomes, so an average increase in rates plays a much greater part in an individual's expenditure than in many other areas.

Further, we depend very heavily on small businesses, and frequently it is small businesses that suffer most from large increases in rates. So our local authorities are very responsibly trying to hold down rate increases, but, with a growing population, it makes it much more difficult to provide even static services.

We also resent the fact that we are having to cope, through our growing population, with people coming from areas such as London. We, with a dimishing grant, are providing help to areas such as London, whereas those areas are getting an increase in grant.

We resent the fact that the figures in the rate support grant formula are out of date. Since so much of this is based on the 1971 census and the real increase in population that has come since then, clearly the formula does not reflect the true position.

We are grateful for the fact that now the Department of Education and Science is giving us a fast expanding education building programme to cope with our bulging school population, but the problem is that, as my hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley) has pointed out, this has substantial implications for the revenue side of the local authority budget in future years, and I do not believe that the rate support grant formula yet reflects that.

Those counties which have increasing populations obviously have above-average expenditure requirements. One would expect that some local authority areas with decreasing populations would, all things being equal, get a declining part of the rate support grant, yet there is no evidence that this is what has happened. I live in Haringey during the week and in Norfolk at the weekend. My wife is a councillor on Haringey council. Haringey is faced with a fast declining school population and there are therefore proposals now before it to close a number of schools. We in Norfolk have a fast-rising school population, yet we do not have a sufficient building programme yet to cope with it.

I realise that the implications of this go way beyond the matter under discussion tonight, because it raises much wider issues, such as the distribution of population policy that we have pursued in the past and what changes we should make now. But it also has implications for the rate support grant formula. We do not believe that we are being fairly treated in that respect.

In conclusion, I share the views of those who have today expressed concern about the way in which we debate the rate support grant, particularly the fact that we debate it retrospectively. I hope that in future we can discuss some of these problems in a less charged atmosphere and try to get to grips with the formula.

The Secretary of State must recognise the enormous dissatisfaction that there is this year—yet again—with the way in which the formula has worked out. He must bring in radical changes next year—a new-look rate support grant formula—to reflect all the criticisms that have been made.

I recognise the right hon. Member's difficulties. It has become obvious from the debate that we all have particular local problems and we are all putting pressures upon him. But unless a fairer formula is properly put before the House, the suspicion will remain that today the right hon. Gentleman has been wriggling in an attempt to justify an indefensible plan, which has been a cover-up for a blatant piece of gerrymandering which has been brutally exposed.

8.55 p.m.

Mr. Stanley Newens (Harlow)

I listened with care to the explanation given by my right hon. Friend the Secretary of State for the Environment about the way in which it is proposed to apportion rate support grant for the coming year. I am bound to say from the outset that I am no more reassured about the equity and justice of the arrangement than I was beforehand. I hasten to add that my position is somewhat different from Opposition hon. Members. Unlike many of them, I have never demanded across-the-board cuts in public expenditure. On the contrary, I have raised my voice against such cuts and on occasions have withheld my vote on some of the cuts that have been implemented.

It seems that there is something of a contradiction between voicing a general demand for ever more far-reaching cuts in public expenditure and objecting to those that affect one's own constituents. That is the position of many Opposition hon. Members. When I challenged the hon. Member for Henley (Mr. Heseltine), he refused to say whether the counties would get more if there were a Conservative Government. The reason for his refusal is quite clear. It is that they would have been given less.

The only reason for supporting the proposition that has been put forward by the Opposition is that London and various other places such as London might get less. However, I see that as a flimsy reason for adopting that view. I believe that everybody benefits from and is entitled to high standards in public service—for example, education, roads, welfare and housing. It is no part of my case to argue that London should get less, that the global sum should be diminished, or that a larger part of a diminished sum should go to my area.

In many respects the debate has gone the wrong way in that it has sought to divide town from country. It is clear that there are many parts of London that have overwhelming needs and that many other parts of London are extremely affluent in their conditions. In the same way, there are many parts of different counties that have affluent areas and areas in which there are people with limited means.

Public expenditure, including the rate support grant, should be maintained at a level sufficient to provide an adequate standard of service for everybody everywhere. It is wrong to base arguments on the proposition that London—I hasten to add that it includes the largest run-down inner city area in the country—should have less. That would be totally contrary to any reasonable proposal. My concern is that in many parts of the country, including my own, the rate support grant has been fixed at a level that is inadequate, which means that there will be serious problems for those living in such areas.

As my right hon. Friend pointed out, the aim has been to continue to exercise restraint on the growth of expenditure in the form of the rate support grant. However, owing to the formula that he has adopted, the restraint and cutbacks involved fall with greater force on many county councils, especially those in the Eastern Region, of which Essex is one.

In 1978–79 the county councils' overall share of the total needs element in the rate support grant will fall by 31 per cent. The loss suffered by Essex will be 7.9 per cent. as compared with the 1977–78 grant, which is greater than that experienced by any other county except Kent.

Dr. McDonald

Does my hon. Friend agree that that is because, unfortunately, people do not realise that in many parts of Essex there are rapidly growing towns or, as in the case of my constituency, there is a rundown industrial area with extensive land dereliction problems, with people living on low incomes and in some cases suffering from poor housing? If the Government were properly aware of these problems they would look to the needs of Essex as well as to the needs of London, since I agree with my hon. Friend that we do not want any alteration at the expense of inner city areas.

Mr. Newens

I entirely agree with my hon. Friend. She underlines some of the points that I have made. The situation in which Essex in 1978–79 will be one of the hardest hit counties is not new. The hon. Member for Cambridge (Mr. Rhodes James) is present. He is aware that Cambridgeshire was very hard hit last year, and unfairly so. There is a considerable body of evidence to demonstrate that the needs formula does not provide justice for counties with rapidly increasing populations. That is the case in much of East Anglia, a situation which has been referred to by the hon. Member for Norfolk, South (Mr. MacGregor).

On that basis I consider that Essex has had a very unfair deal. The effect can be seen by comparing parts of Essex with contiguous metropolitan areas. The rate burden on properties almost identical in character and a few miles apart is very different. For example, people living in a property in the Epping Forest district will be much harder hit than those in a very similar property across the Greater London boundary in Redbridge. That is totally wrong, because by no means could Redbridge be regarded as having the same problems as other parts of London, such as Hackney and Islington, have to cope with. That demonstrates how wrong the present formula is.

Figures given to me by my hon. Friend the Under-Secretary in reply to a Question that I tabled showed that during the period 1973–74 to 1977–78, Essex County Council budgeted expenditure trebled, but the needs element as a proportion fell from 66.2 per cent. to 33.7 per cent. in those years. I have no wish to justify the cuts which have been made in the services in the county of Essex. On the contrary, I have consistently opposed them, as did the Labour Party in the May elections.

But it must be said that the system is most unfair and it means that whichever party is in power in Essex, it faces an unreasonable burden and problem. I make it clear that I do not agree with the manner in which the majority party in Essex has tackled many of these problems, which is by going ahead with cuts which I regard as totally wrong. But one cannot fail to recognise the serious problem which exists.

My right hon. Friend the Secretary of State has tried to stem the growth of inequality by means of the safety net. That accepts a loss to the equivalent of a 2p rate, and that may not be a total loss. The resources element is quite inadequate, on the basis of the calculation I have seen, to redress the balance. I emphasise that I am not asking that other areas particularly London, be cut back. But there is a need for some additional help to be given to hard-hit counties such as Essex.

It is ridiculous to suggest that every resident of Essex lives in affluence, and it is not good enough merely to promise further adjustments next year. In a period of pay restraint and rising prices increases in rates are a considerable burden on all citizens. The rating system at the best of times is a very unjust method of raising local taxes, and I think we are entitled, particularly on the Government side, to ask as Socialists for fair shares for all. At the present time, despite the safety net, the system does not provide for this.

I am very deeply concerned for all ratepayers who, without regard to their ability to pay, are to be saddled with new burdens. As the Member for Harlow, which covers the Epping Forest and Harlow, I am particularly concerned about my own constituents. I therefore appeal to the Minister to give further consideration to the injustice which is being perpetrated by the present system and to provide some additional help, of to consider how it can be provided, even at this stage, to those counties which are hardest hit.

Make no mistake about it: Essex has on this occasion been very hard hit. In the long run, I believe, as one who opposed the block grant when it was first proposed, that the present system should be scrapped and replaced by a system which is far more easily understood by all, including—as the hon. Member for Norfolk, South said—Members of Parliament, members of councils and the public at large, and a system which is also more equitable. Until that is done. I believe that we shall never succeed in avoiding these continual feelings of injustice which are generated on every occasion that we have a new decision on the rate support grant.

9.7 p.m.

Mr. Robert Boscawen (Wells)

My right hon. and hon. colleagues in the county of Somerset share with me the grave concern about the punishment being meted out again to our shire county. In essence, the needs element of the rate support grant is less than half what is needed if it is to match the Government's highly optimistic figure of inflation. Even if the Association of County Councils' figures are wrong, a growth of 3.9 per cent. for 1977–78 in the needs grant is a long way from cushioning the effect of a 9 per cent. increase in inflation, and who is optimistic enough to say for certain that we shall get that 9 per cent.? There was little comfort in hearing from the Secretary of State that but for the safety net the cuts which will follow or the increases in rates will be more severe.

I entirely agree with the many hon. Members who have said that the shortcomings of the "regressive analysis" system ought to be put right. I strongly suspect that one of the reasons they have not been changed before is that it suited the Government to see that the shire counties are the milch cows for these are the areas where the Labour votes are fewest. What does it matter to them if a few areas such as Essex or Anglesey, in which there are Labour Members, suffer in this way? It helps the cover up. In the main it will not be the Labour seats that suffer.

I find it sickening to hear from the Secretary of State that no blame is to lie on him or on the Government if the shire counties decide to cut their services rather than raise the rates. The choice is not as simple as that. In our county we have already run down our balances almost to danger point. We have increased our rates above the average level for the shire counties in the past two years—by more than 20 per cent. the year before last and by 15 per cent. last year. Our county authority has already tempered the cuts that it has had to make to the minimum by means of savings and reductions in staff. Even so, great dismay has been caused amongst our constituents by the authority having, for example, to withdraw concessionary fares for transport on school buses. Concessionary transport is very important in an area such as Somerset, where parents are worried about their children walking along dangerous, narrow lanes that were never built to take the heavy lorries which now pound along them.

There are many spheres in which serious cuts are affecting the quality of life of people who live in Somerset. Domiciliary care and residential homes for the elderly have suffered considerably in the past year or two. We are sadly conscious that our spending levels per head of population are lower than those of the majority of other counties.

At the same time, we have to say to the Minister that we start, as do other shire counties in the West Country, a long way behind urban areas of the country. We start less well developed than some of the rural areas, too. Services are more expensive to provide in our Western counties which are sparsely populated, with long distances between villages and high road mileages. So often today our county roads have to bear the heavy transport delivering goods to the inner urban areas about which we have heard so much. We have to bear the cost of that, too.

Somerset receives large quantities of tourists who pass through, and these are costly to a county such as ours. The area is one also in which considerable numbers of elderly people have chosen to retire in the last 20 or 30 years, for the very reason that the rates were not particularly high. They went there because they thought that in their retirement they would settle and live there in a reasonable state of comfort, only to find the inexorable effect of inflation pushing up the rates year after year, which means they have to eke out their lives sometimes in a most miserable existence.

What is the choice facing a county such as Somerset? It can continue to increase the rates. It could well be that this year we should have to increase the rates by 18 per cent., 19 per cent. or 20 per cent. to prevent further cuts in services. This adds to the number of bankruptcies amongst small businesses, it adds to the numbers of young people who find it difficult to obtain employment in our area, and it creates a reduction in the number of jobs available. Alternatively, our county will have to take other severe steps to cut into essential services, such as reducing the teacher-pupil ratio. We already have one of the worst teacher-pupil ratios in the country. That is one of the only spheres left in which there can be really substantial cuts, if we are forced to make them. So it will be this or it will be a bleak outlook this year for the ratepayers of our county.

It is high time that the system of calculating the needs element was changed in order to take more account of the difficulties faced by a county such as Somerset. We are in the South-West, an area in which wages are, and always have been historically, lower than in most other parts of the country. There are thus grave doubts about the fairness of the system.

There is growing bitterness about a system which encourages spendthrift urban areas. There is growing doubt and anger over the lack of awareness which apparently exists in the Department of the Environment about the difficulties and the extra costs involved in living in rural areas. Men, women and children do not live in the lap of luxury in counties such as Somerset. With the vast increases in the cost of transport in the past few years, it is difficult for them to travel about, for in our county transport is a disaster area. It costs some of my constituents £2 or £3 to hire a taxi to get to the doctor. The heating costs, too, for elderly people are enormous in the high parts of the county. Those are the extra costs from which we suffer. That is why we find the Government's deliberate discrimination against our part of the world such a scandal. We hope for the day when a Conservative Government will redress this situation.

9.16 p.m.

Mr. Michael McGuire (Ince)

I want to take up one point brought out in the debate before beginning the main part of my speech. Some of my London colleagues may have, wittingly or unwittingly, received the impression that we do not recognise and understand the deep and difficult problems with which they have to contend. They may, perhaps, have got the impression, which I want to dispel, that we in the Northern Region where we have our problems, want to take money from them. Nothing could be further from the truth.

I agree with many of the comments of my hon. Friend the Member for Harlow (Mr. Newens). The gist of what he said was that we should not deal with any area as an entirety. There are special problems within an area, whether we are talking of towns within London or districts in Essex, which should be dealt with on a separate basis and should receive special help. That brings me to the case—

Mr. Steen

rose—

Mr. McGuire

I have hardly begun. I very rarely interrupt the speeches of other hon. Members and I should like to get out a few sentences. When I get the feel of my argument, I shall probably give way.

Sir Bernard Braine

I gave way to the hon. Gentleman.

Mr. McGuire

I know that I interrupted the speech of the hon. Member for Essex, South-East (Sir B. Braine). I apologise. I told him that we were not yet on television. His was a marvellous act. If it had been televised, he would have got 10 marks out of 10 for his performance and would have been singled out for a promising career. I interrupted him mainly because he was implying that the rate support grant was a political initiative on the part of my right hon. Friend who was seeking to reward his supporters. I wish to make the case that many areas represented by Labour Members will suffer.

I come to the effect of these orders on England and Wales. I represent a constituency that is divided into three parts, the biggest of which is in the new metropolitan borough of Wigan. We shall be very badly done by as a result of the orders. I cannot understand why the metropolitan borough of Wigan has not been given special help to deal with its problems. In my constituency, I have the old townships of Ince and Platt Bridge. These towns have some of the worst housing conditions in the country, if not the worst. In his policy statement on the inner cities the Secretary of State laid down the measuring stick for Government help to towns and cities to tackle the problems. The Wigan metropolitan borough should have been given special help under this policy.

I wonder what will happen when the citizens of my constituency get their rate demands. The people who worked out the policy are absolutely incensed. Those who will receive the rate demands will find that these will contain increases of not less than 20 per cent. and their anger will bubble over. I wrote to the Secretary of State about the unfair discrimination against the Wigan metropolitan borough and the tone of that letter will be like a love letter compared with the one that I shall send him.

The Secretary of State has forecast that the average increase in rates should be in single figures. I realise that if it is about 8 per cent. or 9 per cent. some areas will be above that and some will be below. However, I do not think that a 20 per cent. increase should occur in an area such as the Wigan metropolitan borough.

I cannot understand why we have not been given that special help. Apart from one ingredient mentioned in the White Paper and other policy statements, we have almost a microcosm of the community qualifying for help. The missing ingredient is that we have hardly any ethnic minorities of immigrants. I wish to quote from paragraph 17 of the policy document for the inner cities. It says: Even though individually the majority of people may have satisfactory homes and worthwhile jobs collective deprivation arises from the pervasive sense of decay which affects the whole area through the decline of community spirit … The document goes on to list poor housing and social and industrial dereliction and so on.

In the metropolitan borough of Wigan and the two towns that I have mentioned many of the problems for Wigan have been inherited as a result of local government reform and it has not been given resources to deal with them in a sensible way. Mostly within these two towns we have 3 per cent. of the total derelict land area of the United Kingdom. That means that 24 per cent. of the land area in these towns is derelict. More than 21 per cent. of the children receive free school meals.

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

My hon. Friend might like to know that the subject of derelict land is dealt with under a different grant. Only recently the Government launched a scheme in the Wigan metropolitan county borough aimed at clearing derelict land, and the cost was £1 million. All that money will be found by the Government.

Mr. McGuire

I am grateful to the Minister for mentioning that. Every hon. Member whose constituency contains derelict land will be grateful for 100 per cent. grant. However, there are certain on-costs to be considered, which are not provided for and have to be met. However, as the Minister said, it is a considerable sum.

When we examine the criteria laid down in regard to the various grants, I wonder why the Wigan area has not been given enough help. Let me outline one area in which help has been lacking in my area. The House might be surprised to learn that a total of 21 per cent. of the children in my area receive free school meals. I am told by educationists that once an area goes over the 5 per cent. figure in respect of free school meals, it is regarded as having big problems. I repeat that the figure in my area is 21 per cent. Furthermore, 18 per cent. of the houses in the area—most of them substandard—lack a fixed bath. We also have a high proportion of single elderly people. The other factor I have already mentioned in the area is the considerable land dereliction.

If we do not qualify for assistance in these respects I should like to know why. A good part of my constituency is situated in the metropolitan borough of Wigan and we have enormous problems on our plate. If we are to receive special help, the Wigan metropolitan borough will be the authority that will have to be given it. I understand that Wigan will receive a sum of £78.7 per head of population, whereas the average for the metropolitan districts is £97.4. In other words, Wigan with all its problems comes thirty-first out of 36 districts.

There are 10 boroughs within the Greater Manchester Metropolitan County and nine of them in one way or other will receive special help. Wigan is again outside in terms of such assistance. seven of those boroughs receive aid under the urban renewal programme relating to inner cities. The three towns which are outside are Wigan, Bury and Stockport. Even more curious is that Bury and Stockport will gain as a result of these provisions, but Wigan will not.

I shall draw my remarks to a close, Mr. Speaker, because I see that you are transmitting extra-sensory messages to me to the effect "Michael, I should like you to wind up." I will oblige you in meeting your unuttered request.

The White Paper to which I have already drawn attention says that the key to good local government is a prosperous community. When the House realises the final figure to be given to my area it will take the view "Do not give us any special help. Ince has made an overwhelming case that help must go to that constituency." But that help must go to the metropolitan borough. Wigan is surrounded by new towns or areas with special development status.

My hon. Friend the Member for Wigan (Mr. Fitch) has consistently, regularly and forcefully put our case when he has led various delegations, of which I have been part, to a whole host of Ministers. He has put the case for Wigan—a case that is unanswerable and should now be conceded without a deputation. Wigan's unemployment rate is more than 9 per cent. The average unemployment rate in Great Britain is 6 per cent. and in the North-West 7 per cent., and yet Wigan enjoys the lowest form of grant aid status. It is surrounded by towns that attract and enjoy higher development status and the jobs that Wigan must have if it is to become a prosperous area. On that account alone we should have special help. We cannot understand why this discrimination persists.

I want to make a final and special plea to the Government. I believe that the figures that I have given are accurate. No doubt the Miniser will check them, although I am assured that they are absolutely accurate. I receive such figures from officials and extrapolate them from various sources. They are as authentic as they can be. I ask the Minister to look again at the special needs of Wigan and to remove this burning sense of injustice, because this is the last straw that breaks the camel's back. The people are making this plea through me. We have special problems and we need special help to deal with them.

Several Hon. Members

rose—

Mr. Speaker

Order. I am trying to fit in a speaker from every county as best I can, and I am concerned that there should also be a speaker from an urban area on the Conservative side. I know that hon. Members have co-operated, but we have only an hour and a half left for Back Bench speakers.

9.32 p.m.

Mr. Anthony Steen (Liverpool, Wavertree)

This is an opportunity for me to speak for one of the major urban conurbations in this country—Merseyside—and to dispel the belief that may have been gained from speakers on all sides of the House that it is the shire counties that are being discriminated against in the Government's plans for rates for 1978–79. That is far from true. A great many urban areas are being discriminated against, too. I hope to show, briefly, that Merseyside and Liverpool in particular have done extremely badly.

It may well be that many of my hon. Friends and hon. Members opposite who represent Liverpool constituencies are not here tonight because they have been blinded by the Secretary of State's footwork. It is quite brilliant. The right hon. Gentleman is probably in the wrong job and should have gone into the ring. He would have done a good job there because, for all his huffing and puffing, for all his statistical formulae and mathematical calculations and his taking on and his taking off of his glasses, he can not conceal that the percentage rate grant is a matter of straightforward political judgment.

The Secretary of State has made his judgment in favour of the Labour areas and away from the Conservative-controlled areas. That is the conclusion of his policy. It may be that the right hon. Gentleman did not intend that, but that is how it has worked out.

I should like to look first at the needs element. The right hon. Gentleman has reduced the needs element for the shire counties from 58.3 per cent. in 1974 to 51.9 per cent. next year. Most urban areas appear to have benefited, but many actually have not. I suspect that the Secretary of State has been too clever by half and that there is an enormous smokescreen that he has blown across such areas as Liverpool to mislead everyone into thinking that he will benefit. Nothing of the sort is so. Liverpool will actually receive less.

The arguments are compelling. There is the decline in population, reduced rate base, and mile after mile of areas of so-called urban deprivation. However, the Secretary of State sheds crocodile tears, because he is construing the inner city to include parts of such areas as the constituency of Garston, which is five miles from the city centre. There is complete despair among those in the inner city area. It is absolute nonsense to suggest that the right hon. Gentleman is concerned about inner cities. He is concerned about urban areas in the hands of Labour hon. Members.

Let us take the example of the local authority mortgage scheme in Liverpool under which our constituents can buy older houses in the city and get loans to improve them. In 1974–75, that scheme stood at £3.7 million. People could buy houses in the inner area, and this is what the Secretary of State has said that he is so concerned about. But this year there is only £50,000 left in the scheme. The right hon. Gentleman has therefore turned to the building societies in Liverpool and said that they should lend on the older houses. But the right hon. Gentleman has misunderstood the problem. He has said that the building societies should make available money for pre-1919 houses, but it is the pre-1893 houses in Liverpool that are ready for improvements.

The Secretary of State said at the Habitat Conference in Vancouver that we must pension off the bulldozer in Britain. Here, again, those are crocodile tears. He has no intention of doing that, because what he has done in Liverpool through the reduced funds for buying and improving older houses means that all that will be left in years to come will be for them to be bulldozed. However well-intentioned he may be the Secretary of State must be schizophrenic. What is happening in Liverpool will eventually mean the demolition of inner area housing. This is curious, because Liverpool has been subject to more Government investigations on urban deprivation than anywhere else in Great Britain.

Three or four years ago, one could not walk more than 200 yards without stumbling on one of the Government schemes or the professional social workers and research workers who were running them. One stumbled first on the urban aid programme projects, then the community development teams. A total of £150,000 was allocated for neighbourhood projects, there were educational priority areas and inner area study teams—all within four years. One would have thought that the city would now have tremendous prosperity and, with special development area status, be on the road to recovery.

Why is it that life in Liverpool and many other major urban areas has not improved? The Secretary of State is doing a simple conjuring trick. While distracting attention with a flurry of activity, partnership agreements, urban aid programmes and all that jazz, he is taking away the whole base of finance. In 1974–75 he reduced the local authority funds for improvement grants from £4.9 million to £1.5 million.

Mr. Marks

The hon. Gentleman started his speech by saying that under the order Liverpool would be worse off, but he has talked entirely about something which has nothing to do with the order. Will he now tell us how much Liverpool gets this year in needs element of the grant and how much is proposed in the order?

Mr. Steen

I am just coming to that. The Minister will see the equation of what is happening. There has been a reduction in improvement grants from £4.9 million to £1.5 million. Local authority funds for loans to purchase have been reduced from £4.7 million to £1.1 million. Council house improvements have been reduced from £11 million to £9 million and the net result is that Liverpool is £12 million worse off.

That is on the negative side. Let us look on the positive side. It was the Minister's declaration that he would make available £50 million for five inner city areas through the partnership agreements over a period of two years. That means £10 million for each of these areas—£5 million a year for two years. That is the answer for Liverpool—£12 million lost on one side and £5 million gained on the other. The claim, therefore, that Liverpool will be better off is a mere smokescreen. The idea that Liverpudlians will benefit is complete nonsense.

Again, the pound is now worth 60p compared with what it was in 1974. Thus, the Government have not only made a reduction from £12 million to £5 million for Liverpool but have changed the value of the pound, making the value of the money much less. What relevance therefore, is the Department's claim that next year, through rate support, there will be £300,000 more for Liverpool? It all amounts to £300,000 more in one way but £12 million less in another. The Secretary of State is trying to create a grand illusion in the metropolitan areas such as Liverpool that all the urban areas are going to be better off. The truth is that most of them will be worse off, some of them being as badly off as the shire counties.

9.42 p.m.

Mr. Ronald Brown (Hackney, South and Shoreditch)

The hon. Member for Liverpool, Wavertree (Mr. Steen) tried a three-card trick. Such a trick is tried in the markets of London quite frequently, and the people who do it get short shrift. The way in which the hon. Gentleman concocted the figures fascinated me. I have one figure which he left out. The North-West Region will get more than £12 million from the European Regional Fund.

Mr. Steen

Not much.

Mr. Brown

The hon. Gentleman may not think that it amounts to much, but my borough would certainly love to have part of it. It is one area for which there is no regional fund. The Northern Region is to get nearly £42 million from the Regional Fund, while London, an area which should have money from the Fund in order to refurbish its industry, is getting nothing. The hon. Member may cast aside the £12 million for the North-West as being little or nothing, but London cannot take such a view.

The tragedy of the debate has been the Opposition's concentration on London, trying to make out that London is doing very well. My hon. Friend the Member for Woolwich, East (Mr. Cartwright) showed how so much of the information being given by hon. Members opposite was ill-founded. Whether they get it from Conservative Central Office or the Association of County Councils, which is the same sort of place and which produces the same sort of information, I do not know, but the information was false, as my hon. Friend demonstrated.

The clawback through the rate support grant settlement was in order to ensure that people like my constituents should have the same level of cash increases in their rate bills as do ratepayers in other parts of the country. I cannot understand why it should be argued by the Opposition that that is improper. The result of this attempt to ensure that my constituents pay only the same sort of increases as people in other parts of the country is that London is going to lose only £270 million. Last year, we lost £403 million. That means that we are losing £673 million over two years.

I was waiting patiently for Conservative Members, particularly the hon. Member for Essex, South-East (Sir B. Braine), to explain which parts of their areas were losing £673 million in two years. None of the Opposition Members could inform me. I now challenge those on the Opposition Front Bench to say which of the areas they represent are losing £673 million in two years. I noted, incidentally, that Scotland is receiving £33½ million from the European Regional Fund while London is receiving nothing.

Some hon. Members are opposing this order on the basis that London is apparently getting too much. My answer to them is to ask why they think any area should be forced to give up £673 million. They had better be able to justify it.

There has also been a continuing argument about regression analysis being wrong and that it is time to reform it. Many of us in London have been arguing this case for a long time. We have done everything to argue that what we thought was an unjustified system should be put right. However, we never received a ha'pence worth of support, with the exception of the absentees tonight. Those absentees were very good when they had to come to help us. I think that it was at election time, so they could not afford to stay away. They were the hon. Member for Hornsey (Mr. Rossi) and the hon. Member for Hampstead (Mr. Finsberg), who are now known as the Opposition spokesmen for London. [HON. MEMBERS: "Where are they"?] I suspect that the hon. Gentlemen are keeping a low profile, as they say in news stories. They helped very much to argue the case, but nothing was ever done.

The voice that was most muted was that of the Association of County Councils, which is now called Tory Central Office. Nothing was coming from the ACC, which was satisfied with the situation. London was losing thousands of millions of pounds over the years, but nothing happened, and the Opposition Members could not care less. It ill behoves them now to start making raucous noises about what they call an unfair situation when they were unwilling to put right the injustices that were probably clear to everyone who wished to understand them. Opposition Members have not done themselves any credit tonight.

The hon. Member for Henley (Mr. Heseltine) regaled us well today. He has also disappeared, and is keeping a low prifile. In a typically poor speech, he warned that the position had been deteriorating in the past three years. The hon. Gentleman was very happy to sit watching my constituents and other constituents in London paying for his constituents in Henley. He was quite satisfied. Because that injustice is being put right—not wholly, but slightly—he regards it as a deterioration.

Mr. Molloy

Does my hon. Friend recall that when the counties were not doing too badly and Greater London was suffering considerably we heard nothing from the Association of County Councils? Yet when my right hon. Friend's proposals had been adumbrated we had the supposedly independent, non-political Secretary of the ACC making a broadcast that was so non-political and so independent that if he ever became a Member of Parliament he would immediately be plonked on the Tory Front Bench. These people should not masquerade—

Mr. Speaker

Order. Is the hon. Gentleman intervening or addressing the House?

Mr. Molloy

With respect, Mr. Speaker, I have to address the House to intervene, or intervene to address the House. I think that my hon. Friend has made a very important point. Some of us are getting a little tired of these officials, who pretend to be apolitical but, when they get a little angry, reveal themselves as the Tories that they are.

Mr. Brown

I am obliged to my hon. Friend thought that he was about to point out that in this debate, during which London has come in for the maximum of strictures, we have managed, with Mr. Speaker's help, to which we pay tribute, to have two speeches only from London Members. I find that somewhat offensive, since there are 92 London Members and I feel that our share should acid up to a bit more than two in a debate of this kind, when London is being upbraided by the rest of the House. I therefore have much in mind the point made by my hon. Friend.

The hon. Member for Henley went on to object to one group of people, as he put it, having to pay for another group. How he was able to reconcile that with the fact that my constituents in the Hackney area of London and people in London as a whole were paying for his constituents in Henley—which he was quite satisfied about—I could not understand. But that is the sort of lunacy that he exhibits from time to time.

I am intrigued to know the views of the right hon. Lady the Leader of the Opposition. She is a London constituency Member. Are we to understand that she underwrites what is said by the hon. Member for Henley when he calls for a greater clawback from London in order to satisfy Henley? I should like to know whether that is the view of the right hon. Lady the Member for Finchley (Mrs. Thatcher), because, in her absence tonight, without evidence that she has disowned her Front Bench spokesman, we must understand, given that she will be in Government at some time in the future, that she will take further money away from London. That is the message which we take tonight from the antics of the hon. Member for Henley.

The hon. Gentleman then indulged in a carefully rehearsed antic with his hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths), who put to him much the same sort of point as that just made by the hon. Member for Wavertree, suggesting that all this is a political plot, that the Secretary of State is moving money out of Tory areas into Labour areas, and that is what it is all about. As this went on, I intervened to point out that the hon. Member for Henley was again up to his trick of telling fibs, but, as he did not properly take the point, I had better explain what I meant.

Again taking the case of London—I stick strictly with London—it was said by the hon. Member for Bury St. Edmunds that all the London boroughs which got the biggest increases were Labour boroughs. Richmond, regrettably, is not a Labour-controlled borough, and Richmond has a 123 per cent. increase. Sutton, also not yet a Labour borough, has a 106 per cent. increase. Bromley, which we all know is not a Labour borough, has a 103 per cent. increase. I come next to Tower Hamlets, in my right hon. Friend's area. He will not be delighted to hear from me that his area received only a 72 per cent. increase.

I asked the hon. Member for Henley to withdraw what he said. He refused to do so. I have now shown how he has been guilty of calculated inaccuracy. I do not wish to call it untruth, though I suppose it must be. There was such an effort made to prove the point, but it is plainly wrong.

Very little has been said about the additional burdens in London. I listened to the hon. Member for Conway (Mr. Roberts), who came, made his speech and went away. He is not here now, either. But he told us about the problems of Wales. Let me tell him a little story. I was the recipient of a letter passed to me by a Conservative Member of Parliament—a letter which he had received from one of his constituents, a civil servant, complaining bitterly about the Labour Government, about Labour Members of Parliament and about everyone in general. Apparently, his daughter was in my constituency and she was not getting all her fair due. This gentleman had complained very strongly that it was all the fault of the Labour Administration.

I made inquiries about the case and I then asked to see the young lady. It transpired that she had come from Swansea or Cardiff—it does not matter where—and had arrived in London. As I say, daddy was a civil servant. En fact, she was dossing—squatting—in one of our council flats, which should have been used by a family desperately in need of housing in our area. There she was, sleeping on a palliasse in that flat. If the hon. Gentleman has to export his problems, I suggest that there are many other boroughs to which he can send them. He can send them to Richmond, Sutton or Bromley, and he can do so with great pleasure, because they are to receive the maximum increase.

It has been depressing to hear the inability of the Opposition to mount a campaign tonight. The rate support grant is a difficult thing to bring together. We know that it is difficult to construct. At best it can be only rough justice, and I think that this year my right hon. Friend has tried desperately hard to be fair and just. I do not believe that the fact that London is to lose £673 million is particularly just, but, nevertheless, my right hon. Friend is trying very hard to be fair. He has our support, and we hope that next year we shall be able to do even better to make sure that there is full justice in the RSG.

9.56 p.m.

Mr. Arthur Jones (Daventry)

I shall not, if he will forgive me, follow the hon. Member for Hackney, South and Shore-ditch (Mr. Brown) along the lines and the devious paths that I suspect he has walked about his beloved London. We always respect the views that he mirrors of this great city, but I think that he has not reflected the main action that has been brought on this debate tonight. It lies in the criticism that has been directed towards the arrangements under the RSG calculation. I think that that has been the main burden of our debate.

I am aware that the Secretary of State is cognisant of the difficulties involved in implementing the RSG arrangements, the complications of the system, and the difficulties that exist in its interpretation, but the criticisms that have been directed to the arrangements show that serious consideration will have to be given to the future of these arrangements.

I think it is admitted that an annual review of the allocation of the various elements that comprise the rate support grant needs to be considered, but whether the existing criteria are sufficiently well understood and reflect the various problems facing the differing parts of the country is questionable. When one considers the remarks of the right hon. Gentleman about rate levels, it is questionable whether the views that he reflects and the opinions that he has expressed are possible of interpretation.

In the Press notice that the right hon. Gentleman issued on 18th November he said: Current expenditure is effectively at the same level as in the 1977/8 settlement. It provides sufficient resources to ensure that overall authorities need not make further cuts in spending programmes. I recall that the right hon. Gentleman emphasised that point earlier today. He went on to say: I expect average domestic rate rises attendant upon this settlement to be within single figures. I think it has been demonstrated, without contradiction, that that will not be the case for many rating authorities this year.

The right hon. Gentleman said that the average may be within single figures, but for many authorities it will be double. He seemed to be a little irresponsible in terms when he said that it will be up to the rating authorities to demand the additional resources they need through their local levies. There is some contradiction in what he said in those two respects.

No allowance is made for continuing inflation for those counties which face increased population. I questioned the right hon. Gentleman about this during his speech, when he said that allowance was made within the rate support grant procedures for increased population. I am still in doubt about that. In North-amptonshire, for example—a rapidly expanding county—if expenditure on current services were to continue at present levels it would increase by no less than £9 million, £7 million for inflation and £2 million for growth to meet additional population. I am informed that the Government grant offered towards this additional expenditure is £200,000. North-amptonshire is therefore faced with circumstances which require ratepayers to face an increase in the rates of about 17 per cent. if services are to continue at present levels, and that calls into question the Secretary of State's attitude.

In reply to a recent Parliamentary Question arising from the Secretary of State's provision—as he put it—of a "safety net element", the object of which is to ensure that no local authority will lose more than 2p in the pound as a result of changes in this year's distribution as compared with last year's, the right hon. Gentleman was very guarded in what he said to me, which is on the record. He said: The safety net will ensure that no authority will lose more than 2p in the pound.… The comparison is not based on the share of grant which individual authorities received in 1977–78, since this would fail to take account of changes over the past year in circumstances which were relevant to the 1977–78 settlement."—[Official Report, 13th December 1977; Vol. 941, c. 153.] So I think that what has been elicited on the subject of the safety net of 2p in the pound is not quite what we understood was the Secretary of State's intention originally. My conclusion is that the sentence in that reply does not convey the same assurance as we were led to understand in the right hon. Gentleman's original statement.

Mr. Shore

The point I should make clear is that, whatever doubt there might have been in the minds of hon. Members, there could have been no doubt in the minds of the Association of County Councils, whose officials were brought into the discussion at the earliest stage affecting the 2p safety net, so there could have been no possibility of misunderstanding on their part.

Mr. Jones

I understand the point that the Secretary of State is making. I understand that he has to take the decisions at the end of the day. Although the type of consultation is one thing, it is another thing to admit that at the end of the day the Secretary of State has to take decisions and has to require the rating authorities to conform to his ultimate decision. This is inescapable. It does not do to maintain that the matter has been done by agreement or that the Association of County Councils or the Association of District Councils was aware of what was in the Secretary of State's mind. It is not easy as that. It is one thing to engage in consultations it is another to recognise that at the end of the day the Secretary of State determines the eventual proportion of the rate support grant settlement.

The now widely used expression "regression analysis" is a statistical technique used to determine the relationship between a number of variables. As for the rate support grant calculations, the variables tend to be inter-related and therefore the analysis requires to be extended to cover the relationships between these variables. This is what I think the right hon. Member for Anglesey (Mr. Hughes) was trying to get at.

I have had a note from the Library which tells me that the complicated mathematical methods that are involved in the rate support grant arrangements are not particularly covered by the expression "regression analysis", but require the added words "multi-variate regression analysis" because of the incredible complication of the rate support grant computation procedures. It is that which strikes fundamentally at the arrangement.

The rate support grant has served its purpose for a number of years—I believe that it goes back to 1971—but we must reconsider the criteria that are used and their application. It is recognised that the rate support grant relates to past council expenditures, and it is clear that it is here that the substantive criticism of the system lies. The prudent and careful are penalised and the profligate are provided with perhaps unmerited additional resources. That is something that the right hon. Gentleman recognises. He says that it is difficult to get away from it. Who is to take the decision in the absence of the criteria that are used in the rate support grant procedures? I suggest that we need closely to consider the rate support grant and to consider improved and more effective methods of distributing this vast sum of public money.

I welcome that which is set out in the second paragraph of Appendix F of the order, as it contains an admission on the point that I am trying to make. The paragraph states: The technique identifies a quantitative relationship between the per head expenditure of local authorities and the incidence of various need and cost factors. It is the expenditure where the emphasis lies, and it is that that we need to examine in future. Is the need not in terms of expenditure but in anticipation of the requirement of the particular local authorities? I am less confident in the statement that reads: The relationship derived represents the collective view of local authorities and their ratepayers on the spending needs of authorities, as conditioned by national statutory requirements and central government advice. That is the point that I was trying to make earlier. The whole thing turns on central Government advice, and that is where the dictation of the terms that the Secretary of State requires to be implemented is made effective. It underlines that the judgment at the end is left—properly so under the arrangements—to the Secretary of State. I think that the right hon. Gentleman leaves himself open to some of the political questions that have been asked. For example, it is sometimes suggested that he may be using the grant procedures to achieve political objectives. I think that he is trying to deny that, but at the end of the day the responsibility rests with him, and it is difficult for him to avoid such questioning.

Mr. George Cunningham

Does the hon. Gentleman recollect, three or four years ago, was it, that the previous Administration used all the methods that it could to work out a good impartial system for distributing the rate support grant? Did it not then fight shy of implementing it and decide to impose a political judgment on top of that to shift resources at that time from the cities to the rural areas? That was the previous Administration, which quite explicitly imposed a political judgment on top of the impartial statistical examination. Nothing like that has occurred with the present Administration. Instead, what has been done is to change the statistical methods perfectly impartially and objectively to try to recognise more of the needs of inner cities than have been previously recognised.

Mr. Jones

The hon. Gentleman is not usually accused of whitewashing, but I am afraid that I must make the accusation now. He has given no evidence in support of his contention either that the Conservative Government were responsible for a political judgment, or that the present Government are white.

It is out of character for the hon. Gentleman to make such allegations. He is usually so well documented that he does not allow his argument to rest on unsubstantiated evidence. I am surprised that he has allowed that to happen tonight.

The hon. Gentleman has in no way supported or helped the argument that I am trying to make. It could equally apply to an Administration of any complexion. It is far better for the Secretary of State to be detached from the allegation that he is using a political judgment in the distribution of the rate support grant. I contend that it should rest on much more substantial criteria. There is a judgment, but the decision under the present arrangement lies so firmly in the hands of the Secretary of State that he finds it difficult to avoid the accusations that are sometimes made.

Education demands about 60 per cent. of total expenditure, and additional emphasis has been given to social factors in recent years. This is set out fully in Appendix F of the order. Persons whose homes lack basic amenities and lone-parent families have been selected in three years out of the last four in each case. I find it difficult to see how factors involving such widely divergent judgments can make any realistic contribution towards expenditure by one authority or another. There is no national adjudication on the needs of differing parts of the country in this respect.

For many years local authorities, particularly those faced with substantial population expansion, have drawn attention to the fact that the rate support grant procedures make no allowance for this factor. The Secretary of State said that he did make an allowance for it, but my information is that this is not the case.

The factors listed on page 21 of the order refer to population decline over 10 and five years, respectively, but, as I recall, nothing has been suggested to provide that an allowance should be made for a rising population figure. I understand the difficulties of anticipating such a figure, but some judgment in this matter is required.

Population decline leads to reduced expenditure, although phased over a period of years. But the same attention does not seem to have been given to the necessity of increasing services where increased numbers require provision. I shall be glad to know whether the Secretary of State and perhaps, the Minister who will wind up, have any information in this respect.

I do not think that this is the occasion to go into any further detail over the rate support grant, but the unsatisfactory nature of these present arrangements must be challenged.

10.13 p.m.

Mr. Bruce George (Walsall, South)

I intend to be brief, Mr. Speaker. Speeches from Conservative Members have been characterised by disparaging remarks towards my right hon. Friend the Secretary of State. In the last four hours or so he has been accused of making judgments in favour of Labour areas, of being too clever by half, of manipulation, of lack of principle, of unfairness and inequity, and of being guilty of blatant political gerrymandering.

There are enough delightful phrases there to keep many an editor of a local newspaper happy for the next couple of days. But we on this side realise that no one has a monopoly of honesty. The House cannot be divided into those who are honest and those who are dishonest, and we need no lesson in political morality from Members of the Conservative Party.

I should like to refer to an incident involving the Conservative Party in my area. This concerns a meeting that took place on 23rd November. The person who has written to me on this is a very good friend of mine who is a West Midlands county councillor for Kingshurst and Chelmsley Wood, which is in the Meriden constituency. That person is Mrs. Renée Spector. She attended a meeting of the West Midlands County Council and of the Staffordshire County Council which was examining a number of draft modifications to the Secretary of State's structure plan for Staffordshire.

This joint meeting was attended by the West Midlands County Council planning committee chairman and vice-chairman and the other two Conservative members of that committee. On the Staffordshire side the chair was taken by Councillor A. G. Ward, the chairman of the county council. Also present were Mr. Jones, the vice-chairman of the county council, Mr. Brown the chairman of planning, Mr. Bowen the vice-chairman of planning and Mr. Lightbown, vice-chairman of policy and resources.

The officers at one stage were asked to leave the meeting, but, unfortunately for those present, Councillor Spector was not asked to leave. She was a new councillor and I presume that most of the Staffordshire members did not recognise her. She took extensive notes of the meeting. At the meeting the members discussed housing policy in the council area in Staffordshire and in the West Midlands county, particularly the North Bloxwich housing development in the Walsall, North constituency. Incidentally, the county council in the West Midlands does not allow its officers to make statements of any kind to the Press and apparently does not like them even to attend meetings, for the reasons that I shall explain shortly.

At this meeting Councillor Lightbown made the point that the county council needed to be very careful about housing strategy. It was stated that there was a Member of Parliament in AldridgeBrownhills who could be got out if the right sort of development took place. It was said that Walsall, South was vulnerable, that the balance of Lichfield and Tamworth could be altered, and that the balance of power in the parliamentary seats along the borders of the county could be quite dramatically changed if the wrong sort of development took place. In this meeting Councillor Lightbown said that South Staffordshire could be quite dramatically altered—

Mr. Peter Rees (Dover and Deal)

On a point of order, Mr. Speaker. May I seek your guidance? Is it in order to discuss a whole range of planning decisions in the Midlands, such as the hon. Gentleman is presently doing?

Mr. Dennis Skinner (Bolsover)

On a point of order, Mr. Speaker. I think you will have noticed that my hon. Friend the Member for Walsall, South (Mr. George) is attempting to illustrate not only that the Tories in the West Midlands are involved in gerrymandering but that the result would also he that rate support grant factors would be influenced.

Mr. Max Madden (Sowerby)

Further to the point of order, Mr. Speaker. Earlier in the debate my hon. Friend the Member for Swindon (Mr. Stoddart) was referring to the reluctance of district councillors sometimes to incur the infrastructure costs caused by new housing developments. He called attention to the relevance of this within the rate support grant settlements and negotiations. The matter to which my hon. Friend the Member for Walsall, South (Mr. George) is now referring is very germane to that sort of consideration which takes place in all local authorities.

Several hon. Members

rose—

Mr. Speaker

Order. The hon. Member for Walsall, South (Mr. George) had undertaken, I believe, to speak for five minutes. I have no doubt that he will not count the time that has been taken by points of order. I know that everyone in the House is anxious for other colleagues to have a chance to speak. I have been tolerant and that is why I did not pull up another hon. Member earlier, because I knew that he would restrict his speech to a very few minutes. The rule is, of course, that the subject matter must be related to the rate support grant.

Mr. George

I hope that the jutification of what I am seeking to raise has been made by other hon. Members before me. In regard to housing policy, it was said, as to Wolverhampton, South-East, that the odds should be weighed carefully or that seat would be jeopardised as well. As I indicated earlier, it was said also that South Staffordshire could be altered quite dramatically. It was said that Staffordshire would change its political balance if this type of development was persisted with, as the north of Staffordshire votes Labour and the party could not afford to lose the seats in the south as well.

Mr. Robin Hodgson (Walsall, North)

While I share the hon. Member's concern that the people of Walsall should have adequate housing, I point out that the development north of Bloxwich will go on valuable agricultural land as opposed to derelict land which is available within the borough. Secondly, the building would be on green fields which provide the only lung, the only open space, for people in the north of Walsall between Walsall and Cannock.

Mr. George

I have been stating the arguments that the officers were putting forward, when they were allowed to be present, about the cost of the infrastruc- ture of the north of Bloxwich development, but when the officers were thrown out they got down to the real reasons, political reasons, why they did not want the development. Councillor Lightbown went on to say that the Conservative Party must be very careful about the choice it made. It was said that the Conservatives must build private houses in Aldridge-Brownhills and Walsall, South and that this would alter the boundaries considerably. It was also said that any housing to be undertaken should be for private sale wherever possible.

This was the kind of argument put forward at this planning committee meeting which, to my mind, was more like a joint meeting of the West Midlands Conservative Party. Will the councillors be paid the expenses which they incurred in attending this meeting, which was blatantly political?

I shall not comment on the wisdom of making a statement such as that made by Councillor Lightbown when there were strangers present. That is his problem. It may be that I am naive, but I assumed that planning decisions should be taken on rational and impartial grounds. In this case the grounds borne in mind appear to have been more of a conspiratorial exercise in political gerrymandering of the very worst kind.

Mr. Speaker

Order. The hon. Member must speak about the support grant now. I have been very tolerant. I allowed the hon. Gentleman much more than the five minutes for which he asked.

Mr. George

Thank you, Mr. Speaker. I really had thought that it was germane to the debate this evening.

In conclusion, I ask the Secretary of State to inquire into the circumstances of this meeting and to judge very carefully the decisions emanating from the West Midlands County Council Tories and from the Staffordshire Tories in relation not only to the development north of Bloxwich, but to any other planning proposal as well.

Mr. Hugh Fraser

On a point of order, Mr. Speaker. The hon. Member for Walsall, South (Mr. George) made a number of very serious allegations. In fact, the meeting called with the Ministry was attended not just by Conservative members but by Labour Members for North Staffordshire. I was present at the meeting. The issue was raised by the county council as a whole, both Conservative and Labour members.

10.21 p.m.

Mr. Geoffrey Pattie (Chertsey and Walton)

My constituency is in the county of Surrey, and I speak in this debate on behalf of 10 of my hon. Friends with constituencies in that county.

Last year, our county was the worst hit of all the county authorities in the country. We have now ceased to have that rather dubious privilege, although we have lost £3 million in the forthcoming rearrangement.

I do not intend to talk about multiple regression analyses or needs elements. All that I wish to say about the system is that it no longer reflects adequately the needs and that it penalises the prudent authorities.

If the Secretary of State and any members of his departmental staff came to my constituency in the county of Surrey and met a random selection of my constituents, they would learn that my constituents regard it as something of a sick joke that now, apparently, they are the new rich and the inhabitants of a shire area which is to be raided each year to have its resources transferred to an inner city area.

It is not that people living in the county of Surrey think that there are no problems in London. We know very well that there are, and we wish to see measures taken wherever posible to alleviate them. Flow-ever, there is the implication in the way that this measure is drawn that there are no problems in a county such as Surrey and that it is populated entirely by people with numerous motor cars, swimming pools and all manner of modern conveniences.

However, we actually have children in care. We have a great many old people and we have a heavy concentration of mentally handicapped and mentally ill people. We have a lot of homelessness because of the high cost of housing We have a high incidence of alcoholism. I do not know why that should be peculiar to the county, but it seems to be. We have a high proportion of one-parent families. But the implication comes across to the people living in the county of Surrey, who are given the impression by a rate assessment in this form, that they are being raided in order to put right the situation in the inner cities. That is not the way to tackle the problems of the inner cities.

It seems that Surrey has experienced the same kind of cuts as those referred to by my hon. Friends from Kent and Essex. We have had exactly the same problems, and we have had to make the same reductions in our services.

I wish to say on behalf of my hon. Friends from Surrey that it is time to draw the line. This must be the last year—and I pray to God it will be—when we shall have a formula that is devised in this way.

10.25 p.m.

Mr. Gerry Fowler (The Wrekin)

I promised to be brief, and I shall make my points in rather staccato form.

Let me defend my right hon. Friend the Secretary of State for the Environment against the charge that this settlement is determined merely by his consideration of political advantage. My right hon. Friend is well aware that there is a high concentration of Labour marginal seats—not in the metropolitan areas or in London, but in the fringe areas situated in the shire counties to which people have moved from the conurbations in recent years. Those seats in general determine the results of a General Election.

My seat was once an example in that category. I am not sure that it is now and, indeed, I hope that it is now a fairly safe Labour seat. I noticed my hon. Friend the Parliamentary Secretary to the Privy Council Office was in the Chamber a few moments ago, and we all know that he is the Member for Rugby. That is an apt example for the purposes of my argument. Has he benefited from this settlement? That would not appear to be the case, and I feel that any action by my right hon. Friend on the lines suggested by the Tory Party as appropriate to his party political advantage would not win elections for him and his party.

We all know that in the inner cities there is a high concentration of social problems. Equally, we must also admit that historically resources have been maldistributed between county and inner city areas. I am not sorry that there has been a switch in recent years in order to correct the historical imbalance. Personally, I hope that the process will not go very much further. I am here as the Member representing the Wrekin, but also as a ratepayer in the Wrekin and in Westminster. I would say from my experience that the balance is now much nearer to correction, and I do not cavil at the switch of resources in the last two years.

The second point I wish to mention has been raised in various forms and relates to the regression analysis. Many people have said that the difficulty of that analysis is that it penalises the prudent and benefits the profligate. My point is different. I wish to advance the argument that it penalises the historically stingy, the socially irresponsible authorities, and benefits those that have shown their social responsiveness in the past.

Let me take my own county of Shropshire in terms of its social services. I wish to quote some figures used recently by the director of social services for that county. He makes clear in a Press report which I have before me that the county's estimated budget for the social services is 73 per cent. of the figure for England and Wales as a whole. Shropshire will spend only £12.18 per head of population on social services this year compared with a national average of £16.69.

He goes on, using the same basis of expenditure per head of population, to quote examples from specific services. Shropshire spends 28p a head on day centres for old people, compared with the national average of 83p. It spends £1.39 a head on home helps, compared with the national average of £2.02. It spends 29p a head on residential care for the physically handicapped, compared with the national average of 49p, and 49p on care for the mentally handicapped compared with 71p.

Why has this come about? Certainly not because of the rate support grant settlement of the last few years, but because the county is dominated by independents of the old-fashioned sort, and Conservatives of the rather more modern sort, whose basic principle is to cut public expenditure. These Conservatives believe that public expenditure is undesirable and that whatever money can be saved should be saved.

One of the weaknesses of the multi-variant regression analysis is that it perpetuates the problem. I hope that the Secretary of State will look at this and make a fresh start on a fairer basis. I can see the case that my right hon. Friend was making earlier about the difficulty of making assessments other than on this basis. However, I hope he will consider the possibility of trying to make a new effort to undo some of the damage that has been done by such authorities in the past.

I received a letter today from the county education officer for Shropshire protesting against a statement I made, oddly enough. I was surprised at this, because I check all my statements thoroughly before I make them. He thought that the county was doing very well on discretionary grants for further education because it was proposing to cut them only by £29,000 in absolute terms next year. Taking account of inflation, this is a cut of more than £29,000—it is a cut in real terms of 13 per cent. of the sum spent at present. Even assuming that the county was giving one discretionary grant in further education per 1,000 of the population—a pretty poor percentage—the sum spent per discretionary grant will be only £180 a year.

What does one do with an authority like this? It is no good saying that we put in what we can through the rate support grant and leave it to the discretion of the authority. We must go further than revision of the format and look again at the possibility of certain specific grants for essential services being provided by local government.

The formula at the moment does not take sufficient account of the needs of areas of rapidly increasing populations. This is particularly the case in my area—in Telford—and it brings with it a whole host of social problems. There is specific help for new towns, and I concede that happily. It helps to redress the balance, but goes only part of the way towards doing so.

In my new town I have schools in which, for example, 53 per cent. of the child population come from broken homes. I have another school with a high concentration of immigrant children, which most people would not believe was possible in lovely rural Shropshire. There is also a high incidence of social problems and broken marriages. But throughout the area the standard of social services provided by the Shropshire County Council is below the national average, even in terms of areas without a high incidence of such problems.

I therefore hope that the Secretary of State will look again at he problem of areas of expanding population and particularly those areas where the population that is coming into the area brings with it a variety of social problems that may hitherto have been alien to that authority. Indeed, they may have been not only alien but beyond the experience of the authority whose task it is to deal with them. I notice that the hon. Member for Bromsgrove and Redditch (Mr. Miller) who has similar problems in his constituency is nodding—so that I am making a non-party point.

Much of this debate has been wasted with scoring cheap political points. The Secretary of State has done what he could in the circumstances this year. The formula is inadequate and needs revision, but that is not the fault of the Secretary of State. Pray God we can get away from petty, party political squabbling in attempting to solve the means of supporting the local authorities upon which every one of us depends so much.

10.37 p.m.

Mr. Dudley Smith (Warwick and Leamington)

This has been a remarkable debate. It has lasted seven hours and there are still many hon. Members who wish to speak. One can look back to the sixties when the rate support grant debate was a formality, held late at night and only certain hon. Members who were interested took part in it. It became extended to a quarter of a day's debate and then to half. Now today we have had a full parliamentary day and not everyone who wished to speak could be satisfied. This underlines what other hon. Members have said—that there is something seriously wrong with the whole matter of the rate support grant and the system.

I have sat through seven hours of this debate today and there has been a stream of criticism. Some of it has been political and directed against the Secretary of State and the Government, but most of it has been against the system. We have heard from hon. Members on both sides of the House who represent, for example, Liverpool constituencies, as well as hon. Members from the shire counties. Of all taking part, only two hon. Members spoke in favour of the Government's decisions and they were both representing London constituencies which will do very well out of this settlement. Apart from that, there has been general and consistent criticism.

The debate has underlined the essential unfairness of the rating system overall. Reform should have come years ago and I blame successive Governments for that. The burden of rates should not be an argument between the shires and London, but about a balanced system between citizen and citizen, the residents of inner areas, towns and the countryside. It should be based on the ability to pay and generally applied across the population.

There are many old people, childless couples and others on low incomes but not sufficiently low for them to qualify for rate relief. These people are being asked more and more to bear an ever greater burden in this matter.

I have heard that there is a silly rumour going round that my party is not now quite as keen on rating reform as it was once. I believe that that is all that it is and I hope that the Opposition spokesman tonight will declare that we are as keen as ever to reform the rating system. Some of us have campaigned for years to get the rating system reformed and we shall continue to do so until the Government, of whichever party, does so and grasps the nettle. Given the hotch-potch of the present system in an inflationary age, it is undoubtedly true, and no impartial person who has listened to this debate from the Galleries today could be in any doubt whatsoever, that the counties are being hammered cynically and unfairly.

If I have one particular criticism of hon. Members opposite who have spoken it is of the attacks made on the ACC. The Association is a reliable, responsible body and it considers the proposals to be grossly inequitable and wholly unacceptable. Many of its criticisms are shared by the Association of District Councils. These are expert, professional people and there is no doubt that those who study these matters realise that this year's grant leaves a great deal wanting.

It is clear that the formula has been adjusted to favour London. The shire counties once again lose most heavily, thus continuing the trend which started in 1974–75. There has been a lot of special pleading. I do not want to make a particularly special plea for Warwickshire, because there are so many Warwickshires. A total of 39 counties are doing very badly as a result of the grant, and Warwickshire is the sixth hardest loser. It will have to tighten its belt and increase its rates. It is not a plush, rich area such as Surrey. It has some desirable parts, but it also has a high percentage of lower than average incomes and people in trouble who need help from official sources.

There is more politics than attempted parity in what the Secretary of State is trying to do. I received a letter yesterday from a constituent who implied that he may have been a Labour Party member once and said in regard to the rate support grant: I have never understood why the Labour Party, supposedly the party of social justice, seeks to maintain this system among many other inequities. That view would be echoed by many others. Perhaps it is too much to ask the Secretary of State to think again and to draw up a new formula for next year. I imagine that the right hon. Gentleman will, by then, be back at the drawing board in Transport House at the start of a lengthy period in opposition, but if he is still in office, I hope that he will look at this matter again and try to do something about it. If we are in power by that time, I hope that we shall already have embarked on the desperate need to reform the whole rating system.

10.43 p.m.

Mr. Hugh Jenkins (Putney)

I am glad that the provision for libraries, museums and art galleries allows for a slight increase in the volume of expenditure as new facilities come into use. Before the grant is fixed, discussions take place between all Departments. Arts Ministers have come in for severe criticism in the past, and my successor has not been immune from it, but he has done well to get an increase this year.

Libraries are an important part of our public life and it is desirable that they should be given the opportunity to expand. They have many new requirements falling upon them, including the development of the loan of cassettes gramophone records and so on.

Another good point is that the settlement provides an increase in police officer manpower and the number of police civilians and cadets. There has been a lot of argument on this point and it is a good thing that this provision has been included. These are non-controversial matters to which I am glad to draw attention.

There seems to have been misguided criticism about the relationship between London and the rest of the country. What is being done in the order represents simply a reduction in the largesse that London distributes to the rest of the country. To hear some hon. Members opposite, one would think that the opposite was true. All that the Minister has done is to make a long overdue redistribution in favour of London.

Even now, under this procedure, all that the Secretary of State does is to make an arrangement which allows for London's domestic rate bills to increase by the same cash amount as the average elsewhere. That is all there is to it. From the Londoner's point of view, since he is proportionately so out of line with the rest of the country, since it is so much more expensive in rate terms to live in London, the readjustment is not enough.

There can be no question of my right hon. Friend having done some political manoeuvring to benefit Labour authorities. A long overdue measure of justice has been introduced here. My right hon. Friend lives in my constituency, in the borough of Wandsworth, and Wandsworth has done slightly less well than the rest of the London boroughs. If he is being over-cautious about doing well for Wandsworth, he and I and the rest of my constituents have to pay for his over-caution.

Mr. Newton

Would the hon. Gentleman agree that one of the problems here is that the definition of London appears to be crude? The hon. Member for Harlow (Mr. Newens) and others have pointed out that at the edges—for example, between Redbridge and the rural parts of Essex—people are better off than those on the other side of the border. We need a less crude instrument to bring aid to the inner areas of London.

Mr. Jenkins

This instrument is not crude but highly complex. We cannot get away from its complexity because of the basic nature of the rating system. We are saddled, until we choose to alter it, with a single regressive form of taxation. It is highly unpopular. Every local authority is confined to its rating formula, and until we get away from that and permit local authorities a wider range of money-raising abilities on their own account and look at our whole method of financing local government, we cannot get away from the complexity of the system and from the inequalities which, however careful one is as between one authority and another, must necessarily arise. Eventually, as the system gets more and more complex, the House—both sides of it—will find itself forced to the conclusion that at long last we must look at the whole method of local government financing and fundamentally reform it.

10.48 p.m.

Mr. Tim Sainsbury (Hove)

It is a pity that the Secretary of State, who attended this long debate very well, was not present to hear the hon. Member for Putney (Mr. Jenkins), because he would thus have heard the only speech in the debate which nearly got to being uncritical of the order. Just at the end, some criticism—in which I follow the hon. Gentleman—did creep in when he said that the whole system was unworkable.

In seven and a quarter hours of debate, the best that the Secretary of State has heard has been London Members saying "It is not good enough" and the hon. Member for Rother Valley (Mr. Hardy) saying "One bad order deserves another". It is not surprising, in view of the ingredients of the order, that the right hon. Gentleman is so universally held to have done a bad job. Nor is it surprising that he has been accused of exercising political judgment instead of a genuine judgment of needs. Given the instrument that the right hon. Gentleman has, he would be more saintly than perhaps any other Member were he able totally to resist the temptation to interpret the figures a little to political advantage.

What is the first element of the rate support grant? It is the domestic element. No explanation has been advanced as to why there is twice as high a domestic element in Wales as in the rest of the country. The late Mr. Anthony Crosland said, in a debate on the rate support grant: The result of this decision, I fully concede, is very rough justice, with a strong element of the capricious about it."—[Official Report, 25th March 1974; Vol. 871, c. 55.] Later, on 12th December, he said: The basic reason for the wide margin is that the cost both of local government reorganisation and water reorganisation was much greater in Wales than it was in England."—[Official Report, 12th December 1974; Vol. 883, c. 789.] It seems that the Welsh are taking a very long time to sort out water reorganisation and local government reorganisation if, four years later, they really merit twice as high a domestic element as the rest of the country. There are other parts of the country that are just as badly off on those grounds.

The second element of the rate support grant, which concerns more than £2,000 million, is the resources element. As has been pointed out, this extraordinary element is an absolute invitation to an authority to spend more money. I think that the Minister will be aware that some authorities will actually receive more taxpayers' money than ratepayers' money for every additional penny in the pound that they levy. That is a total incentive to spend more money.

I refer the Minister to something with which I hope he is already familiar, the authoritative report on the distribution of the rate support grant by Richard Jackman and Mary Sellars of the Centre for Environmental Studies, which dealt very satisfactorily with this point. The report pointed out that Grant mechanisms could snowball, with an increase in grant leading to an increase in costs leading to further increases in entitlement and further increases in expenditure and so on. That analysis had a look at what we get from the resources element.

The other defect of the resources element is that it is based on the fallacy that one can compare realistic rateable values in one area with the rateable values in another area. That is not true. It is not true of commercial properties and is even less true of residential properties.

I hope that the Secretary of State and his team are familiar with Table 8 on page 158 of the Layfield Report, from which we see that if we compare the rates on entirely similar three-bedroomed semi-detached houses, and if the rateable value in Wales is indexed at 100, by the time one comes to the South-East an identical house has a rateable value of 157, and an identical house in London has a rateable value of 225, nearly two and a quarter times as great. Therefore, we have a resources element put on rateable values which are not comparable, as well as being an invitation to local authorities to spend more.

Most hon. Members have concentrated their criticism on the now generally decried and disgraced multiple regression analysis method of allocating nearly £4,000 million handed out in the needs element. It might be suggested that it is a little late in the day to turn to what is perhaps the most profound criticism of multiple regression analysis, which is that it suffers from multicollinearity [HON. MEMBERS: "What?"] I invite the Secretary of State to explain how he has dealt with this. It is a very simple thing, with which I am sure hon. Members are familiar. When one adds one form which is closely related to another form, one ends up achieving the reverse effect of what was expected to achieve, because of the effect of the first factor on the second factor. Multiple regression analysis is totally riddled with multicollinearity, and I hope that it will rapidly prove fatal.

There are many other criticisms that I could make. My hon. Friends the Members for Henley (Mr. Heseltine) and Daventry (Mr. Jones) have both pointed out the inadequacy of the data base. We can see this if we look at two or three elements in particular.

Incidentally, before we leave the statistics perhaps I ought to draw the attention of the House to the coefficient of variation from the average rate poundage, because it is generally accepted—indeed, the Secretary of State has told us—that the purpose of the needs element formula is to compensate authorities with particular spending problems so as to prevent an especially heavy burden falling upon the rates.

The House will readily realise that if this was working we would find that the variation from the norm in the rates would be reducing, but if we look at the coefficient of variation we find that it shows no signs of circular conversions at all—in fact, on the contrary. So, on a statistical basis, one can firmly say that the alleged purpose of the needs element is not being realised.

If we look at the factors, that is perhaps not surprising. Let us consider lone-parent families. It is right that they are given a much heavier weighting this year and the year before. The weighting is based on the 1971 census figures of a number of lone-parent families, from which I can only conclude that the Department of Environment does not study the Finer Report. Had it done so it would have found a note from the DHSS which is reprinted in Appendix 4 on page 79 of Volume II. It says: Census methodology is unsatisfactory for identifying unmarried mothers living with their children. Both the 1966 and 1971 analyses understate the probable number of unmarried mothers. Thus we have a factor given special weight which has already been found, even on that very out-of-date basis of the 1971 census, to be totally unrealistic.

When we come to persons living in housing lacking certain amenities, we find that, in spite of a housing division survey having been carried out in 1976, that factor is still being based on the 1971 census. As the Secretary of State in an answer to me, has already projected a further fall of 57 per cent. in the number of unsatisfactory houses in the country, I should like to ask how much money is being paid on non-existent amenity-lacking houses because of his use of out-of-date factors.

Perhaps the worst of these factors is the third additional factor to which I should like to refer, and that is factor (i)—pensioners living alone. Surely everybody in the House would accept the number of pensioners living in an area to be of major importance in determining the amount of rate support grant that might be required, yet the only factor that we find on this subject is one for pensioners living alone, and that is down-weighted this year and is, of course, based on totally out-of-date figures Nothing is given for those amongst the elderly who have the greatest need—the over 75s. In East Sussex there are more people over 75, and over 65, than there are in any other county. Therefore, it is not surprising that we find that East Sussex has lost £4.1 million in grant because of the down-grading of the rate given to the factor relating to pensioners.

The reality is that both by political decision and by the effect of the higher spending by the cities as a group the regression analysis has been shown to have failed totally. The outcome has been the direct result of persisting with the regression approach, and, as that same CES article finds, it is an increase in the cities' expenditure rather than any real increase in needs that has gained them the additional grant.

I started by referring to the late Anthony Crosland, and I end the same way. He said: The revised formula produced by my predecessor represents a considerable improvement on any previous formulae … but it is still far from perfect and I shall want to look closely at how it works out."—[Official Report, 25th March 1974; Vol. 871, c. 50.] I hope the House will agree that, after the debate today, we cannot wait another year to find a better answer.

11.0 p.m.

Mr. William Molloy (Ealing, North)

We have to acknowledge that the hon. Member for Hove (Mr. Sainsbury) is red hot at reading tables and mustard at quoting extracts from other people.

The point made by the hon. Hember for Warwick and Leamington (Mr. Smith) was a good one, like that made by his hon. Friend the Member for Chertsey and Walton (Mr. Pattie). We have to acknowledge that even in the so-called wealthy areas in the counties, like Surrey and Warwickshire, there are elements of poverty and hardship among those we tend to think of as fairly wealthy. The House would be remiss not to acknowledge that. It also proves that even in the midst of plenty one can have poverty, but that is part of a political problem which cannot be debated tonight.

I also agree with the point made by many hon. Members that the rate support grant debate has attracted a great deal of attention, either because hon. Members believe that the grant is unfair to the counties and favours London, or because, like me, they take the reverse view.

Some of us start with a little knowledge of the matter, having been involved in London local government for 25 or 30 years. We appreciate the feelings of county MPs who have never done battle over the last three decades, as we have, in appealing for more justice for London.

The offensive thing which the Secretary of State has done has been to listen to genuine appeals, to examine the facts and to make this decision. The right hon. Member for Henley (Mr. Heseltine) hints at some sort of political juggling by my right hon. Friend the Secretary of State. What neck, and what nerve it is for the Tory Party even to consider that, in the context of the GLC, someone might do a bit of fiddling! The whole GLC and its entire structure are the biggest piece of gerrymandering in the history of this country, so we do not want that sort of nonsense from the right hon. Member, nor from anybody else on that side of the House. It has been acknowledged as a vicious example of a blot on the British political character and it comes ill from any hon. Member opposite to make the foul aspersions which have been made tonight.

Mr. Ronald Brown

Will my hon. Friend note that the Tories on the GLC are involved in another piece of fiddling by setting up something called the Marshall Report and going back to the 1950s and the Herbert Commission? They are trying to do some more gerrymandering, about which we shall hear later in the year.

Mr. Molloy

I agree. It is like an orchestra with one instrument, namely, the fiddle.

There are problems we have not been able to tackle because of insufficient funds. The rating system is wanting, but nobody has found an alternative. We have not tried for any length of time any idea alternative to the rating system. When a Minister is prepared to do that, even for a trial period, even if he fails, his courage will be acknowledged.

The point was made earlier that the economic situation was drastic and that when the United States was seized with a form of political pneumonia for which we are not responsible we had in various parts of our island large chunks of unemployment. It was the Government's policy to try to reduce unemployment in places like Wales and for industry to be created there and when it could not, for industry to move from Greater London. That has caused enormous problems.

There is no example in the country comparable with what happens in London because of the removal of industry. No place has lost so large a number of apprenticeships as Greater London, and that has had its effect on education. When all this is put together, it is the main burden on the expenses of Greater London area and that burden is larger than that borne by any other part of the country because of unemployment and relocation of industry—

Mr. Michael Brotherton (Louth)

On a point of order, Mr. Deputy Speaker What has this to do with the rate support grant?

Mr. Molloy

I will deal with the hon. Gentleman. If he cannot see that the problems of the unemployed, of old-age pensioners, of education, and of roads have something to do with the rate support grant, he has no right to be here. He has not been here very long. He might as well go back whence he came.

I am sure that if we had been graced by the presence of the Leader of the Opposition—she is dead crafty; she has not attended the debate—she would have known that what we have been saying from these Benches about London is the truth. She would have known that for decades Greater London has had to put up with being at the bottom of the list for consideration. My right hon. Friend has acknowledged London's difficulties and its status. He has made some endeavour to right a wrong which has existed for far too long.

11.5 p.m.

Dr. Alan Glyn (Windsor and Maidenhead)

In the one minute I have available to me I want to make two brief points. Speaking on behalf of Berkshire and all the other county areas, two points are clear to me. First of all, the rate support grant 1977–78 followed by the grant for 1978–79 means that two things must happen. First, there must be a cut in services and, secondly, there must almost certainly be a rise in the rate poundage.

All that we in the county areas are asking for is some equitable treatment, not that some areas should be treated equally and others more equally.—The whole basis of the criteria and of formula on which they are based should be looked at very carefully. The Minister has gone so far as to agree with that.

Early-Day Motion No. 142, proposed by me and signed by my hon. Friends in Berkshire, spells out what we wish to do in Berkshire and the other county areas. It sets out clearly that this settlement must result in a rise in rates and a reduction in services. In Berkshire's case the Government have said that we should lose £1 million, the ACC has said that the figure is £2.3 million, and I am assured by the county that the figure is probably nearer £3 million. This will result in an increase in rate poundage from 60p to 68p, a rise of well over 12 per cent. Any result on services such as roads, schools or anything else will be directly associated with this order.

I hope that the Minister will do two things—look carefully at the recommendations made in Early-Day Motion No. 142 and, secondly, look at the formulá and the criteria upon which this new rate support grant is based.

11.7 p.m.

Mr. Robert Rhodes James (Cambridge)

In the short time that is available to me—although I must point out that I have been present right from the beginning of the debate—I wish to draw the attention of the House to the predicaments affecting my constituency and the county of Cambridgeshire which, as the hon. Member for Isle of Wight (Mr. Ross) pointed out, was most particularly hit by the rate support grant of last year.

There were various other matters that I wished to bring to the attention of the House and of the Secretary of State in particular, but in view of the manner in which the debate has gone I do not have that opportunity, though I trust that on another occasion I shall have the privilege of informing the House in more detail of the very particular problems which we in my constituency face.

11.8 p.m.

Mr. Teddy Taylor (Glasgow, Cathcart)

We are debating orders affecting England and Wales, but understandably, because of the lateness of the hour on Thursday night, most of the debate has been about the position in England. However, the position in Scotland, as the Secretary of State will agree, is equally serious.

The Secretary of State, in introducing the order, said that it was fair and reasonable. A number of things have become clear during the debate. First, the right hon. Gentleman must accept on the basis of all the speeches that have been made from both sides that his view is very much a minority view. The evidence advanced by many speakers with detailed knowledge of local government in the areas demonstrated that the Government's proposals are not accepted as either fait or just. That view has been expressed not just from these Benches, but many of his hon. Friends—the right hon. Member for Anglesey (Mr. Hughes) and the hon. Members for Swindon (Mr Stoddart), for Rotherham (Mr. Crowther) for Ince (Mr. McGuire) and for Harlow (Mr. Newens)—have made it clear that the order is resented and will cause real damage in many areas which are already suffering a great deal.

The first thing that the Secretary of State must appreciate is that we cannot consider the order in isolation. For many areas, including the shires, this is a blow coming after three bad years. My hon. Friend the Member for Ton-bridge and Mailing (Mr. Stanley) made it clear that his county had lost about £25 million over the past three years and many other such examples were given, including that by my hon. Friend the Member for Warwick and Leamington (Mr. Smith). Those who are affected in this way and who have lost a great deal because of the change in emphasis over the past three years would rather resent the Secretary of State's advice that they should not use the occasion of this further cut as an excuse to cut spending on services. The Secretary of State must be aware that the only alternative they have is further to raise the rates, notwithstanding that already for very many they are a very great hardship. Many small businesses, for example, are ending the burden intolerable.

The second argument has been about the needs element formula. Does the right hon. Gentleman accept on reflection that there is any meaningful relation to need, or is the procedure to reallocate grant merely becoming a vehicle for what amounts to a political decision? We have had many endeavours on the part of the right hon. Gentleman and others to explain the needs formula. A few minutes ago my hon. Friend the Member for Hove (Mr. Sainsbury) gave us a detailed explanation, and he was as difficult to follow as the right hon. Gentleman.

Some of the changes that have been made are difficult to justify in logic. One change has been the complete removal of the unemployment factor. The hon. Gentleman may remember what he said almost a year ago on 22nd December 1976 when he told the House that he was proud of the inclusion of the unemployment factor. He said: 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."—[Official Report, 22nd December 1976; Vol. 923, c. 846.] What has happened since then? Has unemployment disappeared? Far from it; it has increased further. It is now at about the highest level since the 1930s. However, the unemployment factor has been removed. How can the Minister say that there is logic in these matters and a fair assessment of need?

Another point that has been emphasised time and again by my hon. Friends is that need is not limited to the inner cities. We all accept that they have special problems, but the right hon. Gentleman must accept that bad housing and deprivation are not limited to the inner city areas. As my hon. Friend the Member for Wells (Mr. Boscawen) said, transport problems are not limited to the inner city areas. As my right hon. Friend the Member for Stafford and Stone (Mr. Fraser) emphasised, the problems of expansion and related needs are not confined to the inner city areas. It would be wrong if the whole exercise were based on the principle that need was something limited to the inner city areas.

The right hon. Gentleman has made an assumption that we find difficult to follow—namely, that inflation will be limited to 9 per cent. over the forthcoming 12 months. That assumption is based on a pay policy that was designed to produce increases of between 6 per cent. and 10 per cent. Surely the Minister accepts that we now have the problem of deferred pay rises, which are almost time-bombs that can provoke an increase in inflation. We have the possibility of two rises for the police, and possibly two for the firemen, in the period that we are contemplating. However, the Minister has made the assumption that inflation will be limited to 9 per cent. for the forthcoming 12 months.

As the Secretary of State for Scotland has said, we have special problems in Scotland. We have the problem of reallocation, which in some ways is made worse by the revaluation that is taking place in Scotland this year. The result of that, as the Secretary of State indicated, is that there will be an even greater shift in the allocation of grant than in England. We find that Lothian could suffer a loss that has been estimated at £6 million. Fife, of course, has many special problems. It could lose as much as £5 million. Most of the areas outside Strathclyde will lose because of the revaluation. We find that industry will be carrying the larger share.

The Minister pointed out that he was cutting down the domestic rates element by a substantial amount because of the special problems facing industry. Does he think that it is wise to put such a massive additional burden on industry when unemployment in Scotland is so high? In both Scotland and England in recent times finance has become a nightmare for both treasurers and ratepayers. They have had the problem of coping with inflation. There has been the problem of obtaining ever-increasing revenue from the rating system, which has been creaking at the seams. I say to my hon. Friend the Member for Warwick and Leamington that the problem is just as bad in Scotland. A recent answer reveals—I think that it was given on 6th September—that rate arrears in Scotland are about £20 million. That gives some indication of how the system is creaking at the seams.

As my hon. Friend the Member for Warwick and Leamington emphasised, we have in the orders an additional problem—namely, that of coping with the juggling act of the Government that appears to be designed to solve the complex problems of inner city areas by artificially milking other areas.

We accept that action is needed to help the inner city areas, but the repeated milking of other areas is not the way to achieve that. There is no doubt from what has been said from both sides of the House that these proposals will cause great hardship to ratepayers who have already suffered over the past three years. The principles do not seem to be based on justice or need, and the indications are that this order represents a further episode for what appears to have been almost a vendetta against large areas of the United Kingdom. It is time that that vendetta was ended and that grants were based on real justice, not on political expediency, as appears to have been the basis of this order.

11.16 p.m.

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

I recall that on the last occasion when we discussed the rate support grant—in December last year—the right hon. Member for Crosby (Mr. Page) suggested an old boy's tie for the rate support grant club. From tonight's debate it seems that the membership of the club has increased, but there has not been a great deal of unity among the members.

Some of my hon. Friends have welcomed the proposals, and some have criticised them. From the Opposition we have had nothing but criticism. That may be because no London Conservative Member has spoken in tonight's debate.

We have heard the suggestion that certain Opposition Members might vote. That is their right, but I say to anyone who is contemplating such action that it would create a serious situation for local authorities if the orders were voted down. That would produce chaos in local government offices, because the authorities would be unable to plan their budgets. I mention that only to familiarise hon. Members with the consequences of any such action, and I do not seek to prevent them from voting.

A number of points were made to the effect that the cash limit for 1978–79 has been set too low. The cash limit we have set implies an annual increase in costs affecting local authority current expenditure of just over 71 per cent. However, it takes account of a substantial once-and-for-all reduction in national insurance contributions which, when excluded, brings the annual increase to about 9 per cent. for the year.

Let me just make clear what the cash limit figure does and does not include. It does not include provision for the recent police settlement, since this has been allowed for in the price base for the settlement. It does include provision for other pay settlements.

As to the latest proposals on the firemen, the Home Secretary said in the House last week that the Government would be prepared to contribute through the rate support grant to the cost of the proposed settlement; this undertaking stands. It means that the additional expenditure arising from a settlement with the firemen will be added to relevant expenditure and be eligible for grant. If it is necessary to increase the cash limit in order to meet any undertaking given by the Home Secretary, this will be done.

Mr. Heseltine

What is the basis of the settlement level included in the rate support grant settlement already announced?

Mr. Jones

There has not been a settlement in the firemen's dispute yet. I have indicated how we would react when a settlement was reached and how we would deal with it through rate support grant.

Perhaps I may say a few words about regression analysis. This still provides a reasonably objective picture of relative needs. It is supported by some of the local authorities and it reflects the growing problems of inner urban areas. Since last year's rate support grant debate in the House we have tried to find a genuinely acceptable alternative. We are continuing discussions and inquiries with local authority associations to see whether we can bring this about. I offer a challenge to those who criticise the present formula and who think they can produce a better system of needs assessment: produce it and we shall consider it. If it is better and can be seen to be better, we are prepared to use it.

Let me say a few words about varying data. A number of hon. Members said that population increase should be reflected in the needs element distribution. It is included. About half the needs grant is paid out in proportion to population, so that the increase in population brings with it an increase in the proportion of needs element.

Some Members seem to think that an increase in population should lead to an increase in the amount of the needs element that goes to even out variations in costs per head in meeting needs, but this should occur only if it can be shown that an increase in population has led an increase in the cost per head. What evidence we possess is to the effect that normal increases in population such as occur in many of the Home counties do not lead to increases in costs per head.

Where there are increases in the number of special groups, such as school children and one-parent families, these are picked up in many of the needs factors. But if there are able-bodied members of the community involved in these matters, there is no reason why they should increase the cost per head relative to other authorities.

Many Members have asked about elderly people living alone and other groups in the community. We are conscious of the fact that some of the data used in this respect are out of date or unreliable, and this point was mentioned by the hon. Member for the Isle of Wight (Mr. Ross). The information was derived from the 1971 census, is now six years out of date, and we do not believe that it is sufficiently valid to be used.

On the subject of unemployment statistics, we now find that data on this topic are up to date, but can be resorted from employment exchange areas to local authority areas only on a most unsatisfactory basis. Because a large number of the unemployed do not register for employment in areas in which they live, we have had to use poor quality data in needs assessments. The Consultative Council on Local Government Finance, consisting of central and local government officials, is examining the prospect of improving data. We expect its report to be available early in 1978. We must await that report before we know what are the prospects for an improvement in the situation.

A word about my own patch, Wales. Welsh authorities have faced difficult times in the last two years. They have responded well to the overall economic objectives set by central Government, and I wish to pay tribute to them. I very much welcome the discussions we have had with those authorities in the Welsh Consultative Council on Local Government Finance.

Mr. Wyn Roberts

rose—

Mr. Jones

I cannot give way. On the last two occasions when I gave way in similar debates my speech was so truncated that I was throwing away my speech notes like a strip-tease artist.

The comments on the settlement in Wales concentrated on the needs element of rate support grant paid to county councils. I readily admit that there will be a marginal fall in the share of needs element which Welsh counties will attract next year, in common with the fall in the share of the English shire counties. However, I wish to correct the impression that this means that the Welsh counties will get a smaller needs element this year than in others. It does not. Welsh authorities will receive an estimated £243 million in needs element next year compared with £233 million this year. Each Welsh county will receive an increase in the amount varying from county to county. Gwynedd and Powys will also benefit under the safety net arrangements.

The rate support grant also includes the domestic element. The domestic element is, in effect, a Government subsidy to all domestic ratepayers in Wales. The Government, taking into account their anti-inflationary policies, have decided that for next year the levels will remain 36p in the pound in Wales and 18.5p in England. This is of considerable benefit to ratepayers, with the higher level in Wales being worth some £21 million. Its effect is shown by the fact that, without the higher level in Wales, the average rate bill this year would be—

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

Order. We have been waiting so long to hear what the Minister has to say that it would be nice if we could hear what he said.

Mr. Jones

Thank you, Mr. Deputy Speaker. Without the benefit of the domestic element, the average rate bill this year in Wales would be £21, or 31 per cent. higher than it is.

Similarly, all Welsh district councils will receive the third component of rate support grant next year—the resources element.

I should point out to the Welsh counties that these orders make provision for the payment of transport supplementary grant. My right hon. and learned Friend the Secretary of State for Wales will shortly be announcing the settlement for next year. I cannot anticipate what he will say, but I should point out that Wales is always treated generously. Her special needs are always taken into account in this settlement. I have no reason to suppose that this will not be the case this year.

The rate support grant settlement as a whole is therefore fair for Wales. Welsh authorities will naturally be disappointed about the reduction in their share of the needs element, but they must appreciate the value of the higher level of domestic relief to Welsh ratepayers and that of the resources element.

The hon. Member for Merioneth (Mr. Thomas) asked specifically whether the rate support grant would be decentralised to the Welsh Office before the setting up of the Assembly. Responsibility for the rate support grant in Wales is to be transferred to the Assembly, but consideration will need to be given to the precise way in which this transfer is to be made. We are now having consultations with local authority associations in Wales to try to devise a system particularly suited to the needs of Wales in this respect.

In our proposals we have tried to strike the right balance between, on the one hand, our continuing policy of concentrating resources in those areas with the most pressing social and economic problems and, on the other hand, keeping changes in the pattern of grant distribution within reasonable limits.

No one tonight has come anywhere near making an adequate case for ignoring the problems of areas faced with serious social and economic deprivation. Indeed, several hon. Members have suggested that we are not doing enough for such areas. If we had had enough resources at our disposal, we would have liked to do more. Within a fixed overall grant total, any gains for one group of authorities must necessarily be losses for others. Some authorities must do less well than average.

I recommend the rate support grant orders to the House as embodying an

Division No. 51]	AYES	[11.29 p.m.
Archer, Rt Hon Peter	Graham, Ted	Morris, Rt Hon J. (Aberavon)
Armstrong, Ernest	Hamilton, W. W. (Central Fife)	Moyle, Roland
Atkinson, Norman	Hardy, Peter	Mulley, Rt Hon Frederick
Barnett, Guy (Greenwich)	Harrison, Rt Hon Walter	Murray, Rt Hon Ronald King
Barnett, Rt Hon Joel (Heywood)	Hattersley, Rt Hon Roy	O'Halloran, Michael
Bates, Alf	Hayman, Mrs Helene	Orbach, Maurice
Benn, Rt Hon Anthony Wedgwood	Healey, Rt Hon Denis	Owen, Rt Hon Dr David
Bidwell, Sydney	Heffer, Eric S.	Palmer, Arthur
Bishop, Rt Hon Edward	Hooley, Frank	Pendry, Tom
Blenkinsop, Arthur	Horam, John	Perry, Ernest
Boothroyd, Miss Betty	Huckfield, Les	Price, William (Rugby)
Bottomley, Rt Hon Arthur	Hughes, Rt Hon C. (Anglesey)	Radice, Giles
Brown, Robert C. (Newcastle W)	Irving, Rt Hon S. (Dartford)	Rees, Rt Hon Merlyn (Leeds S)
Butler, Mrs Joyce (Wood Green)	Jackson, Miss Margaret (Lincoln)	Roderick, Caerwyn
Callaghan, Rt Hon J. (Cardiff SE)	Jay, Rt Hon Douglas	Rodgers, George (Chorley)
Carter, Ray	Jenkins, Hugh (Putney)	Rooker, J. W.
Cartwright, John	John, Brynmor	Roper, John
Castle, Rt Hon Barbara	Johnson, James (Hull West)	Sever, John
Cocks, Rt Hon Michael (Bristol S)	Jones, Alec (Rhondda)	Shaw, Arnold (Ilford South)
Coleman, Donald	Jones, Barry (East Flint)	Shore, Rt Hon Peter
Concannon, J. D.	Judd, Frank	Silkin, Rt Hon John (Deptford)
Cook, Robin F. (Edin C)	Kaufman, Gerald	Silkin, Rt Hon S. C. (Dulwich)
Cowans, Harry	Kerr, Russell	Skinner, Dennis
Cox, Thomas (Tooting)	Lamborn, Harry	Smith, John (N Lanarkshire)
Cronin, John	Lamond, James	Snape, Peter
Crowther, Stan (Rotherham)	Latham, Arthur (Paddington)	Spearing, Nigel
Cryer, Bob	Lestor, Miss Joan (Eton & Slough)	Stallard, A. W.
Cunningham, G. (Islington S)	Lever, Rt Hon Harold	Stewart, Rt Hon M. (Fulham)
Cunningham, Dr J. (Whiteh)	Litterick, Tom	Stoddart, David
Davidson, Arthur	Luard, Evan	Stott, Roger
Davies, Bryan (Enfield N)	McCartney, Hugh	Strang, Gavin
Davies, Denzil (Llanelli)	McDonald, Dr Oonagh	Summerskill, Hon Dr Shirley
Davis, Clinton (Hackney C)	McElhone, Frank	Taylor, Mrs Ann (Bolton W)
Deakins, Eric	MacFarquhar, Roderick	Tomlinson, John
Dell, Rt Hon Edmund	McGuire, Michael (Ince)	Urwin, T. W.
Dormand, J. D.	Mackenzie, Rt Hon Gregor	Wainwright, Edwin (Dearne V)
Douglas-Mann Bruce	Maclennan, Robert	Walker, Harold (Doncaster)
Eadie, Alex	Madden, Max	Walker, Terry (Kingswood)
Ellis, John (Brigg & Scun)	Magee, Bryan	Ward, Michael
Ennals, Rt Hon David	Marks, Kenneth	White, Frank R. (Bury)
Ewing, Harry (Stirling)	Marshall, Dr Edmund (Goole)	Whitehead, Phillip
Faulds, Andrew	Marshall, Jim (Leicester S)	Williams, Rt Hon Alan (Swansea W)
Flannery, Martin	Maynard, Miss Joan	Williams, Alan Lee (Hornch'ch)
Foot, Rt Hon Michael	Meacher, Michael	Williams, Rt Hon Shirley (Hertford)
Forrester, John	Mellish, Rt Hon Robert	Wilson, William (Coventry SE)
Fowler, Gerald (The Wrekin)	Mikardo, Ian	Wise, Mrs Audrey
Fraser, John (Lambetn, N'w'd)	Millan, Rt Hon Bruce
Freeson, Rt Hon Reginald	Miller, Dr M. S. (E Kilbride)	TELLERS FOR THE AYES:
Garrett, W. E. (Wallsend)	Molloy, William	Mr. James Hamilton and
George, Bruce	Morris, Alfred (Wythenshawe)	Mr. Joseph Harper.
Gilbert, Dr John

equitable settlement which is as generous for local authorities as present economic circumstances allow.

Question put:—

The House divided: Ayes 147, Noes 76.

Rhodes James, R.	Stainton, Keith	Wakeham, John
Ridsdale, Julian	Stanley, John	Wells, John
Roberts, Michael (Cardiff NW)	Steen, Anthony (Wavertree)	Winterton, Nicholas
Roberts, Wyn (Conway)	Stradling Thomas, J.
Ross, Stephen (Isle of Wight)	Tapsell, Peter	TELLERS FOR THE NOES:
Sainsbury, Tim	Thomas, Dafydd (Merioneth)	Mr. Dudley Smith and
Shepherd, Colin	Thorpe, Rt Hon Jeremy (N Devon)	Mr. A. P. Costain.
Sinclair, Sir George	van Straubenzee, W. R.

Question accordingly agreed to.

Resolved, That the Rate Support Grant Order 1977, a copy of which was laid before this House on 20th November be approved.

Resolved, That the Rate Support Grant (Increase) Order 1977, a copy of which was laid before this House on 30th November, be approved.—[Mr. Shore.]…

Resolved, That the Rate Support Grant (Increase) (No. 2) Order 1977, a copy of which was laid before this House on 30th November, be approved.—[Mr. Shore.]

Resolved, That the Rate Support Grant (Scotland) Order 1977, a copy of which was laid before this House on 1st December, be approved.—[Mr. Milton.]