Rate Support Grant (Hansard, 11 January 1978)

§ 2. Mr. Hal Miller
asked the Secretary of State for the Environment if he will inaugurate a departmental review of the operation of the rate support grant, with particular attention to the calculation of need, so that a more equitable settlement can be made in 1979–80.

§ 13. Mr. Hicks
asked the Secretary of State for the Environment if he will inaugurate a departmental review of the operation of the rate support grant, with particular attention to the calculation of need, so that a more equitable settlement can be made in 1979– 80.

§ 14. Mr. Peter Mills
asked the Secretary of State for the Environment if he will inaugurate a departmental review of the operation of the rate support grant, with particular attention to the calculation of need, so that a more equitable settlement can be made in 1979–80.

§ Mr. Shore
The Consultative Council on Local Government Finance itself has commissioned a review which includes consideration of methods of needs assessment and the grant machinery. Results will be reported to the Consultative Council in the spring.

§ Mr. Miller
Does the Secretary of State realise that the present formula operates severely to the disadvantage of counties with a growing population, such as the one that I have the honour to represent, and that it seems all the more unfair when additional resources are given to the metropolitan areas exporting that population?

§ Mr. Shore
No, Sir. I do not accept that. I understand very well the difficulties that faced all local authorities, and particularly counties, especially last year, because a redistributive mechanism is involved in the assessment of needs. On the whole, it operates against the counties in favour of the cities. I accept that. But I do not accept that the counties are disadvantaged, if we consider, as I believe the House does consider, that needs should be the major criteria upon which we should base the allocation of RSG.

§ Mr. Hicks
Will the Minister bear in mind that rural areas, which are counties, tend to have rising populations and yet their resources are less, and that therefore their needs under the existing formula place them at a disadvantage compared with urban areas, whose resources tend to be greater and whose populations may well be declining? That is the point that we wish to register with the Secretary of State.

§ Mr. Shore
The truth of the matter is that within the needs grant there are really two major elements. One of those major elements precisely reflects increases in population. Therefore, to the extent that population is increasing it is reflected in the needs element. But the other part of the needs element reflects relative needs per capita, based upon the use of the various factors that enter into what we consider to be the main categories of need.

§ Mr. Mills
Whatever the Minister says, it is unfair, and many people in the South-West feel a real sense of injustice in these matters. Will he take it from me that 1643 services have been badly affected in rural areas, even when counties have tried to save money? The present basis is totally unfair, and we are getting rather tired of being clobbered in this matter.

§ Mr. Shore
I understand the difficulties that have faced many authorities and many of the counties in recent years. I do not wish to pretend that they do not exist. They are real. Nevertheless, I believe that we have chosen what is still the best of the formulae available to us in deciding how to meet the needs, which vary and are differentiated between different parts of the country. If we can find a better method of assessing needs I shall be extremely happy to use it.

§ Mr. Roy Hughes
Does my right hon. Friend appreciate that the Welsh share of the grant for the forthcoming year will decrease by 3 per cent., whereas London's share increases by 12.2 per cent.? Does he agree that the older industrial communities of South Wales face just as much the problems of poor housing and heavy unemployment as do some of the inner cities?

§ Mr. Shore
My hon. Friend knows that I have the greatest sympathy and concern for Wales, as I have for other parts of the country. However, the truth about London is that it is paying, on average, much higher rate bills than the rest of the country. Therefore, it seemed to me to be right to moderate that process during this rate support grant settlement.

§ Mrs. Kellett-Bowman
In view of what the Minister said in reply to my hon. Friend the Member for Bodmin (Mr. Hicks), how can he possibly justify the fact that since 1974 the counties' share of the needs grant has fallen by 16 per cent. and London's share has risen by 54 per cent., despite the fact that the share of the population of the non-metropolitan counties has risen, whilst that of London has fallen substantially? Further, how can he justify the fact that the average increase throughout the country is 7.3 per cent. and that in Lancashire, in particular, it is only 5.7 per cent., despite its growing population, to which he referred?

§ Mr. Shore
The truth is that there is only a partial correlation between needs and growth of population. In so far as the growth of population brings forth further 1644 expenditure needs, that is reflected in the formula. But the other part of the needs formula must take account of the services that are obviously much more expensive. For example, there may be a larger number of single-parent families or old people living on their own. If there are categories of need of that kind—they tend to accumulate in particular areas—one must acknowledge that there is a need, and it must be met.

§ Mr. Hooley
Will my right hon. Friend disabuse the House of any notion that there has been some peculiar generosity to the cities? Is he aware that the grant to Sheffield has been savagely cut, in real terms, though Sheffield's needs have in no way diminished? Can he arrange for a public discussion of the basis of these calculations, which seem to have produced absolutely bizarre results?

§ Mr. Shore
I do not agree with my hon. Friend. I think that I explained to him on an earlier occasion—certainly during the course of our debate in December—that some effects were produced by a re-sorting of data in the RSG formula this year. Sheffield, like certain other metropolitan areas, was affected by those changes, which were agreed by all the local authority associations. But I do not believe that that is a continuing effect. It has happened in this year and is not likely to be repeated.

§ Mr. Heseltine
Does the Secretary of State understand that much of the anxiety on both sides of the House arises when he refers to needs but when in fact we all know that his calculations are based on figures that are about seven years out of date? Does he appreciate, therefore, that it is the suspicion of the arbitrary use of power behind closed doors which actually concerns hon. Members? For example, in September 1976 he injected unemployment into his calculations as a figure, and then, when unemployment was higher in September 1977, he took it out again.

§ Mr. Shore
I accept the first part of what the hon. Gentleman said—that there is a continuing problem with data and that, unless we have up-to-date information, whatever system we use for assessing needs is bound to be that much more fragile and less secure than we would wish it to be. Having said that, I do not 1645 accept what he said about arbitrariness and closed doors. If at any time the hon. Member wants to ask for a further debate on the whole question of how we can best deal with the assessment of needs, why does he not do so?

§ 25. Mr. Newton
asked the Secretary of State for the Environment what further representations he has received concerning the 1978–79 rate support grant for Essex; and what reply he has sent.

§ Mr. Shore
Since my reply to the hon. Member's identical Question on 23rd November 1977, I have been in conespondence with my hon. Friend the Member for Harlow (Mr. Newens) and the hon. Member for Essex, South-East (Sir B. Braine). I have sought to clear up the misunderstandings that exist about the safety net, and repeated my readiness to see a deputation of Essex Members.

§ Mr. Newton
Will the Secretary of State accept our thanks for that assurance? Does he understand that all Members representing Essex constituencies share the views expressed earlier on the question whether the rate support grant takes proper account of the needs of counties with expanding population? Does he further accept that in Essex this problem is compounded by under-funding on the transport supplementary grant, and not least on the hospital services? Will he consult other Ministers about the total flow of Government funds to a county in that situation before making next year's decision about rate support grant?

§ Mr. Shore
As I said, I am willing to see hon. Members from Essex. I agree that Essex has headed the league of counties which have been adversely affected by successive rate support grant settlements. I shall be willing to go over in detail the problems that affect the county.

§ Mr. Newens
Is my right hon. Friend aware that many Labour activists, who fully recognise the serious needs of London, can in no way begrudge the settlement within the metropolis but nevertheless feel that the needs element does not provide for Essex and cannot do so in the future? Is he aware that unless something is done about it before next year's grant is settled, services in Essex will inevitably deteriorate, or very heavy 1646 additional burdens will fall upon ratepayers?

§ Mr. Shore
I certainly hope that there will be no reductions in services in Essex, although I understand that the financial needs of the county may well face the county council with the necessity for a considerably higher than average rate call. I repeat that I am willing to examine with my hon. Friend and his colleagues the various factors that have affected Essex.

§ Mr. Ovenden
Does my right hon. Friend agree that we might avoid this annual and rather pointless ritual of arguing about the effect of the rate support grant on individual areas if we set up a Select Committee to study the alternative methods of determining rate support grant and to consider the respective merits? Would he recommend such an idea to his right hon. Friend the Leader of the House?

§ Mr. Shore
I certainly would not dismiss such a suggestion from my mind. But if my hon. Friend imagines that that would be a way of preventing, ironing out or somehow avoiding continued argument, I must discourage him on that point. As he knows, we have a continued dialogue with the associations of local authorities, and they do not always agree amongst themselves. I am sure that would be reflected in discussions in this House—and not necessarily on party lines.

§ Mr. Michael Morris
Is not Essex's problem also due largely to the education system and the fact that it was the right hon. Gentleman's decision to remove the factor on education? When there are increasing numbers of schoolchildren, that must involve the county in increased expenditure. Is that not one of the key points that he must look at when revising the formula?

§ Mr. Shore
I think that the hon. Gentleman is referring to the re-sorting of the educational data which stopped the double payment of moneys in respect of authorities which are educating children and young people who live in another authority. It was an agreed recommendation of the local authorities that it should end. Additionally, in Essex this year the county was affected by changes in the improved data that became available in 1647 relation to earnings—earnings not only of male workers but of women workers.

§ Mr. Heseltine
If the Secretary of State was convinced by the Essex case, what powers has he to help that county in the 1978–79 settlement?

§ Mr. Shore
What we could do, and what we try to do when views are put to us by various deputations, is to consider within the working group the possibilities of testing different factors of need, so that we use those which are most relevant and which genuinely detect the existing needs.

§ Mr. Heseltine
Do I take it from that answer that the Secretary of State has no powers to help them?

§ Mr. Shore
What I do not have is the power to select a particular authority and say that I shall make money available to it; nor do I think that that would be a good power for Secretaries of State to have. I have to deal with broad categories of authorities and with broad categories of need.