RATE SUPPORT GRANT (SHIRE COUNTIES) (Hansard, 11 July 1979)

§ Mr. Tony Marlow (Northampton, North)
Hon. Members have expressed great interest in the subject of this debate. My hon. Friend the Member for East Grinstead (Mr. Johnson Smith) is most concerned that the county of West Sussex has been harshly treated. I have had messages of support from my hon. Friends the Members for Bristol, North-West (Mr. Colvin) and for Brecon and Radnor (Mr. Hooson), and I have received a great deal of support from Members from Essex, Hertfordshire, Cambridgeshire and Cheshire.
I am honoured and delighted to be able to raise this matter in the House tonight—honoured because for the first time in many years we now have a Government prepared to grasp nettles, and delighted because they are a Government who will carry out their intentions without fear or favour and do that which they find to be right. A lesser Government, of course, when looking at the allocation of Government expenditure for local authorities, would stoop and grovel in pursuit of electoral considerations.
If the distribution of rate support grant is unfair, as it is, and if to make it fair would disturb the " fat cats " in the marginal metropolitan areas, then as far as they are concerned it would be allowed to remain unfair. The skeleton rather than the ghost of such a Government rattles its chains on the Labour Benches.
I am happy to say that we now have a Government of courage, vision and determination. I know that my words will fall on receptive ears and that action will be taken and past injustices remedied.

§ Mr. Dennis Canavan (West Stirlingshire)
Get back in your cage.

§ Mr. Marlow
In common with many Tory Members, I have a very prudent local authority in my constituency. It is not profligate, it does not say what it will do irrespective of cost and then immediately thrust its hands into the people's pockets to find the money. It 624 asks " What can the people afford? " When it has decided what the people can afford, it cuts its coat according to the cloth available. It is the model of a modern local authority, a model of responsibility, an example to all of Conservative philosophy.
Each year since we have had a Conservative council rates in Northampton-shire have been increased at the rate of inflation only. Last year we had to raid our reserves, and now we have virtually none left. We did this because we believed there would be a Conservative Government and knew that our past prudence would be rewarded. We knew that past injustices would not be perpetuated.
We knew that we would have a Government of action and that, if we did not have such a Government, our rates would have to rise by 25 to 30 per cent. in the following year, well above the rate of inflation. We know that our Conservative colleagues in government will not allow that to happen because it would betray the endeavours we have made in the past.

§ Mr. Russell Kerr (Feltham and Heston)
It's the old pals' act operating again.

§ Mr. Marlow
Today I have received a letter from our county treasurer, Mr. Frank Fielding, by first-class mail setting out some very interesting statistics. The first thing to say is that in England and Wales the needs element grant for London in 1974–75 was 30 per cent. higher than that of Northampton. Now the grant for London is 100 per cent. greater than ours. What has changed?

Canavan
The Government.

§ Mr. Marlow
This happened when the Labour Government were in power. Where is the justice? What absurd luxuries have they been aggregating in London? The result is that the capitation sum which we can afford to spend on school books—and this applies to many counties such as ours—is half that spent in London. Do people in London read twice as avidly? Do they use twice as much paper? I doubt it.
We are a shire county, an expanding county, and a careful county, and for all those supposed sins we have been most severely punished. The first cut of the 625 lash is that mad device the resources element, where Government stand in as a phantom ratepayer for properties that do not exist. The more one spends, the more one wastes; the more one charges one's ratepayers, the more the taxpayer forks out. There is a moral in this: waste and be rewarded. It is the survival of the fattest.
The second instrument of our torture has been that profligate's charter the needs element formula, carefully designed, as I have already shown, to exclude those factors most prevalent in shire counties—a confidence trick by which Socialist Governments have held back our standards to pay for the extravagances of the Socialist empire-builders in the inner cities: the lush pastures of Camden, the no doubt gold-paved corridors of the council offices in Tower Hamlets.
The third indignity compounding our discomfiture is that we are an expanding county—

§ Mr. Canavan
Will the hon. Gentleman give way?

§ Mr. Marlow
No, I will not.
Our population relative to the rest of the county has been rising by 1 per cent. a year. Our school population relative to the rest of the country is increasing by 3 per cent. a year. I am sure this is true of many other counties, too. The rate support grant assessment is based on out-of-date population statistics. It is 2¼ years out of date and sometimes 10 years out of date. In 2¼ years the school population of my constituency has gone up by 7 per cent. As education accounts for 70 per cent. of local authority expenditure, we are 5 per cent. under-funded.
We have been twice robbed by the bent " coppers " on the Labour Benches. They have looked on smugly while they have been in receipt of the protection money of potential votes in urban marginal seats. Now the force has been cleaned up, and this criminal activity will not be allowed to continue.
The counties with new towns have extra burdens. We have to pay the first £50,000 of any undue burdens and take on 25 per cent. of the remaining undue 626 burdens. We are solving the population problems of the rest of the country. Why should we pay a penny of it? We have ignored the Mad Hatter rules. We have tried to save our ratepayers. We have spared the taxpayer. We have behaved responsibly, but we have been kicked in the teeth.
We agree that we must cut public expenditure. We have cut it savagely, We have not raided the people's pockets, as Labour Members are prone to do. We have been forced to cut, and we have cut hard. We have cut not just to the bone but halfway through it. The patient is brave but sick. We have now given so much blood that it is our turn for a transfusion. We are glad that we have an understanding Government now who will answer our needs. By that I do not mean 90 per cent. proportionate compensation which will not meet the need.

§ Mr. Alec Jones (Rhondda)
Will the hon. Member give way?

§ Mr. Marlow
No, I shall not give way.
Not only should the Government restore an immediate sense of justice but they should provide flexibility.
Will the Government do something about the absurd pooling arrangements in further education under which status-mad authorities can set up daft schemes for which the rest of us must pick up the tab? Let us charge more or less for our services, let us spare the ratepayer and let the person who uses the service pay more towards it.
School meals cost us £3½ million a year. We are short of school books. Between £300,000 and £500,000 could put that right. Let us decide locally how much to charge for school meals. Let us reduce the temperature in the greenhouses that pass for council offices and schools.
Above all, I urge the Government not to let us down. Let them not destroy our and their own credibility. Given the chance, we could put matters right. The Government must look at the past injustices. They must not say that we shall suffer fewer injustices this year. We cannot afford to suffer any injustices. For many of us the rate support grant is the most important issue for our constituents. The Government will be aware that 627 our support will depend on the fair treatment that they intend to give us on this issue.

§ Dr. Brian Mawhinney (Peterborough)
I am grateful to my hon. Friend the Member for Northampton, North (Mr. Marlow) for allowing me to comment on the position in Cambridgeshire, the fastest growing county in the country.
Between 1973 and 1979 Cambridgeshire suffered a needs element grant decrease of £l8½ million. That represents a 28 per cent. fall in Cambridgeshire's share of the needs element grant for England and Wales. But at the same time we have experienced a 9 per cent. increase in the share of national population. Consequently, since 1973–74, the county precept has been forced up by 176 per cent., and at the same time there has had to be a 15 per cent. decrease in county council expenditure per head in relation to the national average.
Therefore, for this reason alone, expenditure per head is less than the national average in education, police and fire services, highways and transportation, and the social services. The Government grants to the county and districts in Cambridgeshire are 23.7 per cent. below the national average.
There are three things that we should like the Government to do. First, as my hon. Friend has said, we should like to see an end to politically motivated discrimination against shire counties. On this, we feel confident—

§ Mr. Canavan
On a point of order, Mr. Deputy Speaker. I represent West Stirlingshire. Do I represent a shire county, or are the shire counties simply the Tory places which voted for cuts in public expenditure at the last general election? Will you please give a ruling on the definition of " shire county "?

§ Mr. Deputy Speaker (Mr. Richard Crawshaw)
Not on that point of order. The Chair has to make many rulings, but that is not one of them.

§ Dr. Mawhinney
We understand that it may not be possible to reverse the discrimination this year, but we shall certainly expect to see the Government stop it and move to reverse the trend in succeeding years. 628 Secondly, we should like the Government to recognise that fast-growing counties such as Cambridgeshire, which has London overspill towns, and a new town development which is in my constituency, are penalised because the calculation of resources grant is based on dates for population and rateable value which are out of step and to our disadvantage.
Thirdly, we should like the Government to replace the existing system with one which moves away from a direct link with expenditure, to which my hon. Friend has already referred. A method based on the standard unit costs of providing basic services would fulfil this objective and give a better measure of true need. It would also benefit efficiently run counties, such as Cambridgeshire.

§ Mr. Nicholas Winterton (Macclesfield)
I am grateful to my hon. Friend the Member for Northampton, North (Mr. Marlow) for allowing me a moment or two of his excellent debate to advance the cause of Cheshire. Cheshire is another shire county which has suffered severe cuts in its allocation of the rate support grant under the previous Socialist Government.

§ Mr. Canavan
What is a shire county?

§ Mr. Winterton
My hon. Friend the Member for Northampton, North has made a considerable impression on the House since he came here a few weeks ago. In initiating this Adjournment debate he is serving the best interests of very large areas of the country which suffered an injustice during the period of the previous Socialist Government, which redirected—

§ Mr. Alec Jones
Will the hon. Gentleman give way?

§ Mr. Winterton
—which redirected—

§ Mr. Deputy Speaker
Order. The hon. Member for Macclesfield (Mr. Winterton) is obviously not giving way. The right hon. Gentleman must resume his seat.

§ Mr. Winterton
I am not giving way, Mr. Deputy Speaker.

§ Mr. Canavan
What is a shire county?

§ Mr. Winterton
The previous Government redirected increasing sums of money to the inner city areas and the metropolitan counties and the metropolitan boroughs and districts. I would advise my hon. Friend the Minister that there are many towns in shire counties—

§ Mr. Canavan
What is a shire county?

§ Mr. Winterton
—which suffer from the same problems as the inner city areas of Birmingham, Manchester and London, and where money is required very urgently if the infrastructure is not to break down.
Therefore, I make this plea to the Minister. I believe that the criteria upon which the RSG is decided and the sums granted to the various counties and authorities in this country must be reassessed in order to restore the justice which was sadly done away with by the previous Government for political purposes.

§ Mr. Alec Jones
Absolute rubbish!

§ Mr. Winterton
Although it is not a fast-growing county, Cheshire has an expanding population and a new town. I make this plea in support of the views that have been expressed by my two hon. Friends. The Government should show a sympathetic understanding of the very grave problems that are facing these authorities—which took the advice and answered the request of the previous Government to cut public expenditure, but have suffered as a result.

§ The Under-Secretary of State for the Environment (Mr. Geoffrey Finsberg)
May I first congratulate my hon. Friend the Member for Northampton, North (Mr. Marlow) on a very forceful and interesting speech—in spite of the babbling brook with which he had to contend, and which has now apparently run away from us—and also for providing the House with an opportunity of discussing this very important and controversial topic. If I may say so, Mr. Deputy Speaker, I think he is to be congratulated on initiating a debate on a key subject so soon after winning his seat and coming to this House.
Rate support grant is a notoriously complex and difficult area. As one who has served for 25 years in local government 630 I still do not believe that many of us understand it in enough detail. But we should not be in any doubt about its real importance. At more than £7,000 million in the current year, it is one of the largest blocks of central Government expenditure. The distribution of the grant is therefore always a matter of interest and controversy.
I am certainly not here to try to justify the pattern of the grant distribution we inherited from the previous Administration; far from it. Indeed that might be described in the last five years as sheer political manipulation. It might, however, be helpful if I were to explain how the present state of affairs has come about.
It is the needs element of the grant—and the use of multiple regression analysis to assess local authorities' expenditure needs—which has provoked the most controversy. My hon. Friend has argued very fairly that it is the use of this method and its susceptibility to political manipulation which has led to the steady shift of grant away from the shire counties over that period. Although I entirely understand and respect my hon. Friend's feelings on the matter, I suggest that the real villain of the peace is not multiple regression analysis but the naked political considerations of the previous Government. Let me try to explain why.
I remind my hon. Friend that it was the last Conservative Administration who introduced this technique. We did so because the method of assessing expenditure needs prior to 1974 was a fairly crude judgmental system which was not properly sensitive to the needs of all authorities, in particular to the real problems of the urban areas. We therefore introduced multiple regression analysis, not to favour any particular group of authorities but because it was a more objective and accurate basis for measuring the needs of all local authorities. We did not expect the twisting that was done by the Labour Party.
It is perhaps multiple regression analysis which has most contributed to RSG's reputation as an incomprehensible system. In essence, however, its basic principles are simple enough. It is a method of selecting and weighting a range of social and economic factors according to the extent to which they are correlated with variations in the actual expenditure 631 of authorities. These factors constitute a formula which is then applied to all authorities to produce an assessment of need.
My hon. Friend implied in his speech that these factors had in the past been carefully selected by politicians to produce particular results in the grant distribution, favouring one type of authority rather than another. I have to say, however, that I do not believe regression analysis can be accused of lending itself to manipulation of this sort. It is the people who run it who were responsible, not the actual formula. The analysis itself is carried out by computer following standard statistical procedures.

§ Mr. Alec Jones
Will the hon. Gentleman give way?

§ Mr. Finsberg
No.

§ Mr. Deputy Speaker
The right hon. Gentleman must resume his seat. The Minister is not giving way.

§ Mr. Jones
The Minister should not tell lies.

§ Mr. Finsberg
I invite you, Mr. Deputy Speaker, to ask for the withdrawal of that word.

§ Mr. Deputy Speaker
I am sure that the right hon. Member for Rhondda (Mr. Jones) did not intend to say that. I Would ask him to withdraw it.

§ Mr. Jones
There is, Mr. Deputy Speaker, an alternative to " lie " which I understand to be " terminological inexactitude ". If that is so, I withdraw the word " lie ".

§ Mr. Finsberg
I hope that the right hon. Gentleman renounces that expression.
The analysis is carried out by computer following standard statistical procedures. Either the factors are found to be correlated with the pattern of expenditure or they are not. If they are, they are weighted according to the strength of the correlation as part of the mathematical analysis.
My hon. Friend also argued that by basing the regression analysis on the actual expenditure of authorities it inevitably produced a formula which favoured high-spending authorities. This 632 is probably true, in my view, of groups of authorities. But no individual authority's grant entitlement depends directly upon its expenditure. The analysis produces a formula which represents an average relationship between a range of factors and the pattern of expenditure. Nevertheless, there must inevitably be some concern that groups of authorities with similar characteristics and expenditure behaviour, that is, Socialist spendthrift authorities, may unduly influence the outcome of the analysis. This is something to which we shall want to give further consideration in the not too distant future.
I do not therefore accept—I do not think that my hon. Friend implied it—that multiple regression analysis has been the major cause of the shift of grant away from the shire counties.
What, then, has caused the continual grant losses experienced by the shires? Quite simply, it has been the result of a shift in the grant distribution since 1974–75, when the party then in power decided to twist the whole system towards London. The total amount of grant going to London is ultimately determined not by multiple regression analysis but by the Secretary of State through a device known as London clawback. This reduces the total amount of grant which London would otherwise receive under the needs element formula in order to take account of the capital's very considerable advantage in terms of high rateable resources. The amount by which London's grant entitlement is reduced is then distributed to all non-London authorities.
There is no objective basis for determining the size of London clawback. It is therefore left to the judgment of the Secretary of State. In recent years, under the previous Administration, the claw-back decision was increasingly favourable to London, with the result that since 1974–75 its share of the total needs element increased by 25 per cent. Despite this, however, the London authorities still maintain that they have not done as well as their special circumstances justify.

§ Mr. Finsberg
I shall not give way. I am debating this matter with my hon. Friends, who raised it. The right hon. Gentleman did not seem interested in the subject in all the years that he was 633 in office. Therefore I shall not give way to him now.
Despite that, the London ratepayer is paying per head more than anyone else. None the less, the shire counties' share of the grant has fallen by about 10 per cent. The non-London metropolitan districts, despite all the claims made by the previous Administration about helping areas with the greatest problems, have increased their share by less than 6 per cent. In the last two settlements their share of grant actually fell.
London has therefore been benefiting from a series of political decisions by the previous Secretary of State at the expense of non-London authorities. More than anything else, this has caused the erosion of the shire counties' position. I might add that in spite of this political gerrymandering Labour managed to lose control in short order of both the GLC and the London Boroughs Association as people were not prepared to be bought off in a shameless way by the previous Government. [Interruption.] I thought that we had got rid of the babbling brook.
My hon. Friend also mentioned a number of problems which his own authority in Northamptonshire faced. He made some suggestions about education pooling arrangements, fees and charges, and school meals. He will appreciate that they are more matters for my right hon. Friend the Secretary of State for Education and Science. I shall make certain that his attention is drawn to those points.
My hon. Friend also made the point that Northamptonshire faces particular problems because of its growing population. He pointed out that although its grant has fallen its population has increased and that out-of-date population data have meant that the authority has not received the full amount of the grant to which it is entitled.
My hon. Friends the Members for Macclesfield (Mr. Winterton), on behalf of Cheshire, and for Peterborough (Dr. Mawhinney), on behalf of Cambridgeshire, made similar points showing how the shares for their shire counties had fallen. I shall make certain that those points are also taken on board. I am perfectly certain that a substantial number of my hon. Friends from other counties, 634 had they had the time and had the debate been longer, would have wished to make the same points.
On the first point, it does not follow that an increase in the authority's population should be accompanied by an increase in its grant entitlement. The purpose of the needs element is to compensate for variations in authorities' expenditure needs per head of population. It may be a revelation to the hon. Member for Berwick-upon-Tweed (Mr. Beith), but these are he facts, as he should know. My hon. Friends know them quite well. I am merely putting the facts on record for the benefit of the hon. Gentleman. Whilst an authority's total expenditure may well increase in line with its population, it does not follow that its expenditure needs per head will increase as well, particularly if the increase is accounted for by able-bodied, independent households.
Secondly—and this is a trickier point—my hon. Friend spoke of the use of out-of-date data. This is a technical matter. I can assure my hon. Friend that the data used are the most up-to-date available consistent with the principle of " data freezing " which has been agreed with the local authority associations in order to provide authorities with reasonable certainty as to their grant entitlement at the start of the grant year. However, one is always ready to see whether there is a more up-to-date method, and my right hon. Friend will be happy to receive any ideas my hon. Friend may care to send to us on this matter.
Finally, my hon. Friend painted a rather gloomy picture of Northamptonshire's financial position next year if its grant position is not improved. He also rightly emphasised that future cuts in the grant should not fall indiscriminately on thrify and profligate authorities alike. I shall draw that point to my right hon. Friend's attention.
I think that the House will appreciate the points that my hon. Friend has raised. He is to be congratulated on having the initiative to apply for this Adjournment debate, on having been fortunate enough to secure it, and on having two others of my hon. Friends take part.
My hon. Friend will understand that at this stage I cannot give him any commitment about the rate support grant, and 635 he did not expect me to, as he made quite clear. What he wanted was to make his points so that they could be taken on board in the negotiations. I give him an unqualified assurance that what he has said will be taken on board when we are having the discussions.
The matter is highly complex. Ministers have yet to reach final decisions, so my hon. Friend's points are certainly not made too late, and we have noted them. I assure the House that we are in no doubt about the concern of the shire counties over recent RSG settlements. Ultimately, the interests of the taxpayer and the ratepayer and what they can reasonably afford must be our overriding concern.

§ Mr. Finsberg
We shall keep the position of the taxpayer and the ratepayer very much in mind when we are reaching our decisions. I give that assurance to 636 my hon. Friend and those who supported him in his short but very interesting and helpful debate. I am most grateful to my hon. Friends for giving me the chance to explain the matter. I am sure that the House is sorry that no Opposition hon. Member thought it practical to put his name in at the right time, though there was an attempt to remove time from my hon. Friends who raised the matter.

§ Mr. Jones
On a point of order. Mr. Deputy Speaker. For the Minister to suggest that no hon. Member on the Labour Benches wanted to speak in this debate is—