HC Deb 25 May 1979 vol 967 cc1418-32

2.25 p.m.

Mr. Stephen Ross (Isle of Wight)

I am very grateful to Mr. Speaker for the opportunity to raise at this early stage in the new Government's life a matter of particular interest to my constituents—the local government structure and its financial position on the Isle of Wight.

The three authorities there, especially the county council, face a perilous financial situation. I hope that we shall be able to resolve soon the strong feeling that is building up that the structure of government on the island is not the right one, based as it is on a two-tier system, for a permanent residential population of between 112,000 and 115,000.

The fight for special recognition in our rate support grant settlement goes back many years—certainly to 1962 and possibly before. It was recognised then that we had a particular problem. The Edwards report of that date, for instance, said that we had approximately a 4 per cent. higher cost of living.

The case is well documented, particularly recently, in the archives of the Department of the Environment. In case the Under-Secretary has not seen the principal documents, I draw his attention to one of February 1977 dealing with the case for island recognition in the Government grants system—bound in blue, appropriately enough, since this Government came to power—and one in October 1977 about the argument for a special factor in the rate support grant to meet the island's needs.

Two deputations from the island met the former Secretary of State and the Under-Secretary. To précis a long and exasperating story, after the two deputations and a series of meetings between our able county treasurer, Mr. Donald Tuck, and officials at Marsham Street, it looked as if we had at last won our case. We got the timing right last year. One lives and learns in this place, and I believe that I have the timing right now, since the crucial decisions are made when the Secretary of State and other Ministers meet local authority association representatives towards the end of July. Our timing was not so good the year before.

I draw the Minister's attention to a letter from his Department dated 18 July 1978, sent to our county treasurer and signed by Mr. G. H. Chipperfield, in which the latter recognises the extra costs which the island faces as being entirely due to our severance from the mainland by sea. On the subject of road materials, he says: We can agree with you a figure of £227,000. There is another paragraph on building materials.

However, Mr. Chipperfield did not accept our argument on food costs. On education costs, he said, the matter was open to argument, but he agreed a figure of £20,000 for transporting goods across the Solent and £18,000 for the extra transport costs of Isle of Wight members, officials and clients. That totals over £250,000 and there was still over £500,000 outstanding, which we were still arguing about and on which we believe we have a good case. We wanted this to be paid through a special factor written into the rate support grant formula or in some circumstances through the transport supplementary grant.

Therefore, we had high hopes when the then Secretary of State, the right hon. Member for Stepney and Poplar (Mr. Shore), met the local authority associations on 24 July last year and indicated that he was minded to back our argument and to feed in some special factor for the Isle of Wight. I think that he was somewhat surprised—certainly my local authority friends and I on the Isle of Wight were—to be rebuffed by the representatives of the Conservative-controlled ACC and ADC who felt that it would lead to a proliferation of demands from other counties. I think that they had in mind the sparsity factor which applies in some Welsh counties—Dyfed, Clwyd and others. But surely we are unique. We are the only county constituency surrounded entirely by water. We have no bridge or tunnel. Therefore, everything which comes across costs more. In the event, we got only a promise to look at the whole structure again, including those counties with sparsity problems. All that was to take place during the ensuing 12 months—a period which is now rapidly coming to an end.

The last letter that I received on the subject, because I have been prompting the former Secretary of State on this matter over a considerable period, was dated 27th April this year. In that letter the right hon. Gentleman said: My Department has discussed this with the local authority Associations at official level, and I understand that the Associations do see considerable difficulties in this exercise. However, as you know, I wanted to discuss this further with the Associations at member level in the Consultative Council. That would have to wait until after the outcome of the general election.

I am now looking to the new Government to take it on from there. We have a new Secretary of State. My constituents want to know his attitude and that of his Department to their claim. I confess that I have not been happy about the noises that have been coming from the Department of the Environment. I put a question directly to the Secretary of State recently on the whole construction of the regression analysis formula of the rate support grant and asked whether he could do anything in time for this year's settlement. I am sure that he accepts that it has many anomalies certainly. Tory Members representing shire counties will support that view. They did when they were in Opposition. However, the Secretary of State did not feel that he would have time to do much about it. I suppose that I cannot complain too much about that, because there is not a great deal of time and this is a complicated subject. But certainly the Secretary of State can look at the island's case.

The Isle of Wight is now one of the highest rated authorities in the country. The average county rate is 85p; our county rate is 95.3p. This spring we had a sizeable rate revolt on our hands. It takes a long time for the mild-mannered citizens of the Isle of Wight to get worked up, but they certainly got worked up this year when they were faced with a 31.3 per cent. increase in the county precept. Unfortunately, the county council did not publicise this matter as much as it might have done. Members here will realise that it would be less by the time it reached the two boroughs because of the change in the needs element distribution. Nevertheless, the rates have gone up by between 22 per cent. and 24 per cent., depending where on the island one lives. About a quarter of my constituents live on fixed incomes and they are finding the rate burden extremely heavy.

I gave some official figures—that the average household income spent on rates had not gone up over the last 10 years but had stayed fairly static at approximately 2.1 per cent.—but I was immediately challenged on that matter. I now accept that many of my constituents are paying between 7 per cent. and 10 per cent. of their household income on rates. That is another good reason for changing the rating system, but that is not the subject of this debate.

Some facts should be taken on board by the Department of the Environment. We had to impose a high rating increase—I do not criticise the county council—because we received per 1,000 population grants amounting to £14,510 less than the average. Specific grants from central Government to the county council were £4,913 less per 1,000 population. Even the transport supplementary grant—and we got a good one last time—was £27 less, and the needs element in the rate support grant was £9,570 less. We suffer in that way. Frankly, our expenditure per 1,000 head of population is not high. We spend £748 less than the average shire county, so no one can say that we are throwing money around.

Moreover, our ability to take money from balances—our balances are completely run down—was £3,284 per 1,000 population less than average. I doubt whether we have more than a penny rate in balance now—approximately £200,000.

I note that the Scilly Isles receives no less than £224.21 in needs element per head compared with our measly £66.98. I do not know whether it has anything to do with the fact that an ex-Prime Minister lives in the Scilly Isles. If reports are correct, the right hon. Member for Sidcup (Mr. Heath) is supposed to be looking at houses in my constituency. Perhaps I should encourage him to get on and buy one as we might then do rather better with our needs element.

The present Secretary of State is on record as having great sympathy with our position. On 15 December 1977 he said: There is one other special case which merits attention from the Secretary of State —he was then referring in reverse position to the right hon. Member for Stepney and Poplar— 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 claim of the Isle of Wight, but I believe that the representatives have put forward one special claim in their memorandum which merits the consideration of the Secretary of State.… 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."—[Official Report, 15 December 1977; Vol. 941, c. 953–4.] My Conservative opponent in the recent election claimed that he had a firm commitment of additional help from his party. I accept, and made clear during the election campaign, that no such commitment had ever been put on record in the House.

Where do we stand now? Our services are at full stretch with an ever-increasing old-age population and an increasing school population. It is an amazing situation. Our school population of 20,000 is still increasing, largely due to immigration, and so is the old-age population. Nevertheless, we are spending less than average on social services, police, education, refuse collection and town planning and slightly more, as is to be expected, on coastal protection, roads and libraries. We have practically nothing in balances. A supplementary rate demand coming on top of the recent huge increases—especially if we are to keep our teachers, as we surely must, following the recent pay settlement—could lead to civil disobedience.

There is one way in which we should be able to save a little money and at the same time provide a more understandable local authority structure in the Isle of Wight, and that is for us to merge our three main authorities—the county and the two boroughs—into one all-purpose unit: in other words, the old county borough status. That was the argument which the former county council, on which I served, put to the 1970–74 Administration at the time of local government reorganisation.

We were certain that we were right then. Unfortunately we had a number of smaller authorities, all of which had different ideas. Some wanted to split the island east-west—the traditional way—and some wanted to split it north-south. Some wanted us to go into Hampshire. Unfortunately, we never reached agreement between the authorities. Only the county council put the idea forward. It has been of great benefit, for instance, to the Highlands and Islands in Scotland, which have their all-purpose authorities. For a population of under 115,000, it surely makes sense on the island.

Take the case of the South Wight borough council. The administrative centre is in Newport. The chief executive is there. The housing manage is in Shanklin, the financial officer is in Sandown, while the technical officer is in Ventnor. For the 8,000 or 10,000 people who live in Freshwater, it takes a whole day to go by bus to Sandown to see, for instance, the housing manager and to return. There is pressure in that authority to house all these officers under one roof. There is a design to build new municipal premises in Sandown. Architects have been retained to draw up plans. If we are not careful we shall be set on a path for building municipal offices there. However, we should look at the total structure beforehand.

Sensibly, we established an area planning officer to serve all three authorities. We should now bring them together, subject to the proviso that we establish successor town councils or urban parishes at the same time. There are now rural parishes—but there is no one to speak for Cowes, Ryde, Newport and other urban conurbations. That is what the majority of my constituents would like. The Isle of Wight alliance of ratepayers' and residents' associations is pressing for that. The chambers of commerce and trade think that it makes sense. However, I do not claim that the proposal is universally popular with local councillors or local government officers.

I ask that we be given the opportunity to put the matter to the people of the Isle of Wight in a referendum. I think that the scheme would receive overwhelming support. If the Government mean what they say and want to see the most efficient and cost-effective ways of administering ourselves established in local government, they should allow us to do just that, and act upon the outcome of a referendum. Let the Government admit past errors. They should allow us to put our house in order. I am sure that the Prime Minister would agree with that if we could show that we could make savings in housing policies. If we can make further savings amongst the chief officers and administrators, we should do so before putting down bricks and mortar and building permanent offices for the two borough councils.

We do not want the Isle of Wight to be included in Hampshire. It was tried in 1888 but abandoned after two years. The people of the Isle of Wight like their independence. They know that they can run their own affairs adequately provided that they are permitted to get on with it in their own way and given the same resources as their neighbours to maintain adequate levels of services as required by the Government. We receive constant reminders from the Department of Health and Social Security that we are not maintaining the required services, especially for the elderly. We are conscious of that. However, as there is no recognition of our case for additional help, that makes it difficult for us to carry out this work.

We hope and trust that, despite the outcome of the election on the Isle of Wight, we shall not look in vain to the Ministers. On the Isle of Wight there is a Conservative-controlled county council and a Liberal-controlled district council. We know that we have friends among the new Ministers at the Department of the Environment. I ask them to look at the facts for themselves and not allow themselves to be knocked off course by any obstruction from the local authority associations.

2.45 p.m.

The Under-Secretary of State for the Environment (Mr. Marcus Fox)

First of all, I should like to congratulate the hon. Member for Isle of Wight (Mr. Ross) on a very interesting speech and for providing the House with an opportunity to debate the structure and finance of this unique local authority. The Isle of Wight—apart from being a most attractive and agreeable place—is, after all, our most heavily populated island and is the only island county council in England and Wales.

However, I think it is only fair to point out that the hon. Gentleman—he mentioned this—is by no means the only one to draw attention to these issues, particularly the question of financial support for the island. The Isle of Wight county council itself first raised this issue several years ago. It has been the subject of dis- cussion and negotiation with central Government on a number of occasions since then. I assure the hon. Gentleman that I have seen the two documents that he produced in the House.

The hon. Gentleman raised a number of points in his speech and I should like first of all to deal with those relating to the structure of local government on the island.

The hon. Gentleman is an impartial Member of this place, as we well know. The instance he gave of suggesting that he would agree to the demolition of a Liberal-controlled council is proof of his impartiality.

The main proposal which the hon. Gentleman made here is that the Isle of Wight should become a single all-purpose authority. I fully recognise his reasons for proposing this and, if I may say so, he has certainly made out a plausible case. However that may be, I am sure he will understand that our situations are very different. As a constituency Member of Parliament he is entitled, indeed obliged, to pursue the individual interests of those he represents. He does not need to consider the wider implications, which I may not disregard. As a spokesman for the Government I must look at his proposals in the context of the overall organisation of local government in England.

First, I remind the House of the background. One of the aims of the 1974 reorganisation of local government was to replace the 1,200 authorities in England with a rationalised system which would reduce considerably the number of units with executive responsibility. The Conservative Government's basic approach involved the creation throughout England of a two-tier system of county and district councils. The system was not entirely uniform—it created both metropolitan and shire areas—but the two-tier approach applied in both types of area.

Within this basic framework the Government's original proposal for the Isle of Wight was that it should become a district of the county of Hampshire. I remember the vigorous battle that the hon. Gentleman's predecessor successfully fought in Committee to maintain the identity of the Isle of Wight, in view of its geographical situation.

I have no doubt that local pride too—and quite naturally—played a part in the desire to retain an identity separate from Hampshire. The island's campaign was highly successful. The second tier of administration was provided by the formulation of two districts, Medina and South Wight.

The hon. Gentleman has argued forcefully that this arrangement is illogical and wasteful and that it puts a great strain on local finances because three separate bureaucracies have to be supported by his 110,000 constituents.

It is early days for this Government, but I must remind the hon. Gentleman that the perilous financial situation to which he referred is not contained only in the Isle of Wight. The Government are deeply concerned at the possible increases in rates which will face the whole of the United Kingdom.

Let me say first of all that I do not agree that, prima facie, an organisational case can be made out for cutting the three local authorities down to one. But that is not the whole story. I question the argument that a reduction in the bureaucracy could of itself go a long way towards solving the Isle of Wight's resources problem. The savings would simply be insufficient to make a real dent in it.

Mr. Stephen Ross

I did not say that it would cure the financial problems. I said that it would go some way towards doing that. It makes more sense to the electors and it should save some money. I accept that it is not the cure-all of the situation. That will remain. The county council was consistent in its wish for an all-purpose authority and twice voted for it. I accept the role played by the previous Member of Parliament representing this constituency. He played a good role. He told us that he had to accept a two-tier structure or the Isle of Wight would be incorporated in Hampshire. It was a "Take it or leave it" situation.

Mr. Fox

I accept the hon. Gentleman's correction on the question of what contribution his proposal would make towards the saving of resources The hon. Gentleman is right on the second point. But I argue that it would not be feasible to make an exception. I shall continue the argument.

The first essential difficulty is that the population of the island—only 110,000—is sustaining very costly services such as education, which in most other parts of England are sustained by substantially larger populations. I do not wish the hon. Gentleman to think that I am unsympathetic to his constituents' problems, but it is fair to point out that in pressing for county status in 1972 the Isle of Wight must have recognised the inevitable difficulties it would face in sustaining the full range of services.

Leaving that argument aside, there are still compelling reasons against making the Isle of Wight a unitary authority—and here we must consider the implications for the rest of England. If the Government decided to accept the hon. Gentleman's proposal, that would create one glaring exception to the two-tier system of local government in England. This might of itself be no more than undesirable. However, it would be extremely difficult for the Government to make an exception for the Isle of Wight and then refuse to consider the claims of other areas. I accept that the Isle of Wight is a special case but, as we all know only too well, a special case is not necessarily a unique case. There can be no doubt that other areas of the country would be able to make reasonable cases for the establishment of unitary areas which the Government would have great difficulty in resisting, having set a precedent. The result would be a return to the fragmented structure which the 1974 system was designed to eliminate.

This latter objection to the hon. Gentleman's proposal must weigh very heavily in the balance. However, I should make it clear that the Government are not unsympathetic to the Isle of Wight's difficulties. If the isle's authorities decided to propose that they should be unified, we would, of course, give full consideration to their case, but we could not ignore the wider implications which I have set out this afternoon.

Let me now turn to the question of financing local government on the Isle of Wight. The hon. Member has provided the House with a useful description of the extra costs which local authorities on the island face as a result of their severance from the mainland.

He has also reminded me that my right hon. Friend the Secretary of State said in Opposition in the annual rate support grant debate in December 1977 that a Conservative Government would be disposed to give careful consideration to the Isle of Wight's case for some recognition of the special costs it faces. My right hon. Friend was careful to emphasise that he could give no personal commitment in this. The hon. Member referred to what was said during the election campaign, but, as he well knows, what matters is what is said in this House.

The hon. Member has asked the Government to confirm their willingness to look at the island's case, and has suggested that a special factor should be included in the rate support grant distribution formula to reflect the extra costs faced by the island.

Let me say at once that we have considerable sympathy with the island's case. As the hon. Member knows, an extensive study was undertaken last year by Department of the Environment officials in conjunction with officials from the county council into the island's costs. Although it was not possible to reach complete agreement with the county council on the magnitude of the costs involved, certain extra costs, relating mainly to ferry charges on materials imported from the mainland, were identified. I have seen the letter to the county treasurer, dated 18 July last. So there is no doubt that the island faces some special costs and that these costs are unlikely to be fully reflected in the rate support grant formula. But to provide compensation by incorporating some sort of special Isle of Wight factor in the grant distribution formula would pose considerable problems, both in practice and in principle.

To explain why that is so, I need first to give some indication of the general principles on which the rate support grant system rests. It is a very complex area, and I hope that the hon. Member will bear with me for a few moments. The first point is that rate support grant is a block grant. It is provided in support of local authority expenditure generally, and no part of it is earmarked for any particular service. It is for authorities themselves to allocate their resources as they think best.

The second point is that the distribution of the grant is designed to secure a precise objective of enabling local authorities to provide a comparable standard of services for a similar rate in the pound. The needs and resources of local authorities differ so widely that the grant must be distributed so as to compensate for differences in authorities' expenditure needs and for differences in their rateable resources, so that no authority is placed at a disadvantage as a result of either high needs or low resources.

In the Isle of Wight's case we are concerned with the question of expenditure needs and how they are assessed. If we are compensating authorities throughout the country for differences in their needs, it is fundamental that those needs should be measured on the basis of a common yardstick. In practice this means that we must have some sort of generalised formula for measuring needs which is applied equally to all authorities and which uses only data which is available for all authorities. The inevitable consequence of this is that such a formula cannot take account of problems which are unique to individual authorities—such as the Isle of Wight's severance from the mainland.

There is, of course, a good deal of argument about the way in which this formula is derived. The method used over the past five years—multiple regression analysis—has, for example, resulted in a steady and substantial shift of grant away from the shire countries, which has given rise to a good deal of criticism. There has been—and will doubtless continue to be—much controversy about the best way of deriving the formula. But the fact remains that the block grant principle and the objective of equalising expenditure needs mean that there must be a general formula—however it is derived—which is applied equally to all authorities. The only alternative to this approach would be for central Government to make a subjective judgment of the needs and circumstances of each individual authority.

Quite apart from the considerable time and effort that would then be involved, this would seriously undermine the principles of local democracy and would flatly contradict this Government's policy of reducing central Government involvement in the detailed affairs of local authorities. I have no doubt that this would be quite unacceptable to all the parties involved. As this stage I take note of the hon. Member's suggestion for a referendum, but I am sure that he does not expect me to express an opinion in this debate.

It follows from this that to start introducing special factors into the present formula to take account of the particular problems of individual authorities would undermine the principle that rate support grant should be distributed on the basis of a general formula without discrimination in favour of—or against—any individual authority. It would also involve the Government in making subjective judgments about the special needs of authorities, which would only be the subject of endless argument and controversy.

As the hon. Member may recall, it was these considerations which led the local authority associations to opopse unanimously any special treatment for the Isle of Wight in the last rate support grant settlement. Their view was that the island was unlikely to be the only authority with special problems. Some authorities, for example, face higher building costs on account of mining subsidence. Others face higher labour costs because they need to provide services at night. Their view also was that to give recognition to the Isle of Wight's case for aid in respect of specific costs through the rate support grant mechanism could create a precedent which would ultimately weaken the block grant principle, on which the rate support grant system rests and which the local authority associations support.

The previous Administration accepted the associations' views and made no special provision for the Isle of Wight in the 1979–80 rate support grant settlement. I have to say that in the face of the firm and unanimous opposition of the local authority associations this Government would probably have reached the same decision in the circumstances.

However, in rejecting the Isle of Wight's case the previous Government commissioned a general study of the extent to which local authorities—not just the Isle of Wight—face special costs arising from unique circumstances which are not reflected in the rate support grant formula. I understand that officials from central Government and the local authority associations had considered the im- placations of this study and were about to report to the consultative council on local government finance when the general election intervened.

To be frank, I understand that officials foresaw some major difficulties in such a study. But I do not want to prejudge the issue, and I believe that the case for this study—which is of course very pertinent to the Isle of Wight and to the hon. Member's constituents—should be considered by Ministers and members of the local authority associations in the consultative council. I shall, therefore, propose that the officials' report should go forward to the consultative council in the near future, and I hope that, after it has had a full airing, the hon. Member and I will meet on some other occasion.