HC Deb 16 December 1980 vol 996 cc157-65
The Secretary of State for Wales (Mr. Nicholas Edwards)

With permission, I wish to make a statement about the Welsh rate support grant settlement for next year and about housing finance.

This is the first time that there has been a separate RSG settlement for Wales. At the same time, this year's settlement sees the introduction of the new block grant system. My right hon. Friend the Secretary of State for the Environment and I have therefore thought it right exceptionally to announce to the House our decisions by way of oral statements on this occasion before I meet the Welsh Consultative Council later this afternoon.

The Government's decisions—in accordance with the policies already announced to the House by my right hon. and learned Friend the Chancellor of the Exchequer—have to take account of the essential economic requirements to reduce public spending, of which local government spending forms such a large part.

The most important factor in determining the total amount of Exchequer grant is the volume of local authority spending we are prepared to accept for grant purposes, which is termed relevant expenditure. Until now there has been no separate determination of the amounts of relevant expenditure and grant for England and Wales, and in the preparations leading up to this settlement we have had to establish separate relevant expenditure shares. This has involved a comprehensive review of expenditure programmes with other Government Departments, and I am satisfied that the results provide a fair basis for the start of the separate Welsh RSG system.

In deciding the amount of aggregate Exchequer grant for Wales, we have taken into account the average level of grant received by Welsh local authorities as a whole in recent years.

I announce first our decisions about housing rent subsidies and housing capital programmes. For rate support grant purposes, I am setting the increase in the local contribution for the purposes of housing subsidy at £2.95. In addition, local authorities have to meet housing costs which fall outside the subsidy system and on average these may require rent income of a further 30p per dwelling. The total resources available within my block for housing next year will be £158.6 million at 1980 survey prices—that is, in effect, November 1979 prices—of which £23 million will be available to the Housing Corporation and £87.4 million will be earmarked for local authorities. I am holding back from distribution £14 million to cover any possible overspend and to enable underspenders to have a further allocation when this year's final figures are known, provided that this year's cash limit is not breached. The reserve also covers pump priming for improvements for sales schemes. I am announcing today the housing capital allocations for individual local authorities at outturn prices, and the figures have been placed in the Library of the House.

Turning to the RSG settlement, I have decided to accept a total, at 1981–82 outturn prices, of £1,187 million for relevant expenditure. This figure is consistent with the level of expenditure set out in the last public expenditure White Paper as modified by the expenditure reductions announced by my right hon. and learned Friend the Chancellor of the Exchequer last month. It therefore provides for a volume of current expenditure which is broadly 3 per cent. below the level that local authorities were asked to achieve in 1980–81.

The second decision that I have to make is the grant percentage. As my right hon. Friend said earlier, the grant percentage, taking England and Wales together, is being reduced by 1 per cent. from the 61 per cent. level last year. In terms of grant for Wales next year, this works out at 73.4 per cent. The higher percentage of Government grant for Wales reflects the substantially lower rateable values in the Principality.

The aggregate Exchequer grant will therefore be £871 million at 1981–82 outturn prices. In calculating the cash limit within this figure, allowance has been made for a 6 per cent. increase in earnings on due settlement dates from 1 November 1980 and provisionally for the pay round starting in August next year. For non-pay items, allowance has been made for an increase of 11 per cent. between the average levels for 1980–81 and 1981–82. Within the aggregate Exchequer grant, specific grants are estimated at £85.14 million, the transport supplementary grant at £40 million and the national parks supplementary grant at £1.36 million. This leaves £744.5 million for the rate support grant itself, including the domestic rate relief grant.

For 1981–82, I have decided that for the first year of the new block grant system it would be sensible to maintain the domestic rate relief at its present level—36p in the pound.

I turn now to the amount of money to be distributed to local authorities in Wales through the block grant—£696.7 million. I do not propose to go into any great detail about the new block grant system itself since hon. Members are familiar with the basic principles involved and can study the details from the Welsh rate support grant report that I am laying today.

The principles underlying block grant are, of course, the same in both England and Wales, although there are some differences in the detailed arrangements for Wales to take account of our particular circumstances and of views expressed to me by the Welsh local authority associations. The new system will ensure that authorities that increase their expenditure do not just do so at the expense of others but that the consequences of the decisions are in large part borne locally.

There will be some substantial changes arising from the move to the new system based on a current assessment of need rather than on a system based on the past patterns of expenditure, and I have decided to moderate these by applying safety nets and a ceiling on grant gains to provide protection for individual authorities and ratepayers. I must make it clear, however, that the safety net will not provide protection against the expenditure decisions of individual authorities. Expenditure decisions remain the responsibility of individual local authorities, which, in setting their rates, must consider the effect on ratepayers at large, including, of course, industry and commerce.

I have confidence that local authorities will continue to respond to Government targets as they have in the past. The efforts already made by local authorities in Wales to reduce their manpower and expenditure are encouraging, as the Manpower Watch figures published today, showing an annual reduction for general services of 3.8 per cent. with a 1.5 per cent reduction in the last quarter, prove. Nevertheless, sustained efforts will continue to be required if expenditure is to be brought down to our targets. I urge every local authority, every councillor, to ensure that the Government's volume reductions are achieved and that rate increases are kept to the absolute minimum.

Mr. Alan Williams (Swansea, West)

Does the Secretary of State accept that those who represent Welsh constituencies feel cheated that he has chosen today to make three major devastating policy announcements in one statement—massive rate increases, enormous rent increases and crippling council house building cuts—when even the Secretary of State for the Environment, who has an unenviable record for seeking to evade the scrutiny of the House, had the decency to break them down into two separate statements? Is he aware that in confining Welsh Back Benchers to one supplementary question on these three major policy decisions he will be seen in Wales as running away from parliamentary scrutiny and criticism?

Does the right hon. Gentleman realise that his statement inevitably means brutal increases in council rents and rates and that the further £19 million cut on top of already vicious cuts in house building in Wales will mean less or even no hope for those on already extended council house waiting lists? Will he confirm that the £3.25 council house rent increase is purely rent and does not fully measure the increase that the council tenant will face, because he will have to face the rate increase in addition? Therefore, the council tenant is being singled out for double misery today.

Does the right hon. Gentleman admit that rebates to those on lower incomes will at best only partially ameliorate the impact of these increases and that part of the cost of these rate and rent rebates will add to the local rate increases that will be required?

Will the Secretary of State explain how it is realistic to ask tenants or house owners to accept the 6 per cent. pay rise to cover increased national insurance charges, increased rates by possibly up to 30 per cent. and the increase of £3.25 in council house rents, plus a full year's inflation?

Is there no limit to the humiliation and misery that the Secretary of State feels must be imposed on Wales in the name of Tory dogma? Is not the destruction of our industry enough for him? Why must we lose more Government money?

Will the right hon. Gentleman confirm that the 3 per cent. cut envisaged in the statement, when added to the revised 3 per cent. for this year, will mean a cut of about 6.8 per cent. in councils' programmes? What great Tory purpose is being served by cutting services to the elderly, the disabled and the young?

Will the right hon. Gentleman confirm that if Welsh authorities try to make up the cuts from Government grants they will need a 3 per cent. increase in the domestic rate for each 1 per cent. cut in Government grant and that that will therefore mean a 10 per cent. increase in domestic rates—higher than would be required in England?

Because of the extra costs imposed by the Government on social services departments by unemployment, on education by youngsters staying on for higher education and the rate and rent rebates, will not local authorities need an extra £30 million and not a cut? Will the right hon. Gentleman confirm that the 6 per cent. cash limit alone will mean the cutting of 1,000 teaching jobs in Wales?

Will the right hon. Gentleman frankly admit that this whole package boils down to administering another twist in the monetarist deflation of an already collapsing Welsh economy? Finally, will he confirm that this can only mean more unemployment and that it therefore gives the lie to the Secretary of State for Employment, who, in an interview on radio today, blamed the fact that unemployment will continue to rise on everyone but the Government?

Mr. Edwards

It is a bit cool for the right hon. Gentleman to criticise me for making too few statements on this subject in the House when his Government never came to the House and made a statement about the RSG. As my right hon. Friend the Secretary of State for the Environmnet had to deal with three other major items in housing statements, I think that that explains why it was felt that an extra statement was needed.

The right hon. Gentleman talks about crippling cuts in house building. He knows about crippling cuts in house building programmes because the previous Government, in the four years that they were in power, cut capital programmes on housing in Wales by £110 million. The cuts in our first three years amount to £44 million. He is not one to talk about cuts in capital programmes.

The right hon. Gentleman talks about rent increases. We debated the issue of rent increases in full last week in the Welsh Grand Committee. I have no need to add to what I said then, except that it was the deliberate policy of the right hon. Gentleman's Government to switch resources into consumption and into subsiding rents, and to remove them from capital programmes and the maintenance of our derelict housing stock in Wales. That seems to me to be a totally false sense of priority, particularly when one takes account of the fact that 46 per cent. of local authority tenants in Wales will receive rent rebates of one kind or another, that about 25 per cent. will pay no increase at all and that almost as many will have some 60 per cent. of the increased burden carried for them.

I confirm that a percentage cut across the board has a higher poundage effect in Wales—5.5p as against 3p—for the obvious reason that Wales gets a very much higher level of grant support to meet its expenditure than does England.

The right hon. Gentleman's final point concerned the effect on unemployment and industry. I well understand that it is the policy of the Opposition Benches to seek to add to the burdens of industry by adding to public expenditure and by urging local authorities to increase rates. I hope that local authorities will have a greater sense of responsibility and will realise that the greatest contribution that they can make to industry in their areas is to cut their expenditure and to reduce their rate bills.

Several Hon. Members


Mr. Speaker

Order. I propose to allow questions on this statement to run until 10 minutes to five in order that we can get on to the main debate.

Mr. Geraint Howells (Cardigan)

Today's statement is another setback to the Welsh economy. Will the Secretary of State clarify two matters? Will his statement affect the rural housing programme in any way? If those in the public sector will not accept a 6 per cent. pay rise, where will the excess money come from?

Mr. Edwards

As we have indicated, the housing programme is being reduced. That will affect housing programmes right across Wales. Individual local authorities will have to decide on the exact level of their programmes within the total allocations that I am making.

As to the 6 per cent. figure, we have made it clear that this is a cash limit. If any individual claim exceeds that limit, local authorities will have a choice between reducing the manning levels or services and increasing rates. I hope that if they consider the latter option they will realise the damaging effect that that has on industry. I hope that they will continue the encouraging progress to reducing the record manning levels which we inherited when we came into office and that they will concentrate on that rather than on reductions in services or increases in rates.

Sir Raymond Gower (Barry)

Is it not a fact that the conclusions reached by the right hon. Member for Swansea, West (Mr. Williams) are not to be substantiated in advance of decisions to be reached after mature consideration of all the factors by local authority members and their officers? Therefore, is it not hasty to reach such conclusions at this early moment?

Secondly, in the context of an industrial-economic world which is in such terrible trouble, in which even the Communist countries are now facing economic crises of some magnitude, and in which the Arab States are now contemplating yet another very large increase in oil prices, is it not a fact that not only must our industry be much more effective and efficient, but that our local government must become much more efficient, too?

Mr. Edwards

My hon. Friend's point about efficiency will be well understood by most ratepayers and those who receive local authority services, because they all know perfectly well that there is room for substantial improvement in the efficiency of many local authorities. I confirm what my hon. Friend says—that the decisions about expenditure and about rating levels rest with the local authorities. Therefore, it is ludicrous to make general forecasts about rating levels until we have given them a chance to consider those decisions. But there is absolutely no reason to think that the general rise in rates will be up to last year's level.

Mr. D. E. Thomas (Merioneth)

Will not the Secretary of State understand that those of us who represent Welsh constituencies, and certainly Welsh local authorities, are certain that the aggregate Exchequer grant which he has obtained for Wales is totally inadequate to meet the needs of Wales by any social indicators—housing, education, personal social services or the incidence of low income in Wales? Does not the right hon. Gentleman accept that it is intolerable for tenants of local authority housing in Wales to be subjected to exactly the same rent increase as those in England, when the level of personal wealth and the level of supplementary benefit and social security take-up in Wales is 20 per cent. higher and the level of income is that much lower?

Will the right hon. Gentleman confirm that his figures for the percentage of persons receiving rent and rates rebates in Wales who might qualify are potential take-up figures rather than actual take-up figures? Of those persons who would be eligible, how many qualify and take up these benefits? Will he understand that there is a substantial gap between those who are eligible for these benefits and those who take them up? Does he accept, therefore, that by placing emphasis on this matter he is increasing the deprivation of rentpayers in Wales?

As regards the housing allocation, will the Secretary of State admit that our debate on housing in the Welsh Grand Committee last Wednesday was a charade? He must have known these figures and that he would be coming to the House to ensure a cut to the lowest possible estimate, the lowest option, of the Housing Corporation grant, and he is also holding back £14 million—

Mr. Speaker

Order. The hon. Gentleman is continuing for so long that he has already cut out one other hon. Member. He might come to a conclusion.

Mr. Thomas

Will the Secretary of State accept that the £14 million which he is now holding back on Welsh housing will induce local authorities to underspend?

Mr. Edwards

I note what the hon. Gentleman says about the aggregate Exchequer grant, but I also note that the United Kingdom authorities are protesting to my right hon. Friend the Secretary of State for the Environment that the aggregate Exchequer grant given to Wales is excessive. I suspect that, if the attack comes from both sides, the Government may have got the balance about right. I am satisfied that on any criterion of past spending and, indeed, on the detailed reassessment of individual programmes that we have done, which takes account of recent factors and not just recent average receipts, we have dealt very fairly by Wales.

The hon. Gentleman talks about people on social security. As I have said, 46 per cent. of tenants in Wales will receive rent rebates of one kind or another, and, as I pointed out to the Welsh Grand Committee last week, the average industrial wage in Wales is £110. I do not believe that the rents about which we are talking are excessive for people at that level. If the hon. Gentleman says that not everyone is taking up the benefits to which people are entitled, clearly, if they are entitled to them, they have every right to take them up.

The reason why I am holding back the £14 million at present is that I wish the underspending authorities this year not to be penalised but to have the opportunity to spend this programme, which we are carrying over into the next year, so long as the cash limit is not broken. If and when I am satisfied that they are within the cash limit, and the total has been spent, I shall make the money available to the underspenders in Wales, and they will have every opportunity to spend it in the coming year.

Sir Anthony Meyer (Flint, West)

Is my right hon. Friend aware that there will be gratitude in Wales for the way in which he has managed in the Cabinet to shield Wales from the worst consequences of the cuts that have necessarily been imposed on us by the economic situation? Is it not now clear that it is up to the local authorities to shield their ratepayers from the worst impact of the necessary economies by ensuring that they fall on administration and personnel rather than on services?

Mr. Edwards

I thank my hon. Friend for his remarks. My right hon. Friend the Secretary of State for the Environment said that the cut amounted to 3.1 per cent. in England. There is a smaller cut —2.6 per cent.—in Wales. That shows that we have taken special account of Welsh problems. The cut in Wales of total Government finance for housing has been less than that for England. My hon. Friend is right to urge the local authorities to improve their efficiency and prune their administration rather than cut services or increase rates.

Mr. Ioan Evans (Aberdare)

Since Wales has suffered more than any other part of Britain from increasing unemployment, should not the right hon. Gentleman have argued to exempt it from cuts in local authority services and housing? Will he inform Wales that it is he who is responsible for those cuts, not the local councillors? What special regard will he have for the authorities which have lost in their areas factories and companies which have closed directly because of Government policies? What can he offer them to make up for the consequential loss of rateable value?

Mr. Edwards

As a result of the changes we have introduced, there will be a far quicker response to the changes in rateable values. Hitherto, local authorities have had to wait for up to two years for those changes to be taken into account. I am basing rateable values on the November period, which means that the adjustment will be made in the course of the financial year. The authorities will therefore receive grant and make their decisions on the basis of a current assessment of rateable value, taking account of the closing and opening of plants, not of a calculation that is many months out of date. I know that local authorities will welcome that change.

Mr. Keith Best (Anglesey)

Is my hon. Friend aware that his maintenance of the domestic rate relief of 36p is to be welcomed? Will he make it clear that local authorities can substantially ameliorate their financial position by increased sales of council houses? We appreciate that one of the inequities of the previous rate support grant system was that wasteful authorities could use their expenditure as a base for future central Government grant. Is my right hon. Friend optimistic, however, that that will not be the case in the future? Will he make sure that never again will local authorities be able to criticise the Government for not listening closely enough to the needs of local government in taking account of individual factors in those local authority areas which are directly responsible for providing criteria for Government subsidy?

Mr. Edwards

I can confirm that all the factors have been arrived at after careful consultation with the local authority associations. It was right in this first year to maintain the 36p domestic relief. It is within the power of the local authorities to augment their receipts by the sale of council houses, and I hope that those which are doing so will continue to do so and that those which are not will begin. I also confirm that the old system meant that those that were wasteful or extravagant penalised the prudent. That can still happen during the transitional period while we are applying the safety nets. By protecting the high spenders against sharp changes, we clearly do not provide the same benefits to the prudent as we should in the absence of safety nets. However, as we move to a position in which there is not full protection, those prudent local authorities will be better provided for than they have been in the past.

Mr. Donald Coleman (Neath)

Is it not clear from today's exchanges that the Conservatives are unaware of the dismay that will be felt in Wales by those who are affected by local government services at what the Secretary of State announced? That applies especially to housing and transport, particularly transport for those who live in the remoter parts. Will not the continuing attack on local authority housing mean that many people in Wales will be not only jobless but homeless?

Mr. Edwards

The hon. Gentleman speaks of dismay. I believe that there will be pleasure that we have taken a fair share of the total England and Wales division this year and that we have suffered a smaller cut than has been imposed on England. There will be pleasure that I have been able largely to protect the spending programme of, for example, the Housing Corporation and that I have been able to maintain the 36p domestic relief. All these points will be matters for congratulation, not condemnation.

Mr. Delwyn Williams (Montgomery)

Does my right hon. Friend agree that the new block system will militate against rural areas just as much as the old system did? Will he give an assurance that he will liaise with the local authorities and revise this pernicious system as soon as possible?

Mr. Edwards

The detailed assessment of the factors of need which have been discussed with the local authorities has produced a result in my hon. Friend's part of Wales—in Powys—broadly similar to the old system. It has not produced any dramatic changes. That may go to show that the old system was not as far out as some people have argued. However, the local authorities feel that there may be room for further refinement to deal with the particular problems of Powys, and they have asked us to examine the whole matter again during the coming year. We shall be consulting the local authorities generally about Powys then.

Mr. James Callaghan (Cardiff, South-East)

On the deteriorating housing situation, did the Secretary of State watch that tragic programme last Friday on BBC television introduced by Vincent Kane which showed the appalling housing conditions in Beresford Road and Moorland Road in Cardiff which have come about partly as a result of an ill-fated road widening scheme that was never proceeded with? Did he hear, and if he did not will he check, that the chairman of the housing committee, Councillor Herbert, said that he had £500,000 available for improving these conditions but that the Secretary of State for Wales was denying him permission to use it?

As that programme must have awakened the consciences of many people who did not know the circumstances in which these awful housing conditions were being perpetrated, will the right hon. Gentleman give immediate consent for the money to be spent and the plight of these miserable people improved?

Mr. Edwards

Of course, I shall look at the point made by the right hon. Gentleman and carefully examine his representations. If the conditions are generally as he describes them, one wonders why his Government cut £110 million off capital programmes over the four years and why they wasted so much money subsidising council tenants who did not require the subsidies instead of concentrating it on the real areas of need such as the right hon. Gentleman has just described.

Mr. James Callaghan

Does not the right hon. Gentleman realise that, although these party points can be made across the Floor of the House, the simple truth is that the chairman of the housing committee says that he has £500,000 available now? He is seekinng only the permission of the Secretary of State. We can have the party debate afterwards, but I ask the right hon. Gentleman please to get on and improve the houses.

Mr. Edwards

I have told the right hon. Gentleman that I shall look at the specific point that he has made. But, as he has given a vivid description, it is perfectly fair—and I do not apologise for it—for me to indicate that responsibility for the condition of the housing stock in Wales is shared with the previous Government.

Mr. Barry Jones (Flint, East)

In the Minister's depressing statement today, are not the cuts in the council house building programmes and the large increases in rents and rates likely to put an even greater strain on the social fabric in Wales? Will they not make it more difficult to weather the storm of rising unemployment in Wales? Should not the right hon. Gentleman be ashamed of his statement?

Mr. Edwards

In order to ride the storm of rising unemployment, we must switch resources into productive industry and help to create jobs. By arguing for the maintenance of high spending on consumption, the hon. Gentleman is actually damaging the economic recovery for which he pleads.