HC Deb 12 January 1981 vol 996 cc830-6

Motion made, and Question proposed, That this House do now adjourn. — [Lord James Douglas-Hamilton.]

10 pm

Mr. William Shelton (Streatham)

With sadness, I wish to tell the House about the tale of Socialism in Lambeth. It is a tale of inefficiency and overspending by Lambeth council. Indeed, of all the spendthrift and profligate councils in the country run by Left-wing loonies, I put Lambeth at the top of the league.

This might be a foretaste of what could come to pass should the Left wing win the Greater London Council elections or if it should win control of Westminster. In the past I have detailed some of the inefficiencies and profligacies of Lambeth council, so I shall not dwell at length on them tonight. I shall simply mention a few of the highlights.

About 1,000 additional staff have been recruited in Lambeth in the last 24 months. Staff are still being added at the rate of about 40 per month. The estimated cost of this additional staff next year, is about £7½ million. Had all that staff been recruited last year, the cost would have been £6½ million. Had that staff recruitment been frozen, as was urged by the Conservatives on Lambeth council, the crisis would probably not exist in Lambeth today.

The consumer services organised by Lambeth council average 10 times those of the other 18 London boroughs. If one examines the wilder flights of fancy by Lambeth council, one finds that a poet and an artist are in residence and paid out of the rates. In addition, a gentleman is paid to sculpture with a chain-saw dead trees wherever he finds them in the borough.

Mr. Ian Gow (Eastbourne)

That cannot be true.

Mr. Shelton

My hon. Friend might say that, but I am reliably informed that it is so.

Since the present leadership of Lambeth council took over about two and three-quarter years ago, the domestic rate has increased in real terms by 142 per cent. That includes the supplementary rate that is being discussed this evening. Of course I recognise the difficulties that face an inner London borough. I would not object so deeply if the money were well spent and the results were worth while for the ratepayer.

I shall mention only a few of the gross inefficiencies. Almost 4,000 empty properties are owned by Lambeth council. That means that the council forgoes a revenue from rates and rents of about £1¼million a year. That is apart from the cost of vandalism and of maintaining a guard on such houses. Rent arrears are the highest of any inner London council and amount to about £3 million. The streets are dirty and many services are poor. Some indication of the state of the council is that the customary board of local government officers has been disbanded. It has been replaced by a board of politicians, which means that judgments are political rather than managerial.

I add to the tale of overspending and mismanagement and waste the deliberate confrontation and challenge to the Government by Lambeth and its leader. That has led to the pretty pass in Lambeth this evening when a special council meeting is in progress. It is certain that a supplementary rate will be levied. This will involve a one-off payment before the end of March to cover a deficit of more than £11 million.

We are told that the supplementary rate will mean that the average domestic ratepayer will have to write a cheque, or find the cash, to pay a £50 demand, that the average small shop will be called upon to pay £140, that a department store will have to pay more than £11,000, that the Shell building will have to pay more than £600,000 and that County Hall will have to pay more than £1 million.

I read today in the newspaper that Sir Horace Cutler has said that if he could pick up County Hall he would walk with it out of Lambeth. That is the only Lambeth Walk that we shall see while this council remains in office. It will be people walking out of the borough and reducing still further the rate base and adding to the cycle that is hitting so hard those who live in the borough.

Mr. John Page (Harrow, West)

My hon. Friend has shocked me by reciting such figures and explaining how the extra cash will have to be found. Does he believe that it is a trend that will be compounded and continued in future? Is he saying that it is not a once-and-for-all payment and that it will be once and for ever?

Mr. Shelton

My hon. Friend asks a good question. The supplementary rate that is being levied is designed to meet a current deficit for the fiscal year to the end of March. The ratepayers will have to find more than £11 million at the levels that I have mentioned. It is expected that in April there will be another vast rate increase. It is estimated that that will be 40 per cent. or more. If we add that to the supplementary rate in this calendar year, the ratepayers of Lambeth will have to find an additional 65 per cent. in real terms during this year.

I have deep sympathy for the ratepayers and sympathy for the council officers. The director of finance must find himself in a difficult position. The leader of Lambeth council is attempting to blame the Government for the pass to which the council has brought itself. In general, that blame is not well founded. It is true that within the overspend of about £11 million this year has been included some of the Government's cuts. They may amount to £2 million or £3 million. However, most of that would have been restored if Lambeth council, like other councils, had followed the Government's guidelines. It chose deliberately not to do so for ideological and political reasons. It was its own decision and it has brought the present difficulty on its own head. It has no recourse but to blame the Government.

The new block grant settlement favours Lambeth to a greater extent than all the other inner London boroughs. The housing investment programme announced by the Government will give Lambeth the highest investment of all the London areas. That indicates that the Government recognise the problems that Lambeth faces as an inner city borough.

The reduction, as a result of Government policy, for Lambeth is only.9p, or.6 per cent. However, in fact the Government grant will be lower due to the built-in penalties that Lambeth is incurring because of overspending. This is another deliberte decision on the part of the council.

I accept that it is the Government's intention to discipline profligate authorities by reducing grants progressively for spending above the grant-related expenditure threshold. I understand the Government's reason for doing so. The expectation is that Nemesis would catch up with the overspending council at the polls, and councillors would be driven from office by infuriated ratepayers.

However, we have seen that that does not always happen. There is not the correlation that one would expect between high rates and loss of votes for an overspending council. As far as I can see, the reason is that in an area such as Lambeth perhaps more than half of those who have a vote do not pay or are not aware of paying directly the, full rate. Many are on rate rebates and many live in multi-occupation, paying the rate within the rent. They are unaware of the rate content. That is also true for those who live in council properties. Therefore, the Government's expectation, if that is what they have, that in the polls Nemesis will descend on overspending authorities is, unfortunately, not necessarily true.

Some who pay rates, such as the commercial ratepayer, do not vote. I should very much like to see the reestablishment of the vote for commercial ratepayers.

My conclusion is that rates are a deeply unjust tax. We all know the reason for one form of injustice. A house with one occupier will pay rates similar to thse of a house with five occupiers which uses, say, five times as much of the amenities. I was interested in the article in the Sunday Express by my hon. Friend the Member for Aberdeen, South (Mr. Sproat). A local government tax should rest equally on the shoulders of all voters in local government elections and not on a minority.

Many people have written to me asking why the Government do not pass legislation to limit the size of rate increases or, indeed, why the Government do not forbid local authorities from levying a tax at all but have a block grant from the Government. It is an attractive solution, but unfortunately it would lead to deep problems. Councils such as Lambeth would deliberately overspend. By November they would be bankrupt and would go to the Government to see what they proposed to do. The Government would have no alternative but to lend a council money and become involved in its day-to-day management. When one considers that there are about 400 councils in the country, one realises that that is an, impossibility.

The answer might lie in a poll tax, a tax on those on the electoral register—but people move around and it is difficult to keep track of them—a local sales tax, as in the United States, or local income tax, which could perhaps be collected by the Inland Revenue and redistributed back to the council. It would, of course, he essential that the relative levels were determined by Westminster and not by the local council.

My hon. Friend the Under-Secretary of State will remember that in its 1974 election manifesto the Conservative Party pledged to abolish domestic rates. In 1979 the intention was there, but I remind the House and the ratepayers of Lambeth that there was no pledge. I hope that the pledge will be restored. I hope that the Government will, before the end of this Parliament, look at the matter in detail and see whether it is possible to abolish domestic rates and to replace them with a fairer tax that will ensure that the burden of irresponsible councils such as Lambeth rests on the shoulders of all the voters in the borough, so that when the elections come they can all show their contempt for such behaviour. If we can do that, we shall bring relief to the hard-pressed ratepayers of Lambeth.

10.13 pm
The Under-Secretary of State for the Environment (Mr. Geoffrey Finsberg)

We are all grateful, not for the first time, to my hon. Friend the Member for Streatham (Mr. Shelton) for the chance to discuss a matter of major concern to the ratepayers of the London borough of Lambeth.

Recently, in the rather long debate on the Consolidated Fund, my hon. Friend the Member for Putney (Mr. Mellor) likened the exercise of commenting on the financial position of Lambeth to that of hitting a barn door at 10 paces. Like him, I am not concerned with scoring easy points. However, since I understand from press reports that Lambeth council intends to circularise each of its ratepayers in an attempt to blame the Government for its predicament, I am grateful for the opportunity to record the hard facts, so that there can be no doubt where the responsibility lies. That responsibility lies fairly and squarely at Lambeth's own door.

The supplementary rate that the council is considering levying tonight arises from its own projection of a rate fund deficit of £11.6 million, equivalent to a 20p rate, at the end of this financial year if no action is taken. In May 1978, the council had a general rate fund surplus of £7.9 million. From that healthy start, it is frankly astounding to me that any local authority could have reached its present position in the course of less than three financial years.

The report of the district auditor in April last year—at which stage the rate fund was in deficit only to the extent of £1.7 million—made it clear that broadly speaking the reduction" — in rate fund balances — since March 1977 is a result of increased expenditure on Council services and successive decisions by the Council to meet a part of increased expenditure from the General Rate Fund balance. The conclusion of the district auditor—who is a statutorily impartial official—that increased expenditure is to blame for the present position is clearly borne out by the facts. The 1979–80 budget showed a 20 per cent. increase in real terms over the previous year. The budget for 1980–81 showed a further 25 per cent. increase over that year, again in real terms.

Those increases, totalling about 50 per cent. in two years, have to be seen against the background of the general requests that have been made by central Government for reductions in the volume of local authority expenditure. In 1980–81, the Government asked local authorities to reduce the volume of their current expenditure by 2 per cent. That general guideline was translated into specific advice for each authority. The response of the London borough of Lambeth was a very public rejection of that advice and a budget that exceeded the target contained in it by £5.6 million—11.7per cent.—unlike the bulk of local authorities of all political persuasions that have gone along with the request in the way that normal local authorities have always responded to calls by Governments of both parties.

As part of the Government's efforts to reduce the volume of local authority expenditure, we have also asked authorities to do everything they can to reduce the numbers of people they employ, because about 70 per cent. of local authority costs relate to manpower. The latest returns that Lambeth submitted to the Joint Manpower Watch show that between September 1979 and September 1980 the council increased the number of its full-time employees by no less than 378–4.8 per cent. My hon. Friend gave the result in cash figures.

In considering the extent of the council's expenditure, I have deliberately abstained from judging whether what is spent is wisely spent. That is not for me tonight. There is, however, another side to this question, namely, the extent to which the cost to the rates can be affected by ensuring that the maximum benefit is secured from other sources of income. One that is of particular concern to me with my specific responsibilities in the area of housing is the revenue lost from empty housing —

Mr. Tony Marlow (Northampton, North)

Before my hon. Friend goes too far into that point, will he come to the point of principle raised so cogently by my hon. Friend the Member for Streatham (Mr. Shelton) that there is no proper sanction against an authority such as Lambeth, even through the ballot box, because the majority of electors either are not ratepayers or they receive some benefit as council tenants, through rate rebates or as employees of the local authority? Lambeth and similar authorities will continue their activities until such time as the Government introduce measures to stop this travesty of justice from continuing. Will my hon. Friend say what the Government will do about that vital point of principle?

Mr. Finsberg

If my hon. Friend will be patient, I shall answer my hon. Friend the Member for Steatham in a moment. I am in the middle of a rather important argument, which tries to show even more clearly the financial ineptitude of Lambeth councillors.

On 1 April last year, the council had 3,140 empty dwellings on its books, and 1,189 of those had been empty for more than one year. That is a substantial stock of empty housing, which will cost about £600,000 in lost rents. In addition, there will be debt expenditure on those buildings for which no benefit will be received. There will be lost rates, and the council will incur substantial expenditure on alternative accommodation for the homeless.

In short, there are substantial costs associated with under-using valuable housing assets and substantial gains to be made from improving performance in this field.

Not only is this gross incompetence; it shows a careless disregard for the homeless, who could have been rehoused by schemes such as the intelligent homesteading of the Conservative GLC. But Lambeth is more interested in its political dogmas than the needs of ordinary people on its waiting list.

Let us look at the cost of this disregard of the Government's firm requests for savings and the pursuit of the council's own ideological views, which have fallen upon the hard-hit ratepayers of the borough. The two rates declared by the council since 1978 have shown domestic rate increases of 39.8 per cent. in 1979–80 and 49.5 per cent. in 1980–81, but even these enormous increases have failed to match the council's insatiable appetite for expenditure. The supplementary rates now being considered would bring to 73.3 per cent. the increase in domestic rates for 1980–81 and, as my hon. Friend said, would cost an average domestic ratepayer in the borough an extra £50. The rate increases for these years, and, indeed, for earlier years, have exceeded not just the average for England and Wales but even that for the inner London boroughs, where increases were 16.2 per cent. and 36.1 per cent.

Rate increases at these levels are justified by the council as necessary to meet the needs of a deprived inner city area. Yet it does not require extraordinary foresight to recognise how continuing large increases in taxation will undermine the economic and social base of the area, driving away the jobs and amenities on which the people depend. Since 1978–79 the rate bills of businesses in the borough have already increased by 83.3 per cent.

My hon. Friend made it clear that the transitional arrangements will mean that Lambeth will lose a part of its rate support grant for the current year if the House agrees the proposals when the orders are debated on Wednesday. The anticipated loss of that grant is part of the council's justification for the supplementary rate, which it blames upon the Government.

Let us be clear about the facts. Lambeth has the fifth highest uniform rate in the country, at more than 207p in the pound. That is substantially above the 155p uniform rate that my right hon. Friend the Secretary of State has proposed as the threshold level for penalties under the transitional arrangements and the 119p national uniform rate applying to the country as a whole. Even so, Lambeth, and any of the other nine authorities likely to be affected, could have avoided any penalty either by ensuring that the increase in the 1980–81 budget was just 3 per cent. lower in real terms than the average for the class of authority or by budgeting to meet the general 2 per cent. reduction in the volume of current expenditure being sought from all authorities compared with actual expenditure in 1978–79. Those were not impossible options; far from it. Fourteen of the original 23 authorities identified in September as possible losers under these arrangements have managed to qualify for one or other of these waivers. I remind the House that the majority of them were also Labour-controlled.

Not so the London borough of Lambeth. It has defiantly refused to effect any economies. By its own choice, therefore, it will not only attract penalties in the form of reduced grant of £2.1 million from its original budget but in preferring even at this stage to load futher burdens on its ratepayers rather than make economies, the effect of levying a supplementary rate would be to, increase the grant reduction to £2.7 million.

Lambeth is, of course, an inner city area and a partnership authority with the Government for the purposes of dealing with these problems. We have made it quite clear that in our book a partnership requires cooperation from both sides. As a result of the council's failure to co-operate with the Government's priorities for reducing public expenditure, it stands to lose a further £1 million of urban programme support this year and £1.5 million next year.

All of this is Lambeth's own decision, not the Government's. I have made clear, I hope beyond any shadow of doubt, that Lambeth cannot blame our policies, or, indeed, anything other than its own decisions, for the mess in which it now is.

Our policies have sought to reflect what the country can afford, something that Lambeth has chosen to ignore. Of course, Lambeth's higher spending needs are recognised. The new grant-related expenditure assessments give Lambeth the third highest volume of assessed, need per head of population in the country, excluding the City of London and the Isles of Scilly. Partly as a result of that, the council has emerged from the annual rate support grant settlement in a very favourable position and stands to increase its total grant in 1981–2—provided it is prepared to conform with the general expenditure targets which the Government have announced and which are implicit in the grant calculations. But, if the council chooses to pursue its previous policy, each increase in expenditure will reduce its grant entitlement and throw additional burdens on to the ratepayers.

My hon. Friend the Member for Streatham and my hon. Friend the Member for Northampton, North (Mr. Marlow) suggested that the best hope for the beleaguered ratepayers of this and other boroughs that follow similar policies lies in the early abolition of rates. The Government, of course, remain committed to the eventual abolition of this unjust tax as soon as other priorities allow. But increasingly the questions which are being asked about the rating system now go beyond its fairness as a tax to questioning a system which gives local authorities—often without effective electoral control—an unfettered right to levy taxes without regard to national priorities and policies. It is perfectly clear that national policies must override local policies.

The development that I have described is interesting. While circumstances of the kind affecting the ratepayers of Lambeth continue to occur, it seems to me inevitable that growing numbers of people will be asking just that sort of question.

To sum up, the rulers of Lambeth are not just dogmatic; they are incompetent and inefficient. They are deliberately causing unemployment by driving business away. They have chosen a cheap, nasty and cowardly way of making others pay for their own pet political theories. Their day of reckoning cannot come too soon. I do not share my hon. Friend's gloom. I believe that the ratepayers of Lambeth, many of whom were sensible enough to send him to this House, will rebel and take the earliest opportunity of throwing out the little men of Lambeth.

I have spent more than 25 years in London politics. I knew what I would call great men of the London Labour Party—Ike Hayward, Bill Fiske and Norman Pritchard. They would not be seen dead in the company of those who claim to be Labour and who are not now running but ruining Lambeth—people who have a lot to answer for, if they have any conscience at all.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes past Ten o'clock.