§ Mr. Ronald W. Brown (Hackney, South and Shoreditch)It can be argued, I suppose, that there must be something odd about a ballot in Mr. Speaker's office that leads to my debate following immediately on a similar one. I hope that the Minister will not mix up his notes in answering the two debates. I take up the point of the hon. Member for Paddington (Mr. Wheeler) about Marxists who use local government to come into this place. I can think only of the hon. Members for Hampstead (Mr. Finsberg), for Hornsey (Mr. Rossi), for Fulham (Mr. Stevens), for Northampton, South (Mr. Morris) and for Twickenham (Mr. Jessel) and also the right hon. Member for Worcester (Mr. Walker)—all young Marxists, who used local government to get into this House.
I wish to draw attention to the appalling financial situation facing the London borough of Hackney. I continue to argue that Hackney, by any yardstick, is being wrongly penalised. The question whether what has happened is legal is a matter for some other place to decide. I believe that the borough planned to spend less in cash terms in 1981–82 than it spent in 1980–81. In view of inflation, increasing responsibilities and the additional burdens placed on the London borough of Hackney by the Government, one can only marvel at the attempts made by the council to meet the unprecedented control now being exercised over local government by the men in Whitehall. The reward for trying to meet the target was a penalty involving the loss of £17 million of Exchequer grant.
I am sorry that the hon. Member for Paddington, who was so interested in rates in London, has now left the Chamber. The withdrawal of £17 million has meant a rate of 56p in Hackney, which is not so wealthy as the hon. Gentleman's part of Westminster, where people speak in terms of millions of pounds. We can speak only in terms of hundreds of thousands of pounds. Therefore, not only is the borough council penalised on the rate support grant. It is also penalised by the Government on partnership, which is quite outrageous. Furthermore, it is even penalised on urban aid.
Not surprisingly, the council had to raise its rate by imposing an increase of 55p in April. That was due entirely to the actions of the Government. The council has cut spending, yet it was penalised.
Interest rates are still very high and are still rising. The House has to realise that an increase of 1 per cent. in the interest rate costs Hackney borough council £450,000. Since currently it is paying between 12½ per cent. and 14 per cent. for its money, it is costing £6.3 million, or an 18p rate, just to finance the work that it has had to do as provided by statute.
In addition, the cash limit set by the Government was based on a 6 per cent. increase. The Minister knows that that is rubbish and totally unreal. In fact, the NALGO settlement was 7½ per cent. The Minister may say that that is the council's responsibility for negotiating so high. But only today we read that his Government have negotiated the same increase with their civil servants. I take it that there will be no penalty on the Government. They will not suffer the withdrawal of funds. Yet they have made precisely the same settlement.
1464 The council has to finance the difference between the rate increases which will have to be levied as a result of the difference between the real world and the fictitious world in which the Government live. That additional sum will have to be found from the rate fund. But then the council will be subjected by the Government to being included in a further penalty, and the increases will be added to the target calculation.
In an earlier debate, I heard the Minister discussing ways of solving the heating charges problem. I listened to him carefully since this is one of Hackney's problems. The Minister identified four areas in which he thought councils could operate to help alleviate the problem. Our heating charges in Hackney are exactly the same as those quoted by my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham). However, if Hackney took the Minister's advice and used any one of his four suggested solutions, each of them costing money, it would incur even further penalties.
Those hon. Members who listened to that debate found it hard to contain themselves in silence. It is misleading the House to suggest that Hackney, with exactly the same problem, could do what the Minister suggests without involving itself in greater penalties and having to raise even additional rates to pay for it and to overcome the penalties.
We hear continually from Ministers about the need to make more and more people unemployed. Hackney is now being forced to sack some 200 building workers because Ministers believe that it will save money. But it does not save money. Quite apart from the morality of deliberately creating a vast army of unemployed, it costs more in the first year than any money that is saved, and that money is an abortive cost. It is of no value to the country, to the council or to the ratepayer. But the bill goes to the ratepayer in the end, because the Government impose even greater penalties upon the council.
At the same time as the Government demand the sacking of staff, they harass the council of the London borough of Hackney to do more and more work. Only yesterday the Minister for Housing and Construction informed me by letter that he was naming Hackney borough council for intervention under section 23 of the Housing Act 1980 because he concluded that the council had been too slow in processing applications for the sale of council property.
Let me set out the facts. Between October last year and the end of May the council received 943 applications, of which 776 had been checked, with 229 being returned as incorrect. The right to purchase was admitted in 524 cases and denied in 13.
The borough council has given me an interesting breakdown of the figures. A total of 301 applicants are in three-bedroomed houses. There are only a handful of such houses in the constituency, and one can see what sort of future faces those on the waiting list. Another 42 applicants are in four-bedroomed houses, of which there are even fewer in Hackney. I have discussed that problem with the Minister. All that is an argument for another day, but Hackney borough council is carrying out the task demanded by the Government in the Housing Act, yet the Department of the Environment is taking action against the borough.
In the past two or three weeks more than 20 staff in the treasurer's department have been employed in paying benefits that should have been paid by the Department of 1465 Employment and the DHSS. Hundreds of people who should have been queueing outside the offices of those Departments have been queueing outside the town hall and receiving benefits there. But there has been not a word of praise from the Government for the council's action in saving those people from hardship.
While those 20 or more staff have been paying benefits, they have nor been able to process housing purchase applications or even to collect rates for the borough. The council's rate collection has been falling behind, but Ministers are not courteous enough even to acknowledge publicly the great task undertaken by the council. The Government's only action has been to issue a notice to the council stating that they are dissatisfied with its actions.
There is still doubt about whether the money paid by the council on behalf of Government Departments will be added to its volume total. Two weeks ago I was promised a letter confirming that the money would not be added to the total, but I have still not received it. Half an hour ago I telephoned the Department to ask why the letter had not arrived and I was told that it was on its way and that it would confirm that the money would not count in the volume total. It is perhaps significant that it has taken two weeks for that decision to be made.
Hackney has 16,000 families—46,000 people—on its waiting list. They desperately want two, three and four-bedroomed houses, but the council is being made to sell the homes in its stock. The council cannot build any more properties. It is already in the penalty box, and if it spent any more on building council houses the Government would penalise it even more. The average rates paid in Hackney are £399.47—about 50 per cent. more than the level in Bromley and three times the level in other parts of the country.
I have pleaded with the Minister for justice for Hackney. We have discussed the matter a number of times, and I pay tribute to the hon. Gentleman's courtesy to me, but I continue to argue for justice for the borough. It may be said that the council's philosophy is different from that of some other authorities, but that is no reason for unfairly withdrawing money from the borough.
The Minister knows that I have produced evidence that shows beyond peradventure that the council is conforming with Government policy, but it is still placed on the hit list. It is being forced to carry out the sales policy; it is being forced to accept the transfer of 26,000 GLC properties, many of which are in a deplorable condition. There is no precedent for such an arrangement. It is a case of an unwilling seller and an unwilling buyer. It is being forced to carry out the work of Government Departments in default and, at the same time, it is being forced to sack more and more people.
How can the Government justify their onslaught on Hackney borough council? How can they justify the resulting attacks on the people of Hackney in the face of all the evidence that I have offered over months? Surely the time has come for the Minister to accept the facts and to agree that enough is enough in the way in which the Government are treating the London borough of Hackney.
§ The Under-Secretary of State for the Environment (Mr. Geoffrey Finsberg)I am not quite sure whether I live in the same world as the hon. Member for Hackney, South and Shoreditch (Mr. Brown). He appears to have one view and I have another. My view seems to be shared 1466 by many people. I shall try to stick to the facts, and I hope that what I say will put those facts on record. Then I shall be perfectly content for people to see whether the hon. Gentleman's statements stand up to the light of day.
Perhaps I ought to begin by outlining the new rate support grant system that was introduced in England last year by the Local Government, Planning and Land Act. Rate support grant consists of two elements—domestic rate relief grant, which is paid to all rating authorities to compensate them for the 18 ½p rate relief given to all their domestic ratepayers, and block grant. Block grant is by far the more important, amounting this year to about £8,000 million, which is nearly half the total expenditure of local government.
One of the main functions of block grant is the equalisation of rate poundages—ironing out the inequalities between authorities by making more grant available to those with greater needs and lower rateable values. The object in general is to ensure that all authorities, whatever their rateable value, can provide arty given level of service by levying the same rate poundage on their ratepayers.
That is achieved by calculating for each authority, according to a general formula, the cost of providing a typical level of service. This cost is known, in a somewhat odd phrase which is, I fear, becoming familiar to the House, as its "grant-related expenditure", or "GREA". GREA is not an expenditure target; it simply provides the common reference point necessary for the calculation of grant. Grant is then set so that all authorities spending at GREA are able to charge the same rate poundage, whatever their rateable value, so that any difference in expenditure per head above or below this level has in each case the same effect on the poundage. That means that a minority of authorities—those with high rateable values—which would otherwise be able to finance large increases in expenditure from comparatively small increases in their rate poundage may actually be paid less grant the higher their level of expenditure. That does not mean that such authorities are unfairly disadvantaged. On the contrary, it means that resources are distributed equally between authorities according to their needs.
The full effects of poundage equalisation have not this year been felt in inner London. The rateable values of the City and Westminster are so high that they receive no grant, and by falling outside the block grant system they are able to retain the advantage of their high rateable values. Some of this is then redistributed to the other inner London boroughs, under the Greater London rate equalisation scheme, which is made each year under section 66 of the London Government Act 1963. This year, Hackney has benefited from the scheme to the extent of £4 million. In addition, because rateable values are on average higher than those in the rest of the country, block grant is adjusted so that the poundage required to finance any given level of expenditure in inner London is lower than that required elsewhere. This, of course, has the effect of further reducing rate bills in inner London.
Despite these special provisions, London has of course lost grant compared with last year. Part of this loss arises from the general reduction in the planned level of local authority expenditure and the cut of 1 per cent. in the grant percentage—factors which applied equally to all authorities throughout the country. The Government have 1467 also stemmed the flow of money from the rest of the country to London which had characterised rate support grant settlements in the recent past.
In 1975–76 London's share of grant was 13.3 per cent. By 1979–80 it had reached 17 per cent. In 1978–79 Hackney received more grant than was necessary to finance the whole of the borough's services, and was able to charge a general rate that was 4.47p less than the precepts levied on the borough by the Greater London Council, the Inner London Education Authority, the Thames water authority and the Metropolitan Police. This continuing drain on the resources available to the rest of the country could not be justified or allowed to continue.
This year's settlement therefore reduced London's share of grant to 15.8 per cent., which is still larger than in any year before 1978–79—hardly a severe retrenchment. Taken together, the grant losses implied by the settlement amount to £108 million, compared with budgeted local authority expenditure this year in London alone of nearly £2,500 million.
When the settlement was drawn up, it was announced that, as in the past, local authorities as a whole would be expected to spend in line with the Government's expenditure plans. Nobody seriously involved with local government on either side of the House has ever suggested that the Government do not have the responsibility of setting the overall expenditure guidelines within which local authorities should work, and local government has in the past prided itself on meeting those targets. The hon. Gentleman and I in our own local government careers followed this line. The hon. Gentleman knows that full well.
I accept that it is easier to meet a target that is rising from year to year than one that is falling. Difficult decisions have to be made; difficult choices have to be faced. When it became clear that the country could not afford to maintain public expenditure at its present high level, and my right hon. Friend the Secretary of State announced that he was asking local authorities to reduce the volume of their expenditure by 5.6 per cent. compared with 1978–79, I do not pretend that the task was necessarily easy.
1468 The hon. Gentleman rightly said that we could not discuss in detail today a case that is sub judice. He mentioned the "penalty box" in relation to rate support grant. Without giving any expression of view, I should like to quote the facts that are on record. The following is an extract from the agenda of Hackney borough council dated 28 January 1981, which is a public document:
We received reports of the meetings of the Panel at our meeting on 7 January. In the light of these reports and a full discussion of the issues in the political context and having regard to the financial and other implications for the authority, the Panel recommended us not to apply for waiver. We endorsed their recommendation and agreed to take no action to secure exemption from the liability to a reduction of rate support grant under the transitional arrangements provided in the Local Government, Planning and Land Act, 1980.I reserve comments for a time when the court case is decided. Those are the facts, on public record.I do not believe that the reductions that the Government asked for are in any way impossible to achieve. A figure of 5.6 per cent. over three years is not too terrible a reduction. When local authorities drew up their budgets this year, it nevertheless became clear that they missed their targets. In aggregate they were planning to overspend by 5.3 per cent.
My right hon. Friend accordingly asked all authorities to review their spending and to try to bring it back into line with our public expenditure plans. We have asked for revised budgets to be submitted today. When we have examined them, we shall know how far local government has responded to our request. We still hope that local authorities will have been able to make the savings that we are asking for. If not, the first consequence will be that claims will exceed the total of grant available, and entitlements will have to be reduced to bring them back into line. The greedy will be penalising the more thrifty. This alone would reduce London's grant by a further £44 million.
My right hon. Friend also said that we may have to consider asking Parliament to approve a reduction in the rate support grant which would have the effect of reducing London's grant by another £57 million.. I stress that none of this is inevitable. The remedy lies in the hands of local authorities themselves to act responsibly. I hope that the hon. Gentleman will use his undoubted influence in Hackney to good effect.