HC Deb 02 June 1981 vol 5 cc787-91

4.8 pm

The Secretary of State for Wales (Mr. Nicholas Edwards)

With permission, Mr. Speaker, I will make a statement on current expenditure by local authorities in Wales in 1981–82.

My Department has analysed the local authorities' budget plans for 1981–82, and these show that in aggregate planned current expenditure will exceed the Government's target by about 2.2 per cent. or £21 million at November 1980 prices.

Any current expenditure excess is a matter of serious concern and I have given very careful consideration to the need for corrective action. In doing so I have taken account, first, of the fact that in recent years budgets have in aggregate overstated the actual volume of current expenditure by proportions not dissimilar from the present indicated excess, and, secondly, the considered view of the Welsh local authority associations that the Government's current expenditure target will be met.

In view of these considerations, and noting that in aggregate Welsh local authorities have clearly made efforts to meet the Government's current expenditure targets, I have decided not to call for revised budgets or to withhold grant at supplementary report stage this autumn.

In adopting this course, my determination to see that current expenditure is kept at the level allowed for in the RSG settlement is in no way lessened; rather, I am deferring judgment on the need to withhold grant. If, despite the local authority associations' views, there is an overspend this year, I will take action to reduce the total amount of grant available by the amount of that excess. In so doing I would protect authorities who had made an appropriate contribution to the necessary expenditure reductions.

This decision reflects my trust that Welsh local authorities will meet our expenditure target. It is entirely up to them, both individually and collectively, whether I will need to withhold grant at a later stage.

I have communicated this decision to the Welsh Consultative Council on Local Government Finance. I have also told it that I shall be consulting it in due course about the matters concerning the rating system to which my right hon. Friend the Secretary of State for the Environment referred at the end of his statement this afternoon.

Dr. Roger Thomas (Carmarthen)

Does the Minister feel that running through the whole statement there is a thread that the lesson of the loss of South Glamorgan two months ago has not gone unheeded? For that change of heart, which may be only temporary, we should be grateful, and grateful also that the reductions in services and hardship suffered by the electorate will not be aggravated by further cuts. This appears, for the time being, to be a standstill decision. We are glad that although the majority of Welsh counties and districts have possibly transgressed, for the time being at any rate they are to be given a stay of execution and that we are to be saved from further injurious Government interference.

The sword of Damocles still hangs above us and may well strike some later. This is a sneaking imposition of further controls. Why did the Secretary of State not have the courage to come into the open before the county council elections? Let him remember that the district elections will be available for the electorate to make their views known next year, should further cuts be made.

Mr. Edwards

The hon. Gentleman's reaction to my statement is in sharp contrast to that of the local authority associations, which recognise its importance. and recognise also that it confirms the Government's willingness and ability under the new RSG system to deal separately with the problems of Wales. They recognise, too, that we are responding to their undertakings and their belief. They said that they believed that they could meet the Government's targets and they noted that I was placing that responsibility firmly on the local authorities.

As to South Glamorgan and press reports that it may revise its budget upwards and introduce a supplementary rate, I have made it clear that if there is an excess of expenditure and I have to come back on this, those authorities that are responsible for it will have to pay the penalty. If South Glamorgan, or any other authority, increases its spending plans it will face the possibility of a larger hold-back some time next year. That will mean that the electors of that authority will face a heavier rate burden next year, in addition to the supplementary rate burden that would be imposed this year.

Several Hon. Members

rose——

Mr. Speaker

I propose to allow these questions to run till 4.25 pm, which, with our customary Welsh brevity, ought to enable us to get everyone in.

Sir Raymond Gower (Barry)

Is my right hon. Friend aware that there will be a general welcome for the degree of co-operation that he has received from several of the Welsh local authorities? In connection with the questions asked about English local authorities where there has been a change of political control and a decision to levy another rate, will my right hon. Friend implore any authorities that contemplate such action, including South Glamorgan, to think again, in view of the injurious effects that it would have on many companies and firms that are facing other difficulties?

Mr. Edwards

In my consultations with the local authority associations I thanked them for their co-operation collectively, which has enabled me to take this decision. To those authorities that might introduce a supplementary rate I pointed out that not only would that have an impact on them, but that it could create an excess overall that would penalise all other local authorities that had not fully met the targets. It would have the effect of imposing an additional rate burden next year in addition to the supplementary rate burden this year, which could only be damaging for business, industry and those who are seeking to provide jobs in those local authority areas.

Mr. Geraint Howells (Cardigan)

I welcome the Government's initiative in considering alternatives to the domestic rating system. This is long overdue. Can the Secretary of State give an assurance that his Government will bring forward legislation in the next parliamentary Session or within the next three years to change the system? If the Secretary of State is going to claw back the £22 million suggested in his statement, by how much will unemployment rise in Wales?

Mr. Edwards

On the first point, I cannot give a timetable for the major change that would be needed to alter the whole system of finance for local government following a period of consultation. This is a major long-term exercise and it is impossible to give an undertaking. As to a clawback of £21 million or £22 million, the point is that the local authorities have told me that they do not expect there to be any need for this. Therefore, the hon. Gentleman's last question is hypothetical and there is no need for me to answer it.

Sir Anthony Meyer (Flint, West)

Is my right hon. Friend aware that Welsh local authorities, whatever their political complexion, need the support of a resolute Secretary of State if they are to resist plausible demands for ever-higher expenditure, which can only result in rate increases which will inflict great hardship on individuals and lead to massive local unemployment as firms are driven out of the area?

Mr. Edwards

I made it clear to the local authorities that I was as determined as was my right hon. Friend the Secretary of State for the Environment to see that the Government's spending plans were met. The local authorities believe that they can do this. I also emphasised to them the point made by my right hon. Friend about the effect that excessive rates have on industry, and therefore on jobs.

Mr. Ioan Evans (Aberdare)

Does the Secretary of State realise that with an increase in unemployment of over 80 per cent. under this Government there are massive problems facing local authorities? Should he not therefore think of giving them extra resources to spend, since there is a need during a recession to indertake public works to encourage employment? Will the consultative document that is to be issued on the rating system deal also with the water rate? Will the right hon. Gentleman consider abolishing the water rate, rather than revising it?

Mr. Edwards

The water rate is a different issue. My statement deals with the rating system for local government. On the first point, as the Government have stated repeatedly, the overall levels of public expenditure and their impact on borrowing and interest rates are extremely important if we are to see the economy turn round, as we all hope. As my right hon. Friend the Secretary of State for the Environment pointed out a few minutes ago, one of the difficulties in calling for capital programmes of the kind suggested by the hon. Member is that local authorities have used their resources increasingly on consumption, and therefore made those programmes more difficult to achieve.

Mr. Tom Ellis (Wrexham)

Is the right hon. Gentleman aware that many Welsh Members will be pleased that this statement differs significantly from that of his right hon. Friend the Secretary of State for the Environment? The issues being forced upon the people were spelt out by the Layfield committee several years ago and were touched on by the hon. Member for Cardigan (Mr. Howells). Therefore, will the right hon. Gentleman prepare a White Paper, or a Green Paper, setting out in broad terms proposals to maintain local government as local government and to finance it locally, with all the economic consequences for Wales, so that the Welsh people may make a judgment on their position in this grossly over-centralised country and its assorted financial arrangements?

Mr. Edwards

We have said that we will issue a consultative document on alternatives to the rating system, not on alternatives to the structure of local government. We are not contemplating putting forward a consultative document on changing the status of local government. We are concerned with consultations about the nature of local government finance.

Mr. Keith Best (Anglesey)

Is my right hon. Friend aware that the enthusiasm with which his statement has been greeted by all Opposition parties, with the exception of members of Plaid Cymru, who, regrettably, are not in their seats, will be echoed throughout the whole of Wales, because it allows local authorities to order their own houses and is not a diktat from the Government? This freedom is so often decried by those who are less than enthusiastic about what the Government are trying to do. Will my right hon. Friend also tell the House, lest it be thought that the Members of the principal Opposition party actually represent what the local authorities believe, that when he met the authorities they, too, were enthusiastic about what he had to say?

Mr. Edwards

The local authorities gave a warm welcome to what I had to say and expressed their thanks that I was prepared to accept their word that they would meet the Government's objectives in their own way. The chairman of the Welsh Counties Committee said that I was placing the responsibility firmly on local government as a whole. He welcomed the fact that I did not intend to pick out individual authorities, but was confident that local authorities collectively could come up with what the Government were asking for.

Several Hon. Members

rose——

Mr. Speaker

Order. I shall call all those hon. Members who have been seeking to catch my eye.

Mr. Roy Hughes (Newport)

Does the Secretary of State realise that, despite his statement, all our local authorities are fed up with his dictatorial attitude? Whereas the measures that he has introduced penalise the ratepayers, it is the elected representatives who have to take the can back when services prove to be inadequate. Need I remind the Secretary of State of the disgraceful way in which Newport has been treated over the sale of prefabricated houses? Added to this is the confusion that has been caused over this issue by the broadcast made by the Under-Secretary of State last week in the "Week In-Week Out" programme. Is it not time that the right hon. Gentleman gave priority to clearing up this issue for the Newport ratepayers?

Mr. Edwards

The representatives of the local authorities who saw me this afternoon thanked me for not pursuing dictatorial policies and spoke in exactly opposite terms to the remarks made by the hon. Member for Newport (Mr. Hughes). I am glad that Newport has reversed its decision and decided to accept its responsibilities under the law of the land and to carry out the law as it has been passed by Parliament.

Mr. Delwyn Williams (Montgomery)

Is my right hon. Friend aware that my county of Powys had the lowest increase in expenditure in percentage terms of any county in England and Wales? While I appreciate that he has no intention of penalising overspending authorites, will he consider giving a bonus to Powys, which has pulled its weight?

Mr. Edwards

I congratulate the local authorities that have achieved these reductions and therefore made the task easier for local authorities elsewhere in Wales which, because the overall spending of local authorities is not over the aggregate target, will perhaps not be penalised.

Mr. Donald Anderson (Swansea, East)

Is the Secretary of State saying any more than that on the past record of underspending on budgets the Welsh local authorities are likely to be on target? Does not that target, as a result of high unemployment and demographic factors, mean real cuts for Welsh ratepayers and Welsh residents?

Mr. Edwards

We asked for a reduction in expenditure by local government. By the way that they have set about this task the Welsh local authorities have shown that this is possible without destroying services, and, incidentally, have set a very good example for the United Kingdom.

Mr. Edward Rowlands (Merthyr Tydfil)

We hear a great deal about the traditional relationship between central and local government. Is it not also traditional that elected councillors are entitled to put proposals to electors which may or may not lead to an increase in rates? The councillors in South Glamorgan put forward proposals and won a mandate from the people. Will the right hon. Gentleman state that he will not interfere with the democratic right of the people of South Glamorgan?

Mr. Edwards

I am saying that if there is an aggregate excess expenditure I shall act to correct that excess. The authorities that are responsible for that excess will have to pay for it. If one local authority chooses to increase its budget, that will threaten the position of other local authorities and, inevitably, the local people will have to pay higher rates next year as well as this year.