§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Newton.]
11.30 pm§ Mr. Tom Benyon (Abingdon)I am fortunate in having in my constituency two districts councils—both Conservative-controlled, disciplined and responsive. They are both dedicated to keeping down rates and costs in their area and to maintaining services to their ratepayers. The first is the South Oxfordshire district council, which is responsible for the southern part of my constituency, and the second is the Vale of the White Horse district council, based in Abingdon.
Neither of those councils is an over-spender. Both have shown a determination to run their areas responsibly and in the best traditions of local government. Both have set examples of financial continence and prudence that I hope will be noted by the voters at the next local government elections in May. The councillors in both districts have been tolerant of the problems that appear, as far as they can see, to have emanated from Government in recent months. Both councils have, to my certain knowledge, attempted to understand the new block grant system. Neither met the change in local government financing 'with closed minds.
Senior councillors in the Vale of the White Horse district council were grateful for the opportunity to meet a Minister at the Department earlier this year who explained to them the intricacies of the block grant. However, I have to tell my hon. Friend the Under-Secretary that these councillors were not entirely satisfied with the answers given. Nor did they fully understand the block grant. This is one of the reasons why I have raised this debate.
I fully appreciate, as do my constituency councillors, that the Government have the highest aspirations in making the change from the old system to the present block grant. I believe that the Government's intentions were to achieve the following commendable aims. First, they sought to increase incentives where few existed previously by tapering off Government support for local government spending once a certain limit was passed. Secondly, they sought to provide greater scope for local decision-making by allowing almost total freedom, on the capital side, in any event, in reaching decisions on how to spend the more tightly constrained total of funds. Since council current spending covers the provision of services that are a statutory obligation, the scope for freedom is necessarily limited.
The third aim of the Government was to achieve simplicity. I am sure that one of their aims was to have a system that was understandable. The Secretary of State has often said—I agree with him—that the old system was incomprehensible and that a simpler system was needed—one that could be achieved by measuring local needs on a declared basis and publishing the sums so provided. At least when one understands the principles one can argue the quantum, presumably on a rational basis.
In a perfect world this system should work. The old system was obscure, expensive and inefficient. However, I have yet to be convinced—this applies to my constituency councillors and many others; not only those 533 who always see problems for every solution produced by the Government but genuine Government supporters—that the new system will be an improvement on the old one.
Thoughtful observers of the new system fear that it is every bit as obscure, inefficient and possibly as expensive as the old system. It will give me genuine pleasure and relief to be persuaded to the contrary by the Under-Secretary. I hope that the proof of the pudding will be seen to be in the eating, when, in a year's time, my hon. Friend will be able to announce what saving has been made as a result of the implementation of the new block grant system.
However, it is possible that the old system is being dumped before the new system has been entirely thought through. To date my constituents are not convinced that the rough justice that has been meted out is not unnecessarily rough. They feel that there is not enough justice in the system for them. They believe that the new block grant system may have the opposite effect to what was intended. Far from being clear, the new system appears to be rather arbitrary in its application. With the measurement of needs being applied through some form of algebra, the result is somewhat obscure.
The Vale of White Horse district council has attempted to work out the variations between what has happened to it and to local authorities bordering it, both Oxford city and the South Oxford district council. I shall not weary the Minister with the detailed workings of the calculation. Suffice it to say that the grant appears to allow £18.64 more per head of ratepayer in the area of Oxford city and £1.24 more in the area of South Oxford district council than ratepayers in the Vale of White Horse district council will receive, and I have to say to the Minister that no one can quite see why these things should be.
Secondly, and partly to allow for known imperfections, individual grants are not fixed but are still partly related to expenditure, and yet the total of all grants is fixed by cash limits. This might be an open provocation to over-budgeting, since authorities expect to get only a proportion of their entitlement. That, I think is human nature. I see, with a degree of alarm, that I asked my right hon. Friend the Secretary of State how many local authorities had budgeted for expenditure in the current year in excess of the targets laid down by his Department. I received the reply yesterday that, on the basis of local authority 1980–81 revised budgets, 249 authorities in England had budgeted for current expenditure in excess of their volume targets for 1980–81 by a total of £317 million at November 1979 prices. I regard that answer as rather alarming in the circumstances. It appears to justify the doubts that I have about the inflationary element in the way that the block grant is calculated.
I have to say to my hon. Friend that my council is keen to help in the battle against rising public expenditure. Today it is facing a reduction of over £¾ million in its rate support grant, which is equivalent to an increase of 4.4p in the pound. This is coupled with the extra costs involved in the full cost of rate collection, which will be added to the district rate next year. Faced with the prospect of an increase of over 7p in the rate for district purposes, the future for the electors in my constituency appears to be bleak. As, I repeat, the council has a record of sound budgetary control that Whitehall should envy, it is having 534 great difficulty in finding where to cut. The savings that are contemplated will cut into the bone because there is no fat left.
The senior councillors know the trap of just cutting capital expenditure. It is so much easier to do that in a democracy. It is the revenue expenditure that always hurts the most. The councillors know that cutting capital expenditure leads to problems if the administration is merely allowed to march on—a lesson that Whitehall might take to heart as well.
The councillors are reluctant to cut services, because they take considerable pride in running them, as they have for many years, most efficiently. However, the council has been forced to cut recreational facilities at the old gaol in Abingdon, to the great distress of my constituents and, indeed, the council.
I must tell my hon. Friend that 12 people have recently been made redundant. The councillors and senior officers are also looking at other areas of the administration to make savings. They know that no-redundancy policies are Socialist luxuries, which the corporate ratepayers and ordinary ratepayers cannot contemplate or afford. They have been making savings and taking proper steps so that the rates will not have to rise unduly, although there will be a considerable hoist in the rates this year.
Most of the problems are faced by other councils in the country. We cannot claim a monopoly of problems as a result of the rate support grant. However, a specific problem is faced by the Vale of White Horse district council, which believes that it has been penalised over the rate support grant calculation for selling its housing stock to tenants.
The problem arises when calculating the authority's assessment for grant based on how much it should spend. The arithmetic dealing with profits and deficits and housing revenue account assumes that future interest and mortgage payments resulting from council house sales will put the district council into substantial profit. That income counts as a contribution to the rate fund, depresses the Government's grant-related expenditure assessment for the council, and leaves it with a smaller grant entitlement than it would have received if it had not sold any council houses.
There is a further problem involved in council house rents. The calculation assumes that councils will charge the average rent for the region. Councils charging below the regional average have a lower assessment and lower grant. They will have to make up the difference by increasing rents or rates and cutting services even further.
My constituent councillors are concerned that they are being penalised by having to charge higher rents to ensure that expenditure assessment and grant entitlement is higher in 1982–83. If that is the national tendency it could be inflationary. Councils with high rents and high levels of expenditure do not appear to be penalised in the same way under the formula.
I cite Lambeth—and who does not cite Lambeth when talking about incontinent councils? Lambeth makes a speciality of spending money, ignores Government requests for rent rises, and does not make haste in selling council houses—quite the reverse—and does well. In this aspect of grant allocation my council is being penalised because of low expenditure and low rents.
I do not wish to sound negative. My Conservative councillors and I are at one in wishing the Government success in their attempts to introduce controls and to save 535 on public authority expenditure, but we remain unconvinced that the present system is working in the interests of my constituents or, indeed, of the country at large.
I hope that the Minister can give my authority some comfort. Surely we cannot sit idly by and see our facilities reduced and our rents and rates rise whilst other authorities who ignore calls for cutting costs benefit at the expense of the public purse.
I respectfully seek from the Minister the replacing of about £286,000, which has been lopped off our housing revenue account in the erroneous belief that on sales of council houses the Vale of White Horse district council is cash in. Mortgages are supplied by the council and it is not in receipt of substantial sums. It has merely transferred cash from one ledger to another. It is wrong to believe that the council has benefited substantially in the short term. We freely concede that what has been done has been done. We hope that it will be reviewed in years to come. We also hope that the Minister will review the grant after the first year.
My constituent councillors know that there is an element of rough justice. They are not seeking Utopia, or grumbling irresponsibly about cuts. They intend to serve, but they do not believe that Westminster has got it right at the start. They believe, with some justice, that the problems of local government are not always understood at Westminster. Sometimes councillors feel patronised by Departments that do not appear fully to understand the problems of councillors or the efficient way in which they run their local authorities. That could be reflected in the way in which Westminster Departments are run.
I cordially invite the Minister to Abingdon to see for himself the unique contribution that my council has made to planning, and how ancient Abingdon lives happily with modern housing, which blends with discreetly placed industrial estates for medium and small business. The whole is a pleasure to the eye and a tribute and compliment to the authorities that have grappled with many problems of late, not least with the closure of MG in Abingdon, which now entails a new beginning for an industrial estate to be developed by Standard Life, which we hope will replace the jobs lost last year. All those problems have been faced manfully by my district council.
I end on a high note. If the Minister comes to my constituency—as I hope he will—he might take time to pay tribute to the Edwards twins, who have served the local authority well for the past 30 years and who will honourably retire in May this year. I am sure that he will want to wish them well.
On behalf of my council, I shall listen to the Minister's reply with great interest. He will know that although we are critical we offer constructive criticism and hope that the Minister can offer us what we want and what has been expected by my council—an open and constructive mind.
§ The Under-Secretary of State for the Environment (Mr. Giles Shaw)I congratulate my hon. Friend the Member for Abingdon (Mr. Benyon) on the way in which he put over his case about his council and on the way in which he marshalled his arguments, which suggest that under the present new system of determining the rate support grant his council has been to some extent unfairly treated.
536 I wish to be associated with the good wishes to the Edwards twins after their extremely long record of public service. I also wish to be associated with congratulating the council of Vale of White Horse on the efforts that it has made to establish the industrial estate to take over from the recently closed Abingdon works. I am delighted to know that there is now a significant prospect of a development there.
The burden of my hon. Friend's remarks understandably related to the block grant. He graphically illustrated many of the exceedingly difficult elements in that system. Those elements illustrate the dilemmas which face any Government when they distribute the rate support grant each year. The task is to share out about £11 billion between over 400 local authorities. That is half the total yield of income tax. Every authority is different. I venture to suggest that my hon. Friend would expect many of our hon. Friends to argue that their authorities deserve special consideration in terms of the way in which the amount should be shared. Each one has its own competing claims on a greater share of grant. The vast majority can point to a long and creditable tradition of responsible decision making and responsible financial control. The Vale of White Horse is one of those authorities.
My right hon. Friend the Member for Bridgwater (Mr. King) was pleased to meet the leaders of that authority last January, together with my hon. Friend. Although they enjoyed their meeting and found it useful, perhaps they did not entirely understand the problem, but at least they had an opportunity for a full and frank discussion about it. One of the major steps forward is that we can have such a discussion at all. That could not have happened under the old arrangements. Therefore, if I commiserate with my hon. Friend's councillors over the fact that they were not totally satisfied, at least the door is open for discussion on those matters.
No longer are the calculations hidden from view. On the contrary, we have opened up both the figures and the thinking behind them to a greater extent than ever before.
I can fully understand my hon. Friend's concern about the not inconsiderable grant changes that the council is experiencing, despite its good record of economy and observance of Government spending guidelines. But that does not mean that the block grant system is failing to achieve its objectives. Nor, indeed, would it be true to say that we are muddying waters which have remained undisturbed for years. Only two years ago, in 1979–80, the then Secretary of State decided to reallocate to shire district councils part of the needs element of the rate support grant, which had previously been paid only to county councils in shire areas. The effect of that was to give district authorities, in one fell swoop, more than £300 million in grant, enabling many of them to achieve very low rate increases that year, or even to cut their rates, because of this windfall. The Vale of White Horse obtained almost £1 million in this way, and cut its local rate by one-third in that year.
How was that money shared out among the shire districts? It was shared out not by using any proper assessment or consistent measure of spending need for districts across the county but by means of a rough and ready arrangement under which three-quarters was based on population and one-quarter was related to their average expenditure over the previous three years. Not only 'was that extraordinarily cumbersome and indefensible as a means of compensating for spending needs; a significant 537 part of the grant distribution was dependent upon what authorities actually spent. Even the right hon. Member for Stepney and Poplar (Mr. Shore) recognised that that approach could not last and had to be replaced by a better basis for the longer term. We were faced with dismantling those arrangements and bringing district councils fully into the rate support grant on a sound basis. Of course, correcting the anomalies created by the ad hoc arrangements inevitably means some extra difficulty for some authorities this year. But changes now for districts like the Vale of White Horse must be seen in the context of its sudden windfall grant gain of only two years ago.
I turn to the assessment of spending needs—the grant-related expenditures. Of course, for shire districts housing is a key component of their spending and is represented in the GREs by indicator E7. My hon. Friend criticised the way in which we have put this factor together. I accept that the technicalities are difficult to follow and I hope that he will accept, for his part, that the underlying reasoning takes account of the position in which authorities now find themselves.
The indicator is built up on the assumption that each authority is able to charge the regional average rent, so that in some cases—as for the Vale of White Horse—they are assumed to make a contribution to, rather than from, their rate fund. It is the case that Vale of White Horse rent levels are relatively low, and beneath the regional average.
Different reasons may apply in different areas to explain why rents have been kept low. The position can be affected by the age of the stock and the costs which the authority has to bear as a result. Local expenditure on upkeep may be relevant. So too, of course, is the effectiveness or otherwise of local management. But I note what my hon. Friend said about the Vale of White Horse. I would not wish to dispute that its management of its housing stock has been economical and that that has contributed to low rents. I note also what my hon. Friend said about the sale of council houses and the assumptions made that that would allow the authority to retain significant sums. The question of the mortgage payment is involved. There is an arrangement about mortgages which is relevant to this point. The mortgage payment is 100 per cent., and is spread over a considerable time. It is not deductible at once from the amount available for housing. Local authorities now have an enlarged discretion on rent, as is implicitly recognised in basing our housing GRE calculation on the assumption of each authority charging, and being able to charge, rent at the regional average level.
The housing component of the GRE notwithstanding, I gather that the Vale of White Horse is planning to restrain its overall spending in 1981–82 to below the level of its total GRE. That appears to be a matter for congratulation. I am in no doubt that authorities that are able to do that will be in a much better position when we come to next year's settlement. We shall be able to smile on responsible authorities and to frown on irresponsible ones, such as Lambeth.
Naturally, I can give no guarantees about how the rate support grant for the following year, 1982–83, will come out. There are a number of aspects of this year's block 538 grant which we shall want to examine further with the local authority associations in the Consultative Council on Local Government Finance during the course of this year. It is appropriate, therefore, to tell my hon. Friend quite clearly that the sort of points that he raised tonight in relation to the apparent feeling of unfairness and discrimination in the operation of the system will be matters reflected not only by my right hon. Friend in respect of his district council but by other hon. Members on both sides of the House in respect to many other councils. Therefore, we intend further to investigate the scheme with the local authority associations. No doubt many of the matters connected with factor E7 and housing matters will be concerned. We shall enormously value the comments that my hon. Friend and other hon. Members make on these matters.
There is an important point. The new-found ability of hon. Members to contribute to the wide-ranging debate about the development of the rate support grant is important. It allows us to try to evolve a system to eliminate some of the problems which must have occurred as we applied the system initially this year.
I assure my hon. Friend that while these matters may not in one year either all be explicable or all be put in hand without difficulty, the prospect for the future is that we shall be able to review the operation of the new system and, we hope, make changes in the light of experience.
As my right hon. Friend the Minister told my hon. Friend and his colleagues in January, and as he has made clear in this House on more than one occasion, we are under no illusion that this year's RSG settlement is anything but a tough one. We know that it is a tough one. We are asking a good deal from local authorities—particularly Conservative councils like the Vale of White Horse, which has always readily responded in the past to Government calls for economy. It is essential that every entity charged with responsibility for spending public money at this time should examine its plans afresh to see whether they can be afforded. One corollary of this is less money for local government as a whole out of the Exchequer's resources. But I am confident that we have taken a considerable step forward towards greater fairness in the distribution of those limited funds.
I note what my hon. Friend says about the comparisons between the Vale of White Horse and its adjacent authority, Oxford city. I should like to examine that and write to my hon. Friend on it, offering comments upon it. But overall the system that we have implemented this year is based upon an essential fairness, which was absent from a system which largely depended upon previous rates of expenditure. I urge councillors in my hon. Friend's area and elsewhere to stick to the task of ensuring efficiency and economy. Those are the authorities which will reap the benefits of the greater fairness of the new grant distribution system in years to come.
I am confident that the councillors of the Vale of White Horse and my hon. Friend's authority will be those to whom we shall look for leadership in this matter, because I feel certain that they will be able to operate as efficiently in the future as they have in the past.
§ Question put and agreed to.
§ Adjourned accordingly at two minutes to Twelve o' clock.