§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Goodlad.]
11.59 pm§ Dr. Edmund Marshall (Goole)I have sought this Adjournment debate because of the unsatisfactory nature of the replies given to me by the Secretary of State for the Environment at Question Time on Wednesday 6 May, as reported at column 147 of the Official Report.
The question that I then asked concerned the shift in rate support grant this year away from district councils in favour of county councils. In particular, I asked the Secretary of State what was his estimate of the percentage increase in total grant paid to county councils in England in 1981–82 compared with 1980–81.
I am afraid that the right hon. Gentleman did not attempt to give a direct answer to what was really a straightforward question from me. Instead, he gave me some different figures which arise from including within county incomes the amounts precepted by the counties on district councils. I was talking not about precept income but simply about the grants paid direct from the Government to the county councils.
The right hon. Gentleman also claimed that Humberside county council, which he chose to mention, was a grant loser between 1980–81 and 1981–82. But this claim must be based on some very abstruse arithmetic, as I shall show, and it is completely contradicted by figures which I had earlier received from the Minister for Local Government and Environmental Services.
My purpose in the debate is to set on record the true facts of the redistribution of rate support grant between last year and this year. I am pleased that the hon. Member for Pudsey (Mr. Shaw), the Under-Secretary of State for the Environment, whom I know to be a very fair-minded man and a fellow Yorkshireman, has come to the House to join me in clarifying these matters. I look to him to help me in my search for truth.
I mentioned a moment ago figures which I received from the Minister for Local Government and Environmental Services. Those figures were set out in tabular form accompanying a letter which I received from the Minister dated 27 January 1981. The letter came in response to an earlier parliamentary question, in which I had asked for information about what the new arrangements for rate support grant would mean in cash terms for every principal authority in England.
While in general I accept all the provisos and the caveats given in that letter from the Minister, the tables accompanying it contained all the information that I was then seeking—namely, the amounts of grant paid to individual local authorities in 1979–80 and the estimated amounts for 1980–81, all expressed in constant money terms at 1981–82 prices. Clearly, those figures will have been superseded by better estimates obtained from information that has become real fact since 27 January. I shall be delighted if the Under-Secretary of State is able to provide any updating of that information. In broad terms, however, the figures accompanying the letter of 27 January indicate quite clearly the general implications of the grant redistribution this year.
The main conclusion to be drawn from the figures given by the Minister is that the new grant arrangements involve 133 a considerable reduction in the total amount of grant paid to district councils and a somewhat smaller increase in the total amount paid to county councils.
In the last few days I have been doing some laborious arithmetic, using the figures given in the Minister's tables, and I find that, at constant 1981–82 prices, the total estimated grant paid to the 46 English county councils—that is, including the Greater London Council—in 1980–81 is £2,286,188,000. The corresponding figure for 1981–82 is £4,571,143,000. That represents an increase of 99.95 per cent., which is remarkedly near to a doubling of the grant paid by the Government to county councils.
Considering that that increase is based on constant prices, I can now see that the correct answer by the Secretary of State to my question should have been that his estimate was well in excess of 100 per cent. In simple terms, the total grant paid to the 46 English counties has been more than doubled between last year and this year. Now that the county council elections are over, perhaps Ministers will openly admit that that has been the main effect of the rate support grant reconstruction which has taken place this year.
I should like to quote the figures for Humberside as an example. That county was specifically mentioned by the Secretary of State in his oral answers. In the tables sent to me by the Minister for Local Government and Environmental Services on 27 January, the figures for Humberside showed estimated grants of £104,799,000 for 1980–81 and £163,380,000 for 1981–82—again, at constant 1981–82 prices.
No juggling of the arithmetic can possibly substantiate the Secretary of State's claim in his oral answer to me that Humberside "was a grant loser". The plain fact, based on the Minister's figures, is that at constant money values the grant increase for Humberside between last year and this year is £58,581,000.
Let us look at what that means in terms of rateable value. The total rateable value for the county of Humberside in 1980–81 was £94,263,000. That means that the increase in rate support grant paid to the county council for this year compared with last year is equivalent to a precept income of 62.15p in the pound. Yet the actual precept levied by the outgoing Tory county council in Humberside, which now no longer holds office, showed a decrease of only 6p in the pound. Even that small decrease was the subject of much boasting by Tory county councillors and even by the Secretary of State in his answers to me on 6 May.
For any saving to have been demonstrated by the county council between last year and this year, the precept which it levied this year should have been reduced by more than 62p in the pound to end up with a county precept of, at most, 39p in the pound. As things now stand, the total precept, plus rate support grant income to Humberside county council, shows an increase from last year to this year, not allowing for inflation, equivalent to 56p in the pound. On those figures, which are based on the information given to me by the Minister on 27 January, county councils throughout the country, such as Humberside, would seem to be well placed financially at present, although some have fared better than others and some have more urgent spending needs than others.
But the reverse of the picture is the position of the district councils and the London borough councils. Again, taking the figures given to me by the Minister in January, 134 the total estimated grants to be paid to all district councils and the London boroughs, including the payments for ILEA and the Metropolitan Police, show a change from £7,076,600,000 in 1980–81 to £4,443,301,000 in 1981–82, both figures at 1981–82 prices. That means a reduction of 37 per cent.
As a particular example of that effect on district councils, the figures that the Minister gave me for Doncaster metropolitan borough council—which covers a major part of my constituency—show a decrease in rate support grant from £77,355,000 in 1980–81 to £58,719,000 in 1981–82. Both these figures are at constant prices. That decrease of 24 per cent. for Doncaster is equivalent to a loss of rate income of 65.85p in the pound throughout the Doncaster borough.
At the same time, the increase in grant to South Yorkshire county council, which covers Doncaster, is equivalent to a precept increase of only 48.62p in the pound. If those two figures are put together, it means that all ratepayers in the Doncaster borough are, on the basis of the Minister's figures, worse off in real terms by 17.23p in the pound of rateable value as a result of the Government's changes in rate support grant.
Everything that I have said this evening is based on the figures that the Minister for Local Government and Environmental Services gave me in the tables that accompanied his letter of 27 January. Although I accept that those figures will need modification to bring them fully up to date, I cannot see how that modification could be so drastic as to alter my main points. Although I am ready to consider any additional information that the Under-Secretary can provide this evening or in writing to me, nothing can affect the clear conclusion that this year has seen a dramatic switch in Government financial help in favour of county councils and away from borough and district councils. In broad terms, last year the county councils received just under one-quarter of the total rate support grant. In 1981–82, county councils will receive just over half the total rate support grant. As the total grant has marginally decreased, that shows that a great increase in provision has gone into county treasuries.
§ The Under-Secretary of State for the Environment (Mr. Giles Shaw)It is a rash man who seeks to joust in statistics with the hon. and statistical Member for Goole (Dr. Marshall). He is well versed in that science, or art form. I begin to understand that the same set of statistics can be made by various experts to prove different parameters. If my remarks do not satisfy the hon. Gentleman, and knowing how carefully he has gone into this matter, I should be willing for him to discuss the matter officially with me. We could then try to speak the same language.
It is impossible to discuss the figures that my right hon. Friend the Minister for Local Government and Environmental Services sent to the hon. Gentleman on 27 January without bearing in mind my right hon. Friend's warning and ultimate paragraph. He wrote:
Because of the differences in the grant arrangements for the different years and the different status of the figures in the different years (outturn through to estimates) I do not think direct comparisons between the entitlements of individual authorities in the different areas would be very meaningful".My right hon. Friend hoped that the hon. Gentleman would bear that caveat in mind. My task is to set that 135 within the context of the rate support grant system and to endeavour to explain the position of the shires and districts.The object of rate support grant is to supplement authorities' own finances so that they can provide similar standards of service for a similar rate in the pound despite differences in need for the services that they provide and in the rateable resources that they can draw on. The new system introduced by last year's Local Government, Planning and Land Act established close links between spending, grant and rates. For the first time, as the House has come to recognise, it is possible to see the principles on which central Government have distributed grants. In that respect central Government will also be open to more searching scrutiny as to how grant has been distributed. We welcome this opportunity for informed debate.
The hon. Member is concerned about changes in the distribution of grant. Measuring such changes in the first year of a new system is inevitably a complicated business. Gains and losses must be calculated against a base position corresponding to grant entitlements in the previous year. In the first year of the new system we have had to construct that by recalculating the grant that authorities obtained in 1980–81 on a basis consistent with their estimated block grant entitlements for 1981–82.
There have been quite a lot of changes. There are three main reasons. First, there are changes that follow from the improved approach to estimating expenditure needs. They are especially pronounced in non-metropolitan districts and in London because of the lack of a proper arrangement for assessing needs in such areas under the old system. Secondly, there is, of course, an across-the-board loss arising from the cut in the grant percentage—that is roughly the equivalent of a 3p rate. Thirdly, there are losses for high-spending authorities because of the effects of the grant taper when the threshold is reached. But, with one small exception—which I shall come to later—there has been no shift of grant, real or apparent, between tiers in shire areas. There has been nothing to mislead the voters, and I hope that I can demonstrate that there has been no trickery.
I realise that rate support grant and the changes introduced this year are complicated and technical, but I shall try to be clear. I do not apologise for this complication because there is a trade-off between simplicity and fairness. Rough and ready systems inevitably produce anomalies. I believe that we have struck the right balance.
Last year, unhypothecated rate support grant—what a marvellous phrase for this time in the morning—consisted of three elements: the needs element, the resources element and the domestic element. This year, under the new grant system introduced by the Local Government, Planning and Land Act, which implements some of the recommendations of the Layfield report, it consists of two elements: block grant and domestic rate relief grant. Domestic rate relief grant directly replaces the domestic element and there has been no change in the way in which it is distributed. We are therefore concerned only with the differences between last year's needs and resources element and this year's block grant.
Let us look, therefore, at the shire counties, excluding the GLC, the London boroughs and the metropolitan counties. They, and especially Humberside, appear to 136 concern most the hon. Member. Last year in shire areas needs element was paid to both counties and districts. Counties received £2,313 million and districts £365 million. Resources element was paid only to the districts, and amounted to £1,574 million. If one adds up these figures, it appears on the face of it that the counties received £2,313 million, and the districts £1,939 million. But that is not the end of the story. I hope that this is not becoming too complicated. The counties naturally put their needs element towards the cost of providing their services, but then they have to raise the rest of their revenue by precepting on the rate income of their constituent districts.
This is the crux of the matter. The £1,574 million received by the districts as resources element counted as part of their rate income. This means that the counties obtained through the precept not only the greater part of the money raised by the districts from their ratepayers, but also the greater part of the grant paid to the districts as resources element. We have estimated as best we can the actual destination of grant when this transfer through the precept to the counties is taken into account. It is that, last year, shire counties received £3,678 million, or about 86.5 per cent. of the combined needs and resources element, and districts received £574 million or 13.49 per cent.
This year, the same counties—the shire counties—have claimed 86.98 per cent. of block grant and the districts 13.02 per cent., an average shift to the counties of 0.47 percentage points, which, as I suspect the hon. Gentleman agrees, is statistically of little significance. We should, therefore, be clear, if that is possible in this complicated jungle, that there has been no significant shift of grant between tiers. Nor—and this is the point which understandably appears to worry the hon. Member—has the change in the way grant is paid had any real effect on the figures shown on the rate demand notes received by ratepayers.
There is no plot to conceal overspending by counties. The point is that grant is now paid directly to both tiers, and that none of it any longer counts as rate income. In other words, although counties now have to raise less money through the precept, the income on which they can precept is proportionately smaller, and there is therefore no net effect in terms of the poundage charged to the ratepayer. That is the justification for my suggestion that there is no trickery and deception. It is a simple mathematical fact, if there is any such thing.
In metropolitan areas, the position is slightly more complicated. There has been a shift of 1.08 percentage points from districts to counties compared to the base position which I referred to earlier, and which was published in the rate support grant report last autumn. This reflects the only significant change in the proportions of grant paid in respect of county and district services in metropolitan areas. There was, however, an anomaly in the old system, which the committee of inquiry into local government finance, the Layfield committee, urged the Government to correct. This was the needs element paid in respect of county services, which, in metropolitan areas, was paid to the districts, but not as rate income. I see that the hon. Gentleman agrees with me.
The counties were therefore unable to precept on it, and the county precept was higher—and the district rate lower—than it should have been. The new system corrects this. We estimate that last year £284 million of the resources element—12.04 per cent. of the total 137 grant—was passed to the counties through the precept. In addition, we estimate that £23 million of the needs element paid to the districts was attributable to services provided by the counties. Although, therefore, there has been an apparent shift of grant of over seven percentage points, this does not mean that proportionately more grant has been paid in respect of county services, and there has, of course, been no net effect at ratepayer level.
I said earlier that there was one small exception to this general picture. It concerns the cost of rate collection. I have already reminded the House that counties do not collect their own rates, but that they are collected for them by their districts. In the past, they have nevertheless contributed to the administrative costs of collection in proportion to the size of their precept. These were, however, costs over which they, the counties, had no control, the administrative efficiency of the operation being entirely a matter for the district. We have therefore now made districts wholly responsible for meeting these costs. This is a simple matter of encouraging efficient management, and is to everyone's benefit. It has nevertheless had the effect of reducing the county precept and increasing the district rate. We estimate that it involves less than a 2p rate—a far cry from the larger figures the hon. Member quoted. Not only that, but many rate demands notes have clearly identified the amount and the reason for the change.
I accept and I have possibly even demonstrated that rate support grant is a difficult and technical subject and easy to misunderstand. But if there has been any trickery or any electioneering, it is surely more likely to have been entertained by Opposition Members. I take the figures quoted by the hon. Member on 6 May. The hon. Gentleman claimed that there had been a shift in grant in favour of county councils equivalent to county rates of 78p in the pound in Lancashire and Northumberland, and 80p in the pound in Cumbria.
I assume that those extraordinary figures have been arrived at by taking the difference in grants paid direct to those counties in 1980–81 and 1981–82, and dividing it by their rateable values. I hope that I have said enough to make it clear that that is highly misleading, for it does not take into account the grant that they were able to obtain by precepting on the resources element paid to the districts. There has, in fact, been a shift to the county of 2.2 percentage points in Cumbria, 0.82 percentage points in Lancashire and 0.26 percentage points in Northumberland. If we take the rateable value figures published in the current "Municipal Year Book", that amounts to a 4.9p rate in Cumbria, a 1.8p rate in Lancashire and a 0.5p rate in Northumberland.
Let me emphasise that even those small shifts are not the result of Government policy, but are an indirect consequence of spending decisions made by the authorities.
138 The hon. Gentleman rightly raised a point in connection with Humberside. After taking into account the precept made last year on the resources element paid to the district, this year Humberside county council received a smaller proportion of the rate support grant paid in the county, compared to the districts, than in 1980–81. I will write to the hon. Gentleman to give him the figures involved.
I hope that my explanation of the change in the way grant is paid has been relatively simple to follow. The change is complicated, but that is largely because the old system was a hodge-podge of ad hoc compromise and adaptation. The new system which has replaced it—where grant is separately assessed for each authority, and separately paid to it—is straightforward and clear and will, I hope, make it unnecessary for misunderstandings like this to occur in the future.
It is plain that hon. Members are concerned about local authority overspending, as well they might be. My right hon. Friend the Secretary of State has made it clear on many occasions that the Government are determined to see through the adjustments to our economy that industry's plight demands. We are determined to concentrate on the creation of wealth before we concentrate on spending it, and we are looking to local government to respond to the challenge that has been forced upon us.
Let me set in context what is being asked of local government. In the private sector the word austerity has some major meaning, and it is not just the private sector that is making changes at a much greater rate than those being asked of local government.
Since the election, staff numbers in the Department of the Environment have been reduced from 52.100 to 46,100—a fall of 11 per cent.—and almost none by compulsory redundancy. Over a slightly shorter time, Civil Service manpower has been reduced from 732,000 to 695,000. Over the lifetime of this Parliament we aim to reduce Civil Service manpower by 14 per cent.
Those figures put local government plans into context. After nearly three decades of unparalleled growth in real terms, our ability to live beyond our means has come to a halt. We shall not be deflected from our objective of switching the balance between current and capital spending in the public sector. The 5 per cent reduction in real terms in current expenditure we have asked for over the three years from 1978–79 to 1981–82 belongs in that context——
§ The Question having been proposed after Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question putl, pursuant to the Standing Order.
§ Adjourned at twenty-nine minutes past Twelve o'clock.