METROPOLITAN POLICE BLOCK GRANT (Hansard, 5 April 1982)

§ Mr. Squire
I beg to move, That the clause be read a Second time.
It is not unusual for me to move an amendment concerning block grant—those with long memories will remember other occasions—but the House will be relieved to hear that my remarks today will be brief.
One of the basic principles is that the block grant is paid to each authority—notwithstanding the comments made in relation to the previous new clause—so that the accountability of each authority to its ratepayers and electors is as clear as possible.
However, there are two anomalies in the Local Government, Planning and Land Act which weaken the application of that principle. Under subsections (2) to (5) of section 56, the possibility is admitted of block grant for the GLC, a local education authority or a county council being paid to the rating authorities in the area. Those provisions were invoked in 1981–82 in favour of the GLC and the ILEA, but they are not to be invoked in 1982–83 in favour of those authorities or of any county council. The prospect of their use in future appears, at least at the moment, to be remote.
773 The other anomaly which the new clause seeks to tackle is in section 64 and schedule 11, in which provision is made for block grants in respect of the Metropolitan Police to be paid to the rating authorities in the Metropolitan Police district. That provision reduces the accountability of the rating authorities and of the Metropolitan Police. It also causes serious accounting problems for the rating authorities. They have to include in their budgets an estimate of the block grant that they are likely to receive in respect of the Metropolitan Police, but there is no way in which they can accurately estimate what that grant will be.
At the time of the rate support grant settlement, the Secretary of State publishes his initial estimate of the block grant entitlement of each authority, given certain assumptions, but the amount that each authority actually receives depends not only upon various determinations made by the Secretary of State, which may change, and what the authority itself spends, but on what all other authorities spend. Estimates of block grant entitlement are thus continually revised during the grant year and cannot finally be known until some months after the grant year has ended, when the actual expenditure of all authorities and the final determination of the Secretary of State are known. The latter process has become known as clawback.
Of course, all authorities have to suffer that uncertainty in respect of their own block grant entitlement, but rating authorities in the Metropolitan Police district have to suffer it not only on their own account but in respect of the block grant entitlement of the Metropolitan Police. This is unfair, and it can have either of two results. If the rating authority takes a pessimistic view of the ultimate block grant entitlement of the Metropolitan Police, it must rate higher than it would otherwise need to do to cover any possible shortfall in that entitlement. That is not only unfair on the authority's ratepayers, but contrary to public policy which requires rate increases to be kept as low as possible. It is at least contrary to the Government's declared policy in this respect.
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The second, obvious, alternative is that, if the rating authority takes an optimistic view, it may have to dip into its own reserves to cover any shortfall in the Metropolitan Police block grant, with the real possibility that those reserves may prove inadequate to meet this and other calls upon them.
With part I of the Local Government Finance (No. 2) Bill enacted, and local authorities losing the power to levy a supplementary rate, an authority would have to ask the Secretary of State's permission to borrow to cover a revenue shortfall, thus putting itself—through no fault of its own—under the direct control of the Secretary of State.
The London Boroughs Association considers that section 64 and schedule 11 of the 1980 Act should be repealed and replaced by the proposed new clause. Representations to this effect have been made to the Department of the Environment, which has undertaken to consider the point. However, the association is anxious that the present legislative opportunity should not be lost.
The proposed section 64(2) provides that section 57 of the 1980 Act shall not apply to the Metropolitan Police as it deals with the method of determining the grant-related poundage and expenditure of local authorities in 774 accordance with principles to be applied to all local authorities. Those principles would not be relevant to the Metropolitan Police. The proposed section 64(3) provides for the Secretary of State to make the necessary determinations in respect of the Metropolitan Police, thus replacing the equivalent provision in schedule 11.

§ Mr. Giles Shaw
I listened with care to what my hon. Friend the Member for Hornchurch (Mr. Squire) said. He has moved a new clause on behalf of the London Boroughs Association, which I know has expressed concern. My hon. Friend will understand that the existing system derives from discussions that we had with the association during the passage of the 1980 Act, when it was agreed that this system should be used.
The 1980 Act also specified that the block grant to the Metropolitan Police should reach them indirectly through the authorities on which they precepted. That was similar to the way in which all the precepting authorities in London obtained their rate support grant under the old grant system. At that time, it was not thought necessary to change it.
We have had a year's experience of the new system, and clearly the boroughs are less than happy with the original proposals. Now that the grant entitlements are based on expenditure, it is true that they are likely to fluctuate more than they did under the old system. However, I cannot accept the new clause, although I certainly promise to look at it closely and, more important, to consider the problem that my hon. Friend has raised.
The association and the Department had a preliminary discussion at the meeting of the grant working group on 1 April and agreed to hold further and more detailed discussions on this proposal. It undoubtedly raises technical questions of considerable complexity that could easily have repercussions outside the confines of the Metropolitan Police district.
If there is a problem to which there is a straightforward and acceptable solution—from what my hon. Friend has said, I am by no means sure that there is—it is possible that we shall be able to do something about it. Perhaps my hon. Friend will allow me to discuss this matter more fully. We are already having discussions with the association, and I believe that it would be best to leave the matter there for the time being.

§ Mr. Squire
I am grateful for my hon. Friend's expression of opinion. He is in danger of breaking my run, to which the right hon. Member for Manchester, Ardwick (Mr. Kaufman) referred in Committee, whereby it was expected that I would get my amendments accepted. My hon. Friend will therefore understand my feeling of shock and horror as a result of his answer.
In the light of what has been said, I hope that the Government will keep these matters under review. I think that the clause would reduce uncertainty if it formed part of the Bill. However, having had the chance to air my views, I beg to ask leave to withdraw the motion.