Rate Support Grant (England)

HC Deb 16 February 1982 vol 18 cc152-235 3.55 pm

The Secretary of State for the Environment (Mr. Michael Heseltine)

I beg to move, That the Rate Support Grant Report (England) 1982/83, a copy of which was laid before this House on 5th February, be approved.

Mr. Speaker

I think that it is in the interests of the House if this is discussed together with the other two motions on the Order Paper: That the Rate Support Grant (Increase) Order 1982, a copy of which was laid before this House on 28th January, be approved. That the Rate Support Grant Supplementary Report (England) 1982, a copy of which was laid before this House on 28th January, be approved.

Mr. Heseltine

As you say, Mr. Speaker, it may be for the convenience of the House if this report is taken with motions Nos. 1 and 2 on the Order Paper.

I seek approval today for three measures: the Rate Support Grant (Increase) Order 1982, the Rate Support Grant Supplementary Report (England) 1982 and the Rate Support Grant Report (England) 1982–83.

The rate support grant order is central to the public expenditure policies of the Government. Technically, it is the means by which central Government distribute taxpayers' money to help finance the spending programmes of local government. But the process of determining the order is based upon the expenditure plans for the individual programmes settled by the Government. That has always been the case. It now involves indicating how £11.5 billion is allocated for over 20 major public services to more than 400 authorities. It is necessary to allocate the taxpayers' support after taking into account the amount each of these authorities should reasonably be able to afford having regard to their rateable resources and other potential local revenue.

The rate support grant has inevitably been a complex and controversial programme affecting directly every local authority and every constituency in the country. It was difficult enough when, every year, there was an increase in expenditure and when the principal basis of distribution was the actual spending decisions of each authority. Over the past three years, I have had to challenge these assumptions of additional expenditure, and I have sought to distribute the taxpayers' support not on the basis of what each local authority decided to spend but upon independently measured criteria of need.

The Government came to office, as I explained to the House in this debate last year, after a generation in which local government manpower in Great Britain had doubled, reaching nearly 3 million—11.2 per cent. of the working population—in 1979. The inevitable effect of inexorably increasing manpower bills was a savage reduction in capital spending programmes. The previous Government cut local government capital and ended up by halving the levels of 1975 before they lost the general election.

It is against this background of spiralling, unearned consumption that the shift in direction that I have sought in local government has to be seen. To anyone who has the first idea of the strain of the present recession on industry and commerce, or who knows of the damage to investment and jobs caused by high rates, the targets I set were reasonable and obtainable.

The simple fact is that between May 1979 and April 1982 I sought an overall reduction in the volume of local authority current spending of 5 to 6 per cent. That is under 2 per cent. a year.

There has been an uninterrupted flow of misleading threats as to the consequences that would follow. The carefully orchestrated headlines were contrived not to present views or inform the public; they were produced as part of deliberate campaigns to prevent any cuts at all. They are the familiar hallmark of assertive politics.

However, the results achieve by the great majority of local authorities now prove the reasonableness of my policies. Out of a total of 413 authorities, 279 are budgeting to spend within 2 per cent. of the reduced level. It is not any one class of authority. They represent 31 per cent. of shire counties, 69 per cent. of London boroughs, 47 per cent. of metropolitan districts and 77 per cent of shire districts. The onus is therefore on high spending authorities to prove why they cannot do what the majority are doing. It is no longer for me to prove that it is possible.

That is one part of what I mean by the beginnings of a change in direction. I shall return in a moment to the consequences of the behaviour of the minority of authorities that have decided to follow a different course.

Mr. Alfred Morris (Manchester, Wythenshawe)

Is the right hon. Gentleman aware of the statement by Mr. Peter Westland, under-secretary for social services of the Association of Metropolitan Authorities, that many local authorities can no longer meet their statutory duties under the Chronically Sick and Disabled Persons Act 1970, even to the very severely disabled? For example, Wandsworth is spending twice as much on its social services as the Secretary of State and his colleagues think it should be spending. Yet the borough is still reported to be unable to meet its statutory responsibilities towards disabled people. Is this situation not deeply disquieting to the Secretary of State and to the House?

Mr. Heseltine

I have not the slightest doubt that if any local authority in the country is failing in its statutory duty, someone will challenge the position of that authority. The right hon. Member for Manchester, Wythenshawe (Mr. Morris) is as aware as I am that the arrangement of priorities within each authority is a matter for that authority. We have made it clear that where the cuts should come is a matter for the individual authority's choice and discretion.

It is important for the right hon. Gentleman to square the statement that he has made, which doubtless is designed to present the cuts in the least favourable way, with the fact that 47 per cent. of metropolitan districts either have achieved or are very close to achieving my economies. The onus today is on those authorities which are not achieving or not attempting to achieve our policies to prove why it is no longer possible, because the majority of the authorities have proved that it is possible.

Another indicator of the change in direction is, of course, local authority manpower. The manpower bills of local government account for more than 70 per cent. of current spending and, as a result of pressures in the last three years, the graph which had risen so strongly year after year for 30 years has now turned downwards. Between June 1979 and September 1981 the manpower level in local government in England dropped by 4.1 per cent. For nine successive quarters the numbers have fallen.

Mr. Dennis Skinner (Bolsover):

Yes, to the dole queues.

Mr. Heseltine

The hon. Gentleman undoubtedly wants me to give way.

Mr. Skinner

The Minister is putting before the House figures which indicate that he is gloating because he has managed to get another few thousand people out of local government employment and into the dole queues. As for his figures being correct in terms of local authority expenditure, why should those in local government be terribly concerned about getting the figures to balance when this Government, of which he is a member, reached the end of the 1981 financial year having spent 60 per cent. more than they had originally calculated? The public sector borrowing requirement rose from £8, 500 million to £13, 500 million. Who is he to tell local authorities what to do?

Mr. Heseltine

The hon. Gentleman will want to make his own speech, but he is fully aware of the reason why I want to see lower levels of manpower in local government. It is because I want to help private industry, which has to pay the bills, to take on people, to invest and to enjoy a climate in which it can make the profits on which the prosperity of the hon. Gentleman's constituents depend.

For nine successive quarters, therefore, the numbers employed in local government have fallen. The latest figures show that in the 12 months to September 1981 the numbers employed in England dropped by about 42, 000 full-time equivalent—an annual rate of more than 2 per cent. In the last quarter alone, there was a 1 per cent. drop—an all-time record for a quarter.

I welcome and pay tribute to those local authorities which are now seeking to meet the Government's expenditure programmes. The fact that so many authorities are now showing that, with sensible manpower and recruitment policies, savings can be made, demonstrates once again the reasonable nature of what I have asked for. However, although the shift is happening, it is taking place late in the day. Unless the pace of the last quarter is maintained, it will still be below the level needed overall to maintain current spending targets.

Some authorities have made no effort. They have deliberately chosen to frustrate the Government's policies—policies often debated in and, of course, approved by the House. Instead of an overall reduction in real terms in current spending, we have a budgeted cash overspend of perhaps £1.3 billion this year. We have certainly stopped the upward spiral and rid ourselves of the inherited and unrealistic growth. The direction has changed, but, thanks to a minority of local authorities, it has not yet been reversed. I have decided, therefore, to confirm the withholding of £200 million from the 1980–81 rate support grant. It is for this reason that the first order for which approval is sought today provides only for an additional £84 million in grant. This increase is mainly for increased loan charges in that year. A full £200 million has been held back as the aggregate expenditure of local authorities in that year was 2½ per cent. above the volume target.

There is one other matter related to the rate support grant for 1980–81. The House knows that last October the Divisional Court, while holding that I had exercised my discretion to abate the grant of six London authorities on valid considerations, quashed the decision on the ground that I had not been prepared to receive representations from the authorities concerned after November 1980. The court held that it was open to me, after considering representations, to reach any decision I considered right. Accordingly, I invited the authorities concerned to submit further representations, and this they have now done.

Having considered carefully the points they have made and taken into account all the factors drawn to my attention, I have decided to reduce the amount of grant payable in respect of 1980–81 to authorities whose adjusted uniform rate exceeded 155p and whose expenditure does not qualify for a waiver. To this extent, this decision is the same as that I announced last year. However, I have decided to modify the conditions for waivers. Authorities which did not gain a waiver on the basis that I announced last year will have their performance recalculated, using outturn figures and appropriate repricing factors, with urban programme expenditure excluded from the calculation. I have made these modifications in response to points made by the authorities themselves. The modifications may enable some of the affected authorities to achieve a waiver and gain exemption from grant abatement.

I do not yet know whether this will be the case. My Department will be asking authorities to provide the figures for making the relevant calculations and will also be writing to the authorities directly affected by the decision to explain it in more detail.

The second measure is the supplementary report for 1981–82. This provides an increased grant of £122 million, mainly to reflect higher loan charges. The report also uses new data to bring up to date the grant-related expenditure assessments—GREAs—of individual authorities. As the report explains, there is likely to be a further supplementary report for 1981–82.

The Local Government Finance Bill makes express provision for adjustment of grant entitlement to reflect the degree to which authorities have followed the Government's expenditure guidance. If enacted, authorities which in 1981–82 spend above their volume target and above their grant-related expenditure assessment could have a loss of grant. There is no reason for the taxpayer to support authorities which choose to ignore the guidelines which have been set. I have explained in detail how the abatement will work. The remedy was in the hands of the authorities concerned. I shall bring the report before the House as soon as practicable.

Turning now to the main report for 1982–83, we are dealing with the disbursement of £11.5 billion of grant, provided by the taxpayer, to more than 400 authorities.

I appreciate that the earlier I can announce decisions, the better for local government, but there is a balance to be struck between informed and early decisions. It was immensely to the gain of local government that, albeit rather later than I would have liked, we were able to provide a settlement which met local government at least half-way on some of its more difficult problems, even though many of those problems were of its own making.

I made my announcements on 2 and 21 December, as soon as possible after examining authorities' revised budgets for 1981–82, including the £1 billion increase over the White Paper provision. We made it clear in sending figures out on 21 December that we were going to alter the GREAs by substituting actual capital allocations. Of course, this happens every year, but usually later, in a supplementary report. This year we have done it earlier than usual to reduce the changes in GREA which would still have happened, but would have happened later.

I should refer here to the report of the Select Committee on Statutory Instruments which has suggested that the targets should have been included in the rate support grant report to Parliament. I have, of course, laid copies of the target figures in the Library of the House and they are available to any hon. Member. I did not include them in the report because, as the Committee points out. they have no direct statutory force. What will have statutory force is the grant abatement scheme. As I have assured the House, I shall bring full details of the abatement scheme before the House in a supplementary report before there is any question of its being implemented.

Our starting point for the total allowable expenditure was the overspend this year—an overspend which. as I have explained, stems largely from the refusal of a minority of authorities to adhere to the reasonable targets that I have set. Authorities in 1981–82 are planning; to spend about £17.5 billion. That includes the £1.3 billion cash overspend to which I have referred.

Mr. Bruce Douglas-Mann (Mitcham and Morden)

To what extent was there an underspend of budgeted expenditure in previous years, and to what extent, therefore, is the planned overspend to which the right hon. Gentleman refers likely to be reached this year? Is that budgeted overspend likely to reflect local authorities' fear of the type of control that has been introduced in legislation to prohibit supplementary rates?

Mr. Heseltine

The overspend is not affected by the fear that there will be no supplementary rates. Only the rating provision, which is not on the same s of the income and expenditure account as the level of expenditure, may be affected, though I hope very much that that will not be the case.

As to the difference between outturn and budget, I do not have the precise figures, but I can give the hon. Gentleman the flavour of the position. In the years preceding the period for which I was responsible for local government there tended to be a 11/2 to 2 per cent. differential between budget and outturn, but that was always against the background of rising levels of expenditure and rising budgets. The indications for the past year or so are that there is not such a margin between budgets and the outturn, but this is a completely new situation for local authorities. They are having to reduce their expenditure and are therefore budgeting much more tightly than they did previously.

Mr. Douglas-Mann

Is the difference to which the right hon. Gentleman refers an underspend of budgeted expenditure rather that an overspend on past experience?

Mr. Heseltine

In the past five or six years there has always been an underspend on the budget by 1½ to 2 per cent., but the position is now changing. Our latest impression is that the budget and the outturn will come much closer than they did previously as expenditure expectations go down.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

One of the nitty-gritty points is the grant-related expenditure assessment for the police, where the Government have been generous to London at everybody else's expense. London has been given about £60 million—an increase of 24 per cent.—Merseyside has been given about £300, 000—an increase of 0.8 per cent.—and the West Midlands has received £1.4 million—an increase of just 2.8 per cent. How does that square with our promise at the general election that we regarded police expenditure as the most important thing, because we wanted the police to be up to full strength? Is my right hon. Friend aware that the West Midlands police force is now up to full strength and must remain so?

If the Government rightly say that the police force must not be cut—indeed it must not, because we should not be forgiven if it were—what would be his answer to people who said that other expenditure would have to be cut by 37 per cent.? Incidentally, I agree that the Labour-controlled West Midlands is a difficult authority on expenditure. Are the figures as I have been told? Shall we receive a better grant than the paltry sum that I have described, which would have meant that we were paying for London's lawlessness?

Mr. Deputy Speaker (Mr. Ernest Armstrong)

Order. I remind the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) that hon. Members must not make speeches in interventions.

Mr. Beaumont-Dark

It was a question, Mr. Deputy Speaker.

Mr. Heseltine

I know that my hon. Friend will bear with me. I intend to deal later in my speech with the point that he raised.

Before the interventions I had said that authorities were planning to spend about £17.5 billion in 1981–82, which implied the £1.3 billion cash overspend to which I had referred. But our original White Paper plans imply a total for 1982–83 of under £17 billion. To have stuck to the targets, and allowing for the overspend, I should have had to ask local government as a whole for a reduction in real terms of about 10 per cent. I decided against that.

Given the high percentage of manpower costs in local government current expenditure, there is a limit to any possible rundown in a given year on what can be achieved without redundancy payments that will actually put up the expenditure in that year. If I recognised that there was a point beyond which higher-spending authorities could not go, the only way to achieve the original target would have been to look to those authorities that were achieving my targets, or were close to achieving them, to make up for the failures of the rest. That would have been manifestly unfair. I therefore decided to protect the services in lower-spending authorities.

It would have been fair, given the notice that local government has been given, to base the RSG settlement for 1982–83 on the 10 per cent. reduction figure. But, following discussions with local government, I took the view that a reduction of 10 per cent. would be difficult to achieve in one year. I am therefore proposing an increase to £18 billion for the planned expenditure next year. That is a 2.8 per cent. cash increase over revised budgets for this year. It is over £1 billion more than the White Paper provision.

Our estimate is that, given the cash planning factors of 4 per cent. for pay and 9 per cent. for other costs, local government overall needs to make a 3.2 per cent. reduction in real terms from the level of this year's budgets. That is a tough, challenging, but realistic target for local government as a whole.

The next element in the settlement is the grant percentage. We have decided that, as a further means of keeping up pressure on the spending plans of local government, it is fair for a higher percentage of those plans to be financed at the local level, especially given my acceptance of a higher level of overall spend. For that reason, I have reduced the rate of grant from 59.1 per cent. to 56.1 per cent. In cash terms, that means that the Government will provide a total of £111/2; billion in 1982–83—an increase of over £1/2 billion in cash on last year's settlement.

There are three further aspects of the settlement to which I would draw attention. First, the settlement refines the methodology for setting targets. In the past, all local authorities have been asked to make the same volume reduction in settling an individual target. That has been criticised by many authorities. The choice of base years is said to be arbitrary, and equal volume reductions are said to make no distinction between those authorities that have tried to reduce spending in the past and those that have not.

I have always recognised that there is some validity in those criticisms, and I have now begun to move away from those base lines. The new targets are based on the lower of the original or revised budgets for 1981–82. The budgets are then adjusted to compare spending in 1981–82 with both the volume target and the GREAs. For authorities spending less than both those limits the targets are higher. For authorities that are overspending, the targets are lower.

To underline the equitable nature of the new targets, we have built in two constraints. First, no authority is being asked for more than a 7 per cent. reduction in real terms compared with the lower of its original or revised budget for 1981–82, although, of course, if an authority has increased budgeted expenditure during the year against the Government's policy it will be expected to make a larger reduction to offset that increase. For authorities spending less than their volume target and GREA the maximum real reduction will be 1 per cent.

The new targets are fair. They are based on up-to-date spending figures; they include comparison with GREAs; they benefit authorities that have succeeded in reducing spending. On the evidence of three years they are reasonable.

There are three main changes in GREAs for 1982–83. After discussion with the local authority associations we have made a number of changes to the housing assessment this year. We assume an average increase in rents of £2.50 a week. Where that increase results in a notional surplus on housing revenue account the GREA is not, as it was last year, to be a minus figure. It is being set at zero. No GREA is reduced this year by an assessed surplus on housing revenue account. Many district councils have an improved GREA as a result. In agreement with my right hon. Friends the Secretary of State for Education and Science and the Secretary of State for Social Services I have altered the GREAs for education and personal social services to include more weight for social and economic factors.

Of course, I understand that no authority feels that its GRE assessment is exactly right. We are continuing to work on improvements with the local authority associations. No single methodology could reflect the precise spending needs of over 400 different authorities, but the GRE system is the best available. Its overwhelming advantage is that we have opened up grant distribution to discussion and the public can now compare and contrast.

Mr. Christopher Price (Lewisham, West)

I am sure that the right hon. Gentleman would agree that this is a very complicated subject and that even he has difficulty from time to time in comprehending it completely. He said that in agreement with his two right hon. Friends he had increased the social and economic elements in the GREA. By how much has he increased them? Is the increase significant enough for any inner city local authority to feel the difference, as it were?

Mr. Heseltine

Yes, it certainly is. That is one of the reasons why the shift of grant has taken place between various authorities in the distribution this year. I shall try to help the hon. Member and perhaps the House, because it is very important to understand how the system works.

When the public expenditure programmes have been set Department by Department. individual Departments then work out how the money should be allocated to the various authorities which administer the services. My task as Secretary of State for the Environment is to draw together, on the basis of the advice I get from the specialist Departments, the whole of the rate support grant settlement. Of course, policy decisions about the allocation of public expenditure ceilings are initiated by the various sponsoring Departments, although I have a coordinating role and am deeply involved in consulting those Departments. As I have said, the work is done in conjunction with the working groups in local government.

I also propose this year to abate grant for authorities which overspend their targets. I should make it clear that no authority spending below its GRE will suffer grant abatement. Only authorities spending above target and above GRE are affected; and, as my right hon. Friend announced earlier in the month, we will not change the grant abatement rules in mid-year. Authorities understand the methodology for grant abatement next year, and we have undertaken to amend clause 4 Local Government Finance (No. 2) Bill now in Committee to ensure that in future tha principles of grant abatement will be set out in the main report for the following financial year.

Those are the main components of the settlement. It is a realistic, fair and achievable package.

Mr. W. Benyon (Buckingham)

Before my right hon. Friend leaves this complicated matter, can he give an assurance that the vexed question of rapid increases in population will be considered in time for next year's assessment?

Mr. Heseltine

I am grateful to my hon. Friend. I intend to deal with that point.

I apologise for detaining the House but there are many matters of great concern. The subject is complicated and I must go through these matters with care. Let me comment on specific aspects that I know have caused concern on both sides of the House. Providing expenditure targets are met, M expect the metropolitan areas outside London to retain broadly the same share of the grant total that they have received in recent years, that is, between 29 and 30 per cent. In London the loss of grant during 1981–82 far exceeded the partial reversal I had planned of the unjustifiable gain of £300 million grant from the shire areas which took place under the right hon. Member for Stepney and Poplar (Mr. Shore). That loss of grant was entirely as a result of overspending by London authorities.

For 1982–83 I am giving London the prospect of an improvement in its grant share' if expenditure targets are met. That is an opportunity for London, but the House will want to balance that against the considerable shift above what I anticipated that took place as a result of the high spending policies of London in the current year.

There is one change of policy incorporated in the report compared with the proposals issued in December. Those proposals provided for an increase in the proportion of rateable value of London authorities which is discounted in assessing grant entitlements. This change was to be effected by the setting of a multiplier in the same way as the special within London equalisation arrangements and the general safety net provisions. To some extent, these different multipliers interacted so that a minority of London authorities gained no benefit from the changed discount.

On further consideration, I have decided that this was not a fair arrangement and I have therefore recalculated the multipliers so that the benefit of the improved discount is applied as a final stage in the calculation, so allowing all London authorities to benefit equally. So that this change would not disadvantage authorities outside London, it has been necessary to increase slightly the aggregate Exchequer grant.

I shall deal more specifically with the inner city partnership authorities. The change which I have made in the method of assessing GRE to which I referred a few minutes ago to take more account of their particular problems has helped many of these authorities. but for some of them—Manchester, for example—problems remain from the years of unrestrained expenditure growth.

I have never made any secret of my view that more investment in our inner cities is essential, but we cannot make the room for increased capital investment until the stranglehold of ever-increasing current consumption is loosened.

This year I have been able to make a start on capital expenditure. On housing I have been able to announce a real growth in the gross provision for housing capital of 3 per cent. The inner city partnership and programme authorities have been given extra recognition in the distribution formula—as a result their share of the total HIPs will now be an all-time high of 34.6 per cent

I have announced the largest ever urban programme of £270 million. Resources for the partnership authorities will increase by 32 per cent. and for programme authorities by 21 per cent.

I have been urged to consider once again exempting the inner city authorities from having to include their urban programme expenditure when judging their performance against their expenditure targets. The targets for next year differ from earlier targets by being based on actual expenditure levels this year. They therefore largely reflect already existing patterns of spending on the urban programme. The case for an exemption is less clear cut, therefore.

I attach priority to continuing reductions in current expenditure in the inner cities. Nevertheless, I have shown my willingness to be flexible in considering representations from the inner city authorities where these are founded on genuine endeavours to respond to the need for economies, as I have shown by the decision I have today announced on the waivers on the transitional arrangements for 1980–81.

My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) has asked about the police. I am aware that the metropolitan counties have been discussing with my right hon. Friend the Home Secretary the level of their police expenditure in the light of the expenditure targets that I have set. All of these authorities have been set tough targets. This reflects their existing high levels of expenditure. For three of the counties—Merseyside, West Midlands, and West Yorkshire—their decision to increase expenditure or revenue support for transport undertakings has increased their difficulties. I expect those authorities to make expenditure reduction based on their already high level of spending in relation to both this year's target and their GREs.

The authorities concerned must decide for themselves how to set about meeting their expenditure targets. I could not accept their contention, however, that reduction must inevitably fall equally on all services. No service is exempt from the search for economies, but, as the House knows, the Government attach priority to the law and order services and we have provided for this priority in our expenditure plans. The House will expect the metropolitan counties to recognise this priority and seek to find the bulk of the reductions required from those services where they know they are overspending most.

The position of police authorities outside London will be improved by the news today that the precept of the Metropolitan Police will be based on a budget approved by my right hon. Friend the Home Secretary. That provides for total expenditure in 1982–83 of £325 million. That figure is about £13 million lower than the estimate included for GRE purposes in the RSG report. An adjustment to the Metropolitan Police GRE will be made at an appropriate opportunity during the year. There will be modest consequential increases in the GRE figures for police authorities outside London at that time.

Let me say a word about the rural areas—the non-metropolitan areas. Under the Labour Government those parts of the country steadily lost their share of grant to London. It shrank from 57.3 per cent. in 1975–76 to 53.6 per cent. in 1980–81. Last year I took steps to correct that unjustified switch. The non-metropolitan share of grant rose to 55.4 per cent. after revised budgets. For 1982–83, the non-metropolitan share is likely to be about the same, although that will depend on the budget decisions of all authorities.

Some of the non-metropolitan counties are concerned about loss of grant through the close-ending adjustment that must take place later in the year. I have had representations from such authorities as Surrey and Hertfordshire on that point, but it now seems likely that the amount of close-ending reductions will be very small indeed in 1982–83. That is good news for those authorities. Other authorities, such as Essex and Buckinghamshire, have made the point that the statistical base is out of date.

Next year the census results will be coming on stream. We shall incorporate those figures next year. If there are authorities whose population growth was underestimated before the census, the new figures will be fairer to them. I hope that that answers the point made by my hon. Friend the Member for Buckingham (Mr. Benyon).

The House will be aware that the level of overall local government expenditure is primarily within the control of local government. We know that 70 per cent. of current costs go on manpower. The level of pay awards is in their hands. If staffing costs rise faster than allowed for, savings elsewhere must be found. In the private sector, employers cannot be insulated from excessive price increases. They must reduce costs, and the same must apply in local government. Instead of leading an inflationary cycle, I wish to see the local government sector leading an accelerated downward trend. The success—or otherwise—of that trend will be reflected in the rate bills of individual councils.

I have refused to set targets for levels of rate increases. I do not believe that that would be a helpful exercise. For example, last year in local government there was a range between an increase of 47 per cent. and a reduction of 3 per cent., so averages mean little. But every councillor now taking decisions has an essential role in the strategy for beating inflation. The decisions taken by local government affect every family's budget, but they also affect the industrial and domestic ratepayer. If councillors have not yet realised that their high rate policies are destroying the jobs and the investment in their areas, they have not listened to the clamour of indignation now coming from those who must earn the wealth that some councils are so freely prepared to spend. There is no question but that they want councillors to keep spending within the set limits. They wish councillors to make savings where they can and they want greater efficiency.

I wish to pay tribute to my hon. Friend the Member for Peterborough (Dr. Mawhinney), who is to be congratulated on the way in which he has persuaded his local Labour council and his local industrialists to work together in looking for economy and efficiency. I wish that we saw far more of such common sense of community. It is in stark contrast to Labour Party spokesmen, who lose no opportunity to encourage and support high rate policies.

Mr. Tony Durant (Reading, North)

In view of what my right hon. Friend has just said and his earlier remarks about aid to the shire counties being in sharp contrast with what happened under the Labour Government, would it not be wrong for a local authority such as Berkshire to increase its rates by 371/2 per cent., which seems to me astronomical and unfair to industry?

Mr. Heseltine

I support my hon. Friend, who I know has expressed those views trenchantly locally. It is to be regretted that, when jobs are being lost and investment cut and the wealth-producing sector of the economy is severely strained, local authorities do not bear their fair share of the responsibility to try to contain expenditure.

There has never been—I support the efforts that many of my colleagues are making locally in support of the matter—a greater opportunity for industry and commerce to bring their management expertise and experience to support local government in its search for economies. Perhaps it is not sufficiently recognised that, as a result of what the Government are doing, there has never been so much published information to help those who seek economies to effect them.

Each local authority now should be publishing, service by service, its quarterly manpower figures. Each planning authority should be publishing the time that it takes to deal with planning applications. By April there should be registers of unused or underused land of over an acre in size, owned by the public sector in each district authority. The housing authorities should be publishing the cost and value of their capital housing projects. The Chartered Institute of Public Finance and Accountancy—the organisation of local government treasurers—now publishes detailed comparisons of the cost of services provided by each authority. They include actual expenditure figures for 1979–80. In the pressure of recession and the search for economy, there are endless questions to be asked and the information from which to ask them is or should be publicly available.

I shall give an example of some of the questions to be asked. It is perhaps for the right hon. Member for Manchester. Ardwick (Mr. Kaufman) to provide the answers. In Camden, the net annual cost of all services for every 1, 000 people is £370, 000. In Lambeth it is £285, 000. In Wandsworth it is £200, 000. Why does it cost 85 per cent. more in Camden than in Wandsworth?

In the London borough of Haringey, it costs £619 a year for every primary school child. In Barking and Dagenham—also Labour—controlled London boroughs—the cost per child is £504. That is a difference of 21.8 per cent. But, it could be argued, surely Barking must have a vastly inferior pupil-teacher ratio. That is not what the CIPFA statistics show. It is 20 in Haringey and, similarly, 21.7 in the much less expensive Barking

I have taken those figures almost at random from the first dozen pages of the CIPFA statistical comparison. It is an invaluable source for every inquiring ratepayer. Why does it cost £2, 859 per 1, 000 population for planning in Tyne and Wear county and only £767 in the West Midlands? That is a difference of over 300 per cent. Perhaps the ratepayers in Tyne and Wear deserve an explanation.

I was interested to see that in Sheffield this month the Labour-controlled council decided to increase the rates by 20 per cent. for domestic ratepayers, and 18 per cent. for industrial ratepayers. Yet only in November a local Engineering Employers Federation survey produced a report showing lost jobs and the cancellation or postponement of £1.5 million of investment as a result of last year's 40 per cent. increase. I was startled to read that the chairman of the budget committee is alleged to have said: I think we are now running a very tight ship. That was after a 40 per cent. rate rise followed by a 20 per cent. rate rise in a city where the net cost of services per 1, 000 population is 9 per cent. higher than in neighbouring Rotherham and where the cost of refuse collection is 20 per cent. higher than in Doncaster, in the same county area. It costs £649 to educate a secondary pupil in Sheffield and £573 to educate the same pupil in Bolton—a town that I chose because the pupil-teacher ratio is the same.

I cannot know the answers to those questions. They are matters for each authority. But I know that it is right that local people should have the information for an informed public debate and for the wider protection of the ratepayer.

There is a wider lesson to be drawn. This settlement is about responsibility. We now have a system that brings home more clearly than ever before the responsibility of the individual councils for their actions. It is a responsibility that is more visible than ever before. I began by talking about a shift in direction. Over the next 12 months it is my belief that that shift will accelerate. That is my objective, and that is what I shall continue to work for.

4.40 pm

Mr. Gerald Kaufman (Manchester, Ardwick)

Listening to the Secretary of State is somewhat like watching the dance of the seven veils. As he peels off each layer we feel that this time, surely, at the conclusion of the performance the truth will be revealed. But when the seventh veil has been discarded we find that all that has been disclosed to us are seven more veils. The right hon. Gentleman may not be good at much, but he is certainly an expert at concealing the truth.

The rate support grant settlement is a prime specimen of his art. After a 45 minute speech by the right hon.Gentleman purporting to explain it, we know, on the whole, rather less than when he rose to address the House. We know that he has reduced the level of grant from 59.1 per cent. to 56.1 per cent., but he gave us no idea what this means in real money. By insisting on comparing the cash award, made last year in last year's prices, with the cash award made this year in this year's prices, the Secretary of State seeks to give the impression that the value of the grant settlement has risen. This is far from the case. Any attempt to obtain a true comparison on a constant price basis has been met with the response that these figures are best presented in cash terms.

On the other hand, local authorities are required to work out on a constant price basis how much they are to cut this year's budgets to conform to next year's targets. The Secretary of State has refused to tell us how much he is cutting their grant on the same constant price basis. Therefore, I wrote to the Prime Minister asking whether she could help and I received the following explanation: In some circumstances it may be meaningful to compare expenditure on a constant price basis but it is more difficult to revalue the financing item. It is particularly difficult to make meaningful comparisons involving future years, where the mix of expenditure which the grant will finance is necessarily uncertain. There are special reasons for using constant prices in constructing the expenditure targets for 1982–83 … This was done so the impact on the target policy could be contained within achievable limits. Book tokens are offered for the first three correct explanations opened.

As Ministers will not publish the calculations that they have certainly made—[HON. MEMBERS: "What is the correct answer?"] I am about to say that the Minister has the information but will not give it.

As Ministers will not publish the calculations that they have certainly made within their Department and which the Treasury also has, I will assist by publishing them. In constant prices, the Secretary of State has reduced the block grant for the coming year by £827 million, a reduction of 8.7 per cent. Worst hit of all are the partnership and programme authorities, the inner cities, for whom the Prime Minister has just demonstrated her compassion by appointing the Under-Secretary of State for the Environment, the hon. Member for Ealing, Acton (Sir G. Young) to look after them. He is not so much an overlord as a mini-Minister.

The inner city share of the rate support grant has fallen drastically since the Government came to office. One would never guess that from the passage in the Secretary of State's speech today. Compared with Labour's last year in office the share of rate support grant going to the inner cities has fallen from 23.5 per cent. to 18.6 per cent. of the total. This year they will be losing £154 million in block grant alone. The Secretary of State is also reducing housing subsidy by £427 million. That means that the local authorities will have to find another £1¼ billion out of rate revenue simply to maintain services and employment at present levels. Even if local authorities make massive cuts, the reduction in the rate support grant will still mean greatly increased rates and precepts.

This is quite apart from the Government's insistence that local authorities should calculate their budgets on an assumption of pay settlements of 4 per cent. when all settlements to date have been well above that level, and on a 9 per cent. inflation rate, when it has just been confirmed that inflation is running at a consistent 12 per cent. So rates will go up substantially, directly as a result of this rate support grant settlement.

When he announced the settlement, the Secretary of State claimed: Provided that local government seeks to match our target expenditure levels, rate increases generally will be low next year. Three areas, East Sussex, Essex and Wiltshire, all less than 3 per cent. above the penalty level, are having to raise their precepts by, respectively, 13.8 per cent., 14.9 per cent. and 13.9 per cent.

My hon. Friend the Member for Harlow (Mr. Newens) referred, at Prime Minister's questions today, to the plight of Essex. Essex has now sent a telegram to its Members of Parliament complaining that its representations to the Secretary of State have been ignored. It is true that the rate support grant settlement includes a safety net to protect local authorities in danger of suffering an excessive grant loss.

Mr. Stanley Newens (Harlow)

Before my right hon. Friend leaves the question of Essex, is he aware that the Secretary of State and his colleagues have confirmed that Essex is one of the most efficient and prudent authorities? It has still suffered the heavy cut to which my right hon. Friend is referring. Surely that shows that there is no reward for pursuing the economic policies that the Secretary of State advocates?

Mr. Kaufman

As I shall seek to demonstrate to the House, it is a sad fact that the more prudent a local authority, the more likely is the Secretary of State to punish rather than reward it.

It is true that the Government tell us that the safety net to protect local authorities in danger of suffering an excessive grant loss has been increased. The Government tell us that the safety net this year will be brought into operation when an authority suffers a grant loss of 5p in terms of rate poundage, compared to 13p last year. That is a great improvement and we should be thoroughly grateful for it, except—I am afraid that with this Secretary of State there is always an "except"—that the safety net is based not on what the local authority will actually be spending but on what the Department of the Environment says that it should be spending.

In the overwhelming majority of cases that will be the lesser of the two. Therefore, in the "through the looking glass world" in which local authorities are being required to budget, the Secretary of State may deem a council to be gaining grant when it is losing grant. Even though the safety net has been raised, many local authorities will jump, expecting this protection, but will find that they go right through one of the holes in it.

Local authorities are also being denied grant because of a shortcoming in compiling grant-related expenditure or simply because of mistakes by the computer at the Department of Environment—rather, the two computer systems, which keep a watchful eye on each other but sometimes succeed in doubling the mistakes. Some of the work has been done on computers in Cleveland, Ohio and Rockville, Connecticut. It may be that the calculations were made in United States dollars. That would be as rational an explanation as I have heard for what has taken place.

Be that as it may, the results are very serious. The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) raised the question of the impact on the police of what the Secretary of State is doing and the reply by the Secretary of State was grievously inadequate for those concerned about the matter. My right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), in his intervention referred to the inability of local authorities to meet their legal duties under the Chronically Sick and Disabled Persons Act. For example, in Liverpool nearly 400 severely disabled people have been put on an indefinite waiting list for telephones, which social services Ministers have said is illegal. Liverpool's defence is that that has been caused by the Secretary of State's cuts. Councillor Anthony Mogford, the chairman of the policy committee of Buckinghamshire county council, claims that his council's loss of £12.5 million in rate support grant for 1982–83 is due to the failure of the system to take account of the recent population growth. When the Secretary of State purported to reply to a question from the hon. Member for Buckingham (Mr. Benyon), he offered no immediate comfort for that county.

My hon. Friend the Member for Rother Valley (Mr. Hardy) told me that Rotherham, which was an underspender last year, will suffer a loss in grant of at least 8 per cent. in 1982–83, purely because of the Government's artificially low assumption for inflation. Yet the Secretary of State had the nerve today to pay Rotherham a compliment. Birmingham had its grant-related expenditure assessment reduced between 21 December 1981 and 25 January 1982 by £l.l million, which could mean a loss of grant of £2.3 million. The Minister for Local Government and Environmental Services, in a letter to the leader of Birmingham city council, offered the following explanation: the reason for the change lies in the correction of an error in the information we use to make an assessment of the component of GRE in relation to land drainage". The fate of jobs and services depends on such nonsenses.

The most extreme example is that of Thurrock in Essex. That bewildered local authority finds that, at a stroke, it will lose every penny of its grant in the forthcoming financial year. That is largely because its rate support grant allowance for housing revenue account deficit has been wiped out. That is a manifestation of the Secretary of State's gratitude to Thurrock for doing what he asked, and raising rents by the level that he laid down. Thurrock's grant loss will bring about a rates increase of 40 per cent. That council is the victim of the Department of the Environment failing to understand its own methodology. No doubt the Secretary of State will take an early opportunity to denounce the high spending policies of Thurrock borough council.

Raising rents is not the only Government policy that councils are being punished for obeying. Authorities will also lose grant as a result of the additional income they obtain from selling council houses. In addition, the greater the number of council houses they sell, the more grant they will lose. They are also punished because the Secretary of State will not let them build new houses to replace those that he is forcing them to sell. Under the GRE assessment house starts indicator, grant entitlement is chalked up on the basis of the number of new houses begun in an area. Yet the Government's housing policy is drastically reducing the number of new starts year by year. Far from increasing the housing investment allocation programme, as the Secretary of State claimed this afternoon, he has cut it by 4 per cent., which is based on a phoney 8.9 per cent. inflation rate. On the proper inflation rate, the cut in housing investment is far greater, and local authorities will be penalised for that by reduced rate support grant.

There are other curiosities in the way that the mysterious GRE assessments are compiled. For example, grants for concessionary fares for the elderly are based not on the number of elderly who may benefit, but on the number who live in an area. Therefore, an area that deprives its elderly of cheap transport is rewarded by the Secretary of State. Not only do local authorities gain or lose almost at random on the basis of their allotted GRE assessments, they suffer from a new refinement in the calculation of their grant-related poundage. Hon. Members will recall that the key element in the calculation of a local authority's block grant is its grant-related poundage. In the rate support grant report, every class of authority is allocated a GRP. That is multiplied by the rateable value for the area, and the product of that calculation is subject to the multiplier allocated individually to each council. The result of that calculation is deducted from the local authority's total expenditure, and what remains is the block grant.

One element in the GRP is the tariff, otherwise known as the slope. For each additional £10 per head of expenditure below the threshold above its GREA, a local authority is required to raise an additional sum in rates. Last year the tariff was 5.6p. This year the Secretary of State has steepened the slope by increasing it to 6p. That may not sound a great deal, but it is a 7 per cent. increase. That penalty is imposed on local authorities even when they are spending below what the Secretary of State tells them they need to spend to provide the services that their area requires. Of course, that penalty increases even more when they spend above the threshold and the taper comes into operation.

But those penalties are as nothing compared with the punishment that the Secretary of State is imposing on local authorities that are spending above his expenditure targets. This is where Sherlock Holmes appears on the scene. Students of Conan Doyle will remember the exchange of dialogue between Holmes and Dr. Watson in the story "Silver Blaze". The detective refers to the curious incident of the dog in the nighttime. Watson comments: The dog did nothing in the nighttime. Holmes remarks: That was the curious incident. We are debating one rate support grant order, one rate support grant report and one rate support grant supplementary report. In addition to the one supplementary report, which makes certain non-controversial changes following last year's main report, we should be debating another supplementary report to impose the penalties threatened by the Secretary of State when he was conducting his holdback operation last summer—the exercise in which, last June, he ordered local authorities to cut their budgets by 5.6 per cent. below their expenditure for the financial year 1978–79.

At that time, the right hon. Gentleman warned that councils that failed to make the demanded cuts by the end of July would be visited by the most stringent punishment in the form of reduced grant, called "holdback" in the Secretary of State's quaint but sinister phraseology. One hundred and seventy five local authorities failed to do as they were told. The Secretary of State let off 61 of them with a caution, having discovered the irrelevant but extenuating circumstance that they were budgeting below their GRE assessment, even though they were still spending above their target by an aggregate of more than £70 million. That left 114 authorities cowering under the expected lash of the Secretary of State's holdback penalties. But the lash has not fallen—the grant has not been docked. The dog has done nothing in the night time.

There is a simple reason for that, but we would never guess it from the way in which the Secretary of State glossed over the matter in his speech. He has discovered that that holdback operation—targets, penalties and all—is illegal. As he reminded us today, he has already been taken to court once by local authorities from which he withheld grants unlawfully. We shall have to study carefully the text of his belated announcement today. It is clear that he is afraid to risk being labelled a wrongdoer by another set of judges.

The game is given away in paragraph 9 of the main rate support grant report that we are debating today. It says: Clause 4 of the Local Government Finance (No. 2) Bill currently before Parliament is intended to clarify the powers under which such a scheme could be operated. What a nice word "clarify" is! In the dictionary of Heseltinese the definition of "clarify" is "retrospectively make lawful that which was unlawful". Clause 4 of the Local Government Finance (No. 2) Bill, row in Committee, seeks to achieve that clarification by legalising retrospectively both the illegal targets that the Secretary of State set and the illegal penalties that he threatened. The Minister for Local Government and Environmental Services confessed that until the local Government Finance (No. 2) Bill is passed, it will not be proper for the Government to impose the penalties.

So there we have it. The Secretary of State, who lectures local authorities about the need to conduct themselves lawfully, has been conducting himself unlawfully ever since last June. If he were not a Minister of the Crown with an obedient majority ready to bail him out, he would by now be helping the police with their inquiries.

However, the Secretary of State's lack of legal authority to penalise those whom he has categorised as overspenders saved him from some embarrassment last weekend. Two days ago, the Secretary of State made again his now familiar speech about his determination to reduce local authority spending. He said: I am unrepentant about the need for economies. He made his speech at the Young Conservatives' annual conference. The conference was held in Harrogate. Under the Secretary of State's holdback exercise, Conservative-controlled Harrogate emerged as the second worst overspender of all England's 411 local authorities. The reason why Harrogate has so blatantly contravened the Secretary of State's edicts is that it has been spending vast amounts of ratepayers' money on a grandiose new conference centre. The Secretary of State made his speech attacking local authority extravagance in that same grandiose conference centre, which has turned Harrogate into the second most extravagant local authority in England.

Indeed, the Young Conservative conference was the first major event in that conference centre. There is only one reason why the Secretary of State has not yet fined Harrogate £313, 000 in grant holdback for building the conference centre in which he denounced such extravagance as building the conference centre in which he was delivering his denunciation. The reason is that the penalty is still illegal, and will remain so until Parliament retrospectively legalises it.

The Secretary of State has now changed the whole basis on which he calculated the targets by which overspending will be judged for the forthcoming financial year. During the Second Reading of the Local Government Finance (No. 2) Bill, I mentioned the methods by which the new targets were assessed. Some brows were furrowed when I said that the final stage in the construction of the targets involves the iterative process. So hon. Members will be relieved to learn that in a handy guide just issued, the Association of Metropolitan Authorities has provided a definition of that iterative process, namely, required to he calculated over and over again until the right answer appears. The targets are so sweeping that they indict 365 of the 411 English local authorities as overspenders. That iterative process, far from being fair, as the Secretary of State claimed this afternoon, has led to some serious anomalies, one of them resulting from the rule that no local authority is required to make cuts of more than 7 per cent. from this year's budget. I hasten to add that those anomalies do not affect Harrogate. Just as it is a maximum overspender in the current financial year, so it would be a maximum overspender in the new financial year. That conference centre is an expensive item.

Other authorities are even less lucky than Harrogate. On the other hand, certain councils are much luckier. Let us take Portsmouth and Northamptonshire. In last year's drive for economies, Portsmouth did everything for which the Secretary of State could hope. Obeying his legal instructions, it cut its budget by £669, 000. Those cuts turned Portsmouth into the apple of the Secretary of State's eye—an underspender. However, under his idiosyncratic system of rewards and penalties, he recompensed Portsmouth for its frugality by reducing its rate support grant by £333, 000. That is bad enough, but worse is to come. This year, on precisely the same budget that last year made it an underspender, Portsmouth becomes a maximum overspender. It is being made to cut its budget by the 7 per cent. maximum to avoid penalty. The final turn of the screw is that if Portsmouth had not cut its budget last year in response to the Secretary of State's illegal demands, it would now be called upon to cut 7 per cent. only from its original, higher budget, rather than from its reduced budget. So Portsmouth loses four ways: it made cuts last year; it was penalised for doing so; it is being ordered to make maximum cuts this year; and its required cuts are higher as a direct result of the cuts that it made last year.

Letus contrast Portsmouth's agony with Northamptonshire's good fortune. Last year, Northamptonshire completely ignored the Secretary of State's call for cuts. Instead, it increased its budget by £5, 705, 000. The Secretary of State responded smartly by increasing Northamptonshire's grant by £3, 810, 000. This year, it is true that Northamptonshire is an overspender and is due to be penalised—but by only 3.8 per cent. That is half the penalty hanging over virtuous Portsmouth.

Anomalies of that kind can be repeated all over the country. They stem from a series of absurdities—the absurdity of the system by which last year's grant was awarded; the absurdity of last year's illegal spending targets; the absurdity of last year's illegal penalties; the absurdity governing the award of this year's block grant; and the crowning absurdity of this year's penalties.

Sir Julian Ridsdale

(Harwich)rose——

Mr. Kaufman

I hope that the hon. Gentleman will forgive me for not giving way, because I am coming to the end of my remarks. The Secretary of State took so long that I want to make a short speech, by comparison.

It is no wonder that the Secretary of State is tired of the whole wretched business. It is no wonder that he is desperate to reform the whole rating system. This week, The Sunday Times revealed details of the top secret, almost occult, Cabinet meeting that was held a fortnight ago to discuss the rates—a meeting that was so secret that only several journalists obtained full details of it. It turns out that the Secretary of State has been compelled by the Prime Minister to bring before the House policies in which he does not believe. As The Sunday Times put it: When he was looking for ways to tame spendthrift local authorities last year, one method he rejected was the local referendum. Yet over his strong objections, that is the method the cabinet chose. He was therefore saddled with defending a policy he thought both wrong and unpopular … Later, Conservative MPs proved his judgment right by forcing the government to withdraw its referendum proposal. Not only do we disagree with what the Secretary of State is doing, but the Secretary of State himself disagrees with what the Secretary of State is doing.

Mr. Ted Graham (Edmonton)

Have a referendum.

Mr. Kaufman

The trouble is that there was a referendum in the Cabinet and the Secretary of State lost. If we defeat the Secretary of State in the vote tonight, by imposing on him what appears to be a public humiliation, we shall provide him with a private triumph. Therefore, I not only invite the Secretary of State's sadly numerous enemies, but also whatever friends he may have, to join us in the Lobby tonight to throw out this wretched, illogical, unfair and mean-minded rate support grant settlement.

5.11 pm

Mr. Mark Carlisle (Runcorn)

It would be churlish to pretend that one had not enjoyed some of the wit and amusement of the right hon. Member for Manchester, Ardwick (Mr. K aufman). He rightly pointed out—if he is right in the figures that he gave—many of the apparent anomalies in the rate support grant. I am bound to say, however, that over the past 14 years, many similar speeches have been made by Opposition Members in debates on the rate support grant, pointing out various anomalies in division of the money.

Although the right hon. Member for Ardwick is not normally given to generosity towards Conservative Members, he may agree that the real point thrown up by his wit and humour is the genuine complexity of the rate support grant. The rate support grant is understood by my right hon. Friend the Secretary of State and by my right hon. Friend the Minister for Local Government and Environmental Services, but it is otherwise understood by only one official in the Department of the Environment, one official in the Department of Education and Science and by the Department of the Environment's computer. However, as we heard, there is a certain doubt about the computer.

This is the first time that I have addressed the House in a general debate since being dropped from the Government last summer. I am grateful to you, Mr. Deputy Speaker, for calling me. In a debate on the rate support grant and local authority expenditure, it is important to remember that a high proportion of that expenditure goes on education. Any debate, therefore, on the funding of local authorities, or on the level of the rate support grant that goes towards the funding of local authority expenditure is bound to have an important effect on education throughout the country. I am not talking only about education in schools. It is worth remembering that local authorities are responsible not only for the education of those of compulsory school age, but also for the education of children under five, of those between the ages of 16 and 18 who wish to stay in full-time education, and for the whole of higher and further education, with the exception of the university sector.

As I said, the rate support grant is a complicated piece of machinery. I do not want to become involved in its complexities now, or in arguments about the effect of any particular grant on an area. I should like to make what I believe are, if over-simplistic, at least straightforward points concerning our approach to the debate.The first point is self-evident and was highlighted in the speech of my right hon. Friend the Secretary of State. In a period of recession, rate increases are placing a heavier and heavier burden both on individuals and on industry and many people are becoming greatly concerned. It is worth remembering that when debating the rate support grant we are debating one quarter of all public expenditure. The types of rate increases that we have seen in recent years—and those that some incoming Labour-controlled county councils have imposed in the past 12 months—are making a substantial impact on the viability of many small industries and businesses and, thereby, on unemployment.

More than half the rate-borne part of expenditure is paid not by the domestic ratepayer but by local industry. That is probably the most classic case of taxation without representation. If we tax or rate small businesses in a way that prevents them from expanding or, in some cases, drives them out of business, we shall increase and aggravate our unemployment problems. The Government must have an overall view about the use of the country's resources. They must take responsibility for the macro economic decisions. I totally support my right hon. Friend and the Government. They are wholly right in doing all in their power to restrain the level of local authority expenditure. However, I am sure that my right hon. Friend will agree that expenditure must be commensurate with the provision of adequate services.

My right hon. Friend is right to do all that he can to attack individual spendthrift councils. The Government's critics say not that his attacks have been too successful, but that they may not have been successful enough. Therefore, I am in accord with the basic principle behind the Government's approach. I do not believe—as some members of the public might argue—that education can be excluded from any savings to be made in local authority expenditure. By its very volume, expenditure on education must be part of any attempt to constrain local authority spending. It takes up four times the amount of any other local authority service. At £9, 190 million in the coming year, expenditure on education represents more than half of all local authority current expenditure. It represents about 70 per cent. of the total expenditure of those authorities that are local education authorities.

Of course, it is vital that the country should provide the best education service possible at school, pre-school and post-school age. However, we all know that ultimately the standard of education is not entirely related to expenditure. Other matters must be taken into account. As I have said before, those who criticise the Government for their efforts to restrain such expenditure do not benefit today's schoolchildren, because if we spend more than we can afford on education we may leave them to face even greater economic problems in the future.

Therefore, I believe that it was right to examine education expenditure as we have over the past two and a half years. I ask those who criticise what the Government have been trying to achieve to have a sense of proportion. It is right that we have reduced public expenditure on education. We were aiming to spend 31/2 per cent. less in 1981–82 than in 1978–79, for a further fall of 1 per cent. in the coming year and 6½ per cent. less in 1983–84.

We must remember that those figures are being aimed at and largely achieved against a fall in the number of pupils which is substantially greater. That fall is 7 per cent. from the date of the Government's coming to office to the present day and it will be 13 per cent. by the end of 1984. That means that, despite the genuine savings that have been made, we have today a higher pupil-teacher ratio, and are likely to continue to have one when the 1982 figures are available, than we have ever had before. It is certainly considerably better than it was in 1978 and 1979.

Planning for a reduction is always difficult. l realise that there are diseconomies of scale that are bound to affect the savings made. I support the comment of my right hon. Friend the Secretary of State that the targets that had been set to local government in this area, although tough, were attainable. It would be impossible to go further than we have and I would resist any attempt to make further savings in education.

How successful have we been in making those reductions? Again, it is worth pointing out that, compared with local authority expenditure as a whole, education authorities have been considerably more successful in achieving the reduced expenditure targets than other areas of local authority expenditure. If one examines the outfall for 1980–81, one sees that, apart from an increase in overspend on school meals, the outfall for the rest of education expenditure was equivalent to the relevant expenditure. I dare to predict that for 1981–82 the outcome overall will show again that the expenditure is roughly equivalent to that which was allowed for in relevant expenditure.

About 80 to 85 per cent. of the reduction in local authority manpower has been achieved by local education authorities, largely in non-teaching costs. If one could convey to local authorities the need to examine some of their other services, particularly local administrative services, and if they compared that with the way some local education authorities have examined their expenditure, which is a highly politically sensitive area, they would find it easier to achieve many of the targets set by my right hon. Friend.

Therefore, faced by the overspend, my right hon. Friend is right to say that he is carrying through his threat to withhold grant for 1980–81, because he has no alternative. At the moment, it is the only method he has for controlling the total resources that may be used. It is the only method he has for bringing to the notice of local ratepayers the effects of the extravagance of individual local authorities. He is right to make it clear that he intends to withhold grant in 1981–82 from the individual authorities that continue to overspend.

While I take the point of the right hon. Member for Ardwick about the Local Government Finance (No. 2) Bill, I should have thought that it was a substantial step forward that my right hon. Friend and the Government were putting on the statute book legislation that allowed them to pursue an overspending individual authority rather than having to suffer the sins of the few at the cost of the many.

My right hon. Friend the Secretary of State must be clear what is meant by overspending. I do not believe that we can simply look at historical levels and say that every authority—I shall take some figures used by my right hon. Friend—that has not spent 5.6 per cent. below its 1978–79 expenditure is, ex hypothesi, an overspender. As he will agree, that is not so.

In many aspects of local authority expenditure the overall responsibility of a Government is primarily financial and they aim to keep down local authority expenditure. However, with regard to education expenditure, the Government are bound to have an interest not only in the level of expenditure and the cost of the service but in the standard of the service that is provided.

Largely thanks to the energy of my right hon. Friend, today we have a system of assessing the needs of local authorities which is far more sophisticated than past systems, and the level of grant-related expenditure of each authority. I know that the system is not perfect. No system is perfect. I am sure that an amusing and witty speech could be made by the right hon. Member for Ardwick pointing out the fallacies and individual problems of grant-related expenditure.

In the end grant-related expenditure is based on calculations that contain a series of ingredients that have largely been accepted by the Association of Metropolitan Authorities and the Association of County Councils as taking account of the needs of spending in an area. In education, I can say without fear of contradiction that those ingredients were set not by the Department of the Environment but by the Department of Education and Science. I was glad to hear my right hon. Friend say that some changes had been made this year which I know were being looked at in conjuction with the other partners—the AMA and the ACC.

As we have grant-related expenditure, and as grant-related expenditure is not the same as historic levels of expenditure, it is nonsense to suggest that authorities that may not be spending 5.6 per cent. below the 1978–79 level, yet are spending at or below the level of grant-related expenditure, are overspenders, whereas those that have achieved the 5.6 per cent. target are not overspenders, even if they are still well above the level of grant-related expenditure. That appeared to apply to many shire counties. That is why I welcome the statement made by my right hon. Friend in the latter part of last year, reaffirmed in the Rate Support Grant Supplementary Report (England) 1982, that those authorities whose expenditure is below the GRE should be exempt from penalties, even if expenditure is above the 5.6 per cent. figure.

I should have thought that the quicker we broke away from the system of judging local authorities on historic expenditure lines as a means of assessing Government help, the better. The sooner we move over to a system of relating that help to grant-related expenditure based on an assessment of needs the better. The block grant provisions in the Local Government Finance (No. 2) Bill allow us to work in that way.

To some extent, there will always be a clash, which GRE will avoid, between the overall view of the Government, who are concerned with the general level of expenditure of local authorities, and a particular view of a Department such as the Department of Education and Science, which, because of the nature and importance of education, is bound to be concerned about the standard of that service.

Will my right hon. Friend the Minister for Local Government and Environmental Services explain—I do not doubt the efforts of my right hon. Friend to do so—the relationship between target levels of expenditure and GRE for 1982–83? I understand that they are different. I am glad that the right hon. Member for Ardwick signifies his agreement with me on that. I think that my right hon. Friend said that before a penalty was exacted local authorities would have to fail on both levels—target and GRE. That is important.

Having made what I hope my right hon. Friend will feel are many remarks supportive of the proposals, I must continue by expressing my anxiety about the Government's intention to reduce the RSG from 59.1 per cent. to 56.1 per cent. this year. I believe that the reduction is likely to have a grave impact on rates, given the public nature of many local authority services although I fully understand the reasons behind the thinking of my right hon. Friend and his Cabinet colleagues in coming to that decision.

I realise that at the back of my right hon. Friend's thinking must be the thought that if local authorities are made responsible for a higher proportion of the money which they spend they will be more accountable and will be forced to be more careful with the money they spend. In other words, the effect will be a squeeze upon them. I thought that the right hon. Member for Ardwick was a little unkind to imply that my right hon. Friend had misled the House with the figures that he gave today. When the right hon. Gentleman gave his figures for the cash reduction in RSG for the coming year, I thought that that was the total of the reduction from 59.1 per cent. to 56.1 per cent. and the reduction in volume to which my right hon. Friend had referred. The right hon. Gentleman assisted the House with mathematics rather than revealed any deliberate attempt to evade responsibility for the figures which emerged.

The only way to consider the Government's proposed reduction from 59.1 per cent. to 56.1 per cent. is to see it, as I am sure is the intention, as a further restraining influence. I remind my right hon. Friend and the House that there are already two squeezes working on local authorities. The first, which I welcome, is the volume reduction in expenditure which the Government are attempting to achieve. The second is the tough approach to inflation assumptions in the coming rate support grant. I agree with what the Government have done. They are absolutely right to make an assumption on pay which is hard of achievement. Those who maintain that 4 per cent. is totally unrealistic and the teaching profession generally should remember that since the Government came to office in 1979 teachers' salaries have increased by 58 per cent. as a result of the Clegg award and the later assessment. A 4 per cent. limit is now legitimate and right. I remind those involved in teaching that, to a large extent, despite the inevitable reduction in the number of pupils, they have greater job security and job satisfaction than many people in the private sector.

As a result of the two forms of squeeze that I have mentioned, the only practical effect of reducing the RSG from 59.1 per cent. to 56.1 per cent. will be a transfer of expenditure from central Government to the rates. That in itself will mean a 5 per cent. increase to pay for the assumed new levels of expenditure. To that extent, therefore, the Government are being over-optimistic if they believe that the reduction from 59.1 per cent. to 56–1 per cent. in rate support grant will achieve a further reduction in local authority expenditure. Certainly it will not be possible in education. Indeed, I believe that authorities which attempt to achieve it will probably be those which have always done their best to run a tight service and are therefore least able to achieve it and most likely to suffer damage to services as a result.

I understand the reasons behind the proposals, but it is a pity that the rate support grant has been reduced in this way because in practice it will mean a transfer of expenditure on to rates which is contrary to the direction in which we should be going at a time when rates are attacked for falling unduly hard on industry, households and private businesses.

My final point relates to the future. It is no good criticising the rating system or the level of rate support grant unless one is prepared to say what, if anything, should be done about it. Again, my right hon. Friend is to be congratulated, as is my right hon. Friend the Minister for Local Government and Environmental Services, on the Government's great initiative in inviting public comment on alternatives to the rating system.

It is easy to criticise the rating system for not adequately representing people's ability to pay, the number of people in each household or the extent to which services are used. Nevertheless, it has some advantages, one of which is ease and cheapness of collection. Speaking purely for myself, I cannot pretend to be enamoured of the alternatives set out in the Green Paper. If we are serious in reacting with concern to the burden of rates on small businesses and individuals, we must try to reduce the proportion of expenditure collected through rates. Realistically. the only area in which that could be done is that of education expenditure.

Mr. Christopher Price

The right hon. and learned Gentleman has criticised the Green Paper. Does he agree that the appendix to it was prepared under his own stewardship and suggests taking teachers' salaries out of the rate support grant altogether?

Mr. Carlisle

I shall limit myself to saying that the date of the Green Paper is December last year. However, I was about to say that I happen to agree with the views stated in the appendix or at least that they deserve further thought.

I believe that there is a case for transferring a far greater proportion of education expenditure to central Government. This could be done in two ways. Teachers' pay could be taken out and put on to central Government. It should be remembered that for most county and metropolitan districts staffing costs represent 70 per cent. of the education budget and teaching staff alone 50 per cent. of the budget. Alternatively, a specific block rant for education could be provided related to grant-related expenditure for the area.

I realise that the second proposal would affect the present relationship between the Department of Education and Science and local education authorities, but that would not necessarily be undesirable. The very fact that local authority expenditure cannot at present be hypothecated means that the Department cannot ensure that money will be spent in the way that one might wish it to be spent. Indeed, there is confirmation of that.

In recent months and years there have been substantially different levels of provision in different geographical areas. A fair description of the Secretary of State for Education and Science is that he is the reverse harlot of the ages. He must take responsibility for what lie has done in education, although he has very little or no power. Therefore, something which changes the relationship between local education authorities and his Department would not necessarily be undesirable. It would not mean that we would have to do away with all local authority control in education. I certainly do not believe that taking greater financial control centrally would mean local education authorities giving up their right to choose the types of schools in their areas.

We have a system of grant-related expenditure. It would be possible to pay to that level or, better still, to pay to about 90 per cent. of it on a direct grant with any decision above that level having to be met by the local authority out of its ratepayers' pockets. One could then achieve a method of financing education which could live alongside the existing local education authorities with their interest and involvement in education, while at the same time reducing the level of expenditure on the rates, without encouraging financial irresponsibility by the authorities. I very much hope that before next year's rate support grant further thought will be given to this matter.

5.41 pm

Mr. Stephen Ross (Isle of Wight)

I congratulate the right hon. and learned Member for Runcorn (Mr. Carlisle) on his realistic attitude to what is likely to happen on rating reform. So much hot air has been talked and political publicity made out of the whole question of changing the rating system that it is only when one gets down to deciding how to improve matters that the subject becomes more complicated. I should prefer to do something more on the lines he suggested than, say, a poll tax, which I gather is the present front option.

This debate is occurring very late in the day. We on the Isle of Wight approved our budget today. I suppose that if the Government are defeated tonight, we could be in some trouble. I made my speech, got the proposal through this morning, and here I am this afternoon debating the grant order.

I am worried about the Secretary of State's announcement, although I know it appeared in the supplementary order, of his withholding about £116 million on the rate increase order, which presumably will affect councils' budgets in a form of clawback. Am I not right?

Mr. Heseltine

The hon. Gentleman will obviously want me to consider any specific question and I shall do that immediately and urgently. I was confirming announcements about which treasurers will be fully aware.

Mr. Ross

I am grateful for that comment, but I am not sure whether the treasurers were aware of it before 28 January. If they were, I shall leave it at that. I am relieved, because I did not want to face changing matters again.

I never opposed the present Administration's change in the formula, and if one considers the record that will be confirmed. Although I believe it was well intended, I never felt that the formula introduced early in 1974—which was a genuine attempt by the previous Conservative Administration to give more money to inner cities—ever worked to my local authority's advantage or many others. The right hon. Member for Manchester, Ardwick (Mr. Kaufman) commented on that aspect, but the same criticisms might be levelled at the previous Labour Administration.

The old formula took the wrong grant base, penalised the thrifty and encouraged overspending. Therefore, I thought that the Government were entitled to change it and to introduce the block grant. My authority's position was improved by the block grant. It is somewhat difficult to talk against it, because it has certainly been a great relief to us.

The transport supplementary grant which we received this year has been generous, and I suspect that other authorities have been similarly treated. We certainly are grateful for it. However, it is a complicated formula and it contains a whole range of new jargon: "claw-backs", "holdbacks" and "super holdbacks". We are supposed to lie back and enjoy the "super holdbacks", but I still do not understand them.

It was rightly stated that many authorities have experienced some pretty odd results. The formula is not yet right.

The right hon. and learned Member for Runcorn referred to the reduction of the rate support grant from 59.1 to 56 per cent. As he rightly said, that places a greater burden on local authorities. In my constituency, it means an automatic rate increase of 5.94p. That sum is required to make up the balance from our rates. I would not object to the shift of grants from central to local level if only the Government would give it more publicity, say what they have done and explain it to our ratepayers.

I want local authorities, if possible, to raise more of their own finance, so long as they are given greater jurisdiction on how that money is spent. My main complaint against the Government is the continual denigration of local authorities, nearly all of which is undeserved. The general public, of course, tend to believe what they hear and read and it makes the lives of officers and elected members much more difficult and often unenviable. If one wants people to give up time to stand and serve on local authorities, we are not now going about it in the right way.

Another in word is "privatisation". Many Conservative councillors and their supporters at public meetings say "Why not privatise this, that and the other?." There are cases when privatisation can be made to work, but there is nothing wrong with an efficiently managed public service. It is about time that that was also said in the House, because some of our public services are extremely well run and will not improve by being privatised.

The rate support grant settlement this year, as previously, contains an unrealistic allowance for inflation and wage increases. That fact should also be appreciated when local authorities make rate assessments. We have allowed 7.5 per cent. for inflation and the settlement allows 9 per cent., which is, of course, well below the current rate. Individual councillors have virtually no say on wage settlements, and certainly not on educational salaries. It is not good enough to tell them it is all in their hands. It may be in the hands of appointees from the ACC or AMA, but we know that we have no say in determining the level of the wage settlement. Nevertheless, we must pick up the bill at the end of the day. That is a very good reason why teachers' salaries ought to be decided and paid by central Government.

The Secretary of State wants local authorities to issue reports on almost every subject of expenditure under the sun. He must be a little more careful and fairer when quoting comparisons between authorities. There are often good reasons for such differences.

Taking a headage count, as appeared in my local newspaper recently, the numbers at county hall, it was claimed, had risen by about 50. That figure was levelled at me at almost every public meeting I subsequently attended. However, our employees actually decreased between March and December by 53. It depends on the day the count is taken, how many people may be in the office, away through illness or are part-time workers on that day. It is easy to use some of these statistics and create a misleading story.

The main complaint at our rate fixing this morning came from the leader of the Conservative group describing the amount of paper work. He complained bitterly about all the paper work involved with primary schools—he said that he was a governor of such a school—setting out the rights of parents and individuals about the appeal system and other aspects. We had to tell him that the Education Act 1981 introduced the requirement. It is burdensome for local authorities and it adds to their costs. However, it is right that parents and others should have more say in the way in which schools are run and the complaint system. They should be able to make representations that their children should go to a particular school, for example.

However, when the Government introduce these requirements, they should have the generosity to explain that a duty has been imposed on local authorities by central Government that they are expected to carry out and that the procedure will be more burdensome and will involve extra paper work to ensure that it is carried out properly. If the requirement is not observed, undoubtedly someone will complain to the ombudsman, which will present a further burden.

My general complaint against the Government is their attitude to housing. Hon. Members will do well to read the third leader in The Times today. We are having yet more rent increases for still poorer services. The bad odour for this falls on the unfortunate housing authorities and the party that is in office, whether Tory, Labour or Liberal. If the party that is in office is increasing the rents, tenants will consider that it is the fault of the council down the road. The Government's housing policies are a disgrace, and I do not know when we shall be able to put them right. It will take a long time to do so.

It is the reported intention of the Secretary of State to limit the expenditure of local authorities on unemployment initiatives to a halfpenny rate. That will be a monstrous imposition. Councillors with any gumption must surely be allowed the opportunity to have more flexibility than that. They are in a position to know better what needs to be done. Local councils will not produce schemes that are contrary to Government policy. They will not come up with schemes that will cost umpteen million pounds, but there are smaller things that they can do. A halfpenny rate on the Isle of Wight would produce only £65, 000 or £70, 000. That would be a flea bite. We want desperately to take more initiatives to help those out of work.

Representatives of the Confederation of Shipbuilding and Engineering Unions met me last night to discuss the 14.2 per cent. unemployment rate on the Isle of Wight. We are not an assisted area. The confederation expects the local authority to do more and the authority wants to do more, even if that is only putting on extra education classes at our technical college.

It is to be expected that any Government who meet over half the cost of local authority services will expect to have a major say in how much taxpayers' money is spent and on what. The argument between central Government and local authorities appears to centre on whether the Government should have control over the portion that is provided by ratepayers. I believe that local communities need local government and should want to keep it. I think that it is their wish to retain it. If they learn that they are about to lose it, they will be profoundly disturbed.

I am concerned at the progressive erosion of local government sovereignty in the name of Government macro-economic control. Whitehall bureaucrats worry me a darned sight more than county hall bureaucrats, and the Whitehall bureaucrats have been far less successful in managing their budgets than those at the county hall.

The Liberal Party has no wish to place unnecessary burdens on ratepayers, whether domestic, commercial or industrial. In my constituency, we shall endeavour to keep within the Secretary of State's limits. The authority in my constituency has laid it down clearly and flatly that it will stay within the GRE. I am delighted that the right hon. Gentleman has confirmed that there will not be any holdback on those who stay within the GREs. It is inevitable that there will be clawback. The authority on the Isle of Wight does not know the extent of the clawback and it has had to provide adequate resources and balances to meet it when it comes. The authority has come up with an 11.9 per cent. rate increase, which will put it into the lowest third of English and Welsh counties, but that means a standstill budget.

Mr. Heseltine

Perhaps the hon. Gentleman did not hear what I said about clawback. As he has talked about coming to decisions and making provision for clawback, it is important that he should read carefully what said in my opening statement. From what we see of the budgeting of local authorities, it is our view that clawback will be low.

Mr. Ross

I am delighted to hear that, but that is what we were told a year ago. I am a member of the Local Government Finance (No. 2) Bill Committee. When I asked the right hon. Gentleman's ministerial colleague about this issue, he said "Yes, there will be clawback." There is good reason to complain that this news is corning very late. I am sure that authorities other than ours on the Isle of Wight have already announced their budgets. My authority will have to live with its budget now. As I have said, it will mean a standstill budget and a restricted capital programme. I think that there is only one major project. This will not be good news for contractors who are desperately looking for business.

I become rather tired when I hear the constant pleas made from the Tory Benches to relieve the "unfair" burden that commerce and industry have to bear. I own two shops and am a ratepayer. I do not believe that Tory Members' claims are fully justified. I am sure that it is possible to select areas in which there have been huge rate increases. I am not saying that there has not been suffering in those areas. I agree that there are exceptions. However, do not believe that the burden has fallen unfairly on commerce and industry. Just look at current rents arid rate assessments before complaining. It is infuriating that those who shout the loudest are most often those who are demanding improved services.

If the Government want to do something for industry—I am sure that they do—surely they should introduce some measure of derating, which still applies in Scotland and now in the enterprise zones. It is the continuing denigration of local government and not so much the extraordinary vagaries of the rate support grant, which. I fear will be with us for much longer, that leads me to support the Opposition, and I shall do so when the Division is called. It is time that we heard more support for local government from the Government Benches.

5.57 pm

Mr. Nicholas Lyell (Hemel Hempstead)

I am glad to take part in this important debate on what is a complicated but highly significant subject for the whole of Hertfordshire. I am glad to say that in large measure my remarks will have the support of my right hon. arid hon. Friends who represent the other constituencies in the county.

I shall make some general comments about our overall rate support grant settlement and some detailed remarks about grant-related expenditure, our constantly falling grant, the potential effects—in the light of what my right hon. Friend the Secretary of State has said, I am happy to be able to say "potential"—of clawback, and about the adverse results that we suffer as a result of our high rateable values.

In opening such a speech one is conscious of using a good deal of jargon, and some might think gobbledegook, but so technical is the subject that it is essential that anyone who plays an active part in fighting the rate support grant battle for his county or district has to become learned in this sort of necromancy.

I recognise the background to the Government's actions and I fully support what they are trying to do. No one can fail to realise the importance of controlling the consistent overspending that has taken place over the past 10, 15, 20, even 25 years. It was much higher overspending when the previous Labour Government were in office but the Government must tackle the overspending that is still taking place.

Over the past year there has been overspending of about 10 per cent. on the Government's income and that is represented by excessive borrowing in the whole public sector. One cannot overlook the effect of that on inflation, on our competitiveness and, therefore, on the long-term interests of our children with whose future we are so deeply concerned. That will be especially so when I discuss the effect on education of the rate support grant settlement in Hertfordshire. I am entirely behind what the Government are seeking to do to control spending. In seeking control we cannot overlook the fact that local government expenditure, including education spending, is about 25 per cent. of all public spending.

We have some significant problems in Hertfordshire this year arising from the outcome of the rate support grant. I do not suggest that they are our problems alone, or that they cannot be overcome. We shall, however need good-will and help from all influential quarters—from the county council, which has to make difficult budget decisions following the reductions; from those in the education sector whose approach and whose wage and salary levels affect spending so much; and, above all, from the Government, who have to set up and to implement a fair and satisfactory system. I value the discussions that I have had with educationists throughout the county and I shall say more about them later.

I shall summarise Hertfordshire's problems. The county has practically the smallest grant-related expenditure increase of any of the shire counties—about 5.6 per cent. It is within that increase that one has to try to pack the desire for services and spending against a background of inflation in the wages and general sectors.

Hertfordshire has almost the largest loss of grant of any shire county—6.8 per cent. Surrey is the only county that fares worse. Hertfordshire has one of the highest average domestic rate payments. That is an important point. Domestic and business ratepayers in Hertfordshire pay a higher proportion of the total county spending bill than in almost any other county. They have to meet between 57 per cent. and 60 per cent. of the total bill. Although the overall levels of spending are being cut this year, the substantial loss of grant means that rate increases of at least 13.6 per cent. will have to be met.

We in Hertford shire recognise, as my right hon. Friend has pointed out to us in helpful discussions, that the county is a high spender on education. It is a high spender by choice. That choice was not made in the past few years. It has been established by a Conservative-controlled county council over the past 20 years. We believe in high spending on education, not for itself but for what it provides. I am grateful to note that Opposition Members are nodding. But we are not excessively high spenders overall. We have our priorities right. Our spending on education is 13 per cent. above average. I know, Mr. Speaker, that you will approve of that. But our overall spending is only 31/2 per cent. above average, and our spending on refuse collection is 18 per cent. below average. That represents a proper sense of priorities in the county that I am proud to represent.

Why is Hertfordshire a high spender on education? It is not because we do not control our budget, but because, 20 years ago, we instituted a system of smaller secondary schools than most counties, with only five form entry, and with many local primary schools.

Hertfordshire is an area of high technology, where parents rightly have high expectations for their children. It provides 21 per cent. more pupils taking 0-levels and A-levels than average. I know that my right hon. Friends will wish to encourage that. They will agree that the principle of reinforcing success should be fostered. It is necessary, when planning this year, and in future years for proper levels of support for education and for proper levels for the education component of the grant-related expenditure assessment, to make enough allowance for the high level of education spending to which I have referred.

This is not to say that there are not things that we in Hertfordshire can do to improve our own position. I shall deal with county council services generally and the education sector in particular before making a particular request to my right hon. Friends concerning what they should do for us. I am glad to be able to say that as a result of close consultation involving senior county councillors and county officials there is a move afoot for the county council, possibly with the assistance of outside consultants, to scrutinise once again—the decision has not yet been taken by the county council but I am glad to see this initiative—its overall level of spending within its grant-related expenditure assessment of £303 million.

Many people believe that the long-standing policy of five-form entry secondary schools should be reviewed and that there must be a willingness to consolidate in line with existing rolls to provide the best possible value for our children and to achieve the spread of subjects and the excellence of teaching that is required. This is the view of many headmasters who have spoken to me privately about the matter. There is a wish to return to a policy of recruiting outside the county to achieve the excellence that I have described. There is need to examine again the number of primary and secondary schools in the county required to achieve the best possible effects.

Mr. Tristan Garel-Jones (Watford)

Will my hon. and learned Friend agree that the teaching profession can assist Hertfordshire county council to retain the standards enjoyed by our children by working within its trade unions to try to achieve a reasonable wage settlement within the range of the Government's guidelines? If such a wage settlement were achieved, I think I am right in saying that it would probably not be necessary to make any cuts in the education budget.

Mr. Lyell

I am grateful to my hon. Friend. What he says is right. I am sure that this kind of support and cooperation will be obtained from the many teachers that we have met. My hon. Friend and I and, indeed, all my right hon. and hon. Friends within the county have met teachers, governors and parents who have expressed their desire to maintain the fabric of our high standard of education. We can be confident, I believe, that when the teachers give advice to their unions negotiating the Burnham settlement they will bear in mind the part that they can play.

It is, I believe, sufficiently well known for me to say that Hertfordshire has allowed 6 per cent. for teachers' pay in its budgeting for this year. The Government guideline is 4 per cent. According to what has appeared on the tape today, the offer within the Burnham Committee—I do not know whether this represents an opening offer—is that 3.4 per cent. is appropriate. The background, as my right hon. and learned Friend the Member for Runcorn (Mr. Carlisle) the former Secretary of State for Education and Science has stated, is a rise in education salaries of 58 per cent. since 1979 and the Clegg report. If salary increases were kept down to 4 per cent., the county would be saved about £2.6 million. The proposal in Hertfordshire this year is for extra cuts of £4.1 million. If the number of teachers were reduced in line with falling rolls, which is not an unreasonable proposition, although it has not happened in all past years, and salary increases were kept to 4 per cent. it would not be necessary to make one other extra cut. That is very significant.

I am sure, from the very responsible attitude of every teacher I have met—and I think I can fairly say that 1 have met scores in the course of my discussions in the last few months—they will be putting that point very firmly when they are looking at what they can do to help. I am not saying that to suggest that teachers are overpaid. I greatly value what they do in our county. But then most other people would not regard themselves as overpaid either, and we know that levels of pay in much of the private sector are often rising between 4 and 6 per cent. and frequently less, as my right hon. Friend said, and not necessarily against the background of the increase of 58 per cent. since 1979, which I am happy to say teachers have enjoyed.

My concluding remarks concern what we look for from Government now and in the future, because my right hon. Friends have not only to look at this year, they have to look keenly at next year. This is where we would be very grateful for their sympathetic consideration. We are tackling our problems this year and some of the things I have said bear on that, but we are also looking to next year when rolls will go on falling and our problems will not simply disappear, though I hope we can square the circle and overcome them.

It is very important that we do not find ourselves boxed in by too tight a grant-related expenditure assessment. It is very important that that assessment, particularly in education, takes account of our high standards, and high standards of achievement, which we wish to maintain, and which parents all over Hertfordshire wish to maintain. When I say that in the last 10 days I have been to a very sensible and orderly meeting on this subject in Tring—which is, after all, a town of, say, 7, 000 to 10, 000 people in my constituency with one major secondary school—and the school hall was absolutely full, with standing room only, that will demonstrate more eloquently than the hundreds of letters that I and my colleagues have received how much we in Hertfordshire cherish our education system. We do not, therefore, wish to find ourselves boxed in on what we are entitled to spend. We have no wish to go into the penalty area but we must have sufficient room for manoeuvre to maintain those standards.

Last year we were very sensitive on clawback. We lost the equivalent, I think, of 3.3p in the pound in rates by clawback, a sum running to several million pounds. If we had that today, we should be that much better off at the start of this year. I was much encouraged by what my right hon. Friend said, that there is much less to fear from clawback this year, and I shall be inviting those who have the budgetary responsibility in the county to take that into account in manoeuvring right up to the top level of spending to which they are entitled. I see my right hon. Friend blenching a little, but that is how it has to be, because he knows as well as I do that the effect of clawback is not to give us a penny piece more that we are entitled to spend before we hit the penalty area, but simply to ease the cartilages a little, and enable precise budgeting to be done with even greater precision. That is one of the important technical details I have learnt over the last few months.

What we would say about clawback, if there were to be any, is that it is wrong in principle that those who stay within the guidelines should pay the penalties for those who do not. I appreciate that it is a long-standing system and perhaps one which my right hon. Friends have inherited. They inherited many a bad thing which they have sought to put right and I ask them to turn their formidable minds to putting this right as well.

Hertfordshire has been losing grant consistently, year in, year out, Government in, Government out. In 1973 we received 1.8 per cent. of the total grant going; this year we received exactly half that figure, 0.9 per cent. This year, in particular, the fact that we have very high rateable values in Hertfordshire, the fact that the individual has a highly rated house because it is on the outskirts of London and so digs deeper into his pocket to pay his rate bills than do others in other parts of the country, militates against the amount of grant that we receive; since it is assumed that because our rateable values are high we who live in those houses are rich. That is not necessarily a correct assumption. 1 am not taking any brickbats from the Opposition, and I am glad to hear that they are quiet when I mention that. [Laughter.] That is the way to stir them up, Mr. Speaker.

I am not taking any brickbats from the Opposition because more money has gone into inner cities, and more money has gone to the deeply deprived in our society, and this they no doubt welcome. I hope they will give credit for that to this Government, whom they always describe as being unconcerned with such problems.

Nevertheless, it is hitting us hard in Hertfordshire. We are not as rich as our rateable values would make us appear and we need a fairer system of grants for the future.

We are thoroughly behind what the Government are trying to achieve. We recognise the complexity of what they are seeking to do. Nevertheless, we cherish our education above all else and we will not have it said to us that we may not have a high standard of education. We believe it is possible to square the circle in the different ways I have suggested and we look to my right hon. Friends to do everything they can to help us do that.

6.16 pm

Mr. John McWilliam (Blaydon)

I have listened with great interest to what the hon. and learned Member for Hemel Hempstead (Mr. Lyell) and also the right hon. and learned Member for Runcorn (Mr. Carlisle) said in relation to education expenditure within the GREAs. I would commend to their reading the report of the Select Committee on Education, Science and Arts on 14 to 16-year-olds, laid on the table and published today, because it advises the Secretary of State to introduce a system of curriculum-led staffing.

It is all very well for the right hon. and learned Member for Runcorn to talk about pupil-teacher ratios improving simply because of the accident of fewer children going into schools; and that is true only in certain age ranges, anyway. What he did not say was that that can create problems as well because, whilst there may well be an improving teacher-pupil ratio, if there are insufficient specialist teachers to provide the breadth of curriculum that a child needs, the improvement is illusory and the standard of education of the child accordingly poorer. Indeed, when we were taking evidence on this fact we heard from Dorset that it had attempted to introduce the recommendation that it should go to curriculum-led staffing but that it had been roughly 50 teachers short and had not been allowed to recruit them.

There is no doubt, therefore, that if the hon. and learned Member for Hemel Hemstead and his right hon. Friends want to see an improvement in education, they have to accept that it is marginally more expensive to introduce curriculum-led staffing than to look at misleading pupil-teacher ratios that do not tell us a great deal about either the schools or what the children are taught in them.

I would like also to complain bitterly about the overall level of education expenditure within this rate support grant order because in my county, Tyne and Wear, a very small metropolitan county with poor metropolitan district councils in it, the result of the penny-pinching in education last year and continuing pressure on it this year is that young people, in an area where youth unemployment is over 50 per cent. are unable to take appropriate courses of further education at certain colleges because those colleges happen to be in another local authority area. Unless it is a directly vocational course, or one leading on to a vocational course, those young people will not receive the outwith fee from the local authority.

Before the Government congratulate themselves too much, will they realise that within this set of dry documents there lies a tale of continuing human misery and tragedy in areas such as the North-East? Every halfpenny cut from local authority expenditure hits us in different ways in different parts of the country.

I listened with interest to the hon. and learned Member for Hemel Hempstead complaining that high rateable values in Hertfordshire were causing people problems with high rates. The high rateable value puts a far less onerous burden on ratepayers than the massive social and economic problems that we suffer in the North-East. The money that local authorities have to spend to try to counter at least some of those problems, because the House has given them a duty to counter them, results in high rates in Newcastle as well, not because of high rateable values but because the rate support grants particularly in the past year, going on to this year, are incapable at their present level of doing anything to alleviate the absolute disaster that the present Government have perpetrated on the North-East.

I advise the Secretary of State to think very carefully before he continues his claims that he has saved public money. Every time he cuts expenditure in such a way that it costs us a local government job in the North-East not a halfpenny of public expenditure is saved, because the person concerned goes straight on to the dole. All that we do is to change the accounts from which the money comes. There is no opportunity for the person to obtain another job in my area. The adult male unemployment rate in some villages in my constituency is over 45 per cent. When we pay off a school caretaker because we close a school in a village such as Blackhall Mill we not only close the village's only amenity but produce another unemployed person three miles from the Consett steelworks. He does not have a cat's chance of another job. Therefore, let us be aware of when we are saving money and when we are not. Let us not be self-satisfied over the illusion of saving, which the Secretary of State seems to be so keen on.

There is another problem under the order. In an area where youth unemployment is particularly high the local authority, being a good employer, has traditionally always taken on more than its fair share of craft apprentices. Because of the restrictions on public expenditure imposed by the present heartless Government, it can no longer do so. Therefore, we are not only causing youth unemployment today but are storing up trouble. Industry in those areas is going out of existence so fast that it is not true, and it certainly is not taking on many apprentices.

In a few years we shall have acute shortages in necessary skills. Where will the carpenters, the electricians, the bricklayers and the stonemasons come from? Many of our schools are Victorian and are built of stone. We need all those skills to keep the fabric of local government and the education system alive. We are not training those workers and industry is not training them. Where shall we obtain them? The order does not contain sufficient provision even to permit little luxuries such as taking on an additional couple of apprentices.

I should like to refer back to the suggestion that somehow everything will be all right when the Government tell us what will replace the rates. I must again disillusion the House. Like the hon. Member for Isle of Wight (Mr. Ross), I serve on Standing Committee D considering the Local Government Finance (No. 2) Bill. It was clear from the debate on part I that no viable alternative—indeed, no alternative, whether viable or not—would be presented to the House in the coming year and probably not next year.

Any hon. Member who has taken the time to read carefully the Green Paper on the rates will know that the parts knocking down suggested alternatives are more tightly written and better argued than those setting up the suggestions. The overall impact of the Green Paper is to discourage any hope that there will be a real change. I do not believe that there will be any change. My impression is that the Green Paper was published merely to fulfil a pledge given by the Prime Minister some years ago. I have the distinct impression that that is as far as it will go.

I become very annoyed when I hear people decry local government and when I hear people glibly throwing around words such as "overspending", because, in the context in which it is currently used with regard to local government, "overspending" has nothing to do with the idea that the word would reasonably create. I see nothing wrong with a local authority, duly elected on a programme which it fairly put before the people and which it fairly stated would cost more money, carrying out that programme. That is democracy. What is wrong is central Government's trying to suggest to local government that the civil servants in Marsham Street know best. They are all extremely able and intelligent people, who work very hard, but they do not know the problems in Winlaton and Blackhall Mill. My local authority certainly does. The civil servants do not know what the problems are in Blaydon and parts of Hertfordshire. Most of them have never been there. Come to think of it, I do not think that I have been to Hertfordshire.

It is ludicrous that local government is told "Be thrifty. We know best. We shall see you all right. We know the problems that you face" and at the same time there is imposed on duly elected local authorities the will of people who do not know where those authorities are, what they do or what the basic problems are. I cannot pay a high enough tribute to the many thousands of local councillors throughout the country, whatever their political persuasion, who spend hours and hours going through the tedious paperwork resulting directly from the Government's legislation. They spend hours and hours slogging their way through budget meetings trying to work out what they can do to save money on this and that and mitigate the worst effects of some of the orders.

I cannot praise those people enough, and I should like to hear the Secretary of State say the same for once. Local councillors receive next to no recompense. They work long hours, and their jobs and their families suffer as a result. I should like to hear the Secretary of State for once graciously tell them "You are doing a good job, lads. A few of you are a bit naughty, but you are all doing a grand job, and I hope that you will continue to do it." Without those willing people, we should not have an active local democracy. We ought to recognise that. Most of us are here all the time and we are paid for being here. We do not have to do anything but eat, sleep and think about politics, but they have their families to look after. So let us have some grace towards local authorities.

Derating and enterprise zones have been mentioned. Industrial derating as it exists in Scotland is an interesting concept. It is designed to try to stop Scottish industry paying more rates than it would, were it located in England. That is all. It does not effectively derate industry at all. The calculations are complex. It depends on fixed plant, investment and all sorts of things. I do not think it is a viable alternative.

It is nonsense to say that enterprise zones benefit. The biggest chunk of an enterprise zone in Britain is on Tyneside, in my constituency. All that has happened is that rental values have gone up by more than the occupiers would have had to pay in rates. The Secretary of State is saying to local authorities that they can forgo the rate income, and the landowner or whoever owns the factory is making a profit. It all seems strange.

This order is appalling. It brings no comfort to us in the North. It does nothing to alleviate the problems that people are facing as a direct result of the policies of the Government. It does nothing to help redress the balance of advantage that has always existed towards the South-East. It does nothing to encourage local authorities to be more entrepreneurial about attracting new industry. It does nothing to help ratepayers find money which, in the North, they are hard pressed to find.

None of us wants people to have to pay excessive rates. On the other hand, all of us want to see the kind of services that the House has legislated for properly financed and applied. I look forward to the day, which I think is coming very soon because of this order, when a local authority takes the Secretary of State to court because it cannot carry out its fiduciary duty.

6.33 pm

Sir Julian Ridsdale (Harwich)

I welcome the opportunity to speak in the debate. I have taken pan in many debates on rate support grants. When I first came into the House, rates were not nearly so much of a problem because local authority expenditure was not so high. More often than not the order went through on the nod with just one or two Members present. With inflation and increased spending, so much of which falls on the ratepayer, we all have constituency interests.

Both sides of the House must bear responsibility for what has happened. We have had the opportunity for many years to reform local government finance. One of the absurdities is that we have a rate support grant system so complex that even the Secretary of State, who is an able Minister, has to read very complicated jargon. I wondered whether he understood it himself when he was reading some of it.

Nevertheless, we have had an interesting debate so far. We had an important speech from my right hon. and learned Friend the Member for Runcorn (Mr. Carlisle), a former Secretary of State for Education and Science. I was pleased to hear him advocating the transfer of the huge burden of teachers' salaries from local government to the central Exchequer. The number of teachers in England and Wales is 443, 000. It is greater than the Armed Forces, but equivalent to the size of the Armed Forces after the end of the war. Just think of the reaction if the cost of the Armed Forces had been put on the rates and we had asked for a huge subsidy to help meet it. This is the system with teachers' salaries.

Conservative Members, who do not believe in subsidy, have to find an aggregate amount of rate support grant of £10, 175 million. I support the Chancellor, the Prime Minister and the Government in the aims of their financial policies, but I wonder whether a mistake has been made, as my right hon. and learned Friend the Member for Runcorn said, in making a deduction of 4 per cent. in the rate support grant. That means that the burden will be transferred from the taxpayer to the ratepayer or, as in my constituency, that there will be severe cuts in the social services. Among my 33, 000 constituents there are 10, 000) widows and many disabled people. They wish to live in their own homes. If we as a party care, as we do, we ought to be careful about the move we are making glibly to transfer this burden from the taxpayer to the ratepayer. It would be much fairer if this expenditure were borne by the taxpayer. Because of inflation, ratepayers are finding it more difficult to maintain their property and they are less able to bear the extra burden.

Essex faces cuts of £36 million to achieve the Government's target. When my right hon. Friend replies I hope he will give a detailed explanation of his reasoning and the arguments so that we can put them to our authorities. From the correspondence that I have had with my local authority, I am not satisfied with the position in which I find myself. This is why I am speaking in the debate.

To get down to the grant-related expenditure in Essex, while taking account of inflation, will require a £7 million cut. As I said, the additional cut is £36 million. That means either a further burden on the ratepayer or further cuts in social services. I should prefer the burden to be borne by the taxpayer, not the ratepayer. In the end it will not achieve the result we want—value for money. It will bring about aggravation and agitation. It will undermine longterm Government policy, which is the policy that we should be pursuing.

Essex has been treated unfairly because it has done what it can in the past to try to meet the targets and has been good in achieving the required expenditure cuts. We do not like to compare ourselves with other counties, but when we look across the water we see that Kent is getting very much better treatment because of an anachronism in the rateable value. My right hon. Friend shakes his head. I am glad, because it gives me an additional argument to put to my local authority which tells me that Kent is receiving £60 million more than Essex in the settlement. I wish to have arguments that will satisfy not only my constituents but my county authority.

In a speech in 1972, I said that the 1972–73 approved expenditure on which grant was calculated was £4, 735 million, of which the aggregate of rate support grant was £2, 528 million. That has risen fivefold in 1982–83. We now have a figure of £21 billion and a subsidy of £10, 175 million. The subsidies are Alice in Wonderland figures. We do not believe in subsidy, but we believe that we should try to get value for money and responsibility from those who must carry out——

Mr. Dan Jones (Burnley)

I notice that the hon. Gentleman heavily weighed his words on subsidy. The Secretary of State did that as much as the hon. Gentleman. Is it not a fact that the housing stock is becoming older? Costs are bound to rise as a consequence. Surely it must be acknowledged that houses that were built before the turn of the century will now need many repairs or must be demolished and replaced by new houses. Surely the hon. Gentleman will realise that and take it into consideration for Essex.

Sir Julian Ridsdale

I shall take those matters into consideration, but I wish to see realistic local government finance. I hope that my right hon. Friend will answer some of the points that I have made about Essex. I was delighted to hear my right hon. and learned Friend the Member for Runcorn approve the proposed transfer of teachers' salaries to the central Exchequer. If that is done, much of the steam will be taken out of the reform of local government finance. We need not worry about poll tax and other matters. To answer the intervention by the hon. Member for Burnley (Mr. Jones), if those proposals are carried out, the person who looks after his own house will have more money to spend on it because his rate bill will not be so high.

6.43 pm

Mr. John Cartwright (Woolwich, East)

I hope that the hon. Member for Harwich (Sir J. Ridsdale) will forgive me if I do not follow all his arguments about the problems in Essex. However, on his main point, there is no doubt a strong case for transferring the financial responsibility for certain social services from local government to central Government. I hope that we do not grab at that straw without thinking about it carefully, because it could leave us in a position where local authorities are running services for which they are not financially responsible. It would cause difficulties in the relationship between central and local government if the former were paying and the latter administering. I agree with the hon Member for Harwich that the rate base is not large enough or buoyant enough to meet the demands that are being made on it, which is why we must have a reform of local government finances.

Faced with the plethora of documents before us and the complexity of the formulae and calculations, my abiding feeling is one of sympathy for my former colleagues in local government and especially for local authority treasurers who must make some sense of the matter. The Government's most powerful supporters would not deny that there is an element of doubt and uncertainty about the impact of the grant system on the present position.

In the Green Paper entitled "Alternatives to Domestic Rates, " the Government said: To budget sensibly and tightly, local authorities need to be able to project their income and their cash flow with reasonable precision. All hon. Members will agree that local authorities have grave difficulties at the moment in forecasting their grant income. That is not a new problem. The rate support grant system has had, in recent years, a lottery element. There have been one or two winners and many losers. The winners and the losers seem to be decided by the attitudes of the Secretary of State of the day.

As long ago as 1976, the Layfield Committee, talking about the rate support grant system, said that the amount has been far from constant and its volatile and unpredictable character has been marked. That has also been a factor in the past few years. The material before us shows that the figures are later than usual and, more shrouded in mystery than usual and that the whole system is more complicated than any that we have had before. Our discussions today are dominated by the spectre of the Government's second attempt at a Local Government Finance Bill. I agree strongly with the point made by the Member for Manchester, Ardwick (Mr. Kaufman). I do not altogether agree with the comment in paragraph 9 of the main report that clause 4 of that Bill will clarify the position. "Clarify" is not a word that I would have used about clause 4 in any of its manifestations.

Three aspects of the procedure before us are the grant-related expenditure assessments, targets and holdback. The GREAs are the central mechanism of the grant system. They are the foundation on which the edifice rests and increasingly they are to be used for target-setting in local government spending, despite all Government assurances to the contrary during the passage of the Local Government, Planning and Land Act 1980. The GREAs are supposed to measure what each council must spend to provide a common standard of service. However, there is wide agreement that GREAs do not properly measure needs in different parts of Britain. I quote the Association of District Councils, which is still Conservative-controlled, which said that the grant-related expenditure system is "extremely suspect and unreliable". In January it said of GREAs: They are much more complex, unintelligible and uncertain in their results than the previous system, and produce inexplicable and widely varying assessments unrelated to local spending needs of individual districts and types of district. That is generally agreed in local government, as can be seen from some of the speeches that we have heard from hon. Members on both sides of the House.

Some of the anomalies have already been referred to in the debate. The police service is the classic example. We know that the GREA for the Metropolitan Police has increased by 24 per cent. between the supplementary report of 1981–82 and the 1982–83 report. That compares with a total increase for England of only 8.9 per cent. and an increase for the police authorities outside London of only 3.6 per cent. That huge rise for the Metropolitan Police means that there must effectively be a cut for all other police authorities. As is clear from the GRE figures, the lowest rise is in the area most affected by street violence, Merseyside, where the increase is only 0.8 per cent.

Either the GRE figures for 1981–82 were wrong or those for 1982–83 are wrong. They cannot both be right if there is such a massive change. As a further sophisticated amendment was announced today by the Secretary of State, that means another alteration. That shows that the GRE fixing at the Department of the Environment is not an exact science. Yet much depends upon those figures.

The second issue is housing. The Secretary of State reminded us of the Government's alteration this year, which proposes that if a local authority's notional housing revenue account is in surplus, its GREA is assumed to be zero. It is assumed that there will be no profit made from council rents transferred to the general rate fund. But that means that if there is to be a zero GRE figure for housing for a local authority it has no incentive to raise rents because it is automatically protected from a loss of block grant.

On the other hand, the urban areas, which often still receive housing subsidies and make contributions to the housing revenue account from their general rate fund will, if they fail to raise rents by the Government's recommended £2.50, have to increase their spending to make good the deficit out of the rate fund. That will lay them open to a loss of block grant and all the other penalties that will follow from the loss of block grant. The net result of this approach is to drive up rents in the areas with the greatest housing need and the worst housing problems, and where the service being given to tenants is often declining as the rents are rising. This is typical of the many anomalies of the GRE system.

Although targets are not set out in the report they are clearly central to the Government's strategy on the allocation of grant and in the control of local authority spending. Paragraph 8 of the main report puts it mildly. It says: The Secretary of State is therefore issuing guidance to each local authority about a target level of expenditure. That sounds innocent and reasonable. However, there is a sting in the tail of paragraph 9, which says: the Secretary of State considers that it would be desirable to operate a scheme whereby the grant entitlement…should be abated for any authority spending above both its target and grant-related expenditure. We know that under clause 4 of the Local Government Finance (No. 2) Bill the Government are seeking to introduce a powerful weapon to ensure that those targets are adhered to.

I object to the basic principle of setting targets for individual local authorities in this way. These targets are based on arbitrary decisions, not on any real, effective judgment of local needs and circumstances. They are based on the concept of a standard level of service which if applied would produce the dull uniformity that is inherent in the idea of a standard level of services. Variety, pioneering and experiment have always been the life blood of local government. We shall stamp out that feeling if we go too far down this road of overall standard levels of services, and if the target level of spending is applied for all local authorities.

I reject the principle of targets as the Government are applying them because I believe that it is an intrusion into the autonomy and freedom of local authorities. It is based on the centralist philosophy that the man in Whitehall or the man in Marsham Street knows best. I believe that the decisions about spending levels and the quality of local services ought to be taken by local people, and not by central Government or civil servants. I certainly believe that Government should not be involved in all the detailed spending of individual local authorities.

The Minister for Local Government and Environmental Services (Mr. Tom King)

I have listened to the speech of the hon. Member for Woolwich, East (Mr. Cartwright) with interest, and I think that the House would be interested to know whether he is the spokesman for the SDP on these matters. He often, says "I believe" and the House would be interested to know whether that includes "we believe". He has spoken of decentralisation, a view with which many hon. Members on both sides of the House will be sympathetic. However, does the hon. Gentleman believe that national Government should have an overall responsibility for the level of public expenditure as represented by local government expenditure? That was the policy followed by some of his senior colleagues when they were in Government in another party. Does the policy of decentralisation mean that that policy has now changed?

Mr. Cartwright

I am the spokesman for the SDP in this House and I carry my colleagues with me in what I say. A little later I shall be spelling out some of the thoughts that the SDP has on its approach to the reform of local government finance. On this issue we are in the happy position of being no worse off than either of the two old parties. Neither of them is clear about its attitude to local government finance. The Government have simply produced a Green Paper that reproduces most of the schemes looked at by Layfield. The Labour Party has riot yet announced its own views about reform of local government finance. Therefore, although the SDP policies may not be clear it is in no worse a position than the other two parties.

Yes, central Government has a proper duty to be concerned about the overall level of public expenditure. Therefore, it is right for the Government to have a view about the overall level of grant and there is a case, although it could be argued both ways, for central Government to have a view about the totality of local Government spending. Where I quarrel with the Government is when central Government become involved in the individual spending decisions of hundreds of individual local authorities. That is wrong and I have not yet seen the Government spell out a clear economic case that justifies that sort of detailed control.

Mr. King

The hon. Gentleman referred to grant. Central Government have to be concerned about the level of grant—that is what the order is about, and it is Government money that is going. I hope that the SDP will realise that the Government have to be concerned about. that. The question is whether they should be concerned about the overall level. The hon. Member thought that there were other arguments, although by and large it was probably right for central Government to be concerned about the overall level of local Government expenditure. If that is so, and if those levels are not being achieved, what does the SDP think is the right approach to helping that achievement?

Mr. Cartwright

Our approach is clear from the policy of decentralisation. If, as a result of the reform of local government finance, and probably from reforms of local election procedures, local authorities can be much more directly accountable to electors for spending, instead of large amounts of local authority spending not being perceptible to the ratepayers, because they come from central Government grants or from the domestic rate, we shall have a closer relationship between a local authority, its spending and its local electors. The best way of controlling local authority spending is by local people, not by central Government deciding what the right level of an individual authority's spending should be or what services are right and proper for individual local authorities.

Some of the anomalies in the grant system have already been referred to. For example, the Secretary of State said that no local authority would be asked for more than a 7 per cent. cut in real terms, but that is against the minimum volume budget and is the lower of the original or the revised 1981–82 Budget. That means that those who increase budgets from the original budget of 1981–82 to the revised budget will have to suffer a much larger cut. It also means that some of those who cut their budgets between the original and revised budgets may still find themselves penalised by anything up to that 7 per cent. figure.

We also know that that 7 per cent. is based on the Government's assumption of a 4 per cent. pay increase and a 9 per cent. increase in other prices. There is wide cynicism in all parts of the House as to whether those figures will be achieved. If they are not, and the figures are higher, there will be a further real cut beyond the 7 per cent. figure.

Thirdly, there will be no adjustment in these targets for unforseen circumstances, such as riots, snow damage, local authorities meeting higher costs as a result of an increase in interest rates, or higher rent or rate rebate commitments as a result of the high unemployment. If any unexpected extra expenditure occurs there will be no alteration in the targeting system and local authorities will have to make good by making cuts in other services.

I wish to make a point about the Government application of the targeting system of individual local authorities. Some local authorities, who have met their 1981–82 target figures, are nevertheless clobbered the second time around under the Government's proposals for 1982–83. This is because of the inadequacy of the original GRE figure, which turns authorities into overspenders and wipes out the credit for past performance. That is particularly true of inner London.

I take the examples of four inner London boroughs, of varying political persuasions, so that I am not accused of any political bias. I shall start with Islington, which, as you will understand Mr. Deputy Speaker, is close to my heart. On the 1981–82 figures, Islington was estimated to be 2.9 per cent. below its target figures. It is under its target spending figure, yet it is required to make the full 7 per cent. cut to achieve its target for 1982–83.

Hammersmith and Fulham, a Liberal-Conservative coalition council, is 2.6 per cent. under target, yet it is expected to make the full 7 per cent. cut. Southwark, a Labour-controlled authority that crept in, was 0.1 per cent. below target, but will have to make the full 7 per cent. cut to achieve its target for 1982–83. Wandsworth, often held up as a model of economy—the sort of authority that makes the cuts that the Government require—achieved a performance of 11.5 per cent. below target, yet it is expected to make further cuts of 3.2 per cent. to achieve its target for 1982–83. That shows the peculiarities and injustices of the target system.

I wish to point out two anomalies in the holdback system. I am grateful to the Association of Metropolitan Authorities, which produced a clear guide on the rate support grant settlement, for drawing attention to them. The first anomaly is the built-in propensity to overspend. As the Secretary of State said, the penalties apply only when spending is above the GRE figure or the target figure. Both add up to the same total. If councils spend to the higher of the two figures, to extract the last penny of grant, the total will be overspent. The AMA assesses the 1982–83 potential overspend as £790 million–58 per cent. will be in the shire counties and 23 per cent. in the shire districts. That is a major anomaly.

The second anomaly is what the AMA refers to as the switchback effect, which affects a number of authorities with a low rateable value per head of population—less than £133. Those authorities have discovered that if they continue to spend through the penalty area where they lose grant, they begin to attract grant again. In some cases, they can theoretically attract all the grant lost in the penalty area if they continue to spend. That is an incentive to spend rather than to cut expenditure. I am hesitant to draw attention to those anomalies as the Government will seek to make their arrangements even more complicated next year to tackle them. I should be grateful if the Minister would deal with those points when he replies.

The orders before us and the Local Government Finance (No. 2) Bill are part of a continuing process of ever-increasing central Government control—a process that rests on the theory that the man in Marsham Street knows best. It is a process of ever-increasing complexity. The Layfield Committee in 1976 said: the method of settling and distributing the grant is little understood outside very specialised circles. If that was true in 1976, it is even more true today with all the talk in the debate about iterative processes, skewed targets, minimum volume budgets and close ending. It is dangerous that something as important as the rate support grant is so little understood by those whom it directly affects.

The whole process confirms one of the major conclusions of the Layfield Committee that local authority dependence on central Government grant has been a main factor undermining the independence and autonomy of local government. Layfield said: We are satisfied that the amount of grant…powerfully reinforces the political pressures for Government intervention. His committee said: We too believe that in the end he who pays the piper calls the tune. The whole centralist approach of the Government, which follows the pattern of the Labour Government, threatens the autonomy of local government. It is a commitment to an ever-increasing, more complicated and incomprehensible jungle of regulations. It will produce inevitable injustice and unfairness between local authorities. That is why I and my colleagues believe that the reform of local government finance must reduce the dependence of local authorities on central Government grant. We must create a position in which grant is used simply as a means to equalise varying levels of resources available to local authorities. We must have a system of local government finance that makes local authorities more responsible for paying for their own services. That system must give control of spending to local electors, not central Government. The orders before us go wholly in the opposite direction, and my hon. Friends and I will oppose them in the Lobby.

7.6 pm

Mr. K. Harvey Proctor (Basildon)

I propose to vote against the rate support grant orders. My reasons for doing so are not the same as those advanced by the hon. Member for Woolwich, East (Mr. Cartwright), still less those advanced by the right hon. Member for Manchester, Ardwick (Mr. Kaufman) in his opening remarks. In contrast to the right hon. Member for Ardwick, I fully support the Government's aim of curbing local and central Government expenditure. A reduction in Exchequer support for local authority relevant expenditure from 59.1 per cent. to 56 per cent. is to be welcomed within the present system. Even so, aggregate Exchequer grant in England in 1982–83 will be a staggering £11, 400 million.

My opposition to the orders is based on the distribution of expenditure between shire counties and inner city and urban areas. Before I develop that theme, I wish to thank my right hon. Friend for his timely reply today to a letter that I wrote on 22 December last year—together with the hon. Member for Harlow (Mr. Newens) and some of my hon. Friends—about the position of the London new town counties and the block grant system. I received his reply only today, and it needs careful consideration. I am sure that hon. Members will wish to examine it closely and discuss it with their new town councils before we reply to the Minister. In his letter he said: As the paper points out, the actual spending of nearly all the district councils with new towns in their areas is above GRE in 1981–82. The question which we have to address is whether this is because the GRE's understate the spending needs of these authorities, or because they are providing higher than average levels of services—if this is the case, the principles of the grant system mean that their ratepayers should be expected to make a higher contribution than in other areas, and grant is assessed on that basis. My initial reaction to that statement is that local authorities with new towns have responsibilities placed upon them not of their own volition, but at the request of the Government and development corporations. I wish to discuss that important letter with my district council before I reply to the Minister.

Hitherto, it has been the Government's policy to redress the imbalance of the previous Labour Administration and return funds and resources to the shire counties. The rate support grant settlement orders mark the end of that process and initiate a trend of redistribution back to the urban areas. My right hon. Friend the Secretary of State for the Environment, in a purple passage in his speech, made it clear that much was being done for the urban and inner city areas. 1.understand that within the settlement there will be an estimated increase from 18.3 per cent. to 18.6 per cent. in block grant to the urban authorities within the inner city and partnership schemes, assuming that authorities spend to target.

I shall briefly describe the effects on Essex. I am sure that the Secretary of State will agree that Essex has consistently been one of the most prudent and efficient local authorities in the country and that its record of expenditure in any service amply demonstrates that. However, the Essex case is that the Secretary of State confirms that the county needs to spend £28 million more just to maintain its present level of service, grant-related expenditure figures. Nevertheless, the county is to receive £7 million less in grant to support that.

The Government are further saying that Essex should really be spending £36 million less to get down to the Government's target figures. Even to get down to the grant-related expenditure figure, while accomodating inflation, has required £7 million of cuts, as my hon. Friend the Member for Harwich (Sir J. Ridsdale) said. To contemplate a further £36 million reduction would require savage reductions in service in all areas, in defiance of statutory duties.

The result is that in 1982–83, Essex is losing £18.8 million of grants, compared with last year. Of that amount, £11.3 million is clue to the national percentage cut, to which I referred earlier, from 59.1 per cent. to 56 per cent. That is a national decision that I and the county council accept. However, the county council objects—.and I agree with it—that its share of grant-related expenditure has fallen from 2.244 per cent. last year to 2.208 per cent. this year. As a result, Essex has lost a further £7.5 million, which the Essex ratepayer has to meet.

I am delighted to see my hon. Friends the Members for Brentwood and Ongar (Mr. McCrindle) and Saffron Walden (Mr. Haselhurst) present for this debate. It shows the importance that we attach to this matter. So far I have probably carried my hon. Friends with me in what I have said, but I may not do so for much longer.

Mr. King

One of the arguments advanced by Essex concerns numbers and the problem whether GREs accurately reflect the up-to-date numbers. The argument is that there are more ratepayers in Essex than there were in earlier years. That should not be overlooked. My hon. Friend will know that we had meetings with the senior members and officials of Essex, and I put the question to them, as I do now to my hon. Friend: what has happened to the product of the 1p rate in Essex during the past three years?

Mr. Proctor

I need notice of that question. I have said that I welcome the statement of my right hon. Friend the Secretary of State about the census figures coming through into the grant-related expenditure estimates in future. That will help a rapidly growing county such as Essex, and also a rapidly growing new town such as Basildon. It will help in future, but it is little consolation for the next financial year.

I come back to my argument. I ask myself why this has happened. I can only assume that it is because of the Government's decision to redirect at least some resources back into urban areas. Why? In my view, it is because of Government panic reaction to the riots that plagued our inner city areas last year. The idea is to throw money at the problem and hope that it will go away. To add insult to injury, we are now throwing at the problem not only money, but Ministers.

That brings me to one of my principal reasons for voting against the order, and that is the unwise appointment, in my opinion, of a Minister to take special responsibility for matters concerned with race relations in the Department of the Environment's field of activity."—[Official Report, 11 February 1982; Vol. 17, c. 465.) I make no personal criticism of my hon. Friend the Member for Ealing, Acton (Sir G. Young), who has taken on these responsibilities. However, I think that he was most unwise and ill-advised to issue an invitation to the ethnic community leaders, as reported in the Daily Mail, saying: If you have any serious problems just write to me and I will be glad to see you. The important thing is that people should feel they have a Minister they can come and talk to. My door will be open. The extent to which a Minister's door is open should never depend on the colour of a person's skin.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

Order. Perhaps the hon. Gentleman could help the House by saying which part of the instrument he is talking about.

Mr. Proctor

I am dealing with expenditure in the inner city and urban areas, as a number of other right hon. and hon. Members have done. I was commenting on the Minister who, presumably, will oversee the expenditure of these funds. My hon. Friend's reported comments that much of the £270 million mentioned by my right hon. Friend the Secretary of State in his opening remarks that is allocated to the urban programme next year—£60 million more than this year—should go on projects which will help to provide work for young unemployed blacks as well as improving their physical environment through better housing, will be heard with frustration and anger by the unemployed in Basildon and the county of Essex.

In my opinion, that appointment is an exquisite example of positive discrimination. It is an insult to the vast majority of the ethnic community and the indigenuous population who did not riot, burn and loot last year to the tune of £28 million, and who believe that this settlement represents funds which have been diverted from shire counties, such as Essex, and new towns, such as Basildon, to inner city areas. It will be seen—rightly, in my view—as a political sop, a gimmick, that will be regarded as being nothing more than an affront to the dignity of the ethnic communities and one which will do untold damage to race relations in this country.

I shall use my vote tonight in protest against an unworthy act which will be bitterly resented and regretted by the British people. It will make more certain, not avert, racial strife in the months and years ahead.

7.18 pm

Mr. Frank Haynes (Ashfield)

I have listened carefully to what has been said in the debate, and it appears to me that there is a lot of complacency among Conservative Members apart from the hon. Member for Basildon (Mr. Proctor), some of whose comments I welcome.

I am sorry that the hon. Member for Harwich (Sir J. Ridsdale) has left the Chamber. He said that he did not agree with subsidies. It is odd to hear a statement of that kind when one realises that there is a fair amount of agriculture in Harwich. Agriculture obviously involves subsidies. If the hon. Member wants the subsidies to be stopped, he should say so.

Mr. Michael Brown (Brigg and Scunthorpe)

Is not the hon. Gentleman on a slightly dangerous point when he refers to subsidies? I presume that he is trying to make the point that farmers in Harwich are subsidised. However, I always thought that agricultural subsidies were meant to benefit consumers rather than farmers.

Mr. Haynes

I am a little surprised that the hon. Member should make a point like that. He represents a steel constituency. He went into the Lobby to stop subsidies to the steel industry in his constituency. He ought to be ashamed of himself for making a comment like that.

The Secretary of State for Defence asked the House for more subsidies to buy Trident, because it is much more expensive nowadays. He will be asking again. Conservative Members complain about subsidies, yet go into the Lobby to approve subsidies for that type of expenditure. Therefore, it is a bit hypocritical to hear such comments from Conservative Members.

The right hon. and learned Member for Runcorn (Mr. Carlisle)—who has left the Chamber—said that the rate support grant was complicated. That is not the point. The rate support grant should help local authorities to provide services for the people. Cuts in the rate support grant mean cuts in services. I have a whole list of them here, particularly for the county that I serve. What does a reduction mean? I have heard more about education this afternoon than anything else, as though it is only education that matters. I am a little surprised at that. The hon. Member for Ealing, North (Mr. Greenway) knows as well as I do that the Government have imposed massive cuts on local authorities that provide adult education. In some places, adult education has almost disappeared. People, particularly in my constituency, are trying to encourage those who have accepted redundancies from heavy industry to keep themselves active by means of adult education.

Mr. Harry Greenway (Ealing, North)

I should like the hon. Gentleman to make it clear that he does not deplore education debates and that they are most valuable. To that end the hon. Gentleman and I have sought to have education debates in the House. His remarks are a little out of phase with what he ought to be saying.

Mr. Haynes

I accept part of the hon. Gentleman's point. However, he must agree that many places have almost lost their adult education set-ups. My county was seriously affected. That was one reason why the adult education group was set up in the House. We go all over the place to find out the problems and to see if we can help.

The winter is not quite finished yet. I listened to the Prime Minister today talking about the way in which the economy has been affected by the snow and bad weather. The roads were tremendously affected by the bad weather. At times, we could ill afford even to grit them because of the Department of the Environment's cuts. The Minister should listen to what is being said, because I am severely criticising the Government and their monetary policy. The rate support grant is related to that. The Government's policy has been a dismal failure and the number of those who cannot find work speaks for itself.

The rate support grant is linked to the Government's policy on monetarism. Many local authorities will have to cut back even further than at present. My right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), who once had responsibility for the disabled, asked a question today about 1981 being the International Year of Disabled People. Cuts were made up and down the country, although we were supposed to have provided that little bit extra. The disabled should be considered not only in 1981 but in every year and we should provide the proper services.

The social services could not exist without a Government grant. They get a slice of the rate support grant in order to provide the necessary services. One day an elderly lady met me at my surgery. She was 68 and had a mother at home aged 96. Her mother was not in an old people's home or in a warden's complex but was living with her daughter in a bungalow. The county of Nottingham has recently had four years of Conservative rule and cuts were being made before the Conservative Party formed the Government. The lady received home help twice a week. The Conservatives were elected to county hall, and at the end of the first year she received help only once a week. After the second year, she did not receive any help. However, there has been a change in political flavour at county hall and those services have been restored. That elderly lady was not looking after her mother at the State's expense, although that would have been possible. She is eaten up with arthritis and finds it difficult to cope.

That is what cuts mean to the social services. The same applies to the disabled. Ministers come to the Dispatch Box and ask for voluntary services, but life does not work like that. Sometimes we must beg people to do something, people have plenty to do anyway. We try to encourage families to look after their old people and they usually do. However, we have tremendous responsibility for some people and we should look after them. They are being hit by the cuts in the rate support grant.

We are told that inflation is the No. 1 priority. If inflation rises, as it has under this Administration, and if the rate support grant decreases, how are we to pay for the services that must be provided? That can be done only by increasing rates. Nevertheless, the Secretary of State has the nerve to stand at the Dispatch Box and to say that local authorities should not increase their rates. That is what he is saying in so many words. If local authorities go a little beyond the guidelines that he has suggested, he clobbers them and threatens to apply cuts in some other way.

Mr. D. N. Campbell-Savours (Workington)

He taxes them.

Mr. Haynes

Taxes will not work for this Government. At present we have a means test in the form of rateable value. If we switch to tax, those with money will have to pay. That will not help the Conservative Party, because its members will stop contributing to party funds. The Government will get a belt in the mouth for that.

We must be sensible. I cannot see any alternative to the present system. It is obvious that there is no other alternative, or the Government would have adopted it by now. The Government made many promises before the election. I remember when the Minister of State and the Secretary of State were in Opposition. They talked differently then from the way they talk now. They said that when the Conservative Party returned to office there would be less Government control over local authorities. The exact opposite has happened. The Conservative Party is now in power, and the Government are shackling local authorities. They are also shackling the trade unions—or they think they are.

Whatever the Government attempt, it goes wrong. That is clear if one looks at the economy since 1979. People outside have recognised that. People recognise it in my constituency because I tell them why the rates are going up. It is because of this Administration. I shall continue to tell my constituents the truth. The Government are causing the rate increases, not the councillors back home, who are being made to increase them.

7.32 pm

Mr. Harry Greenway (Ealing, North)

I cannot go down the same road as the hon. Member for Ashfield (Mr. Haynes), who has given us a wide-ranging speech with masterly content. I know what an excellent fellow he is. However, if I went through education in general, adult education, the problems of the disabled, social services, inflation, taxation, reform of the unions—to name but a few subjects mentioned by the hon. Gentleman—I would be supporting him in his misdirected straying from the business before the House. Therefore, I return to the subject.

I welcome the grant-related expenditure assessment as a more flexible and selective system, on the whole, than the old method of calculating the rate support grant. I cannot see how anyone can argue for a blind block grant that is not open to scrutiny in detail as against the much more open system, which has a much greater moral force on the areas to which it relates—[Interruption.] I am no longer following the argument of the hon. Member for Ashfield. I had to explain that I could not go down the same road. The system that we have had for the past two years is much more open and much fairer, and is to be welcomed for that.

For the hon. Member for Woolwich, East (Mr. Cartwright) to say that the figures for this year are more shrouded in mystery than usual is nonsense. With the exception of last year the figures are more open this year than they have ever been. The hon. Gentleman went on to say that, if implemented, the target levels would produce a dull uniformity of provision and that it was a case of Whitehall knowing best. What the hon. Gentleman says does not stand up to examination. One has only to examine the GREA in detail to see that it takes account of local needs specifically and visibly. There is no question of uniformity. There are things that one can say against the GREA, but not that.

Mr. Campbell-Savours

The hon. Gentleman implies that the GRE is translucent and that he can see it in detail. Has he seen the formula on which it is based?

Mr. Greenway

Yes, Sir. It is open to everyone to see the formula. I am pleased that the Under-Secretary of State for the Environment, my hon. Friend the Member for Ealing, Acton (Sir G. Young) is in the Chamber bsssecause he will be concerned with what I shall say.

Mr. King

Did not my hon. Friend think that that was an extrordinary intervention by the hon. Member for Workington (Mr. Campbell-Savours)? As my hon. Friend is a conscientious Member of Parliament, he will have studied the GRE formula, which we published last year and which we made available to every hon. Member. We shall do the same this year. Each local authority has its own printout of its calculations and it is possible for hon. Members to see the way in which the formula is put together. It is obvious from the question by the hon. Member for Workington that this is the first time that he has heard of the formula being available for examination. We published it and every responsible Member should have read it.

Mr. Greenway

I am grateful to my hon. Friend because it puts the hon. Member for Workington (Mr. Campbell-Savours)——

Mr. Campbell-Savours

rose——

Mr. Greenway

I shall not give way to the hon. Gentleman because I made my point clearly. It was based on a detailed study last year and this year of the figures to which he referred. It was unworthy of him to make that intervention.

I welcome the system and this year's settlement because the needs of London are recognised. A real term improvement in cash grant has been made for 1982–83 compared to 1981–82. I am particularly in favour of this year's GREA because the special needs of boroughs such as Ealing can be met by the increased weighting given to the proportion of the population that is non-white or non-United Kingdom born. I know that my hon. Friend the Member for Ealing, Acton will be concerned about that.

Ealing's GREA for 1982–83 more closely represents the needs of an authority that in some ways are more akin to those of an inner London borough than an outer London borough. It is commendable that the system is so flexible as to admit recognition of that important point. I am thinking of the needs in some parts of Ealing for extra teachers of English as a second language. It all costs money. The rate support grant allows for that. We are grateful. There are other relevant social and housing needs, which are covered in the settlement. We are grateful for that.

I congratulate Ealing council on meeting expenditure targets worked out with the Government for 1981–82 because that will be to the benefit of the borough and its ratepayers. The target set for 1982–83 leaves it only a 1 per cent. reduction in real terms to find—enough in itself, but small compared to that of almost everyone else.

Hon. Members will not be surprised to hear that Ealing is a Conservative-controlled council. Its efficiency has been achieved by well-run local government and other factors such as the selling of council houses and by crediting the housing revenue account with interest on receipts from those sales, which are expected to reach 2, 000 by the end of March.

Mr. Geoffrey Robinson (Coventry, North-West)

What receipts? There will be none.

Mr. Greenway

That can be worked out. I shall find out for the hon. Gentleman. That will be shown in the council's accounts.

Additionally, capital receipts from the disposal of surplus land for which there is no use, bought by previous Labour Administrations, have also been credited to the housing revenue account. Much of that surplus land was released quickly, when Ealing council was taken over by a Conservative Administration, to the private sector so that starter homes for private ownership could be built. That meant £10 million for the housing revenue account, employment for local people and more money in the form of rateable value for the rest of the local community.

Last December, I had the pleasure of opening one of a number of houses. Land had been released just over a year previously, work started shortly after that, and within a year the houses were completed and people were living in them. That has been a great gain in local housing. All types of house have been built—low-priced, single-bedroom and larger units.

The borough's direct labour operations have also been streamlined and that has helped to balance the books. Direct labour is an area, if ever there was one, in which many authorities have been wasteful, overmanned and inefficient. Much remains to be done in areas other than Ealing, and even Ealing is not yet satisfied. Nevertheless, it has tightened up its direct labour operations substantially, to the great benefit of the community.

This has been a great success story, not one of pain and anguish as many would have us believe, and it is based on a fair system of GREAs, which penalises those authorities which have no care for tomorrow and are spendthrift with people's hard-earned rate payments. If Ealing had overspent by £1 million, the rates would have been increased by 4p in the pound. Ealing borough council has done its ratepayers a great favour by not doing that. Moreover, as a result of its efficiency, if there is any increase at all in the coming year's figures it will be small—contrasting sharply in the minds of people in Ealing and elsewhere with the 60 per cent. increase that took place in the penultimate year of the local Labour Party's last period of office.

The only threat to the smooth running of local authorities is the built-in pay increase of 4 per cent. allowed for in the GREAs. If the teachers, for example, settle for more than 4 per cent., the result will be either fewer teachers or an increase in rates. I am not arguing against the setting of pay targets. As has already been said, teachers' pay has increased by 58 per cent. since 1979. A 4 per cent. increase would be more than reasonable for them, and the same is true of other local government employees. They have benefited substantially in wage terms since 1979 and a wage target is reasonable for this and other years.

We should seriously consider hiving off this part of local authority expenditure and making teachers' salaries centrally funded. That would relieve local education authorities of an enormous financial responsibility that could seriously disrupt local finances if a large claim were awarded to teachers.

I wish to comment briefly on the way in which the GREA has affected advanced further education in Ealing. We have one of the best colleges in the country—the Ealing college of further and higher education—but I must draw my right hon. Friend's attention to a problem that has arisen. Unlike other areas of the rate support grant, the advanced further education pool does not penalise authorities which overspend. The Ealing college receives 80 per cent. of its funding from that pool. Because the pool is overdrawn nationally, Ealing has been asked to cut the college's funds by £500, 000 in the remaining two months of the current financial year. It is clear that authorities which refused to reduce their budgets have benefited at the expense of those such as Ealing which have done so. That is grossly unfair.

As an authority which pursues a definite policy of financial discipline for its colleges, Ealing must not be expected to pay for overspending or lack of budgetary discipline by other authorities. I say that straight and true to my right hon. Friend and ask him to consider it. Nor should Ealing be expected to pay because student numbers for 1982–83 are incorrectly calculated on out-of-date and partial statistics. For the grant system to work equitably, it must be adjusted to the actual number of students. At present, Ealing is understated by some £900, 000.

I have been strong in my comments as I wish to draw my right hon. Friend's attention to this. For those authorities exercising financial discipline and efficiency, the GREAs are certainly working, but in advanced further education, unfair irregularities must be ironed out urgently.

As a London Member, it would be wrong of me to participate in the debate without saying something about the profligacy of the GLC. [HoN. MEMBERS: "Come off it."' It is my duty and my business to defend the people of London, and particularly those of Ealing, North, who are being bled of hard-earned cash through the profligacy of the bunch of cowboys in control at county hall. My area is being subjected to a GLC rate increase of 90 per cent. The hon. Member for Ashfield, who has conveniently left the Chamber, talked about inflation and percentages. Let him take that on board.

Mr Newens

rose——

Mr. Greenway

No, I shall not give way for a moment. A supplementary rate demand of £50, 000 for one building, which has since been quashed, helped to break the back of the Hoover factory in Perivale in my constituency. As we know, that factory is now closing and employees being made redundant. Therefore, when I hear people saying that rates have no bearing on jobs, I bridle strongly.

Mr. Newens

The hon. Gentleman should make that point to the Government.

Mr. Greenway

A small shop next door to the Hoover building received a supplementary rate demand, happily also quashed, of £1, 200. That, too, cost somebody's job. There is further proof of what I say.

The GLC has had to levy that higher rate because among other things it has established at least 50 jobs costing about £25, 000 each, many of them totally unnecessary and non-statutory. In addition, each of those 50 people probably has a personal assistant, a secretary, a telephone, office space, all the paper that is pushed around, a typewriter and so on—[Interruption.] That is not cheap. It costs a lot of money, and people who cannot afford to do so, such as the disabled and many others who find it hard to make ends meet, are being milked to pay for it. Hon. Members cannot say that it is cheap to play the county hall game and throw other people's money around in that way.

I cite another example. The Londoner, the paper that is pushed through everybody's door four times a year, costs around £500, 000 per year. Moreover, it contains nothing but Socialist propaganda, much of it of a low and unattractive kind.

Mr. Newens

The hon. Gentleman wants it to be more attractive?

Mr. Greenway

It could not be attractive. Following the first edition, I received letters from business men and from ordinary people protesting strongly and vigorously against it. I sent them on to county hall but one does not often get answers to letters to Mr. Livingstone.

The GLC is establishing a job creation board costing £80 million. It has been said that every time there is an increase in a firm's rates of £5, 000, a job is lost. If one takes that as a rough figure and divides it into £80 million, the result is 16, 000. Therefore, the board needs to create 16, 000 new jobs to maintain the present position. What would happen if there were job creation at the rate established by the Labour Government of the late 1960s? Jobs were then costing £78, 000 a time, so today that £80 million would produce about 1, 000 jobs. Therefore, we are dealing with seriously diminishing returns.

Money is being granted to "weirdo" arts and many peculiar activities, such as the formation of a police committee costing £250, 000. The GLC has no remit to interest itself in the police. It has set aside over £1 million for the race relations committee. Heaven knows what that committee will do. The GLC has no remit on race relations. Therefore, one can understand why London people are so resentful about the way in which their rates are levied by the GLC.

If I had to end with an example of the sort of encouragement that business does not need to set up and produce real work, I should take the Brent local authority which is adjacent to Ealing. Houses stand side by side on the border of Brent and Ealing. A three-bedroomed house in Brent costs a ratepayer £600 a year while the house next door in Ealing, costs a ratepayer £300 a year. The difference speaks for itself. There are no better services in Brent and it is not such a nice place in which to live.

Finally, I hope that the Secretary of State will consider forcing the GLC directly to precept its rates so that it must go straight to the people on whom it makes these extravagant demands. It would get a direct crack back from them, which it deserves and needs.

7.53 pm

Mr. Stanley Newens (Harlow)

The hon. Member for Ealing, North (Mr. Greenway), at the end of his speech, indulged in a trivial and petty argument which was unworthy of him and the respect in which he is generally held in the House as a result of his contributions on education.

The hon. Gentleman earlier argued adequate financial support for his constituency, which he regards as having the problems of an inner city area, in contrast to his hon. Friend the Member for Basildon (Mr. Proctor), who attacked the distribution of the total rate support grant as giving additional funds to inner city areas. I am utterly opposed to the attempts to set inner city areas against shire counties as rivals. Both shire counties and inner city areas have needs and we should he setting out to meet both. I oppose the policy of ruthless cuts in public expenditure

A principal reason for the increase in rates this yew is the rate support settlement and the Government's cutbacks. It is all very well for the hon. Member for Ealing, North not to face that aspect and to talk about the GLC. His attacks should be directed at the settlement proposed by the Secretary of State.

The objective pursued by the Secretary of State since he accepted office has been the reduction of public expenditure. Although he was frustrated, with the help of some of his hon. Friends, on some of his methods, he has relentlessly continued towards the same goal. It is not difficult to win public approval for this policy as long as it is presented as an opportunity to pay lower taxes or rates it is presented as an opportunity to pay lower taxes or rates and provided that no one mentions the consequences. People will applaud a policy if they are unaware that they will suffer as a result.

Many members of the public are now waking up to the fact that cuts, far from being painless, are becoming increasingly irksome and fraught with real hardship. We now see a continuing and, in many ways, catastrophic decline in local government expenditure in real terms. More and more local authorities are forced to make cuts in education provision, facilities for the old and disabled, fire cover, road maintenance and in many other spheres. As my right hon. Friend the Member for Manchester Ardwick (Mr. Kaufman) stated, the more local authorities have been prepared to economise, the harder they have

It is not true that Labour authorities are extravagant and that Conservative authorities are prudent. The records of many Conservative authorities are just as open to criticism, as my right hon. Friend the Member for Ardwick demonstrated, on the criteria set by the Government.

The truth is that the system for determining and distributing the rate support grant is not an effective method of measuring and rewarding efficiency. That fact ought to be recognised.

It appeared earlier in this financial year that all areas characterised by rapidly expanding populations were being shabbily treated. Among them, the new towns were probably hardest hit. As the hon. Member for Basildon stated, that was recognised not merely by Labour Members, such as myself, but by Conservatives. I see the hon. Member for Basildon nodding in agreement.

As a result of certain changes, particularly the way housing income has been treated, the situation fortunately altered. I have not yet seen the letter to which the hon. Member for Basildon referred, but I shall be interested to study it. Consideration should be given to introducing into the formula for determining rate support grant a factor which would reflect the particular problems of new towns and other areas where there have been rapid population expansions.

It is frequently necessary, in order to provide for the needs of such populations, to incur heavy capital expenditure on the provision of amenities, at much higher interest rates than those prevailing in past years when other communities were able to provide those amenities for themselves.

When compared with old towns, the position of new towns is analogous to that of an owner-occupier who begins to buy his house today compared with an owner-occupier who began to buy perhaps 30 years ago. In those circumstances, it is wrong and, frankly, idiotic to regard new towns as expanding areas which are extravagant. Their expenditure is higher. The very character of their problems necessitates spending at a much higher level than is true for older communities.

Therefore, I hope that careful consideration will be given to the introduction of a factor in the formula for determining rate support grant which will reflect new towns' problems. However, in the present rate support grant settlement, among the worst hit of the authorities are certain county councils. I shall refer, as did the hon. Members for Harwich (Sir J. Ridsdale) and Basildon, to Essex, to where my constituency is situated.

Essex has not been under Labour control in recent years, and its leaders have always claimed to be strong supporters of the Conservative Party and advocates of prudent expenditure. It is not possible to attack them as being responsible for extravagance or to blame the Labour Party for indulging in extravagant expenditure.

I have frequently been opposed to some of the policies of Essex county council. In some areas it has been prepared to aim at the standards that I and many of my Labour colleagues on the authority desire. I am critical of its failure to provide nursery education, of its lack of generosity with student grants and of the introduction of charges for many services that are available for the less well off. It has been quite wrong in not collecting transport supplementary grant to pass on to support the Epping-Ongar stretch of the Central line in my constituency. I am not intent on attacking the county council. I am merely showing that I speak of its present problems as one who cannot be regarded as an unqualified supporter of all that it has set out to do.

Having made that clear, it is fair to say that the way in which Essex has been treated is little short of disgraceful. The grant-related expenditure figure is the Government's assessment of the amount that an authority needs to spend to maintain a common standard of service. They set Essex's GRE at £450.7 million. However, the Secretary of State has set the target for Essex—the realistic and fair figure that would result in low rate increases—at £415 million—in other words, £36 million below the GRE.

Essex will receive £7 million less in 1982–83 than it received in 1981–82. The Secretary of State is requiring Essex to make draconic cuts equivalent to about £36 million. It cannot possibly carry out those cuts, even on the basis of the figures that have been provided by the Government, without a drastic reduction in services which would hit all Essex people very hard.

There is no equity in the Government's approach. Kent, with a similar population and area, will receive £60 million more than Essex. I appreciate that rateable values in Essex are higher than those in Kent and that Kent should receive more than Essex, but the disparity between the two counties cannot be explained adequately on that ground.

Earlier in the debate the Minister for Local Government and Environmental Services asked about the product of a 1p rate in Essex. He was implying—although the hon. Member for Basildon could not give him a direct reply—that the product had increased considerably. According to the figures that I have, the product of a penny rate in 1981–82 was £2, 309, 000. By 1982–83, it had increased to £2, 333, 000. It is true that it has risen, but the increase is nothing like the proportion that would be necessary to justify the way in which Essex has been treated in this rate support grant settlement.

The vote this evening will determine the position for this year, but the matter should not be left there. I shall vote against the rate support grant settlement, and I hope that Conservative Members who represent Essex constituencies will decide likewise. However, I suspect that even if they do, the Government will still have a majority. None the less, I hope that they will find the means of returning to the specific problems with which the Government have landed Essex. Ultimately, county ratepayers will be hit hard—let it be stated clearly—by the Government, not by any local authority or the Labour Party or the Conservative Party in the country. It is their responsibility. When I receive complaints about the level of rates, I shall reply that it is the Government who are to blame. I shall use that reply for industrial, commercial and domestic ratepayers alike. As the House knows, domestic, commercial and industrial ratepayers' circumstances concern me greatly.

Everybody knows that industry in Harlow is having a thin time. Everyone knows also that in many instances those who are engaged in small businesses are finding it difficult to continue their operations under this Government. In the circumstances, it is too much for the Government to saddle them with additional rate payments and then to blame local authorities. Responsibility for any cuts which take place in school transport, education provision, social services and other facilities will rest equally in the same quarter.

I shall oppose many of the cuts that the Essex county council may determine to implement. Having said that, I recognise the impossible position in which the county council has been placed by the Government. That is the message that the Under-Secretary of State should take to the Secretary of State and the Prime Minister. It comes from Opposition Members and Conservative Members representing Essex.

It will be no good the Under-Secretary of State, or whoever is to reply, saying "Next year, Essex will do better." What is Essex supposed to do during the current year? What will it do if services have to be cut? Services cannot be left in limbo. We cannot say to employees "Go away and come back for your wages in a year's time when we have a more favourable rate support grant settlement."

The Government have imposed a serious financial crisis upon Essex county council. They should not be allowed to get away with it. I hope that, even at this late stage in the debate, the Government will come forward with other proposals that will enable the people of Essex—whether supporters of the Conservative, Labour or any other party—to enjoy the standards to which they are entitled without having draconic rate increases imposed on them as a result of the Government's policies.

8.9 pm

Mr. Michael Brown (Brigg and Scunthorpe)

The hon. Member for Harlow (Mr. Newens) will forgive me, as a Northern Member, for not following the intricacies of the rate support grant and grant-related expenditure in his county. However, I am competent to speak about the situation in Humberside. The right hon. Member for Manchester, Ardwick (Mr. Kaufman) made a witty, interesting, knowledgeable and lively speech. We always enjoy the right hon. Gentleman's style. He made many jokes about GREs and the way in which the rate support grant settlement has affected counties and towns in Britain.

The right hon. Gentleman ranged far and wide around the country but he did not dare mention the county of Humberside. Only five or six days after the county council, Labour controlled since May last year, announced its rate increase, the right hon. Gentleman knows that it is no joke for the people of Humberside. The rate increase in Humberside is the second highest so far announced in the country.

I thought that the right hon. Gentleman might suggest, if he was being true to his argument, that the Government had withheld a certain amount of grant last year, as, indeed, happened. He knew, however, that he would be unable to get away with that argument. Nor can the Labour Party in the county use it. If it had been the case, the hon Members for Grimsby (Mr. Mitchell), Kingston upon Hull, Central (Mr. McNamara), Kingston upon Hull, East (Mr. Prescott), Kingston upon Hull, West (Mr. Johnson) and Goole (Dr. Marshall)—the five Labour Members of Parliament representing the county of Humberside—would have been present to criticise the Government. They are not present. They know, as the Labour Party in the county knows, that if they try to use the excuse that the Government have held back funds, the argument will not wash. They know jolly well that the reason for the 61 per cent. rate increase over last year when the Conservative administration left office is due to their own deliberate overspending and profligacy.

Before the local government elections, the Conservative administration, sadly to be defeated, had announced the last of four budgets that it had implemented in its four-year term of office between 1977 and 1981. The county council was at that time extremely well run.. Its leader in the early years was my hon. Friend the Member for Bridlington (Mr. Townend). As a result of pegging expenditure, it was able to reduce the rate last May. However, the electorate, for better or for worse—it knows now definitely for the worse—returned a Labour county council. That happened through apathy. The first action of the Labour county council was to lump on a supplementary rate last October. Not content with that. the county council last Wednesday rendered many constituents and myself speechless. That is not normally a condition in which I find myself, as you, Mr. Deputy Speaker, will know. I have now recovered my speech. I also had the opportunity last weekend to assess the real cost of the rate increase.

I have read in the Scunthorpe Evening Telegraph a statement by the managing director of BSC Scunthorpe on the cost of the rate increase to BSC Scunthorpe just at a time when the steelworks is in profit following many years of problems. I can only say "God help them". The rate of the Scunthorpe borough council—another Labour-controlled authority with which I have to live—has yet to be announced. I predict that it is bound to show an increase over last year.

For the Humberside county council rates alone, BSC' Scunthorpe has to find £3 million. In steel debates in the House, Opposition Members are always anxious, rightly in my view, to point to the additional costs and burdens imposed on the British Steel Corporation in Scunthorpe and elsewhere. A burden of £3 million at this sensitive time can only cost jobs. An irate road haulage operator came to see me at my surgery last Saturday morning. The rate increase means that he will have to find an extra £15, 000. I managed to extract the figure from him only after I had foolishly asked the cost to his company of the rate increase. His first response, when I asked him the cost to his company, was "Two jobs". Throughout the county of Humberside, firms ranging from the British Steel Corporation to the small businesses will be making people redundant because they cannot bear this extravagant burden.

Mr. Dennis Skinner (Bolsover)

Is the hon. Gentleman aware that the Government, during nearly three years in office, have caused more than 20, 000 bankruptcies, some of them perhaps in the hon. Gentleman's constituency? Is he aware therefore that one of the main reasons for high rates for commercial, industrial and domestic hereditaments is that there are fewer industrial and commercial concerns that can forward money to the Exchequer? The jam is spread much thinner.

Mr. Brown

I cannot accept the hon. Gentleman's argument in relation to Humberside, the county about which I am competent to speak. The hon. Gentleman defeats his own argument. If the British Steel Corporation has to find £3 million to meet the rate increase, that sum will determine whether or not it is viable in the future. I predict that it is the rates that will be the straw that breaks the camel's back: it will break industrial ratepayers. As inflation falls, industrial and commercial ratepayers will find that rates are the largest single burden of costs. This will create the self-defeating cycle that the hon. Gentleman predicts.

There is no excuse, other than profligacy, for the increase in rates in the county of Humberside. When the Labour county council was returned to power it issued marvellous press releases stating that it would create 600 jobs, that it was taking on people and that it would put up the rates. This happened in one of the most depressed areas of the country. Grimsby and Hull both face the problems that afflict the fishing industry and Scunthorpe faces the difficulties associated with the steel industry. At least the hon. Member for Bolsover (Mr. Skinner) takes the problem seriously. The hon. Member for Grimsby and hon. Members representing the Kingston upon Hull constituencies to which I have already referred have been conspicuous by their absence. They know that the rate increase cannot be blamed on the Government.

I cannot speak for Essex. I accept the logic of the arguments of the hon. Member for Harlow. The Humberside county council, Labour controlled, has simply created jobs out of nothing. They are bogus jobs. I suspect that they have been created at the cost of destroying far more jobs, running into several thousand in the industrial and commercial sectors, as a result of the rate increase. There is no question but that Humberside has to trade off services against rates or rates against what the county alleges it loses from the Government. The county council has announced that it will not pay rate increases. It wants to defend its own employees before anything else. The county council has no regard for the industrial and commercial prosperity of the region that pays the salaries of its work force. The county council is deceiving and deluding its own work force. The county council sees itself as nothing more than a self-perpetuating, job-creating agency for 3, 000 or 4, 000 people.

Last week, when announcing the rate increase, the county council stated that it was a question of either putting up the rates by 61 per cent. or losing 3, 000 jobs in county hall. I should like to know what those 3, 000 people are doing in county hall. I want to know what contribution they are making. I am quite sure that, as individual council employees, they all do very good work; but we must be absolutely honest about this and not hide behind the skirts of the old arguments that we must not attack council employees. I do not attack them as individuals. I am sure that all of them, in their own way, do a very good job for their employers, the Labour-controlled Humberside county council. My point is whether their jobs are necessary in their present form.

I should like to know what additional benefit ratepayers in Humberside are receiving today that they did not have 12 months ago now that 600 more people are working in county hall. All that the commercial ratepayer or the householder living in my village receives is the rates bill and he has to sign the cheque or increase his overdraft to meet it.

Mr. Dan Jones

I am sorry to intervene at this point, Mr. Deputy Speaker, because I want to speak myself in a moment or two, but surely the hon. Member should realise that the responsibility is not that of the employees at all; it belongs to those who manage the town hall. That is where the responsibility must lie.

Mr. Brown

I completely accept the responsibility, or rather the irresponsibility, of the Humberside county council in taking on people when there is no money to pay for them except by extracting vast sums from industry which is already hard pressed in the harsh, cold reality of the world outside.

The only point at which I part company with my right hon. Friend the Secretary of State is that I submit that Humberside county council, acting like latter-day highwaymen, like pirates, literally confiscating money from people who have no option but to pay, has abrogated its responsibility and acted in an irresponsible way. Earlier this afternoon my right hon. Friend said that he had resisted the temptation to impose targets on authorities. He said he wanted to preserve their freedom. I submit that the freedom of the so-called democratically elected Humberside county council has been abrogated, together with its responsibility.

I urge my right hon. Friend seriously to reconsider the decision not to set targets in the case of my own county council, for that is the only way in which we may be able to preserve the steel industry, under threat once again after doing its best in the last two years to become competitive. At the end of last year it showed a profit, and now all its forecasts are to be tossed aside because of the irresponsibility of the spendrift and profligate Labour-controlled local authority.

8.23 pm

Mr. Arthur Palmer (Bristol, North-East)

The hon. Member for Brigg and Scunthorpe (Mr. Brown) will forgive me. He could not follow my hon. Friend the Member for Harlow (Mr. Newens), coming from further north, and equally it would be difficult for me to follow him, because I want to speak about the affairs of Avon county council. I have been longing to do this for quite a time. Before Christmas we had a kind of "dawn raid" by hon. Gentlemen who are not in their places, the Conservative Members for Bristol, West (Mr. Waldegrave) and Bristol, North-West (Mr. Colvin). I also regret what I hope is the temporary absence of the Minister for Local Government and Environmental Services, the right hon. Member for Bridgwater (Mr. King) because Bridgwater, of course, is very close to Bristol and to Avon. This "dawn raid" was a very wild attack on the Avon county council, now Labour-controlled, for being a spendthrift authority, the argument running along the lines to which we are all too accustomed at the moment.

As a Bristol Member of Parliament—Bristol was an excellent county and city in its own right at one time—I was never enthusiastic about the creation of Avon county council. This was done, of course, by a Conservative Government. The hon. Member for Brigg and Scunthorpe forgets that if there is overlapping, if there is too much bureaucracy in county council work in relation to district council work, it is the fault of that Conservative Government who established these authorities. It very often means—and I am sure that the hon. Member for Southend, East (Mr. Taylor) at least will agree with me—that no jobs are lost at district level and extra jobs are always created at county level. That is where the responsibility lies, with the Conservative Party, which made this possible.

We have this in Avon. In Bristol we had one of the finest all-purpose local authorities in the country, a city and a county in its own right, and we had put round us this ring fence of Avon. The Conservative Government of the time abolished Rutland but created Avon. It was rumoured that this was intended to put a Tory cordon around the traditionally Labour-controlled city of Bristol. At the last county council election, however, the ring fence was broken through; the Labour Party secured for the first time in the short history of Avon a majority on the county council.

Now apparently, under Labour, Avon has committed a crime. It has committed the crime of carrying out the programme on which the Labour Party was elected. It is doing this, as far as I can judge—and I have a letter, from the county treasurer, from which I shall quote in a moment—with as much economy as is reasonably possible. What is the charge brought against Avon by the present Administration, and by the Minister? It is that Avon is carrying out the programme on which the majority of its members were recently elected and is not carrying out the programme of the Conservative Government, elected in 1979.

It is all part of democracy, and I do not complain too much about it, but the Avon county council has been the subject of a sustained campaign of vilification by the local press and local industry because of the rate increases. I shall come on in a moment to the practical reasons for those increases. As I say, the burden of the complaint has been that the voters of Avon have no right to have the programme for which they voted carried out, and that the county council must be content simply to carry out the programme on which the Government were elected three years ago.

What are the results of the Government's policies? Figures released this morning show that this country's industrial output is now less than it was 15 or so years ago. Indeed, it is less than it was during the three-day working week. I do not know whether that is a triumph of Conservative economics and financial policies, but it seems to me that those in Bristol who say that they speak for local industry would help their own businesses and employees if they protested against the Government's monetarist and credit policies, which are ruining this country's industry. However, the Bristol chamber of commerce and the local representatives of the Confederation of British Industry complain about the burden of county rates instead.

I met the CBI local spokesmen last summer on what was a very pleasant evening, both outside and inside. They were most courteous. We discussed many subjects, including the difficulties that were placed in their way when seeking loans for productive investment. But they said not a word to me about the local rates creating unemployment. I think that that was because it had not then become the fashion to do so.

When the representatives of local industry recently talked to the leaders of the Avon county council they were asked to tell the council what cuts should be made. Those representatives, by the way, never said a word when the council was Conservative-controlled. Do they now want cuts to be made in education, on which they depend so much for the training of their employees? Do they want the cuts to be made in expenditure on the roads? As those roads were maintained, or not maintained, by the previous Conservative majority, they were nothing less than a disgrace. Does local industry accept that? I was interested in what the hon. Member for Brigg and Scunthorpe told us about his road haulier who talked about the high level of his rates. Did he also complain about the condition of the roads? These things are not in separate compartments.

We often hear employer complaints about excessive local government spending, but I have recently received letters and circulars from the building construction industry and the architects of Bristol and district. The architects are particularly noisy on the subject, saying that there is not enough local government expenditure to sustain the balanced level of building and construction locally. They are right but they cannot have it both ways.

As an answer to what Conservative Members for the city of Bristol said some time ago I want to read front a letter I received from the county treasurer of Avon, at my request. He writes in the rather flat style which is typical of local government officials—very clear, of course, but with no poetry about it: I would like to draw your attention to the following points:—

1. A.The major factor in the need for the Supplementary Precept was the loss of £12.4 million Rate Support Grant.
2. B.Even without the additional expenditure proposals approved by the newly elected Council, the County would have suffered a Grant loss of £10.2 million."

I am glad to see that the Minister for Local Government and Environmental Services has returned to the Chamber, because I am talking about a county next to his own, which he knows very well.

The letter continues: C. Even with the additional expenditure proposals, the County plans to spend less in real terms than in the 1978/79 base year which the Secretary of State has arbitrarily chosen as his target. The county treasurer adds, bitterly, I think: This contrasts with the growth in Central Government expenditure of over 7% in the same period. Why should the Government demand that local authorities cease to put right the neglect of years before? Why should they object to local authorities carrying out the programme on which they were elected, when the Government are apparently incapable of carrying out their own programme in the matter of Government expenditure?

I have also received some figures, with which Ministers will be familiar, for the average domestic rate payment per household by county in England, expressed in pounds per week. It is interesting to note that Avon—so much attacked, criticised and vilified for its so-called spendthrift policies—is well down the list. Indeed, there are 14 Conservative local authorities that are spending more per household than Avon. I would draw that to the attention of the Minister.

When the county treasurer wrote to me he enclosed an article that appeared in Local Government News. I wish to quote one paragraph because it raises an interesting constitutional point. I am sorry it is a little long but I did not write it. It was written by a learned professor, Professor John Stewart. He says: Once central government has committed itself to targets for individual local authorities, it has crossed a constitutional divide. It has moved from a concern at the national level into an area which is not its responsibility but is the responsibility of individual local authorities. The danger is that with central government committed to targets, alleged failure to achieve those targets is seen by central government as defiance. Yet a local authority failing to achieve a target is a local authority carrying out its proper responsibility to determine its own level of expenditure or its own judgment of local needs. It is merely that its judgment, in its proper area of concern, differs from central government's judgment in an area that is not its area of concern. There is a fascinating international thing about this Conservative Government not of the Centre but of the Right; some might say of the extreme Right. Across the Channel in France, where there is a Socialist Administration under President Mitterrand the traditional central control of local government by Paris is being steadily 'relaxed. From the point of view of French democracy that is excellent. On this side of the Channel, under a Government of a very different political outlook, centralised control of local government is being strengthened all the time.

I should like to ask the right hon. Gentleman one question that should provide an interesting answer. If it is right for a Conservative Government to compel local authorities to cut expenditure to fit in with the national programme of priorities, will it be right for a Labour Government to compel local authorities to increase expenditure where they are neglecting social needs? What is sauce for the goose should constitutionally be sauce for the gander.

8.39 pm

Mr. Neil Thorne (Ilford, South)

I listened with interest to the hon. Member for Bristol, North-East (Mr. Palmer). I shall not comment on his speech immediately, because I hope to develop later one or two points that he mentioned.

My hon. Friend the Member for Brigg and Scunthorpe (Mr. Brown) said that he was not competent to follow the speech of the hon. Member for Harlow (Mr. Newens). I am sorry that the hon. Member for Harlow is not in his place, because I should have liked to make one comment to him. I understand his concern for Essex. It is proper for him to advance the cause of that authority. However, I do not share his concern to the same degree, because my constituency, now forming part of the London borough of Redbridge was liberated from that county under the London Government Act 1963.

I am sad to say that we have only just received permission for our town centre scheme after 30 years of effort. Rightly or wrongly, the feeling in the local council was that Essex county council was doing all that it could to stop the advancement of our scheme before 1963 because it felt that if we obtained permission for it and expanded, as we expected to do—as had Croydon, East Ham, West Ham and other authorities nearby—we could have applied for county borough status and had we received it, our rateable value would have been removed from the Essex county council. I do not therefore have too much sympathy for Essex county council today, because we had so much trouble getting our scheme under way.

I support what the Government are trying to do in getting the public sector borrowing requirement under control. One of my major regrets is that the Government did not get the public sector borrowing requirement under control quickly enough. Many of my constituents who have small businesses and who are paying exorbitantly high interest rates on their borrowings felt that local government was having too long a honeymoon with the Government after they came to office. I know that it was not easy to achieve control over local government expenditure, which now accounts for much of our national expenditure. I served on the Committee on what became the Local Government, Planning and Land Act 1980. It took some time for the Government to get the necessary power to do what they were elected to do. Because of that, it was over two years before the Government were fully able to implement what the electorate undoubtedly elected them to do in the first place.

I was interested to hear the hon. Member for Isle of Wight (Mr. Ross) express his interest in a form of industrial derating. Many years ago, our predecessors realised how important industry and commerce were to the well-being of the country in general and in providing employment. If my memory serves me correctly, they provided a derating system that made those industrial ratepayers pay only a quarter of their total assessment. I do not advocate a return to that system, but it demonstrates the feeling in the Chamber during those years that it is important to provide the right environment for employment.

I have heard it said that, however high local rates are raised, one is talking only about 1/2 per cent. to 3/4 per cent. on a firm's bill. That may appear to be a small figure, but, when one considers it overall and realises that the majority of business enterprises now produce only about 3 per cent. profit, 1/2 per cent. to 3/4 per cent. is a substantial proportion. Undoubtedly it can mean the difference between survival and bankruptcy for firms oprating on those margins.

Mr. Palmer

In making that balance, does the hon. Gentleman allow for the services that industry receives from local government in the form of roads, sewerage, waste collection and education? Those are gains to industry for which it should pay.

Mr. Thorne

The hon. Gentleman has got it wrong. Sewerage charges are paid through the water rates, not through general taxation. Industry must pay separately for its rubbish to be removed and it must pay substantially for its transport. The road fund tax that it pays goes into the Government's coffers and is more than enough to pay for road maintenance. The examples that the hon. Gentleman advances are not correct, because industry and commerce do not receive the benefits that he mentioned out of that expenditure.

For this reason, I should like taxation of commercial and industrial property to be transferred to central Government. The rate should be levied so that it is paid into central Government coffers and the services provided and adminstered by local government should be funded by central Government. For example, my right hon. and learned Friend the Member for Runcorn (Mr. Carlisle) suggested that education charges should be covered by the Government. That would be ideal. In addition, the police and fire services should follow suit and be dealt with in this way.

Rates for industry should be on a common basis. It is wrong that a firm, employing a large part of the labour force of an area should pay perhaps twice the rate poundage of another firm on the other side of the road. It is in the interests of the Government to preserve and foster employment as they are left to pick up the bill for greater unemployment through unemployment and social security payments. It is wrong that there should be such a variation in' the level of charges to industry.

However, local government should have a fair measure of decision-making of its own. I do not believe that everything should be taken over by central Government, but, like the hon. Member for Bristol, North-East, I am concerned to ensure that this does not happen. I fully support what the Government are trying to do, but the method that has been adopted is not the best. If local people elect a particular type of local government, then the cost of their decision should fall upon the electors' heads, and they, particularly in the residential sector, have a right to determine what they will pay as local taxes.

The Government will soon have to examine rating revaluation. No one has suggested that the industrial and commercial sectors should not have some form of local property taxation. I have been pressing Ministers for some time to bring us up to date because the longer we leave revaluation the worse will be the disparity among different areas. Here I should declare an interest as a chartered surveyor. Rateable value should be assessed on the same basis throughout the country. If this is done properly it will be possible to compare equally different parts of the country—for example the North with the West, or the Midlands with the South-East. There should be a common basis, but the longer the revaluation is left the worse the situation will become.

I hope that the Government will soon take some decision on whether there will be a capital or a rental basis for the commercial sector. The Government will then have to decide what they will do about the residential sector, and whether the present system will be replaced in total or in part. Various systems have been suggested, including a form of poll tax, and there is a possibility that the existing type of rating should be continued.

However, I hope that the reform will not be on the lines of the present system. It is far too expensive to rate every residential property individually. I should like a type of banding valuation. Moreover, it would avoid the bad feeling that is generated when people improve their properties. If people improve their properties by adding an extra room or central heating, they resent the fact that it will affect the local tax that they pay. I know that certain exemptions have been introduced in recent years to prevent that from happening automatically. Nevertheless, the valuation officer still has to carry out a valuation in each case to establish whether the limit has been reached. It is an enormous waste of civil servants' time and energy, and it is wrong to penalise people for modestly improving their private residence.

I applaud the Government for introducing the Green Paper. I am glad that they are consulting widely on this matter, and I hope that they will quickly reach a decision so that we may know what form local taxation will take in future and how it will be administered.

8.51 pm

Mr. Guy Barnett (Greenwich)

In spite of all the protestations of the hon. Member for Ilford, South (Mr. Thorne), he made a highly centralist speech, first by suggesting that education and other services should be centrally funded, and secondly by suggesting that firms operating in an area should pay not rates but taxes to central Government.

I value the fact that firms pay rates to local authorities, because it means that those firms have the right to knock on the door of the local authority and demand the roads and other services that they need for the successful pursuit of their business. Moreover, the local authority then has an incentive to improve the environment in which business can operate.

No doubt there have been times in our history when local authorities have paid too little attention to the needs of local industry. However, during the past few years there has been strong evidence from many parts of the country that local authorities now recognise that if they do all that they can to encourage the development of local industry and increase the rateable value of that industry the community as a whole stands to gain. Moreover, many' local authorities now recognise the value of encouraging local industry as a means of alleviating local unemployment.

The speech of the hon. Member for Ilford, South reflects several of the speeches that I have heard this evening. In some ways, it is a sad commentary on the Government's policy and legislative programme for local government since they took office. I recall the Second Reading debate on the Local Government, Planning and Land Bill, when I predicted that the inevitable consequence of that legislation would be the necessity to discuss the detailed policies of local authorities on the Floor of the House. The ultimate consequence of that legislation and the Local Government Finance (No. 2), Bill which is now in Committee, is that decisions which in the past have been taken by local authorities are now taken by the Government.

Last night I was present at a meeting of the social services committee of the London borough of Greenwich. I and many other people were protesting at the threatened closure of the Vanbrugh day nursery in my constituency. The crowd there included single-parent families w ho are heavily dependent on the nursery because, without it, they could not go out to work and they would then be dependent on unemployment benefit, and in many cases supplementary benefit, too. The nursery has a high priority in my constituency.

A councillor told me that it was no good going to the meeting, because the grant had been cut by £2 million. He said that the council was having to make cuts. He said that the priorities were right, but that the budget had been cut in such a way that one would be justified in protesting only to the Secretary of State for the Environment and to the Secretary of State for Social Services. He said that they—and not the councillors—had made the decisions. The councillors did not want to make those decisions. They wanted to keep the nursery open. However, given the budgetary situation, there was nothing that they could do to alter the decisions. I hope that the nursery will stay open, but nevertheless that is an illustration of the difficulties facing local authorities as a consequence of the Government's centralist policy.

There are other and more dangerous implications of the way in which the Government have assessed the grant-related expenditure. In the debate on Second Reading of the Local Government Finance (No. 2) Bill I said that the grant-related assessment for my borough was roughly £36 million and that the spending level during the current year was about £50 million. If an element is allowed for inflation, if the borough is to retain the services that it now operates, it will need to spend about £55 million. The target figure that the Government have chosen from goodness knows where is £48 million. That means an overspend of £7 million.

Greenwich is described as an overspending authority, yet the House will recall that in the Local Government, Planning and Land Act there is a requirement on local authorities to describe, according to certain formulae, the cost of running their services. During his speech the Secretary of State compared the cost of services run by one authority with those run by another. There is an incredible situation in my borough. We are told to compare the services of my borough with those run by other inner London boroughs. Greenwich is described as an overspending borough.

I want to compare the expenditure figures for Greenwich with the average figures for inner London. For instance, the net annual cost of providing all council services for every 1, 000 of the population in Greenwich is £222, 291. The inner London average is £318, 131. In Greenwich, the figure for rent arrears, as a proportion of the rent collectable for the year, is 4.5 per cent. I make no criticism, but the figure for Lewisham is 12.4 per cent. and for Southwark 8.48 per cent. I do not know the circumstances, but no one could describe Greenwich as an inefficient borough on that basis.

Let us take the cost of libraries. The net annual cost of library services for every 1, 000 of the population is £8, 494 in Greenwich. The inner London average cost is £12, 302. I could go on to describe case after case to show how Greenwich compares favourably with the inner London average. The number of administrative staff for every 1, 000 of the population in personal social services in Greenwich is 0.90. The inner London average is 1.12. The net annual cost of personal social services for every 1, 000 in Greenwich is £77, 086. The inner London average figure is £103, 857. Last month the Minister pointed out that Greenwich's needs may be different from those of other boroughs. He said: The hon. Member for Greenwich (Mr. Barnett), in referring to comparisons of GREs, spoke only of standards of service. He will know that, like the previous needs assessment, the size of the client groups also influences the overall GRE per head—a point that perhaps he did not take fully into account in his contribution."—[Official Report, 18 January 1982; Vol. 16, c. 112.] I did take that into account. The difference between the needs element and the present situation is that the grant-related assessment expenditure figure has been invented by the Department of the Environment and is not in any sense objective. I wish that the Minister would understand that under the previous system of multiple regression analysis there was some objectivity, because that figure was related to and in part determined by expenditure levels by groups of local authorities as a whole.

That is the essential difference between the system being operated now and that operated under multiple regression analysis. In some of the speeches that I have heard there has been almost a feeling of "Come back multiple regression analysis, we need you." The incredible system now being operated results in the absurdities mentioned by many hon. Members and which are also true of my local authority. The Under-Secretary of State, Lord Bellwin, will see a deputation from my local authority soon. I hope that they will carefully examine together the systems implications for my authority and for other authorities. Local government, as I understand that phrase, will become increasingly impossible to operate.

9.1 pm

Mr. Kenneth Lewis (Rutland and Stamford)

When my small county of Rutland was taken over by, or pushed over into, Leicestershire, some years ago, I said that the modest rates that we then paid would escalate. They did. Indeed, as far as I can see they will continue to escalate.

People said that I should not worry because everyone would get more for their money. The area was supposed to lack services. For example, I was told that the area was somewhat short of services for mental defectives. I did not think that anyone thought that we had any mental defectives unless some people put the Member of Parliament or other politicians in that category. Those in my district would tell the Minister today that services have not improved, or have been only so slightly improved as to be hardly noticeable. In recent years many people think they have decreased. I suppose that we are all experts on rates and taxes, because we all have to pay them. I believe there should be a balance between the rates paid and the services provided. I am not one of those hon. Members who say that rates must be kept so low that services wither away. I like my district and county councils to provide reasonable services. By and large, my area gets them. It is extraordinary that some councils have managed with rate increases that are within the rate of inflation and that some have even managed with rate increases that are below the rate of inflation. One of my councils, Lincolnshire, will increase rates this year by a figure that is below the rate of inlation. In Leicestershire, however, rates will increase by about 30 per cent. One wonders why one council spends so much more than another.

What is most extraordinary is that many of the councils in areas where unemployment is highest and where industry is having the greatest difficulty are the ones that are putting their rates increases through the roof. I wish to make two brief pleas to the Ministers who are struggling with this problem. I congratulate them on that struggle because it is a difficult problem. Their objective must be to press down in order to bring reason back into the system, because reason has gone out of the system in recent years.

My first plea to the Ministers and to those who are running the councils, if they have ears to hear—the plea has been already made by a number of my hon. Friends—is that it is vital that industry should not have to carry on with this built-in burden that increases every year. I wonder whether hon. Members appreciate that rates are the largest tax imposed on industry. In many cases, industry has to pay little or no corporation tax. Industry is encouraged by Government not to pay corporation tax because it is allowed to write off all manner of investment to avoid paying that tax. Is it recognised that, in money terms, rates are twice as high as the national insurance surcharge? That position has only developed in recent years. National insurance surcharge was introduced as a tax. Like all taxes, once it is introduced it is difficult to get rid of it. It is now built into the system although I hope that the Chancellor of the Exchequer will do something about it in his Budget speech. However, the fact remains that national insurance surcharge is now less than the burden imposed on industry through rates.

High rates on industry and commerce mean fewer jobs. Therefore, unless councils are realistic and understand that they must keep rates down for industry, there will be more and more unemployed. The unemployed then go on to the dole and become another burden on the rates because once they claim social security they have the advantage of rate rebates. Therefore, there is a vicious circle of unemployment leading to a greater burden placed upon the local councils because they have to finance some of that unemployment. All these problems arise because rates are too high on industry and it is forced to shed jobs.

My second plea is that in the coming grant considerations—we had a second review last year, and we may have a second review this year—the Ministers should bear in mind that councils that are doing their best should be encouraged. Good councils should continue to be encouraged because the councils we want to assist are those that are economical and those that have a fair balance between good services and reasonable rates.

9.8 pm

Mr. Dan Jones (Burnley)

I do not intend to speak for more than five minutes, in deference to the needs of the Minister of State. I would not speak at all if it were riot for the fact that I wish to bring to the attention of the House what I honestly believe to be an injustice.

The Secretary of State has found for Blackpool about £9 million in grant. He has found for Burnley about £5 million in grant. That is a difference of £4 million.

In terms of economic advantage to the country, Burnley is of greater value. Since before this century, Burnley has regularly produced what the country wanted. There was an occasion when two Labour Ministers came to Burnley wanting a change from textiles to other industries. They thought that Burnley would profit by that change of industrial structure. The unions wanted it, but the work force preferred, and stuck to, textiles.

On the other hand, Blackpool has constantly been a seaside resort. I have nothing against Blackpool, but I believe that the Ministers should analyse the figures and find out if they bear any relation to justice. I do not think they do.

The people in Burnley are extraordinarily moderate. Since I have been there they have never been on strike. Were that so everywhere, I would boldly say that the country would be in a finer economic position than now. I hope that the Ministers are taking heed of that instead of whispering to one another.

Burnley has made a handsome contribution to the country for a long time. It must be reasonable to believe that, as it has had over 100 years of industrial experience, the town has achieved a certain standard. As a consequence I should like the Minister to examine the figures that show that Blackpool has an advantage of £4 million over Burnley. He should give me an answer about the authenticity of the figures and their justice.

9.12 pm

Mr. Teddy Taylor (Southend, East)

I am sure that Ministers and Opposition spokesmen appreciate that rate support grant orders are never popular. This order involves a reduction of the Government's contribution from 59.1 per cent. to 56 per cent., which makes it especially unpopular. It represents a direct increase in taxation in a roundabout way.

The Secretary of State will be fully aware that, apart from the complaint about the general reduction about which everyone is concerned, the redistribution on top of that and the hammering of other authorities involves injustice. I hope that he will accept that there is injustice in the figures for Essex.

We accept that for all authorities the rate support grant order will involve special problems and increased rates. However, the Minister must also accept that Essex is suffering a further blow amounting to about £71/2 million, which appears to be unjust.

I should like the Minister to explain to the ratepayers of Essex why there has been a further redistribution in the formula. Ratepayers in Essex, particularly Southend, find it difficult to understand why the redistribution gives a significant bonus to substantial parts of inner city areas and to many authorities that have openly been defying the Government in all their policies.

The ratepayers of Essex find it hard when they hear leaders of the Greater London Council announcing that. although they have increased spending by 50 per cent.. they still think that some ratepayers in the GLC area will have their rates cut this year because of a substantial increase in Government grant. How can that be fair? We know that both Labour and Conservative Governments are often accused of rigging the rate support grant so that their friends are helped. However, the Minister will appreciate that there is no possibility of the present Government being accused of that. They have hammered those who supported Government policy 100 per cent. and gone out: of their way to give a bonus to those who flouted and openly defied it.

It is also difficult to understand why a special bonus is given to areas which have suffered from race riots. If expenditure in connection with race riots is to be disregarded under the formula, is the Minister suggesting that if towns in Essex had had some race riots they could have enjoyed a significant bonus?

The Minister will know that Southend has led Britain in its policy of privatisation, prudence and enterprise. As a result, last year it was able to cut the borough rate. The Minister may not know, however, that only yesterday it was announced that the borough has frozen its rates for this year. Having reduced its rates last year, it has managed, despite inflation and a cut in Government grant, to hold its rate this year. That unique achievement is largely the result of our policy of privatisation, which has achieved a major saving for the ratepayers, better services and higher wages for those employed in the services.

How can the people of Southend be happy when, having achieved that miracle of local government efficiency and reorganisation, they are told the next day that the average ratepayer in Southend will be paying about £1 per week more next year, not because of any failure on their own or the borough's part, but because the Government have introduced a policy which especially hammers Essex?

I recently moved from Glasgow to Southend in circumstances of which most hon. Members are aware. [HON. MEMBERS: "And nearly had to go back. Yes, I almost had to go back, but I now enjoy Southend very much. Having moved to Essex from Glasgow, I have been very conscious that Southend is in no way a lavish authority which wastes money. My children go to school in Southend, and I was surprised to find that this year they had a horrifyingly long Christmas holiday, but their summer holiday has been cut to five weeks, making it very difficult for the average person to fit in holiday arrangements. That had to be done simply to save money on heating schools during the Christmas period. Unlike Glasgow, Southend has no local authority nursery schools because it simply cannot afford them in its budget. I can find no area in which there is waste, although there must be some. Certainly, it seems to be an astonishingly prudent council compared with my previous area, although the rating burden seemed lower to me as a householder.

Essex is especially hammered, first, because it has been prudent in the past and thus has not the same scope for cutting. Secondly, rateable values are high. That problem is largely historic as there has been no revaluation south of the border for a long time, and an area such as Essex with many new properties clearly suffers. The Minister will have heard from the excellent speeches of my hon. Friends the Members for Harwich (Sir J. Ridsdale) and Basildon (Mr. Proctor) and from the hon. Member for Harlow (Mr. Newens) that Essex has a justifiable grievance. I hope that the Minister will accept that there has been injustice to Essex, and especially to Southend which went out of its way to cut rates last year and to freeze them this year, despite having to pay more for the county rate. I hope that the Minister will accept that there has been injustice and will tell us that he intends to do something about it.

9.19 pm

Mr. Gordon Oakes (Widnes)

It is astonishing that this debate is and has been throughout so ill-attended by hon. Members of all parties. I should tell the Secretary of State, who has not been present a great deal himself, that hon. Members on both sides have been conspicuously absent. As the right hon. and learned Member for Runcorn (Mr. Carlisle) said, we are discussing one quarter of public expenditure in this country. Our discussions affect every hon. Member because we all have a local council relying on us to deal with and to debate grants with the Government. Therefore, it is astonishing that this debate is so ill attended.

That is not because hon. Members on either side of the House are uninterested in what is happening. They merely pick up the three or four documents issued by the Government on the rate support grant, read them, consider the "multipliers", which mean six decimal figures against their own authorities, and find that they cannot understand a word that has been presented to the House. That is the truth of the matter. When debating the Local Government, Planning and Land (No. 2) Bill in 1980, I remember the Secretary of State saying that he was introducing a new system to simplify matters. That statement was similar to what my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) said earlier, about the right hon. Gentleman's clarification.

There is a smokescreen over the important issues. The important issues have been mentioned by hon. Members on both sides of the House, particularly by my hon. Friend the Member for Ashfield (Mr. Haynes). In a brilliant and compassionate speech he referred to a 68-year-old constituent who has a mother of 96 years of age and does not have a home help. That is what the debate is about, and that is the essential nature of our discussions.

My hon. Friend the Member for Greenwich (Mr. Barnett) referred to a nursery school. He was told that the borough had no more money to spend upon it.

I hope that hon. Members on both sides of the House will not be put off or terrified by what the hon. and learned Member for Hemel Hempstead (Mr. Lyell) called "gobbledegook" and what the hon. Member for Isle of Wight (Mr. Ross) called "jargon". The essential nature of our discussions is the bread and butter issue of deprivation in local authorities that results from the Government's actions in successive rate support grants.

As my right hon. Friend the Member for Ardwick said, the only mention of grant abatement that is made in any of these documents is in the rate support grant order for next year. That suggests that provision will be made in the Local Government Finance (No. 2) Bill.

To this minute local authorities have no idea what is going on or, when fixing their budgets, what will happen. It may be said that a Bill is going through Parliament, but it is not yet law. As we say in Lancashire, "There is many a slip betwixt cup and lip." There have been so many slips "betwixt cup and lip" on this issue that it is almost unbelievable. Clause 4 of the Local Government Finance (No. 2) Bill is not as it was referred to when the rate support grant paper was written. A completely different clause has been introduced as the result of an amendment proposed by the hon. Member for Hornchurch (Mr. Squire). We debated the new clause 4 at the last meeting of the committee.

My right hon. Friend the Member for Ardwick and I would dearly love to quote the debate that took place last Thursday in the course of moving the amendment to clause 4. The rules of the House, of course, rightly do not permit that. However, I have news for the House. The amendment to clause 4 that we debated last Thursday is now old hat. Further amendments, as I understand it, have been tabled today by the Government. Therefore, we shall discuss yet another clause 4 when we meet on Thursday. The Government have created confusion for local government and Opposition Members—indeed, for the whole House. In the rate support grant settlement we are dependent on legislation that has not been passed or finalised.

The truth is that the Government do not really know what they want to do. That is why we have the ridiculous discrepancies between authorities that hon. Members on both sides of the House have quoted in the debate.

There are two crucial considerations to be applied to the rate support grant settlement for England for 1982. Some hon. Members have discussed them, but they have been avoided by many because of concern for individual authorities and concern about all the gobbledegook to which the hon. and learned Member for Hemel Hempstead referred. However, the crucial considerations were taken up by the right hon. and learned Member for Runcorn, who is my near neighbour. Our constituencies share an authority. I was delighted to hear the right hon. and learned Gentleman speaking again from the Back Benches. His speech, though loyal to the Government, was constructively critical. It was not an example of the whining speeches that we sometimes get from ex-Cabinet Ministers who have lost their positions. Far from it. It was a good Back-Bench speech.

The right hon. and learned Member for Runcorn fairly said that one of the crucial issues in the RSG is the reduction in Government moneys from 59.1 per cent. to 56 per cent. That means that local authorities will get less Government money. They will have to cut their vital services or increase their rates, or both. Nearly every authority, Labour or Conservative, has received less, cut vital services and increased its rate. Authorities have cut their services to the bone, yet have had to increase their rates.

Crocodile tears have been shed by Conservative Members on behalf of the poor ratepayer, especially the industrial ratepayer. The hon. Member for Ealing, North (Mr. Greenway) even suggested that Hoover closed because of the high level of rates. That was an astonishing suggestion. Apparently, the closure had nothing to do with the recession. We were told that it was the local authority's rate that closed the company. The reality is that the Government are forcing local authorities to increase their rates for domestic, industrial and commercial ratepayers. That is what happens when the Government reduce the rate support grant settlement by 3.1 per cent. If the Government had real concern for ratepayers, let alone the spending needs of local authorities, they would have adopted a policy that operated in the reverse direction.

The previous rate support grant was based on the assumption that the rate of inflation for local authorities would be 6.7 per cent. That assumption has never been altered. Indeed, it has not been altered in the supplementary report. The Government know that that is a fictitious figure. I am talking not about deterring future expenditure but about past expenditure. The Minister for Local Government and Environmental Services knows that the current rate of inflation is about 12 per cent. and that wage settlements made during the year have been considerably in excess of the figure set by the Government. That is history.

The same ridiculous assumptions are being made for next year's rate support grant. Are the Government saying that when they decided upon 9 per cent. for the whole of next year they sincerely believed that inflation next year would decrease to 9 per cent. or lower? Do they believe that now? Even the most optimistic figures suggest that the rate of inflation will be about 10 per cent. by the end of the year. Local authorities will have to pick up the tab for that. We cannot judge local authority expenditure fairly on the ordinary cost of living index. The index that is relevant for local authorities is totally different from that for ordinary families. For example, if food prices moderate, that movement will be reflected in the cost of living index and families will benefit, but that will not have a great impact on local authorities. Fuel price increases, for example, have a great effect on local authorities. Local authorities are affected just as much as industry. Only yesterday we heard that gas prices are to be enormously increased during the next 12 months. Most schools and local authority offices are heated by gas. Post and telephone charges are a major item of expense for local authorities. They do not have much effect on the ordinary cost of living index, but they have an enormous effect on local authorities' expenditure. The price of school textbooks has increased. For years inflation has raged in education expenditure. Some schools have no books worthy of the name. Instead of books being beautiful objects to handle they are old, tattered ruins. That has a terrible psychological effect on children and on the way in which they approach books.

The inflation faced by local authorities is totally different from that faced by ordinary families. But the Government take no account of that. They do not even take the ordinary cost of living inflation into account. Not only have the Government reduced the total grant from 59.1 per cent. to 56 per cent., but they have added the further burden on local authorities of a false rate of inflation built into the order. The local authorities either have to make cuts or increase rates.

The Secretary of State says that it is necessary to take these stringent measures because one can see from the expenditure per head of population, or per thousand, how much the figures differ between authorities. Surely, he says, there is room for pruning down and prudence. He gave a number of examples of differences in local authority expenditure per thousand people. What, therefore, will the Minister say to my hon. Friend the Member for Greenwich? That exemplary authority in the London boroughs and the South-East of England has figures that are better than most of the other boroughs. But, lo and behold, according to the Secretary of State, it is an overspending authority. What can one do to satisfy the Secretary of State?

My right hon. Friend the Member for Ardwick referred to the rate for the red areas of East Sussex, Essex and Wiltshire, which are, presumably, deliberately overspending. I concentrate on Essex because there are a number of hon. Members from that county—the hon. Members for Basildon, for Southend, East (Mr. Taylor) and for Harwich (Sir J. Ridsdale) and my hon. Friend the Member for Harlow (Mr. Newens)—all of whom are loyal to their county. They spelt out to the Government the evil and insane effects of the present rate support grant figures. My hon. Friend the Member for Harlow spoke on behalf of a Conservative-controlled county council because he is a democrat. He does not believe in its policies but he believes in democracy and the right of Essex to spend its money in its own way. Essex has not been an imprudent authority, yet it is placed in a deplorable and disgraceful position. Whatever else the Minister does, he must explain to the House, and to the people of Essex, how the county has offended the Secretary of State so much that it should be so cruelly treated by him, after having tried its very best, as so many have done, to follow the dictates of the Secretary of State. As my right hon. Friend said, the more one tries to follow the dictates of the Secretary of State, the harder one is hit as a result.

The right hon. and learned Member for Runcorn introduced a breath of common sense when he stated that, in his opinion, as a former Secretary of State for Education and Science, it is impossible to go further with education cuts. I am sure he is right. As a former Minister of State for Education I agree that education cannot be exempted. Two-thirds of expenditure by local authorities goes on education. The right hon. and learned Gentleman gave a clear warning, however, that one cannot cut further. Yet, when the totality of the rate support grant is cut, that is precisely what the Government are doing. Two-thirds of the burden will inevitably be borne by education.

The right hon. and learned Gentleman also asked what was meant by overspending and argued that the policy could not be pursued on a historical basis. I am sure that the right hon. and learned Gentleman is right. All the anomalies that arise in the difference between grant-related expenditure and targets result from the Government trying to act on a historical basis.

Mr. Mark Carlisle

I stated that it would be wrong to cut further on the limit of relevant expenditure for education which I accept is that proposed when I was Secretary of State for Education, including the additional £60 million cuts that the Prime Minister announced. I was not suggesting that it had been cut further. I stated, however, that I would oppose any further reduction in that level of expenditure.

Mr. Oakes

I agree. I hope that I did not misinterpret the right hon. and learned Gentleman. Inevitably, as a result of this rate support grant settlement, education, like other services, will be cut due to the reduction in the total amount of money given to local authorities and the built-in figures for inflation, which are false figures.

My hon. Friend the Member for Blaydon (Mr. McWilliam) and the hon. Member for Isle of Wight made the valid point that we should stop kicking councillors. They perform an extremely useful service. It is no use blaming the media for the attack on local government. The attack on local government is led by the Government and by Conservative Members. They are the first to call all local authority workers bureaucrats. They are the first to suggest that all councillors, Tory or Labour, are hell-bent on overspending and being profligate with ratepayers' money. They lead the attack.

It is wrong, however, for hon. Members to imply that local government is wasteful. It is not half so wasteful as central Government. It is not half so wasteful when decisions are made on the spot by elected local people rather than by civil servants in Whitehall. Yet the whole idea of grant-related expenditure is precisely a case of officials, people, or a computer, taking decisions. It may sound unbelievable, but I understand from my right hon. Friend the Member for Ardwick that it is an American computer. I wonder whether the Minister can explain why we need an American computer to work out this matter. Are the complications of the rate support grant so horrendous that no British computer can deal with the matter and we need an American space age computer for this purpose?

I am pleased that the hon. Member for Basildon will vote with his feet by joining us in the Lobby tonight. I do not agree with his remarks about his hon. Friend the Under-Secretary of State and the responsibilities that he has been given. The Minister has a difficult job. It is an important job. We on the Opposition Benches wish him well. I do not like to hear an hon. Gentleman attacked before he has even started a job. Despite my strictures, I welcome the hon. Member for Basildon into our Lobby. I wish that other Conservative Members would act as honestly as the hon. Member for Basildon and join him in our Lobby.

We have heard from a number of authorities. I am not going to go into the specific complaints of different authorities. Suffice it to say that, from the debate we have heard tonight, this is a bad report and a bad rate support grant. It is illogical and totally mean and will bring a great deal of distress to many needy and disabled people in this country. I hope that this House votes resoundingly against it.

9.41 pm

The Minister for Local Government and Environmental Services (Mr. Tom King)

I start by agreeing with one thing: this has certainly not been the best attended debate I have ever seen in the House of Commons. One may draw certain conclusions from that. I do not pretend that rate support grant orders are the most thrilling stuff of which Parliament is made, but they are often a barometer of unhappiness and disquiet about some aspects of these matters.

As has been said very fairly, in every settlement—and this point was made to the right hon. Member for Manchester, Ardwick (Mr. Kaufman)—anomalies and difficulties are inevitable. This happens every year. Certain authorities feel very disaffected by the settlements. Every year, therefore, there are safety nets and changes are made to try to protect authorities from the more extreme variations.

We are discussing three motions. The first is on the Rate Support Grant (Increase) Order 1982, for the year 1980–81, in which we have confirmed that, in view of the overspend outturn in that year, we shall be withholding the £200 million which my right hon. Friend the Secretary of State intimated on an earlier occasion would probably be the case; therefore, it covers £84 million, in connection mainly with adjustments for interest and loan charges. We have confirmed the position with regard to the transitional arrangements affecting certain authorities and have said that we shall be writing to those authorities with those amendments which my right hon. Friend has made in the light of the representations that they have made to us.

We also have before us the Rate Support Grant Supplementary Report (England) 1982, for 1981–82, involving £122 million of grant on higher loan charges and the updating of certain of the grant-related expenditure assessments. We have confirmed that we shall be laying before the House a further supplementary report for 1981–82 to confirm and clarify, after the clarification of the legal situation, the whole of the back arrangements for those in excess of volume targets and GREs in 1981–82.

The main matter before us is the Rate Support Grant Report (England) 1982–83. This involves, against an estimated £20.5 billion of public expenditure, the allocation of £11.5 billion of grant, spread among just over 400 local authorities. I recognise that this is a tough settlement. As my right hon. and learned Friend the Member for Runcorn (Mr. Carlisle) said in a most impressive and valuable contribution, it involves a 3 per cent. reduction in the rate support grant. Even with the increased public expenditure allowance that we have made, it is still a tough public expenditure target for local authorities, and, of course, it involves a tight cash limit.

However, included within it are the targets, which we believe are fairly based, to encourage further progress in local government expenditure towards greater value for money, economy and efficiency, about which I shall say something shortly. As my right hon. Friend the Secretary of State said, against the background of the targets that we have set, it is highly significant how many local authorities are now hitting our targets.

Last year 279 out of 413 authorities were able to hit or almost to hit those targets. Those authorities were spread widely over all classes, whether metropolitan districts, London boroughs, or shire counties. They do not include metropolitan counties, but the other classes all made a contribution.

I do not think that the hon. Member for Blaydon (Mr. McWilliam) was listening to the speech of my right hon. Friend the Secretary of State. My right hon. Friend paid tribute to the many people in local authorities throughout the country who have tried to play their part in achieving our public expenditure targets. The hon. Gentleman called for my right hon. Friend to say something nice about those who were playing their part. My right hon. Friend has regularly paid tribute from the Dispatch Box to those authorities that are achieving their targets.

I should like to make clear to some of my hon. Friends who have been concerned about the matter that, of course, the targets are tough. Some have believed that inability to hit targets is an automatic indictment of an almost criminal offence. We have made it clear that the targets collectively represent the overall target that needs to be achieved if local government is to carry out its proudly repeated claim of matching national public expenditure figures.

We have set the highest spenders higher targets, but we have realistically taken into account the maximum reductions that they can make. Others may then have to make their contribution if the overall targets are to he achieved. But we have tried fairly to limit this within a reasonable range. That is why we have set the targets within the range of 1 per cent. to 7 per cent. The highest-spending authorities are on a 7 per cent. reduction, and the figure goes down to 1 per cent. and even in certain cases to a zero reduction where expenditure is significantly below the volume target and grant-related expenditure.

Having put forward our original proposals, we listened to the representations of the local authority associations and made a number of changes. We increased the public expenditure figures for local government by more than £1 billion. Nobody can say that that was not listening to representations from local government. Moreover, we have exempted from the holdback provisions those authorities which are below our GREs, once again, in response to representations. I hope that hon. Members will acknowledge that we have tried to respond to representations which we thought were valid.

I should like to say a quick word about GRE. The hon. Member for Woolwich, East (Mr. Cartwright) again ran that dangerous course for the SDP of coming perilously close to making a policy statement. He tiptoed round the course with great delicacy, but it appears that the old rate support grant system, with all its crudity, unfairness and across-the-board treatment, had certain attractions.

I have here the copy of the document that will be available in the Library and the Vote Office for every hon. Member to consider the GRE formula for this year, in the same way as we published it last year, showing its breakdown. That was not possible with the old multiple regression analysis. Only three people in my Department understood it—not one alone, but the three together in combination were able to give a full explanation. The document, together with the sheet available in each of their local authorities, sets out for hon. Members the GRE for each local authority—the categories and the allocation made against each one. That is a much more comprehensible system for those hon. Members who wish to understand it.

I have often said that a document distributing £111/2 billion around 413 local authorities is not a child's mathematics paper. It is a complicated matter. We are making a genuine attempt to do it in a way that is open and available for discussion and debate. I invite hon. Members who are concerned about the GREs of their authorities to study the documents and to start discussions with us and with their local authorities now. It is not much good starting discussions in October or November, when the die is cast. This is the time when discussions will start on next year's rate support grant settlement. Because we have made the information available, we welcome people who wish to make their contributions.

Mr. Dan Jones

Will the right hon. Gentleman give way? I shall be only 10 seconds.

Mr. King

No, I am sorry; I have very little time.

We shall seek to continue to improve the workings of GRE. In one respect the introduction next year of the full details of the 1981 census will be of benefit, particularly to expanding counties where there have been problems. My hon. Friends who represent constituencies in Essex and Hertfordshire are concerned about these population figures, as are representatives of the expanding county of Buckinghamshire. The figures will be helpful to all these authorities.

Some hon. Members referred to rating reform, which is not a subject for this debate. We have published a Green Paper. My right hon. and learned Friend the Member for Runcorn, my hon. Friend the Member for Harwich (Sir J. Ridsdale) and my hon. Friend the Member for Ilford, South (Mr. Thorne) referred to the possibility of the transfer of some element of education expenditure to the national Exchequer. I see in an article in The Sunday Times that my right hon. Friend and I have undertaken a task to make strong men cringe with horror: between them they are preparing to 'consult' every single Conservative MP, individually, about rating reform. Neither my right hon. Friend nor I cringe with horror at that prospect. We are always delighted to speak to cur colleagues and to other hon. Members.

Mr. Dan Jones

Would the right hon. Gentleman speak to me now?

Mr. King

May I ask the hon. Gentleman to forgive me because I have very little time?

In regard to the moves we have made in the rate support grant this year, my right hon. and learned Friend the Member for Runcorn encouraged us to pay greater attention to GRE. He will recognise that in giving exemptions in GRE this year we have given, as it were, the supremacy of position to GRE even though we still have the volume element within the targets.

I agree very much with what my right hon. and learned Friend said about teachers' pay. Some hon. Members have criticised the cash limits in the rate support grant settlement. My right hon. and learned Friend drew attention to the fact that since 1979 teachers' pay has gone up by 58 per cent. On his estimate, it is not unreasonable to expect teachers to look on 4 per cent. as a not unacceptable provision. That is the provision that is included within the rate support grant of local government as a whole. If some people get more, others are liable to have to make do with less. So I do not accept the overall 4 per cent. as an unreasonable provision.

My hon. and learned Friend the Member for Hemel Hempstead (Mr. Lyell), my hon. Friends the Members for Watford (Mr. Garel-Jones), for Southend, East (Mr. Taylor), for Harwich and for Basildon (Mr. Proctor) and the hon. Member for Harlow (Mr. Newens) referred to Hertfordshire and Essex. There are two issues in regard to which the problems are similar. I shall deal first with the case of the new towns. I know that the hon. Member for Harlow and others represent the concern about the GRE for new towns. We do not accept on the evidence that there is a case for changing the GREs, but we are prepared to have discussions to see whether there is some way in which in next year's settlement we can cover aspects of new towns which are not properly reflected. I have written to my hon. Friend the Member for Basildon about it, and I confirm my offer to have discussions.

My hon. and learned Friend the Member for Hemel Hempstead supported the overall need to control public expenditure but expressed concern about the situation in his county. We have welcomed the discussions which we have been able to have with him, with his hon. Friends and with the county council. I know that they are concerned to play their part in the overall need to reduce public expenditure. I understand that they have been hit by the cut in the grant percentage. That has affected all authorities, but it has a particular effect on high resource authorities such as Hertfordshire and Essex. In both cases I hope that all hon. Members will recognise that the majority of their district councils have done rather better. If we take the district councils into account, the grant share for Essex has changed from 2.82 per cent. to 2.81 per cent. That cannot be said to be a massive slaughter of the grant share.

The new census data will be helpful to authorities in high-growth areas. I know that Hertfordshire and Essex are concerned about the clawback that might be operated. I have better news for them, because there is every prospect that the clawback this year will be very small or even nonexistent.

My hon. Friend the Member for Basildon decided that he would register a protest about the appointment of my hon. Friend the Under-Secretary of State for the Environment to have special responsibility within the Department for ethnic minorities, with which my Department is already involved. I could not disagree with his comments more. It is a part of our responsibilities that we intend to discharge to our full capacity. My hon. Friend the Member for Basildon may object to my hon. Friend saying that he has an open door to members of ethnic minorities, but he should know that that is not discrimination. It has been the policy of my right hon. Friend the Secretary of State and all Ministers to keep as open a door as possible to everyone. Since part of that open door policy included opening it to representatives of the hon. Gentleman's county council, who visited us at their request, I hope that he will support an open door policy in all areas.

We have tried to put before the House a rate support grant settlement that we believe is fair and that, while being tough, recognises the reality of the present economic position. We have had many comments from members of the Labour Party about the way in which they would approach local government. There have also been criticisms of the Government. There seems to be a muddle. I have had the pleasure of reading the press release from the Leader of the Opposition, which is not entirely in line with some of the policies put forward by the right hon. Member for Ardwick. The Leader of the Opposition stated the need to achieve greater independence for local government. The hon. Member for Bedwellty (Mr. Kinnock), who is now the Opposition's education spokesman, is launching proposals to remove control of education expenditure from local authorities. He insists that the present system is not working and that centralisation is the only answer. That may come as a shock to the hon. Member for Greenwich (Mr. Barnett), who took great exception to what my right hon. Friend the Secretary of State said about that.

It seems to have been an unhappy conference for the Labour Party. It was not chaired by the hon. Member for Crewe (Mrs. Dunwoody), who was unkindly described in The Guardian Diary last Friday as "John Golding in Drag". There is an extraordinary story about the wing of the party to which the right hon. Member for Ardwick is attached which was described as the For God's sake stop talking about socialism—there's an election coming wing. Apparently that wing of the party, which includes people such as the right hon. Member for Leeds, East (Mr. Healey), the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) and the right hon. Member for Ardwick has been jumping up and down on the right hon. Lady the Member for Lanark (Dame Judith Hart). That sounds like an extremely painful performance, but apparently they did so because she was threatening not to chair the Labour Party's local government conference. There was then a risk that it would be chaired by the hon. Member for Sheffield, Brightside (Miss Maynard). Not only did it involve the right hon. Member for Sparkbrook, but his mum Enid, the lord mayor of Sheffield, who might have walked out. [HON. MEMBERS: "Answer the debate."]

The For God's sake stop talking about socialism, there's an election coming wing of the party has now been joined by the leader of Lambeth council. Hon. Members will have noticed that there is no more talk about increased expenditure in Lambeth or of tree sculptors and poets on the rates. There is rather talk of tough cash limits, because there is a fear of facing the electorate. No longer are Labour local authorities trying to ignore the ratepayers. In a desperate attempt to curry electoral favour, they are seeking to claim that they are the real protectors of the ratepayers.

As my hon. Friend the Member for Ealing, North (Mr. Greenway) said, there has been a 90 per cent. increase in the GLC rate, a 35 per cent. increase in Avon, a 52 per cent. increase in Nottinghamshire, a 61 per cent. increase in Humberside, and a 66 per cent. increase in West Yorkshire. That does not give Labour councils credentials for claiming to be the friends of the ratepayers.

It is against that background that the Government are seeking to protect employment and to fight for industry in these areas. In the knowledge of the damage that Labour councils are doing, we have sought to preserve a sensible approach to local government expenditure, to give authorities, where they so wish, the opportunity to apply low rates, and to ensure that where authorities are prepared to pursue economic policies it is possible for them to levy low rates. I am delighted by the efforts of a considerable number of authorities this year. I only wish that a number of Labour authorities would follow that example.

It is against that background that the Government put the rate support grant before the House. I commend the settlement.

Resolved,

That the Rate Support Grant (Increase) Order 1982, a copy of which was laid before this House on 28th January, be approved.

That the Rate Support Grant Supplementary Report (England) 1982, a copy of which was laid before this House on 28th January, be approved.

Question put,

That the Rate Support Grant Report (England) 1982/83, a copy of which was laid before this House on 5th February, be approved.

The House divided: Ayes 306, Noes 252.

Division No. 68]	[10.02 pm
AYES
Adley, Robert	Cope, John
Alexander, Richard	Cormack, Patrick
Alison, RtHon Michael	Corrie, John
Amery, RtHon Julian	Costain, SirAlbert
Ancram, Michael	Cranborne, Viscount
Arnold, Tom	Critchley, Julian
Aspinwall, Jack	Crouch, David
Atkins, RtHon H. (S'thorne)	Dean, Paul (NorthSomerset)
Atkins, Robert (PrestonN)	Dickens, Geoffrey
Atkinson, David (B'm'th.E)	Dorrell, Stephen
Baker, Kenneth(St.M'bone)	Douglas-Hamilton, LordJ.
Baker, Nicholas (N Dorset)	Dover, Denshore
Bell, SirRonald	du Cann, Rt Hon Edward
Bendall, Vivian	Dunn, Robert (Dartford)
Benyon, Thomas (A 'don)	Durant, Tony
Benyon, W. (Buckingham)	Dykes, Hugh
Best, Keith	Eden, Rt Hon Sir John
Bevan, David Gilroy	Edwards, RtHon N. (P'broke)
Biffen, RtHon John	Eggar, Tim
Biggs-Davison, SirJohn	Elliott, SirWilliam
Blackburn, John	Emery, Sir Peter
Blaker, Peter	Eyre, Reginald
Body, Richard	Fairbairn, Nicholas
Bonsor, SirNicholas	Fairgrieve, SirRussell
Boscawen, Hon Robert	Faith, MrsSheila
Bottomley, Peter (W'wich W)	Farr, John
Bowden, Andrew	Fell, SirAnthony
Boyson, Dr Rhodes	Fenner, Mrs Peggy
Braine, SirBemard	Finsberg, Geoffrey
Bright, Graham	Fisher, SirNigel
Brinton, Tim	Fletcher, A. (Ed'nb'ghN)
Brittan, Rt. Hon. Leon	Fletcher-Cooke, SirCharles
Brooke, Hon Peter	Fookes, MissJanet
Brotherton, Michael	Forman, Nigel
Brown, Michael (Brigg&Sc'n)	Fowler, Rt Hon Norman
Browne, John (Winchester)	Fox, Marcus
Bruce-Gardyne, John	Fraser, Peter (South Angus)
Bryan, Sir Paul	Fry, Peter
Buck, Antony	Gardiner, George(Reigate)
Budgen, Nick	Gardner, Edward (SFylde)
Bulmer, Esmond	Garel-Jones, Tristan
Burden, SirFrederick	Gilmour, RtHonSirlan
Butcher, John	Glyn, DrAlan
Cadbury, Jocelyn	Goodhart, SirPhilip
Carlisle, Kenneth(Lincoin)	Goodlad, Alastair
Carlisle, RtHon M. (R'c'n)	Gorst, John
Chalker, Mrs. Lynda	Gow, Ian
Channon, Rt. Hon. Paul	Grant, Anthony (HarrowC)
Chapman, Sydney	Gray, Hamish
Churchill, W.S.	Greenway, Harry
Clark, Hon A. (Plym'th, S'n)	Grieve, Percy
Clark, Sir W.(CroydonS)	Griffiths, E. (B'ySf. Edm'ds)
Clarke, Kenneth (Rushcliffe)	Griffiths, Peter Portsm'thN)
Clegg, Sir Walter	Grist, Ian
Cockeram, Eric	Grylls, Michael
Colvin, Michael	Gummer, JohnSelwyn

Hamilton, Hon A.	Moore, John
Hamilton, Michael (Salisbury)	Morgan, Geraint
Hampson, Dr Keith	Morris, M. (N'hamptonS)
Hannam, John	Morrison, Hon C. (Devizes)
Hastings, Stephen	Mudd, David
Havers, Rt Hon Sir Michael	Murphy, Christopher
Hawkins, Paul	Myles, David
Hawksley, Warren	Neale, Gerrard
Hayhoe, Barney	Needham, Richard
Heath, Rt Hon Edward	Nelson, Anthony
Heddle, john	Neubert, Michael
Henderson, Barry	Newton, Tony
Heseltine, Rt Hon Michael	Normanton, Tom
Hicks, Robert	Nott, Rt Hon John
Higgins, Rt Hon Terence L.	Onslow, Cranley
Hill, James	Oppenheim, Rt Hon Mrs S.
Hogg, HonDouglas (Gr'th'm)	Osborn, John
Holland, Philip (Carlton)	Page, John (Harrow, West)
Hooson, Tom	Page, Richard (SW Herts)
Hordern, Peter	Parkinson, Rt Hon Cecil
Howe, Rt Hon Sir Geoffrey	Parris, Matthew
Howell, Rt Hon D. (G'ldf'd)	Patten, Christopher (Bath)
Howell, Ralph (NNorfolk)	Pattie, Geoffrey
Hunt, David (Wirral)	Pawsey, James
Hunt, John (Ravensbourne)	Percival, Sirlan
Hurd, Rt Hon Douglas	Peyton, Rt Hon John
Irving, Charles (Cheltenham)	Pink, R. Bonner
Jenkin, Rt Hon Patrick	Pollock, Alexander
JohnsonSmith, Geoffrey	Porter, Barry
Jopling, Rt Hon Michael	Prentice, Rt Hon Reg
Joseph, Rt Hon Sir Keith	Price, Sir David (Eastleigh)
Kaberry, Sir Donald	Prior, Rt Hon James
Kellett-Bowman, MrsElaine	Pym, RtHon Francis
Kershaw, Sir Anthony	Raison, Rt Hon Timothy
Kimball, Sir Marcus	Rathbone, Tim
King, Rt Hon Tom	Rees-Davies, W. R.
Kitson, Sir Timothy	Renton, Tim
Knight, MrsJill	Rhodes James, Robert
Knox, David	Ridley, HonNicholas
Lamont, Norman	Ridsdale, SirJulian
Lang, Ian	Rifkind, Malcolm
Langford-Holt, SirJohn	Rippon, RtHonGeoffrey
Latham, Michael	Roberts, M. (Cardiff NW)
Lawrence, Ivan	Roberts, Wyn (Conway)
Lawson, Rt Hon Nigel	Rossi, Hugh
Lee, John	Rost, Peter
LeMarchant, Spencer	Sainsbury, HonTimothy
Lennox-Boyd, HonMark	St. John-Stevas, Rt Hon N.
Lester, Jim (Beeston)	Shaw, Giles (Pudsey)
Lewis, Kenneth (Rutland)	Shaw, Michael (Scarborough)
Lloyd, Ian (Havant & W'loo)	Shelton, Willam (Streatham)
Lloyd, Peter (Fareham)	Shepherd, Colin (Hereford)
Loveridge, John	Shepherd, Richard
Luce, Richard	Shersby, Michael
Lyell, Nicholas	Silvester, Fred
Macfarlane, Neil	Sims, Roger
MacGregor, John	Skeet, T. H. H.
MacKay, John (Argyll)	Smith, Dudley
Macmillan, RtHon M.	Speed, Keith
McNair-Wilson, M. (N'bury)	Speller, Tony
McNair-Wilson, P. (New F'st)	Spence, John
McQuarrie, Albert	Spicer, Jim (WestDorset)
Major, John	Spicer, Michael (S Worcs)
Marland, Paul	Sproat, lain
Marlow, Antony	Squire, Robin
Marshall, Michae (Arundel)	Stainton, Keith
Mates, Michael	Stanbrook, lvor
Maude, RtHon Sir Angus	Stanley, John
Mawby, Ray	Steen, Anthony
Mawhinney, DrBrian	Stevens, Martin
Maxwell-Hyslop, Robin	Stewart, A. (ERenfrewshire)
Mayhew, Patrick	Stewart, Ian (Hitchin)
Meyer, SirAnthony	Stokes, John
Miller, Hal (B' grove)	Stradling Thomas, J.
Mills, lain (Meriden)	Tapsell, Peter
Mills, Peter (WestDevon)	Taylor, Teddy (S 'end E)
Mitchell, David (Basingstoke)	Tebbit, Rt Hon Norman
Moate, Roger	Temple-Morris, Peter
Monro, SirHector	Thatcher, Rt Hon Mrs M.
Montgomery, Fergus	Thomas, Rt Hon Peter

Thompson, Donald	Warren, Kenneth
Thorne, Neil (Ilford South)	Watson, John
Thornton, Malcolm	Wells, Bowen
Townend, John (Bridlington)	Wells, John (Maidstone)
Townsend, Cyril D, (B'heath)	Wheeler, John
Trippier, David	Whitelaw, Rt Hon William
Trotter, Neville	Whitney, Raymond
van Straubenzee, Sir W.	Wickenden, Keith
Vaughan, DrGerard	Wiggin, Jerry
Viggers, Peter	Wilkinson, John
Waddington, David	Williams, D.(Montgomery)
Wakeham, John	Winterton, Nicholas
Waldegrave, Hon William	Wolfson, Mark
Walker, B.(Perth)	Young, Sir George (Acton)
Walker-Smith, Rt Hon Sir D.	Younger, Rt Hon George
Wall, Sir Patrick
Waller, Gary	Tellers for the Ayes:
Walters, Dennis	Mr. Anthony Berry and
Ward, John	Mr. Carol Mather.

NOES
Abse, Leo	Dean, Joseph (Leeds West)
Allaun, Frank	Dewar, Donald
Alton, David	Dixon, Donald
Anderson, Donald	Dobson, Frank
Archer, Rt Hon Peter	Dormand, Jack
Ashley, Rt Hon Jack	Douglas, Dick
Ashton, Joe	Douglas-Mann, Bruce
Atkinson, N.(H'gey,)	Dubs, Alfred
Bagier, Gordon A.T.	Duffy, A.E.P.
Barnett, Guy (Greenwich)	Dunn, James A.
Barnett, Rt Hon Joel (H'wd)	Dunnett, Jack
Beith, A.J.	Dunwoody, Hon Mrs G.
Bennett, Andrew (St'kp'tN)	Eadie, Alex
Bidwell, Sydney	Eastham, Ken
Booth, RtHonAlbert	Edwards, R.(W'hampt'n S E)
Boothroyd, MissBetty	Ellis, R.(NE D'bysh're)
Bottomley, RtHonA. (M'b'ro)	Ellis, Tom (Wrexham)
Bray, Dr Jeremy	English, Michael
Brown, Hugh D. (Provan)	Ennals, Rt Hon David
Brown, R. C. (N'castle W)	Evans, loan (Aberdare)
Brown, Ronald W. (H'ckn'yS)	Evans, John (Newton)
Brown, Ron (E'burgh, Leith)	Ewing, Harry
Buchan, Norman	Field, Frank
Callaghan, Rt Hon J.	Fitch, Alan
Callaghan, Jim (Midd't'n & p)	Flannery, Martin
Campbell, Ian	Fletcher, Ted (Darlington)
Campbell-Savours, Dale	Foot, Rt Hon Michael
Canavan, Dennis	Ford, Ben
Cant, R. B.	Forrester, John
Carmichael, Neil	Foster, Derek
Carter-Jones, Lewis	Foulkes, George
Cartwright, John	Fraser, J.(Lamb'th.N'w'd)
Clark, Dr David (S Shields)	Freeson, Rt Hon Reginald
Cocks, Rt Hon M. (B'stolS)	Garrett, John (NorwichS)
Cohen, Stanley	Garrett, W. E. (Wallsend)
Coleman, Donald	George, Bruce
Concannon, RtHon J. D.	Gilbert, Rt Hon Dr John
Conlan, Bernard	Ginsburg, David
Cook, Robin F.	Golding, John
Cowans, Harry	Graham, Ted
Craigen, J.M.(G'gow.M'hill)	Grant, George(Morpeth)
Crawshaw, Richard	Grant, John (IslingtonC)
Crowther, Stan	Grimond, Rt Hon J.
Cryer, Bob	Hamilton, James (Bothwell)
Cunliffe, Lawrence	Hamilton, W.W.(C'tral Fife)
Cunningham, G. (IslingtonS)	Hardy, Peter
Cunningham, Dr J. (W'h'n)	Harrison, Rt Hon Walter
Dalyell, Tam	Hattersley, Rt Hon Roy
Davidson, Arthur	Healey, Rt Hon Denis
Davies, Rt Hon Denzil (L'lli)	Heffer, Eric S.
Davies, Ifor (Gower)	Hogg, N. (EDunb't'nshire)
Davis, Clinton (HackneyC)	Holland, S. (L'b'th, Vaux'll)
Davis, Terry (B'ham, Stechf'd)	HomeRobertson, John
Deakins, Eric	Homewood, William
Question accordingly agreed to.

Hooley, Frank	Pavitt, Laurie
Horam, John	Pendry, Tom
Howell, Rt Hon D.	Penhaligon, David
Howells, Geraint	Powell, Raymond (Ogmore)
Hoyle, Douglas	Prescott, John
Huckfield, Les	Price, C. (Lewisham W)
Hughes, Mark. (Durham)	Proctor, K. Harvey
Hughes, Robert (Aberdeen N)	Race, Reg
Hughes, Roy (Newport)	Radice, Giles
Janner, Hon Greville	Rees, Rt Hon M (Leeds S)
Jay, Rt Hon Douglas	Roberts, Albert (Normanton)
John, Brynmor	Roberts, Allan (Bootle)
Johnson, James (Hull West)	Roberts, Ernest (Hackney N)
Johnson, Walter (Derby S)	Roberts, Gwilym (Cannock)
Jones, Rt Hon Alec (Rh'dda)	Robinson, G. (Coventry NW)
Jones, Barry (East Flint)	Rodgers, Rt Hon William
Jones, Dan (Burnley)	Rooker, J.W.
Kaufman, Rt Hon Gerald	Roper, John
Kerr, Russell	Ross, Ernest (Dundee West)
Kilfedder, James A.	Ross, Stephen (Isle of Wight)
Kilroy-Silk, Robert	Rowlands, Ted
Kinnock, Neil	Ryman, John
Lambie, David	Sandelson, Neville
Lamborn, Harry	Sever, John
Lamond, James	Sheerman, Barry
Leadbitter, Ted	Sheldon, Rt Hon R.
Leighton, Ronald	Shore, Rt Hon Peter
Lestor, Miss Joan	Silkin, Rt Hon J. (Deptford)
Lewis, Arthur (N'ham NW)	Silkin, Rt Hon S. C. (Dulwich)
Lewis, Ron (Carlisle)	Silverman, Julius
Litherland, Robert	Skinner, Dennis
Lofthouse, Geoffrey	Snape, Peter
Lyon, Alexander (York)	Spearing, Nigel
Lyons, Edward (Bradf'd W)	Spriggs, Leslie
Mabon, Rt Hon Dr J. Dickson	Stallard, A.W.
McCartney, Hugh	Steel, Rt Hon David
McDonald, DrOonagh	Stoddart, David
McElhone, Frank	Stott, Roger
McGuire, Michael (Ince)	Straw, Jack
McKay, Allen (Penistone)	Summerskill, HonDrShirley
McKelvey, William	Taylor, Mrs Ann (Bolton W)
MacKenzie, Rt Hon Gregor	Thomas, Dafydd (Merioneth)
McNally, Thomas	Thomas, DrR. (Carmarthen)
McNamara, Kevin	Thorne, Stan (Preston South)
McTaggart, Robert	Tilley, John
McWilliam, John	Torney, Tom
Marshall, D (G'gowS'ton)	Urwin, Rt Hon Tom
Marshall, DrEdmund (Goole)	Varley, Rt Hon Eric G.
Marshall, Jim (Leicester S)	Wainwright, E. (DearneV)
Marlin, M (G'gowS'burn)	Wainwright, R. (ColneV)
Mason, Rt Hon Roy	Walker, Rt Hon H. (D'caster)
Maxton, John	Watkins, David
Maynard, Miss Joan	Weetch, Ken
Meacher, Michael	Wellbeloved, James
Mellish, Rt Hon Robert	Welsh, Michael
Mikardo, lan	White, Frank R.
Millan, Rt Hon Bruce	White, J. (G'gowPollok)
Miller, Dr M.S.(E Kilbride)	Whitehead, Phillip
Mitchell, Austin (Grimsby)	Whitlock, William
Mitchell, R.C. (Soton ltchen)	Wigley, Dafydd
Morris, Rt Hon A. (W'shawe)	Willey, Rt Hon Frederick
Morris, Rt Hon C. (O'shaw)	Williams, Rt Hon A. (S'sea W)
Morris, Rt Hon J. (Aberavon)	Williams, Rt Hon Mrs (Crosby)
Morton, George	Wilson, Rt Hon Sir H. (H'ton)
Moyle, Rt Hon Roland	Wilson, William (C'try SE)
Newens, Stanley	Winnick, David
Oakes, Rt Hon Gordon	Woodall, Alec
O'Neill, Martin	Woolmer, Kenneth
Orme, Rt Hon Stanley	Wright, Sheila
Owen, Rt Hon Dr David	Young, David (Bolton E)
Palmer, Arthur
Park, George	Tellers for the Noes:
Parker, John	Mr. James Tinn and
Parry, Robert	Mr. Frank Haynes.