HC Deb 14 December 1983 vol 50 cc995-1008 3.31 pm
The Secretary of State for the Environment (Mr. Patrick Jenkin)

With permission, Mr. Speaker, I should like to make a statement on the rate support grant settlement in England for 1984–85. The necessary order is being laid today and there will be a debate early in the new year. My right hon. Friend the Secretary of State for Wales intends to make an oral statement next week on the Welsh rate support grant settlement.

Local authority current spending forms part of the total of public expenditure. For next year, the House endorsed that total at the end of the debate following the publication of the autumn statement by my right hon. Friend the Chancellor of the Exchequer. The rate support grant report which is published today, copies of which will be in the Library, deals with three elements which bear on the level of local authority current spending. These are, first, the targets for individual authorities which, in aggregate, relate to the total figure in the autumn statement; second, the amount of and method of distributing rate support grant to local authorities; and, third, the arrangements for grant holdback for authorites which spend above target. There is, of course, a fourth element, the level of rates and precepts; these are fixed by each local authority in the light of its own spending decisions and of the impact of the other three elements.

In each of the last four years, local authority current spending has far exceeded the provision made in the public expenditure White Papers. In each RSG settlement, therefore, my predecessors have had to take account of this by increasing the provision for the following year. For instance, for the current year, 1983–84, the provision was increased this time last year by about £1.1 billion or around 6 per cent. Despite that, local authorities have still budgeted to overspend by a further £770 million, or 3.8 per cent. In the context of our policy of holding public spending in check—a policy repeatedly endorsed by this House — such substantial overspending cannot be ignored. In order to keep total public spending under control, other spending programmes have to be cut, including local authorities' own capital spending. Those who complain loudest about restrictions on capital spending are often those who have forced them on us by excessive current spending.

Of course, not all local authorities are equally to blame. On the contrary, about 80 per cent. of all authorities are budgeting this year to spend at or within 2 per cent. above target. The great bulk of the overspend arises from the decisions of the remaining 20 per cent. of authorities to spend above those levels—some of them by tens of millions of pounds. Indeed, no more than 16 authorities are responsible for about three quarters of the total overspend. As the House knows, the Government intend to deal directly with that problem of the highest overspenders in a Bill which I hope to introduce before Christmas — but that must be for another day. This statement relates to 1984–85, which of course cannot be affected by the proposed legislation.

For next year, therefore, we must sustain pressure for real reductions in local authority current spending across the board. At the same time, we must make a greater distinction between the majority of local authorities which have made efforts to find economies and the minority of high spenders which have not.

Since August, I have been consulting local authorities on the main proposals for next year's settlement. There have been two meetings of the Consultative Council on Local Government Finance, my hon. Friends and I have met a great many deputations from individual councils and we have received written representations from many more. As the House will see, we have taken account of some of the points raised with us in the settlement which I am announcing today. The main features are as follows.

Provision for local authority current spending for 1984–85 is £20.4 billion — an increase of over £0.5 billion on the provision made in last February's public expenditure White Paper. The aggregate of targets comes to just over that figure—£20.5 billion. This is about 3 per cent. higher than the total of targets for the current year. The basis of fixing targets remains broadly as I proposed in August. The distinction between low-spending and high-spending authorities will be much more marked next year than hitherto. The targets for most low-spending authorities represent a cash increase of 3 per cent. over their budget this year. The targets for most high spenders represent a cash cut of up to 6 per cent.

In the light of the representations since August, however, I am proposing three minor changes which will increase targets for 107 authorities. The three changes, which all operate to raise the budget base line and so increase the head room for next year, cover budgeted transfers from housing revenue account, budgeted interest receipts representing more than 10 per cent. of expenditure and expenditure more than 2 per cent. below target for 1983–84. The third change will give authorities such as Birmingham, which budget well below target, an incentive to continue to do so. Even with those changes the targets are tough for everyone but they are much tougher on the minority of high-spending authorities, where the biggest scope for economy lies.

I shall now deal with grant. Aggregate Exchequer grant for next year will be £11.9 billion—£90 million more than in the current year. It is 51.9 per cent. of total relevant expenditure as compared with 52.8 per cent. for this year. Although there are a number of technical changes in the method of distributing the grant to local authorities, they should have only a limited effect on the individual ratepayer.

The third element in the settlement is the grant holdback. As the House knows, the system is intended to reinforce the pressure of block grant by making sure that the impact of overspending falls on ratepayers to whom local authorities are accountable and not on the general body of taxpayers. For authorities which exceed their target, I confirm the pattern of holdback proposed in October. At ratepayer level, holdback will be at the rate of 2p in rate poundage terms for the first one percentage point of overspend, 4p for the second, 8p for the third and 9p for each percentage point above that.

Certain spending is disregarded—that is, it does not count against an authority's spending for the purposes of the target and holdback regime. As in this year, we shall disregard increased urban programme expenditure by partnership and programme authorities and increased expenditure on civil defence. For next year, there will be an additional disregard. I propose to disregard increased expenditure on those community care schemes which are jointly financed with health authorities. I hope that this relaxation will be widely welcomed by local authorities.

The House will wish to know the impact of all this on the level of rates. If local authorities budget to spend in line with the targets I have set, the average increases facing ratepayers next year should be very low. For some ratepayers, there could be rate reductions. High rates are unfair to ratepayers, damaging to industry's competitiveness and destructive of jobs. It is now up to each local authority to take its spending decisions in the light of the announcements I have made and with a clear view of the impact of those decisions upon their ratepayers.

Dr. John Cunningham (Copeland)

The House has just listened to a long statement that was replete with attacks upon people, their services and communities and the freedom of local government to exercise democratic choices. A number of important questions arise from it.

How will the Secretary of State explain to local authorities that the block grant for next year represents a cut in real terms of £619 million, compared with the figure for 1983–84. without acknowledging a resulting major increase in rates that will be well above the rate of inflation?

Will the Secretary of State confirm that the total of targets for 1984–85 that he has just announced will be more than £400 million below local authorities' budgets in the current year and, therefore, far below their budgets for next year?

Is it not true that, after provision for inflation, the Government are asking local authorities to cut back by £1,450 million, or almost 7 per cent. in real terms? What will the Secretary of State say to the Conservative leader of the Association of County Councils, who described those ceilings as "unachievable" and entailing severe cuts in budgets and services"? Do the Government take pride in the prospect facing communities up and down the country of massive cuts in services that will affect those sections of the community least able to defend themselves—the elderly, children and young people, the disabled, the unemployed and those requiring council houses? The cuts will also affect house improvements in the public and private sectors, and provision for students in schools and colleges.

Does the Secretary of State refute the report of the expenditure groups, which predicted— I am using his figures — about 12,000 fewer teachers, 11,000 fewer residential places for the elderly and mentally handicapped, about 46,000 fewer home help visits, and 7,000 fewer police, reductions in concessionary fare schemes and fare rises above the rate of inflation?

Why has not the Secretary of State announced a supplementary report for 1982–83? What has he been doing with the local authority returns that have been held by his Department for many months? Does he admit that many local authorities were wrongfully penalised last year, and that he should hand over the money being withheld? For example, is it not the case that he owes the GLC and London's ratepayers about £100 million in grant for 1982–83? That money rightfully belongs to the people of London. Millions of pounds are owed to other councils up and down the country.

Does not the statement entail a reduction in support for areas such as south Tyneside, Hackney and Merseyside, where people are already carrying huge burdens as a result of the Government's policy? Is it not also true that every English county will be seriously affected by the Government's penalty system? That is what the Tory chairman of the ACC has said. As is made clear by the Secretary of State's letter of 8 December to the Prime Minister and his Cabinet colleagues, with briefing notes attached, of which I have a copy, the Secretary of State is now admitting that in real terms reductions are required from all local authorities, including those which have tried to meet targets in the past. Is not the most sinister prospect of all the anti-democratic nature of the Government's present policies and proposals for local government, which deny councillors and communities their right to choose? The stranglehold that successive Tory Ministers have placed on local authorities is to be further tightened to the point where budgets and rates will be dictated from Whitehall.

Not only do we reject and oppose today's statement, but we shall oppose the policy implications of central dictatorship that lie behind it and take the first opportunity, when in government, to free local authorities from these iniquitous restrictions and restore their constitutional freedom and rights.

Mr. Jenkin

As I have said, we shall have an opportunity to debate these matters when we discuss the rate support grant order in the new year. I shall do my best to answer the hon. Gentleman's questions. The House is entitled to know whether the hon. Gentleman supports the principle that the total of public spending is for the House to approve and for no other body—

Dr. Cunningham

The targets are impossible to achieve. Will not they mean the slashing of essential services?

Mr. Jenkin

No. The targets for next year are about 3 per cent. more than the targets for this year. That is not unreasonable in the present circumstances. Moreover, the targets are framed to put the most pressure on the highest spenders, many of which are authorities that have made no effort to reduce their spending levels. We know that there is substantial scope for making economies in such authorities without jeopardising reasonable service levels.

The hon. Gentleman asked me whether the targets represent a real terms cut. Neither the hon. Gentleman nor I can put a figure on that because it depends——

Dr. Cunningham

Why not? The right hon. Gentleman is a member of the Government.

Mr. Jenkin

The hon. Gentleman should know better. It all depends on how fast the costs of local government go up next year. Some 70 per cent. of local authorities' costs are for wages. If local government achieves low wage settlements this year, a 3 per cent. cash increase will mean only a small real terms cut. However, I do not disguise the fact that we are having to ask for economies across the board in local government and in the rest of the public sector.

The hon. Gentleman mentioned Hackney. Its problems are recognised by the Government. It is one of only three partnership authorities in London under the urban programme, which we are maintaining next year. Hackney has the highest GRE per head of any local authority in the country for social services, but one has to ask whether that justifies an increase in local authority manpower of 12.5 per cent. since 1979 compared with an average reduction in England of 4.3 per cent. Last year Hackney indulged in what is euphemistically called creative accounting, and in that way disguised its expenditure and minimised its holdback. Next year, Hackney's problems may well come home to roost.

The hon. Gentleman asked me about the 1982.83 supplementary report. Because the GLC hopelessly over-budgeted, there will probably be a substantial gap between its budgeting for that year and its outturn—[Interruption.] A margin of nearly £200 million between the GLC' s budget and what it spent is gross incompetence. [Interruption.] That will have to await the supplementary report for 1982–83.

There is shortly to be a timetabled debate and I think that some of the other questions of the hon. Member could be answered in the debate on the order.

Dr. Cunningham

May I remind—

Mr. Speaker

Order. Before I allow the hon. Gentleman to do so, may I remind the House that I have a duty to protect the following business, which inludes a ten-minute Bill which is to be opposed and a Bill under the timetable.

Dr. Cunningham

Will the right hon. Gentleman——

Sir William Clark (Croydon, South)

On a point of order, Mr. Speaker. I ask for your guidance. We have heard a Second Reading speech——

Mr. Speaker

Order. I fear that this will take up more time. I called the hon. Member for Copeland (Dr. Cunningham) to make a brief point.

Dr. Cunningham

As the Secretary of State's memory seems to be failing him, may I ask him to explain the words towards the end of his statement that he proposed to disregard increased expenditure on those community care schemes which are jointly financed". Does that not mean that existing expenditure will not be disregarded? What will happen to authorities where time-expired schemes come up in 1984–85? Will he fund them without penalising them?

Mr. Jenkin

I meant precisely what I said. I am sorry that the hon. Gentleman should be so churlish about a concession which will be welcomed by social service authorities. Where there is local authority spending on schemes that are jointly funded by the personal social services, or local authorities, and the National Health Service, any increase—

Dr. Cunningham

Just the increase?

Mr. Jenkin

Of course, that is what I said, as with the increase in spending on urban policy and civil defence. We have added a new category of disregard, and I had hoped that the hon. Gentleman would welcome it

Several hon. Members


Mr. Speaker

Order. In the light of what I have just said, and in the interests of Back Benchers and the business to follow, I propose to allow questions to run for half an hour from now.

Sir Bernard Braine (Castle Point)

I fully sympathise with the objectives of my right hon. Friend, but I wonder why a low-spending, well-administered county such as Essex, which for years has kept its expenditure under control, should be penalised because of the irresponsible behaviour of high-spending local authorities.

Mr. Jenkin

Like my predecessors, I have had to make it clear that when local authority current spending is so far in excess of the provision approved by the House we have to seek savings from all authorities. I accept that that is not always wholly fair, and I look forward to my hon. Friend's support for the Bill to cap the rates of the greatest overspenders. That may enable us to deal in a rather more relaxed way with those who have been budgeting responsibly.

Mr. Brian Sedgemore (Hackney, South and Shoreditch)

The cynical, contemptuous, inhuman and barbarous response of the Secretary of State to the problems facing the people of Hackney, which the Minister himself recognises as being the poorest borough in the kingdom, will be greeted with dismay in the local community. Is the Secretary of State aware that his statement may well ignite a fuse which will lead to disorder and the complete breakdown of local government?

Mr. Jenkin

The hon. Gentleman's extravagant language is unworthy of him. Since 1978–79 Hackney has increased its expenditure by no less than 154 per cent. That is substantially in excess of the class average for inner London authorities. As I said earlier, Hackney's problems are beginning to come home to roost. We have already recognised the conditions in Hackney through the urban programme and the highest GRE for personal services in the country.

Mr. Sedgemore

Go and live there and see what it is like. It is a disgrace.

Mr. Jenkin

The people of Hackney will object to the appallingly high rates which will be charged as a result of the council's profligacy.

Mr. Charles Morrison (Devizes)

Is my right hon. Friend aware that because of the demographic changes the shire counties will require an increase of 1 per cent. in expenditure to maintain services in 1984.85? If that and inflation are taken into account, a 3 per cent. increase in target expenditure must mean a cut in services, above all in the 14 most responsible counties out of 39 that are keeping to their target this year. Do the Government want a cut in services? We should be clear about that. If they do, will they give those local authorities more discretion about how to make the cuts?

Mr. Jenkin

It is Government policy to give expenditure guidance through the targets and support through the rate support grant for the totality of public spending. For the most part, we leave it entirely to local authorities to determine how they spend their money and where they make any savings necessary to keep within their public spending totals. I entirely understand the shire counties' problems, as I said to my hon. Friend the Member for Castle Point (Sir B. Braine) earlier. The Government must seek savings from all local authorities when the excess over the provision approved by the House has been so great. Again, I look forward to receiving my hon. Friend's support for the Bill designed to limit the rates of the highest spenders and so enable us to have a fairer system which will pay due regard to the needs of low-spending authorities which budget responsibly.

Mr. Simon Hughes (Southwark and Bermondsey)

Does the Secretary of State accept that all authorities will have real cuts and that during the past four years there has been a 9 per cent. cut in Government grant? The effect will be to place the burden on the ratepayers. The Government have no rate reform policy. Instead of bringing two nations together, which has been the duty of the Government over the years, the Government are driving the poorer places into greater poverty with greater rates while allowing other places to become relatively more affluent. The Government are bankrupt of policy and ideas. This is a dishonest way to mislead the House, local government officers and those people who are trying to do a good job in difficult circumstances.

Mr. Jenkin

The hon. Gentleman is correct. The Government have reduced the percentage of expenditure met by rate support grant over the period, because that will increase local government's accountability to local ratepayers and maintain the pressure on local government across the board to find the necessary economies. The grant rate for the current year was reduced by over 3 per cent., but the average rate increase was the lowest for five years. There is not necessarily a correlation between the one and the other.

Mr. Robin Maxwell-Hyslop (Tiverton)

Is my right hon. Friend aware that those of his right hon. and hon. Friends who regard the present rating system as an unjust form of taxation will be bound to vote against an order which increases the proportion of local government expenditure funded by inherently unjust taxation?

Mr. Jenkin

I am well aware of my hon. Friend's views on the subject of local authority finance, and he is, of course, entitled to his views. No Government have sought harder or more thoroughly than this Government to find an alternative system of local authority finance. As the Select Committee said, having examined the Green Paper and heard evidence about alternative forms of taxation, there is no alternative that appears to command any consensus. The Government, therefore, decided to stick to the rate system but to relieve the main problem, which is the sheer size of rates.

Mr. William O'Brien (Normanton)

Will the Secretary of State accept the general view of the House that this is a further attack on local government? Will he accept that what he has said today means further hardship for local government? If it is right to disregard expenditure on joint services with the health authorities, does he not accept that other services — caring services — have a similar background that should also be disregarded? Does he accept that what he has said today is a further admission that the Government have failed in their philosophy and in their promise to abolish domestic rates?

Mr. Jenkin

We recognise, of course, that the targets are tough, but, as I said several times already, the budgeted spending of local authorities is running far ahead of the amounts that have been approved by the House. In those circumstances, we must ask local authorities to make economies so as to keep the total spending in line with the total that this House approved as recently as last month. Many local authorities have shown that they can make savings by increasing efficiency, and without cutting services, and it is time that other local authorities did so.

Mr. Chris Smith (Islington, South and Finsbury)

Will the Secretary of State admit that his statement that the targets will be particularly tough on high-spending authorities reveals that the targets will be set purely on political grounds and will be totally unrelated to the genuine needs of people in those communities — the elderly, children, the disabled, and those who receive local authority services? Does he admit that he will not set targets in relation to those needs but rather according to his own arbitrary criteria?

Mr. Jenkin

On the contrary, the targets reflect the needs of high-spending authorities. The target methodology is based on the GRE, and many of those authorities have assessed needs under the GRE system which reflect the real social deprivation in their areas. I have already mentioned Hackney, and it applies to a number of other authorities. However, that does not justify those authorities spending in a prolfigate way, increasing their manpower, putting huge extra burdens on the ratepayers and then claiming that it is all necessary to relieve the social problems in their areas. It is not.

Mr. Fred Silvester (Manchester, Withington)

Does my right hon. Friend accept that he may have made great efforts to reform the rates but that he has failed to do so? It is surely wholly illogical to argue that a tax which we argued was thoroughly unsatisfactory and unfair should now carry a higher proportion of the burden. Does he accept that that is a totally unsatisfactory response?

Mr. Jenkin

I hope that my hon. Friend took comfort from the fact that the reduction in the proportion of expenditure met by grant is significantly smaller than the reductions that took place in recent years—indeed, it is less than 1 per cent. My hon. Friend will, I think., know that when that figure was put forward for consultation, it was greeted with some satisfaction by authorities which had been expecting a significantly bigger reduction in the proportion met by grant.

Mr. Barry Sheerman (Huddersfield)

On a point of order, Mr. Speaker.

Mr. Speaker

Well, points of order take time out of the question period. May we take it at the end?

Mr. Sheerman

In the interests of balance, Mr. Speaker, could you find someone on either side of the House to support the Minister?

Mr. Speaker

That is exactly what I feared.

Mr. John Evans (St. Helens, North)

Will the Secretary of State confirm that, as a direct result of his statement, the people of St. Helens can look forward, in 1984, to substantially increased rates, substantially reduced services and substantially increased unemployment?

Mr. Jenkin

These are decisions that the local authority in St. Helens, which I know faces formidable problems because it is part of my Merseyside responsibilities, must face. It now has the facts on the basis on which it can draw up its budget and make its decisions for next year.

Sir Anthony Grant (Cambridgeshire, South-West)

Is my right hon. Friend aware that councils such as Cambridgeshire, which over the years have exercised prudent financial control and have directly suffered in the RSG award as a result, nevertheless wholly agree with the need to curb the loony councils? Can my right hon. Friend, therefore, give a clear assurance that his rate-capping legislation will be directed to that end, and that as a result it will benefit responsible councils such as Cambridgeshire?

Mr. Jenkin

I am well aware of the problems of Cambridgeshire. The county is one of those whose target is on the maximum of budget plus 3 per cent. Moreover, its target is based on its GRE. For that reason, despite the fact that in the current year it had budgeted 2 per cent. over target, it still gets the maximum for next year of the 3 per cent. uplift on this year's budget. I am aware of the problems, and I can assure my hon. Friend that Cambridgeshire is exactly the kind of low-spending, economical and efficient authority that stands to gain once we have it in our power to curb the spending of what he referred to as the loony authorities.

Mr. John Mc William (Blaydon)

Will the Minister tell the House what advice he will give it when he hears from his right hon. Friend the Secretary of State for Education and Science that his inspectors are finding that local authorities are unable to provide under the Act because of the cuts that are being imposed in the order? Will he explain what will happen in Gateshead, an authority that was threatened in such a way just two years ago and which, as a result of the order, will have to cut by at least 4p in the pound to meet his requirements, but will not be able to meet the requirements of the Secretary of State for Education and Science?

Mr. Jenkin

As I think the hon. Gentleman knows, many authorities have found effective ways to cope with cuts in education without restricting services. Perhaps I might quote what the Audit Commission said recently, in its handbook "Economy, Efficiency and Effectiveness", on the subject of further education. It said: Many previous studies have shown that there are often significant opportunities to increase the number of students and reduce costs without adverse effects on the quality of education It went on: The studies have shown wide and inexplicable differences in the ratios of non-teaching staff to students and there is repeated evidence of opportunities to reduce other overhead costs". I hope that authorities will take those opportunities.

Mrs. Angela Rumbold (Mitcham and Morden)

Although I understand my right hon. Friend's need to contain local authority expenditure within the public expenditure limits, may I ask him to say whether, if the 16 profligate authorities had not been so profligate, the remaining 140 or so authorities might have had a more flexible rate support settlement this year?

Mr. Jenkin

My hon. Friend is quite right. If we did not face the massive overspend by the 20 per cent. of authorities which are spending miles above their targets, we would not have had to seek the savings that we do across the board. I look forward to my hon. Friend's support for our legislation to cap the spending of the highest spending authorities.

Mr. Allan Roberts (Bootle)

Will the Minister finally admit that this rate support grant settlement is not an attack on overspending authorities but an attack on those in need of the services provided by local authorities throughout the country, and that it is a worthy Christmas present from this Government to those in need? Does he accept that if Charles Dickens were alive today, he would say that Tory fact is stranger than even his fiction? What advice would he give to those authorities that will go bankrupt as a result of the Government's cuts in rate support grant?

Mr. Jenkin

I hope that no authority will be so silly as to do that. There are plenty of authorities, with majority parties of all political persuasions, which have responsibly and effectively faced the task of living within their targets. Such authorities form 80 per cent. of the whole, and they include Labour-controlled authorities, many of which have the problems to which the hon. Gentleman referred. They have budgeted responsibly and kept their spending within the targets. They will not lose rate support grant as a result. I hope that more will follow their example.

Mr. Peter Thurnham (Bolton, North-East)

Will my right hon. Friend confirm that the purpose of his measures is to control a small number of high-spending Labour authorities and that the majority of responsible and moderate authorities should welcome the forthcoming Bill for that very reason?

Mr. Jenkin

I am grateful to my hon. Friend for his remarks. It is a case that I have been trying to make to the local authority associations.

Mr. Ron Leighton (Newham, North-East)

Is it not true to say that rates as a percentage of national income have fallen while Government expenditure has increased? As the Government are cutting the rate support grant, does that not really mean that they are financing Government expenditure by rates rather than by taxes?

Mr. Jenkin

The hon. Gentleman has got it all wrong. Those comparisons are hardly relevant. The Government have had to finance through the social security budget an increasing number of elderly people while local government is now having to educate substantially fewer children because of falling school rolls. In those circumstances, one might reasonably have expected to see local authority current spending falling instead of rising. It is in order to bring pressure on authorities to keep their spending under control that my predecessors devised the system of target and holdback.

Mr. Tim Rathbone (Lewes)

Does my right hon. Friend accept that on the Conservative Benches and in the country there will be a general welcome for the increased disregard for jointly financed schemes, which are important to many groups of people who need most help from local authorities? Has he had any conversations with the Opposition spokesman as to what limit he would have set on local authority spending, as he said, when interviewed on radio earlier this week, he would have set a limit?

Mr. Jenkin

Perhaps the Opposition spokesman will tell us in the debate next January whether he still subscribes to the view expressed in a circular of the last Labour Government that local authorities will know that the present economic situation makes it imperative that the Government's plans for public expenditure are not exceeded. That is what the Labour Government said when they were in office.

I am grateful for my hon. Friend's welcome for the disregard for increases in joint-funded expenditure.

Mr. Robert Parry (Liverpool, Riverside)

The Secretary of State will be aware of the massive support given last year to the Liverpool Labour party in the local elections. The Labour council is now trying to sort out the shocking mess that was left by the Tory-Liberal coalition. If the city council does not keep within the Government's targets and the Minister sends in commissioners, he will be acting like a gauleiter or a commissar.

Mr. Jenkin

As I have said many times, I have no power to send in commissioners. Perhaps the hon. Gentleman could convey to his friends in the majority group on the Liverpool city council that I hope that they are taking the most careful legal advice before they go down the path on which they appear to have embarked.

Mr. Nicholas Winterton (Macclesfield)

Does my right hon. Friend accept that his announcement this afternoon completely ignores the sacrifice and responsibility of those many local authorities, such as the Macclesfield borough council, which have met the requests of successive Governments, have dipped into balances and have kept their rates low? In the debate which is to be held in January next year, will he introduce some flexibility so that the points made by Conservative Members will be met and that those authorities that have been responsible will not be further penalised in the future?

Mr. Jenkin

I must point out to my hon. Friend that the differentiation between the targets we are setting for high-spending authorities and those which have budgeted responsibly is wider in this rate support settlement than ever before.

Mr. Maxwell-Hyslop

It still penalises low spenders.

Mr. Jenkin

That is because we must ask for savings from all authorities in view of the massive excess of current spending over the sums approved by the House. That is the reason, and I hope that my hon. Friend the Member for Macclesfield (Mr. Winterton) will recognise that we have made an effort to be fairer, as many of my hon. Friends have sought, in widening this differentiation.

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

Is the Secretary of State aware that when Labour took control of Cumbria county council in 1980 we inherited £1 million in balances from the Tories which we have converted into £10 million today as a result of prudent housekeeping? If it were not for those balances, in order to meet the Government's targets we would have to sack 1,000 people. Is that really the Government's intention? Should not the Secretary of State congratulate the Labour-controlled Cumbria county council on good housekeeping and on avoiding the Government's ravages.

Mr. Jenkin

I had the pleasure of visiting Cumbria with the hon. Gentleman only last week. I saw something of what the county council is doing in the reclamation of west Cumbria. I expressed my praise for that. We did not get involved in the subject of the county council's spending. Cumbria is now one of the highest-spending shire counties and it is not unreasonable that it should be asked to make economies which will keep its spending within the reasonable target which we have set.

Mr. Peter Bottomley (Eltham)

Does my right hon. Friend accept that a number of ratepayers in my constituency suffer under at least three of the high-spending Labour councils — the GLC, ILEA and Greenwich — and that they look forward to getting effective control over the high rates, which have more than trebled in the last four increases, and to great support for the rate-capping proposals so that jobs can be created outside the county councils and ratepayers can afford to live within their areas?

Mr. Jenkin

Greenwich has a bad record, with a 113.6 per cent. increase in expenditure since 1978–79 against an increase in local authority costs of less than 80 per cent. Its rates have increased in the past three years by no less than 77 per cent. There must be businesses in my lion. Friend's constituency which have gone bust as a result of that. I am grateful for my hon. Friend's support for our legislation.

Dr. Oonagh McDonald (Thurrock)

Is the right hon. Gentleman aware that, even on current levels of spending, Essex is spending far too little on education and that the Secretary of State for Education and Science has advised Essex to spend more? Why has the right hon. Gentleman ignored the advice of his Cabinet colleague and the pleas of all his right hon. and hon. Friends representing Essex for more money to be made available for the county?

Mr. Jenkin

Education in Essex is a matter for my right hon. Friend the Secretary of State for Education and Science. The Essex authority has made its view clear to the Government. We have taken account in the statement of the representations made to us. The authority in Essex has a number of problems, but it also has a great deal going for it. I think it will find on reflection, particularly with the modifications I have announced in the settlement, that it is really quite a fair settlement.

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

Does my right hon. Friend still think that there is a need to make councils into elected quangos? We now have the bludgeon of the rate settlements, which work out to be tremendously unfair. Does he really think that making councils elected quangos is not telling people that rates will be able to fall more than they really are? Is he not making a rod for his own back as well as taking away democracy from people who have elected to serve?

Mr. Jenkin

Perhaps the arguments on the merits of the proposed legislation are for another occasion. I think that my hon. Friend is using, if I may say so, extravagant language in suggesting that a local authority whose expenditure will be subject to a cash limit is being turned into a quango. It will remain elected and it will have a wide measure of discretion about how it spends the money available to it. Those who argue that this is the end of local government are taking it too far.

Mr. Derek Foster (Bishop Auckland)

Is the Secretary of State aware that, by his hysterical attempts to control the expenditure of a few local authorities, he has brought us to the threshold of constitutional crisis, which is deeply worrying to many hon. Members on his own side? In a country that is already over-centralised, is he not in danger of sweeping away the last vestige of local democracy? In an area such as Durham, which has high unemployment and increasing poverty, he will be cutting back services for those who can afford it least.

Mr. Jenkin

The argument about a constitutional crisis is absurd because for years all authorities have followed the convention that spending should remain within the total approved by the House. We are now faced with a minority of local authorities that have cast that convention to the winds, and in these circumstances the Government have a duty to legislate.

Mr. John Maples (Lewisham, West)

Does my right hon. Friend agree that many local authorities could make substantial savings without affecting services by a combination of better management and the elimination of frivolous political expenditure? Is he aware that in my authority, one of the bad 16, we not only employ a borough artist but we spend £130,000 a year on sexism awareness training?

Mr. Jenkin

My hon. Friend has given examples of the kind of spending by some high-spending authorities that has brought local government into disrepute and has been widely condemned by many, even by those who call themselves Labour supporters. It is possible to make efficiency savings and I commend to the House the Audit Commission's handbook, which points to a whole range of measures available to local authorities to save costs.

Mr. David Penhaligon (Truro)

Will the Minister confirm his view that the GRE represents the real social needs of a local authority? If that is so, why was Cornwall fined £800,000 last year when it is the second lowest-spending county authority in the United Kingdom and way below the GRE? Why is he looking for further cuts this year despite Cornwall's clear underspending record?

Mr. Jenkin

GREs have never been seen as targets. They are a notional assessment of the cost of providing common standards of service, which is made for the purpose of distributing the block grant.

Mr. Penhaligon

Cornwall is 6 per cent. below that.

Mr. Jenkin

The basic methodology for fixing the targets starts with the higher of the GRE and the target for this year so that the comparison is based on the GRE for this purpose. [Interruption.] The hon. Member for Truro (Mr. Penhaligon) keeps waving his hands while I am seeking to answer his question. The fact is that the aggregate of the targets has to add up roughly to the figure for total current expenditure in the autumn statement. Cornwall is in the same position as many other authorities which, although low spending, have been asked to make savings so that we can hope to claw back the figures nearer to what the House has approved.

Mr. Andrew Rowe (Mid-Kent)

Does my right hon. Friend agree that the only sensible alternative to controlling the high-spending authorities is to reduce the number of functions over which local government has direct control? Does he accept that on that premise he will receive the reluctant support of a number of his anxious hon. Friends, provided that he will also assure us that frugal authorities will have to tighten their belts for only a comparatively short time?

Mr. Jenkin

I hope that I can give my hon. Friend that assurance.

Mr. Eric S. Heifer (Liverpool, Walton)

The right hon. Gentleman has responsibility for Merseyside, as he is supposedly the Merseyside Minister. How can he honestly say that the Merseyside local authorities, and Liverpool in particular, are overspending local authorities when there is great social need in that area because of the high levels of unemployment, the poverty and deprivation, and the terrible conditions that masses of our people live in? How can the right hon. Gentleman say that an area such as Merseyside has overspent? Is it not clear that once again, according to the figures in the document issued through the Vote Office, that area is being hammered? It cannot possibly reach the suggested targets, and whether the right hon. Gentleman likes it or not he is storing up a great deal of trouble that could be avoided and that he should go out of his way to avoid in order to deal with the social needs of the area.

Mr. Jenkin

The hon. Gentleman may be aware that I answered a parliamentary question the other day about the substantial—running into hundreds of millions of pounds — Government aid that has been given to Merseyside in the past two or three years, far more than has been given to any other part of the country. That is as a result of the Government's recognition of the problems of Merseyside. That does not absolve the local authorities on Merseyside from seeking to budget sensibly, economically and efficiently to try to live within the targets, which take account of the social needs of the area.