§ The Secretary of State for Wales (Mr. Nicholas Edwards)
With permission, Mr. Speaker, I wish to make a statement about the Welsh rate support grant settlement for 1984–85.
I have today announced to the Welsh consultative council on local government finance the details of the 1984–85 rate support grant settlement. Copies of the text of my statement to the consultative council have been placed in the Library of the House. The rate support grant report will be laid before the House after the recess and will be debated in the usual way.
The main features of the 1984–85 settlement confirm the intentions I announced in November. They must be seen in the context of the Government's continuing commitment to secure reductions in public expenditure. The total of relevant expenditure provision accepted for grants is £1,440 million. That comprises £1,253 million for current expenditure and £187 million for non-current items. Aggregate Exchequer grant will be £996 million, consisting of £138.8 million for specific grants, £31 million for transport supplementary grant, £1.9 million for national parks supplementary grant and £824.3 million for the rate support grants. Domestic rate relief is unchanged at 18.5p in the pound, which costs £25.3 million, leaving £799 million for distribution as block grant.
The settlement is a fair one. Current expenditure provision, after allowing for the 1.5 per cent. reduction in authorities' national insurance surcharge from next April and the way in which housing benefit administration costs are now counted for rate support grant purposes, is £57 million or 4.8 per cent. more than the provision underlying the 1983–84 settlement.
Aggregate Exchequer grant at £996 million is £21 million or 2–2 per cent. more than the aggregate Exchequer grant provision in the main rate support grant settlement for the current year. Even more important for rating purposes, it is £36 million or 3.8 per cent. higher than the amount authorities have included in their budgets for the present year.
As in the present year and the preceding one I have set individual authority expenditure targets. Experience has shown that these are helpful to authorities in providing a degree of certainty of grant entitlement for spending at target and clearly exert a significant influence on expenditure decisions. In the light of the views expressed by the two Welsh local authority associations I have retained the same method for determining next year's expenditure targets as that used in the current year. This enables me to withhold grant in an equitable way by ensuring that the amount of grant withheld from an authority is directly related to its own overspending and not to the expenditure decisions of other authorities.
The targets I have set are very tough for some authorities—but are reasonable for all. Every authority's target gives a cash increase in its current expenditure: the minimum increase is 1.5 per cent. and the maximum 6 per cent., after making allowance for the reduction in the national insurance surcharge next year and a modest amount of budget drift.
The grant withholding penalty for spending in excess of targets has been strengthened. As in the present year, the amount of grant withheld for excess expenditure up to 274 1 per cent. above target is 40 per cent. of that excess, but above that level the rate of holdback increases progressively with a maximum rate of 90 per cent. for authorities spending 5 per cent. or more above target: this compares with a maximum rate of grant withholding in the current year of 75 per cent. at 6 per cent. spending above target. I am retaining the grant protection arrangements already adopted whereby any authority spending at or below target will be exempted from both grant holdback and close-ending. Similarly, the limitation of grant holdback for low rateable resource authorities set in the present year will be retained for 1984–85.
Block grant will be distributed in accordance with the grant-related expenditure formulae agreed by the Welsh local authority associations. I have decided to retain the existing block grant mechanisms which determine the distribution of block grant before holdback and the same safety net for limiting grant losses associated with changes in GRE—a maximum 4p loss at the county level and 1p loss at the district level.
There is a continuing need for restraint in local government expenditure. Some progress has been made on this front, but there is still some way to go. Since 1978–79 local government current expenditure in Wales has risen by about 2 per cent. more than the increase in costs for the economy as a whole. We must reverse this trend. The realistic increases in expenditure provision and aggregate Exchequer grant for 1984–85 should enable authorities to maintain reasonable service standards provided pay settlements are kept down and authorities continue and reinforce their efforts to secure greater efficiency and economy and better value for money. In this respect I note that the latest joint manpower watch figures, which are being released today, confirm that staff numbers in Wales have risen by about 1,000 over the 12 months to last September. This alone must have cost ratepayers about £15 million in the current year, after making allowance for the effect of grant holdback. Clearly, if authorities are to meet their targets for next year, this growth of manpower must be reversed. I appreciate, of course, that authorities have difficult choices of priority to make but that applies in all areas of public expenditure, including my own programmes.
What happens to rates next year will, of course, depend on the decisions of authorities themselves. Here I will simply make two points. Authorities can on average increase their net revenue expenditure next year by nearly 4 per cent. and still spend in line with targets. If authorities spend at this level and apply only half of the balances they have applied in the present year, rate increases will average only 1 per cent. Indeed, rates could fall if authorities applied balances to the same extent as in the current year.
These figures are a very far cry from some of those which have been bandied about — for example, the average rate increase of 17 per cent. reported in the press. I regard that figure as wildly exaggerated and simply do not believe it. It would imply about a 7 per cent. increase in net revenue expenditure, which I am sure authorities in general will not seek to impose on their ratepayers. Furthermore, rates this year on average rose by less than 1 per cent. despite earlier local authority forecasts—and forecasts by Opposition Members — that average rate levels in Wales would be into double figures.
I conclude by repeating that the settlement is fair and reasonable. I am confident that local authorities, like the 275 Government, want to keep rate increases down to the absolute minimum. Low rate increases benefit all sectors of the community: industry, commerce and domestic ratepayers alike. It is now for each local authority to take its own spending decisions in the light of the settlement provision and of the effect of its decisions on ratepayers as a whole.
§ Mr. Barry Jones (Alyn and Deeside)
Is the right hon. Gentleman aware that many leading local authority members question the value of the Consultative Council when, as in this authoritarian statement, he seems to take little account of any of its recommendations, which have been brushed aside in haughty ministerial style? Does he agree that the level of relevant expenditure contains a miserably inadequate allowance for both inflation and the ever-increasing demand for services as it is only 4 per cent. higher than the figure for the current year and a paltry 2–75 per cent. higher than the authorities' budgets for the current year? Having set a grimly unrealistic expenditure level, has he not also increased the problems of local authorities and their ratepayers by reducing the rate of grant, thus in a single act pushing rate bills 4 per cent. higher than they would otherwise be?
On penalties and targets, does the right hon. Gentleman accept that it is a flagrant injustice to impose even more impossible targets and even tougher penalties on authorities which cannot cut priority services and which have genuinely tried to restrain expenditure? How can local elections ever again have real meaning? Does the right hon. Gentleman appreciate that the cumulative effects of the settlement will guarantee substantial average rate increases and that unless authorities cut their services significantly and/or take large sums from working balances, average increases may rise well into double figures?
This is a black day for local government in Wales. The settlement and the new Bill show that the freedoms of local government are at risk and that the Government are advancing towards bureaucratic dictatorship, forcing dedicated councillors to be the executioners of their own services. Increasingly there is a flavour of the colonial governor about the Secretary of State. That style is not appreciated in Wales.
§ Mr. Edwards
The hon. Gentleman's predecessor, speaking from the Dispatch Box on the same occasion last year, made exactly the same forecast of double figure rate increases. In fact, rate increases in Wales have averaged less than 1 per cent. I believe that the hon. Gentleman's exaggerated claims this year will prove equally unfounded. Increases of 17 per cent. would mean that local authorities were increasing spending by about 7 per cent. —well above any likely rate of inflation—and making no use of balances. Balances are currently about £100 million. It is therefore absurd to suggest that local authorities will do any such thing.
The hon. Gentleman referred to the value of the consultative council. I realise that local authorities would like a larger share of resources provided by the taxpayer, but the Government and the House are responsible for the totality of public spending, for the very large sums of general tax revenue given to the local authorities and for the interests of ratepayers, many of whom cannot effectively protect themselves at local level from the rate increases imposed on them.
276 The hon. Gentleman spoke about the adequacy of the relevant expenditure provision. As I said in my statement, the amount counting for rate support grant purposes is 4.8 per cent. more than the provision underlying the 1983–84 settlement and is nearly 4 per cent. more than the estimated outturn. It is absurd to pretend that that imposes impossible targets.
The hon. Gentleman also mentioned penalties and said that they were impossible. That is exactly what was said last year, yet 32 out of the 45 authorities achieved. without penalty, the targets which I set. It is in the interests of industry, ratepayers and the economy in general that local authority expenditure is kept within reasonable limits. I am confident that Welsh local authorities will be able to provide a high level of services within the expenditure figures that I have announced.
§ Mr. Tom Hooson (Brecon and Radnor)
My right hon. Friend's announcement of cash increases for every Welsh local authority will be most welcome. However. among rural authorities there will be some disappointment that we shall have a third year with the same GRE basis for the allocation of grant. Is it not time, as we approach the fourth year, that there was consultation between the Welsh Office and Welsh local authorities on a review of that grant as there are factors such as sparsity which are inadequately reflected in the present formula?
§ Mr. Edwards
I suspect that it will be suggested later that the interests of areas of heavy population are inadequately represented. I was specifically asked to maintain the same system this year but I have already agreed with local authorities to enter discussions about the formula that we shall use next year. We continue to keep in close touch with local authorities and to discuss these matters and will do so in the coming year.
§ Mr. Donald Coleman (Neath)
The right lion. Gentleman said that rates in Wales increased by only 1 per cent. last year. What, therefore, is the reason for the draconian measures that he has announced today? Why do we have this announcement year after year, and why is he continuing to try to continue to destroy local democracy?
§ Mr. Edwards
Welsh local authorities spent £27 million above the provision which was made last year. We have made it absolutely clear that the Government must set the total level of expenditure by local authorities in the national interest and in consideration of our economic objectives. In setting the targets, we are trying to constrain the totality of local government spending.
§ Mr. Keith Raffan (Delyn)
Does my right hon. Friend agree that there is considerable scope for overspending authorities to make the necessary economies without cutting services? Will he continue to highlight authorities that have excessive manning levels so that authorities such as Clywd do not get away with cosmetic reductions in manpower such as those of the past five years during which time it has reduced full-time staff by 235 while increasing part-time staff by 461, twice as many?
§ Mr. Edwards
I am as worried as my hon. Friend about the increase in local authority manpower in the past 12 months. It is nonsense to suggest that it is impossible to maintain all services if, at the same time, local authorities — especially the Welsh counties — increase manpower as they have done. The Audit Commission recently made some interesting comments about the scope 277 for saving and improving efficiency in local government. I do not believe that anyone who knows local government, which is a substantial employer, believes that it is not possible to achieve more improvements in efficiency.
§ Mr. Dafydd Wigley (Caernarfon)
Will the Secretary of State admit that beneath the myriad of figures that he has just announced he is really shifting the buck again from the central Exchequer to the local exchequer? Does he agree that rate-borne expenditure will increase from 29.6 per cent. to 31 per cent. of total expenditure, whereas centrally borne expenditure will decrease from 70.4 per cent. to 69 per cent.? Does he agree that that will inevitably entail at least a 5 per cent. increase in rates before anything else starts?
Will he confirm that the GRE for Wales is close to the target for Wales but that there are many authorities for which the target is substantially lower than the GRE? For those areas, will he consider ensuring that clawback is not used unless those authorities overspend their GREs and not simply their targets?
§ Mr. Edwards
The suggestion is always made that, if we reduce the level of central Government contribution, rates will go up substantially—the hon. Gentleman used the figure of 4 or 5 per cent. The same thing was said last year when we cut the grant level by 2 per cent., but rates went up by under 1 per cent. It does not follow that a reduction of RSG such as we have made will produce the rate increases that he and the hon. Member for Alyn and Deeside (Mr. Jones) suggested. There is still room for other switches and improvements in efficiency. As I said in my statement, those authorities which do not exceed their targets will not be liable to clawback and penalty.
§ Sir Anthony Meyer (Clwyd, North-West)
Is my right hon. Friend aware that even the hon. Member for Alyn and Deeside (Mr. Jones), who presumably had some advance notice of this statement, was unable to do anything but flounder feebly, and for the rest of us, wishing to comment intelligently on something of great importance to Wales, it is extremely difficult to react successfully to a complex statement? None the less, will my right hon. Friend persist in his firm line in obliging local authorities to cut their expenditure to the bone? They will scream, but in the end they will comply, to the benefit of ratepayers.
§ Mr. Edwards
On the complexity of the RSG system and the announcement, I sympathise with my hon. Friend, but there will be a full opportunity to debate the settlement when we return in the new year. It is right that the Government should set out central economic objectives clearly and should look to local government to carry out those requirements. It is for local government to choose its own priorities and make its own decisions about what is necessary at local level within the totality of what we allow, and taking full account of the rate burdens imposed on local ratepayers.
§ Dr. John Marek (Wrexham)
Will the Secretary of State do the House a service by clarifying the position so that the House is not misled? Will he accept that rates will have to go up, and if they only go up to the extent that he estimates, the result will be a cut in the services provided for the people in Wales? Will he also accept that the statement will be viewed with despair and dismay by the 278 people of Wales, who overwhelmingly did not vote for his party in the last general election? Is there not a logical conclusion to his centralist and Stalinist policies for local government, which is—he may well ponder on this—that he could achieve greater saving by dispensing with elected councillors altogether? Will he announce plans to do this?
§ Mr. Edwards
The hon. Gentleman talks about rate forecasts again, but local authorities could maintain services, and, if they use their resources efficiently and their balances on a modest scale, there should be very small rate increases. That was the forecast that I made last year and it is reasonable to make it again this year. The suggestions that have been made about large rate increases are alarmist and unfounded.
§ Mr. Stefan Terlezki (Cardiff, West)
I am grateful to my right hon. Friend for his announcement, and I listened carefully to its details. I find it ludicrous that there has been an increase in staff of 1,000 in the past few years, at a cost of £15 million for local authorities. Surely to God, that money could be used for much better purposes—for example for old age pensioners, schools, roads and many other facilities that need that money. What is more, it is tragic to think that out of the 45 local authorities, 32 are on target but 13 are not. Why are they not? Simply because they are bad housekeepers.
§ Mr. Edwards
In fairness to local authorities, some of them have tough targets, and I do not underestimate the difficult choices that have to be made. However, at a time when they are having to make difficult choices and seek improvements in efficiency, they have increased manpower over the past 12 months. There has been an increase in local government current expenditure since 1978–79 of 2 per cent. above the increase in cost for the economy as a whole. Against that background, no one can suggest that local government is being cut to the bone and that what we are asking is impossible.
§ Mr. Alex Carlile (Montgomery)
Does the Secretary of State realise that the statement will be perceived and understood in Wales in this way: first, that all authorities will face cuts in real terms; second, that poorer areas will be driven to greater and real poverty; third, that in rural areas the sparsity factor, which the Secretary of State cannot dismiss with a sneer, is being totally ignored; and fourth, that the effect of his statement will be the reduction of already declining standards in Wales to standards that will be unacceptable to many local authorities, let alone their electors?
§ Mr. Edwards
I do not accept any of the hon. Gentleman's statements, and I certainly did not dismiss the sparsity factor with a sneer. It is the outcome of detailed discussions with the local authority associations, which agreed through the consultative process on the factors to be taken into account and the weight to be given to them. As I said, I agreed with the local authority associations that we can look at these and other factors again. I note that during the period of this Government, a time when expenditure by local authorities has risen faster than the general increase in costs in the country as a whole, the rate increases have been vastly lower than during the period of the Labour Government, who were supported by the hon. Gentleman's party.
§ Mr. Brynmor John (Pontypridd)
Will the Secretary of State list the authorities that are being set the toughest targets under his rate support grant settlement? Secondly, as he thinks that the increase in local authority staffing should be reversed—he said so specifically—is he not thereby taking the initiative out of the hands of local authorities, and by how much should the staff be cut overall in Wales next year, to meet his targets?
§ Mr. Edwards
I have not set a specific target of manpower reductions for local authorities. I pointed out that the increase that took place during the past year probably meant an addition of £10 million or £15 million in ratepayers' costs. If local authorities say that they face difficult choices about priorities, I hope that they will try to get the manpower savings that I think are possible. The health authorities in Wales are getting an additional £2.75 million in priority services by achieving manpower reductions. If it is possible to achieve manpower reductions in the health service, it should be possible to achieve manpower reductions in local government as well.
§ Mr. Peter Pike (Burnley)
Does the Secretary of State agree that there is a serious flaw in his statement and in the answers that he has given this afternoon? He said several times that one could use the balances. Surely, once the balances have been used, or they reach certain levels, one cannot keep using them year after year? So local government in Wales would be faced with only one alternative — either to cut services, or to have major increases in rates. They cannot keep using balances year after year.
§ Mr. Edwards
As I said, at present the balances in Wales total about £100 million, and there is probably room for some use of balances. In giving the figures, I suggested that local government might consider using balances for about half the rates that they thought appropriate in the current year. I also said that, even if they did not use 280 balances, the rate increases, in our view, could be comparitively low. There is a great deal of scope for local authorities to take their own decisions on these matters, and I hope that in doing so, they will consider the interests of their ratepayers, particularly their industrial ratepayers, on whom future employment prospects so much depend.
§ Mr. loan Evans (Cynon Valley)
Does the Secretary of State realise that his statement is a further attack upon people, their services, Welsh communities and the democratic control of expenditure at local level? That is particularly so when the statement is made on the very day that the Rates Bill is published. That Bill covers Wales as well as England and comes on top of the restrictions already imposed in Wales on local authority capital spending. Is the Secretary of State aware that the cuts will hit hardest the sections of the community least able to protect themselves — the elderly, children, young people, the disabled, the unemployed and those waiting for a council house? Is he aware that local authorities have increased their manpower recently to meet the increased need?
Does the Secretary of State realise that his policy will place a greater burden on ratepayers if authorities are to maintain existing services? Does he realise that the demands on local authorities made by high unemployment, increasing poverty and deprivation caused in recent years by this Government are not met by his statement?
§ Mr. Edwards
I note that the hon. Gentleman has made many vague and wild generalisations. He listed some of the priorities with which local government must contend. I cannot believe shat local government will choose to make its savings on priority services. I presume that it will seek to make a judgment about which services are most important. As the Audit Commission report clearly reveals, there is plenty of scope for substantial improvements in local government efficiency.