Rate Support Grant

HC Deb 20 January 1983 vol 35 cc504-70

5.1 pm

The Secretary of State for the Environment (Mr. Tom King)

I beg to move, That the Rate Support Grant Supplementary Report (England) 1982–83, which was laid before this House on 16th December, be approved.

Mr. Speaker

With this it will be convenient to discuss the motion: That the Rate Support Grant Report (England) 1983–84, which was laid before this House on 17th January, be approved.

Mr. King

These reports come after nearly four years of steady pressure for restraint in local government spending which has led to a new understanding in local government about the need for current spending to be kept to levels that the nation can afford. There is a growing realisation of the strains that uncontrolled spending impose not just on the householder but, in particular, on business and commerce. It is that new and realistic approach that I want to encourage.

The proposals in the report are designed to encourage further restraint while allowing efficient and responsible authorities to provide a good standard of service at reasonable cost. The central concern must remain the enormous influence that local government expenditure has in the economy as a whole. In 1983–84, the year ahead, local government is expected to spend some £22,000 million on services, mainly in the form of salaries to its employees. Central Government—of course, that means the taxpayer—will contribute to that expenditure about £12,000 million of grant assistance. In that context, no Government could fail to honour their responsibility to set the boundaries of expenditure within which local government should operate.

The purpose of the two reports is to set the parameters for 1983–84 and to confirm the measures to hold back grant from those authorities that are budgeting to overspend both grant-related expenditure and targets in the current year. The supplementary report makes some minor adjustments to grant entitlement that mainly reflect reductions in interest rates. However, its main purpose is to confirm the principles of block grant holdback for 1982–83.

The total holdback for 1982–83, on the basis of local authority budgets, is £308 million. All the authorities that may suffer holdback had clear warning of the consequences that they would face if they increased expenditure above the levels that the majority found necessary. In deciding to reject the Government's request for economy, there could have been no misunderstanding about the consequences for the individual authority. I shall return to the subject of holdback in 1982–83 later, because some things may have changed. However, the tragedy is that the expenditure plans and decisions of some authorities that will incur holdback were clearly taken in a spirit of political dogma. The last to be considered were those—individuals, families and firms—who would ultimately have to meet the bills.

There are three main elements to the report for 1983–84: expenditure, grant, and the holdback proposals for those overspending their targets. On current expenditure, if authorities are prudent, the cash available next year should be about 5 per cent. more than spending this year. That is tough, but reasonable. It implies a continuing need for economies in current expenditure.

We are providing £11.8 billion of grant for 1983–84. That is £300 million more than the curent year. It represents 52.8 per cent. of relevant expenditure compared with 56.1 per cent. last year. We have made no major changes to the way in which grant-related expenditure is assessed, and the basic grant distribution mechanism is unchanged.

However, this is the first settlement that incorporates data from the 1981 census. I know that that will be welcomed, in particular, by those in expanding counties. I note the presence of my hon. Friend the Member for Buckingham (Mr. Benyon). We are conscious of areas such as Milton Keynes in Buckinghamshire and of the problems of expanding populations. The incorporation of the census data and their further updating represent a significant step forward in correcting the under-assessments of previous settlements. However, I also recognise that, because of the inevitable lags in the data, that problem has not been fully solved, and we shall give it further thought.

Mr. Eldon Griffiths (Bury St. Edmunds)

I am grateful to my right hon. Friend for his remarks and for the understanding that he has shown about the way in which the 1981 census can help in growing areas whilst still not entirely meeting the problem. I hope that he will bear in mind that it is difficult to explain to rapidly growing counties why they should get less on the grant-related expenditure assessment formulae than they might otherwise get.

Mr. King

I accept that there is a problem. Given my hon. Friend's constituency and his good understanding of such issues, I realise why he has risen on the subject of expanding counties and the problems of changing populations. No doubt other hon. Members who represent authorities with declining populations and, in particular, with rapidly falling school rolls, will advise the House about the difficulties of making immediate and equivalent reductions in education expenditure. Indeed, I seem to have struck a chord with some hon. Members. It is a question of balance. However, I hope that that brief exchange demonstrates that I am very conscious of the issue and of the need to tackle it.

The final target figures were issued to all local authorities in December, but only minor changes were made to the July figures, and all of those were increases. Local government—I am grateful to it—has given an appreciative welcome to the fact that it has had more notice this year than ever before of the likely settlement for the year ahead. We have received representations from local authorities but it is no good receiving the first intimations in January, by which time budgets must be made and rate fixing carried out. That is why I was determined and pleased that we achieved last July as the date at which to give the first guidance of the probable shape of this year's settlement. That will undoubtedly help local government.

Under the system of targets for the year ahead, our proposals are that most low-spending authorities should have a 4 per cent. increase in cash over their budget for this year, but that most high-spending authorities should be expected to make a 1 per cent. cash reduction from their budget this year.

The House will immediately recognise—many hon. Members could have reminded me if I had not mentioned it—that all authorities are invited to make economies, whether they be the lowest or highest-spending authorities. The highest-spending authorities are being asked to make overwhelmingly the largest contribution. That is right, and I am sure that many of my hon. Friends recognise that the highest spenders have more scope to reduce their consumption. Unless they do, the holdback scheme will bite hard in the coming year.

There can be no misunderstanding about either the intention or the detail of our proposals. The report describes in detail the proposed holdback scheme. During each of the first 2 percentage points of spending above target, grant will be reduced at the rate of 1p at ratepayer level for each 1 per cent. of overspend. For authorities which deliberately decide to spend more than 2 per cent. above the target, the grant will be reduced at the rate of 5p for each 1 per cent. That is very tough, and rightly so.

There is no need for any authority to suffer holdback at this higher penal rate. If they decide to do so, individual councillors will have made those decisions.

The report has been revised since December to make it clear beyond all doubt that the 1983–84 holdback scheme is continuous and will apply to all levels of spending above target. That has always been the intention, and local authority associations were well aware of it; but it was suggested to us that the wording of the earlier version of the report could be ambiguous. To avoid any misunderstanding, therefore, I have today tabled a new version of the report.

In the past three years we have seen many fierce arguments between central and local government about the change in direction that has been necessary. Together with virtually every other major industrial nation, we have tried to reduce spending on consumption, which has been financed in the past only at the expense of savage cuts in the capital programme.

I have had the honour to serve Britain, first, as Minister for Local Government and Environmental Services and now in my present position. During that time I have had to deliver fairly tough messages to local government about the need for economy. When local government is responsible for more than a quarter of all public expenditure, those messages and the delivery of them could not have been avoided by any responsible Minister or Government.

Faced with criticism from the Opposition, I have noted steps that other countries have had to take. France has had to face the possibility of cuts in social security and family and unemployment benefit because of its serious economic problem. We have sought, by means of economic restraint, to live within the bounds of what Britain can afford. I hope that the country will recognise, as do hon. Members, our inescapable duty to seek such economies.

Mr. Stuart Holland (Vauxhall)

The Secretary of State will no doubt wish to inform the House that the cuts in social security benefits that were introduced in France followed, for the first time, a genuine generalisation of those benefits that had been partial in crucial respects. Therefore, a considerable increase in expenditure was caused by the cuts.

On the Minister's main argument, if it is difficult for one country to go it alone with reflation, what action are the British Government taking in the international arena to avoid the beggar-my-neighbour syndrome of slump that is induced by the mutual cuts in public and local authority spending in several countries?

Mr. King

I cannot check the list of speakers yesterday, but that intervention sounded as though it came from a frustrated hon. Member in yesterday's debate. The point would have been of great interest to that audience. I am grateful to the hon. Member for Vauxhall (Mr. Holland) for confirming my point. Whatever his preamble may have been about the generalisation of benefits, he confirmed that the French Government—a Socialist Government—had to carry through cuts that would have caused multiple hysteria among Opposition Members had the British Government tried to introduce them. We tried an alternative and voluntary approach of co-operation, and I make no apologies on behalf of the Government or myself for having done so.

In the past, Britain financed the extravagance of current consumption by savage cuts in the capital programme. During the five years of the Labour Government, capital expenditure by local government was halved, while current consumption rose by about 6 per cent. Long-term investment was sacrificed at the expense of maintaining excessive levels of staffing and of current spending overall. That is why, when we came into government, we inherited the highest ever level of manpower employed by local authorities. We have been trying to reverse that trend. We have had to learn to live within our means.

During that time, I have had to listen to some extreme allegations and assertions. However, in the relative calm of today, I hope that some of the extreme reactions of recent years may now be passing. Too often in the debates there has been assertion and ignorance of the true facts.

I place in context what this great argument is all about, what the demands of a tough Conservative Government are alleged to have been and what they have actually been. The basic fact is that, during the first three years, central Government have asked local government for a cumulative reduction in the volume of its current expenditure of 5.6 per cent. That is 5.6 per cent. during a period in which school rolls have fallen by 8 per cent.—and every hon. Member knows that education is by far the biggest single cost for local government.

In the years before 1979–80, local authorities took some pride in spending in line with the Government's planned figure. Many authorities made that proud boast to me, but of course that happened when the fugures were rising. The trouble was that, when we had to call a halt to that rise, co-operation by several local authorities stopped suddenly. From the opportunity that I have had to observe local government, it is clear that the targets for reduction of less than 2 per cent. a year from the all-time record level of spending were not unreasonable and were well capable of being met by local government as a whole. But even when they were not, central Government responded constructively.

Hon. Members will be aware that the 1982–83 expenditure guidelines deliberately recognised the need to start not from the original targets that were not achieved, but from where we were. However, even then some local authorities deliberately ignored the new guidelines and budgeted to spend far more on consumption than the Government had planned.

Interest rates fell substantially in the summer, and there are now much better prospects for controlling inflation than when the budgets were framed. Therefore, my expectation is that the overspend for this year will be significantly less than was originally expected.

Figures for the current year increasingly confirm my point that the vast majority of local authorities have acted, and will act, responsibly. They understand as well as the Government that increased expenditure is financed through higher Government demands on the taxpayer, higher charges to the consumers of services or higher rates draining family budgets and the resources of industry. There is no other way to finance expenditure. That is the reality. At a time when the private sector in many areas is fighting for its very existence in the face of an unparalleled world recession, local government has an added responsibility to ensure that any additional burdens imposed are the minimum possible.

Sir Albert Costain (Folkestone and Hythe)

My right hon. Friend will recall the correspondence that he has had with Kent county council. Although the council supports him all along the way, councillors believe that, although they have made sacrifices because they have been good boys, they are now being penalised with the bad boys. Can my right hon. Friend assure us about that?

Mr. King

I know that my hon. Friend's anxiety is shared by many of my hon. Friends. I said earlier that we are asking all authorities to make a contribution to the achievement of the economies that we must make. However, I also said that every authority that has matched our targets in the past—Kent is a clear and exemplary illustration—will have a target this year of 4 per cent. above the current year's budget, which was framed when inflation and interest rates were significantly higher. With the normal shortfall that occurs between budget and outturn, I expect that for the low-spending authorities, with prudent and efficient budgeting, the target of 4 per cent. over this year's budget will be reasonable. I hope that my hon. Friend will find that to be the case in his authority.

Mr. Keith Stainton (Sudbury and Woodbridge)

Will my right hon. Friend pursue that point in terms of the relationship between the 4 per cent. higher target, which is a cash figure, and the grant-related expenditure level?

Mr. King

If my hon. Friend is saying that there is a difference between the targets, that is the whole point. On reflection, I should be grateful that GRE has become such a popular item in the House. I did not believe in the early days that it would catch on in the way that it has, but several of my hon. Friends are now dedicated enthusiasts. By definition, the GRE, which is our best effort, is the average expenditure of authorities that provide an average level of services. Some authorities will be above the average and some will be below. Those hon. Members who have had the misfortune, or whatever they wish to call it, to live with me through several such debates know that I have never claimed absolute precision for the scheme. It would be impossible to do so. It is simply an attempt to make a fair estimate. If it is an average and if we set that as the target, it would be unrealistic, because the high-spending authorities, which we expect to make economies, will still spend above it. A rate of reduction can be achieved beyond which it is impossible to go. I know that my hon. Friend will accept that if the Government are trying to achieve those overall levels of expenditure, we cannot avoid the conclusion that everyone must make a contribution. However, for the prudent authorities, the contribution is neither unreasonable nor unfair. I have adopted that position because of my observations, and I have put it to the House as frankly and as clearly as I can.

The tragedy of high rate increases is that many companies must close when the rate demand becomes the final marginal cost that they can no longer meet. That has happened in far too many authorities during the past three years. One example is Sheffield, where the chamber of commerce recently carried out a survey. Anyone who knows Sheffield would be worried about unemployment in that city. Yet, in a survey of 150 firms in the area, 49 per cent. said that high rates had contributed to reductions in their work forces during the past two years, and 34 per cent. were contemplating moving to areas with lower rates. That is hardly surprising, because the rate in Sheffield is now 233p in the pound, which is higher than for any other metropolitan district.

Mr. Stephen Ross (Isle of Wight)

I do not defend the example that the Secretary of State has just quoted, but many local authorities—mine is one—wish to help industry through the derating of industrial premises. At present, 50 per cent. rate charges can be applied for a three-month period. Has the right hon. Gentleman considered sympathetically a scheme to enable local authorities to extend that period and to be compensated for doing so, because they would be giving up a substantial sum?

Mr. King

There may be good news for industry in the hon. Gentleman's area, because the matter is entirely at the local authority's discretion. The 50 per cent. is the maximum at which that discretion can be exercised. It is entirely at the authority's discretion to charge no rates on empty premises. For once, it is a town hall, not a Whitehall, decision.

Mr. Robin Maxwell-Hyslop (Tiverton)

Although I agree with my right hon. Friend's moving description of the effect of the burden of rates on industry—he could also have mentioned trade and domestic ratepayers—is not the logic of his statement that he should have increased the percentage payment of rate support grant so that a lower percentage is based on this utterly unjust system, rather than decreased the percentage paid by rate support grant so that the unjust system pays a higher percentage of expenditure? Is he not, by his actions, contravening his thoroughly convincing argument?

Mr. King

The essence of my thoroughly convincing argument, as my hon. Friend describes it, is to try to strike a balance among the interests of the ratepayers, of the taxpayers, who will pay the grant, and of Britain's overall expenditure. A higher percentage grant might well encourage higher expenditure. We tried to restrain higher expenditure without putting an unreasonable burden on the ratepayer. I hope that events and what I shall say about rates will demonstrate that there is a good chance that that will happen.

Although I cited an especially extravagant authority, the majority of authorities take a more sensible view. The majority are trying to make economies and to hit our targets. It is interesting to note that there has been a reduction in manpower levels of about 5 per cent. since we came to office. We are now back to the manpower levels of 1972. That is a major achievement.

There is increasing evidence that more savings can be made in a number of areas. I could not help but remember, as I prepared for the debate, that a group of Labour Members, led by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), came to see me last year about the problems of Birmingham. They said that the crucial element in Birmingham's problem was a shortage of grant of £1 million. Hon. Members may know that a Conservative authority has now come to power in Birmingham. It has put refuse collection out to competitive tender, which will result in a substantial saving of £3.5 million per annum. I understand that this year, as a result of the improvements, there will be increased spending to improve the standards of the education service and, at the same time, rates will be reduced by 12 per cent. That is a classic example of a responsible Conservative authority at work.

It is time for a new philosophy and approach in local government. Local authorities are providers, organisers and contractors of a range of services. They have a range of specific duties and powers, but there is no need for the too prevalent conformity of approach that we often find in local government. I hope that local government will search much more diligently for the best ways in which to discharge its responsibilities. All too often things are done like that because things have always been done like that. It is time for some of the practices and approaches to change. We often hear about the "listening bank". I should like increasingly to see the "questioning council"—the council that examines each of its activities and questions whether it is really doing things in the right way. We are certainly anxious to co-operate with authorities in every way we can to help to achieve greater economies.

It is interesting to see how the message—that one can make economies and not destroy services—is getting across. I notice that even some of the least likely candidates are now accepting this assertion. The Labour leader of Avon last year defended rate increases of 40 per cent. as unavoidable to protect essential services. This year the song is a little different. He said: Economies are being achieved which will have no direct effect on the level of services which we provide. In West Yorkshire, another Labour-controlled authority, rates rose last year by 56 per cent. This year the leader is advertising an increase of 2.7 per cent. He said: The low increase … is the result of our unremitting search for economies. In Humberside last year there was a substantial rate increase of 61 per cent. This year, announcing a 6 per cent. rise, the leader said: It will be possible to meet the rate target without major cuts in services.

Mr. Frank Dobson (Holborn and St. Pancras, South)

rose—

Mr. King

Thinking back over the years in which we have been pursuing our policies of restraint, I remember all those extraordinary organisations that formed up against us. The hon. Member for Holborn and St. Pancras, South (Mr. Dobson) may remember the "Vegetarians Against the Cuts" and various other strange anti-cut organisations that marched. Now people are beginning to understand that there is a prize in value for money that can be achieved, that can make possible reductions in expenditure and still provide adequate services.

Mr. Dobson

rose—

Mr. King

I hope the hon. Gentleman will forgive me, but I have given way a number of times and I am conscious that other hon. Members wish to speak. I do not wish to detain the House too long.

I believe that we now have a changing attitude in local authorities. There is a growing professionalism and an improvement in management in many of the authorities. My concern is to see that practice and understanding much more widely spread. I want to consolidate the progress that we have already made. I would much rather work in partnership with local government than in a state of mutual suspicion. There is no reason why that should not be. If we can achieve that, the beneficiaries of the partnership will be the ratepayers and the people living in each of those local authorities, many of whom may depend anxiously on the services that are provided. They will benefit when local authorities spend within the guidelines we have sought.

The history is clear. In 1981–82 two thirds of all authorities budgeted to spend within target or within 2 per cent. above target. Nearly seven out of 10 local councils were able to demonstrate that the levels set were achievable. That pattern has continued in the current year. Two thirds of authorities are budgeting to avoid holdback. Conservative authorites are certainly the most conspicuous, but authorities of other parties are doing so as well. Only a minority persist in overspending, and a minority within that minority provide the worst examples year after year.

It is that background and the contribution of those authorities to it that explains the need for targets. We certainly did not wish to introduce targets but, in the face of the flouting of the understanding that all parties previously upheld, neither the Government nor the ratepayers could allow current expenditure provisions consistently to be exceeded. In the past it was the practice to take across-the-board measures which hit both the prudent and the extravagant. We have introduced more selective grant pressures.

We see a pattern emerging. We see three groups of local authorities—those controlled by the Conservative party; those with no overall control; and those controlled by the Labour party. I have examined the figures for rate increases in the current year. In the first group, the Conservative authorities, the precepts increased by 12 per cent. In the second group, those with no overall control and with minority parties, the precepts increased by 21 per cent. Traditionally and predictably, the counties controlled by the Labour party increased rates by a staggering 31 per cent. It is a simple fact that rate poundages and rate increases are and have been higher under Labour councils than under Conservative councils.

That is the reality that ratepayers have had to face in those areas but, even in those areas, times are changing. Authorities now have a chance, because of reducing inflation, falling interest rates and the earliest possible notice of the settlement, without there being any doubt about our intentions for that settlement, to achieve the guidelines that we have set. I say clearly to the House—the evidence is increasingly mounting—that if those guidelines are followed, as they will be, rate increases will be surprisingly low in a number of areas. Indeed, there will be some rate reductions.

The pattern is starting to evolve. I referred to Birmingham, which is to reduce its rates by 12 per cent. Conservative-led Waltham Forest will reduce its rates by 14 per cent. Perhaps the best news of all, when one remembers recent history, is that the reduction in Kensington and Chelsea may be 25 per cent. I am sure that my hon. Friend the Member for Kensington (Sir B. Rhys Williams) will agree that if that is the position in Kensington and Chelsea, many will say, "Would that the GLC and ILEA got the same message".

Our targets are fair. Authorities which have behaved responsibly will have a 4 per cent. increase in cash terms. That is a realistic and reasonable figure. There is no reason why the targets cannot be met. The settlement before us today offers local government every incentive to build on the progress that we have made. The trend of spiralling current comsumption has been reversed.

In 1979, we inherited a level of expenditure at an all-time high. By the end of 1981–82 there had been a real reduction from that level, which I want to see continued into the current year. It must be continued into next year. That is what the householder wants and what business, commerce and industry need most of all. It is what the country needs if we are to continue to see inflation reduced, interest rates depressed and the best possible prospect for restoring and strengthening the economy of Britain.

The objective of the settlement is continuing restraint and a return to the traditional co-operation in achieving the Government's overall targets which have marked the history of central and local government. The Government will certainly play their part. I shall seek to follow that objective. I want local government to succeed by its own efforts.

I commend the reports to the House.

5.40 pm

Mr. Gerald Kaufman (Manchester, Ardwick)

It is, first, my pleasant duty to congratulate the Secretary of State on his appointment. The right hon. Gentleman's promotion is good news for bridesmaids. He has waited a long time for the Prime Minister to pop the question, and she has finally done so. Ministers promoted to new responsibilities generally have to read themselves into their portfolio to acquire their predecessors' knowledge of the subject. In the right hon. Gentleman's case, to acquire his predecessor's knowledge he will have to forget a great deal of what he already knows. Bernard Shaw in his "Maxims for Revolutionists" said that the man with the toothache thinks everyone happy whose teeth are sound". With the departure of the previous Secretary of State, the right hon. Member for Henley (Mr. Heseltine), the ache has softened to a dull throb. Debating the rate support grant without him is like a performance of Peter Pan without Captain Hook.

In an interview with the Municipal Journal last week, the new Secretary of State hospitably informed local authorities that "my door is open". Unfortunately, his speech today showed that his mind is closed. He has already acquired some of his predecessor's bad habits, and anyone listening to him would never have guessed that the rate support grant is the worst ever recorded—52.8 per cent. compared with 61 per cent. when Labour left office. Moreover, Labour's percentage was a proportion of actual expenditure. This fourth Tory rate support grant will reach as high as 52.8 per cent. only if current expenditure adheres to the right hon. Gentleman's arbitrary spending ceilings.

For the first time ever, rate support grant in the forthcoming year may fall to less than 50 per cent. of outturn expenditure. One reason for the confusion is that the Secretary of State uses cash terms when he wants to pretend that he is being generous to local authorities. In paragraph 6 of the statement to the consultative council he misleadingly claimed that the grant was up by £298 million over last year. Yet in paragraph 17 of the same statement there is a sudden switch to what he calls a real level of spending". In annex L of the main report the right hon. Gentleman goes so far as to use a repricing factor. Even that is unrealistic, as it assumes an inflation rate throughout the financial year of 5 per cent.

It falls to the Opposition to give the facts about the settlement. The reduction in rate support grant since the Government took office, in proportionate terms, is 8.2 per cent. In constant prices, the annual award has fallen by an enormous £1,600 million. The cut in block grants in real money since Labour left office is no less than 15.4 per cent. Householders are worse off, because by keeping domestic rate relief at the same figure as it was eight years ago—18.5p—the Secretary of State is cutting the relief in real terms to 6p. That, not local authority profligacy, is one reason why rate bills will be higher in the spring.

The right hon. Gentleman has already had his ritual publicity pictures taken in Liverpool. Yet Merseyside and all the other inner-city areas will be hit even harder than the remainder of Britain. Their share of the savagely reduced total grant—and that in the improbable eventuality that they avoid any holdback penalty—will be at most 19 per cent. of the total, compared with 23.5 per cent. in the Labour Government's last settlement. That means that the most needy areas will lose £767 million in block grant—32 per cent. of the grant that they received under Labour. Their cut in grant will be more than twice the national reduction. That puts into perspective the sort of sanctimonious platitudes that we are accustomed to hearing from the Government Front Bench about their concern for the plight of the inner cities.

The Government bear much of the responsibility for that plight, yet they have attempted to adjust the rate support grant factors in favour of some of the deprived. For example, there is a recognition in the report of the impact of unemployment by the increase in the GREA youth unemployment factor from £120.58 per unit to £265.39 per unit. That is an effort to recognise reality, even though the weird position of the statistics is quite inexplicable. However, the anomalies in that lunatic system remain as mystifying as ever.

When the previous Secretary of State, two years ago, introduced his rate support grant under the new system he confidently informed the House: The new grant … is distributed in such a way that the system used for the purpose is clear and open."—[Official Report, 14 January 1981; Vol. 996, c. 993.] Let us consider some of the items in the clear and open system. The methodology of awarding grant for concessionary fares is still based on the number of potential travellers who would benefit if a concessionary fares scheme happened to be in operation, rather than on the number who benefit because one is in operation. Therefore, it pays an authority not to have a concessionary fares scheme, because it receives the grant without having to spend anything in return. Thirty-two local authorities that do not pay one penny towards public transport receive grant as a reward for not contributing. Thirty-one of them are Conservative-controlled—the thirty-second is not Labour-controlled.

The criterion for awarding grant for museums and art galleries has nothing to do with anything so obvious and boring as actually providing museums and art galleries. It is based on the total shopping floor space in a local authority area, presumably on the assumption that a housewife, exhausted from trailing around the shops in a vain search for bargains, will pop into the local museum to gaze at a Henry Moore while recuperating her strength. In Greater Manchester that fantasy has the consequence that Trafford receives 8 per cent. of the rate support grant available for museums, even though it has no museum. Trafford, instead of supplying the Henry Moore, provides the hole. Trafford is a Conservative-controlled local authority.

The Secretary of State spoke in a self-congratulatory manner about the treatment of Buckinghamshire, yet Mr. Roger Parker-Jervis, the Tory chairman of Buckinghamshire county council, has declared: Previous confusion is worse confounded and the handful of specialists who are able to interpret where the money will go already advise that the formula is demonstrably unfair to ratepayers in some areas and overgenerous to others". It is no wonder that he laments: Present proposals for its distribution are again incredibly complicated, once more use a fresh and untried formula, and are incomprehensible to the ordinary man in the street. I challenge the Secretary of State to stop a man in the street in Buckinghamshire or Bridgwater and put to him the formulae contained in the letter sent to local authorities from his Department. To be fair, the letter starts with a joke. It says "For convenience". It continues, and I shall quote just a small fragment, by saying that the formula is in 3 stages: 1) GRP=GRP^*+(D)(A) where GRP^* is the national standard poundage for the class, D is the expenditure difference from GRE for the authority in £ph, and A is the slope of the schedule below the threshold expressed in £'s per £ eg 0.006. This leads eventually to: the slope of the schedule above the threshold as: B+(Y)(X²) (D-TH)^x-1".

There are four more pages of that. The letter is signed by the Einstein of the Department of the Environment, Mr. Phillip D. Ward. I hope that duty never requires me to read Mr. Ward's collected letters.

The press recently carried the following disquieting report: Profound alarm was felt yesterday among commercial organisations after news that a young Israeli mathematician had cracked the world's most secret code raising fears that no secret message can now remain secret for long. Mr. Adi Shamir, 30, of the Weizmann Institute, has broken the 'public key' code, invented by three American mathematicians in 1980. It was hailed at the time as the ultimate masterpiece of cryptography. … His discovery is highly alarming both for government spying organisations". I recommend that if these Government spying organisations want the ultimate masterpiece of cryptography, with which no young interfering young Israeli will be able to meddle, they should apply to Mr.

Phillip D. Ward, 2 Marsham street, London SW1. The complacency with which the Government regard the abtruse complexities is alarming. I invite the House to examine the report with its decimalised tables, algebraic formulae and all the other pages of arcane mathematics and reconcile it with the statement in the memorandum of the Department of the Environment to the Select Committee on Statutory Instruments which has been made available to the House today: The Department has been considering ways of reducing the length and complexity of rate support grant reports and supplementary reports and the Report in question was drafted with these objectives in mind". The impact of the rate support grant on local authorities is extremely damaging. Devon will lose 10 per cent. of its last year's grant. For Cornwall the reduction in grant will be 11.7 per cent. It is no wonder that Mr. Granville Sharp, a Tory councillor in West Sussex, said last week that the view of many—including Conservative county councillors like myself—is that Michael Heseltine's policies are a menace to good local government … This high-handed, grossly unfair and dictatorial attitude of the Marsham Street people not only penalises the needed work of low-spending councils, but also will alienate many Conservative and non-aligned voters. I hope Michael Heseltine's successor, Tom King, will be instructed to change drastically his Department's plans, which are so damaging to local government and the countryside. It is no wonder that Mr. Douglas Robertson, the chairman of Surrey county council policy committee, says that the rate support grant settlement places Surrey in an extremely grave situation. He goes on to say: It will undoubtedly mean either considerable reductions in our services in the year ahead or a substantial rate increase in April". The Secretary of State is so perplexed by the sheer lack of logic in grant allocation that he is spending up to £200,000 on commissioning the school of advanced urban studies of the university of Bristol to undertake a research project into the system and examine the scope for improvements. I can save the Government that money without any difficulty. The main cost-effective improvement would be to get rid of the zany system altogether.

One problem is that these days, when we consider rate support grant, the actual award of grant—crucial though it undoubtedly is—seems almost incidental. Far more time and thought—if the word "thought" is appropriate in this context—are devoted to spending ceilings and penalties for alleged overspending. Almost all of the Secretary of State's speech was devoted to penalties.

Today, in addition to the main report for the next financial year, we are considering yet another penalties report, this time for the current financial year, even though when the report was presented only two thirds of the financial year had elapsed and it was impossible to know what the actual expenditure figures would be. The penalties are linked to spending ceilings. The ceilings—targets, as the Secretary of State misleadingly dubs them—cause confusion, because every year the Government change the way in which they are calculated. They also change the penalties and the ways in which the penalties can be avoided.

The Conservative-controlled Association of District Councils calls this year's targets "unfair and arbitrary". Its chairman of housing, Mr. John Morgan, has warned the Secretary of State: Yet another switch in target methodology which for some authorities means cuts of up to 50 per cent. in the effective target can only do irreparable damage to the credibility of your"— that is the Secretary of State's— whole strategy". The Secretary of State claims that the supplementary report is justified because it penalises overspenders. Even if we accept—which I do not—that any authority is overspending because it spends more than the Secretary of State wants it to spend, the report penalises fewer than half of them. Whereas 268 local authorities spent above the Secretary of State's targets, only 126 are being punished. The remaining 142 escape because of the amnesty for councils which spend above their ceiling but below their GREA, even though the Secretary of State assured the House that grant-related expenditure assessments relate to the 'total expenditure' of each authority, whereas the volume targets relate only to current expenditure. They cannot, therefore, be directly compared."—[Official Report, 16 March 1981; Vol. 1, c. 46]. The House may not regard it as entirely coincidental that in this supplementary report, of the 96 Labour councils spending above their ceilings, 81 are being penalised, and that of the 148 Tory councils spending above their ceilings, 118 are not being penalised. Councils responsible for £405 million of what the Government call overspending will escape scot-free. Bristol, a Labour authority, with an overspend of 1.6 per cent., is penalised. Kingswood, which is Conservative, with an overspend of 36.7 per cent., is not penalised. In Derbyshire, North-East Derbyshire, a Labour authority with an overspend of 0.1 per cent. is being penalised. West Derbyshire, which is Conservative, with an overspend of 10.4 per cent., is not being penalised.

In Hereford and Worcester, Wyre Forest, which is not controlled by any party and has an overspend of 4.3 per cent. is penalised, but the Liberal-controlled Hereford authority, with an overspend of 14.5 per cent., is not penalised. In Hertfordshire, Labour-controlled Watford, with an overspend of 1.4 per cent., is penalised, but Conservative North Hertfordshire, with an overspend of 12.9 per cent., is not. In Nottinghamshire, Labour-controlled Mansfield, with an overspend of 6.9 per cent., is penalised, but Conservative-controlled Gedling, with an overspend of 15.7 per cent., is not. And so it goes on. The penalties are so irrational that 11 councils accused of overspending will lose more in penalty than they are said to have overspent.

In the coming financial year the sheer dishonesty of what the report proposes will make the anomalies even more unjustifiable. The Local Government Finance Act 1982, the statute that belatedly makes lawful these previously unlawful operations, provides in section 8(2): Any guidance issued for the purposes of subsection (6)(cc) above shall be framed by reference to principles applicable to all local authorities. Let us consider some of the principles applicable to all local authorities.

In accordance with the Secretary of State's preliminary statement last July, local authorities' spending ceilings were to be based on their budgets for 1982–83 as stated in their block grant claim form BG3. After submitting those forms, however, some councils found that, for reasons that we shall examine, it would benefit them to increase their budgets. This they did on another form called RER83. Paragraph 3 of annex E of the rate support grant report contains a little surprise—the higher of the budgets submitted in BG3 or RER83 is the one that will count in calculating the spending ceiling. The result is to increase the ceilings for 29 councils—17 Conservative-controlled and eight Labour-controlled. That is quite a nice principle applicable to all local authorities". Paragraph 2 of annex E makes another change when it lays down that where the spending ceiling stated last July would mean that the council's expenditure in the next financial year would fall below its budget for 1981–82 the ceiling shall be adjusted upwards to the level of the 1981–82 budget. The Secretary of State has invented a revolutionary architectural concept—he has provided a floor for the ceilings. That innovation, or this new principle, applicable to all local authorities raises the ceilings for 15 local authorities—all Conservative—controlled.

In addition, the preliminary statement last July provided that ceilings should be no more than 20 per cent. higher than a council's budget for 1981–82—in other words, there was a ceiling for the ceiling. That condition was introduced specifically to reduce the spending ceiling of the GLC, whose budget for 1982–83 was exceptionally high due to the deficit on London Transport caused by the Law Lords' ruling.

The Secretary of State wished to find a further way of penalising the GLC. To his dismay, however, he found that two other authorities would be caught by the 20 per cent. limit. Paragraph 2 of annex E of the rate support grant report therefore raises to 25 per cent. the July limit of 20 per cent. So keen are the Government to discriminate against the GLC alone that they even allowed the change to benefit a Labour council—Corby—as well as Tory Milton Keynes. This is what the Act describes as a principle applicable to all local authorities but it is specifically designed to penalise one authority out of 411.

There is, however, a limit to the extent to which even this Government can fiddle the rules to suit their friends or their prejudices. Thus, some authorities penalised under the supplementary report for this year will be compensated for their alleged profligacy by receiving more grant next year. There are 77 such authorities, 29 of which are so fortunate that their grant will be higher in real terms even if inflation is more than 7 per cent. Their good fortune is to be contrasted with the ill luck of a further 108 authorities which budgeted to spend so little this year that they are not only not penalised in the supplementary report but do not even need the GRE exemption to escape punishment. The prudence of the virtuous 108 is to be requited by receiving less grant in cash terms under the report. In real terms, their grant will fall by nearly 8 per cent.

There are then the idiots so loyal to the Government that this year they budgeted to spend below their ceilings—the councils which the hon. Member for Folkestone and Hythe (Sir A. Costain) described in his moving intervention as the good boys. Authorities that were less careful with their money are to be allowed to spend 5 per cent. more than their last year's ceiling or GREA without being punished. That is why some councils, having twigged the dodge, sent in RER83 forms to increase their budgets. The most penny-pinching and virtuous councils of all, however, having budgeted below their ceilings, are to be penalised if they spend not 5 per cent. above their ceiling but 4 per cent. above their budget, which itself is below their ceiling. No fewer than 108 councils are caught in that trap, and for 23 of them the cash ceiling is actually lower than last year.

The predicament of those councils was movingly described in a letter by Councillor Mrs. L. M. S. Anderson, leader of Tewkesbury council. This is her touching lament to the Secretary of State: My Council considers that it is being severely penalised because it produced a 1982–83 budget lower than the spending target set by you. This Budget was produced by curtailing some services and, indeed, by withdrawing others …. The decision that spending targets for 1983–84 be set at 4 per cent. above the 1982–83 Budgets and not 1982–83 targets inevitably leads us to the obvious conclusion that low-spending authorities are being unfairly treated. If Tewkesbury borough council had produced a Budget for 1982–83 in line with the spending target set for that year, its 1983–84 target would have been £2,565,000 instead of £2,289,000, an increase of £276,000. The letter continues: Although non-political with no distinctly drawn lines, the majority of the Councillors are Conservatives and in a paragraph that may lead the hardest heart to bleed in sympathy, Mrs. Anderson says: With District elections is prospect … the majority of Councillors are naturally concerned about their position".

Sir Geoffrey Johnson Smith (East Grinstead)

As the right hon. Gentleman has done so much research on this, can he tell us how many of the councils suffering in that way are Conservative?

Mr. Kaufman

The overwhelming majority are Conservative. That is why I say that although the Secretary of State fiddles as much as he can he has produced a system then even has the fault that he cannot fiddle it in favour of his friends as much as he would like. I have shown that where he can fiddle it, he does, but he has produced a system so insensitive to human influence that he cannot fiddle it wherever he wishes, even when it damages his friends.

Mr. Dobson

I have some sympathy with my right hon. Friend's clear exposition of the fact that the Secretary of State is incapable of distinguishing between wise and foolish virgins in local government, but I want to refer to his reference to the requirement that the Government can only enunciate principles covering all local authorities. Does my right hon. Friend agree that what has been done by a series of computer runs, coming up with a general principle which punished only the GLC, is clearly contrary to the spirit of the legislation? Does he agree that it may well be contrary to the letter of the legislation, and that consequently the Secretary of State, not for the first time, may find himself in the High Court trying to explain how and why he has been breaking the law in an effort to penalise Labour local authorities?

Mr. Kaufman

The Secretary of State for the Environment, in his incarnation as a holder of an office rather than as an individual, has left himself open to legal action before and has been held to have acted unlawfully. It would be interesting if local authorities, penalised by the way in which these alleged general principles have been manipulated, decided to test in the courts what the Secretary of State has done.

Mr. King

The right hon. Gentleman would not wish to mislead the House. He appears to imply that the change made in the principle to which he referred was intended to victimise the GLC. It actually had the effect of benefiting the GLC by increasing its grant. As I said in my speech, each of the changes involved increases for every authority concerned.

Mr. Kaufman

Yes, indeed. What happened was that the Secretary of State, by increasing the level from 20 to 25 per cent.—he chose 25 per cent. because that was the amount necessary to exclude Corby and Milton Keynes; he would be dishonest to deny that—for the purpose of avoiding difficulty for those two local authorities, was required to ease the position of the GLC. If he had really wanted to help the GLC, he would not have had the principle. The principle exists to penalise the GLC. The adjustment of the principle relieves the GLC of part of the pressure on it, but only part of that pressure. Indeed, the Secretary of State agrees with what I am saying. The GLC will read that with interest, because the Secretary of State now admits on the Floor of the House that that principle exists to hurt the GLC.

Mr. King

As the right hon. Gentleman seeks to misrepresent me, I shall make the position clear. All hon. Members know and understand why the principle is there. If one is fixing a budget and seeking to be fair to all authorities, there must be a limit on those authorities whose increase in expenditure has been substantial over the two years. We know why the GLC budget took the sudden leap that it did, but, in fairness, because this is an issue of fairness to all authorities in sharing out grant, that change was made. We received representations. One of those representations was from the GLC, and we responded in part to those representations.

Mr. Kaufman

I am sure that all those who study these matters will be grateful to the right hon. Gentleman for being so open with the House and admitting that this principle, a principle which the law says should be applicable to all local authorities, has been invented to deal with one local authority, the Greater London council.

That brings me to yet another group of councils which have cause for concern as a result of the report. If the hon. Member for Wirral (Mr. Hunt) is not interested in what is being said, I suggest that he goes back to his constituents and discusses with his local authority the problems in Merseyside, which are caused by what is being done to rate support grant for Merseyside.

I come, therefore, to the councils which in the coming year will have ceilings below their GREAs. It is a matter to which the hon. Member for Sudbury and Woodbridge (Mr. Stainton) drew our attention, and one about which the hon. Member for Folkestone and Hythe is worried. The House will recall that the GREAs are levels up to which the Department of the Environment says that councils need to spend to provide a standard level of services. However, with no GREA exemption from penalty next year, councils which spend over their ceiling and up to GREA will be punished, for the astonishing reason that they are trying to provide the services which the Secretary of State says they should provide. More than half of the councils in England—231 out of 411—face this problem. By a sad irony—I donate this point to the hon. Member for East Grinstead (Sir G. Johnson Smith)—most of them are Tory shire districts and Tory shire counties. Kent county council, if it provides the services which the Secretary of State says it should provide, will be penalised to the extent of a 20p rate in the pound.

By now hon. Members may feel that we have reached the politics and the mathematics of Bedlam, but in the words of Al Jolson You ain't heard nothin' yet, folks". Paragraph 38 of the main report promises that increased expenditure on the urban programme will escape penalty by being excluding from the spending ceilings. It said that such expenditure will be "specifically encouraged". However, there is nothing in this report to give effect to that exemption for expenditure which the Secretary of State says is "specifically encouraged". The fact is that inner city councils will be penalised by grant holdback for this specifically encouraged expenditure until the House approves a supplementary report some time in the unspecified future.

So benefits must wait, but penalties are immediate. In the debate on last month's penalties report, I drew attention to the plight of those councils which are to lose grant because their budgets are above the ceiling, even though their spending for the budget year, all properly audited, is not above the ceiling. These improperly and unfairly penalised councils have been told by the Government that their penalty cannot be withdrawn, even though they have done nothing to be penalised for, because the penalty is contained in a supplementary report, and the report, which is a parliamentary order, cannot be amended.

The Secretary of State gave this explanation in a letter to the hon. Member for Loughborough (Mr. Dorrell), who made representations on behalf of North West Leicestershire district council. He said: I can assure you that it is Parliamentary procedure, and not bureaucratic inertia, which prevents the existing report being amended piecemeal". Lord Bellwin, the new Minister for Local Government and Environmental Services, went into more detail in the letter to the council itself. He said: The reasons why the Supplementary Report which has been presented to Parliament cannot now be amended as you suggest, are entirely matters of Parliamentary procedure. Once an RSG report has been presented to Parliament, it cannot be amended, only withdrawn". What have we heard from the Secretary of State today? He admitted that, because of a ludicrous mistake, on Monday he withdrew the very report that we should have been debating today, amended it, and introduced in its place the report that we are now debating. He told the House in his speech this evening that he did that because the original report could be ambiguous. In fact he did it because, if he had not done so, local authorities could have taken successful legal action against him. In withdrawing the rate support grant report, amending it, and representing it to Parliament, he has done to suit himself what he told North West Leicestershire council he could not do to provide relief for it and other unfairly penalised councils. In an answer to me today the Secretary of State said that the cost to public funds of reprinting and redistributing the rate support grant report was £3,500.

Mr. Eldon Griffiths

The right hon. Gentleman has enlightened and entertained the House, but I am sure that he would not want to get away with something that is close to a deception. He must know from his experience, as all of us who have to do with rate support grant settlements know, that one cannot amend, take away or change an RSG once the House has considered it and agreed it.

Certainly my right hon. friend has taken back a proposal by the Government which the House at that time had not considered and had not agreed.

Mr. Kaufman

If only the hon. Gentleman had followed these matters, he would not have found it necessary to make that invalid intervention. In the case to which I referred, that of North West Leicestershire—another local authority, Knowsley, was affected—after the Secretary of State presented the supplementary report penalising those local authorities in the summer, they wrote and told him that their accounts had been audited and demonstrated that they had spent below his ceiling, so there was no valid reason for penalising them. They therefore asked him to change the report so that their penalties could be removed. The Secretary of State told them—and I have quoted it—

Mr. Eldon Griffiths

It was under the standing orders of the House.

Mr. Kaufman

It was not under the standing orders of the House. The Secretary of State told that local authority and others that he could not do that because the report had been presented and he could not amend it, only withdraw it and re-present it. It was open to him to do so. He had several months in which to do so, but he did not.

It was drawn to the Secretary of State's attention that the report that we are debating would damage a number of other local authorities. He withdrew it, amended it and re-presented it. Therefore, he did precisely what we recommended he should do for the other local authorities. I fear that the hon. Member for Bury St. Edmunds (Mr. Griffiths), in his eagerness to assist his right hon. Friend, has made a serious error, although I am sure that he has done so inadvertently, as he so often does when he is making errors.

In his parliamentary answer, the Secretary of State told me that the cost of the whole operation of withdrawing the report and re-presenting it was £3,500. I should be grateful if he would re-examine that figure and make sure that the cost of re-presenting a 64-page report—scrapping previous copies and presenting new ones—is only £3,500. If he confirms that it is only £3,500, I should be grateful if he would supply me with the name of the printer. At these prices, I should like that printer to print my election address for me when the next general election comes.

In fact, the right hon. Gentleman is showing himself to be a true disciple of his predecessor. The right hon. Member for Henley made a mess of two local government Bills and had to withdraw them and then reintroduce them. The right hon. Member for Bridgwater (Mr. King) has made a mess of his first rate support grant report and has had to withdraw it and then reintroduce it. That is what is known as continuity of policy.

Mr. King

I am sure that the right hon. Gentleman is a better student of history than that and has a good memory of dates. Surely he remembers who tabled the first rate support grant report.

Mr. Kaufman

I am delighted that the right hon. Gentleman has taken this early opportunity to dissociate himself from his predecessor. He has picked up the material that he used to collect on behalf of his right hon. Friend when his horse had travelled in front of him, and he has thrown it at his right hon. Friend.

Mr. King

I was intrigued by the right hon. Gentleman's opening remarks, when he compared me to a bridesmaid. This is the first bridesmaid that I have seen with a shovel.

Mr. Kaufman

The right hon. Gentleman is unfortunately, also, as his confessions come thick and fast, a bridesmaid who is clearly not a virgin.

In his statement to the House last month, the former Secretary of State, whom the new Secretary of State takes every possible opportunity to disown—I do not blame him—told the House, with the present Secretary of State sitting by him and nodding in agreement, that rate increases next year should for most authorities be nil or in low single figures."—[Official Report, 16 December 1982;Vol. 32, c. 489.] This afternoon the Secretary of State said that he thought that rate increases would be surprisingly low.

That is not how many Tory local authority leaders see the prospect. Mr. Ian McCallum, the chairman of the Association of District Councils, says: The combined effects of the reduction in total grant, which shifts the burden of paying for local services from the taxpayer to the ratepayer, together with technical changes in the distribution system itself, makes widescale lower rates rises scarcely possible. The Oxfordshire country treasurer has warned: Even though we may be on target for this year's spending there still could be a large rate rise next year because we may be getting a lower grant. Mr. Brian Tanner, the county treasurer in the Secretary of State's county of Somerset said: My immediate reaction is one of bitter disappointment. If we are to pursue our policy of maintaining services at the same level as last year with an extra one and a half million pounds in the education budget there is no way we can keep percentage rate increases in single figures. Whenever we hear from the Secretary of State now about local authorities—

Sir Geoffrey Johnson Smith

Come on.

Mr. Kaufman

If the hon. Gentleman did not wish me to take such a long time, he would have done well not to interrupt me and require me to answer him in such convincing detail.

Whenever the tale of woe of any council, Tory or Labour, is cited, the Secretary of State parades his new golden boy, Birmingham, as he did this afternoon. If Birmingham can do it, we are told, so can anyone else. Birmingham is to cut its rate by 12 per cent. That amounts to a saving of £24 million. How has that miracle been achieved? First, it has happened because the quirks of the rate support grant award have increased Birmingham's grant by £14 million, so that accounts for £14 million of the £24 million. That is not so much good housekeeping—it is more a lucky windfall. Although Birmingham now claims that it is increasing the social services budget for next year, it cut the social services budget for this year after it came to power in May.

Birmingham also increased rents three months ago by an average of £1.50 per week on top of last April's increase, so it saved money that otherwise would have been transferred from the general rate fund. What is more, it is planning another rent increase this year of £1.25 a week compared with the Government's guideline of 85p. All its cuts, together with windfall gains, have increased Birmingham's balances by £25 million. Rent increases alone will bring it £17 million. Add that to the rate support grant increase of £14 million, and one gets a total gain of £39 million. That is how Birmingham has managed a rate reduction of £24 million in the forthcoming financial year. It is easy to be so generous in the forthcoming financial year if one has been foresighted enough to make excessive cuts and rent increases in the previous financial year.

Local authority finances are in an almost inextricable mess. The ceilings are not being met. The Government have had to confess defeat by increasing provision for local authority spending this coming year by £900 million more than is allowed for in the public expenditure White Paper. The arithmetic is so perverse that any local authority spending up to 4 per cent. above its ceiling next year will suffer less than it does for the same excess this year. Therefore, the penalty system in many cases will result in extra expenditure. Camden is able to look forward to a single figure rate rise this year because for two years it has received no rate support grant whatsoever. Accordingly it can make plans without being subject to a penalty.

No wonder that, faced with that insane mess of their own making, the Government are so sick of local government finance that they are planning to divert attention by another local government reorganisation. The party that set up the Greater London council now says that London's problems can be solved only by abolishing the GLC. The party that set up the metropolitan counties states that the problem of England's cities can be solved only by abolishing the metropolitan counties. When it comes to excuses, this Government are endlessly inventive.

For the first three years of this Parliament the Government put the blame for anything that went wrong on the last Labour Government. As they approach an election they are turning their blame on the next Labour Government. The new Secretary of State caps it all by blaming the mess in local government partly on the last Tory Government and partly on the Tory Government before that. This will be the last Tory rate support grant report. The next report will be presented by a Labour Government. The task of restoring fairness and justice to our hard-pressed local authorities and their overburdened ratepayers will begin.

6.31 pm

Mr. Fergus Montgomery (Altrincham and Sale)

I am grateful for having been called in this debate. I shall make a short speech. We have just had a long and interminable speech from the right hon. Member for Manchester, Ardwick (Mr. Kaufman)—[HON. MEMBERS: "Fifty minutes"]. It seemed much longer.

The ratepayers of Trafford have come out of this settlement very badly. I understand that my right hon. Friend and his Department are checking several figures to see whether any mistakes have been made. I hope that a check will be made on the numbers of children in Trafford schools. I cannot for the life of me understand why the figures now show that the drop in school rolls in Trafford is much greater than in any of the other local education authorities in Greater Manchester. That is critically important to Trafford's rate support grant calculation.

Ever since the borough of Trafford was formed, it has been Conservative controlled, as the right hon. Member for Ardwick so eloquently said. It has watched the spending of ratepayers' money very carefully. As a consequence, it has levied the lowest rate support poundage of any of the 10 metropolitan district councils in Greater Manchester. That is a matter of pride for the Conservative-controlled council. It has been beneficial to the householders and to the industries of Trafford.

My right hon. Friend the Secretary of State talked about the problems facing industry in areas where there are excessive rate bills, and the effect that has on unemployment. Trafford has practised policies that have been prudent and has tried to look after its ratepayers' money, but that does not seem to have done the authority much good in this rate support grant settlement.

About three years ago the then Secretary of State brought in the present concept of the block grant. That idea was welcomed by the Conservative-controlled Trafford council. It believed that the new grant would be allocated according to an objective assessment of the needs and resources of local authorities and that it would no longer be based on the unjustifiable spending levels of certain spendthrift councils. Trafford has never asked for special treatment, only for a fair deal.

Trafford council believes that the new grant would be fairer to the prudent local authorities that closely examine expenditure. Previously, it had watched in disbelief while spendthrift councils were rewarded and encouraged by generous settlements from the same system that in 1974–75, when the Labour party was in power, had dealt a crippling blow to the new metropolitan borough of Trafford by under-providing subvention. Despite that, Trafford continued its policy of trying to put forward prudent policies, and it has been proclaimed by successive Ministers as a model local authority.

Every Government guideline that has been brought out has been scrupulously observed, services have been controlled, cuts—many of which Trafford has been unhappy about—have been made and implemented. Trafford Conservatives have prided themselves on an efficient financial administration. They had hoped that the new grant system would give them the fair deal that they sought. The treatment meted out to Trafford is unmatched in severity by anything suffered by any other metropolitan authority, certainly in the Greater Manchester area.

Statistics can be used to make a case for or against something, but statistics often confuse people. I should like to enumerate seven facts about the problems that face Trafford council.

First, it has been told that its grant is to be cut from £24.464 million to £21.339 million next year. That is a cut of more than £3 million before inflation is even taken into account.

Secondly, since the new grant was introduced in 1981–82, Trafford has been notified of no less than 10 reductions. How can it be expected to plan sensibly for the running of its services when that sort of thing happens?

Thirdly, the grant settlement of £26 million in 1981–82 is being knocked down to £21 million in 1983–84—a decrease in real terms of £8 million or 28 per cent.

Fourthly, in round figures, the 1983–84 settlement means an 18 per cent. rate increase, even though Trafford proposes to spend only at the level of the Secretary of State's guideline. It is not difficult to imagine the confusion caused to the leaders of Trafford council when, at the same time, the Department of the Environment released a local press statement saying that average rate increases will be very low indeed. Fifthly, Trafford's grant-related expenditure assessment has been reduced, not just in real terms but in cash, from £70.885 million to £70.775 million, while in the contrary direction its target has been increased from £66.597 million to £70.484 million.

Sixthly—this is one of the points on which I feel strongly—Trafford is regarded in the grant system as a high resource area because of its high rateable value per head. The practical result of the redistribution of resources that follows from this is that in the current year, including both district and county rate and grant-borne expenditure, while 25 metropolitan districts spend more per head than Trafford, in only 12 does the average domestic ratepayer actually have to pay more.

My seventh point is that last year Trafford council absorbed a cut of £2 million. At that time it went to the Department of the Environment to see the Minister to give early warning of the problems it would face if the situation deteriorated any further. We now know that the situation has deteriorated even further.

Some explanation must he given to the councillors and ratepayers of Trafford. My constituents feel that they have reached the limit at which they can be expected to absorb reductions in the grant. I ask my hon. Friend who is to reply to the debate to look very carefully at Trafford's case again.

I reiterate that Trafford council is not seeking any special consideration. Either there has been a mistake in the calculations or the formula being followed is at fault if a local authority such as Trafford, which has consistently implemented Government policy and controlled local government expenditure, is to be penalised year after year.

In last week's issue of the Altrincham and Sale Guardian, the leading article was devoted to this question. I do not think I can do better than to quote it: When other local authorities in the country were being condemned by the Government for over-spending or even refusing to follow Government guidelines, Trafford Borough Council was being congratulated for its good 'housekeepng' … and rightly so. For Trafford has been cautious—some would say over-cautious—in spending public money and as a result, ratepayers throughout the borough have not been faced with the massive rates increases, which have been evident in some parts of the country. The news, therefore, that the borough's rate support grant, had been cut by a frightening £3,125 million came as a bitter blow to finance chiefs in Trafford who, quite obviously are surprised and disappointed with the Government's action. A genuine mistake by Whitehall or a calculation which, in effect, gives Trafford the worst settlement of any metropolitan district in the country? Finance chiefs are investigating and we have no doubt that Whitehall has already felt the full force of Trafford's anger at being treated so unjustly. If an error has been made, we hope, for all our sakes, that the Government will quickly rectify the position. If not, then this drastic cut in the rate support grant, of about 13 per cent. will mean that Trafford is being treated shabbily and being penalised, whereas the high spenders are getting away with it. Such treatment cannot be tolerated by a local authority which prides itself on continually fixing the lowest rate in the Greater Manchester area. Like many others, we believed the Government's policy was to punish the high spenders. Given that a serious error has not occurred in calculating Trafford's RSG, it makes nonsense of everything that Trafford has tried to do. That leading article puts the case succinctly and much more effectively than anything I can say.

I have made this speech to protest to the Government about the treatment that has been handed out to the ratepayers of Trafford. I shall listen carefully to my hon. Friend's reply. How I vote will very much depend on the satisfactory assurances that I hope he will give.

6.41 pm

Mr. Stephen Ross (Isle of Wight)

I congratulate the Secretary of State on his elevation. Just before Christmas I said that I hoped that the right hon. Gentleman would receive good news during the recess, and it came just in time.

No one in local government ought to be surprised by the settlement announced by the right hon. Gentleman's predecessor on 16 December, because it was very much in line with the statement on 27 July. That does not mean that it is a good settlement, because palpably it is not. That is evident from the speech of the hon. Member for Altrincham and Sale (Mr. Montgomery). However, we had plenty of warning of what to expect.

There are many valid reasons why the settlement is unsatisfactory, some of which have already been outlined. First and foremost, the system is still enormously complicated. Any hon. Member who was present earlier and heard the algebraic calculations knows that that is true. That arises from using one method to assess the need to spend and to award GREAs, and a different method to set a target and to assess grant penalties for failing to observe it. The vagaries of the GRE assessment are such that the use of the 1981 census figures shows little correlation between client-population increase and GRE increase.

Metropolitan county councils with declining populations show the largest GRE increases, which leads one to suspect that the GREs are still unduly influenced by past spending patterns rather than client numbers. I am sure that that will be a consistent feature of the speeches we hear tonight.

It seems that a majority of the shire counties—about 59 per cent.—are likely to be penalised for spending below their assessed need for grant purposes. That is daft. I appreciate that in the coming year £904 million—about 4 per cent.—has been added to targets but not to GREs to help soften the blow. However, we are told this will not be repeated in 1984–85. How will that affect block grant entitlements in the coming financial year, and what can we expect in the following year? In other words, is the stated intention to withdraw the £904 million a threat or a firm promise?

As someone with responsibility for presenting the Isle of Wight county council's budget, I can say that that authority is extremely grateful for a generous transport supplementary grant offer. It hopes to take up that offer in full, despite revenue implications of about £365,000, which represents nearly a 3p rate. The county council has received a generous transport supplementary grant, and it would be foolhardy if it failed to accept it.

I hope that the Government will soon recognise our soundly based representations for help to reduce the crushing burden of our ferry costs, which are unique in the United Kingdom as they are in no way subsidised. Umpteen delegations have met Ministers and many letters have been written. There have been helpful noises from both parties. When the Labour Party was in office, the right hon. Member for Stepney and Poplar (Mr. Shore) tried to help. Equally, I shall never forget the speech made by the new Secretary of State for Defence when he was in opposition. Despite all that, nothing has happened.

I am prepared to say "Thank you" inasmuch as our pleas have been partially conceded. I should like to hear some reciprocation from Ministers, because until today most of them have come to the Dispatch Box and denigrated local authorities and the nationalised industries. The Secretary of State for Transport was at it only yesterday when he called for the privatisation of British Rail catering facilities, yet any fair-minded Member knows that British Rail has in recent years made great strides to improve that service.

It may be that Ministers spend too much time in their black limousines—certainly the Prime Minister does. I merely ask them to look at Waterloo and at the catering transformation that has occurred there over the past few years.

The same is true of local government. Too rarely is there a kind word for it, with the possible exception of Kent county council. It seems that if one serves on that authority one can run a garden centre in Liverpool or even take over the Bank of England. The vast majority of councillors and local government officers are doing their best, often under difficult circumstances and extreme pressures from outside groups, to honour central Government diktat. All too often all they get for their pains is a slap in the face. The previous Secretary of State for the Environment was a pastmaster at the game. I hope that that will now stop, or no one worthwhile will take on the job of councillor.

According to the Tories, the blue-eyed authority is Birmingham, but, as the right hon. Member for Manchester, Ardwick (Mr. Kaufman) clearly demon-strated, it has not worked any particular miracles. Indeed, what it is now doing with its waste disposal services, many councils, including my own, did months or years previously. Birmingham has had a cracking good settlement and probably had some damned good balances. As a result, it has been able to make a cut in its assessment for next year. Moreover, Birmingham was well managed under Labour, and its leader Clive Wilkinson, was a capable former chairman of CoSIRA. It does not help when this sort of tit-for-tat takes place, because Birmingham has had a well-run administration for many years.

No hon. Member is ever likely to praise a Liberal-controlled authority—not even the right hon. Member fo Ardwick—because that is not the done thing in two-party confrontation politics. I put on record my appreciation of the success that has been achieved by the six authorities under Liberal control. It is quite untrue to suggest that where Liberals are in control the rates have soared. The opposite is the case. This year, my own authority is likely to keep its increase below 6 per cent., and the borough of Medina, also under Liberal control, will probably impose no increase at all, despite the extra demands that we face from the problems of increasing old age and Government legislation.

We should like to help small businesses and industrialists who may wish to convert empty premises that cannot be refurbished or let. We should like to de-rate for longer than three months. That costs money, and if the Government are not prepared to make a contribution we must seriously consider whether such a move would be fair to others. In my constituency, an extra 1,000 adults each year reach retirement age. The burdens falling on our social services are becoming acute and the resources to deal with them are inadequate. We are, I regret, still below GRE on their service.

On 9 December, I received a reply from the Secretary of State to my request for extra financial assistance within the rate support grant to refund the extra local government costs involved in implementing the provision of the Social Security and Housing Benefits Act 1982. I got a raspberry in reply—no increase in expenditure was likely. This measure is likely to cost my authority an extra £28,000 a year, which I am told represents £50 million, or 350 extra staff, in local government as a whole.

The county treasurer of a large Conservative-controlled council not far from my shores recently wrote: The whole wretched scheme is horribly complex and from the point of view of the public sector employer a total waste of time". The local authorities will have to bear these extra burdens. My own authority will have to spend £2,000 to provide a secure cupboard for records to satisfy the insurers. Such things are constantly passed down the line from central Government to local government, and local government is then ticked off for imposing extra demands on the ratepayers.

Between 1976 and 1981 when the retail price index went up 85.1 per cent. and total central Government expenditure went up 130 per cent.—it went up 110 per cent. if we exclude social security payments—local government expenditure went up by only 77 per cent. That is not a bad record. I accept that savings could still be made if only the Government would listen to common sense.

It is rumoured that the days of the metropolitan counties may be numbered. There may be justification for that. My hon. Friend the Member for Liverpool, Edge Hill (Mr. Alton) is nodding his head. I am sorry that the Secretary of State has left. The Department could help my constituency immediately by allowing the three councils in the Isle of Wight to merge into one all-purpose authority. As the Member of Parliament for the area and leader of the county council, I am driven up the wall trying to settle who will pay planning fees and whether south Wight will have the same housing policy as Medina. If there were a referendum on the subject, we would win hands down. I should be surprised if more than 10 per cent. of my constituents would vote against the proposal.

Apparently we shall have to wait until 1984 at the earliest for a review of local government structure under the Local Government Act 1972. Indeed, it will probably be 1990 before we can do anything about it. That will be abolutely ghastly. I ask the Secretary of State to let us do something about it now. We have gone part of the way by sharing facilities, setting up joint committees, and so on. That is not good enough. We shall not get things settled satisfactorily until we are given the sort of authority which we begged for when the former county council, of which I was a member, made representations to the Maud committee which considered the subject of local government in the early 1970s. I plead with the Secretary of State to give us the opportunity to streamline local authority organisation in the Isle of Wight now and thus save ratepayers money.

6.52 pm

Mr. Robin Squire (Hornchurch)

It is unfortunate when, in the main debate of the day, the first Back-Bench Member speaks at about 6.30. I am sure that my observation will be noted in the appropriate quarter.

In his absence, I congratulate my right hon. Friend the Secretary of State on his elevation. I speak not just as one of his many colleagues but as a member of the Environment Select Committee which no doubt ensures that he and I will continue to have contact for a considerable time. He has acquired a justifiable reputation in the House for being fair-minded and persuasive. No doubt he will need and hold on to those abilities in the ensuing years in his new post.

No attention has been given to the desperate position in which the right hon. Member for Manchester, Ardwick (Mr. Kaufman) finds himself, shorn, so to speak, of his rival. The right hon. Gentleman has built a mini-career on the activities, fact or fiction, of my right hon. Friend the Member for Henley (Mr. Heseltine). Now he stands deprived of his main target. We should have sympathy for him in this pantomime season. He is like a beanstalk without an ogre or a Jane without a Tarzan.

I should like to concentrate first on the aspects of the 1983–84 settlement as they affect my own London borough of Havering and welcome unreservedly the decision to stagger the holdback arrangements for penalties. A deputation from Havering—myself joined by my hon. Friends the Members for Upminster (Mr. Loveridge) and for Romford (Mr. Neubert)—went to see my right hon. Friend a short time ago. We made the point forcefully that if there were not a staggered penalty system it would be grossly unfair for local authorities which overspent marginally and thus had to pay the full cost as opposed to a more modest contribution for a small overspend. I am delighted that the Government have seen fit to bring in that adjustment.

Even if I put to one side my own authority's position, there must be other authorities which because of that decision have a greater incentive to come down from a considerable overspend to a marginal overspend. Previously there was no incentive for them to do anything about it. To that extent also there must be a gain.

The settlement has been described as an increase of 4 per cent. on the 1982–83 budget. I am reminded that on these matters we can describe the same thing in different ways. The settlement for my local authority, for instance, for 1983–84 as advised by the Department of the Environment is £41.3 million. It is assumed that all authorities are spending on target and there is no provision for any grant shortfall, although in practice we know that there will be adjustments later. The figure for 1982–83 notified at the same stage by the Department of the Environment was £40.9 million, which was subsequently reduced by £400,000.

On that basis my authority, which for many years complied with the wishes of successive Governments regardless of political persuasion, is getting an increase of just 1 per cent. in cash terms. I underline that point because, as every hon. Member will appreciate, it is impossible even in the best-run authority to have anything other than further savings, further cutbacks and further retrenchments if the settlement is just 1 per cent. more in cash terms than that of the previous year.

The third detailed aspect of the settlement to which I wish to refer before turning to other matters is the removal of the concession to those authorities which spent above target and below their grant-related expenditure assess-ment figure. My borough has not had any benefit in this context because we are not structured in such a way that we can be affected, so my observations are made from the point of view of a Member of Parliament who is not and cannot be affected by the removal of the concession.

It seems unfair and unfortunate that the effect of removing the concession is to strengthen further the targets which are themselves merely an extension based on past expenditure at the cost of reducing the impact of grant-related expenditure assessments. As I shall show later, I am not suggesting that the latter should be elevated to such a status that they become tablets of stone, so to speak, but if there is to be a distinction between the two one would have thought that it should be shaded towards the measured grant-related expenditure assessments which have been arrived at by the most modern, up-to-date bases of measuring need inasmuch as one can do that from the centre, as we are regularly and rightly told. I am sorry that the removal of the concession means that the emphasis has shifted back more to the targets which ultimately were arbitrarily based on the outturn of a particular year suitably uprated.

The performance of the Greater London Council is never far from the minds of all those who live in and represent areas in greater London. Lest Opposition Members assume that I am about to launch into a predictable tirade against the GLC, I point out that I remain of the belief that there is a function for a regional authority, as I have said a number of times. It is therefore doubly sad for someone like myself, holding these views, to watch some of the things that have been taking place on the other side of the river.

Mr. Maxwell-Hyslop

Who does my hon. Friend think should have the pleasure of paying for yet another layer of local government—ratepayers or the central Government taxpayer?

Mr. Squire

I am grateful to my hon. Friend, who studies these things but who has anticipated by five minutes and no more, I assure him, my conclusion on that matter. If he will bear with me, I shall undoubtedly deal with the point. Whether my answer is to my hon. Friend's satisfaction will be for him to decide.

There is a function for a regional authority. I become increasingly depressed, however, about aspects of that authority. I shall not produce a long catalogue. I shall concentrate on one area that has received rather less attention than most. I refer to the proposals that have been circulated covering so-called good employer practice. In a CBI release, Mr. Bill Doughty, chairman of the CBI's London region, states how damaging the proposals of the GLC could prove to be. The CBI release states: Mr. Doughty accuses the GLC of trying to assume the functions of Government agencies such as the Commission for Racial Equality and the Equal Opportunities Commission, and says that the Council should not be dabbling in such areas, as it lacks competence in them, and would in any case be duplicating effort. The GLC, he says, should concentrate its efforts on what should be its prime aim—of providing cost effective services to the residents and ratepayers of London. He warns that suppliers to the GLC would be deterred from tendering for contracts by the prospect of increased administrative costs of compliance, by uncertainty about how the Compliance Unit would exercise its discretion, and by the unclear legal status of some of the proposals". That is one area. There are many things that the GLC could, and should, be doing and that it has been elected to do. Every time that it starts to involve itself in these other costly administrative, bureaucratic and overlapping areas, it is doing a disservice to the people of London.

I wish now to deal with the kernel of the discussion on rate support grant and financing. In passing, I trust that I shall answer the interjection of my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) I wish to examine the proportion of expenditure that is now met by the Government. The right hon. Member for Manchester, Ardwick (Mr. Kaufman) pointed out that, under this Government, it has fallen from 61 per cent. to 52.8 per cent. overall on today's figures, although, as he also pointed out, that is in advance. The figure is bound to be reduced once the holdback provisions are known. It may well fall below 50 per cent.

Perversely, I do not regard that as a bad sign. The long-term future for local government is that it should increasingly not be reliant upon central Government support and that it should fund itself from own local sources. The more that central Governmet pays to local government the more, in practice, it will invariably call the tune. I am happy, at the first leg, to see a reduction.

There is, however, a big "but". One cannot divorce the reduction from the consequential effect on the far too narrow base of ratepayers that now exists. It is impossible to expect, if this progression continued and central Government support fell to 40 per cent. or less, that ratepayers, particularly business ratepayers, would be able to afford the consequential increase that would be entailed. When one takes into account the relative unfairness of releasing many income tax payers who do not pay rates from the responsibility for higher contributions to local government services, it becomes even more obvious. This underlines the need for alternative finance to spread the load.

The Environment Select Committee on which I have the privilege to sit published a report a few months ago. Hon. Members will be relieved to know that I do not intend to quote from it at length. It seems to me, however, that the Committee faced up to the problem and produced a number of interesting proposals. It recognised, in particular, that if this alternative finance is to be provided, it is likely to be based on some form of local income tax. The details can obviously be discussed on another occasion.

Armed with a new local tax—this is one proposal on which the Committee did not agree but which I feel free to put forward—it would be possible to transfer non-domestic rates from local government to central Government where, in any event, the issue more naturally belongs as a major part of economic planning. We are talking of substantial figures. Any Government are bound to be concerned with the health and wealth of limited companies and corporations that provide employment. Those aims cannot be achieved until we have an alternative source of funding.

We cannot continue to reduce the percentage Government grant unless we provide the alternative finance. Despite preferring grant-related expenditure assessments to targets, I remain of the belief—perhaps it is increasingly old-fashioned—that a system of control that does not rely on individual council-by-council control would be infinitely better and would not involve so many people spending so many hours in working out the complexities, as demonstrated amply by the right hon. Member for Ardwick. Ultimately, control of local authority behaviour and performance is more likely to be created and granted by the local electorate bringing pressure to bear than by Governments of whatever persuasion. Until and unless we can get that equation right and more naturally link and identify those who pay for Government services and local government services with those who benefit from them, we shall continue to face this impossible problem from year to year.

My right hon. Friend the Secretary of State has gone on record as saying that he believes in greater local democracy. I support him wholeheartedly. I trust and hope that during the years that he holds this office—we look ahead beyond mere elections—he will have the opportunity to demonstrate the reality behind that statement and bring about the greater democracy that he and I support.

7.8 pm

Mr. Ken Eastham (Manchester, Blackley)

Before my election to this House, I served for many years in local government. I am constantly disappointed when I hear Ministers make all kinds of jaundiced claims about local government. There appears to me often to be a campaign of hate against local government and the services and responsibilities that local authorities try to fulfil for the community. One often hears glib assertions from the Government Front Bench about "big spenders". Such assertions are usually accompanied by a reference to inner cities and the large authorities, such as my own city of Manchester. It is about time that some of these charges were put in perspective. We should knock down some of the half-truths that have to be constantly endured during these debates.

There is no doubt that inner cities are confronted by special problems. When there is decline in population and slum clearance, one also has to consider the consequences of lower rate income for the inner cities. There is usually also a high proportion of pensioners who need the support of local agencies provided by the local authority. This has never been recognised by the Government.

The inner cities are often expected to provide services from which surrounding authorities take the benefit. I remember some years ago an estate agent advertised his houses as having low rates but being near enough to Manchester to take advantage of the benefit of the provisions made by the city.

I should like to cite one or two examples to reinforce my defence of the inner cities and to show some of the problems. Recently, hospitals were on the agenda during Question Time and reference was made to hospitals of excellence. I referred to the plastic surgery, micro-surgery and cancer hospitals in Manchester, and quoted the example of Christie's hospital—perhaps the most famous hospital in Britain for cancer treatment.

I have spoken to the chief social services officer, who made some comparisons. He said that, of the patients attending Christie's, about 93 per cent. were from outside the city. However, he is expected to provide all the hospital social workers. That is an illustration of the large financial burden placed on the ratepayers of Manchester. The big hospitals—Christie's, the Manchester royal infirmary and Wythenshawe—will need social workers, the cost of whom have been estimated at approximately £1.5 million, which cost will be placed on inner city Manchester rates.

Does the Minister consider that this is overspending? It is reasonable for me to ask him this question and to expect some kind of answer. Will the Minister abolish the services, or will he consider special funding for these necessary services, the cost of which is unfairly placed on Manchester? I can give numerous other examples of services, such as the libraries and the university with all its special needs, paid for by the city of Manchester.

Earlier in the debate the Minister referred to education and falling rolls. It is about time that we attempted to nail this theory, because it is not as simple as he will insist it is. For instance, if there were a fall in numbers of 1,000, we could not simply say that is equivalent to a high school and we can close one high school. Falling rolls are usually spread right across the city and are interspersed through classes. Two or three children may be left in a class, but that does not mean that one can close the class.

There is another problem with small children. It is not easy to close infant or primary schools, even if there are small numbers. There is a special problem about the distances that mothers will need to take these toddlers to school. One cannot close schools on the basis of a simple formula or arithmetical analysis. The Minister is dishonest to speak in this way.

We must recognise that local government is labour intensive. The Minister may be bold enough to say that it is great to reduce the number of staff, but that produces unemployment. Manchester has massive unemployment—some of the highest in the country. We would simply be removing people from doing vital and useful jobs for the community through local government and putting them in the dole queue. As I understand it, every time a working man is put in the dole queue, it costs the Government about £5,000 a year. That is crackpot economics.

Year after year since 1979 the Government have reduced financial support for local government. The reduction is 5.6 per cent. in real terms, as against the 1979 figures. We can already witness major deterioration in the provisions made by the city of Manchester. If one drives through Manchester, one sees the potholes and missing street lights. All these things require maintenance, because they are a safety hazard. That is the problem that we have in Manchester, and I am sure that city is not unique.

I have already mentioned the problems of education, social services and a high proportion of old-age pensioners making legitimate demands on local government agencies. There is also the acute problem of housing maintenance. Even owner-occupiers recognise that it is wise housekeeping to paint their homes and to keep up the repairs. There is now an acute problem, with thousands of council homes urgently needing major maintenance. The problem is deteriorating, not getting better. If the Minister puts through the reduction that he is swanking about today, it will mean a further aggravation of the problem and more deterioration.

Dr. Keith Hampson (Ripon)

What about Birmingham?

Mr. Eastham

I am surprised that the hon. Member for Ripon (Dr. Hampson) speaks of Birmingham after my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) has already dealt with that city.

Let us consider local government and its efficiency. We know that local government is far more efficient than central Government. The targets that the Government are demanding from local government are far harsher than the targets that they expect from central Government. It is useful to compare expenditure between local and central Government.

Taking 1976 as 100 for central and local government, by the time that we get to 1982 central Government expenditure has risen from 100 to 108 whereas local government expenditure has gone down from 100 to 80. How can we talk about the inefficiencies of local government when we know that this is a fact? We have to listen to special money orders being presented annually because of massive overspending by the Government.

To add to the worsening of the problems of inner cities—I am trying to illustrate some real problems in places such as Manchester, because Manchester is often referred to—the Government have decided to punish the inner cities by reducing grants.

Assisted area status has been removed, despite the loss of jobs and industry. While, in desperation the city is trying to encourage industry, jobs and self-sufficiency, the Government are penalising it by taking away that assistance.

This is not just a case of cuts. The Government are carrying out a vendetta against local authorities. I wish to place on record my strongest protest at the constant half-truths when charges are made against local government. We know full well that local government should be accusing the Government.

7.20 pm

Mr. Robin Maxwell-Hyslop (Tiverton)

My principal complaint about the grant settlement can be summed up concisely. It is that no steps have been taken to reform local government finance, principally because of the mischievous and ill-informed report of the Select Committee on the Environment, which was probably the greatest single instrument in preventing the reform of local government finance from appearing in this Session's legislative programme.

Mr. Squire

It would be unfair to debate the issues of the report, so all I shall say is that if my hon. Friend believes that the Select Committee on the Environment has that much influence on the Government, he believes a jolly sight more than the members of the Committee, separately or collectively.

Mr. Maxwell-Hyslop

My hon. Friend is entitled to that view, but it is difficult for a Government to introduce a Bill in the face of the sort of report that was produced by that Select Committee before the matter had even been debated in the House. Let me give one example of the folly embodied in that report. To say that there is no strong movement in Britain in favour of rate reform solely on the ground of a speech by a completely ill-informed peer is the most unsubstantiated and foolish proposition that it is possible to remember ever being embodied in a Select Committee's report. I leave it to my hon. Friend to reflect on that.

The Government now face a position in which all the commercial and industrial ratepayers have no vote, and are therefore not an effective brake on local government expenditure, and where only a small minority of domestic voters pay the local government tax. That is a real problem. However, I do not regard that as a justification for reducing the percentage of the tax burden that is arrived at by the relatively fair system of taxation.

If Government taxation is not a relatively fair system, the Government have no one to blame but themselves. Every year in the Finance Bill the Chancellor of the Exchequer puts before the House what he believes to be the fairest way of raising money to finance Government expenditure. Therefore, to reduce the percentage of local government expenditure that is financed in that way and to increase the percentage that is financed in a demonstrably unfair way is a thoroughly retrograde step in Government policy for which the Minister now carries responsibility, even though it properly belongs on the shoulders of my right hon. Friend the Member for Henley (Mr. Heseltine), because of the gestation period of these events. Be that as it may, I cannot accept that this is either prudent or just policy.

Another consideration is that by basing the targets on the historic pattern of expenditure the Government are penalising those local authorities which have been particularly economical in the past. Not only is that inherently unjust; it is in many cases inherently unwise. If, in the past, in response to Government appeals for economy in local government expenditure, for example, road maintenance has been cut to the bone, to ask for further reductions not only can, but does, result in the break-up of the substructure of roads. It will cost far more to reconstruct roads than to keep them in a reasonable state of repair. That is not just a theoretical consideration; it is happening in Devon.

Devon is a good example of a low-spending county which has been consistently economical in its public expenditure, as have many of the district councils. To treat its low past expenditure as a base on which to assess what it should be spending now is to penalise past economy rather than to reward it. That is neither just nor good public policy.

I have nothing but a welcome for the departure of the old system of assessing local government needs before GREA. It was a fiddler's symphony—there is no other description for the sheer political fiddling that went on when the Labour party came to power, in favour of, for instance, Wales and urban areas. Devon lost about £48 million, filched away during the years of the Labour Government. The formula was fiddled in a way which was not rational, and which could not be and never was explained. That, among other things, has contributed to the historically low expenditure of Devon—a county with far more than the national average of old people, because people tend to retire there, and with the highest mileage per head of unclassified road of any county in England.

My major criticisms are, first, that it is wrong to reduce the percentage of Government contribution to local government expenditure, having failed to grasp the nettle of rate reform. Even reducing that percentage will not have the effect which the Ministers want it to have, because it is still as true afterwards as it was before that only a small minority of the local government electorate will be directly affected by it. There will still be a majority of the local government electorate not directly affected by rate increases. That is why it will not even be an effective means of doing what the Government wish to do. Unfortunately, representations to Ministers—particularly Ministers who are not in the House of Commons—prove remarkably unfruitful in that regard.

I well remember the previous Secretary of State for the Environment, who has now been translated to the Ministry of Defence, asserting that under the new system counties and districts that were economical and kept within their budgets would not be penalised by the overspending of profligate local authorities. I commended that fair and reasonable proposition. However, I cannot commend the failure to abide by it. It is undeniable that there has been a clawback. Economic local authorities have had to pay for the overspending of profligate authorities. That is contrary to the previous Secretary of State's statement of Government policy. That is not only unjust and contrary to his declared policy, but makes accurate expenditure control impossible.

The clawback is an unknown amount and it is impossible to budget for it, because it is based on the expenditure performance of others. In any case, there are many things that are outside a local authority's control. For example, if there is an increase in fuel tax, the cost of transporting children to school in a widespread county council area will increase through no fault of the local education authority. The cost of running local government welfare services will also increase where driving is involved. Such increases in expenditure are outside the county council's control. Many matters are outside its control. However, it is undeniable that many factors are much more within its control than it used to be fashionable to believe.

I have already alluded to the fact that the target figures are wrongly based. If they are laid down by the Government, a council does not even know whether it can spend the target sum, because of the clawback provisions. Therefore, clawback should be abolished for those authorities that do not exceed their grant-related expenditure or their target. The disparity between the grant-related expenditure assessment and the target—due to using the wrong historic basis in the first place—and the penalising of low rather than the high spenders adds to the practical problems of those local authorities that endeavour to stay within their targets.

The right hon. Member for Manchester, Ardwick (Mr. Kaufman) pointed out, in a speech that had considerable analytic merit, the contrary effect of over-budgeting to attract more favourable treatment from central Government. That makes it all the more difficult for those local authorities that are economic by habit and by necessity. Many of them represent areas in which average earnings are well below the national average and in which the cost of living is much higher than the national average, because of the high cost of transport to work and to the shops, and because fuel costs are higher in the outer areas than in the central areas of Britain. The same is often true of food prices. It is a myth that food costs less in the rural areas than in the great conurbations. Huge quantities of food are sent to the conurbations, and because of the economies of scale the unit cost is considerably lower.

Housing costs in rural areas are sometimes much higher than in urban areas. When those living in large industrial conurbations retire, they often roll over the capital from selling their houses and put the money into cottages in what they consider to be holiday areas. However, to others, those areas are their working and living environment. As a result, prices are forced up out of the reach of those on lower than average incomes.

The local authorities that face such problems tend to have lower expenditure patterns than those without such problems. That is why it is wrong for central Government to take past performance and to reduce the target for a local authority's expenditure, as if its needs were less because its means are less.

That mistake is sometimes made in other areas of policy and politics. To say that needs are less because expenditure is less is to stand cause and effect on its head, where expenditure is less because the means to expand are less. Therefore, the gravamen of my message is that my right hon. Friend and his colleagues in the Department of the Environment are a long way from getting things right. The position is not very commendable, but it has been grossly aggravated by reducing the percentage paid by central Government under a formula that is highly unsatisfactory and by leaving in existence a local government financing system which the Government do not consider to be either just or acceptable. Neither do I.

7.37 pm

Mr. Stuart Holland (Vauxhall)

We have heard a speech of amazing complacency from the Secretary of State for the Environment as he takes his first confident steps in his new kingdom. It was clearly part and parcel of the Government's prejudice against public spending and welfare, which still assumes that public expenditure drains, rather than sustains, the private sector. But it also was clear evidence of the Government's total disarray over central and local expenditure targets.

The hon. Member for Tiverton (Mr. Maxwell-Hyslop) and my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) have put the anomalies and contradictions of the situation well. It is, indeed, an indictment when the Financial Times of 17 January mentions the targets and penalties and observes: Even if all councils met the targets, the erratic and contradictory method of allocating central Government grant means that about 80 of the 414 local authorities would still need rate rises of 10 per cent. or more—double the government target for 1983 inflation. The article rightly points out that places such as Liverpool, Bedfordshire and my borough, Lambeth, could achieve hefty rate cuts if they could make the enormous spending cuts required to hit the target, but that they would need large rate increase just to maintain existing spending levels. In the case of Lambeth, the rate increase that would be necessary is about 25 per cent.

The Secretary of State reeled off to the House the increases that are being imposed by allegedly irresponsible local authorities as if those increases have nothing to do with the penalties that are being imposed. In effect, they amount to £1 of cuts for £1 of—not over-spending—but maintenance of the existing levels of goods and services, or £1 million of penalties for every £1 million over the limit.

The situation is especially serious in inner city boroughs such as Lambeth, which has one of the highest unemployment levels in the south-east of England—as high as 22.1 per cent. male unemployment in parts of the borough, a higher rate among school leavers and higher still among black school leavers.

The Secretary of State argues as though responsibility in public spending is defined by what one can cut or what one cannot spend, without looking at the use value of local services. For example, we have a severe situation in my own constituency of Vauxhall, as regards social services, where it is not at all clear that the local authority can maintain its statutory obligation of protecting the interests of children who are at risk.

I have recently had a case of a single parent—a man—who has been victimised on other grounds by neighbours and has twice been viciously attacked. He is fighting to preserve what remains of his family—two charming young children who are still bright and alert. He lacks furniture and the children lack books and toys. On the supplementary benefits application, which is not directly within the purview of the local authority, he can gain only the barest minimum for basic furniture and equipment. In the key area of social services, where that man needs help, he cannot get attention or the moral and psychological encouragement of talking through his problems. He cannot get assistance even in applying for his basic rights, because we do not have the social services staff to help him out.

I take another case of an elderly constituent who came to this country from Austria before the war to escape Nazism. She told me recently that for most of the time in which she had been in this country she considered herself fortunate to have escaped the holocaust in central Europe. Now an elderly woman in her eighties, she says that she would rather be dead than carry on living as she is. Her home help visits have been cut. She now gets home help only twice a week. The local facilities to assist her on the estate are very inadequate. The programme for the sheltered accommodation that she has been promised has been put back year after year after year. She is frightened, apprehensive and worried, even about the use of electrical equipment in her flat.

This woman's judgment of her own life and her own tragedy are an indictment of this Government, an indictment of a policy that assumes that it is better not to spend or to cut spending than to provide a social service. It is in a real sense a test of whether a country is civilised that it should, in effect, put profits before people in these cases.

In the example of housing, a young couple recently came to my weekly advice surgery saying that they had been assured that there was no hope of being housed at any time by Lambeth council because of the need to give priority to the homeless and to other social categories of greater need. I looked into the case to see whether there was some possibility of their being allocated a property that they might do up themselves—they had the skills to do it—but they did not have enough joint income to purchase a property of their own. I am afraid that the reply from the council confirmed my suspicions that there was almost no hope whatever.

How can these people understand that the cuts in the housing investment programme and in the rate support grant so drastically affect their housing prospects? Many of them are beginning to realise, and one thing that has encouraged them to see what the Government are doing has been the transfer of housing from the GLC to the local authorities, which is again part of the strategic onslaught of the Government against what they regard as over-large and unnecessary local authorities.

In Lambeth, when I became a Member of the House, we used to move about 2,500 individuals or families out each year to outer London boroughs, through the strategic housing role of the Greater London authorities. That has now virtually come to a halt. The inter-borough nomination scheme—the bilateral application on behalf of the tenant to move from one borough to another—is rightly seen as a no-hope situation, as a closed door, by my constituents. When they apply to the outer London boroughs, those boroughs have no desire to take responsibility for them. The result is that many people, old and young, in an inner London borough such as Lambeth have moved from low hope to no hope. That is the social cost of these cuts and restraints in Government spending.

I urge the attention of the Secretary of State and all Members on the Government Front Bench to a warning that they seem to have chosen to ignore. It was the warning given by Lord Scarman in his report on the Brixton disorders, which occurred on the edge of my constituency and literally within a few hundred or thousand yards of several of the people to whom I have just referred. He said that homelessness was one of the three main underlying factors in the disturbances. That cannot be strongly enough stressed, nor does it seem to be part of the consciousness of the Government.

Most people are aware that Lord Scarman claimed that policing tactics were a major item in the disturbances, as was the underlying unemployment. But the third factor that he cited was homelessness. That homelessness is a scandal when at present there are more than one-third of a million houses in the Greater London area that either lack a basic amenity or need major modernisation or repair.

It is also surprising that the Government seem to believe—it was echoed by the Secretary of State earlier today—that there is a Manichaean division in the economy, that private spending is good and public spending is bad and that the two never meet. I took the trouble to note some of the words used by the Secretary of State. When I intervened—I was grateful to him for giving way—he chose to say that economic matters were for yesterday's debate.

If the Secretary of State carries on thinking that economic matters are for yesterday's debate, it is time that he learnt to give certain messages to the Chancellor of the Exchequer, not only so that the Chancellor gets it right on the day, but so that he can fulfil some of his own responsibilities as Secretary of State for the Environment.

The right hon. Gentleman said that there had been four years of pressure on local councils, that the Government had to cope with the strains of uncontrolled spending, and that the Government would "encourage further restraint." Why this restraint? Why these cuts? The right hon. Gentleman added, "The central concern"—of the Government—"must remain the enormous influence that local government expenditure has in the economy as a whole." We then heard the quantitative argument. The Secretary of State said that local government expenditure amounted to about £22 billion and that the Government must set some boundaries to it. He followed up with the argument of the international arena. He said: Together with virtually every other major industrial nation, we have tried to reduce spending on consumption". He claimed that as if it was a self-evident merit in either the central or local economy.

The facts which the Secretary of State is unwilling to admit are elementary. One country's imports are another country's exports. If each Government seek to cut public spending, whether regionally, locally or in health or social services to reduce imports, they are contracting other country's exports and thereby deepening the world slump.

There are two ways of approaching the argument. One is to look at the actual forecasts that are coming out of organisations such as the OECD and the EC. The Government are expecting some kind of upturn, although they are certainly not promising to channel resources from that upturn into local authorities in inner city areas. It is part of their economic brutalism to turn their face from inner city communities.

In reality, in their own interest, they should take note of the fact that unemployment in western Europe today is already around 11½ million and is likely to be more than 20 million in 10 years' time if the slump continues. They should note that there is a joint interest for exporters, for employers, for inner city employment and the generation of jobs in local areas through a reflation of world trade. This is an approach which the Prime Minister rejects and the Chancellor of the Exchequer rejects, but which the Secretary of State for the Environment, who has a reputation for being a shrewd and astute man, should realise is crucial and central to his interest.

I invite the right hon. Gentleman to sponsor a conference in this country of Secretaries of State for regional and local government, or his equivalents in various countries, to consider whether it serves their joint interests—if they are trying to provide viable local communities in a civilised environment—to endorse, as Ministers of Governments, policies of beggar-my-neighbour deflation.

The Secretary of State chose to refer to France. The reality is that when the French ran into difficulties with reflationary policies, which is not in dispute, the country which mainly benefited from that reflation was West Germany. That actually means that jobs are preserved in areas such as Stuttgart or Dusseldorf or other urban areas. Rates and local taxes are thereby paid by people in employment which can be recycled into the economy. The same obtains for this country with regard to trade with other countries.

If this lesson is not learnt, if the gap which at present exists between the Secretary of State's thinking and the Government's thinking on this matter cannot be bridged, the grave crisis at present registered in inner city areas will become generalised. We have already seen major disorders in Brixton. We are likely to see other disorders as well. I give that warning with no enthusiasm. But the fact is that the Government, by their policies, are not only increasing social tension in inner city areas, but are undermining the economic fabric of the regions and country at the same time.

This matter will be settled either by them before the election or at the ballot box, or, again, on the streets. The Secretary of State must take responsibility for this. It is no good sending busloads of bankers around inner city areas or expressing the hope and intention that regeneration will occur, unless he takes on board the central economic argument concerning public expenditure. Public expenditure sustains the private sector—it does not drain it.

I shall leave the Secretary of State with one fact gained from a parliamentary question that I put to his predecessor about the proportion of council housing in England and Wales that was provided by direct labour organisations of local councils rather than by private contractors. The proportion was 7 per cent. In Scotland it was even lower, at only 3 per cent. That means that for every £100 of public expenditure cuts on council house building—housing starts are down to less than a fifth today of what they were in 1979—£93 in England and Wales and £97 in Scotland is taken away from private contractors. That is the basic circularity of income in the economy which Keynes argued and which the Government have dismissed as if not only Keynes but argument were totally dead.

We need to go beyond Keynesian policies. We need not only to reflate the economy but to restructure our inner city areas and redistribute resources. If the Government cannot grasp that message, they cannot be surprised at the protest that will again occur. It may be at the ballot box, but, regrettably, it may again be on the streets of our inner cities.

7.57 pm

Mr. W. Benyon (Buckingham)

I would have listened with a little more sympathy to the hon. Member for Vauxhall (Mr. Holland) if he had acknowledged in the slightest degree the role that local government can play in the encouragement of business and commerce. In the London borough of Camden there is considerable concern about the flight of business and commerce from the borough. Things are changing as a result. We have heard today that Camden is keeping its rates level even though it receives no rate support grant.

I was grateful to my right hon. Friend the Secretary of State for his remarks about the problems of Buckinghamshire, which is by far the most rapidly growing area in Britain. This is exemplified by the fact that in a few weeks, on 15 February, I shall represent 128,000 constituents. I sincerely hope that the Boundary Commmission is not too far away.

Mr. Maxwell-Hyslop

Voters or constituents?

Mr. Benyon

Voters.

In the debate on this subject on 16 February last year I intervened to ask the then Secretary of State for an assurance that the particular problem which affects Buckinghamshire—the rapid increase in population—would be dealt with in time for this year's assessment. It is that assessment which we are discussing today. The problem has not been solved. As a result, an unfair burden has been placed on my constituents and the ratepayers of the county as a whole.

In that debate, the Secretary of State, in reply to me, said: 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."—[Official Report, 16 February 1982; Vol. 18, c. 161.] What in fact has happened? The target of £187 million which has been fixed for Buckinghamshire is a 4 per cent. increase on the current year's budget. Therefore, it relates to the old pre-census population of 543,000.

This year the county council will have to provide services for 593,000 people, an increase of 50,000, which is equivalent to the population of a medium-sized town. The post-census figure of 571,000 has been used for grant-related expenditure. It is the registrar's general estimate of the county's population in June 1981, but is 20,000 short of the actual population. That has resulted in the GRE figure being increased from its current £181 million to £194 million. Even though that is still an underestimate, it is a much better indicator than anything else of the problems facing the county administrators and of the services that they must provide.

In the current year we have had the option of choosing the target or the GRE figure, whichever was the higher. That option does not exist for the next financial year. I understand my right hon. Friend's dilemma. He must have either the target or the GRE. The option was a bad system because it was difficult to divide the total and keep within the overall figures. If he chose GRE rather than target, it would be fairer for areas such as Buckinghamshire, but others would be severely penalised. To help one, he must penalise another.

As has already been said in the debate, it is an intensely complicated business. I doubt whether one elector in 10 in my constituency understands it. Putting the matter in its starkest possible simplicity which people could understand, if there were no penalties this year Buckinghamshire could provide its existing standard of services—with no improvements whatever—with no increase in the rates. However, that level of expenditure incurs a substantial penalty. Therefore, the council is faced with a quandary: does it reduce the services to a level that I believe is below the statutory requirements, or does it meet the penalty by raising additional rates? It has opted for the latter. Therefore, the additional burden that will be placed upon the ratepayers for the forthcoming year will be used exclusively to meet the penalty.

I can put a further gloss on the matter. If the population is rising relatively slowly and is spread throughout an administrative area, it is possible to "stretch" the services. For example, it is possible for an existing fire station to deal with additional houses without increasing the size of the station or the number of staff employed. However, when the increase is as fast as it is in Buckinghamshire, and where it occurs in a wholly new environment, that option is not open. New facilities must be provided and new staff engaged—in many cases before there is any comparable rise in rate income. That is the nub of the problem, and the position will become progressively worse if this system continues.

If Buckinghamshire were at the end of its expansion, or near it, the problem would still exist but would be containable. But our expansion will continue for many years to come, and it will do so under its own private enterprise momentum. That is why we are producing a better environment and better society than the areas referred to by the hon. Member for Vauxhall (Mr. Holland). It is a substantial momentum.

Mr. Stuart Holland

I am trying to find some plausibility in the hon. Gentleman's argument. Will he explain from where that upturn will come when the Government are axing public spending in the economy as a whole? Who will buy the goods and with what?

Mr. Benyon

Buckinghamshire is creating a large number of jobs each year through private enterprise. We are going out of our way to encourage that. If the hon. Gentleman had landed at London airport recently, he would have seen written across the underpass the words "You have arrived in the United Kingdom. Why not come to Milton Keynes?" We are proud of that commercial angle, which has been so successful.

The momentum is there. If the depression ends, the momentum will redouble. Those whom we are accommodating, especially in Milton Keynes, come from London and other urban areas. They are not only young families with children, but the elderly who have connections with people already there. The disabled and others requiring hospital and welfare care have also come, so we are relieving the Ken Livingstones of this world of their problems but are not being given a sufficiently fair allocation of resources in return.

I have always accepted—whether it be in connection with the sale of council houses or other matters in local government—that the Government are the guardians of the taxpayers' money, subject to the control of Parliament, and are perfectly entitled to distribute that money as they think fit. Likewise, local authorities are the guardians of the ratepayers' money and must take the consequences of what they do. Rates in themselves are not inflationary. Rate income must match the rate-borne expenditure. I accept that high local taxes are a grave disincentive to industry and commerce. That was the subject of the intervention of the hon. Member for Vauxhall. However, it is a factor that local authorities must take into account and for which they must answer to their electors. The electors are not fools. They know that high rates are driving out industry and commerce. They feel strongly about it, especially in times of high unemployment.

I understand only too well the Secretary of State's problem. Although I believe that he could make adjustments even at this late hour outside the rate support grant settlement, I understand the difficulties. I am speaking in the debate because I am concerned about the future. The targets worked out on the present basis are clearly unfair. The one point on which I agree with the right hon. Member for Manchester, Ardwick (Mr. Kaufman) is that it is an intensely complicated system. We want a simple system that we can understand and make our decisions accordingly.

As mentioned by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), one of the dangers of the target system is that no sane local authority would spend below target. All authorities will spend to target and will never allow themselves to get into the present position again. Adjustments must be made in future assessments. I beg my right hon. Friend the Secretary of State to consider the problem carefully, since otherwise we shall increasingly find ourselves in a more difficult position.

8.8 pm

Mr. John Cartwright (Woolwich, East)

I agree with the hon. Member for Buckingham (Mr. Benyon) in his yearning for a simple system of rate support grant that we, local authorities and our constituents can understand. The hon. Gentleman graphically demonstrated that what may look perfectly all right in the safety of Marsham street produces some unfortunate results for a local authority that is trying to provide a reasonable level of services in an expanding area.

I wish to concentrate my remarks on the overall impact of the 1983–84 settlement. Paragraph 6 of the main report gives an impression of generosity. It refers to provisions for current spending being £1,500 million more than the 1982–83 settlement. It suggests that it is 3 per cent. More than authorities' budgets in 1982–83. However, those figures are in cash terms only. They give no indication of what the cash will actually produce.

The Select Committee on the Treasury and Civil Service, in its report of 5 April 1982, referring to that procedure, said: it is unlikely that a firm settling its cash budget for a year ahead, would be content to remain in ignorance of what it was going to be able to purchase with the cash it was budgeting for. The Committee went on to say: Cash spending has led to some important information about public expenditure no longer being presented to Parliament or the public. In this instance, a misleading impression can be obtained from looking at the cash figures.

I am grateful to the Association of Metropolitan Authorities for presenting us with some alternative interpretations of what the 1983–84 settlement means. Looking at the current spending element—excluding the debt charge element—and comparing it with the 1982–83 settlement, it is an increase of 9.4 per cent. in pure cash terms. If we compare it with the 1982–83 settlement—allowing for pay rises of 5 per cent. and price rises of 7 per cent. both of which seem to be reasonable forecasts—in real terms it is an increase of 3.8 per cent. only. If we compare it with the local authorities' actual budgets for 1982–83—again allowing for 5 per cent. pay rises and 7 per cent. price rises—we find that it is a cut of 0.8 per cent. in real terms. It is important to underline that we are talking not about an increase but about a cut in real terms of almost 2 per cent.

In paragraph 10 of the report the Government say: present economic circumstances require continuing restraint in the level of current expenditure by local Government. That is a statement that we have heard frequently while the Government have been in power. I have never heard a convincing argument as to why that should be necessary. Many people and local authorities might take a contrary view. They might say that in the present economic circumstances increased spending is required in key areas. For example, if we are to get local industry moving forward, improved infrastructure schemes by local authorities can play an important part.

The Government have been appealing for more capital spending, housing construction and repair and improvement work. Anyone who has had the mixed blessing of being chairman of a local government finance committee knows that those capital schemes lead inevitably, as night follows day, to more revenue current spending in later years. The recession and unemployment have an indirect impact on local government spending. One has only to think of the extra pressure on social service departments by the casualties of the recession—family break-up and low incomes—to realise that spending increases as a result of economic difficulties.

Other hon. Members have pointed out that the effects of this settlement, after the settlements of the past couple of years, have resulted in a large proportion of the local government spending burden being transferred steadily from the central taxpayer to the local ratepayer. In this settlement the proportion of relevant spending to be met by Government grant is 52.8 per cent. That compares with 56 per cent. in the current year and 59.1 per cent. in the previous year.

The right hon. Member for Manchester, Ardwick (Mr. Kaufman) reminded us that, when we allow for the penalties that may be imposed in the 1983–84 settlement, the actual proportion of relevant spending to be met by central Government grant might go down below 50 per cent. A cut of 9 per cent. in the proportion being met by central grant is a massive switch from central taxation to local rates over a short period.

Like the hon. Member for Hornchurch (Mr. Squire), I want to see a reduction in local authorities' dependence on central Government grant. That is the only way in which local authorities will secure genuine independence. But it must be accompanied by a major new, locally controlled source of revenue for local authorities.

The Government's Green Paper was published long ago, but we have been waiting a long time for the Government to come forward with some ideas. Press leaks suggest that the Government will apparently reject all new forms of local authority revenue.

I believe that we shall have the worst of all possible worlds—steady cuts in grant and no new sources of revenue for local authorities. That will put a considerable strain on the already overstretched rating system and make local authorities even more the creatures of central Government control.

As other hon. Members have pointed out, the machinery for grant distribution is extremely complex. The original block grant system was created by the Local Government, Planning and Land Act 1980, and the whole edifice of targets and penalties were created by the Local Government Finance Act 1982. It is complexity heaped upon complexity.

As I said previously, I and my party—the Social Democratic party—reject the whole absurdly complicated, unintelligible paraphernalia that Ministers have created to tie down local councils in a gigantic spider's web of central control. We have all had representations from organisations. I want to quote one that sums up the way that I feel about the complex system of grants and penalties. It says: Any formula-based targets are bound to be unfair to individual authorities. Those which have already cut expenditure to the bone will be particularly hard pressed to make further cuts, whilst those with a higher level of commitments will face very difficult and painful decisions in seeking to reduce them. Most importantly, the statement says: Above all, no centrally assessed expenditure targets can possibly take account of all the variety of local circumstances which are at the heart of what local government is all about. That statement comes not from a Labour, SDP, Liberal, or alliance source, but from the Conservative-controlled London Boroughs Association. It sums up adequately and fairly the objection that many of us have to this complicated system.

I was glad that the Secretary of State accepted that there were imperfections in the grant-related expenditure assessment system. It is not an exact science. A great deal of time and effort is spent on detailed negotiations. It is impossible to satisfy all the critics.

I want to give three examples of the deficiencies in grant-related expenditure assessment. First, in inner London there is a massive social services problem. Inner London has far more than its fair share of one-parent families, and it has a substantial number of elderly, isolated people who cannot depend on their families for care.

The AMA, referring to the GRE and the social services in London, said that they woefully understate the spending needs of inner London boroughs no matter by what political party they are controlled. The second example relates to concessionary fares for the elderly. In the 1982–83 settlements the GREAs for concessionary fares for the elderly in the shire counties were twice the amount that the shire counties were actually spending. Conversely, in London and the metropolitan counties the GREAs were well below the actual spending levels, because in many cases in the shire counties there were no bus services on which concessionary fares could be offered. That seems nonsensical, but I understand that the Government have not changed that grant-related expenditure assessment.

The third example relates to libraries. There is a statutory duty upon local authorities to provide reference services for anyone who needs them, and borrowing facilities for people living, working, or undergoing full-time education in their area. On that basis, the GREA should cover all those categories. In fact, only the daytime population is included for the GRE assessment. That implies that commuters do not need libraries in their home areas. It is an extraordinary concept that commuters will not borrow library books at the weekends. As the Secretary of State recognised, the impact of the penalties is extremely tough. He talked about a tough regime for enforcing expenditure guidance. We are entitled to ask how realistic the targets are. For a number of metropolitan authorities the targets are 1 per cent. less in cash terms than their current spending. That is a major cut in real terms when looking at the expenditure figures at which they have to aim. I am not arguing that savings are impossible. However, such massive cuts in a short period can be only achieved by appalling damage to the quality of services.

There are some very odd situations. The Inner London Education Authority, for example, says that to achieve its target would involve a cut of about £90 million on present spending, allowing for pay and price rises. Its officers are quoted as saying that this could be done only at the cost of widespread dislocation of the education service. Even if it cut its spending down to the target figure, it would apparently obtain no grant. To obtain grant, it would have to cut the current level by about £200 million. Clearly, there is no incentive to get anywhere near the expenditure target.

At the earliest stages of overspending, penalties are considerably less this year. The first 1 per cent. of overspending for instance, results in a loss to ratepayers of only 1p in the pound, compared with 3p in the pound under the previous arrangements. After the first 2 per cent. of overspending, however, the impact on the ratepayer is extremely heavy. For every £1 extra that is spent, the cost to the ratepayer is £1.60. That is a substantial burden.

On 16 December the previous Secretary of State said that he was increasing the grant pressure on the high spenders."—[Official Report, 16 December 1982; Vol. 34, c. 488.] It seems to me, however, that the pressure is falling not on the high-spending councils but on the ratepayers who have to pick up the bill and who in some cases are caught in the cross-fire of this "High Noon" confrontation between a Tory Government and high-spending Labour councils.

It is becoming obvious that some Labour authorities are determined to make a difficult situation a great deal worse. They are determined to continue spending on schemes which, on any judgment, are low priorities in a difficult situation. In the London area, there is a spate of "keeping up with the comrades". If one borough decides to give away what it describes as "free" newspapers, paid for by the ratepayers, the rest have to join in. If one borough decides to appoint a police adviser or a women's adviser, all the rest have to follow suit.

My local authority in Greenwich is already in the penalty area, but this week it is advertising for a police adviser and a women's adviser, each with a salary scale rising to more than £13,700. By the time that one has added superannuation, national insurance, secretarial costs, accommodation and the rest, the spending on those two posts will be about £50,000. This is at a time when the council says that it cannot afford to sweep the streets properly, to mend pavements and footpaths or to put entry phones into vandalised council estates. That kind of spending by councils simply undermines public faith in local government.

The settlement before us flows from the welter of legislation seeking to control local authority spending and it is profoundly dangerous to local democracy. Centrally imposed targets calculated on complex formulae cannot replace local judgment on spending needs and priorities without the whole basis of local government being called into question. The imposition of severe penalties makes local authorities less accountable for their actions because it confuses responsibility as between local councils and central Government and permits the use of the sterile argument, "It is not our fault. It is central Government's fault." The resulting massive rate increases prevent local communities from making a sensible judgment on the cost of a service and the benefits that it brings.

In 1976, the Layfield committee predicted creeping central control by default if no action was taken to give local government more control over its own sources of finance. That prediction comes true with every piece of legislation or rate support grant settlement by the Government that chips away at the fabric of local autonomy. For those reasons, we shall oppose the motion.

8.24 pm

Sir Geoffrey Johnson Smith (East Grinstead)

I join my hon. Friends in congratulating my right hon. Friend the Secretary of State on his well-deserved promotion.

I greatly appreciate the opportunity to contribute to the debate. Many of my hon. Friends from Sussex would also have wished to do so, but we realise that hon. Members from other parts of the country wish to make representations, too. Certainly all my hon. Friends from West Sussex and many from East Sussex are deeply concerned at the effect of the rate support grant formula. It has undoubtedly had serious effects on finances and, regrettably, it has also led to a strong feeling of injustice. We had hoped not only for a fairer system but for a more intelligible system.

Some years ago, I led a deputation of West Sussex councillors and officials to see the Labour Secretary of State for the Environment. I think that the only person who understood the formula—at any rate outside the then Government, who may also have had one person who understood it—was the treasurer of West Sussex county council who acted as an adviser to the Association of County Councils. We all hoped that following our representations then and subsequently the new Government would bring in a scheme that would certainly be fair and, if not intelligible to the layman, well understood by those who had to implement it.

The Government have not succeeded in that aim. I do not suppose that we could ever have anything too simple. If the various needs of different authorities are to be properly weighed, there is bound to be some kind of mathematical formula. I am concerned, however, at the effect of the formula on the fair-minded and intelligent people who have to implement it. I shall not rehearse the general argument so ably stated by my hon. Friends, especially my hon. Friends the Members for Tiverton (Mr. Maxwell-Hyslop) and Buckingham (Mr. Benyon). They feel that the grant operates against the prudent and encourages the profligate.

I draw on the experience and views of two authorities—West Sussex county council and Wealden district council in whose area almost all my constituency is located—not because I expect the Minister to reply in detail today but in the hope that he will at least make it clear that he understands why they feel as they do and then, at a later date, explain to them in writing why he believes that the Government's policies are right or how he believes that they could be modified to meet these entirely justified complaints.

Both authorities have been given spending targets substantially below the Government's own assessment of how much they need to spend to provide a level of service that meets official standards. Both will lose all their grant next year and become entirely self-financing if they exceed the Government's assessment of needs.

The Government's measures for calculating individual targets seem particularly unjust to those counties because in the past they have behaved prudently, yet they are to be treated less generously than other councils under the new provisions for 1983–84.

Let me tell my hon. Friend about the Wealden district council, because one must argue from facts. In the current year it was set a volume target of about £3.9 million and a GREA of £5.2 million. Its budgeted expenditure for the year was £3.85 million, and that budgeted expenditure has complied with both the volume targets and the GREA. The Wealden district council would not have been penalised unless both had been exceeded. However, with the exemption from penalties when GREA is not exceeded having been withdrawn, the council is limited to 104 per cent. of the 1982–83 budget.

This year the council acted reasonably and complied with all the Government's wishes, even though it could have spent over £1 million more than it did without incurring penalties. Had it chosen to do so, its 1983–84 target would have been increased accordingly. It is little wonder that this generates the impression that all one gets for achieving economies and restricting desirable services is a lower target for the next year, regardless of the overall expenditure, and the inevitable result will be to discourage rather than encourage the restraint of public expenditure, to which we all subscribe. The way in which the council put it to me was far more emotional. I can sum up its attitude by saying that it feels that it is being kicked in the guts, and I believe that it is right to feel that way.

I shall say a word about West Sussex. Its feeling of injustice is heightened when it compares its target with those of other counties. West Sussex is next to the bottom of the list of targets, but although those at the top have to make some stiff decisions next year if they want to avoid penalties, it seems that they have had consolidated into their targets the bulk of their extravagant spending decisions in previous years. The county thinks it particularly galling—who can blame it?—when, although it is at the bottom of the list, when there is only one other shire county in the country where the population is growing faster than that of West Sussex, when its school numbers are falling less rapidly than those in other counties, and when the numbers of its old people continue to grow, it finds that its cash target for the coming year ignores those differences in the way its needs are changing compared with other authorities. That is how West Sussex sees the situation.

West Sussex compares itself with what it believes is a comparable Labour shire county in terms of population. The comparable Labour shire county spends about £5.4 million on services for the elderly. It has 69,000 people over 65 years of age, 27,700 of them over 75. West Sussex spends rather more than £5.4 million on elderly people. It spends £6.2 million, but the elderly population over 65 is not 69,000; it is 139,400. Compared with the 27,700 over the age of 75 in the Labour shire county, it has 60,400. If West Sussex were to spend a similar amount per head of its elderly population as the other county, it would increase its spending on this item alone by about £5 million.

Mr. Peter Hordern (Horsham and Crawley)

My hon. Friend talks about the difficulties that occur in our part of west Sussex because of the expansion of Gatwick airport. He rightly said that we are one of the few parts of the country where the population is increasing rapidly. I think I am right in saying that last year the population increased by about 16,000. We were told in a debate on the Adjournment, held after the announcement of the second terminal at Gatwick, that all would be well for the county council because it would have extra rates deriving from the airport. We discovered subsequently that every extra penny available from the rates from Gatwick airport is to be taken back on the rate support grant. So the county council will be no better off as a result of a decision which was made not by the county council but entirely by the Government. Our county council will have to pay for this nationally based expansion, although it represents people who clearly are not in as good a position to pay these extra rates as many other parts of the country are. Should it, by chance, wish to improve its position by carrying out capital sales, I understand that from this April it will be able to spend only half the proceeds of the capital expenditure. I hope that my hon. Friend will agree that those are tough terms.

Sir Geoffrey Johnson Smith

I agree wholeheartedly with what my hon. Friend has said. It applies to a wider area than the one that he represents and is one of the reasons why we looked with profound misgivings at the report that was produced at the Gatwick inquiry, and were even more shattered by the reaction of the Government. However, the decision has been taken. All that we can do is our best to ensure that the bill is properly met by the Government and that we are not forced into penury by the extra load and responsibility forced upon us.

I shall give one other example that accounts for the feelings in Sussex. The latest notification of block grant gives shire counties 45 per cent of their total expenditure.

The figure for west Sussex is 32.6 per cent. If west Sussex were to receive the shire county average, our grant would increase by £22 million.

I know that other hon. Members wish to take part in the debate. I do not want to draw my comments to a sweeping conclusion. I have already shown where my feelings lie. I share wholeheartedly the suspicions of my colleagues. By all means, the Government should try to explain what they are doing. It is probably a better policy than some of us think, but many people will need convincing tonight or later in writing. People like that do not react and criticise policy unless there is substance behind the criticism.

8.37 pm

Mr. W. E. Garrett (Wallsend)

One of the features of the debate so far is the virtually universal hostility to the Government's policies on local government financing. There has not been one word of praise from the Opposition or from Conservative Members. The debate is taking place in an atmosphere of hostility, suspicion and resentment. There is resentment among almost all the local authorities against the Government's local government policies. There is resentment among the electors against the local councillors. There is resentment among the local councillors against the officials. That feeling exists throughout local government.

Many of us started our political careers in local government. Some of us did quite a lot of yeoman service in it before we came to the House. In the late 1950s and early 1960s, when I was in local government, I played a part as chairman of a finance committee and in other roles. I could understand the formula that assessed the grant from the Government. It was a block grant, which was simple and worked. We could explain it to the electors and the ratepayers, but it has now become impossible to understand. I trace that back to two things. One is the reorganisation of local government, which created a bureaucracy in local government, and the second is that throughout the United Kingdom we reduced the number of elected members to local authorities. The reduction in elected members meant more power for executives. In turn, executives have appointed around them a collection of people who are superbrains.

We heard a dissertation from my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) on an algebraic equation. It was an algebraic formula. It was a hybrid combination. What its substance was I do not know. I am sure that the Minister will take on board the fact that, although my right hon. Friend did not make a plea, he should have made a plea for a simplification of the formula so that the Minister can understand it and so that those of us who are ordinary humble Back Benchers can understand it. If we can do that, we shall he well on the way to reasserting our control over the machine.

This is a sombre day for me, because 2,000 redundancies have been announced at British Shipbuilders, of which 1,000 are in and around my constituency. As a result, people in local government in that part of Tyneside will be feeling very sorry about the situation. There will be a reduction in rates in the region, and that will mean more and more problems in financing existing services.

It is difficult to explain to people in other parts of the country what it is like to live in, or represent, a local government area where there are huge pockets of unemployment, but it is becoming easier to understand as more and more people are becoming unemployed.

A gross injustice in our rating system is that it is possible to live in an area and to get the benefits of a lower rating system without meeting one's obligation to help those who live in areas where, because of early industrialisation, an equitable rating system cannot be worked.

I know that efforts have been made to deal with this problem, and I pay tribute to the work done on inner city development by various Ministers. That has now got off the ground. It has some warts, but the inner city areas are now gaining resources. We are all paying, either as taxpayers or ratepayers, into areas where the worst excesses of the industrial revolution are being overcome. The Government took the initiative, and I commend them for what they have done up to now. The Minister, who is a frequent visitor to the north-east, must have seen the results of some of the efforts that have been made. We hope that the nation will continue to support these efforts to regenerate our inner cities.

Reference was made earlier to the fact that cuts are taking place in education. Among the school closures is a Church of England first school in the Gosforth area of my constituency. The proposal is to close this school in five years time because of a fall in the birth rate. In fact, the birth rate has gone up, as have school attendances. That school will be closed because the authority does not have the educational finance and resources to ensure that it remains open. That is the very opposite of Tory philosophy on education. Conservatives often say that there should be a choice in education. If the Church of England school closes, the choice of having that first influence of religion upon five to nine-year-olds will be lost. There will be no alternative but for those children to practise their basic religious concept at a school that does not have an emphasis on the established Church in the United Kingdom.

We are proud of the fact that in the northern region a metro system is operating on Tyneside very efficiently. It operates in an exceptionally smooth manner, and we receive grants from central Government towards the operation of the transport system. We hope there will not be any major cutback on this principle. I assure the Minister that we do not divert the funds from transport to anywhere else. Every penny that we receive is put into the transport system. We do not manage the books by taking money and not using it for the purposes for which it was originally intended.

There are anomalies. I live in the rural constituency of Hexham, which is represented by a Conservative Member. It is a desirable area in which to live. In a way, the people in that area are enjoying the benefits of a transport system that has been paid for by the ratepayers of Tyne and Wear. It seems odd that I should benefit by paying lower rates, because in reality people in the rural areas should be paying more rates to pay for the transport system which many of them use, either for work, shopping, meeting friends or going to the theatre.

What I am about to say will probably be resented in our agriculture areas, but the time is long overdue for a reconsideration of the rating exemption of certain agriculture properties. We all understand that this was introduced in the 1920s to help stop the collapse of British agriculture, but that scheme has never been seriously amended, even though successive Governments and commissions have looked at it. Agriculture is now in a better financial position than it has been for a considerable time, and the support systems that now operate will ensure that it remains efficient and viable. As a result, it should pay a greater contribution towards environmental services. I doubt whether this will be looked at in the lifetime of the present Government, but a future Government should have a close look at this matter.

Other special rate support grants should be given to the industrial areas. We should look as quickly as possible at ways of regenerating some of our older council properties. There is a strong case for giving local authorities grants to improve those houses. In some areas, thousands of council houses remain empty and boarded up, while thousands of people are on the waiting list. We could do much if a scheme such as I have suggested was established on a permanent basis. I am not suggesting that we should overstretch our resources, but the Government should have a look at this so that more houses, some of which were built in the post-war period, can be modernised.

By doing that we would create work and provide craftsmen with jobs. We could even recruit apprentices, for which at present there is a desperate need. Above all, we would give happiness to many people who could then enjoy one of the pleasures in life—that of going home at night and putting one's feet up in comfortable surroundings. The Government should extend the cash available for this purpose in the rate support grant.

I hope that the Minister will take all that I have said on board. I do not expect a detailed reply tonight. If this debate has done anything, I hope that it has highlighted the fact that all of us are fed up with the present rate support system. Someone must take a grip on this matter and come forward with a simplified alternative formula.

8.48 pm

Mr. Churchill (Stretford)

I congratulate my right hon. Friend on his elevation to the position of Secretary of State. It is a richly deserved promotion. I hope that in the months ahead he will look again at the current system by which the rate support grant is calculated.

I cannot conceal the grave concern of my constituents and the ratepayers of Trafford as a whole at the consequences of this year's rate support grant. Of 36 metropolitan districts, only five face any reduction at all. Trafford's cut is by far the greatest. While many local authorities have been profligate with the money of ratepayers and taxpayers alike, Conservative-controlled Trafford has been scrupulous in following every injunction of the Government. While high spenders such as Sheffield, which flies the red flag over the town hall, get a 10 per cent. increase this year in spite of excessive expenditure, Trafford, on the contrary, is rewarded with a 13 per cent. cut. Last year Trafford was faced with absorbing a cut of £2 million in its rate support grant. Now a further £3,125,000 is being cut. If the settlement stands, it will impose a heavy and wholly unjustified burden on the industrial and domestic ratepayers of Trafford—an increase equivalent to at least three times the current rate of inflation. This is grossly unfair.

Trafford's councillors have fought a valiant battle, on which they are to be congratulated, over many years on behalf of local ratepayers, giving them the lowest rate poundage of any of the 10 metropolitan districts of Greater Manchester. I find it difficult to believe that it is the wish of the Government to punish those who have been their most loyal supporters over the years. If that were to be the case, they would be directly undermining the very policies that they seek to see implemented nation-wide. It is this that leads me to conclude that there has been a major error in the calculation of this year's allocation of grant for Trafford or, alternatively, that there is a basic fault in the formula itself.

A major element in Trafford's cut relates to education. My right hon. Friend's Department tells us that between the spring of 1981 and the spring of 1982 there has been a drop in primary school numbers 20 per cent. greater than the national average and in secondary school numbers 100 per cent. greater than the national average. I hope that these figures will be re-examined because they appear suspect.

In speaking up for the ratepayers of Trafford I am not seeking—nor are they—any special deal or preferential treatment. All we are asking for is a fair deal and justice. I look to my hon. Friend the Member for Pudsey (Mr. Shaw), who is to reply to the debate, to provide a reassurance that this is what the Government are determined to achieve.

Nor is this a one-off situation where we have done badly in one year alone. This has been part of a relentless and continuing adverse trend ever since Trafford was established. Since 1975–76 when in current prices Trafford received £46.6 million in rate support grant, the grant has dropped by 55 per cent. to the present figure of £21.4 million this year, imposing a heavy and ever-increasing burden on Trafford's ratepayers in spite of major economies of costs and, indeed, of services, to the point where they are close to being below an acceptable level.

It would appear that Trafford suffers through being labelled a high resource area because of the Trafford park industrial estate, which remains to this day the largest industrial estate in western Europe. I must ask my right hon. Friend why high resource areas in London are protected in some measure by being given a lower multiplier in the calculation of their rate support grant. Why should these special arrangements for high resource areas be confined to London alone? Why should they not be extended to local authorities in similar situations elsewhere?

The effect of the Government's policy of driving relentlessly towards rate poundage equalisation on a national basis is to penalise local authorities which are good housekeepers and which seek to safeguard the interests of their ratepayers and to reward the big spenders on the principle, "Unto them that hath, unto them shall be given." One might add the rider, "From them that hath not shall be taken away even such little as they have." That is the situation that confronts the ratepayers of Trafford today. That is not an acceptable policy. It should be looked at again with the greatest urgency.

If the Government persist in rewarding those who defy their injunctions by spending as if there were no tomorrow, while punishing those who support them by implementing economies, they will ensure the defeat of the central element of their policy towards local authorities, which is to get local government expenditure under control. This cannot be what the Government intend. I appeal to the Government on behalf of my constituents and the ratepayers of Trafford, to look again at the means by which they seek to reach the important objective that all Members on the Government Benches wholeheartedly share.

8.56 pm

Mr. Nicholas Lyell (Hemel Hempstead)

I am grateful for the opportunity to take part in what is becoming almost an annual ritual—the rate support grant debate—when one reviews how one has ended up after a year of battling with my right hon. Friend the Secretary of State's Department. I congratulate my right hon. Friend on his appointment. He takes immense care when one goes to discuss detailed constituency and county problems with him. Like all my colleagues, I welcome his appointment as Secretary of State.

I wish to speak briefly about Hertfordshire, with an eye not so much to the past year as to the coming year. If one does not get one's oar in early on rate support grant matters, it is not that there is an unwillingness to correct the position, but the computer takes over and it is impossible to rejig the whole system. It has been a tight squeeze during the past year. I should like to express my thanks for what we are pleased with and also hope not to be churlish by mentioning the problems that I trust will be corrected in the coming year.

We are thankful, in particular, for the softening of the edges of the penalty area. This year, Hertfordshire is likely to go into the penalty zone by a small amount. This will make it possible for our education budget not to be cut in the drastic way that earlier in the year had appeared necessary. It will be well known to my right hon. Friend and his junior Ministers that Hertfordshire has a high standard of education that we cherish and that we, as a Conservative-controlled authority almost throughout the past 20 years are determined to maintain.

As a result of the softening of the edges, it will no longer be necessary to make the cuts of £6 million that were anticipated and feared. Indeed, the cuts will probably be little over half that amount. The fears for crossing patrols, the reduction of welfare helpers, the cutting out of in-service training, the reduction of primary school staffs and the further reduction in maintenance allowance no longer exist. I am glad to say that, although it is not possible to increase those provisions much, they will not be reduced; that is something for which we are grateful, and which has come about as a result of the softening of the penalty zone boundaries.

It will also be possible—this is most important in a county with many schools with flat roofs—to increase the maintenance available for those schools and to improve the buildings somewhat. That is welcome. Also very important in a county with a population that is becoming increasingly elderly, there will be an extra £250,000, at least, available for domiciliary help and community care, something that is important to the interest that I take on behalf of my constituents.

I move now from the kinder remarks to the problems that we have experienced this year, and from which we hope my hon. Friend the Minister and those in the Department of the Environment will be able to help protect us in the coming year. Hertfordshire, like Trafford, is not fairly treated. It has had a continuing loss of grant over many years. It is a county and its budget is bigger, so its loss of grant is bigger than that of Trafford.

However, when I say that the loss of grant is £9 million this year and that last year it was £10 million, and that the ratepayers of Hertfordshire pay a higher percentage of their income than ratepayers of any other shire county than Surrey you will realise, Mr. Deputy Speaker, as will my right hon. Friends, that those in the shire counties around London, the home counties, are not getting a fair deal.

Hertfordshire has received among the lowest grant-related expenditure settlements in England and Wales, and is 2 per cent.—a significant amount of money—below average. The reason for this demands careful scrutiny, and is closely connected with higher education and, in particular, with part-time students. This may seem somewhat esoteric, but the simple fact is that under the overall system the number of students for whom one receives grant-related expenditure allowance is based on an average per head of population. If, like Hertfordshire, one educates substantially more people part-time than do other counties, one spends much more money but gets nothing in return. This is worth £3 million or £4 million a year to Hertfordshire and that needs to be corrected. I cannot believe it is beyond the wit of man or computer to do so.

There is also an improper estimate of interest received. I spell this out carefully because it is not easy for those who are recording it to pick up. The system assumes that all local authorities receive some money by way of interest. That is true of district councils that collect in cash from ratepayers. They receive much by way of interest.

However, county councils do not. This assumption of interest rates in the case of Hertfordshire assumes that we receive £3 million in interest that we do not receive. There is an assumption in this somewhat artificial but necessarily complex system that we are receiving £6 million or £7 million that we do not receive and for which, if we spent, we should incur penalty.

Another of the detailed problems concerns the high rateable values that apply in the home counties. These bear not only on our loss of grant but on the amount that each ratepayer has to pay. As I have already said, this is as high as anywhere in the nation except Surrey.

Dacorum district council, as the Hemel Hempstead area is known, suffers the anomaly of receiving less in grant and grant-related expenditure assessment this year than it otherwise would have done because it budgeted below target last year. That must be an anomaly. All hon. Members have been brought up on the end of the year "Let's buy a new typewriter" syndrome to spend money which has not been spent under our allowance. I had always hoped that a Conservative Government and local authority would overcome that tempation. I hope that the system will be changed so that next year there will be a benefit rather than a disbenefit from such an underspending. It is not beyond the wit of man or the Secretary of State to achieve that happy result.

Let me end on a more combative note. I have made one or two criticisms, but I make them from the standpoint that it is essential to keep local authority expenditure under tight control. It is rather galling to see Labour Members teasing us about imperfections in a necessary system when they have been grotesquely overspending in their districts regardless of the pockets of either their private or their business ratepayers. To some extent it is necessary for my right hon. Friend the Secretary of State to run a rough and a tough system. On the whole, after two or three years, it is beginning to be run comparatively well. However, like others of my hon. Friends, I have highlighted several anomalies which must be cleared up if the system's credibility is to be maintained. I hope that my remarks, and those of my hon. Friend, will be carefully heeded.

9.6 pm

Mr. Keith Stainton (Sudbury and Woodbridge)

I am delighted to have caught your eye, Mr Speaker, first because it gives me the opportunity to congratulate the Secretary of State on his new appointment, and, secondly, because it is a chance for a voice to be heard from a different part of the country—East Anglia, and Suffolk in particular.

Two themes or chords that have emerged from the debate can be labelled "unfairness" and "obscurity"—unfairness between those who are prudent and those who are profligate; obscurity in the sheer lack of comprehension. I challenge anybody, other than the Secretary of State and the Under-Secretary of State, to assert with hand on heart that he knows how all this works. Recently, I and other local Members of Parliament had a briefing from the Suffolk county council. We found ourselves in dispute—including the chairman, the treasurer and the chairman of the transport committee—and we are still circulating memoranda to clarify several points.

I accept that £11.8 billion must be subject to strict control, but it becomes self-defeating—I say this with the utmost respect to the Secretary of State—when at the end of the day the elected representative—be he a Member of Parliament, county councillor, or district councillor—cannot with confidence stand on a platform and explain how the calculations have been made and what is the justice in the matter.

I do not intend to rehearse all the arguments that underlie my comments; I shall merely concentrate on one or two points. Suffolk falls into the bracket known as the low spending group of shire counties. The 1983–84 expenditure figures in terms of pound per head to avoid penalty are £307.37 for Suffolk, £294.32 for East Sussex, and £280.62 for West Sussex. One discovers Cleveland at the top of the list with £392.18. That does not represent a sudden reversal of trends. I have been receiving such tables from my county council for several years. They all portray a similar situation.

In this context, I shall define East Anglia as Cambridgeshire, Norfolk and Suffolk. If local authorities in the East Anglian region spent at the levels suggested by the Government—I measure my words carefully and may have to retrace my steps somewhat—as being appropriate to provide a standard level of service—that is their grant-related expenditure assessment—they would be penalised by about £20 million. On average, they would have to raise rates by around 17 per cent. Throughout the country, the lowest spending authorities will be penalised most heavily.

If I say that I want to challenge the Minister on grant-related expenditure, I hope that he will not take my words too literally. However, I suspect that the concept of grant-related expenditure may be going out of the window. We need some clarification. We have heard various comments about the imperfections of grant-related expenditure. However, we were groping towards some rational objectivity in the level and quality of services. Although in the past two financial years authorities that had targets that were below the grant-related expenditure were exempted from the holdback penalties, that system is to be abandoned in 1983–84. That is distressing. I wonder whether the Government really consider grant-related expenditure to be a meaningful or misleading description of an authority's need to spend. The implication to me is that GRE represents an irreducible minimum level of spending for the various services that combine to make the total. I hope that my hon. Friend the Minister will address some remarks to this important point.

I believe that I am in order in referring to the transport supplementary grant. It is mentioned in a schedule to the report. Although the total accepted expenditure for England is increased by 12.5 per cent., the Government's share of it through transport supplementary grant is less than in 1982–83 by nearly £7 million. That is very different from the overall grant settlement for council operations. That is 1.5 per cent. in cash terms, or about 7.5 per cent. in value. What is more important for my constituents' interests is the support accruing to the shire counties, which is 17.8 per cent. less in cash terms this coming year than in 1982–83.

In Suffolk, part of which I represent, the county's total accepted expenditure has increased by 9 per cent., against a national average of 12.5 per cent. and a shire county average of 11.35 per cent. Suffolk's share of the transport supplementary grant has decreased by 38 per cent., as compared with 1.5 per cent. nationally and 17.8 per cent. for the shire counties generally.

That reduction derives from two causes—the national reduction in TSG generally and another, more obscure, but pertinent factor which is at work—the threshold poundage level. That expression is obscure and one may well ask what on earth it means. There are two or three paragraphs in the report relating to it, but I hesitate to recite them here or now. The increase in the TPL that one year of 21.28 per cent. is completely disproportionate. I should require stern and strong argument to disabuse me of that belief.

We have not so far discussed capital expenditure approvals, although reference has been made to the use of capital disposal receipts. The use of only 50 per cent. of capital disposal receipts will be an important factor for tightly budgeted counties to consider. I say quite forthrightly that for the past two years in Suffolk we have been "fiddling the books" with our capital expenditure receipts and the consequent movement of balances. If 50 per cent. of the utilisation of those capital receipts is to be denied to us, as I understand will be the case, that is a bleak projection for 1984–85. With great caution and wise management, we shall just about be all right for 1983–84.

I am anxious that capital expenditure approvals should hang together with the rest of the debate. We have been given guides for highways through the transport supplementary grants, but, significantly, we have had no indicators for social services. The latest note that I have received from the Suffolk county council also says: The documents for Education and for 'Other Services' are not yet to hand.

Mr. King

I wish to respond to the very important point that my hon. Friend made about capital and capital receipts. He will be aware that that is what, in our judgment, the country can afford. It is necessary to take into account all the sources of income, including capital receipts, and local government capital receipts are very important. The reason we made the change this year is that an assessment of what we could afford was reserved for local government and was denied to other sectors of the economy, whether inner cities or other programmes, to which both my hon. Friend and others attach importance throughout public expenditure. That assessment is lying unused by local authorities within local government. That is why we made the change about the 50 per cent. rule. I said then that that change need not inconvenience any local authorities that had specific proposals. A letter has been issued to local authorities saying that we shall try to meet any claims. If my hon. Friend has difficulties in that matter, I hope that he will let me know.

Mr. Stainton

I am very grateful to my right hon. Friend for that intervention, although I riposte that we have been going through a cycle of capital disposals that is rapidly diminishing, so perhaps the significance of the point should be reassessed. The 50 per cent. penalty on smaller receipts must be carefully assessed.

On another topic, the youth training scheme is to be a cornerstone of the Government's policies on unemployment. My county is in complete obscurity, both as regards a role as a mode A management agent, and as to its contribution to mode B schemes and to providing off-the-job training to management agents and the financial implications for a rural area. Of course, this is a matter for the Department of Employment and the Manpower Services Commission, but I caution my right hon. Friend about it, because a related point is to be underlined. My council tells me that it is having great difficulty in making up its mind on what it will do about secondary school intakes in September 1983.

As I understand the situation we are not statutorily required to provide secondary education for every child above the minimum school leaving age who presents himself or herself. If that is indeed the case, and if the tight penalties that are now being imposed on a low-spending county bring us to that point, we shall have dug a deep grave not only for ourselves but for countless fellow citizens in Britain.

The hon. Member for Wallsend (Mr. Garrett) made several interesting comments. He mentioned, rather naughtily, what he described as the hostility, suspicion and resentment coming from the Government side of the Chamber. Those three adjectives are entirely misplaced and utterly misconceived. The correct word from this side of the House is "concerned".

9.22 pm

Mr. Gordon Oakes (Widnes)

I join my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) and hon. Members on both sides of the House in sincerely and warmly congratulating the Secretary of State on his appointment. I first met the right hon. Gentleman when I was Under-Secretary of State for Energy and he was the Opposition spokesman on energy. He was a formidable opponent. I and most Members were surprised in 1979 and thereafter when the Secretary of State was not made a member of the Cabinet, in either his present job or a similar job. I am glad that that omission has been rectified. I cannot wish the right hon. Gentleman a long tenure of office. I hope that he will be dealing with the rate support grant next year from this side of the House.

I congratulate the right hon. Gentleman warmly because he has had a baptism of fire. As my hon. Friend the Member for Wallsend (Mr. Garrett) said, none of the speeches, on either side of the House, gave unqualified support to the Government. They differed in their intensity of disappointment about either the obscurity or the injustice of this order, to use the words of the hon. Member for Sudbury and Woodbridge (Mr. Stainton).

The Secretary of State has antagonised not just hon. Members and the metropolitan counties by this rate support grant, but the shire counties and the district councils that are Conservative controlled. Opposition to the order comes not merely from us.

First, I should like to refer to the level of the settlement to which reference was rightly made by the hon. Member for Tiverton (Mr. Maxwell-Hyslop), who, like me, deplored the decision to reduce the percentage of settlement to 52.8 per cent. from 56.1 per cent. The Association of District Councils, a Conservative-controlled organisation, in its letter to me and to other hon. Members of 14 January, said: The cut in the level Aggregate Exchequer Assistance from 56.1 per cent. to 52.8 per cent. represents another significant shift in the burden of paying for local services from the taxpayer to the ratepayer. This is not altogether unwelcome in terms of the Association's view on enhancing local accountability; however, in the immediate context it does place upward pressure on rate levies. So when the Government are baring their hearts to ratepayers and saying how dreadful are the rates they pay, let those ratepayers be well aware that this reduction in the settlement to 52.8 per cent. bears a considerable proportion of the blame.

The same district councils, in point No. 10 of the letter, state: More generally there will be a wide variation in the scale of rate rises implied by the Settlement even if councils spend at target. Sixty-nine districts will be faced with increases in rates of 10 per cent. or more for spending at target and a further 82 with increases of 5 per cent. or over … This is somewhat at odds with the Secretary of State's"— the former Secretary of State— statement that 'as a result of this Settlement rate increases next year should for most authorities be nil or in low single figures.' The present Secretary of State said this afternoon that he considered that rate rises would be "surprisingly low". That is not the view of the Conservative-controlled Association of District Councils. Those rate rises stem from the lowering of the percentage of the aggregate amount of the settlement itself.

Another point that I should like to raise and which has been touched on by other hon. Members concerns the GREs and the population changes and the effects of being able to use the 1981 census returns. When I was a Minister at the Department of the Environment, a continual criticism—a fair criticism from local authorities—was that much of the information on which the rate support grant was based was totally out of date. It varied from being a year or two out of date to being 10 years out of date. That seriously prejudices an authority, particularly a growing authority, as the Secretary of State himself pointed out. My authority of Cheshire, with two new towns, is a growing authority. People are going to that area and it is becoming more and more penalised by the lack of information.

This settlement ought therefore to be a good settlement because we have the more recent returns from the 1981 census. But that is not the case. The Association of County Councils makes that point clearly. I say again that it is not a Labour-controlled association but a Conservative-controlled association of which I have the privilege to be an honorary vice-president. In point 12 of its document "The 1983–84 RSG Settlement—What it Means to Local Authorities" it states: The Association is mystified and unhappy that, while its members' population is increasing faster than that of other classes of authority, its members' share of total GRE has declined—when GRE's are supposedly constructed from population-based measurements. The Association can find no clear or simple relationship between data changes as a result of the 1981 Census and GRE changes, which lead it to doubt whether, despite assurances to the contrary, the proper impact of the new Census data has been reflected in the 1983–84 GREs. I hope that the Under-Secretary of State will deal with this question, because it is of great importance to local authorities. We now have the data from 1981. Has it been properly used in arriving at the settlement? It is a fair point for the Association of County Councils to raise.

The third point that has been heavily emphasised is the ludicrous bedlam that has been created for the rate support grant. The 1980 Act created GREAs. They were not especially acceptable to local authorities, but their object was that central Government should decide the relevant spending needs of an authority. The more one introduces penalties and targets, the more one inevitably undermines GREAs. We wonder about the purpose of GREAs, other than as some trigger point to create penalties for the future. The whole grant system—like the whole of the Secretary of State's speech today—is dominated not by GREAs but by penalties, target ceilings and punishments resulting from the failure to implement targets set by the Secretary of State.

Let us be clear that the targets are set not by the local authorities, but by the Secretary of State. They do not relate to the GREA that the Secretary of State said was a fair level of spending. What lunacy are we about when we debate a rate support grant based on the false, fundamental premise that the GREA is different from the target? One has one or the other. The whole concept of targets introduced by the Secretary of State—as has been stated by many Conservative Members—is not the way to go about the rate support grant settlement.

I echo the words of the Association of District Councils, which said: The Association remains opposed to the whole concept of individual targets and penalties and feels that the continued emphasis upon them foreshadows further damaging conflict in central—local financial relationships during 1983. Those are the words of a Conservative-controlled local authority body.

Not one Member in the debate wholeheartedly supported the settlement. I know that when either party is in government there is always one Back Bencher concerned about the effect of a policy on his authority. But the criticisms went much deeper than that, as the Secretary of State will realise if he takes the trouble to read the Official Report tomorrow. Almost all speakers attacked not simply what was happening to a particular authority but the fundamental nature of the rate support grant. The hon. Member for Sudbury and Woodbridge summed it up exactly. He said that it was a combination of obscurity and injustice. That is what most hon. Members feel.

All my hon. Friends who spoke in the debate represent inner city urban authorities. I echo what they said. High spending is not profligacy. It results from high needs. My hon. Friend the Member for Manchester, Blackley (Mr.

Eastham) made that point on behalf of Manchester, my hon. Friend the Member for Wallsend for Tyne and Wear and Newcastle, and my hon. Friend the Member for Vauxhall (Mr. Holland) spoke vividly about the effect on the inner city. He brought the matter down to earth and made the point that we are talking in global figures. We refer to percentages and have computer-like printouts. He spoke about the effect on the elderly living in a certain authority.

As my hon. Friend rightly said, homelessness is a problem, especially in London, Manchester and Newcastle. One of the causes of homelessness is the high divorce rate. The wife often has the house. If she has children, that is well and good; I do not disagree with that. However, it often means that the husband is homeless. He goes to the inner city and becomes a vagrant. He is a burden on the social security department. That does not mean that Lambeth is deliberately, wilfully and maliciously spending money to attack the Conservative Government. It is because Lambeth has problems, just as Manchester, Newcastle and all urban areas have problems.

Liberal and SDP Members rightly oppose the motion. I echo the comments of the hon. Member for Isle of Wight (Mr. Ross), who has served, and indeed still serves, in local government. Whatever Conservative Members may say, most councillors spend a great deal of time thinking about how they can effect economies. They do not sit in the council chamber wilfully trying to create expenditure. They are wondering how in God's name they can continue their services with the amount of money available and keep the rates down as well. That is true of all councils, whether Conservative or Labour controlled.

The proposals have also been criticised by Conservative Members. I have considerable sympathy with the points made by the hon. Member for Altrincham and Sale (Mr. Montgomery). The Under-Secretary of State must give an answer. The hon. Gentleman took the only course open to any hon. Member whose constituents are being done down when he said that unless he received a satisfactory reply he could not support the Government. In view of the explanation of rate support grant procedures given by my right hon. Friend the Member for Ardwick, I remind the hon. Members for Altrincham and Sale and for Stretford (Mr. Churchill) of what happened in north Leicestershire and Knowsley. Even if the Minister says that there has been an error in relation to Trafford, once the Government's proposals are approved nothing whatever can he done about it. I regret to say, however, that I do not believe that it is an error. I believe that it results from the way in which the rate support grant is calculated under this crazy formula. Whatever the political control of Trafford, I am sure that Conservative councillors there know far more about its problems than do officials at the Department of the Environment. The root cause of the difficulty is that civil servants at the Department rather than local councillors are assessing the needs of the area. Therefore, whatever the Under-Secretary of State's reply, I urge both hon. Members either not to vote or to vote against the motion because if the proposals are approved they cannot be amended.

The mildest criticism came from the hon. Member for Hornchurch (Mr. Squire). I agree with him entirely that effective control is far more likely to come from the electorate than from the Department of the Environment.

The hon. Member for Tiverton also made a point echoed by many others, because the way in which the Secretary of State has done this pleases nobody. The hon. Member for Tiverton, like my right hon. Friend the Member for Ardwick, pointed out that the settlement penalises low spending councils for being economical. Why on earth has the Secretary of State introduced a rate support grant that penalises authorities for being economical? It is the economics of madness.

Mr. Lyell

I accept the right hon. Gentleman's point about the anomaly of penalising local authorities which are seeking to be economical. Does the right hon. Gentleman accept the corollary, that one ought to penalise those which are not being economical? To the extent that the report succeeds in doing that, it should have his support.

Mr. Oakes

I disagree with the hon. and learned Gentleman, because I disagree with the imposition of the criminal law on local authorities. I do not believe that civil servants at the Department of the Environment are competent to decide whether an authority is being economical. That is a decision for the ratepayers and voters.

The hon. Member for Buckingham (Mr. Benyon) attacked the system and the targets as being unfair. It should be made clear to ratepayers in many of the areas that will be affected that rate increases may be due to penalties that result from the rate support grant settlement. The Secretary of State has not just reduced the aggregate amount, which puts up rates, but the penalties and the targets that he has fixed may cause ratepayers to pay considerably more.

The hon. Member for East Grinstead (Sir G. Johnson Smith) did not have a good word to say for the settlement. He used a phrase that most local authority councillors and treasurers might use, that they have been kicked in the guts. That is precisely what the Secretary of State has done to many authorities, both Labour and Tory controlled, by the incompetent way in which the rate support grant settlement does not do what the Secretary of State wants it to do.

The settlement is poor, and, as my right hon. Friend the Member for Ardwick said, it is probably the worst ever recorded because it could fall to less than 50 per cent. The figure of 52.8 per cent. is high and it could fall to less than that. Ratepayers will have to pay more. High-spending authorities, which are high spending through no fault of their own, find themselves in difficulty in providing much needed services. As my right hon. Friend said, low-spending authorities get kicked in the guts in gratitude for being economical.

I urge Conservative Members as well as Opposition Members to vote against the settlement in its entirety. Let the Secretary of State begin his career in his office, in which I wish him well, by creating a different, new and clearer formula which does justice to local authorities instead of working on the principle that the more local authorities are penalised the greater is the Government's prestige.

9.42 pm

The Under-Secretary of State for the Environment (Mr. Giles Shaw)

We have this annual joust, this "tip-toe through the tulips" of the rate support grant settlement, distributing blessings on either side but resulting in nothing but curses from both sides of the House. Nevertheless, we must proceed.

Many of the arguments raised on the rate support grant settlement are traditional and have been heard many times from the Opposition. "RSG" are the initials of "Really Sparkling Gerald", who each year gives of his best when dealing with this subject. This year he was a little lost and off song. GREA is "Gerald's rather engaging analysis" which occasionally results in problems for him. The right hon. Member for Manchester, Ardwick (Mr. Kaufman) seemed to suggest that domestic rate relief should be increased. That would surely mean that an increasing proportion of the rates burden would fall upon commercial and industrial payers. The right hon. Gentleman would hardly want to argue for that when we desperately need to increase jobs.

The right hon. Member for Ardwick also suggested that the report should implement the urban programme exemption. I am sure that he would agree that that is not the case, because hold back for 1983–84 is not implemented by the report. That will happen when we have local authorities' budgets. There will be a supplementary report implementing hold back which will also implement the urban programme exemption. Those are matters that I may have misconstrued—or perhaps ones that he has misconstrued. The fact remains that the right hon. Gentleman felt the need of the traditional joust that he has enjoyed at the Dispatch Box for the past few years. Now he finds himself a Jane without her Tarzan—a somewhat plain Jane, a somewhat balding Jane, a somewhat overdressed Jane, but a welcome Jane, none the less.

Another consistent feature of these debates is the complexity of the GREA. The right hon. Gentleman, in his usual sparkling way, had great fun at its expense. However, I remind all hon. Members that an authority's GREA should in no way be regarded as the minimum level up to which it should spend. Of course they are constructed on formulae related to assessments of the costs of providing a standard level of service, but their primary function in the RSG system is as a means of distributing block grant between authorities. Authorities choose their own level of service, and all the authorities named are permitted the maximum 4 per cent. increase in spending. It is important for hon. Members to remember that.

Mr. Bowen Wells (Hertford and Stevenage)

Will my hon. Friend undertake that GREA should not be used as a means of keeping under control, or putting a maximum on, the expenditure of local authorities, because that denies local democracy?

Mr. Shaw

My hon. Friend has got it wrong. That is not the function of the GREA, and it should not be interpreted as such.

I come to the assessment of needs. About 62 elements make up the GREA. My hon. Friend the Member for Sudbury and Woodbridge (Mr. Stainton) spoke about expanding populations. What is crucial is not simply an expanding population but the range of services that that population will need. If it is a young population, it will need schooling. If it is an older population, it will need provision for social services, and so on. The composite effect of the GREA is what is important.

Important matters were raised by my hon. Friends, and in the remaining minutes I shall do my best to answer them. My hon. Friends the Members for Altrincham and Sale (Mr. Montgomery) and for Stretford (Mr. Churchill) spoke with extreme cogency about Trafford. I listened carefully to what they said, and I am grateful for the clarity and cogency with which they spoke. They could hardly have argued more effectively. When they brought their deputation from Trafford to see my right hon. Friend yesterday, they received a full and fair hearing. They would not expect me to go further than he did then. However, I shall repeat and place on the record the two important assurances that he gave. First, my right hon. Friend undertook to recheck carefully the numbers of school pupils used for calculating Trafford's GRE. If they are wrong, we shall take the earliest opportunity to correct them in the next supplementary report. Secondly, we shall look carefully at all the figures of students in non-advanced further education and the way in which they have been used to calculate the education GRE. My right hon. Friend undertook to look at both those matters carefully, and that will be done.

The hon. Member for Isle of Wight (Mr. Ross) spoke about the £904 million in the current expenditure provided for 1983–84 above the allocated amount. I can reassure him that the £904 million is real money. It is part of the relevant current expenditure, and it is part of the £20 billion, which is the total of authorities' targets. It is distributed among authorities as part of their targets, and it is not distributed between services. Therefore, it does not affect the GRE.

The hon. Member for Manchester, Blackley (Mr. Eastham) raised the important question of the rate support grant settlement in inner city areas. I remind him that, in the settlement that we are discussing, 19 per cent. of the total grant for next year will go to urban authorities. That compares with 18.7 per cent. in 1982–83, and 18.6 per cent. in 1981–82. From that point of view, it is a significant improvement. I am sure that the hon. Gentleman will recognise that.

My hon. Friend the Member for Buckingham (Mr. Benyon), in a cogent speech, referred to his authority. There has been a substantial increase in population in his area. The county complains that a 4 per cent. increase in the 1982–83 budget does not recognise the substantial population growth. However, in 1982–83 the budget was adequate to provide services for the present population, so the 4 per cent. should not require unreasonable reductions in service level. If the county spends at target, block grant entitlement will increase by 4.5 per cent. and local contributions will decrease by 0.2 per cent. I appreciate what my hon. Friend has said, but some provisions are available even without great recourse to rate increases.

My hon. Friends the Members for East Grinstead (Sir G. Johnson Smith) and for Horsham and Crawley (Mr. Hordern) referred to the problems of west Sussex. I assure my hon. Friends that the needs for west Sussex, including any extra demands for local authority services arising from the development at Gatwick, will be reflected in the county's GREA. The object of the GREA is to enable all authorities, whatever their aggregate rateable value, to provide similar levels of service for similar rates in the pound. As the years pass, the Gatwick development will bear its fair share of GREA.

The hon. Member for Wallsend (Mr. Garrett) made an interesting speech. He referred to the review of agricultural exemption from rating, a point that has not often been raised in the House, and house improvements. I remind him that an extremely wide range of grant aids are now available for house improvements. My hon. Friend the Minister for Housing and Construction has been able to encourage local authorities to increase the range of improvements that are available for owner occupiers.

My hon. and learned Friend the Member for Hemel Hempstead (Mr. Lyell) referred to Hertfordshire and the Dacorum district. I understand the points that he made. It is necessary to keep all those matters under review. My hon. and learned Friend will recognise that in the settlement that we are proposing there is a genuine increase and improvement in the amount that the local authorities will spend during the next financial year.

The rate support grant settlement is always a matter of dispute. The right hon. Member for Widnes (Mr. Oakes) referred to the views of the Association of County Councils. I assure him that the 1983–84 settlement takes into account the 1981 census information. I am sure that he will recognise, as I said when I referred to my hon. Friend the Member for Sudbury and Woodbridge, that not the number but the range of services that the new population figures require is the main determinant.

The right hon. Gentleman suggested that everyone was attacking the rate support grant and that there had been not much discussion of fundamental principles in the debate. That was because it is inevitable that individual Members on both sides of the House will look essentially at the local picture. As the right hon. Gentleman will recognise, it is the job of Government to look at the national picture. Inevitably that makes the debate disparate.

My hon. Friend the Member for Sudbury and Woodbridge referred to the transport supplementary grant. I shall draw his remarks to the attention of my right hon. Friend the Secretary of State for Transport and ask him to examine the matter with care. I understand how important it is to a substantial rural area such as the one my hon. Friend represents.

The rate support grant settlement is fair and realistic. We increased the provision for local government's current expenditure to £19.7 billion so that we could set realistic expenditure targets for authorities next year. By publishing our targets in July last year, we have given local authorities much more notice of what is required of them for the next year. We have not sought to reduce those targets in the face of falling inflation rates.

My right hon. Friend made it clear how vital it is for the Government to address themselves to local authority expenditure. It is just not possible for Governments to hang back and to allow local authority expenditure to remain unchecked.

Many hon. Members have said that the method adopted is not the fairest and certainly not the clearest. The method attempts to relate the expenditure to an assessment of need that is far closer to being genuinely based than the previous system it replaced.

My hon. Friend the Member for Hornchurch (Mr. Squire) was the only hon. Member who gallantly agreed that settlement was a significant improvement on its predecessor. I am grateful for the fact that I have one solitary supporting figure. My hon. Friend, as always, is a guide and mentor in matters affecting local authorities.

We have proposed a progressive system of grant holdback that is gentle on those authorities spending just above their target but severe and continuous on those authorities that continue to spend well in excess of target levels.

One of the severest criticisms of the previous methodology within the RSG was that there should be more positive attempts to claw back expenditure on those who over step the mark. My hon. Friends will surely welcome the improvement that has been made to that aspect of the settlement.

The overall effect of the settlement on ratepayers is that, in those authorities that meet their expenditure target, rate increases should be modest. Those authorities that wish to exceed their targets substantially will have to explain themselves to their ratepayers.

The early signs are that the news for ratepayers will be good. The rest is certainly up to local government. Whatever the Government might seek to do in making these assessments, the information is largely supplied by the individual local authorities themselves. That is where the information on which we base our calculations originates. Therefore, it is not just a matter of what the Government do. It is a matter of the way in which local government responds not only to the grant, and the system but also to the community requirements.

As the hon. Member for Vauxhall (Mr. Holland) made clear, it is vitally important that local authorities should be able to deal with what they consider to be the priorities for local expenditure.

In the final analysis, the level of settlement of this grant must exclusively depend on the state of the economy at a given time and on the importance of relating that grant to public expenditure policy. Those who argue that any percentage reduction of grant is a mischievous and unmerciful, attack on local authorities are grossly overstating the position. Any other policy must seriously put at risk not only the Government's economic policy but also the ability of local authorities to benefit from such important things as the reduction of inflation and the improvement in the interest rate.

Those who argue that the consequence will be higher rate increases should recognise the drastic consequences for industry and employment that that would bring. That would cause another spiral not only of job losses but of pressure on inflation. Those who argue the unfairnesses of the system should recall that it is a first attempt to assess local needs to provide for a system where equal services for equal poundage might be available throughout 451 local authorities.

There is much talk about the loss of partnership between local and central government. The real partnership is the recognition that the ratepayer, taxpayer, councillor and Member of Parliament cannot contract out of their responsibilities to one another. I ask the House to approve the order.

Question put: —

The House divided: Ayes 272, Noes 224.

Division No. 49]	[9.58 pm
AYES
Aitken, Jonathan	Benyon, W. (Buckingham)
Alexander, Richard	Berry, Hon Anthony
Amery, Rt Hon Julian	Best, Keith
Ancram, Michael	Bevan, David Gilroy
Arnold, Tom	Biffen, Rt Hon John
Aspinwall, Jack	Biggs-Davison, Sir John
Atkins, Rt Hon H. (S'thorne)	Blackburn, John
Atkins, Robert (Preston N)	Blaker, Peter
Atkinson, David (B'm'th,E)	Body, Richard
Baker, Kenneth (St.M'bone)	Bonsor, Sir Nicholas
Baker, Nicholas (N Dorset)	Boscawen, Hon Robert
Banks, Robert	Bottomley, Peter (W'wich W)
Bendall, Vivian	Bowden, Andrew

Boyson, Dr Rhodes	Higgins, Rt Hon Terence L.
Braine, Sir Bernard	Hill, James
Bright, Graham	Hogg, Hon Douglas (Gr'th'm)
Brinton, Tim	Holland, Philip (Carlton)
Brooke, Hon Peter	Hooson, Tom
Brotherton, Michael	Hordern, Peter
Brown, Michael (Brigg & Sc'n)	Howell, Rt Hon D. (G'ldf'd)
Browne, John (Winchester)	Howell, Ralph (N Norfolk)
Bruce-Gardyne, John	Hunt, David (Wirral)
Bryan, Sir Paul	Hunt, John (Ravensbourne)
Buchanan-Smith, Rt. Hon. A.	Irvine, Rt Hon Bryant Godman
Buck, Antony	Jessel, Toby
Budgen, Nick	Johnson Smith, Sir Geoffrey
Bulmer, Esmond	Jopling, Rt Hon Michael
Butcher, John	Kellett-Bowman, Mrs Elaine
Butler, Hon Adam	Kershaw, Sir Anthony
Carlisle, John (Luton West)	Kimball, Sir Marcus
Carlisle, Kenneth (Lincoln)	King, Rt Hon Tom
Carlisle, Rt Hon M. (R'c'n)	Knight, Mrs Jill
Chalker, Mrs. Lynda	Knox, David
Chapman, Sydney	Lamont, Norman
Clark, Hon A. (Plym'th, S'n)	Lang, Ian
Clark, Sir W. (Croydon S)	Latham, Michael
Clarke, Kenneth (Rushcliffe)	Lawrence, Ivan
Clegg, Sir Walter	Lawson, Rt Hon Nigel
Cockeram, Eric	Lee, John
Colvin, Michael	Le Marchant, Spencer
Cope, John	Lennox-Boyd, Hon Mark
Corrie, John	Lester, Jim (Beeston)
Costain, Sir Albert	Lewis, Sir Kenneth (Rutland)
Cranborne, Viscount	Lloyd, Ian (Havant & W'loo)
Critchley, Julian	Lloyd, Peter (Fareham)
Crouch, David	Loveridge, John
Dickens, Geoffrey	Luce, Richard
Dorrell, Stephen	Lyell, Nicholas
Dover, Denshore	McCrindle, Robert
du Cann, Rt Hon Edward	Macfarlane, Neil
Dunn, Robert (Dartford)	MacKay, John (Argyll)
Durant, Tony	McNair-Wilson, M. (N'bury)
Dykes, Hugh	McNair-Wilson, P. (New F'st)
Eden, Rt Hon Sir John	McQuarrie, Albert
Edwards, Rt Hon N. (P'broke)	Madel, David
Eggar, Tim	Major, John
Elliott, Sir William	Marland, Paul
Emery, Sir Peter	Marlow, Antony
Eyre, Reginald	Marten, Rt Hon Neil
Fairbairn, Nicholas	Mates, Michael
Faith, Mrs Sheila	Mather, Carol
Farr, John	Maude, Rt Hon Sir Angus
Fenner, Mrs Peggy	Mawby, Ray
Finsberg, Geoffrey	Mawhinney, Dr Brian
Fisher, Sir Nigel	Mayhew, Patrick
Fletcher, A. (Ed'nb'gh N)	Mellor, David
Fookes, Miss Janet	Meyer, Sir Anthony
Fowler, Rt Hon Norman	Miller, Hal (B'grove)
Fox, Marcus	Mills, Iain (Meriden)
Gardiner, George (Reigate)	Mills, Sir Peter (West Devon)
Gardner, Sir Edward	Miscampbell, Norman
Glyn, Dr Alan	Moate, Roger
Grant, Sir Anthony	Moore, John
Gray, Rt Hon Hamish	Morgan, Geraint
Greenway, Harry	Morrison, Hon C. (Devizes)
Grieve, Percy	Morrison, Hon P. (Chester)
Griffiths, E. (B'y St. Edm'ds)	Mudd, David
Griffiths, Peter (Portsm'th N)	Murphy, Christopher
Grist, Ian	Myles, David
Gummer, John Selwyn	Neale, Gerrard
Hamilton, Hon A.	Nelson, Anthony
Hamilton, Michael (Salisbury)	Neubert, Michael
Hampson, Dr Keith	Newton, Tony
Hannam,John	Onslow, Cranley
Haselhurst, Alan	Oppenheim, Rt Hon Mrs S.
Hastings, Stephen	Osborn, John
Havers, Rt Hon Sir Michael	Page, John (Harrow, West)
Hawksley, Warren	Page, Richard (SW Herts)
Hayhoe, Barney	Parkinson, Rt Hon Cecil
Heath, Rt Hon Edward	Parris, Matthew
Heddle, John	Pattie, Geoffrey
Henderson, Barry	Pawsey, James
Heseltine, Rt Hon Michael	Percival, Sir Ian

Peyton, Rt Hon John	Stevens, Martin
Pink, R. Bonner	Stewart, A. (E Renfrewshire)
Pollock, Alexander	Stewart, Ian (Hitchin)
Porter, Barry	Stokes, John
Prentice, Rt Hon Reg	Stradling Thomas, J.
Prior, Rt Hon James	Tapsell, Peter
Proctor, K. Harvey	Taylor, Teddy (S'end E)
Pym, Rt Hon Francis	Temple-Morris, Peter
Raison, Rt Hon Timothy	Thomas, Rt Hon Peter
Rathbone, Tim	Thompson, Donald
Rees, Peter (Dover and Deal)	Thorne, Neil (Ilford South)
Rees-Davies, W. R.	Thornton, Malcolm
Renton, Tim	Townend, John (Bridlington)
Rhodes James, Robert	Townsend, Cyril D, (B'heath)
Ridley, Hon Nicholas	Trippier, David
Roberts, M. (Cardiff NW)	Trotter, Neville
Roberts, Wyn (Conway)	van Straubenzee, Sir W.
Rossi, Hugh	Vaughan, Dr Gerard
Rost, Peter	Viggers, Peter
Royle, Sir Anthony	Waddington, David
Rumbold, Mrs A. C. R.	Wakeham, John
Sainsbury, Hon Timothy	Waldegrave, Hon William
St. John-Stevas, Rt Hon N.	Walker, Rt Hon P. (W'cester)
Scott, Nicholas	Walker, B. (Perth)
Shaw, Giles (Pudsey)	Walker-Smith, Rt Hon Sir D.
Shaw, Sir Michael (Scarb')	Waller, Gary
Shelton, William (Streatham)	Walters, Dennis
Shepherd, Colin (Hereford)	Ward, John
Shepherd, Richard	Warren, Kenneth
Shersby, Michael	Watson, John
Silvester, Fred	Wells, Bowen
Sims, Roger	Wells, John (Maidstone)
Skeet, T. H. H.	Wheeler, John
Smith, Tim (Beaconsfield)	Whitelaw, Rt Hon William
Speed, Keith	Whitney, Raymond
Speller, Tony	Wickenden, Keith
Spence, John	Wilkinson, John
Spicer, Jim (West Dorset)	Williams, D. (Montgomery)
Spicer, Michael (S Worcs)	Winterton, Nicholas
Sproat, Iain	Wolfson, Mark
Squire, Robin	Young, Sir George (Acton)
Stainton, Keith
Stanbrook, Ivor	Tellers for the Ayes:
Stanley, John	Mr. Alastair Goodlad and
Steen, Anthony	Mr. Tristan Garel-Jones.
NOES
Abse, Leo	Cook, Robin F.
Adams, Allen	Cowans, Harry
Allaun, Frank	Cox, T. (W'dsw'th, Toot'g)
Alton, David	Craigen, J. M. (G'gow, M'hill)
Anderson, Donald	Crowther, Stan
Archer, Rt Hon Peter	Cryer, Bob
Ashley, Rt Hon Jack	Cunliffe, Lawrence
Ashton, Joe	Cunningham, G. (Islington S)
Atkinson, N. (H'gey,)	Dalyell, Tam
Bagier, Gordon A.T.	Davidson, Arthur
Beith, A. J.	Davies, Rt Hon Denzil (L'lli)
Benn, Rt Hon Tony	Davis, Clinton (Hackney C)
Bennett, Andrew (St'kp't N)	Davis, Terry (B'ham, Stechf'd)
Bidwell, Sydney	Deakins, Eric
Booth, Rt Hon Albert	Dean, Joseph (Leeds West)
Boothroyd, Miss Betty	Dewar, Donald
Bradley, Tom	Dixon, Donald
Brown, Hugh D. (Provan)	Dobson, Frank
Brown, R. C. (N'castle W)	Dormand, Jack
Brown, Ronald W. (H'ckn'y S)	Douglas, Dick
Brown, Ron (E'burgh, Leith)	Dubs, Alfred
Buchan, Norman	Dunnett, Jack
Callaghan, Rt Hon J.	Dunwoody, Hon Mrs G.
Campbell-Savours, Dale	Eastham, Ken
Canavan, Dennis	Edwards, R. (W'hampt'n S E)
Carmichael, Neil	Ellis, R. (NE D'bysh're)
Carter-Jones, Lewis	Ellis, Tom (Wrexham)
Cartwright, John	English, Michael
Clark, Dr David (S Shields)	Ennals, Rt Hon David
Cocks, Rt Hon M. (B'stol S)	Evans, Ioan (Aberdare)
Cohen, Stanley	Evans, John (Newton)
Concannon, Rt Hon J. D.	Faulds, Andrew
Conlan, Bernard	Field, Frank

Flannery, Martin	Lewis, Ron (Carlisle)
Foot, Rt Hon Michael	Litherland, Robert
Ford, Ben	Lofthouse, Geoffrey
Forrester, John	Lyon, Alexander (York)
Foster, Derek	Lyons, Edward (Bradf'd W)
Foulkes, George	McDonald, Dr Oonagh
Fraser, J. (Lamb'th, N'w'd)	McElhone, Mrs Helen
Freeson, Rt Hon Reginald	McGuire, Michael (Ince)
Freud, Clement	McKay, Allen (Penistone)
Garrett, John (Norwich S)	McKelvey, William
Garrett, W. E. (Wallsend)	MacKenzie, Rt Hon Gregor
George, Bruce	Maclennan, Robert
Golding, John	McWilliam, John
Graham, Ted	Magee, Bryan
Grant, John (Islington C)	Marks, Kenneth
Grimond, Rt Hon J.	Marshall, D (G'gow S'ton)
Hamilton, James (Bothwell)	Marshall, Dr Edmund (Goole)
Hamilton, W. W. (C'tral Fife)	Marshall, Jim (Leicester S)
Hardy, Peter	Martin, M (G'gow S'burn)
Harman, Harriet (Peckham)	Mason, Rt Hon Roy
Harrison, Rt Hon Walter	Maxton, John
Hattersley, Rt Hon Roy	Maxwell-Hyslop, Robin
Haynes, Frank	Maynard, Miss Joan
Healey, Rt Hon Denis	Meacher, Michael
Hogg, N. (E Dunb't'nshire)	Mikardo, Ian
Holland, S. (L'b'th, Vauxh'll)	Millan, Rt Hon Bruce
Home Robertson, John	Miller, Dr M. S. (E Kilbride)
Homewood, William	Morris, Rt Hon C. (O'shaw)
Hooley, Frank	Morris, Rt Hon J. (Aberavon)
Horam, John	Morton, George
Howell, Rt Hon D.	Moyle, Rt Hon Roland
Hoyle, Douglas	Newens, Stanley
Huckfield, Les	Oakes, Rt Hon Gordon
Hughes, Mark (Durham)	O'Neill, Martin
Hughes, Robert (Aberdeen N)	Orme, Rt Hon Stanley
Hughes, Roy (Newport)	Paisley, Rev Ian
Janner, Hon Greville	Palmer, Arthur
Jay, Rt Hon Douglas	Park, George
John, Brynmor	Parker, John
Johnson, James (Hull West)	Parry, Robert
Johnson, Walter (Derby S)	Pavitt, Laurie
Johnston, Russell (Inverness)	Penhaligon, David
Jones, Rt Hon Alec (Rh'dda)	Pitt, William Henry
Kaufman, Rt Hon Gerald	Powell, Raymond (Ogmore)
Kerr, Russell	Prescott, John
Kilroy-Silk, Robert	Price, C. (Lewisham W)
Lambie, David	Race, Reg
Lamond, James	Radice, Giles
Leadbitter, Ted	Rees, Rt Hon M (Leeds S)
Lewis, Arthur (N'ham NW)	Richardson, Jo

Roberts, Allan (Bootle)	Taylor, Mrs Ann (Bolton W)
Roberts, Ernest (Hackney N)	Thomas, Dr R. (Carmarthen)
Roberts, Gwilym (Cannock)	Thorne, Stan (Preston South)
Robertson, George	Tilley, John
Robinson, G. (Coventry NW)	Tinn, James
Rooker, J. W.	Torney, Tom
Roper, John	Wainwright, E. (Dearne V)
Ross, Ernest (Dundee West)	Wainwright, R. (Colne V)
Ross, Stephen (Isle of Wight)	Walker, Rt Hon H. (D'caster)
Rowlands, Ted	Warden, Gareth
Ryman, John	Watkins, David
Sandelson, Neville	Weetch, Ken
Sever, John	Wellbeloved, James
Sheerman, Barry	Welsh, Michael
Sheldon, Rt Hon R.	White, Frank R.
Short, Mrs Renée	White, J. (G'gow Pollok)
Silkin, Rt Hon J. (Deptford)	Whitehead, Phillip
Silkin, Rt Hon S. C. (Dulwich)	Whitlock, William
Silverman, Julius	Wigley, Dafydd
Skinner, Dennis	Willey, Rt Hon Frederick
Smith, Rt Hon J. (N Lanark)	Williams, Rt Hon A. (S'sea W)
Snape, Peter	Wilson, Rt Hon Sir H. (H'ton)
Spearing, Nigel	Wilson, William (C'try SE)
Spellar, John Francis (B'ham)	Winnick, David
Spriggs, Leslie	Woodall, Alec
Stallard, A. W.	Wright, Sheila
Steel, Rt Hon David	Young, David (Bolton E)
Stoddart, David
Stott, Roger	Tellers for the Noes:
Strang, Gavin	Mr. Ron Leighton and
Summerskill, Hon Dr Shirley	Mr. Hugh McCartney.

Question accordingly agreed to.

Resolved, That the Rate Support Grant Supplementary Report (England) 1982–83, which was laid before this House on 16th December, be approved. Resolved, That the Rate Support Grant Report (England) 1983–84, which was laid before this House on 17th January, be approved.—[Mr. Cope.].