HC Deb 26 July 1983 vol 46 cc1122-44 8.16 pm
The Secretary of State for Wales (Mr. Nicholas Edwards)

I beg to move That the Welsh Rate Support Grant Supplementary (No. 3) Report 1981/82 (House of Commons Paper No. 12), which was laid before this House on 7th July, be approved.

Mr. Deputy Speaker (Mr. Harold Walker)

With this, it will be convenient to discuss the following motion: That the Welsh Rate Support Grant Supplementary Report 1983/84 (House of Commons Paper No. 11), which was laid before this House on 7th July, be approved.

Mr. Edwards

I shall deal very quickly with the third supplementary report for 1981–82 which is simply a tidying-up operation. In January the House approved the second supplementary report for that year withholding rate support grant from authorities that had exceeded their expenditure targets. Grant withholding was based on authorities' provisional outturn expenditure figures. We now have the final outturn figures which are a little less than the earlier provisional estimates. The effect is to increase by £100,000 the total block grant payable for 1981–82, and if this report is approved that £100,000 will be paid immediately. No substantive increase in the cash limit on the relevant Vote as necessary as the money can be found from the sums withdrawn from 1983–84 if the House goes on to approve the first supplementary report. In that event a token Supplementary Estimate for the appropriate Vote will be ',laid before the House in the coming winter.

One thing this final report for 1981–82 clearly demonstrates is that, when authorities with budgets that are above their expenditure targets subsequently reduce their spending, the amount of grant withheld is also reduced or restored entirely. That is something to be borne in mind as we consider the first supplementary report for 1983–84. I would like the House to consider the background. When we came into office in 1979 local authority expenditure had been rising steadily. for many years. Between 1959 and 1979 local authority spending in Wales multiplied by a factor of 12. Over the same period the retail price index went up by a factor of five. By any reckoning that is a very substantial difference. In those two decades there was only one brief pause in the upward expenditure surge, and that was when the Labour Government, following a period of financial profligacy, were bailed out by the IMF and, without warning, imposed a sharp reduction on local authority expenditure. From 1974 onwards, the increase in current expenditure was coupled, regrettably, with a marked fall in the share of total expenditure taken for capital and by a very substantial increase in local authority manpower, which reached a record level of 128,000 by:1979. Superimposed on those extremely undesirable trends there developed a widely held expectation that local authority expenditure and manpower could continue to grow, regardless of the general condition of the economy or of the burden that this expenditure imposed on taxpayers and ratepayers alike.

When we set out to halt and to reverse those seemingly remorseless trends, many wild accusations were made. No doubt Opposition Members will continue to make them tonight—;[Interruption.] No doubt the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands), when he stops intervening from a sedentary position in his usual way and joins the debate, will use the well-established jargon that describes any modest economy as a shocking cut and any check to rising expectations as a savaging of services. The reality is very different.

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)

As the Secretary of State has invited me to join the debate, I should tell him that we have listened to that speech for five and a half years. He is still resting his case on the position in 1974–75. When will he acknowledge that he has been Secretary of State since 1979 and accept the responsibility for the cuts and the disappearance of our services?

Mr. Edwards

If the hon. Gentleman had not been carrying on his usual practice of mumbling from a sedentary position, he would have heard what I said.

Mr. Rowlands

I heard what the right hon. Gentleman said.

Mr. Edwards

I was seeking not to blame our predecessors for the position we inherited, but trying to say that, against that background, the jargon that he uses about savage cuts is nonsense.

Since 1978–79, local authority current expenditure in Wales has risen by about 74 per cent. This is only 3 per cent. below the rise in costs for the sector and is broadly the same as the rise in costs for the economy as a whole. At the same time, local authority manpower in Wales has fallen by about 3.5 per cent., although the two most recent surveys show an upturn. Claims that local authority staffing levels and services have been slashed simply do not stand up to examination. Even the modest restraint in expenditure achieved between 1978–79 and 1983–84 must be seen against the background of changing requirements in the single largest service provided by the local authorities— education. Between January 1979 and January 1983 pupil numbers decreased by about 49,000, almost 9 per cent., while teacher numbers decreased by only 6—;5 per cent. Public expenditure provision for social services is now rising by about 2 per cent. per annum more than local authority costs to allow principally for the marked increase in the elderly population and for the greater emphasis placed on care in the community. That is not a picture of savagely imposed cuts in service provision. We are after selective reductions in areas where demands are falling to make way for improvements in other sectors.

I am fully aware, given my wide responsibilities, that any reduction in expenditure is difficult, but if those difficult decisions had not been made—;if we had simply continued with expenditure unchecked—;the costs would have fallen on industry, commerce and domestic ratepayers. It is a sobering thought that had manpower remained at its 1979 peak, those burdens would have been about £40 million greater than they are on the basis of that modest reduction of about 3.5 per cent.

Mr. Ron Davies (Caerphilly)

Will the Secretary of State give way?

Mr. Edwards

I shall give way in a moment.

Mr. Rowlands

Give way.

Mr. Edwards

I shall give way, but not because I am ordered to do so by the hon. Gentleman.

Mr. Davies

I do not wish to become involved in an obviously amicable discussion between the Secretary of State and my colleagues.

The Secretary of State has made great play of the reduction in education spending because of falling rolls. Does he agree that the opportunities offered by falling rolls should have been used to provide better education rather than the closure of schools and the sacking of teachers? The right hon. Gentleman referred to the difficulties in providing social services, especially because of the aging population—;

Mr. Deputy Speaker

Order. Interventions must be brief.

Mr. Davies

Yes, Mr. Deputy Speaker.

The right hon. Gentleman has made precious little mention of the other services provided by local authorities. Perhaps he will now mention the problems of housing, industrial development, transport—;

Mr. Deputy Speaker

Order. I suggest that the hon. Gentleman allows the Secretary of State to make his speech.

Mr. Edwards

No doubt the hon. Member for Caerphilly (Mr. Davies) will make his speech in due course.

The pupil-teacher ratio is now at its best ever level, and is much better than it was under the Labour Government. I referred to the fact that local authorities are increasing expenditure on social services above costs. If manpower alone had remained at its 1979 peak, an additional burden of £40 million would have been placed on those who must pay the rates and taxes that sustain local government.

It is an equally salutary thought, and an especially relevant introduction to the 1983–84 supplementary report, that had Welsh local authorities not recruited about 1,000 extra staff between March 1982 and March 1983, their expenditure would have been about £9 million less. Not only could that sum have been trimmed off Welsh rate burdens, but we would have been close to the point where the report that we are considering might not have been necessary.

The principal purpose of this report is to effect grant withholding from authorities whose budget plans exceed their individual targets for the current year, as well as to protect the grant entitlements of the 32 authorities whose planned expenditure is at or below target level. I had hoped that it would not have been necessary to take this action and that all authorities would meet their targets, but authorities' plans in aggregate show that budgeted total expenditure exceeds the rate support grant provision by more than £21 million, and I have told the local authorities that I cannot accept that level of overspending.

The majority of Welsh authorities have planned expenditure for the current year so as not to exceed their targets. Twenty nine of the 37 Welsh districts and three of the eight Welsh counties are in that position and have shown conclusively that what I asked of them was by no means unreasonable or impossible. By keeping within targets, they avoid not only grant withholding but the associated close ending adjustment. I shall explain the effect of this close ending adjustment.

Mr. Rowlands

That is another piece of jargon.

Mr. Edwards

It is another piece of jargon, but the hon. Gentleman, with his experience, will understand it.

Close ending adjustment, which is a phrase extremely familiar to those involved in local government, ensures that the grant paid out equals the amount of grant available, and legislation requires me initially to reduce the block grant of all authorities by a common proportion if grant claims exceed the amount available. That is the case this year, and all authorities have had their grant claims abated by about 1 per cent. It is only right and equitable that authorities meeting their targets should have the initial close ending reductions restored to them at the first opportunity., and that is what I am doing now. I know that those authorities will particularly welcome the fact that decisions are being taken early so that they can plan accordingly.

Possibly one of the most important aspects of achieving targets from the local authority viewpoint is that authorities that budget for expenditure at or below their target level then know within narrow limits the grant that they will receive and are able to plan their affairs with certainty.

While close ending is a consequence of the overall spending decisions of local government taken together, grant withholding is entirely a consequence of the individual performance of authorities. For an authority whose planned expenditure exceeds its target, the amount of grant to be withheld will, as in previous years, be directly related to the extent of its own excess and will in no way be affected by the expenditure decisions of other authorities. An authority's liability to grant holdback should be and is entirely dependent on decisions that it has taken itself in the full knowledge of the financial consequences. Every authority took its budget decisions aware of what would happen if it incurred expenditure in excess of its target. Authorities were notified of their targets last December and knew the amount of grant that would be withheld for particular levels of spending above those targets. Any authority that decided to budget for more than its target amount did so consciously, in the full knowledge of the grant consequences and— this is important—;the consequences for their ratepayers. I told the House and local authorities exactly what we intended. I warned them from the Dispatch Box that we meant what we said. It is against that background that we have to consider the consequences of this report.

Mr. Rowlands

In Merthyr Tydfil and Rhymney, the two local authorities that I represent, 32 councillors were elected in 1983 on the basis of their policies, views, attitudes and expenditure plans. Why has the right hon. Gentleman the right to override those decisions, schemes and arguments?

Mr. Edwards

I should have thought that the hon. Gentleman would understand that the Government are responsible for overall economic management. The Government provide the greater part of local authority finance—;which comes from the taxpayer, not from the local ratepayer—;and are acutely concerned about the effects of rating decisions on local industry, which pays the bulk of local rate burdens. For the hon. Gentleman to intervene when Merthyr Tydfil has the dubious distinction of registering the highest percentage increase in spending of all the Welsh authorities— 17 per cent. Between 1982–83 and 1983–84—;is remarkable.

Mr. Rowlands

We have some of the worst problems and we need to spend money on them.

Mr. Edwards

The Welsh local authorities are budgeting to overspend £21.1 million, which is 1.7 per cent. above the total public expenditure provision that we set. As I have told the House, most authorities, including many with problems at least comparable with those of Merthyr Tydfil and the other overspenders, complied with the target, but five counties and eight districts failed to do so. Therefore, it is the Government's intention to withhold a total of £12.6 million, but it is still open for any of those authorities to avoid withholding by adjusting their spending at this stage.

Authorities that decide to overspend will have to go to their ratepayers, draw from balances previously provided by their ratepayers, or use some combination of those two mechanisms to cover not only the excess expenditure that they are incurring but the amount of grant that will now be withheld. The position will vary from authority to authority, but in aggregate terms it means that overspending authorities have had to find from rates and/ or balances not just the £21.1 million overspend but the £12.6 million grant withholding. The £33.7 million involved is equivalent to about a 12p rate or about 7 per cent. of the average general rate poundage levied this year. In short, after making an allowance for the use of balances, rates in these local authority areas where targets have been exceeded could have been much lower than they are.

As I have made clear, local authorities have not had to act suddenly or unexpectedly. Most of them made provision and adjusted their balances accordingly in the expectation of grant withholding. If I failed to act when this was their response to our declaration of policy, not only would taxpayers and ratepayers suffer on this occasion, but local authorities would henceforward make their plans in the expectation that the Government did not mean what they said.

In addition to our responsibility to contain overall spending to a level which the country can afford, I consider that the Government and the House have an obligation to protect industry, commerce and ratepayers from the profligate policies of the small minority of irresponsible authorities. High spending demands high rates; high rates mean high costs; and high costs mean lost markets and lost job opportunities. We are not prepared to allow that to happen.

It cannot be argued that Government policies have led to large rate increases in Wales. The reverse is true. In the past two years average general poundages in the Principality have risen by about 4 per cent. only, and many authorities have managed to reduce their poundages in recent years. Without the overspending with which we are now dealing, rates could have been even lower. I believe that the lower rate increases we have seen in recent years have taken place only as a response by local authorities to Government policies. I am determined to see that the improvement continues in the period ahead.

8.37 pm
Mr. Denzil Davies (Llanelli)

The Secretary of State for Wales made a tired and cantankerous speech, much of it written, it seems, by junior Treasury officials. I do not blame the Secretary of State for being tired and cantankerous because he has nothing much to show for four years in the Welsh Office and little prospect of anything to show for a further four years if the Government continue their economic policies.

As the Secretary of State said, we are debating the 1981–82 report which does not throw up any substantial issues between us and the supplementary report for 1983–84 upon which I shall concentrate. I am sorry that the Secretary of State did not recognise that the 1983–84 supplementary report is highly damaging to a number of county and district councils in Wales. Under this centralist regime—;one which, as was pointed out, would make the Kremlin and the politburo drool at the mouth if they thought of such a system—;the Government will this year hold back £12.6 million from five county councils and seven district councils, many of which are in areas of high social deprivation and industrial and economic decline. For that reason, we see this document as mean and miserly, but well in keeping with the Government's economic policy and their increasingly futile attempts to control public expenditure and do something about unemployment.

Counties such as mid-Glamorgan, and districts such as the Rhymney valley in Gwent, Wrexham in Clwyd and Merthyr Tydfil, which are affected by the report, were long ago struggling, as the Secretary of State knows, with the social and economic consequences of those Victorian values which are apparently so beloved of the Prime Minister. In addition, those areas must cope with the Government's economic policy, the substantial increases in unemployment and consequent strain on their social and public services. The Secretary of State has insulted those areas tonight. The Government heap further insult and indignity upon them by denying them even a few extra resources—;£400,000 for Merthyr Tydfil—;not to expand their services, but to try to maintain their existing overstretched services.

Mr. Roy Hughes (Newport, East)

My right hon. Friend heard the attack by the Secretary of State on Gwent county council. Will my right hon. Friend point out to the Secretary of State that Gwent's figures were drawn up with the wholehearted collaboration and agreement of Conservative members of the council?

Mr. Davies

I am sure that that is right. Many Conservatives on many councils, not just in Wales but, as we heard during the earlier debate, also in England, are appalled by the Government's attempt to achieve spurious control over local authorities. The figures are called targets but in fact they are ceilings. They are completely arbitrary. It is an attempt to reduce the amount of money that local authorities need.

Stripped of all its jargon, the report means fewer teachers, fewer children able to receive better education, fewer textbooks to be shared by children, roads falling into greater disrepair and fewer home helps to minister to the old, blind and disabled.

Mr. Keith Best (Ynys Môn)

The right hon. Gentleman has not done his homework.

Mr. Davies

There is no point in the hon. Gentleman saying from a sedentary position that I have not done my homework. I know that he is an expert on this and, apparently, many other matters. I know that he does not like it, but I have explained what happens when money is taken from Welsh local authorities. The hon. Gentleman should not kid himself that things will be different.

We are told that this is just the beginning. The Secretary of State has not come clean with the House about this. What is the £12.6 million? Is it a contribution towards the £500 million-worth of panic cuts? I see that the Secretary of State shakes his head. That means that we will have the £12.6 million and the £6.5 million-worth of cuts in the National Health Service which were not announced in the House. The Government, whose large majority makes them arrogant, do not bother to come to the House to announce such matters. Will local authorities face further cuts to make up the Lawson £500 million? We deserve some answers. In what is possibly the last debate on Welsh matters before we rise for the summer recess, the Secretary of State should tell us whether the Government are thinking about additional cuts.

Mr. Nicholas Edwards

The £12.6 million is part of the expenditure provision and programme of targets announced a long time ago and has nothing to do with recent decisions. We are pursuing the normal consultative procedure with local government about local authority expenditure for the next financial year and those decisions have yet to be made.

Mr. Davies

Apparently, the £12.6 million has nothing to do with the Lawson £500 million. We can therefore expect a further Welsh contribution in addition to the £6.5 million Health Service cut. The Secretary of State for the Environment in the previous debate today said that he would announce next week the targets for England for 1984–85. When will the Secretary of State for Wales announce the figures for Wales? Will he give an undertaking that, whenever he does, they will be announced while the House is sitting?

Mr. Nicholas Edwards

I have only just met local authorities in the normal consultative process. I consider it right to study carefully a number of important points that they made. No decision has been taken.

I hope to announce the Welsh decision at about the same time as the English decision, but it would be quite wrong and would make a mockery of the consultative procedure if we met the local authorities after having made our decision. We have listened to the local authorities and are now considering the decision in the light of what they said.

Mr. Davies

Last Welsh Question Time the Secretary of State told us that there was close consultation between different Departments. The Secretary of State for the Environment said that he would announce the expenditure targets for England next week. Is the right hon. Gentleman saying that he will or will not announce the Welsh figures next week? I entirely accept that he may need time; I am not pushing him; I merely wish to know what the position is. But whenever he does this, will he make sure that the House is sitting?

Mr. Nicholas Edwards

It is important that local authorities should be told of our preliminary intentions, and that is what the decisions announced at this time are about. The formal announcements are not made until the autumn. Local authorities have especially asked that we give an early outline of the figures which the Government have in mind. We have listened to their representations. I hope to be able to make an announcement next week, because I am anxious to do so before hon. Members depart for the summer. I cannot be quite certain of the exact date, although it will be as soon as possible.

Mr. Davies

The right hon. Gentleman now says that he may announce this next week. I entirely accept that local authorities should be told, but given that the Government contribute most of the expenditure to local authorities and that the right hon. Gentleman is saying, "We are the paymasters now," he should announce his decision in this House. It is no good saying that he will tell local authorities. We have a right to know because, on the right hon. Gentleman's own argument, we are the paymasters.

From my experience, the public has paid a heavy price for the Tory party's paranoid obsession with local government. It would take an army of psychologists to define the true reasons for that obsession. I could go back beyond 1972, but I shall begin there a5 that was the year in which the Tories introduced the Local Government Act that created vast local authorities in many parts of England and Wales, many of which were bureaucratic and some of which were remote. Apparently we shall now have legislation in the autumn to abolish some of the local authorities that the present Secretary o f State for Energy in a different guise created in 1972.

The Government's obsession is not so much with structure, although that is again surfacing, as with the finance of local government. In four years in the last Parliament, there were three major pieces of legislation on local government finance, and apparently there will be another in the autumn to control rate increases.

Three reports are relevant to this debate—;150 pages of what can only be described as bureau-speak. There is the rate support grant report for 1983–84, which costs £4.20. There is the supplementary report for 1981–82 costing £3.15. The preamble to that report lists four other supplementary reports, all of which were issued between 1980 and 1982. In addition, there is the 1983–84 supplementary report, costing £3.60.

From 1970 onwards, the Tories seem to have had an extraordinary obsession with local government structure and finance. Whatever these reports and new structure have failed to do, they have created work in Whitehall. It is a veritable job creation scheme for top civil servants, and far exceeds anything that the Manpower Services Commission could possibly dream up. Armies of civil servants have copied reams of paper to other armies of civil servants circulating around Whitehall. Humourless statisticians have programmed countless computers, which have duly spewed out jargon and indecipherable algebraic equations.

At the end of the day, what is all this for? Apparently, it is to ensure that Cynon valley district council employs not 10 home helps but 6.666 recurring. We have holdbacks, drawbacks and cutbacks. In the previous debate, we even heard about fallbacks. Are we to have fallbacks in Wales as well? Apparently vie should all have heard about close-ending adjustments, as though people were born understanding such things. We have poundages and multipliers as well. Reading through the report, we see that the people of Powys are very lucky because their guidance-related multiplier is 0.970838. Indeed, they are luckier still, as their safety net multiplier is 0.936962. The hon. Member for Ynys Mon (Mr. Best) laughs. Clearly, he understands all about this.

Mr. Tom Hooson (Brecon and Radnor)

Does the right hon. Gentleman agree that the safety net feature underlines the absurdity of some of the bureaucratic characteristics to which he refers, as the present formula for allocation between districts and counties militates most unfairly against rural areas with sparse populations?

Mr. Davies

I knew that the hon. Gentleman understood all this. Since he has spent years at Conservative central office, one can well understand why he is such an expert on this gobbledegook. No doubt he was trying to make the point that the effective multiplier is 0.909638.

Apparently, all that simply means that this year the authority will not have to sack teachers, but who knows what will happen next year, even with the sparsity multiplier or whatever it is called? It is extremely unfair to subject local authorities to such minute control when the main items of their finance are totally outside their control. As the Secretary of State knows, they have no control at all over the percentage of grant which they receive from the Government. That percentage is determined, as it has been under previous Governments, either by bargaining between the Chief Secretary and the Secretary of State for the Environment, Scotland or Wales, as the case may be. If they cannot agree, the matter goes to the Cabinet and an arbitrary figure is determined according to the public expenditure survey and nothing else. Interest rates, which form a large item in local authorities' expenditure, are also totally outside their control. Now we have this nonsense of targets, which in effect are ceilings. That again is a totally arbitrary figure about which the local authorities have no say whatever.

On top of this completely arbitrary base, the Government come along with a pseudo-scientific framework of control which has little or no relevance to real life in the real world and the only object of which at the end of the day is to cut essential services to deprived areas.

Mr. Ian Grist (Cardiff, Central)

Does 'the right hon. Gentleman accept that when he was a Treasury Minister this country had to run to the International Monetary Fund and that one of the results was one of the most sal age cuts in capital spending by local authorities? Does he accept that we would have done better to cut some of the current spending and maintain the capital spending, but the policy of the Labour Government was to take the easy option and cut the capital spending of local authorities?

Mr. Davies

The hon. Gentleman is beginning to ape the tired old speeches of the Secretary of State. The answer is no, I do not accept what he says. None of those factors is within the control of local authorities. It is extremely unfair to impose this centralist bureaucracy upon them and to try to make them control matters which are outside their control.

The time has come when the Secretary of State should have the guts to appoint himself to run local authorities in Wales. He should stop hiding behind his computers, multipliers, poundages and close-ending adjustments, accept reality and become the gauleiter of local government in Wales. [HON. MEMBERS: "He is the gauleiter."] He is now in the extraordinary position of having power to control without responsibility for the consequences of that control.

As Rudyard Kipling said, we all know whose prerogative is the prerogative of power without responsibility. So let the right hon. Gentleman appoint himself the head gauleiter of local government in Wales. He could appoint the Minister who is muttering and mumbling from a sedentary position as the mini-gauleiter for south Wales. He could appoint the Under-Secretary as the mini-gauleiter for north Wales. I know that the Secretary of State does not look like a gauleiter—; he does not even look like a mini-gauleiter— but underneath his charming bonhomie is a terrible determination to control local government in Wales with an iron fist. He wants to determine how many home helps there should be in the Rhymney valley, how many teachers in the Rhondda and how many books Powys county council should buy for its schoolchildren. The Government want control and power, but do not wish to accept responsiblity for the consequences.

This report—;there will be many more during the next two or three years— is a product of the Government's panic as they perceive that their economic policy is not working. The irony is that when the Government took office in 1979 they were determined to cut public expenditure. They said that it was the root of all evil in the British economy. But they have in fact presided over an increase in public expenditure as a percentage of the country's wealth. The Secretary of State is shaking his head, but there is no doubt that the Government's economic policies have reduced the country's wealth. As a result, unemployment has increased, as has public expenditure as a percentage of the national wealth.

The Government are despairing and want to cut public expenditure. Under the report they will cut the number of teachers and home helps. Tomorrow, they will no doubt cut the numbers of doctors and nurses. When that does not work, the unemployed will face the indignity of bearing the burden and paying the price for the unemployment heaped on them by the Government's economic policies. The Government's next action will be to cut the dole for the unemployed. That also will not work. They will dig a deeper and deeper pit for themselves during the next 18 months.

The Secretary of State should stop hectoring, hounding and lecturing Welsh local authorities. He should accept responsibility for the plight in which they find themselves. The right hon. Gentleman, sitting passively in the Cabinet, has been an abject apologist for the Government's economic policy during the past four years. That policy has caused the problems that face local authorities today.

The Western Mail, in an enlightened and imaginative editorial, put the point well a few days ago. The only problem was that it called for positive thinking, a phrase which causes difficulty for the Government. The article was a good critique of the Government's economic policy. It said: Mrs. Thatcher's second administration is likely to offer the country's economy as cold a climate as did her first … But the signs are that not only will those jobs fail to rise out of the ashes, but that the unemployment which is caused by the present clean-out can reach such proportions that it can itself cause a new bout of inflation … At the present rate, the country's ability to produce real wealth sufficiently to support itself is being steadily diminished. It is a pity that the newspaper did not write that editorial before the general election.

If the Secretary of State is so concerned about the problems of local authorities, where was he a few years ago when the Cabinet abolished exchange control, thereby ensuring that the rate of interest paid by local authorities would have to rise? We read in the newspapers today that £25 billion has left the country and that the rush to invest abroad has become a stampede. The hon. Member for Cardiff, Central (Mr. Grist) looks puzzled. Perhaps he would like to ask a question.

Mr. Grist

Can the right hon. Member explain how, when we had exchange controls and he was a Treasury Minister, money was prevented from running out of the country and we were prevented from running into a financial crisis?

Mr. Davies

I should not have given way. That was a stupid question and I shall not waste time answering it.

When £25 billion is leaving the country, the Secretary of State comes to the House and makes a pompous, hectoring speech because poor old Dwyfor district council has overspent by £17,000. That is ridiculous.

Where was the Secretary of State back in 1980 when the Government smashed the economy by setting monetary targets which had nothing to do with prudent economic management, but everything to do with an antediluvian economic theology? Where was he during the last Budget, when £140 million was given back to the owners of capital? The right hon. Gentleman has come to the House today to penalise the poorest Welsh authorities to the tune of £12.5 million.

In the last four years the Secretary of State has presided over the greatest economic and social decline in Wales since the 1950s. According to the right hon. Gentleman's speech today, we shall get more of that cold comfort. The Secretary of State is attempting in the report to put Welsh local authorities in the dock and to penalise the least well off because of the Government's economic failure. The real guilt lies with the Secretary of State. The real guilt lies with the Cabinet. The real guilt lies with the Prime Minister and her crazy economic policies. By voting in the Lobby tonight, we shall make it clear where that guilt really lies.

9.2 pm

Mr. Tom Hooson (Brecon and Radnor)

The necessity for controlling public expenditure cannot seriously be questioned by anyone, except the right hon. Member for Llanelli (Mr. Davies). In the past four years we experienced great gains in manning efficiency in the private sector. In that period the record for achieving greater efficiency in the public sector was much less satisfactory. It is a tribute to my right hon. Friend the Secretary of State that in the Welsh Office manning was reduced by about 14 per cent. in that four years. In the same period the reduction achieved by Welsh local authorities was about 4 per cent., or 1 per cent. a year. That underlines clearly the gaps between good progress in the private sector, a lower achievement in central Government and very slow progress in local government.

Mr. Allan Rogers (Rhondda)

Does the hon. Member accept the logic that local authorities reduced their staff by less because they provided vital services such as home helps, teachers and other fundamental front line services to the community, whereas in the Welsh Office it was easy to get rid of clerks and penpushers?

Mr. Hooson

I agree that there is a tension between the need to provide services and the demonstrable need, to control public expenditure. It is possible to achieve considerable improvements in efficiency. To assume that that is not achieveable is to accept a counsel of despair. In the past 10 years employment by Welsh local authorities has increased by 75 per cent. No one in Wales can believe that services to the Welsh people have improved by 75 per cent.

I have no doubt that ratepayers want control of rate rises. It is something to say that in the past four years, while the retail price index increased by 55 per cent., the rate burden in Wales rose by 44 per cent. That is not as much progress as we should like, but it is, nevertheless, progress.

My right hon. Friend made a brief reference to the importance of ensuring that the rate burden does not deter industry, which it is vital to attract to Wales. Only last week, I met the Powys members of the CBI. When they went through the list of subjects wh ch were of great concern to them none was higher than the rate burden—;and that is in a county where the rate burden is fairly low. The worry in high spending authority areas hardly bears thinking about.

Dr. John Marek (Wrexham)

If the hon. Gentleman is so worried about industry, will he support me in suggesting to his right hon. Friend the Secretary of State that local authorities seeking to attract industry to their areas should be allowed exempted expenditure, as the Secretary of State can do under section 8 of the 1982 Act?

Mr. Hooson

I am not sure that I would follow the hon. Gentleman in that direction. Those of us who served on the Select Committee on Welsh Affairs in the last Parliament noticed that there was an alarming tendency for a number of local authorities to get into destructive competition with one another. So I would not wish to be led in that direction, because it leads to another form of futile expenditure.

The right hon. Member for Llanelli made one or two derisory remarks about the jargon in these documents. I have a sneaking sympathy with him. I doubt whether there is a right hon. or hon. Member in the Chamber who could define several of the terms that we are debating. Of course, that is not entirely the fault of the people who produced the reports. The concepts themselves are difficult, the sums are formidable, and the balancing of factors on the multiple regression formula that is used for allocations between counties is intricate. There is much to be said for reducing the number of factors involved, but we cannot produce a totally simple world. Life is too complicated.

However, I agree with the right hon. Gentleman in criticising some features of the report. For instance, there are the quarterly reports of the manpower watch. That is intended as a helpful check on the trends in local government employment. I was puzzled to see the discrepancy in the last two quarters' figures for Powys county council. It seems to suggest that expenditure is grossly out of control. In fact, on consulting the financial data, one finds that the manpower figures are misleading. It appears that a part-time worker is courted on the same basis as a full-time worker, and the result is confusion.

Mr. Nicholas Edwards

When I met the local authorities last week I told them that an error had been made in the returns for the Powys authority. That error has been corrected, and the adjustment is, I think, about 100.

Mr. Hooson

I thank my right hon. Friend for that information. I obtained slightly different information earlier, and I am grateful for his correction.

Secondly, the confusion that arises from such intricate language and concepts naturally leads to errors such as the one to which my right hon. Friend referred. It was discovered that Brecknock district council had failed to meet the expenditure guidance because of an error in some of the financial data underpinning its target, and it is good to know that the sum arising from that will be disregarded for the purpose of rate support grant.

I shall refer briefly to another technical problem. I excuse my brevity on the ground that I am already on record on this matter. It is most unfair that the many factors that go into the multiple regression formula should include only one for sparsity when four of the Welsh counties are predominantly rural. A fair number of district councils are rural and there is no possible way in which the provision of services such as schools, roads and village halls in rural areas can compare with what is possible in more densely populated areas. I am told annually by my right hon. Friend that that problem is entirely in the hands of the associations of local authorities. I can only say that those hands are inert and I look to my right hon. Friend to take action in the coming year to start correcting that inadequate allowance for rural sparsity.

9.10 pm
Mr. Roy Hughes (Newport, East)

Having listened to the hon. Member for Brecon and Radnor (Mr. Hooson) on local government and heard the savage attacks that the Government have made repeatedly on local government, I find it difficult to believe that it was the 1970–74 Conservative Government who created this local government structure. Labour Members opposed that throughout and I have repeatedly done so over many years.

If it were not so serious for the people whom we represent, I would describe the Government's attack on local authority services and expenditure as being Alice-inWonderland economics. Take Gwent county council. In the current year 1983–84 Gwent has a grant-related expenditure assessment of £162.8 million. That is the Government's assessment of the money that Gwent needs to spend to provide a standard level of services. If it spends at exactly that level it will spend over its target figure of £160.2 million and it will incur penalties for overspending. What an absurdity— to spend at the level that the Government say is necessary and for that very level to be branded as overspending.

This year Gwent is budgeting to spend rather more than the grant-related expenditure level. It is budgeting to maintain the real standard of services and that inevitably means that it will fall out of the Government's policies. As I pointed out earlier, that is not a partisan decision designed to create confrontation with the Government. The budget was adopted unanimously with the support of the Conservatives on the county council. There was no opposition within the council, yet that budget, just 1.3 per cent. above the grant-related expenditure or 2.4 per cent. above the arbitrary figure laid down by the Government, brings Gwent into the penalty zone by £2.1 million. That £2.1 million is money taken away from the people of Gwent who have suffered much under the Government. It is money which they need and which will be lost to them.

Budgets never exactly match final expenditure figures. Last year in 1982–83 Gwent also budgeted to spend over the Government's target. But when the books were closed at the end of the year it turned out that the final figure was just under the Government's target. The margin was less than £50,000 in a total budget of £150 million. It is a pity that private enterprise cannot work to such fine limits. Yet for that small figure the difference in grant was over £1 million. Indeed, £1 million of grant gained or lost would have been at stake against an overspend or underspend of as little as £1. That is the absurdity. The sum of £1 over the target means £1 million of grant lost. The sum of £1 under the target means £1 million of grants gained. Surely that was not the result intended when the present system of penalties was set up.

I find the penalty system objectionable in principle. We can accept the Government proposing a limit on the amount of grant they pay. We can argue about what that limit should be, but there is some sense in a maximum payment announced and understood. Local authorities can accept that if they go over the limit they will no longer gain extra grant help. It is wrong in principle that after the Government have announced their limit and have received approval from Parliament for that amount they should then reduce the declared grant because an elected local authority takes a democratic decision which is slightly higher than Whitehall or the Welsh Office thinks is needed or indeed the very level that the Welsh Office thinks is needed under its grant-related expenditure hat but higher than they think is right under its targets hat. Such a reduction in grant is an attack on the principle of democratic local government.

But the whole thing becomes utterly absurd when an overspend of just £1 could lead to the loss of £1 million of grant. The Secretary of State used technical terms such as holdback and close-ending but what essentially concerns people is the level of local government services in their communities.

What I am trying to describe is not the end of the story for as this crazy system of penalties presses down on the council other sectors of Government tell our local authorities to spend more. More must be spent under a Conservative Government on law and order. The new Criminal Justice Act allows the making of community service orders against 16-year-olds— more spending needed. New schemes of supervised activities are required for young offenders— more spending needed. With 38-tonne lorries on our roads it will cost more to maintain the roads and the bridges. Social needs are growing. More elderly people are living longer. We all welcome this, but more money must be spent by local authorities to meet those needs. Bus services are in danger of disappearing because the slump caused by the Government means that people no longer have jobs to travel to. People cannot afford to travel on buses when they have no jobs. More subsidies for buses are called for by local authorities. There are many other examples of extra needs but the Government are preventing those needs from being met by imposing their vicious system of targets and penalties.

The whole system of targets and penalties is wrong and with my colleagues on the Opposition Benches we shall be voting against them. On the assumption, as appears highly likely, that the reports are passed, I have a question of detail to ask the Secretary of State. On present budget plans, Gwent county council has incurred a £2.1 million penalty for 1983–84 because it plans to spend over the target. If at the end of the year, by whatever means—;the council has decided unanimously not to seek cuts in services—;its final spending was below the target, could the penalty be removed?

Mr. Nicholas Edwards

I can answer the hon. Gentleman's question straight away. I said that if actual spending was reduced below target the local authority could remove itself from penalty.

Mr. Hughes

I assure the right hon. Gentleman that local authorities are not clear about the position. Perhaps this debate and his answer to my question will remove some remaining doubts. I was asking whether the penalty would be removed if authorities came within their assessed need to spend the grant-related expenditure, and the right hon. Gentleman said that the punishment would not be imposed on action or intentions alone.

For how long can the Government continue operating an Alice-in-Wonderland system by which councils can lose £1 million in grant for £1 overspending and can be penalised as overspenders for spending less than the Government say they need to spend? For how long can this nonsense go on before reason and common sense prevail? Even the Government must see sense eventually. Sadly, however, I fear the worst, for the Secretary of State for the Environment is said to be dreaming up even more stupid, though complicated, proposals— more of the crazy nonsense which is being inflicted on us tonight.

9.21 pm
Sir Anthony Meyer (Clwyd, North-West)

The two district councils, part of whose areas I have the honour to represent, appear to be good boys, according to the publications that we have had. In the absurdly short notice that we were given that this highly complicated debate would be held, I did not have time in which to consult them.

Mr. Donald Coleman (Neath)

Is the hon. Gentleman aware that if it had not been for representations made by the Opposition, this debate would have come on much earlier, and in that event he would have had far less time in which to consult?

Sir Anthony Meyer

It would not have made much difference because, even in the four or five days I had, neither of them felt able to offer any constructive comments on the matter. I have no doubt that if I had consulted Clwyd county council, I should have been provided with a list of complaints as long as my arm. But if there is one common ground of thinking throughout my constituency it is that pretty well everything that emanates from Clwyd county council is likely to be foolish.

It seems that we are paying dear for the failure of the Government and their predecessors to grasp the nettle of rate reform. We are still trying to operate by tinkering with a machine that is no longer roadworthy. It has been fitted with so many adaptations, safety devices and fail-safe measures, with bits and pieces screwed on here and there—all in the pursuit of a passionate desire for what we like to call fairness but which is really a desire to ensure that someone else is not getting away with a bit more—;that the system has become totally unworkable.

Perhaps we should take a leaf out of the system in Red China, where they seem to have evolved a highly effective population policy. For one child one gets generous family allowance; for the second child one gets nothing extra; for three children one loses the allowance for the first child; and for four children one is sent to prison, and that puts an end to it.

I sometimes think that we should consider applying equally drastic methods to the reform of local government finance, and the obvious drastic one would be to remove education and the police from the area of local government finance. I appreciate that there are one hundred and one objections to doing that. Nevertheless, the situation we are in is the most objectionable of all because we have the appearance of responsible local government without having the reality of it. It is no good the Opposition criticising my right hon. and hon. Friends for their failure to deal with local government finance when they were proposing to foist upon us an elected Welsh Assembly that would have had the power to spend money and no responsibility whatever for raising it. That would have been a recipe for catastrophe. To a lesser extent we are in the same position with local government finance, where the great bulk of the money is provided by the taxpayer and local electors elect representatives to run their local councils under the illusion that they are electing people who, in the true sense of the term, will be responsible for their actions. It is a thoroughly unhealthy situation and it is not being improved by all the tinkering that is taking place.

Mr. Geraint Howells (Ceredigion and Pembroke, North)


Sir Anthony Meyer

No, I shall not give way because I intend to make a short speech. If I confine my remarks within a short speech there will be a greater chance that the hon. Member for Ceredigion and Pembroke, North (Mr. Howells) will be able to catch the eye of the Chair, and that will enable me to listen to what he has to say. I have no doubt that I will find that more interesting than listening to his intervention in my few and feeble remarks.

I do not want to repeat the speech that delivered in the Chamber at about three o'clock this morning about how unhappy I am to see extensive cuts in the services provided by local authorities. I look forward to the day when we can have better services provided by local authorities—;smaller classes, more village schools and more home helps. I do not rejoice to see cuts in local authority services but I would rejoice to see the privatisation of many of the services that are now provided by local authorities. I only wish that more authorities in Wales would follow the advice of my hon. Friend the Member for Southend, East (Mr. Taylor), who is constantly urging authorities—;to privatise refuse collection. I believe that great economies could be effected by so doing. I repeat that I do not welcome cuts in local authority services, especially social services.

I have to support the Government when they say that, as they are providing the money for local authorities, there has to be some limit, and that they cannot continue making good the overspending of local authorities which believe that they can solve their problems, especially unemployment, by pouring out vast sums. If ever a tactic was self-defeating it was that one.

I agree so very much with what my hon. Friend the Member for Brecon and Radnor (Mr. Hooson) had to say about local authorities which believe that by spending large sums they can improve employment prospects in their areas. Some local councillors go off on expensive missions to Japan to try to get a factory built in their area rather than in the adjacent one, which is likewise sending a mission to Korea for a similar purpose. Madness lies in that direction. The end result is that rates have to be increased to cover the expenditure that is involved. If the rates increase, the very industry that the authorities sought to attract is frightened away.

Unhappy as I am with the system of local government finance and convinced as I am that it must be changed—;the sooner we change it the better so that less tinkering is needed—;I see no alternative for the time being but to support my right hon. and hon. Friends. In the last resort they have to keep a tight control over public expenditure. As the bulk of the expenditure of local authorities is funded by the taxpayer, they have no alternative but to do so.

9.29 pm
Mr. Geraint Howells (Ceredigion and Pembroke, North)

The debate is important for those of us who care for the young, the needy and the elderly in society. Many of us are afraid that tonight's proposed cuts will have an adverse effect on those who live in our community and I am pleased that you have called me, Mr. Deputy Speaker, to say a few words in this important debate.

The Government's record on local government has been appalling. Not content with disrupting the system in the early 1970s and creating additional and, in some instances, unnecessary tiers of government to confuse the long-suffering public, the Government are now imposing sanctions on those authorities and taking away their independence.

Local authorities in my part of Wales have made tremendous efforts in the past few years to stay within their budgets while providing adequate services for the community. I am sure that many local authorities have found that difficult. However hard they try, the Secretary of State keeps coming back with more and more savage cuts, threatening penalties for those authorities that overstep the mark. As a result, local services are deteriorating rapidly. Schools are finding it impossible to get enough books and equipment, nursery education is having to be eliminated in many areas because of lack of resources and school buildings are inadequate and there is no provision for new ones. I should be interested to hear the Secretary of State say when a school was last built in Ceredigion and Pembroke, North. I leave it to him to break that news.

Social services are also suffering badly. The old and the infirm are having to bear the cost of the cuts. I have received many letters from constituents who need hell) in the home to keep them out of institutional care. I am sure that many other hon. Members have received such Letters. Nevertheless, the hours of home help provided are being severely cut through lack of money. The elderly have given the best part of their working lives to the community, yet the Government are not willing to spend money to look after them in their retirement. That is a disgrace.

In assessing the needs of local authorities, the Government do not take sufficient account of special conditions in rural areas such as the sparsity of population, low average earnings and the high proportion of older people who retire to such areas. Their social needs are considerable. Nor do the Government take into account the stringent measures that local authorities apply to their spending in a constant effort to achieve the low targets that are set for them.

How can the Secretary of State defend a system of local government expenditure control which imposes severe grant penalties on authorities that have spending levels which are higher than the target that is set by him when that target bears little relation to the Welsh Office's grant-related expenditure assessment of the authority's spending need?

In my constituency, Ceredigion district council is experiencing considerable difficulty meeting expenditure targets that have been set by the Secretary of State which, for 1983–84, is only 75 per cent. of the GREA. However, it has one of the lowest district council rate levies in Wales. It feels that, although it has behaved with the utmost care and has applied "Cardi" thrift to all of its financial affairs, it is still being penalised.

I do not want to play with words. I hope that when the Secretary of State winds up the debate he will tell the people of Wales whether there will be any more cuts in local services for the elderly and the young. What effect will such cuts have on employment prospects for the young, and how many more people will be made redundant by them? What effect will such cuts have on the police force and policing? What effect will they have on the morale of the staff and councillors who are responsible for local authorities in Wales?

9.35 pm
Dr. John Marek (Wrexham)

The constituency that I represent is within the borough of Wrexham Maelor, and forms a major part of that district. If the 1983–84 supplementary report is approved tonight, the grant holdback for the Wrexham Maelor borough council will be more than £447,000. That is the largest grant holdback of all the Welsh districts.

During the previous debate the Secretary of State for the Environment said that he had introduced such measures for England because he wanted to curb the few overspending authorities. I take it that the Welsh measures have been introduced for the same reason. I should like to compare the total expenditure of Wrexham Maelor borough council with that of other councils, and to compare it with what it should be under GREA. The table in the report shows that Wrexham council is spending less than the grant-related expenditure assessment. We all know that that assessment is an amount that the Welsh Office agrees with the local authorities. It provides for a standard level of service for every authority. Therefore, I do not see how it can possibly be said that Wrexham Maelor borough council is an overspending authority. However, in the supplementary report it will be penalised more than any other Welsh district. It is quite wrong for the Government, who are intent on punishing overspenders, to punish authorities that underspend.

The hon. Member for Clwyd, North-West (Sir A. Meyer) has unfortunately left the Chamber for the moment, but I agreed with several of his comments. However, I did not quite agree with his intention to vote with the Government this time because some authorities had overspent. It is a pity that he is not in the Chamber, because this report punishes authorities that are spending less than the GREA and are, indeed, underspending. It is ironic that underspending authorities should be punished.

The problem could be looked at differently. One could compare the rate now with what it was not in 1976, 1973 or 1968 but in 1978. The rate now is 26p in the pound. In 1978, five years ago, it was 23p. I could be said that that was a 13 per cent. increase, but we must be a little careful as the grants were reallocated in that year. The calculation must be made properly. If the redistribution is taken into account, the rise in the rate has been about 52 per cent., which compares with a rise in the retail price index of 63 per cent.

It is easy for the Secretary of State for Wales to bandy figures around about certain things going up by five or 12, but we can bandy other figures around. It is clear that in the past five years at least the rate set by the Wrexham Maelor borough council has risen by about 11 per cent. less than the RPI. It must also be remembered that rate support grant has fallen in real terms. Two years ago, it was 73.4 per cent., but it has now fallen to 70.4 per cent. of relevant expenditure. That reinforces the argument.

In addition, there is the argument that local authorities have been saddled with extra tasks without being compensated for them, or with with very little compensation. For example, housing benefits have to be administered. That is an enormous task. Any hon. Member with experience of local authorities will realise that that has put local authorities under a great strain. They can hardly cope with it. Charges for planning applications have been introduced, which hardly pay for themselves. There is also the administration of direct labour organisations. Local authorities have been involved in enormous extra costs and have gained very little in return. Which Government Department has done any better? I do not believe that there is one Department that has done better than the local authorities. In general, it is local government that has shouldered its responsibilities and acted prudently and it is the Government, who are always trying to control expenditure and who are always telling others to control theirs, who never control their own under the limits that they set. There is only a finite number of shares in British Petroleum for the Government to sell to finance their so-called overspending. They will run out eventually and will have to think of a new strategy. Disgraceful acts such as selling the nation's assets are another story, but there is a limit to what they can do here.

We are concerned with the iniquity of an underspending authority suffering the highest grant holdback of all Welsh authorities. Table 5.2 on page 31 of the report shows the grant holdback, and I compare the district councils of Wrexham Maelor and Merthyr Tydfil. My hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) is not here now, but I am sure that he will be interested to read my remarks in Hansard. The total expenditure of Merthyr Tydfil was £6.5 million. There was no disregarded expenditure, so the adjusted expenditure is £6.5 million. The GREA for Merthyr Tydfil is £5.8 million, so that council is spending £752,000 more than its GREA. Its holdback will be £438,000.

The total expenditure for Wrexham Maelor is £8.3 million, with no disregarded expenditure, so the adjusted expenditure is £8.3 million. Its grant-related expenditure is £8.5 million, so it is spending about £200,000 less than its GREA. To use the Government's phrase, it is an underspending authority. It is not spending as much as it should to provide an appropriate standard of service. Yet, according to the Government, it has overspent by £597,000, and its grant holdback is £447,000. That is more than Merthyr Tydfil's holdback. Where is the justice in that? Why is an authority that spent less than its GREA being penalised more than an authority such as Merthyr, which spends above the GREA? However, it is scant comfort to my hon. Friend the Member for Merthyr Tydfil and Rhymney, because authorities should not be penalised at all.

It is too late to do anything about this matter in 1983–84, but perhaps the Secretary of State will consider whether authorities spending less than GRE can be excluded from penalties. If he cannot do that immediately, I would welcome an assurance that he will do it within the next two or three years. I welcome the fact that, in constructing the current expenditure component of targets, the weighting given to the GRE element has been increased from 50 per cent. to 60 per cent., and I wish it to be raised higher.

A further iniquity is that the Government have not exempted from holdback money spent on employment generation schemes. I said earlier in art intervention that the Secretary of State has power to do that under section 8 of the Local Government Finance Act 1982, and I ask him to reconsider the matter. There is nothing wrong with competition, and it was strange to hear the hon. Member for Brecon and Radnor (Mr. Hooson) say that we cannot do that because it would involve too much competition. The Secretary of State should be able to select the expenditure to be disregarded.

The money spent by county councils to support Manpower Services Commission schemes is provided mainly to regenerate private industry, and to provide real jobs. The Government have said much about real jobs. If the Minister is serious, will he reconsider representations from the local authorities—;if they have not made any, which I doubt, they should do so now—;that an appropriate exemption be made in the next supplementary report?

Another aspect of the Welsh RSG supplementary report is how GRE is determined. Two hon. Members have referred to this, and I cannot help feeling that counties such as Clwyd, which are split in two—;the eastern side is industrial and the western side is rural and residential—;lose out in the needs indicators because those do not take sufficient account of the different types of settled population. They do not provide the extra resources necessary to provide different services for the two different life patterns in Clwyd.

It would be foolish to go into detail at this stage, so I shall leave it at that, except for a small item of demographic change. Appendix 3 of the 1983–84 report says in paragraph 3: The adjustment has been effected by reducing the GRE of each authority which has had a net loss of population". That is quite clear; but the report goes on to say: The GRE of authorities which have had a net gain in population has been increased by the amount lost by the appropriate donor authority or authorities. That is not clear. What if the donor authority cannot be ascertained, or if it is in England? Is it clear that if there is an increase in population regardless of whether we can find out where the donor authority is the relevant changes will be made in the GRE?

The borough of Wrexham had a temporary dip in population growth two years ago and I hope that when the Minister constructs the needs indices he will smooth out this dip and make allowances for the generally increasing population in this part of Clwyd. Clwyd county council spends more than its GRE, and some of my points do not apply to it while others do. It has kept its rate precept steady for three years and has acted responsibly in trying to protect services while keeping costs down. The Wrexham Evening Leader, which is an objective paper that does not represent the views of revolutionary Marxists or Right-wing monetarists, said this about the Clwyd rate support grant in its leader: Clwyd County Council knew, of course, that it w as to lose a hefty slice of rate support grant as a penalty for overspending. What it had hoped was that the Secretary of State for Wales would not invoke the maximum penalties, and it is particularly annoyed that the Treasury should claw back cash earmarked for urban aid and Manpower Services Commission schemes, which appears particularly cruel in an area struggling to cope with massive unemployment. For, with the possible exception of the Lowther College venture, no-one can accuse the council of not trying to get its priorities right and its expenses down. It has, after all, held its rate steady for the last three years, and the Welsh Office might have expressed just a shade more practical sympathy for its particular needs and problems. We spent three or four hours discussing English rate support grants, and the Welsh rate support grants are just as important as those.

The opinion voiced in the Clwyd county council has been the same as the opinion voiced in the council chamber of every council in north and mid-Wales. I was a member of a council in the constituency of the hon. Member for Ceredigion and Pembroke, North (Mr. Howells) and not only did the Labour members of that council condemn the Government's policy, but so did the Liberals, the Welsh nationalists and, most telling of all, the Tory members. The Government have lost the support of their thinking members on this issue.

I urge the Secretary of State for Wales to speak up for Wales and for local authorities in Wales. If the Government insist on continuing along this road, the logical conclusion will be the abolition of local authorities completely and direct rule from Cardiff, which is a long way from mid-Wales and north Wales, by civil servants and Ministers fiddling around with figures on a map. The report takes us a step further to such rule. Therefore, I hope that it is soundly defeated tonight.

9.50 pm
Mr. Donald Coleman (Neath)

The apparent cry of Ministers of this Administration and the one previously formed by the Prime Minister whenever we challenged them on the problems affecting constituents and others has been "We are not responsible". They have continually referred us to other bodies to resolve the problems that we have raised with them. That has never been more evident than in matters affecting local government. Time and again we have been told by Ministers that this area or that is the responsibility of local councillors, that they are free to make decisions on such matters and that the Government will not interfere. The Government's behaviour over the rate support grant and the supplementary report for 1983–84 shows the falseness of the posture of Ministers.

The supplementary report implements the threat contained in the main report published on 20 December 1982, which announced the Government's intention to apply penalties to authorities that overspent the targets set for them, not by the local authorities but by this non-interfering Government.

As has been said during the debate, the aggregate clawback will be £12.6 million. Local authorities were spending this amount. The Welsh local authorities expected this arrangement because they are sensible and responsible. It means that the Welsh economy will suffer a direct loss. Those who rub their hands with glee at this punishment of what they regard as spendthrift councils should remember that this is occurring when there is an ever-increasing level of unemployment. They should curb their enjoyment at this measure and face the fact that the cuts in public expenditure of £500 million which were recently announced by the Chancellor of the Exchequer will be in addition to what the Secretary of State is doing in this measure. This will cause a further loss to the Welsh community as it faces a growing unemployment problem.

The Government's penal action is being taken against local authorities because of a marginal excess on the Government's expenditure target. This excess expenditure is incurred at ratepayers' expense and does not increase the amount that the Government are meeting through grants from the Exchequer. The Government can retaliate by reducing the grant and increasing the costs to the local ratepayer.

Of the Welsh counties most affected by the Secretary of State's penalty imposition, mid-Glamorgan and west Glamorgan seem to suffer most. Mid-Glamorgan is at the head of the overspending penalty league. The Secretary of State should know that that county faces exceptional problems. It inherited social conditions and problems which have been aggravated by traditionally high unemployment that in recent years has accelerated. The Secretary of State will remember the arguments advanced during his first Parliament by the then Labour spokesman on Welsh affairs, who is in another place, during the passage of the Conservative party's legislation to reform Welsh local government. Those arguments drew attention to the problems which have dogged mid-Glamorgan since then.

Against a background of adverse social conditions, after months of consideration the county council decided that, rather than make cuts in the 1983–84 budget, it would be necessary to include some limited growth of about £3.5 million in the budget to deal with some of the problems. This is less than 1.75 per cent. of the total budget. Let me itemise this expenditure. First, additional teachers for primary schools; teachers for 16 to 18-year-olds—greatly affected by the depression—;and to assist underachievers. Secondly, restoration of earlier cuts in books and equipment for schools. Thirdly, the opening of a new technology information centre. Fourthly, part restoration of earlier cuts in street lighting and maintenance. We must not forget that last year mid-Glamorgan was affected badly by the snow that damaged many of its roads. Fifthly, an increase in the number of social workers and home helps to provide services for those in need. Where do we find the case of those who accuse the county council of being spendthrift? Rightly or wrongly, and I believe rightly, the county council has judged that it is in a better position to assess what needs to be done than the Secretary of State or his staff at Cathays Park.

West Glamorgan is awarded the lowest assessment of grant-related expenditure per head for Welsh counties—;4.5 per cent. below average. West Glamorgan's population, in proportion to Wales as a whole, justifies GRE £6 million higher than the assessment. That simple adjustment to GRE would transform the counties' grant entitlement within the complex system of thresholds, grant-related poundages, multipliers and targets. Although I accept that the approach to spending needs cannot be based solely on population figures, it is, nevertheless, instructive to compare each county's GRE on that basis. It will show that the biggest sufferers with west Glamorgan are the neighbouring counties in the southern industrial belt including mid-Glamorgan. The conclusion must be that the system is biased in favour of the more rural counties. West Glamorgan suffers from urban deprivation and rural isolation, which work against the county.

The public transport subsidy has affected west Glamorgan. The county council was persuaded by my right hon. and hon. Friends and myself to assist with the cost of public transport in the county. We met the county council with representatives of management and trade unions in the transport industry to urge that the county make a greater contribution towards public transport. We were worried about the problems of the rural part of the county. West Glamorgan's response was in marked contrast to that of Dyfed. Similar pleas there, as I read in the South Wales Evening Post, have met with a blank refusal from the county council. The public will have to put up with a worsening public transport system. Dyfed county council is among the good boys in the Secretary of State's punishment book.

The Government are taking more control over the way that democratically elected councils conduct their affairs. The increasing interference is a threat to the survival of local government in its present form, and that is why I invite the House to join my right hon. and hon. Friends in the Lobby to oppose the report.

9.58 pm
Mr. Nicholas Edwards

The hon. Member for Neath (Mr. Coleman) spoke about people rubbing their hands in glee. I assure him that there is no question of that. I had hoped that we would not have to use the penalty system. As I pointed out to the hon. Member for Newport, East (Mr. Hughes), it is still possible for local authorities to reduce their expenditure and avoid penalty.

The hon. Member for Neath spoke about mid-Glamorgan. He will recall that at the outset the leader of the mid-Glamorgan authority made it clear that the authority intended to ignore the Government's position on this matter. He challenged me publicly and said that he did not believe that in an election year we would dare to use penalties. I made the position perfectly clear from the Dispatch Box and stated that we would not hesitate to impose the penalties if local authorities went ahead as they had said they would.

The hon. Gentleman spoke about the relationship between GRE and targets. In west Glamorgan the target is well above GRE—;7½ per cent.—;and that is the only county which spends above the 10 per cent. Threshold above GRE. It has high spending in relation to GRE—;

It being Ten o'clock, the debate stood adjourned.