HC Deb 02 April 1984 vol 57 cc784-90

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lang.]

1.12 am
Mr. Donald Stewart (Western Isles)

The Western Isles islands council has been put in the most difficult financial position in its history as a result of the Government's policies on rates and rate support grant. Following a settlement last year which was in itself inadequate, the total amount of money available for rate support grant distribution for 1984–85 is less in cash terms than it was for 1983–84.

I am grateful to hon. Members from other parties who have interested themselves in the disastrous position in which the islands council has found itself. The hon. Member for Clackmannan (Mr. O'Neill) travelled to Stornoway and took part with me in a meeting. His hon. Friend the Member for Falkirk, West (Mr. Canavan) has helped by approaching the Secretary of State. The hon. Members for Inverness, Nairn and Lochaber (Mr. Johnston) and for Ross, Cromarty and Skye (Mr. Kennedy) have also assisted.

The Western Isles are the most deprived area in the United Kingdom. That was the finding of the EEC, which decided to inaugurate an integrated development programme on that basis. Unemployment at the end of February was nearly 23 per cent. Other areas of the United Kingdom are now claiming that with 20 per cent. unemployment they are in a difficult situation, but that is something with which we have lived for decades.

Because of public expenditure plans, relevant expenditure will rise by only 2.4 per cent. in Scotland for 1984–85 to 1985–86—a cut in real terms. The Western Isles islands council guideline was artificially adjusted by £300,000. The revenue expenditure guideline next year will be £750,000 less in real terms than the reduced budget for the current year. The total cuts in the Western Isles are in the region of £2.25 million. As a result, the most horrific reduction in essential services has been forced on the local authority.

Budgets have been cut by amounts ranging from 8 to 12 per cent. Let me spell out some of them. Education has been cut by £900,000, transportation by £400,000, central services by £450,000, social work by £300,000, environmental services by £160,000 and development by £75,000, making a total of more than £2.25 million.

In education, the three nursery schools in the Western Isles, catering for 170 children, will be closed. The Ministry of Defence will have some concern about the nursery school in Benbecula, as children of MOD personnel are subjected to frequent changes of schooling.

The Nicholson institute, the only six-year secondary school in the islands, which has disproportionately large numbers in the third and fourth years, is particularly affected by the Munn and Dunning reforms. The four extra teachers cannot now be appointed, and the staff has been cut by a further five teachers, making a shortfall of nine teachers in staffing for 1984–85. In addition, all schools in the Western Isles have had to take a 70 per cent. cut in requisition. This cut, if maintained, will cause schools to run out of essential materials, even paper and jotters, before Christmas 1984, and, in some cases, much earlier.

In Munn and Dunning the Government are pushing through a major reform in education and are not providing the resources to reach the target.

The cuts in social work will operate in an area which has doubled the mainland figure for persons over 65. In the islands, one in four is over 65, as against the Scottish mainland figure of one in eight. The human problems arising from these cuts will be obvious. The council has been obliged to charge £1.50 per week, irrespective of means, as a levy on all recipients of home help.

We have 700 miles of roads, of which only 80 miles are even double track. The problems of cuts in this area will be disastrous. Many roads will not be considered for improvement this century.

The paradox of the islands' position is that many of the most acute problems could have been alleviated, at least to some degree, if the client group method had been adopted for the distribution of the needs element of rate support grant. While the council does not accept that the assessed expenditure need for the council is entirely adequate, it is at least moving in the right direction, and, if it had been given effect to, the council's share of needs element would have been £1.25 million more than is provided.

As it is, the rates have been raised from £1.41 in the pound to £1.52 in the pound, one of the highest rates in Scotland. How do the Government regard that when compared to an expenditure of £1 million per day in the Falkland Islands, with a population of 1,800 against 31,000? We are being forced into a situation similar to that of Liverpool. This is being done to the poorest region in Scotland. The Secretary of State informed me that he cannot produce finance to alleviate the position. I hope that the Minister can at least take the position to heart and state categorically that, for the next financial year, the council can look to a level of assistance that will allow the islands to enjoy a civilised level of essential services.

1.20 am
The Under-Secretary of State for Scotland (Mr. Michael Ancram)

I am pleased to be able to reply to this debate, although at perhaps a later hour than either the right hon. Member for Western Isles (Mr. Stewart) or I should have wished. The right hon. Gentleman has referred to the difficult decision that the Western Isles council has had to take in deciding on its expenditure and rates for 1984–85. I accept that the islanders face difficulties—this is generally accepted—and it has faced problems in coming to its decisions. It is widely recognised, not least by the Government, that there are special problems that affect a small, scattered islands authority such as this. I hope that in my remarks I shall demonstrate clearly that the Government have taken, and shall continue to take, due account of these various factors. It is predictable that the right hon. Gentleman and the authority have sought to blame central Government policy for the difficulties with which they are faced. However, I do not believe that the case for doing so stands up to examination.

Before I speak about the local authority matters, which are the main purpose of the debate, it is right that I should refer to the scope of Government support for the Western Isles generally. As the right hon. Gentleman will be aware, in September 1982 the Government introduced the integrated development programme for the Western Isles, and this is a positive response by the Government, with some EEC assistance, to the economic and structural problems that face the people of the Western Isles. During the five years of the programme, £20 milliom of public expenditure will be invested in agriculture and fisheries. To put things in perspective, as it is important that we do, that is over three times as much as the likely take-up of existing measures in the same period. The programme also envisages spending by public authorities of around £36 million on infrastructure and other activities such as tourism.

Expenditure by the Highlands and Islands Development Board in 1983–84 is expected to be £1.15 million, and in 1984–85 £3.4 million. On shipping services, Caledonian MacBrayne has been given investment approval and has now placed a contract for a new vessel to replace the Hebrides on the Uig-Tarbert-Lochmaddy route. The new ship will be full roll-on/roll-off and will cost £5.5 million. Further expenditure on adapting the three terminals and on associated works will cost a further £5 million, and this new expenditure wil provide an increased service——

Mr. Martin J. O'Neill (Clackmannan)

How much of this money is coming from the EEC and how much is coming from the Government, as distinct from any money that the Scottish Office would have to provide? There is a widespread suspicion that all of the talk about EEC funding is about money that would have come from the Scottish Office anyway, and the money is not much more than what the Scottish Office would have had to pay to meet its obligations to the HIDB.

Mr. Ancram

My understanding is that the Community's farm fund, the FEOGA, will refund 40 per cent. of eligible expenditure, with a limit of £8 million on the Community contribution. I hope that the hon. Gentleman will accept that answer.

I was talking about the general amounts of money other than that, and the hon. Gentleman will appreciate that I have moved on to the other points. This major expenditure will provide a vastly improved service to Lewis, Harris and North Uist and overcome long-standing frustrations arising from the existing vessel. It should encourage round-trip tourism to Lewis and Harris, and that will benefit those communities. I give those points as examples of initiatives taken to assist the Western Isles.

The Government contribute significantly to the cost of the day-to-day services provided by the local authority. This contribution must, however, be seen in the context of our policy of securing reductions in the level of local authority expenditure for broader economic reasons. This policy, as the right hon. Gentleman knows, has been pursued in various ways—for instance, selective action against authorities whose expenditure is excessive and unreasonable. There are signs that some authorities are making the necessary reductions.

The annual central Government grant towards the cost of local authority services comprises two types. One is paid at a given percentage of expenditure incurred on certain services, and the best example is the grant given to the police. The rules governing these grants apply to all authorities. The other, and by far the largest, is a general grant—the rate support grant—which is paid in aid of the whole of an authority's revenues. The distribution of rate support grant has regard to the level of rateable value per head of population in each local authority area and the variations in demand for, and the costs of providing, local authority services in different areas. Given this, it is hardly surprising that the Western Isles receive a very large amount of rate support grant relative to population. In 1984–85, it is £760 per head of population. That is about £430 per head more than the Scottish average and is the highest of any authority in Scotland.

These figures take account of the change in the basis of the distribution of the needs element of rate support grant for 1984–85. The new method, which the right hon. Gentleman mentioned, known as the client group approach, is fully explained in the report on the Rate Support Grant (Scotland) Order 1984. In summary, the essential aim of the approach is to estimate the relative expenditure needs of authorities by taking into account variations in the demand for services and the cost of providing them with a similar degree of efficiency. I listened to what the right hon. Gentleman said about that method, because account is taken of exceptional factors affecting the cost of local authority services in the Western Isles. For instance, full allowance is made for the remoteness payments to teachers and islands allowances to all staff. The Western Isles' authorities are among those to benefit from the allowance made, mainly in education, in respect of the additional costs falling on rural areas.

The new approach is widely considered to be a fairer basis for grant distribution than the demographic formula used in the past. Contrary to the claims of the authority and the right hon. Gentleman, that approach has benefited the Western Isles. The grant payable for 1984–85 is higher in cash by some £30,000 than in 1983–84. Had the previous method of distribution been maintained — this was forcefully suggested by the Convention of Scottish Local Authorities—the authority would have received about £150,000 less in grant than in 1983–84. The fact that we took the decision to change to the new system in part has benefited the Western Isles in a way it would not have done had we accepted COSLA's advice.

Comment has been made about the phasing in of the new method of grant distribution. It has been suggested that the Western Isles is receiving £1.3 million less than would otherwise be the case because of this action. This major change—this must be understood—in the basis of grant distribution implies increases in grant for some authorities and corresponding decreases for others. It is understandable that individual authorities should look only at their position, but my right hon. Friend the Secretary of State for Scotland has properly considered the effects of the change upon all authorities. This clear view, shared by the Convention of Scottish Local Authorities, with whom my right hon. Friend had extensive discussions about local government finance, was that, as on earlier occasions when there were major changes in distribution, sudden large reductions in grant for some authorities which stood to lose should be avoided.

Mr. O'Neill

We are talking about a part of the United Kingdom which requires in global terms only a relatively small amount of money. The Secretary of State is not that well known for his willingness to agree with the wishes of COSLA. This is an occasion on which the general rule could have been broken, and it could have provided an opportunity to improve the living conditions of a group of people in our islands who are living near the breadline and who are now being forced into extreme poverty by what can only be regarded as the Government's indifference to the islands' needs.

Is the Minister not prepared, even at this late hour, to think again and provide for the disadvantaged sections of our islands some degree of support, even if it were assisted by increased rates in the islands, to help the people who are at present defenceless against the ravages of what would seem to be Government deviousness, sophistry and a completely Jesuitic approach to the funding of local government?

Mr. Ancram

Rates are a matter for the local authority. The hon. Gentleman's intervention shows, as I guessed, that he does not understand local government finance.

If we have a system of distribution, it is on the basis of the system that existed, the one that we wish to introduce or a phased system which moves from one to the other. If I accepted the hon. Gentleman's advice, some authorities would have suddenly found that there would be a considerable drop in the revenue available to them, and that would have caused them difficulties. Some of those authorities are not far from the hon. Gentleman's heart normally. It does not lie well in his mouth to make special pleas without taking account of the knock-on effect it would have had on some other Scottish communities which also feel that they have particular difficulties.

When grants for particular services are included, the Government pay 85 per cent. of the day-to-day expenditure of the council on all services except for housing, for which there are separate arrangements. This is not an isolated figure for a single year but is broadly consistent over time. This again is by far the highest level of support of any authority in Scotland, where grant for authorities generally is about 60 per cent. of relevant expenditure. If the hon. Member for Clackmannan wishes to enter a debate of this sort, he should perhaps apply for one.

It is practice to issue to each local authority an indicative current expenditure guideline. This is intended to help authorities to plan expenditure compatible with the total figure considered appropriate by the Secretary of State. The guideline for Western Isles for 1984–85 is £22.394 million, some 16 per cent. more in cash than the guideline for 1983–84 and equivalent to £711 per head of population. I understand that the council's planned expenditure is some £162,000 or 0.7 per cent. above this figure.

Reference has been made to the reductions in expenditure planned by Western Isles. On the basis of returns made by the authority, it appears that, after a number of years during which expenditure—excluding loan charges—has increased in real terms after account is taken of inflation, the authority intends to spend about the same amount in cash in 1984–85 as last year. This points to some savings by the authority, perhaps by improved efficiency or increases in charges for some services and lower levels of service. As the right hon. Member is aware even if the hon. Member for Clackmannan is not, it is for the authority to determine the level of its expenditure and priorities between services. In reaching its judgment it knows the level of Government grants, which in Western Isles, as I have said, is the highest of any authority in Scotland, and it has to weigh carefully, as does every local authority, the need for services and the level of rates to be levied. Expenditure on services in 1984–85 is about £716 per head of population, which is exceeded only by Shetland, where there are exceptional circumstances associated with oil developments. The right hon. Member for Western Isles mentioned rates. He has quite correctly said that the rate for 1984–85 is the highest of any authority in Scotland. But the amount that an individual ratepayer has to pay also depends upon the rateable value of his property, which —again, as the right hon. Gentleman knows—is low in the Western Isles relative to other authorities, reflecting circumstances in the area. As a result—and the level of rate poundage must be seen in context—the average domestic rate bill in the Western Isles is £3.30 per week, compared with the average for Scotland of £6.29 per week.

I turn briefly to capital expenditure. The allocations issued to the authority for 1984–85 permit expenditure on housing of £7.395 million, an increase of £1.065 million or nearly 17 per cent. over estimated expenditure by the authority in 1983–84. In anyone's book, that increase must be welcomed in the islands and by the right hon. Gentleman. For services other than housing, the allocation is £6.935 million, which is again a cash increase over the 1983–84 allocation, of £630,000 or 10 per cent. Again, I hope that that figure is welcomed by the right hon. Gentleman and by the islands.

Mr. Donald Stewart

What about the Falklands?

Mr. Ancram

I assume that the right hon. Gentleman is not inviting me to consider a second military airport on his islands. But, if he is, I am prepared to pass on his request for consideration by my right hon. Friend the Secretary of State for Defence. However, he must talk about the Falklands, if that is his wish, in context.

These figures very clearly show that the Government continue To provide very high levels of support to the Western Isles from public funds. In the light of that, and although I appreciate the severe difficulties faced by such a council, I must firmly refute any suggestion that the blame for these problems can be placed at the door of the Government. As to future years, consultations with the convention have already begun leading to the rate support grant settlement for 1985–86. Any points that the Western Isles wish to be taken into account should be made known to the Scottish Office, preferably through the convention, with which my right hon. Friend the Secretary of State discusses matters of local authority finance.

Mr. Nicholas Fairbairn (Perth and Kinross)

Will my hon. Friend understand that there are many parts of Scotland that face equal difficulties and an equal lack of services and which would be absolutely delighted to get the subventions? We are very grateful that the Government have been so generous and very doubtful about the Opposition whingers.

Mr. Ancram

I am grateful to my hon. and learned Friend for that point.

With those figures I have demonstrated that the particular problems faced by the Western Isles are recognised in the distribution of RSG that we make and in the capital allocations.

Mr. O'Neill


Mr. Ancram

I shall not give way to the hon. Gentleman. Last time I gave way he made more of a speech than an intervention. He should go back and ask COSLA about local government finance. Before intervening in such a debate, he should understand how local government finance works and should he aware that he is asking for much more severe reductions to be made in the expenditure available to other authorities, including those for which he often claims to speak.

I cannot accept the strictures of the right hon. Member for Western Isles. We have recognised the problems faced by the islanders and we shall continue to recognise them. The manner of our response will mean that those problems can be contained. We have made provision which recognises the special nature of the problems in relation to those of other authorities.

I talked earlier about the phasing in of the client group approach. The right hon. Gentleman may feel disappointed, as other councils do, that the change was not made completely in the current year, but I have explained why that was not done. The meaning of phasing is that each year we shall move nearer to the complete client group approach. If the right hon. Gentleman holds to the view that he has taken tonight, I hope that he will make representations to his friends in the convention about the need, if there be one, to move faster to the complete client group approach than the Government have decided this year.

We will continue to meet our responsibilities to the Western Isles. They remain, in our view, an essential and integral part of Scotland. We will try to meet their special needs as we try to meet the needs of every area in Scotland. Nothing in the figures that I have given tonight would cause me to doubt that the Government are committed to ensuring that the problems of the Western Isles are properly met.

Question put and agreed to.

Adjourned accordingly at twenty minutes to Two o' clock.