HC Deb 11 December 1984 vol 69 cc912-26 3.43 pm
The Secretary of State for the Environment (Mr. Patrick Jenkin)

With permission, Mr. Speaker, I wish to make a statement on the rate support grant settlement in England for 1985–86.

In my statement to the House on 24 July I set out my proposals for the main elements of the rate support grant settlement for next year and listed the 18 authorities which I was designating for rate limitation. I have today laid before the House the main Rate Support Grant report for 1985–86 and I am sending rate-capped authorities notices advising them of the rate or precept limit proposed for them. Copies of all the material being sent to local authorities today are available in the Library and the Vote Office.

I have also laid today two Rate Support Grant supplementary reports. The third supplementary report for 1983–84 adjusts authorities' grant entitlements in the light of the latest information on outturn expenditure for the year. The second supplementary report for 1984–85 implements grant abatement for Liverpool city council, whose budget was received too late to be taken into account when I implemented grant abatement for all other authorities in July. Both reports also contain other technical adjustments to grant.

I now turn to the main report for next year. For 1985–86, for the first time, the Rates Act 1984 enables me to influence directly the spending levels of the worst overspenders by imposing limits on their rates. As we promised throughout the passage of the Rates Bill in Parliament, this means that rate limitation will benefit not only the ratepayers of the selected authorities but low-spending authorities, since I am no longer obliged to ask them to make cuts because of the excesses of the high-spending minority.

I have decided to confirm the targets that I proposed in July with two important changes. The first allows most low-spending authorities an increase over this year's budgets of 4.5 per cent. instead of the 4.25 per cent. I previously announced. This reflects the slight increase in the forecast inflation rate over the period. For the first time, targets for the lowest spenders imply spending increases in line with inflation, or, in other words, no further cuts in real terms, the second change relates to a particular group among those low spenders — namely, authorities such as Berkshire budgeting this year to spend not only below grant-related expenditure but at or very close to target. They will be allowed a further relaxation of targets so that they may increase spending by up to 4.625 per cent. —a little more than inflation—without incurring penalties. With these changes, the targets for low-spending authorities fulfil to the letter the undertakings that I gave to the House last January.

I have decided to confirm the stringent holdback tariff which I announced in July at the rate of 7p in the pound for the first percentage point of overspend, 8p for the second, and 9p for each point thereafter. I believe that it is only fair to match realistic targets with a strong incentive that they should be met. I propose, however, to continue to exempt from penalty increases in certain urban programme and civil defence expenditure and increases in expenditure on schemes jointly financed with health authorities. Aggregate Exchequer grant will be £11.764 billion. That is slightly higher than the figure which I proposed in July. The grant percentage is 48.7 per cent.

Following consultation with local government, I have decided on some limited but important changes to GRE assessments, affecting primarily the GREs for passenger transport support, highway maintenance, rate fund contributions to council housing and recreation. I have also increased the slope of the block grant poundage schedule. This increases the importance of spending in relation to GRE as a factor in grant entitlements and increases the marginal cost of spending about GRE for all authorities. Again, this helps low-spending authorities, since it gives more of the available grant to authorities spending at or below GRE.

Mr. Patrick Cormack (Staffordshire, South)

May we have a translation?

Mr. Jenkin

My hon. Friend may take it that it is good news because it gives more of the available grant to authorities spending at or below GRE.

In the light of this RSG settlement, I am issuing maximum rate or precept limits for the 18 selected authorities. Since July, when I announced expenditure levels for these authorities, it has been open to each of them to apply for a redetermination of its expenditure level at a higher level, but none has done so.

Rate or precept limits for 1985–86 are therefore based on the July expenditure levels. I am today sending out statutory notices informing each authority of the limit that is proposed for them. A list of these limits has been placed in the Library and is available in the Vote Office. In calculating the rate or precept limits, I have taken account of the expenditure levels set and the authorities' block grant entitlements next year. I have had regard also to the level of financial reserves available to each authority, making assumptions as necessary.

Authorities now have until 15 January to comment on the rate or precept limits proposed and to draw my attention to any relevant information of which I may not be currently aware. Unless I have comments by 15 January, it will, in the absence of agreement, be necessary to move on to the next stage of asking the House to confirm the rate limits by affirmative order.

The proposed rate and precept limits that I am announcing today will be warmly welcomed by ratepayers in the areas concerned.

Mr. Tony Banks (Newham, North-West)

Tell us what they are.

Mr. Jenkin

For 13 of the 18 authorities I have set rate or precept limits which are lower than the rates or precepts being charged this year. In the five remaining cases, however, the rate or precept will be lower than it would have been without rate-capping.

This year's average rate increase was the lowest for 10 years. If authorities budget to meet their targets next year, the average rate increase next year should be even lower. the first stage of rate limitation will at long last bring relief to ratepayers in the rate-capped areas. Moreover, rate-capping has allowed me to set much fairer targets for low-spending authorities. This settlement has meant increasing the provision for local authority current spending next year by £820 million above the provision in last February's public expenditure White Paper. In present economic circumstances, this is a reasonable and fair settlement, and I commend it to the House.

Dr. John Cunningham (Copeland)

The House will be aware that if the Secretary of State had been bringing good news today, he would have announced it in language that we could all understand. Is not the irony of it the fact that he makes a statement in which he continues the trend which has currently, under this Administration, removed £9,000 million from rate support grant and placed increasing burdens on the ratepayer, when his colleagues in the Treasury are publishing a report which shows that, because of almost six years of Government inefficiency, almost £1 billion is being wasted through Government purchasing policy? That is far in excess of any alleged overspending by local authorities.

Is it not also significant that in the five pages of his statement, the Secretary of State never once mentioned the quality of services or the impact of the settlement on employment? The reality is that the provision for expenditure, despite the right hon. Gentleman's protestations, is 5 per cent. below what is required just to maintain existing services across the country. Have not the local authorities made that clear to the right hon. Gentleman in their discussions with him? Are not local authorities being aided for spending below the assessment of what is required of them for the proper provision of services?

How can the right hon. Gentleman believe that an increase of one eighth of 1 per cent. in targets—that is only for some authorities— will make up for the fact that the aggregate Exchequer grant next year is to be £110 million less in cash terms, which equates to £600 million in real terms? That is the measure of the reduction.

Will the Secretary of State say how many councils spending at target will receive less grant in real terms next year than they received in the present year, after taking into account his changes in transport supplementary grant? Will not most major spending councils receive less in real terms as a result of this settlement? When does the right hon. Gentleman expect to make his announcement about housing investment programmes and other capital allocations?

Is it not a fact that for 1 per cent. expenditure over target, authorities will be fined treble the amount taken away from them in the current year? That is, for every £1 in excess, they will have to pay £10 to the Treasury. Paradoxically, the Treasury has gained from authorities spending above target in the current financial year to the tune of over £500 million. That is how perverse the Government's financial arrangements are.

May I also ask the Secretary of State — [HON. MEMBERS: "No."] If the Secretary of State insists on making two statements, one on rate support grant and one on the Rates Act, he can expect two lots of questions. He will recall saying on 24 July: Rate-capping does not therefore mean that services must be slashed. The spending limits that I am setting are reasonable and should be perfectly attainable". Is he aware that one of the most impoverished boroughs in England is being asked for a cut of 28 per cent., the city of Leicester for a cut of between 15 and 16 per cent., the London borough of Brent more than 13 per cent., Merseyside almost 18 per cent., the London borough of Haringey almost 14 per cent. and the city of Sheffield 12.5 per cent. Does he accept that that is the reality of the cuts in local authority budgets that he seeks?

It is idle to claim, as the Secretary of State does, that the derogation process somehow offers a way out. Is the Secretary of State aware that on derogation the Conservative leader of Portsmouth city council said: The thing about the redetermination is that it could come with strings attached that my council could not possibly accept". That is the view of Conservatives in local government. [HON. MEMBERS: "One."]

Is the Secretary of State aware that in engineering rate decreases at the expense of the shire counties through lower grants being made available to them and at the expense of the Exchequer he has at last admitted what many Members and people outside have put to him—that because of the increase of more than £800 million in public expenditure that he has just announced under the rates Act he is spending £800 million to save £100 million?

May I say, finally—

Hon. Members


Hon. Members


Dr. Cunningham

Is not the Government's message to ratepayers the same old recipe—pay more and get less? Is the right hon. Gentleman aware that people are increasingly realising that the Government are determined to prevent local democracy from working and to prevent elected councils from meeting their statutory obligations?

Mr. Jenkin

I am afraid that the hon. Gentleman spoke a great deal of nonsense, but I will try to answer his specific questions.

Of course there is a reduction in the percentage of expenditure met by the aggregate Exchequer grant — [HON. MEMBERS: "Why?"] That continues the trend of many years, including the period of the Labour Government of which the hon. Gentleman was a member. In 1976 the percentage was 66 per cent.—

Mr. Robin Corbett (Birmingham, Erdington)

Here we go.

Mr. Jenkin

The hon. Gentleman may not like it, but he is going to hear the truth. The percentage fell to 61 per cent. under the Labour Government and it has continued to fall. Many people in local government, and the Association of County Councils in particular, support that development because they recognise that a higher proportion of expenditure being paid by ratepayers enhances local accountability.

The hon. Member for Copeland (Dr. Cunningham) went on to ask how many councils spending at target would receive less grant. I can only advise him to look at the totals. There are a number of changes in grant-related expenditure assessment. A number of councils will receive more grant, but most, of course, will receive less because of the reduction in the percentage. That is perfectly clear. The hon. Gentleman persists in confusing the real savings that will be made with the necessary adjustment in the public expenditure White Paper figures to achieve realistic targets.

The figure that we expect to save this year through the operation of rate-capping, based on what the rate-capped authorities have shown that they would otherwise have spent, is about £400 million. Because of that £400 million, I have now been able to offer much fairer targets to the shire counties and to fulfil our undertakings of last January.

Finally, the hon. Gentleman asked when we expect to make a statement on capital spending. I know that authorities are anxious to know where they stand on capital, so that they can make their plans. I am sorry that we have not managed to make the announcements coincide, as they usually do, with the rate support grant settlement. I cannot yet give a firm date—we are still sorting out some of the details—but I hope to make an announcement quite shortly.

Mr. Mark Carlisle (Warrington, South)

If I understood my right hon. Friend's answer correctly as meaning that the Exchequer proportion of local authority expenditure is further to be reduced, how does that equate with the intention to reduce the rates burden? In particular, how does it equate with the effect on small businesses, on which the employment prospects of many people depend?

Mr. Jenkin

I can assure my right hon. and learned Friend that in each of the past four years the proportion of expenditure met by the rate support grant has fallen and that in each of those four years the percentage increase in rates has fallen as well. There is no necessary connection between the level of rates that a local authority levies and the proportion of its expenditure met by grant. What matters is the level of an authority's spending. By increasing their accountability, we are bringing greater pressure on local authorities to keep their spending firmly under control and to keep their rates down with a lower increase each year. I confidently expect that to happen next year.

Mr. Peter Hardy (Wentworth)

On the point referred to by the right hon. and learned Member for Warrington, South (Mr. Carlisle), will the Secretary of State confirm that—leaving aside the cruel effect on many households —the extra burden on commerce and industry is £4,000 million? Does the right hon. Gentleman consider that the Prime Minister was entitled to make the remarks that she made at Question Time today? Does he accept that the arrangements that he has proposed this afternoon will further increase unemployment, and that many areas cannot stand any further increase?

Mr. Jenkin

On the contrary, the hon. Gentleman is absolutely wrong. High rates cost jobs. In many of the areas of highest unemployment, the rate reductions made possible by rate-capping will help to reduce unemployment.

Mr. Robin Maxwell-Hyslop (Tiverton)

What persuades my right hon. Friend that the present system of rates is a more just form of taxation than central Government taxation? If, like me, he is not satisfied that the rating system is a just form of taxation, why does he increase the percentage of local government expenditure borne by that unjust system?

Mr. Jenkin

I am well aware of my hon. Friend's views on the rating system. I am sure that he will have taken comfort from my announcement in October that I have asked my right hon. Friend the Minister for Local Government to undertake a series of thorough studies into the whole system of local government finance. I hope that that process will produce a fairer and more robust system of financing local authorities and will enhance local authority accountability. I am sure that we would all welcome such an enhancement.

Mr. Simon Hughes (Southwark and Bermondsey)

Does the Secretary of State believe that, by those figures, he can justify taking away over £2,000 million of grant from London in the past four years, because that has been the result? My borough has lost over £70 million in grant. Can the right hon. Gentleman justify the fact that, on the figures now announced, if Southwark spends the maximum that it is allowed to spend under the rate-capping legislation, it will none the less be over £1.5 million over the target above which it will be penalised? Is that logical? If it is logical, where does that logic lead us?

Mr. Jenkin

The ratepayers of Southwark expect to benefit from a reduction of about 25 per cent. in their rates.

Mr. Hughes

Thirty-three per cent.

Mr. Jenkin

The figure on which the rate limit is based is 25.74 per cent. Had Southwark been free to spend in accordance with the intentions that it had disclosed, the domestic and business ratepayers of Southwark would have faced an increase of 30 per cent. rather than a cut of 25 per cent. The hon. Gentleman would do well to keep quiet about the matter for a time.

Mr. John Maples (Lewisham, West)

My constituents will welcome the fact that the three authorities to which they pay rates have all been rate-capped. However, will my right hon. Friend explain the justification for continuing the target and penalty system for rate-capped authorities, and for continuing the grant calculation system under which the GLC and the Inner London education authority will continue to receive no rate support grant? Is that not extremely unfair on Londoners? Could not my right hon. Friend arrange matters so that rate-capped authorities receive their fair share of the rate support grant?

Mr. Jenkin

My hon. Friend must recognise that it would be wildly unfair as between rate-capped authorities and those which fell just below the criteria for rate-capping, to impose penalties on the latter for exceeding their targets but not on the former. That distinction would be completely indefensible.

On this basis, the GLC will recover a marginal entitlement to rate support grant. However, both the GLC and ILEA spend so much more than their grant-related expenditure assessment that they remove themselves almost completely from entitlement to rate support grant. Were that not so, there would be less grant for everyone else.

Mr. Robert N. Wareing (Liverpool, West Derby)

How can the Secretary of State argue that local accountability is improved by reducing the rate support grant to 80 per cent. of expenditure when that reduction is accompanied by fictitious penalties, targets, GREs and rate-capping? Is the right hon. Gentleman aware that his diktat to Merseyside county council will mean the loss of 3,000 local government jobs and the abandonment of statutory obligations? Can the right hon. Gentleman tell Merseyside county council which laws it should break and which statutory obligations it should renege upon?

Mr. Jenkin

There is no question whatever that any local authority faced with a rate limit is likely even to approach the level at which it would be obliged to break its statutory obligations. The authorities concerned are all high-spending authorities, which spend at least 20 per cent.—

Mr. Greville Janner (Leicester, West)

On what?

Mr. Jenkin

—more than their GREA and at least 4 per cent. more than their target. The hon. Member for Liverpool, West Derby (Mr. Wareing) is quite wrong. I suggest that the hon. Gentleman should study the precept limit that I have set for Merseyside. As the legislation requires, I have had to take account of the use of balances in the authority's accounts. Merseyside will still face a substantial precept increase next year, but it will be very much lower than it might have been. If the authority had continued to spend at the level at which it made clear earlier this year it intended to spend, the increase might have been as much as 100 per cent. Merseysiders must be grateful for small mercies.

Mr. Charles Morrison (Devizes)

I welcome my right hon. Friend's proposals for target increases in those shire counties which have been most hard hit by targets after reacting responsibly and diligently to the Government's requests that they should reduce or contain expenditure. However, is my right hon. Friend aware that low rate increases in the shire counties are not the sole objective of a large proportion of the electorate and the ratepayers? People are equally concerned about the provision of adequate services. Is my right hon. Friend aware that the worst of all worlds is a high rate increase couplied with a cut in services?

Looking even further ahead than 1985–86, will my right hon. Friend give a commitment now to relax or preferably to abolish targets for shire counties in 1986–87?

Mr. Jenkin

I am glad to confirm to my hon. Friend that the increase in target for Wiltshire, at 4.625 per cent., is the highest for any authority. I am grateful for his welcome recognition of the steps that we have taken to acknowledge the efforts made by low-spending authorities. I entirely agree that ratepayers are concerned about standards of services. One of the advantages of the present rate support grant settlement, compared with all those that have preceded it, is that any economies that an authority is able to make and any extra efficiencies that it is able to achieve, instead of being clawed back under the penalty system, may be spent on improving and enhancing the quality of services given to the ratepayers. That is a perfectly fair outcome of the consideration that we have given to the matter in the past two months.

Mr. Janner

Does the Secretary of State not understand that it is undemocratic, unreasonable and unfair to penalise a well-run city, such as Leicester, for building up reserves under Conservative and Labour Administrations, precisely as a good businesslike operation would do? How can he expect a reduction of 56.61 per cent. in rates to be absorbed without destroying and causing chaos in services which all citizens need?

Mr. Jenkin

The hon. and learned Gentleman has obviously not studied the figure of Leicester city council's reserves, which, on the information available to us, were astronomically high. It is unreasonable that ratepayers should be expected to add to such reserves. On the contrary, any sensible council with such massive reserves can reasonably be expected to charge ratepayers a lower rate. That is the basis on which we have approached the setting of a rate limit for Leicester. If Leicester believes that we have got it wrong, it has until 15 January to come and give us the true figures.

Mr. Janner

I shall tell the right hon. Gentleman.

Mr. Jenkin

It is for the council to come in. I believe that the ratepayers of Leicester will cheer mightily at the prospect of a 56 per cent. reduction in rates.

Mr. Tim Smith (Beaconsfield)

Is my right hon. Friend aware that his statement will be welcomed in areas which have suffered because of high-spending authorities elsewhere? Will Buckinghamshire be among the low spenders that will benefit from a permitted increase in target spending of 4.625 per cent.? Has my right hon. Friend been able to make any progress on the problem relating to Buckinghamshire's population?

Mr. Jenkin

The target increase for Buckinghamshire is not 4.625 per cent., but a full 4.5 per cent. because it has been budgeting this year marginally over the target. The highest increase in the target goes to authorities which have budgeted below GRE and target. I am well aware of the case of Buckinghamshire and several other authorities which have expanding populations. I am not convinced that the system works as unfairly in their case as they claim, but I am always prepared to listen to arguments about whether further adjustments and refinements of GREs are necessary to reflect that phenomenon.

Mr. John Cartwright (Woolwich)

Is the right hon. Gentleman aware that many rate-capped authorities are planning to spend more rather than less next year? Does he agree that a sudden slamming on of severe cuts will produce chaos, confusion and real hardship for people who depend on local authority services and for local authority employees? Whatever the Secretary of State's argument with councillors might be, will he take steps to limit the impact of rate-capping on innocent bystanders who are not involved in this battle?

Mr. Jenkin

The local authority is responsible for the level of its expenditure. I believe that many ratepayers in Greenwich will welcome an 18 per cent. cut in the rates. Greenwich is that London borough the expenditure and rates of which have increased among the fastest in the country. It has become a byword for extravagance. It is for the council to decide how to live within the level that we have set. I am sure that Greenwich ratepayers will welcome an 18.9 per cent. reduction in rates.

Mr. Gerald Bowden (Dulwich)

By how much would the ILEA precept have increased next year without rate-capping? Will my right hon. Friend confirm that further reductions could be made to bring the ILEA target nearer to its GRE?

Mr. Jenkin

The proposals for the ILEA precept will result in a reduction of 7.25 per cent. ILEA has published for next year a bogus budget of what it would have liked to spend. If it spent that amount, there would be a 12 per cent. increase in the ILEA precept. My hon. Friend is right. ILEA is notoriously extravagant and can make savings which would enable it to come closer to the GRE and so begin to be entitled to rate support grant. Several proposals have been made by the Conservative minority on ILEA.

Mr. Guy Barnett (Greenwich)

The Secretary of State referred several times in his statement to low-spending authorities. Is he aware that the average rate level in the London borough of Greenwich is the fourth lowest in inner London—way below that for Chelsea and Kensington and for Westminster? Is he aware that that is the case in spite of the fact that Greenwich has lost or had stolen by by the Government a larger—[Interruption.] Will the Secretary of State listen?—a larger proportion of its rate support grant than any other authority in Britain? Is he aware that his proposals will lead to the imminent loss of no fewer than 1,000 council jobs and a slashing of services to the elderly, the disabled and the poor? The Secretary of State's Audit Commission described those services as efficient and well run. Is the Secretary of State surprised that my constituents regard his attitude, and that of the Government, towards Greenwich as nothing short of unjust and vindictive?

Mr. Jenkin

The hon. Gentleman is quite wrong. Greenwich's rates have increased by 112 per cent. since 1981–82. It has a high GRE because it scores high on several of the inner-city deprivation indicators, and therefore its base entitlement to grant is fairly high. That is as it should be, but it does not absolve Greenwich from running services effectively and economically. I shall believe the hon. Gentleman's cries of woe when see Greenwich cutting out a lot of its nonsensical spending on advertising, police committees and the rest, rather than on services. By their works we shall know them. We shall watch carefully where Greenwich makes its savings.

Several Hon. Members


Mr. Speaker

Order. I have to take into account the fact that there is another statement and then an important debate. I shall take questions until 4.30 pm. I hope that, if hon. Members ask their questions briefly, I might be able to call them all.

Sir Dudley Smith (Warwick and Leamington)

Is my right hon. Friend aware that, as a ratepayer in the Lambeth area, I am delighted at his tough approach towards high-spending authorities and at his decision to abolish the GLC? Is he further aware that, as a ratepayer in Warwickshire, I am rather less enchanted with the news that he has given us, although it is a move in the right direction? Will he give a pledge that well-run low-spending authorities will continue to be looked on with the greatest favour in view of sacrifices that they have made in the past?

Mr. Jenkin

I thorougly endorse what my hon. Friend said about Lambeth. I wonder whether he has noticed that Lambeth has decided that, for local authority tenants who owe more than £1,000 in rent arrears, for every £1 that the tenant pays off, he will be let off £4? I should have thought that the ratepayers of Lambeth would have something to say about that.

Mr. Jack Straw (Blackburn)

Housing benefits.

Mr. Jenkin

The hon. Member for Blackburn (Mr. Straw) is quite right to mention housing benefits. These tenants are able to pay their rents but are simply allowed to go month after month without paying them. That is a scandal, and Lambeth ought to be thoroughly ashamed of itself.

Warwickshire gets the full 4.5 per cent. increase in target this year. It budgeted marginally above target for the current year and therefore qualifies for a 4.5 per cent. increase of next year's target over this year's budget. With regard to grant entitlement, Warwicksire loses probably less grant in percentage terms than many other counties. [HON. MEMBERS: "Ah—less."] Of course, it will lose some because we are clearly reducing the percentage of the aggregate Exchequer grant. That is in accordance with decisions taken by the Government and our predecessors.

Mr. A. E. P. Duffy (Sheffield, Attercliffe)

Is the Secretary of State aware that people came from all over the world to observe Sheffield's post-war housing take shape? Now in my constituency there is dilapidated and decayed housing, lengthy waiting lists and appalling repair problems. In view of his confirmed stringency and vindictiveness towards Sheffield, will he tell the House how far and on what timescale he expects to correct that regression?

Mr. Jenkin

I think that Sheffield should follow the example of some of its Labour-controlled neighbours and make arrangements for some housing to be modernised with the help and support of the private sector. The hon. Gentleman should look across the Pennines and see what has been going on in Salford, Oldham and other authorities there. They have achieved a substantial upgrading of the quality of life for the people who live there, and it is being done substantially at the cost of the private sector.

The ratepayers of Sheffield, who have been paying through the nose for years because of the extravagance of the council, will welcome the virtual rate standstill next year. It certainly would not have been so if Sheffield had been free to continue spending as it has been doing in recent years.

Mr. Cormack

Does my right hon. Friend agree that Governments tend to lose the confidence of people when they speak in a language which people cannot readily understand? Does he know of any system of local government finance in the Western world which is more confusing and confused than this one?

Mr. Jenkin

I shall send my hon. Friend, together with a number of hon. Members, what I hope will not unkindly be called "A child's guide to the rate support grant system".

Mr. Cormack

indicated assent.

Mr. Jenkin

I share his concern about its complexity.

Mr. Jeff Rooker (Birmingham, Perry Barr)

Has it been helpful to the right hon. Gentleman?

Mr. Jenkin

Yes, it has been very helpful to me. It has helped me to understand the system, and I am not ashamed to admit it. I think that I now understand most of it. I hope that my hon. Friend the Member for Staffordshire, South (Mr. Cormack) will feel that it is a helpful step. It is important that people should understand the system, which is not as illogical as it is sometimes made out to be. Obviously it is complex, but my right hon. Friend the Minister for Local Government is studying its complexity.

Mr. Corbett

Is the Secretary of State aware that in the city of Birmingham we are presently discussing rate increases of up to 100 per cent. merely to stand still, not to carry out any of the policies on which we won control of the council? In the light of his statement how does he propose that the first city outside the capital should deal with urban decay and a genuine crisis in housing?

Mr. Jenkin

Luckily for the present Labour-controlled authority of Birmingham, the previous administration budgeted economically. Birmingham is not spending in excess of its target and it is spending below its GRE. Birmingham will qualify for the 4.625 per cent. —the maximum increase in target. I recognise that Birmingham, as a major city, has financial problems, but they are not as serious as the hon. Gentleman tries to pretend.

Mr. Robin Squire (Hornchurch)

I welcome any increase in grant support for responsible authorities, such as Havering, but is my right hon. Friend aware that until we have a reformed system of local government finance —he has only recently announced the inquiry—many of us will be concerned about the ever-increasing reduction in the amounts met by the Government and the consequent increases now carried by an inadequate local rating system?

Mr. Jenkin

I certainly understand my hon. Friend's concern. When I spoke about the studies that are being undertaken, I made it clear that a central problem that we need to examine is the balance between central and local government of bearing the cost of local government services. Clearly one wishes to achieve maximum accountability of local authorities to those who enjoy their services for the discretionary spending which rests with them. That is one of the points at the heart of my right hon. Friend's study. We want to ensure that we achieve a better, more robust and defensible system.

Mr. Tony Lloyd (Stretford)

Has not the Secretary of State shown that he has no understanding of local government in metropolitan areas, such as Greater Manchester? Will he explain to my constituents who poorer and fewer services, higher rates and increasing unemployment are in their interests?

Mr. Jenkin

Greater Manchester and Manchester city have both been fairly high-spending councils. They have not yet gone above the level that we designated this year for rate-capping. I have no doubt that both authorities can make significant savings without seriously impinging on the level of services, if they are prepared to budget hard and economically. The ratepayers of Manchester would welcome the level of reduction that such action would bring.

Mr. Robert Banks (Harrogate)

Will my right hon. Friend accept my warm support for his statement that civil defence will not count in grant-related expenditure? Does he agree that the financing of old capital expenditure by local authorities should not prejudice the rate support grant, especially where it has led to greater prosperity? Is he aware that Harroate borough council will be affected considerably to its detriment by his statement?

Mr. Jenkin

I am grateful to my hon. Friend. As he said, civil defence expenditure will be disregarded in line with what has happened in earlier years. Where authorities have in the past incurred large capital spending, run up large debts and therefore have interest charges, it would be extremely difficult to disregard those interest charges for the purpose of targets and block grants because they form part of each authority's expenditure. However, each authority must manage its capital expenditure so that the revenue costs can be borne within the guidelines laid down by Parliament.

Mr. Kevin Barron (Rother Valley)

Does the Secretary of State recall, when he made his statement in the House on 24 July, that in my question about the alleged high spending of South Yorkshire county council I said that I had not received any letter of complaint about the rates levied by the council? In answer, he said that he had received many letters from ratepayers in South Yorkshire complaining about rates. I then wrote to his Department asking how many letters had been received from people in Rother Valley, and he wrote back that he had received none in the past nine months. Has he received any since 24 July?

Mr. Jenkin

I can tell the hon. Gentleman that if South Yorkshire had spent at the level of the proposals which have been discussed within the council, the precept increase next year would have been more than 50 per cent. In those circumstances, we would have received a flood of complaints. As it is, South Yorkshire's precept will show a 2 per cent. reduction, which will be welcomed.

Mrs. Edwina Currie (Derbyshire, South)

Has my right hon. Friend taken a look at rate-capping authorities, such as Derbyshire, which think that shoving up rates as fast as possible is part of their duty to their ratepayers and whose services in essenial work, such as education, are worse than those of neighbouring local authorities, such as Nottinghamshire and Birmingham? Incidentally, in Birmingham the Tory council cut the rates twice, yet managed, to find £1 million this year to promote its services in advance of a local election. When can we expect my right hon. Friend's strong right arm to be fully recovered to put a stop to such practices?

Mr. Jenkin

Next May the ratepayers of Derbyshire will have their opportunity to pass judgment on the extravagance of Derbyshire county council. No doubt my hon. Friend will lend her considerable talents to the same end. We are giving urgent attention to the question of spending on advertising. It will also come within the purview of the abuses inquiry, on which I hope to make a statement to the House fairly soon. The huge sums of ratepayers' money which local authorities are spending on what is nothing more or less than blatant political propoganda are an almighty scandal and cause great outrage among many ratepayers who, for the information of the hon. Member for Rother Valley (Mr. Barron), write to me about it frequently.

Mr. Derek Foster (Bishop Auckland)

Will the Secretary of State now admit that by continuing to reduce the grant he will either force up rates or slash services? Is he aware that in my area, which is one of the most deprived in the country, there is male unemployment of 26 per cent., and that we can afford neither? He is heaping burdens on the backs of those who are least able to bear them.

Mr. Jenkin

The hon. Gentleman is quite wrong. Obviously he did not hear what I said earlier. In each of the past four years when the grant has been reduced, the average increase in rates charged by local authorities has also decreased. This year, the increase in rates and precepts will be the lowest on average for the past 10 years.

Several Hon. Members


Mr. Speaker

Order. I realise the importance of the statement. Therefore, exceptionally, I shall allow another five minutes for questions, although I remind hon. Members that long questions lead to long answers.

Mr. Derek Spencer (Leicester, South)

Does my right hon. Friend accept that Leicester city council is well able to comply with the limits that he has set, because it has so much money in the kitty that it has been able to indulge in a massive anti-rate-capping campaign?

Mr. Janner

So it should.

Mr. Jenkin

My hon. and learned Friend is right. He will welcome the 56 per cent. rate-cap that this limit implies.

Mr. Tony Banks

Surely the Secretary of State is aware that he is forcing Labour-controlled local authorities into illegality if they are to defend services—

Mr. Robert Adley (Christchurch)


Mr. Banks

I said, "Surely the Secretary of State is aware" that he is forcing such authorities into illegality. Does the right hon. Gentleman relish the confrontation that he will undoubtedly have with Labour-controlled authorities in London? If the GLC does not raise a precept, which I would recommend it so to do, does the Secretary of State plan to introduce a Bill to allow the boroughs to raise a precept next year?

Mr. Jenkin

I am glad to read in the press that several of the hon. Gentleman's colleagues on the GLC have made it abundantly clear that they will have nothing to do with illegal action and that they will urge the GLC to precept lawfully, as it must, do, by 10 March. If the GLC does not raise a lawful precept in line with the limit that I have announced today, or as may be approved by the House. it will be open to any London borough, which will incur extra costs because of the GLC's action, to take the necessary proceedings in the courts. I have no doubt that one or more will do so.

Dr. Ian Twinn (Edmonton)

Is my right hon. Friend aware that the residential and commercial ratepayers of London, especially those of the London borough of Enfield, will welcome his statement warmly? Were it not for rate-capping, what would the GLC precept have been?

Mr. Jenkin

Had the GLC been free to precept in line with what it was saying, it would have increased rates by at least 20 per cent., or from 36.5p in the pound to 43.8p in the pound. There is no reason why there should be a large increase in Enfield's rates next year, and Enfield ratepayers will benefit from the GLC rate standstill.

Mr. Derek Fatchett (Leeds, Central)

Does the right hon. Gentleman agree that his statement is wholly consistant with the Government's policy of reducing the standard of living of those least able to look after themselves and of reducing jobs? Would it not have been more honest for him to have told us haw many jobs he expects will be lost and about the deterioration in local government services?

Mr. Jenkin

I expect the significant rate reductions in many of the highest-rated areas to be a considerable encouragement to the private sector to expand its businesses and increase employment. The reverse has happened as rates have increased. There is no reason why jobs should not increase as rates decreased.

Mr. Harry Greenway (Ealing, North)

Bearing in mind the complexity of the child's guide which my right hon. Friend will circulate, may I ask him to produce a simpler child's guide? What are the implications of his statement for salary increases for local government workers, teachers and others?

Mr. Jenkin

We have made no assumption about that. The Treasury has estimated the GDP deflator for next year to be 4.5 per cent. That is why we have allowed an increase of at least 4.5 per cent. in the targets of low-spending authorities. I shall do my best to provide what my hon. Friend wishes. Perhaps a pre-natal guide would be the answer. It is a complex system, and if one is to do it justice and my hon. Friends are to understand it, the explanation must be reasonably full and, therefore, complex. My hon. Friend will probably find the paper that I have circulated to be interesting.

Mr. Eddie Loyden (Liverpool, Garston)

Is not the Secretary of State disregarding absolutely areas with high unemployment, aging populations and the need for more, not fewer, local government services? When my hon. Friend the Member for Greenwich (Mr. Barnett) said that the statement would mean the loss of 1,000 jobs, the "Hear, hears" that we heard from Conservative Members were the real voice of the Tory party.

Mr. Jenkin

The points made by the hon. Gentleman about the unemployed, the elderly and other deprived groups are taken into account, through the GREs, in assessing the grant to which an authority is entitled.

Mr. Loyden

indicated dissent.

Mr. Jenkin

The hon. Gentleman shakes his head, but I am telling him nothing less than the truth. If Liverpool city council is prepared to spend irrespective of its financial resources, it is bound to get into serious difficulties. I hope that even now the city council will see sense and not drag the city of Liverpool, as it seems bent on doing, closer to the brink of chaos.

Mr. Richard Holt (Langbaurgh)

Does my right hon. Friend accept that, until the Conservative party takes control of Cleveland next May, there will be considerable rejoicing among Cleveland ratepayers about the action that he has taken? Not least among those rejoicing will be the members of Teesside chamber of commerce, which announced recently that if Cleveland county council continued to spend money as it has at least 3,000 jobs in the private sector would be lost during the next 12 months. He has saved those 3,000 jobs, and probably many more.

Mr. Jenkin

I understand that, but Cleveland is a high-spending shire county, and its target for next year will be lower than its budget this year. Cleveland must bring its expenditure firmly under control, or it will impose severe burdens on its ratepayers. However, the ratepayers will wreak their revenge next May.

Several Hon. Members


Mr. Speaker

Order. I shall bear in mind those hon. Members whom I have not been able to call today, and will give them preference in the debate on the rate support grant settlement.

Mr. Straw

I am grateful to you, Mr. Speaker—I am sure that I express the view of the House — for extending the time for questions on the statement.

Is it not disgraceful that the central message of the settlement—that grants to local authorities will be cut—had to be wrung from the Secretary of State in questions rather than being made clear by him in his statement? As he has now admitted that most authorities will receive less grant, does that not mean that rates in many Conservative-controlled areas will increase as a direct result of his cuts in rate support grant? Does that not mean in turn that the Secretary of State has failed completely to fulfil the solemn undertakings that he gave to the House on 23 January?

Is it not a fact that rates have increased twice as fast as the rate of inflation since 1979, and that the Conservative-controlled Association of County Councils said that excessive increase in rates was entirely attributable to the Government's action?

When the Secretary of State publishes his child's guide, will he ensure that it explains that if Labour overspenders reduce their spending to the level dictated by grant-related expenditure assessments, it will lead to less for the Treasury and for Tory authorities? To give one example, if this year all authorities had spent at their GRE limit, Tory Norfolk would get not £90 million in grant but only £56 million, and its rates would be 20 per cent. higher.

The Secretary of State said that he would sort out some of the details on capital. Is it not true that he is having a major row with the Treasury about the use of capital receipts? When will that row end? Given the screams of private companies about the potential loss of building orders from the public sector, will not the cuts over which the Secretary of State is presiding lead to a loss of jobs not only in the public sector but in the private sector?

Mr. Jenkin

I cannot add to what I said earlier, in reply to the hon. Member for Copeland, about the capital statement. The hon. Member for Blackburn (Mr. Straw) is wrong. I gave the percentage of AEG in my statement. The hon. Gentleman knows that the grant this year was 51.9 per cent., so when I announced that it would be 48.7 per cent. for next year I obviously meant that there would be a reduction. To say that this was wrung from me is absurd.

The hon. Gentleman also has it wrong about the holdback, which is the penalty suffered by those authorities which exceed the targets that have been laid down. The money goes to the Treasury, but the Treasury has made it abundantly clear, both in public and in private, that it would far rather forfeit that holdback and have authorities spending in line with the Government's guidelines, which are approved by the House, than have the penalty money going into its coffers.

I do not accept the figures about which the hon. Gentleman talks. What would be set would depend entirely upon the circumstances. I do not expect a large number of authorities spending well above GREA to come down to GREA overnight. Of course they could not do that.