§ The Secretary of State for Wales (Mr. Nicholas Edwards)
Mr. Speaker, with permission I wish to make a statement about the future arrangements for controlling local authority capital spending in Wales and the level and distribution of capital resources in 1985–86. The decisions that I am announcing this afternoon—[Interruption.]
§ Mr. Donald Coleman (Neath)
On a point of order, Mr. Speaker. I think that I have had the desired effect, as things are quieter now. I could not hear a word that the Secretary of State was saying.
§ Mr. Edwards
The decisions that I am announcing this afternoon have to be seen against the background that since 1979–80 Welsh local authorities have invested, at 1984–85 prices, £2.2 billion in a wide range of projects which have significantly extended and improved the social and economic infrastructure in Wales. The Government's expenditure plans to be published in the forthcoming Public Expenditure White Paper, envisage that over the next three years they should invest a further £1 billion, again at 1984–85 prices. The largest service element within this total of £3.2 billion is some £1.4 billion in respect of housing.
In the course of the review of the control system which was announced in July, I have considered carefully the views both of the Welsh Counties Committee and the Committee of Welsh District Councils. They have emphasised the need for greater flexibility. They attached particular importance to being given a better view of the future trend in resources, and argued strongly for continued access to their reserve of accumulated receipts. Discussions on the way in which the system could be developed will continue in the new year.
Having taken full account of the associations' representations, the Government have decided to make a significant change to the rules governing the operation of the national cash limit. The present facility for carrying forward to the following year an underspend of up to 2 per cent. against the aggregate planning total, will be increased to 5 per cent. In addition, corrective action will not be taken to restrain spending if the cash limit is on course to be exceeded by less than 5 per cent. Any overspending will be taken into account when determining provision for a subsequent year. These changes should greatly reduce the possibility that we have to take corrective action part way through the year, and ensure that resources are not lost if there is only a moderate degree of underspending.
A principal reason for the capital overspending experienced in Wales in the last two years is that the allocation mechanism has not so far taken account of the inherent spending power provided by accumulated receipts. These are expected to amount to over £300 million next year, all but £10 million being in the district tier.
Districts argue that they should have complete freedom to spend their accumulated receipts; but not only would this have serious consequences for public expenditure control generally—and the level of PSBR—but it would 181 enable them to spend a major part of their receipts twice. This is because while housing allocations issued since 1981–82 have been calculated to include a large proportion of receipts forecast to accrue in each year, at the same time districts have been able to borrow to finance the bulk of their housing spending without needing to use the receipts built into the allocation. For this reason, they have been able to accumulate large reserves. It is reasonable to place a measure of constraint on their ability to use these receipts for a second time.
I have, therefore, decided to phase the use of these receipts by reducing, but not eliminating, the proportion which can be used to enhance the spending power of allocations in any one year. In the case of housing the proportion will be reduced by 10 percentage points from 25 to 15 per cent.
§ Mr. Edwards
For non-housing receipts the prescribed proportion will be 50 per cent. These changes should significantly reduce the pressure on the all-Wales cash limit.
Last year I gave authorities forward indications of capital allocations based on 80 per cent. and 70 per cent. for the two later years. This year I intend giving forward indications again, but linked to 80 per cent. for each year to provide a firmer basis for planning.
I turn now to the resources available for 1985–86. Gross expenditure provision underlying the cash limit for the coming year will be £349 million, marginally higher than the level of provision for the present year. When the law and order services are added the total is £354 million.
Within this figure gross provision for local authority housing is £146.5 million. Each authority will receive sufficient to cover the forward indications given them in July 1984. In addition, bids for an allocation to meet expenditure needs on privately and publicly owned prefabricated reinforced concrete dwellings will be met in full. Bids for expenditure on enveloping schemes not covered by previous allocations will also be met in full. I am making provision to enable the two existing Welsh priority estates projects to continue and for a new scheme to commence.
The Housing Corporation's net capital provision will be £39 million. I expect receipts and private sector finance to enhance that total by another £3 million to £4 million.
Total resources for roads and transport, taking into account new receipts, amount to £64 million. Within this sum I have accepted just over £53 million for TSG purposes. This will enable the three new major highway projects announced in the Welsh Grand Committee last Wednesday to start in 1985.
Gross capital provision for other service blocks in 1985–86 is over £10 million higher than the projected level of spending in the current year—an increase from about £125 million to £135 million.
The enterprise zones have been given additional resources amounting to £2.3 million to further their development. In recognition of its regional status, the Polytechnic for Wales has also been given an individual allocation of £500,000 per annum over the next few years to promote its technological development.
Other allocations have been made for major coast protection works at Prestatyn, urgent refuse disposal schemes in Swansea, Rhondda and Ynys Môn, flood 182 alleviation works in Denbigh, repairs to the Brecon and Monmouth canal, and towards the cost of replacing the headquarters of Powys county council, which have become structurally unsound.
The cash limit provision for 1985–86, which is gross spending less forecast receipts, is £249 million excluding law and order services. To calculate the total available for allocation the cash limit has added to it a proportion of housing receipts, and deducted from it estimates of expenditure not counting against allocations, such as leased vehicles and derelict land clearance. The total calculated in this way is £263 million. Of this sum about £14 million is being withheld from those district authorities which resolved to spend in excess of the voluntary restraint level for the present year. If the authorities concerned are able to realise sufficient additional receipts, all or part of the allocations withheld will be restored to them as soon as possible after the end of the present financial year. Details of allocations have been placed in the Library of the House, together with an explanatory note on the new arrangements.
I believe that the new framework for managing local authority capital spending in Wales represents a fair and reasonable compromise between the objectives of local and central government. Coupled with the level of resources that I have announced it is clear proof of the Government's desire to provide a firm foundation for a wide and effective programme of worthwhile capital schemes.
§ Mr. Barry Jones (Alyn and Deeside)
Has not the bad news been camouflaged? However, the allocation for technological development at the Polytechnic of Wales and the 80 per cent. forward indications will be welcomed. The statement can be described as being serious for housing authorities. It has grave implications for district authority powers to spend on services other than housing.
The right hon. Gentleman referred to the proportion of prescribed housing capital receipts. Does not a reduction to 15 per cent. represent a £27 million cut which will restrict the use of capital receipts for housing authorities in Wales? Is not this Scrooge-like and a poor Christmas present for the Welsh authorities?
Is not this bad news when added to the loss of about £30 million of capital spending power in the next year from non-housing capital receipts? The right hon. Gentleman appears to have had a drubbing from the Treasury. Clearly the Chancellor is out of control in terms of Welsh public expenditure needs.
Is the right hon. Gentleman aware that the Association of District Councils believes that casualties are inevitable in environmental improvement schemes, tourist projects, plans for seaside towns, the building of factories, infrastructure services for the entrepreneurial industrial innovator and recreational projects? Does not private enterprise insist upon such services before it locates industries?
Does not the statement mean fewer jobs in the building and construction industries than there were when the right hon. Gentleman took office? Does not the 1983–84 gross housing expenditure, compared with the proposed figure for 1985–86, point to a £60 million reduction? Is there not a decline in real terms of 25 per cent. for 1985–86 when comparison is made with the 1979–80 gross housing capital expenditure? Does the right hon. Gentleman guarantee that the new rules will prevent overspending and 183 that the midnight moratorium is a thing of the past? Are not the Welsh housing associations pottering along at only one sixth of their capacity, being prevented from making a dynamic contribution to the solution of our housing problems? Has the right hon. Gentleman not failed to give them an effective boost?
Is he aware that about 4,000 skilled building workers in Wales are now on the dole and that at least 14,000 unskilled building workers have lost their jobs since he took office? Are there not immense queues for renovation grants throughout Wales? Does he know that 39 per cent. of housing in Wales is of the pre-1919 era, especially in the south-east valleys? Is he aware that one third of these properties are in serious disrepair? South Wales has one of the worst records of homelessness of all areas in the United Kingdom and there are bleak forecasts of worse to come for teenage young and single-parent families. Local authority housing starts in 1983–84 totalled a miserable 1,500.
Does the right hon. Gentleman realise that his proposed funding of housing will not encourage a major attack on the problems to which I have referred? What of the backlog of housing renovation grants? Have the Government not decided, in effect, to deny themselves the chance of launching an imaginative programme of house building to the advantage both of the homeless and the jobless? This statement is a cruel disappointment. Wales will be disappointed today.
§ Mr. Edwards
At the beginning of his questions and later the hon. Gentleman drew attention to an important feature of what I said. He welcomed the future 80 per cent. indications and asked about mid-term moratoriums. A prime objective of the system that we are introducing and developing with local authorities is to give some certainty to local authorities so that they can plan their capital programmes over a period of years, have a degree of flexibility on cash limits and avoid both underspends and overspends from year to year and the necessity to take midterm action. The previous Government were faced with the problem of massive underspends, giving encouragement to spend and then having to haul in the spending powers of local authorities. We have had both underspends and overspends, and the system that we are introducing will give a great deal more certainty and assurance. It will reduce greatly the risk of mid-term action.
The hon. Gentleman asked about the effect of the reduction in the prescribed limit. He appeared not to understand that the reduction has been offset by a 27 per cent. increase in net provision for housing. He has missed the relationship that exists between the allocations made to authorities and their freedom to spend their accrued receipts. Housing provision is close to last year's figure. Estimated receipts are down and we are making a realistic assumption of housing receipts. To offset that, we have substantially increased — by 27 per cent. — the net provision for housing that is funded by the Welsh Office. We are maintaining at a high level expenditure on housing through the Housing Corporation. The corporation's power to spend will be enhanced by the new financial arrangements which we have made with the private sector for that purpose.
The hon. Gentleman spoke of the disrepair of the housing stock in Wales. I remind the hon. Gentleman that 184 the Labour Government whom he supported took practically no action on improvement grants. We have launched a major improvement programme which has substantially improved the condition of the housing stock. We have a 5 per cent. increase in the cash limit overall, which is above the inflation rate in Wales. We have a rising level of investment in the housing area and in the industrial sector. In addition, we have a massive road programme. That gives tremendous opportunity for the building industry in Wales in the year ahead.
§ Sir Anthony Meyer (Clwyd, North-West)
Is my right hon. Friend aware that, within impossibly tight constraints, and given the Treasury's obsession with the public sector borrowing requirement, to the exclusion of pretty well every other economic objective, he has had a remarkable achievement in carrying the acquiescence hitherto of most Welsh local authorities with his policies for local government financing? Will my right hon. Friend say something about the future of the urban aid programme? Is it likely to be sufficiently ample to accommodate essential redevelopment work in town centres? Is the special project school likely to be large enough to cover certain essential works?
§ Mr. Edwards
In introducing this system of control I have tried to avoid the stop-go process from which we suffered and to maintain a consistent and reasonably high level of spending. Welsh local authorities have benefited from the restraint that they have shown in keeping down current expenditure. In per capita terms, capital expenditure in Wales is considerably higher than the corresponding figure in England. That is a recognition of need and of the current expenditure policies that are followed by local authorities in Wales.
In the programme that I have announced there are moneys to provide £19 million in capital for the urban programme. That sum is broadly in line with what local authorities tell us they will spend this year. The urban programme also includes current expenditure and the total to be spent on the urban programme will be over £25 million. I can tell my hon. Friend that there is provision for the continuation of special project expenditure. We have good examples of notable housing improvement that has been carried out in that way at Wrexham and in the Rhondda.
§ Mr. Wigley
Is the Secretary of State not disguising the reality by the way that he has mischievously used statistics? Over the five years from 1979–80 to 1984–85, there was a capital investment level of £440 million per annum. Over the next three years the level will drop to £330 million per annum. That is a drop of 25 per cent. in local authority capital investment at the very time when housing, roads, schools and everything else provided by local authorities require more capital spending and not less. Will the right hon. Gentleman come clean and admit that there has been a U-turn in Government policy? Both he and the Under-Secretary of State for Wales the hon. Member for Conwy (Mr. Roberts), are on record as saying that capital receipts will be available to local authorities to make up for the lack of finances for housing, housing repairs and renovation. He and his hon. Friend are on record as saying that. There has now been a U-turn, so let the right hon. Gentleman be honest with the House and with Wales.
§ Mr. Edwards
The hon. Gentleman's accusation is incompatible with the figures that I announced in my statement. Over the six years from 1979–80, local authorities in Wales will have invested about £2.2 billion in capital projects, and over the next three years they will be investing a further £1 billion. The hon. Gentleman's allegation was wrong.
I have already told the hon. Gentleman in my statement that local authorities increased their reserves and did not spend their receipts on housing improvement at a time when they could have done so. At that stage they were underspending. We are merely asking that they should not spend for a second time in a single year or in a short period, action which would destroy the Government's public spending programme as a whole.
§ Mr. Stefan Terlezki (Cardiff, West)
I welcome my right hon. Friend's statement. It would be marvellous if we had money that we could throw about like confetti so that all the local authorities in Wales could spend it indiscriminately, but the time has come when we must be accountable to our ratepayers, and the local authorities must be good housekeepers. I am sure that Opposition Members will agree that if local authorities did not throw money away on nuclear-free zones, the Campaign for Nuclear Disarmament and all the fringe lunatics on whom they are spending money it would be available to build more roads and houses and for the social services. I welcome my right hon. Friend's support for the redevelopment of the Cardiff docks.
§ Mr. Edwards
I agree with my hon. Friend about unnecessary and frivolous expenditure by local authorities, but Welsh local authorities have made a considerable effort to meet our current expenditure targets, which is one reason why the per capita expenditure that I am announcing is nearly double that in England. It is a direct result of having lower current expenditure. I should also like to make it clear to my hon. Friend that that has enabled us to meet our commitments to cover the 80 per cent. forward indications that we gave local authorities, to meet provision for prefabricated reinforced concrete dwellings in full, to provide continuing enveloping schemes in Wales and to provide for the priority estates that have already been mentioned.
§ Mr. Coleman
May I tell the right hon. Gentleman that, despite all the flim-flam at the end of his statement, he does not put us off the scent that he is guilty of the crime of robbing local authorities of the right to spend their own money? Does not he recall his hon. Friend the Under-Secretary telling us repeatedly that the receipts from the sale of council houses would be used to build more houses? Will he say now how many houses will not be built in Wales as a result of his U-turn?
§ Mr. Edwards
The so-called U-turn to which the hon. Gentleman refers is that I have increased net provision to local authorities by 27 per cent. to take account of the fact that we shall have lower receipts in the year ahead.
§ Mr. Gwilym Jones (Cardiff, North)
My right hon. Friend's references to the enveloping schemes will be welcomed in Cardiff. Last week mention was made of a child's guide to help one to understand the rate support grant settlement. May I suggest to my right hon. Friend that it would be desirable if there were a child's guide on why our local authorities may not freely spend their own capital receipts?
§ Mr. Edwards
The reason why local authorities in Wales may not freely spend their capital receipts is that they have already spent them once and increased their reserves by some £300 million. If they now spend all of them in a single year, that will have a significant effect on the Government's spending policies and on the level of the public sector borrowing requirement. All that I am seeking to do is to ensure that, if they spend that money for a second time they do not do it all in a single year, but in a controlled way over a period.
§ Mr. Geraint Howells (Ceredigion and Pembroke, North)
I wonder whether the Secretary of State, having been in office for five years, is proud of his record towards county councils and district councils in Wales? How does he think they will react once they know the contents of today's statement? I should like to ask the right hon. Gentleman three questions. What effect will today's statement have on employment in Wales? Will there be an increase in the number of houses to be built in 1985? Finally, when will the Secretary of State stand up for the people of Wales and their rights in the Cabinet?
§ Mr. Edwards
I believe that I have a good record with regard to local authorities in Wales. That is why they have had a good settlement for current expenditure and why we are now able to maintain a substantial capital programme. The hon. Gentleman asked about employment. The biggest single contribution to employment will be provided by the rising investment that is taking place in Wales as a result of the Government's firm control of public spending and borrowing, which is keeping interest rates down, restoring company profitability and providing jobs for the future.
§ Mr. Keith Raffan (Delyn)
I welcome the additional amount for enterprise zones and the special allocation for coastal protection works at Prestatyn, but is my hon. Friend aware that Delyn borough council has accumulated capital receipts specifically for the purpose of developing Holywell, a town ravaged by unemployment, most recently by the proposed redundancies of one third of the work force at Courtaulds greenfield, and that unless the council receives a special allocation, that desperately needed development will not go ahead?
§ Mr. Edwards
As my hon. Friend has recognised, his constituency has already done well out of the allocation for coastal protection and the additional amount for the enterprise zones. I have announced the continuation of a major urban programme, including the provision of urban development grant. Of course we shall consider carefully any applications submitted by his local authority.
§ Mrs. Ann Clwyd (Cynon Valley)
Why does the Secretary of State for Disaster in Wales continue to try to persuade us that cuts are good for us when the news that he gave us this afternoon is evidently another slap in the face for the homeless, those on housing waiting lists and those who live in substandard accommodation? Is the right hon. Gentleman aware that my constituency of Cynon Valley has the worst housing in the whole of Wales, and the second worst housing in the whole of Britain? What hope does he hold out for my constituency, with the news that he gave us this afternoon?
§ Mr. Edwards
I say two things to the hon. Lady—first, that the one thing that local government has said consistently over the years is that it dislikes a system of 187 capital planning that does not enable it to plan over a period of years and involves stop-go. I am seeking to introduce a consistency that will enable local authorities to plan for the future. Secondly, the Government whom she has supported in the past did practically nothing to tackle the problem of the housing conditions in her area. This Government have undertaken a massive programme of housing improvement, and are continuing to do so through a whole range of measures.
§ Sir Raymond Gower (Vale of Glamorgan)
Is my right hon. Friend fully satisfied that, with careful administration and good housekeeping, Welsh local authorities will be able to meet their statutory obligations and fulfil the tasks that he has set them?
§ Mr. Donald Anderson (Swansea, East)
Is it not clear that, behind all the camouflage, we have yet another chapter of cuts when the need in Wales, particularly in housing, is rising all the time? As the Secretary of State said that he was proud of his record, may I recommend to him a new year's resolution, that he makes the worst year of the Labour Government in terms of housing completions his target for his best year?
§ Mr. Edwards
I am glad that the hon. Gentleman refers to the Labour Government, who slashed capital expenditure on housing over a period of years. At a time when housing receipts are falling, I take credit for having increased the net provision for local authorities by 27 per cent.
§ Mr. Allan Rogers (Rhondda)
Will not the Secretary of State take on board the fact that the capital overspending that he talked about in his statement is the result of the need and subsequent demand for adequate housing in the valley communities? In the constituency of the Rhondda, which I represent, as a result of the right hon. Gentleman's exhortations we have one of the highest rates of owner-occupancy in the country, and 18,000 people are waiting for improvement grants. What hope can the right hon. Gentleman give those people for next year?
§ Mr. Edwards
The need was there when, three and four years ago, the same local authorities substantially underspent. What I am trying to do is to introduce a system that eliminates both the underspends and the overspends, and enables local authorities to spend in full the provision that is given to them. I remind the hon. Gentleman that he has one of the best examples of a priority estate project being undertaken, in his constituency.
§ Mr. Ron Davies (Caerphilly)
May I give the Secretary of State some comfort? May I welcome his decision to maintain support for the PRC improvement programme? However, does not the right hon. Gentleman appreciate and understand that the maintenance of that programme will put a further strain on the budget available for other housing sector programmes? Will the Secretary of State 188 confirm that one of the prime justifications for the sale of council houses was the release of receipts for local authority capital programmes? Will not his decision now mean that as well as being unable to meet their existing needs, local authorities will not even have the confidence to plan for the future? Does not he realise that he has demoralised and shattered the confidence of local authorities in Wales?
§ Mr. Edwards
No, because I have set a prescribed limit at this level to increase the allocations to local authorities and spread them widely and to meet the commitment to provide for PRC schemes in full. I again repeat that the bids which have been made have been met in full.
§ Mr. Roy Hughes (Newport, East)
Does the Secretary of State appreciate that the decorative parts of his statement do not disguise the fact that this is another major blow to the economy of Wales, let alone to local government, which is tired of being made a scapegoat for the failure of the Government's monetarist policies? Does he also appreciate the devastating effect that these measures will have on the building and construction industry? This industry should be providing jobs and new homes, and should be improving those homes which are so badly in need of improvement.
Has the right hon. Gentleman drawn the Treasury's attention to the report of the chief housing officers of Wales, who in a recent report forcefully pointed out that the bulk of Welsh housing will be fit only for slum clearance by the end of this century? Has he also drawn the Treasury's attention to the report of Mid-Glamorgan chief officers, who have graphically illustrated the effect which bad housing is having on health and mortality rates in their county?
Why does not the right hon. Gentleman at least admit that this is local government money which he is holding back? Does not he appreciate that by acting in this way, the Government are destroying local government, which has such a proud record in British history?
§ Mr. Edwards
By acting in this way I hope to avoid the kind of mid-term corrective action which local authorities rightly resent and which interferes with sensible capital planning. The hon. Gentleman referred to the so-called decorative aspects of my statement. I do not know whether he means the 27 per cent. increase in net provision — that is additional Government grant to local authorities to offset falling receipts—or whether he is criticising the fact that to meet the particular problems of Wales, and in recognition of the Welsh authorities' good record on current spending, Wales has been given about £100 million more than it would have received on the equivalent English per capita basis.