§ Mr. Speaker
Before we start this important debate, I must say again to the House that many right hon. and hon. Members have written to me, stating their wish to take part in it. Several hon. Members were unsuccessful in the debate last Tuesday, and I hope that some of them may be called to speak in this debate. I understand that it will continue until 11.30 pm, so I hope it will be possible to call rather more hon. Members than it was possible to call last week. Mr. Secretary Jenkin.
§ Mr. Robin Maxwell-Hyslop (Tiverton)
On a point of order, Mr. Speaker. Would you be good enough to let the House know whether you have selected the amendments in my name, bearing in mind that this is not an affirmative resolution on the statutory instrument and that you are at liberty to select the amendments if you so desire?
§ Mr. Speaker
I must apologise to the hon. Gentleman. I should have said that I have not selected his amendments.
§ The Secretary of State for the Environment (Mr. Patrick Jenkin)
I beg to move,That the Rate Support Grant Report (England) 1984–85 (House of Commons Paper No. 151), which was laid before this House on 14th December, be approved.Before I deal with the rate support grant settlement, I shall make some general points. The system for settling the rate support grant attracts much criticism. It is complicated, partly because it deals with very large sums of money and many local authorities and partly because it tries to take account of the varying circumstances of individual authorities. As I said on a previous occasion, it can result in rough justice, but let us not forget what went before it. I remember — I am sure that several of my hon. Friends remember it—how, year after year, we all complained that the old system of rate support grant rewarded overspending. The more a council increased its spending, the more rate support grant it received. We now have a system where, under the block grant and taper and, more sharply, under the targets and holdback, an increasing proportion of higher spending comes from the ratepayer and a reducing proportion comes from the taxpayer. The system now rightly penalises overspending.
The local authority associations criticise the way in which targets are set, but the House should know that their officers are under formal instructions not to take part in consultations leading to the setting of those targets. Privately, local authority leaders welcome targets because they provide an excellent discipline which councils can enforce upon their officers. Is it too much to ask that the associations should drop their boycott and consult us at an early stage on the target formula?
I am well aware of the continuing sense of unfairness felt by those councils which have made great efforts to make savings and cut staff costs but which still face demanding targets. Our central problem is that between 1978–79 and 1983–84 current expenditure by local councils in England increased from £11 billion to about £20.5 billion. Allowing for inflation. that is an increase in cost terms over that period of 9 per cent.
§ Mr. Jenkin
Central Government have had to cope with a 4 per cent. increase in the number of pensioners and 638 with, as the Opposition never tire of reminding us, a doubling of unemployment. During that period, local government has experienced a reduction of about 750,000 in the number of children in schools.
§ Mr. Jenkin
I shall not give way.
I pay a very warm tribute to those councils — they include most Conservative-controlled councils — that have done their best to make savings, cut costs and live within their targets. I understand the very real difficulties with which they have been faced. They know that keeping public spending down is central to the economic policy approved by the electorate and endorsed by Parliament.
However, I cannot say the same for those councils— the worst offenders are all Labour-controlled—that have substantially increased their spending. They are the rogue elephants in the system and have made life extremely difficult for the rest.
§ Mr. Jenkin
Governments must be concerned with the totality of local government spending. If some authorities insist on overspending, the targets of the responsible majority must be correspondingly tougher. That has driven us to propose more direct action to curb the highest spenders. Last week, the House passed by a majority that I now understand was 101 the Second Reading of the Rates Bill, which, if the House so wills, will give us power to deal with the feckless few.
§ Dr. Cunningham
I am grateful to the right hon. Gentleman for giving way. As well as implying that pensioners and children do not live in council areas—an odd assertion—he seemed to suggest that pensioners and children were apparently reflected in central Government expenditure but not in local government expenditure. He now says that targets are necessary, and on 14 December he said that they were "tough for everyone". Does he now think that the targets which he is asking local authorities to accept are attainable? Will he be clear and unequivocal in his answer?
§ Mr. Jenkin
The hon. Gentleman will no doubt make his own speech. Very high-spending authorities — the hon. Gentleman knows them — which complain about their targets are complaining about a burden that they have imposed on themselves year after year. Their spending has gone through the roof, they have got themselves into this situation, and it is for them to decide how to get out of it.
§ Mr. Jenkin
I shall not give way, because I want to get on.
As evidence of the responsibility of the majority of authorities, let me cite the outcome of last year's rate support grant settlement. When my right hon. Friend the Member for Henley (Mr. Heseltine), now Secretary of State for Defence, announced his proposals for the 1983–84 settlement, he cut the percentage of spending met by grant from 56 per cent. to 53 per cent., and many targets were again set well below grant-related expenditure. As one well remembers, he was met by the barrage of protest. Foremost among the protestors was that prophet of doom, the right hon. Member for Manchester, Gorton (Mr. Kaufman), to whom I have given notice that I would quote him. He said: 639will it not continue to mean, record high rates, worse services and over 100,000 job losses to add to the present total of 3¼ million?"—[Official Report, 27 July 1982; Vol. 28, c. 924.]What happened? Four out of five authorities, which I have described as the responsible majority, budgeted to spend at or within 2 per cent. above their targets. In other words, the great majority of local authorities buckled to and did their best.
We have heard the usual scare stories about services, but I have seen no hard evidence that they are unacceptably low. The right hon. Gentleman claimed that there would be 100,000 redundancies. I must report to the House that during the year the latest local authority manpower figures show no reduction at all. As for so-called record rates, the general rate increase last year was 6.5 per cent., the lowest for five years.
Of course, I concede that if all the councils had behaved like the Socialist republics so admired by the Labour party, no doubt there would have been record rate increases. Last year, rates in Islington rose by 60 per cent., and in Lambeth by 55 per cent. However, the great majority of councils did their best. Indeed, some were able to cut their rates.
§ Mr. Jenkin
I shall give way when I have finished my sentence.
Birmingham, whose inner city problems are no less serious than those of Islington and Lambeth, cut its rate by 15p last year and has just announced another 5p cut this year. That shows what a sensible, vigorous Tory city council can do if it sets its mind to it.
§ Mr. John Powley (Norwich, South)
Does not my right hon. Friend agree that some local authorities, particularly Labour-controlled authorities, overspend largely because they spend their ratepayers' money on quite unnecessary goods, services and local authority employees? In contrast, Norfolk county council has to spend its money on essential items such as education and the social services. Nevertheless, it is being penalised because of the profligacy—
§ Mr. Jenkin
My hon. Friend is absolutely right. I hope that there may be some words of comfort in my speech for an authority such as Norfolk.
I come to the settlement for 1984–85. Faced with a budgeted overspend in the current year of £0.75 billion —three quarters of that overspend comes from no more than just 16 Labour-controlled authorities — I have had to increase the White Paper provision — [Interruption.] Penalties are nothing to do with this issue. I am talking about spending and there is no question of any penalties affecting the amount that they decide to spend.
§ Mr. Jenkin
I have had to increase the provision for next year by £540 million, to £20.4 billion. That is the figure for local authority current spending. Of course, that increase has put pressure on others of the Chancellor of the Exchequer's programmes. The targets that I have set are consistent with that figure of £20.4 billion.
In setting targets, I have tried to take account of the representations made to me by local authorities. The big change this year is that I have made a larger distinction than ever before between the majority of authorities which 640 have tried to find savings and the high-spending minority which have not. But I do not question for one moment that the targets imply real economies across the board even for responsible low-spending councils.
The target for most low-spending authorities — there are 233 in that category — is a cash increase of 3 per cent. over the adjusted budget for this year. By contrast, most high-spending authorities have targets representing cash cuts of up to 6 per cent. What those targets will buy will depend crucially on the rate of increase in local government costs, and two thirds of those costs are wages. A clear message of this settlement is that restraint in manpower costs is needed more than ever this year. If the local government employers concede high pay settlements this year, of course even the maximum 3 per cent. increase from budgets will mean even greater cuts elsewhere. The downward trend of manpower numbers must be resumed. Councils simply cannot expect to keep their spending below target if they allow their manpower numbers to rise.
§ Mr. Geoffrey Rippon (Hexham)
As my right hon. Friend cannot have known that you, Mr. Speaker, would not accept the amendments in the name of my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), he must have prepared a reply to it. As that amendment raises the only point at issue, will my right hon. Friend reply to it?
§ Mr. Jenkin
With great respect, it might be wiser for my hon. Friend the Under-Secretary to deal with that after my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) has caught Mr. Speaker's eye and made his point at greater length.
§ Mr. Jenkin
I have already given way to several Opposition Members.
Aggregate Exchequer grant for next year will be £11.9 billion — £90 million more than this year's settlement and £370 million more than is being paid this year when one takes account of holdback. The £11.9 billion is 51.9 per cent. of relevant expenditure, only marginally less than the 52.8 per cent. in this year's settlement.
Many councils feared a much larger reduction. In the event, the reduction in the percentage of grant is much smaller than it has been in recent years. I remind the Opposition that not only this Government reduced grant percentage. Our predecessors thought it right to reduce the grant percentage from 66 per cent. to 61 per cent. We have simply continued that trend.
I come now to holdback. As I discussed with local government in October, I am proposing a more severe scheme of grant holdback for authorities which exceed their targets next year. The arrangements are set out in paragraphs 28 to 32 of the report. To summarise, at ratepayer level holdback will be at the rate of 2p in poundage terms for the first percentage point of overspend, 4p for the second. 8p for the third and 9p for each percentage point above that.
§ Mr. Jenkin
I must get on, because many right hon. and hon. Members wish to speak.
Understandably, this scheme has aroused much concern even among responsible authorities and I should like to explain why we have had to do this.
641 The purpose of holdback is to deter overspending by increasing the cost to ratepayers of spending above target. Because authorities exceeding their targets this year will have already rated up for that excess, we must steepen the holdback tariff if deterrence is to work next year. Many councils asked for a gentler lead-in so that the penalty for those which try but narrowly fail to hit their targets is less severe than it is higher up the scale. I understand that argument, and the penalties for the first two percentage points of overspend are therefore much lower than for the higher levels. But if the first step were even smaller, I doubt whether it would have much impact on spending decisions.
§ Mr. Peter Hordern (Horsham)
So far, my right hon. Friend has dealt with the high-spending local authorities. Will he find a place in his speech to deal with low-spending authorities such as West Sussex, which has to meet nationally negotiated wage settlements of 5 per cent. for teachers and 7.5 per cent. for the police with but a 2 per cent. cash increase? It is the lowest precepted authority in the country and if it spends up to its GRE it will lose the whole of its rate support grant.
§ Mr. Jenkin
My hon. Friend anticipates my next argument. I have been asked by many why there cannot be an exemption for spending above the target but below GRE. I am aware that some of the fiercest criticisms of the RSG settlement come from authorities whose targets are set below GRE and which can therefore come into penalty while still not spending up to their GRE level.
§ Mr. Jenkin
I should like to develop my argument.
The main reason why there cannot be such an exemption is that a GRE exemption for next year would provide councils collectively with headroom for additional spending without penalty which could amount to about £500 million. When there was a GRE exemption in 1982–83, two thirds of that headroom was used by the authorities concerned. I am sure that the House understands why it would not be responsible to contemplate allowing extra expenditure — it could be £330 million—of that magnitude this time.
Some expenditure is disregarded for the purposes of holdback. We have added one third to the two existing disregards—increased urban programme expenditure by partnership and programme authorities and increased expenditure on civil defence. I propose to disregard increased spending on those community care schemes which are financed jointly with health authorities. The amount earmarked by the DHSS for joint funding has trebled since 1978–79. The new disregard is therefore an important change for social service authorities such as county councils and has been widely welcomed by them.
§ Mr. Mark Hughes
I wish to deal with a narrow and technical agricultural and rating matter. The present outbreak of sheep scab in the north of England is costing Cumbria county council £11,500. Under these proposals, it will be penalised by an additional £23,000. Can that type of disregard be included?
§ Mr. Jenkin
It is my duty under the statute to consider requests for disregard until the time of the final rate 642 support grant report relating to any year. I have taken note of what the hon. Gentleman has said, but that must be without commitment.
§ Mr. Allan Roberts
If the main thrust of the Minister's rate support grant settlement and rate capping Bill is to penalise overspenders, why has Sefton metropolitan district council, which is one of the lowest-rated metropolitan districts in the country, Conservative-controlled, and high on the list as a paragon of underspending virtue, lost £2 million in real terms in rate support grant in this settlement? If it increases its expenditure by 4.5 per cent. just to cover inflation. it will lose another £4 million on clawback. What must the Conservative authorities do to please the Minister?
§ Mr. Jenkin
I do not accept the hon. Gentleman's figure of 4.5 per cent. By far the biggest influence on that figure will be the pay settlement which is being negotiated. I have made no secret of the fact that I recognise that the targets that we have set and the holdback regime that I have described are tough on everyone. If authorities budget to spend within the targets set, the average rate increase should be quite low.
I am well aware of the anxieties of the low-spending authorities. Many authorities, while criticising this settlement, have expressed to me their very grave anxieties not so much about 1984–85 but about what they fear for the following year, 1985–86. I should like to give this assurance to the House.
I have been made very well aware that a number of low-spending authorities regard the targests that have been set for 1984–85 as an unfair use of a system which should in their eyes be intended to bring pressure primarily on those spending well above GRE. I have already said that, in the absence of any effective way of curbing the extravagance of the high spenders, the Government have been forced to seek savings from everyone—high and low spenders— in order to meet the Chancellor's spending guidelines. The Rates Bill is now before the House. One of its primary purposes is to help restrain the total of local authority expenditure. After enactment — that is a matter for Parliament—we shall, for the first time, have power to restrain the worst excesses of the highest spenders. This power will not change the picture overnight, but as it begins to take effect I would expect in 1985–86 and thereafter to be able to set targests which take greater account of GREs and thus recognise the efforts which low-spending authorities have made.
§ Sir Humphrey Atkins (Spelthorne)
My right hon. Friend has made an important statement which we shall wish to study carefully. He said that he recognises the problem of the low-spending authorities, such as Surrey, of which I represent a part. Can he assure me that his words mean that next year he will seek to deal with the difficulties which he knows that Surrey and other authorities are experiencing?
§ Mr. Jenkin
I am grateful to my right hon. Friend. Surrey is budgeting to spend just below its GRE for this year. It was well below GRE in 1982–83. Its target for next year is £8 million below its GRE. Obviously, I shall want to examine its budget for next year. On the evidence so far, Surrey is precisely the type of authority that I have in mind —an authority which has budgeted carefully and kept its expenditure below GRE and which now finds that a target which is significantly below GRE presents real problems.
§ Sir John Biggs-Davison (Epping Forest)
Bearing in mind the fact that my right hon. Friend is an Essex ratepayer, will he be more precise about what he is saying to Essex? He said that he has an expectation that something might be possible. Is that enough for Essex hon. Members who are wondering how they should vote tonight?
§ Mr. Jenkin
My hon. Friend understands the difficulty that I face. I am seeking to offer some reassurance for the year which begins in April 1985. My hon. Friend knows that the Cabinet's consideration of the totality of public spending and the entire first round has yet to begin. I understand all too clearly the position from the representations made vigorously by hon. Members representing Essex. When the authorities find themselves this year with a target that is 2.1 per cent. below the GRE, they think that it is unfair that Essex should have to suffer penalties in these circumstances. When I draw up the targets next year I shall take greater account of those authorities which have budgeted carefully and which could not, by any stretch of the imagination, be called high spenders.
My hon. Friend will recognise that there is no way at this time of the year of trying to put figures on next year's targets. It would be quite unreasonable to do so. I hope that I have described my intentions in approaching the setting of the rate support grant settlement next time round.
§ Mr. Jack Straw (Blackburn)
As we are talking about 1985–86, if and when the Rates Bill becomes law does the Secretary of State also accept the view of the chairman of the Surrey county council, published in last Friday's Financial Times, that, if rate capping works, more rate support grant will go to the capped authorities, less to the uncapped authorities, including Surrey and Essex, and therefore, in his words,other prudent authorities, will have to foot the bill"?Was the chairman of Surrey county council right or wrong when he used those words?
§ Mr. Jenkin
The chairman of Surrey county council made many assumptions in that letter which I do not accept for one moment. Much will depend on how the rate support grant settlement is drawn up in the light of the knowledge that some authorities will be spending less in 1985–86 than they are spending now. The chairman of Surrey county council made unwarranted assumptions.
Before I sit down, I want to say something about a new factor in the equation — the Audit Commission. Set up under the 1982 Local Government Finance Act, the commission was given a specific remit to look at value for money in local authority spending. The commission really got under way in April of last year, and it has already produced an impressive handbook entitled, "Economy, Efficiency, and Effectiveness" explaining how it proposes to tackle this aspect of its work. Copies are in the Library of the House, and I am sure that the commission will be happy to provide a copy to any hon. Member who wishes to have one. Copies have been sent to every local authority, and each local authority has been given an individual profile of its own spending, costs, and other data — including demographic data — together with comparisons with the figures of other comparable authorities of the same class.
These profiles and the other material in the handbook are intended to help individual authorities and their 644 auditors to identify the areas where they should concentrate their efforts in looking for better value for money and for savings through greater economy and efficiency. They provide the necessary information to enable auditors and councillors to ask the really searching questions that are needed.
The handbook's introduction states:Is the Council getting what it is paying for? Does the Council need to provide all its present services, some of which may well be geared to the needs of an earlier era? Should resources be redeployed to meet new needs and demands? Are there lower cost ways of delivering the same benefits? Is the Council being managed well? These are questions …to which, often there are no ready answers".The handbook deals generally with the arrangements that councils should have in place to ensure economy, efficiency and effectiveness in their use of resources. It should become compulsory reading, not only for chief officers but for the chairmen of policy and resources committees and of finance committees. There may be councils that cannot improve their systems, but I doubt whether there are many of them.
The first edition of the handbook contains sections on further education, police, refuse collection and purchasing. Further sections will be added progressively to cover other services as the commission's special studies of specific areas produce results and findings for general application.
I shall give the House some examples of how the handbook can be used. Let us take the mundane subject of refuse collection. The handbook records how one council cut its refuse collection costs by 30 per cent. using the ROSS computer programme devised by LAMSAC. Others have saved 15 per cent. or more. Why is it that only one refuse collection authority in eight actually uses that computer system?
On police services, the commission outlines the range of opportunities for savings that exist, including, for instance, the use of civilians. Using 1 per cent. more civilians instead of uniformed officers for administrative police work could save a typical county police force £100,000 a year. There is not a scintilla of evidence to suggest that civilianisation reduces the efficiency or effectiveness of any force. Why does the ratio of civilians to police officers in different forces range from as low as 22 per 100 officers to 59? Yet 1 per cent. saves £110,000 a year in a typical county force.
On further education, the handbook spells out the significant opportunities for increasing student numbers and reducing costs without adverse effects on the quality of education. In 1981, one polytechnic alone — the details are in the book — wasted £100,000, of which £20,000 went on rates on buildings it did not need or had already sold or which had even been pulled down. Is every education authority quite satisfied that nothing like that is happening in its area?
I consider the Audit Commission handbook one of the most powerful tools for efficiency ever put into the hands of local councillors. Time and time again, officers tell the councillors, and councillors tell the public—and, I dare say, Members of Parliament — that further economies can mean only savage cuts in services, but who in this House could put his hand on his heart and say that his council is so efficient that any further economies must mean cuts in services?
Why is it that similar authorities can produce such totally different figures for expenditure per head? 645 According to CIPFA figures for 1982–83, Tory Wandsworth spent £246 per head on all its services; Labour Camden spent £528 — more than double Wandsworth's figure—and Tory Dudley spent £290 per head compared with Labour Newcastle's £478 and Labour Manchester's £548. Spending per head is, I agree, a rough and ready comparison, but are we not bound to ask how such disparities can be justified? Are Wandsworth's ratepayers really getting half the services received by Camden's ratepayers? Are Manchester's ratepayers getting nearly twice as much as Dudley's? I do not believe it for one minute.
The hon. Member for Holborn and St. Pancras (Mr. Dobson) made an impassioned speech last Tuesday about the Inner London Education Authority. What the hon. Gentleman did not ask — and I doubt whether he ever thought of asking — is why the administrative clerical costs per pupil in the Inner London Education Authority are 80 per cent. more than the average costs in the outer London boroughs. Why are the support staff costs per pupil 86 per cent. more? Why do staff looking after school premises cost 90 per cent. more? Those are not the classroom or teaching costs; they are the administrative tail on a scale that has made the Inner London Education Authority a byword for feckless extravagance.
§ Mr. Jenkin
I shall give way to the hon. Gentleman later, as I mentioned him.
If we compare ILEA with some of the other hard-pressed inner city areas in the provinces—
§ Mr. Speaker
Order. The Secretary of State is not giving way. When hon. Members intervene, that takes time out of the debate.
§ Mr. Jenkin
I shall finish my sentence and then give way to the hon. Member for Holborn and St. Pancras.
Many of the provincial cities have large ethnic minorities. They must cope with the same problems as inner London. Yet the expenditure per pupil in ILEA is half as much again as in Coventry, Bradford, Birmingham and Wolverhampton. It is twice as much per head as in the metropolitan district of Kirklees. There is absolutely no justification for that. Savings can be made.
§ Mr. Dobson
The Secretary of State obviously did not listen to my quarter of an hour speech on the Rates Bill, or he would have understood the multiplicity of problems that affect ILEA that affect no other authority. Can he tell the House of any other education authority that has 50.000 children—one in six—who speak a language other than English at home?
Can the right hon. Gentleman confirm that Her Majesty's inspectorate of schools has fully endorsed the ILEA administrative back-up expenditure and attacked the failure to provide back-up in such councils as Dudley? Can he also confirm that the Metropolitan Police, for which the Home Secretary is responsible, costs 40 per cent. more than any other police force in Britain?
§ Mr. Jenkin
The hon. Gentleman has abused his opportunity to intervene. I quoted four or five authorities with severe inner city problems, large ethnic minorities 646 and large numbers of children for whom English is not the mother tongue. ILEA is spending half as much again as the highest spender in those authorities. It is impossible to believe that that can be justified. It is an example of the sort of comparison, broken down by function and service, that should enable councillors who genuinely want to cut out waste without damaging services to see the way to do so.
There is a another way. Millions of pounds can be saved by putting services out to competitive contract. That has been shown conclusively by those councils which have done it. Refuse collection, street cleaning, park maintenance, school cleaning and no doubt many other services can show substantial cost reductions through competitive tendering. When the savings are now proven, why do so few councils go down that road? Is it fear of the unions? Many councils have shown that it is perfectly possible to negotiate satisfactory deals with their unions and to secure real benefits for their ratepayers. What is at the moment a pioneering trickle must become a great cost-saving flood. The opportunities are there; all that is needed is the courage and the will to grasp them.
That is the way to make sure that this settlement, tough as it undoubtedly is, brings benefit to ratepayers, and I ask right hon. and hon. Members to give it their approval.
§ Dr. John Cunningham (Copeland)
Last week the Secretary of State introduced his Bill to control local democracy, and now he is springing his trap to ensnare local councils by creating conditions that will justify, in his terms, his action to take over responsibility for local budgets, rates and services. As the intervention of my hon. Friend the Member for Blackburn (Mr. Straw) so clearly demonstrated in respect of Surrey, the authorities that will be caught in the trap will not be restricted to the right hon. Gentleman's favourite hit list. The mess of local government finance that has been created by this Administration is now so unravellable that the trap will catch authorities indiscriminately, as I have no doubt many Conservative Members are dying to tell the right hon. Gentleman. I am sure that they will be armed with examples to support their argument. Surely no one in the House can mistake the Government's strategy. It was clear when the right hon. Gentleman made his announcement to the House on 14 December 1983 that most ratepayers would face steep rates increases in the spring as a direct result of the Government's policy.
The rate support grant that we are asked to approve involves further massive cuts in the cash that the Government are willing to give councils to support the services on which their communities depend. The report marks a further shift of the burden of taxation away from direct taxation, for example, to every rates bill in the country. It is further confirmation, if more were needed, of the Government's intention to sustain a disgraceful assault on local government and local democracy. The cash cut of £100 million in block grant is, after allowing for inflation, a cut in real terms of well over £600 million. That is equivalent to a rates increase of at least 8p in the pound.
The Association of Metropolitan Authorities has estimated that on average the Government's proposals will cost householders another £21 per year at least. It estimates that the cost will be more where councils are penalised by the Government. Council tenants will be 647 worse off because of Government-enforced rent increases. The Government's proposals do not even keep pace with inflation, and they have been condemned as unrealistic, arbitrary and a deception of the public by the Conservative-controlled Association of County Councils. Its anger is understandable and must be as well known to Conservative Members as it is to us. I assure the House that it is well known to us. It has been demonstrated by the volume and strength of the representations that have been made to us by Conservative councils and the Conservative leaders of the councils. Ministers and Government supporters cannot be in any doubt about the intensity of the feelings of their Conservative colleagues in local government.
The Association of County Councils has stated that local councils face anintolerable choice. Rates increases will be far in excess of inflation or major cut-backs in essential services will take place.That is a quotation from the evidence that was submitted by the association to the right hon. Gentleman when its representatives went to see him.
The Government's grant penalty system will penalise harshly and unfairly all those authorities which, over the years, have done their best to meet the Government's requests. The targets allow only a 3 per cent. cash increase compared with the Treasury's estimate of 5 per cent. inflation, which is probably an underestimate. I noted the Secretary of State's refusal to say whether he believed that the targets that he is setting were attainable.
Similarly, the Conservative-controlled Association of District Councils has stated that the Government's policies are likelyto produce a wide range of rates increases across the country.Even if there is spending on the lines that the Government request, the association estimates that more than 180 district councils will have rates rises of 5 per cent.— that is 63 per cent. of all districts — while dozens will have increases of over 10 per cent. It estimates that some councils will have rates increases of 20 per cent. I remind the House, ratepayers and all local electors that in 1979, when we had a Labour Government, local councils received 61 per cent. of all the expenditure that was necessary to provide local services. The Secretary of State rather disingenuously referred to that as being a reduction. He was right, but it was a reduction in a growing total. He is reducing a declining amount, and that is the major difference between the policies being followed by this Administration and those that were followed by the previous Labour Government. It is proposed to reduce the sum yet again to 51.9 per cent.
A massive reduction of rate support grant has taken place under the Governments of the Prime Minster. Penalties in the form of fines on councils which try to maintain services—their only crime is to want to protect the elderly, families with young children and the sick and disabled while keeping down transport costs and fares and keeping people in jobs—will reduce the actual level of support to below 50 per cent., which is what they did in 1983–84. The level of support will be reduced perhaps to as little as 48 per cent. of the total. Councils which refuse or fail to comply with these arbitrary and nonsensical ceilings will face the most vicious penalties on record. They will amount to fines on councils of up to £6 for every £1 that is spent without the right hon. Gentleman's approval.
648 In other words, local ratepayers are facing a double betrayal by the Government. First, the overall amount of grant has been slashed. That means that every council, including those that are spending within their ceilings, will receive less cash for community services. They will be forced to cut those services or to increase their rates, or both.
Secondly, the Government's fines will take money away from ratepayers when their inadequate and unrealistic ceilings are not met. The choice facing local councillors of all political parties is horrendous. In real terms, the Government's policies could mean 12,000 fewer teachers, 11,600 fewer social services residential places, 8,300 fewer day care places, 46,200 fewer homes attended by home helps, over 58,000 fewer meals on wheels per week, 2,400 fewer children boarded out, 7,100 fewer policemen, 7,150 fewer support staff for them, over 3,300 fewer firemen and 2,700 fewer jobs in road maintenance. There could be increased fares, reduced bus and train services and reductions in concessionary fare schemes. Those are the estimates of the Association of Metropolitan Authorities, and they have not been challenged, let alone refuted, by the Minister.
When will more Conservative Members face the reality of the direction in which the Government's policies are leading us? If a recovery is under way, as is claimed, why are all these measures necessary? Why are those who live in Tory-controlled counties and towns being punished, in many instances after decades of unbroken Tory domination of councils? The truth is that the policies have nothing to do with a few high-spending Labour authorities. That is a deception that has been practised by Ministers. The Government's policies are undermining council services throughout the country regardless of which political party is in control in the shire halls and the town halls.
In the documents leaked in December, the Secretary of State himself advised his colleagues thatreal terms reductions are required from all authorities, including those which have tried to meet targets in the past.The Secretary of State wanted to establish his own campaign unit to cloak the harsh reality in some kind of Government propaganda, but the Prime Minister clearly did not trust him or the Department to do the job properly, as she disapproved of the plan and we now learn that it is in the hands of her own press officer.
As my hon. Friend the Member for Workington (Mr. Campbell-Savours) pointed out, The Guardian last Friday revealed the contents of yet another leaked document. I have always supported the case for a freedom of information Act, but I begin to wonder whether it is really necessary. We learn from that document that in addition to central control of local councils Mr. Bernard Ingham is now calling for—note the language—"neutralisation" of "dissident elements" among the Government's own supporters to prevent the Government's attacks on local councils being frustrated.
Other proposals includeremedial action with troublesome journals".What can it all mean? Will it mean fewer gongs, no more knighthoods and a more vigorous reselection process for Conservative Members? Is there to be a Finchley gulag? The mind boggles. Perhaps the right hon. Member for Cambridgeshire South-East (Mr. Pym) will be sent to a correction seminar with Professor Walters or Professor Friedman. In any event, more and more people believe 649 that the journals and newspapers in need of remedial treatment are those that support the Government's policies, not those that oppose them.
The Government cannot disguise the fact that in the coming year grants to local councils will be at least £2,800 million less than in 1979 although there was then far less unemployment, deprivation and hardship than there is now. Yet again, we are being asked to approve the redistribution of resources in favour of the better-off and away from the people most in need. As the latest edition of the Government's own publication, "Social Trends," makes clear, the position of people in need of community support and services is deteriorating. The Financial Times analysed that document and concluded:The gap widens between the 'haves' and 'have-nots'.It is to the shame of the Government in general and the Secretary of State in particular that the House is now being asked to support more of the same policies.
That charge is borne out by the fact that even the neediest communities — the so-called partnership and programme authorities — which the Government recognise as having desperate problems, have lost £231 million in holdback alone since 1981–82. Even if those authorities were able or willing to decimate their services in the 1984–85 financial year and even if they met the Government's imposed ceiling, they would lose a further £40 million in block grant—more than a quarter of the total urban programme specific grant. That is just one aspect of the policy that the Secretary of State asks the House to approve today. Is that what he and the Government regard as fair and equitable in the prevailing climate?
In London, the total grant entitlement is cut by about £100 million in real terms. Although the GLC entitlement is to be increased by £24 million, in practice that authority and ILEA, about which the Secretary of State had much to say, will receive no block grant at all. There will be no block grant support for Londoners living in the GLC area and no block grant support for the children, teachers and other staff at schools in the ILEA area. That is disgraceful.
In the inner London boroughs, entitlement is cut by £44 million in real terms. For outer London boroughs the entitlement is reduced by £65 million in real terms. This represents a real onslaught on London by the Government. Those figures are based on the Government's unrealistic targets and show how shabbily the whole of London, both inner and outer, is being treated.
The penalty system is likely to make the situation even worse unless savage cuts in services are implemented. Preliminary estimates by London boroughs suggest that the cash loss could be up to £150 million, which represents a 37 per cent. reduction on the current financial year.
The Secretary of State has made much of the Audit Commission report, but does he really believe that this is the most efficient way to redistribute resources or reorganise finances?
§ Mr. Nicholas Baker (Dorset, North)
The hon. Gentleman spoke at length about fair redistribution of resources. Does he accept that under Governments of both parties there has been, and still is, unfairness in the way in which resources are distributed as between the high-spending authorities and the lowest-spending authorities? Would it not be progress if the lowest spenders were 650 protected from percentage increases under this rate support grant adjustment so that they receive a fair allocation of resources in the future?
§ Dr. Cunningham
I agree that there is unfairness, but I do not assume that because an authority is a high spender it is by definition profligate or careless. The high spending often reflects the needs of the community that the authority seeks to serve. We cannot accept the simplistic view that high spending is by definition wrong and low spending by definition right and efficient.
The penalty system imposed by the Government will make things much worse for all authorities. If there is a reduction of 37 per cent. compared with the current financial year for the London boroughs, the loss of support for the people of London will be more than £300 per household since the Government came to office. The absurdity of the system is best illustrated by the fact that, using GRE as a yardstick, as the Government now intend, the City of London is defined as a huge overspender, spending 3.3 times the amount that the Government say that it should spend.
Many authorities which do not provide the services on which it is based now receive GRE on equal terms with authorities which do. For example, Gloucestershire receives support for nursery schools although it has no nursery schools. There are countless examples to illustrate the absurdity of the Government's system. The unique achievement of their system of local government finance is that it supports councils which do not provide services and penalises those which do. Is that the way to encourage local accountability?
When the Secretary of State circulated documents to his Cabinet colleagues in December, he said:It is the time of year for scare-stories on rate increases, even from Conservative authorities.The system has produced massive reductions in grant to Tory-controlled shires. Surrey lost £11 million in this financial year, and it will lose another £9 million in 1984–85. Hampshire will lose at least £4 million in the coming financial year 1984–85.
Hertfordshire, another Tory-controlled authority, has lost £9 million in the current year for spending at the level that the Government requested and will lose a further £900,000 in holdback. Hertfordshire will lose at least £8 million in the coming financial year, even if it accepts the Government's ceiling. The present situation in Hertfordshire is so bad that some schools depend more on covenants from parents and private fund-raising efforts than on support from Government grants. Indeed, at a recent lobby of Conservative Members representing Hertfordshire those facts were drawn to their attention. Those hon. Members expressed genuine surprise and concern about the effect of the cuts, which they attributed, in part, to the harshness of Government policies, but they refused to oppose them. That is not the way to represent the people of Hertfordshire.
In Tory Essex, too, it has been made clear that rates will need to increase by 7p in the pound in the coming year to maintain services, the alternative being serious reductions in those services. Indeed, the list is endless, and every member of the Association of County Councils will be clobbered by penalties.
Something more akin to panic seems to have gripped Tory-controlled Kent county council. Kent is in danger of being in the highest penalty list, in spite of its years of 651 cutbacks. According to one of its chief officers, the county council has stopped requisitioning equipment, restricted the use of supply teachers, placed an embargo on the use of telephones in schools, and the painting and decorating of schools has been postponed. So the list goes on. It is all set out in a letter from one of the chief officers of the county council. It is not a figment of our imagination. Does the Secretary of State regard it as a scare story, or does he accept that it is the reality of life in the counties under this Administration?
In view of the examples that I have given, examples from districts, boroughs and shires, both Tory and Labour-controlled, and in view of the fact that every local authority association has condemned the report and the controls and penalties that prop it up, is it not an utter deception, a complete untruth, for the Secretary of State to claim, as he does in paragraph 7 on page 4 of the report, thatThis should enable the Government's policies for individual services to be broadly maintained"?How can services be broadly maintained when we know what is happening, and when we know that there is more to come? Nothing could be further from reality; nothing could he further from the truth. With his now somewhat infamous computer, the Secretary of State epitomises the man who has come to know the price of everything and the value of nothing.
There was a revolt last week against the Prime Minister's attempt to devalue people's votes. How much longer will Conservative Members, who apparently feel that they have nothing to fear from their electors, go on saying to the communities that they represent, "Yes, we intend to go on voting for cuts in all your services; yes, we will vote for reductions in Government support for those who need it most; yes, we have swallowed hook, line and sinker the fact that all this is the result of a handful of Labour councils; yes, we will treat with contempt the representations made to us by our Conservative colleagues in local government; and yes, we will support a Bill to usurp democratic elections that would prevent the worst excesses of this"? With that Bill and this report, councils, communities and those who serve them are caught in a vice. The trap in this report will hasten a local government financial crisis in 1984–85. It will bring it on—perhaps engineer it quite deliberately, so as to justify the Bill.
The Opposition will work to defend all those who are threatened by the Government's policy. In doing so, we hope to leave the country in no doubt that the solutions to the problems can begin only by the rejection of the authors of the Bill and the report—this Government. I hope that the House will reject the report.
May I press the Secretary of State on a matter that I have raised before? Why has he still not introduced a second supplementary report for 1982–83? I asked him about that in December, and it is now long overdue. Does he not realise that the first such report was debated a year ago? Why is he delaying and withholding information from the House and the councils concerned? Is it because it is a somewhat serious embarrassment for him to acknowledge that this Government owe the GLC money? They owe the GLC £100 million in grant that has been wrongfully withheld. How many other authorities are waiting for grants that the Government have delayed in paying? Why cannot we have that report?
For rate support grant, the Secretary of State's ceilings represent the test that he imposes, while in his Rates Bill 652 grant-related expenditure is used to undermine councils' budgets. If, in 1984–85, county councils, excluding the metropolitan counties, spend only to their GRE targets, they will lose £761 million in grant. Is that realistic? Is that what the Government expect from the shire counties? As the Association of County Councils says,The operation of targets has robbed G.R.E.s of their last vestige of credibility. Very few Shire authorities will be in a position to pay attention to their G.R.E.s in fixing their budgets.For example, West Sussex would lose all its block grant if it spent at GRE level. Berkshire would lose 60 per cent. of its grant, and Kent would lose 42 per cent. of its grant. That shows how preposterous the proposal is.
The total grant lost nationally for spending at GRE level would be £1,100 million—one eighth of the entire grant available to all local authorities. It is no wonder that in an unprecedented decision the ACC says that unless these deficiencies are remedied, the Association of County Councils would prefer to see this report rejected by the House. It has never said anything like that before. The report is indeed Byzantine in its complexity and obscurity.
It is now clear why the Secretary of State has set an exclusion limit in his Bill at a figure of £10 million. That is clear from the figures in the report and those associated with it. If his test of 1983–84 budget over GRE is used to construct his now infamous hit list, the authorities that he apparently hates most—Newcastle upon Tyne, Islington, Sheffield, Tyne and Wear, Manchester, West Yorkshire and others—cannot be included on the hit list because many other authorities come out of that test far worse. The Secretary of State therefore introduced his £10 million budget caveat to ensnare the councils which, for his own political purposes, he wants to ensnare.
Can public expenditure best be controlled by restricting dozens of small authorities that overspend by a few million pounds or — as the Secretary of State believes — by tackling one or two very large authorities and using them as an example? There is patently no fairness in what the Secretary of State proposes. Will he confirm that — as reported in the Financial Times today —he is now to introduce yet another spending target, not consistent with those already in existence, so that he can finally ensnare the local authorities that he wishes to ensnare? The treatment of the GLC and the metropolitan county councils in the report seems, as was said in The Times, to be contrived to bring about an easier path to their abolition. To justify them as overspenders, the Secretary of State is imposing ceilings which it will simply be impossible for them to meet without swingeing cuts and massive sackings. The distribution of transport supplementary grant was also deliberately loaded against the metropolitan councils.
Against the background of the absurdities that are now endemic in the Government's approach to council finance, how can the Secretary of State really expect this system to endure? It simply does not work. It is grotesque in its complexity. Authorities cannot plan from one year to the next with any certainty of being able to maintain their services, and all this is done in the name of efficiency.
In a recent letter to me the Prime Minister pretended that she and her Government are committed to the protection of the individualwhere he is being unreasonably oppressed".The Government have brought local authority finance to a totally unreasonable state. I join all the local authority associations in calling for the rejection of the report. I 653 repeat my suggestion that the Minister should now institute urgent discussion with local authority associations on an all-party basis to find a way out of the mess that he and his right hon. Friends have created.
§ Mr. Francis Pym (Cambridgeshire, South-East)
The hon. Member for Copeland (Dr. Cunningham) made some very good points, but I received the impression that he had forgotten too easily the state of our national finances when the Labour party left office in 1979. I must remind him that the previous Labour Government could not be described as a model of fairness in relation to local government finance. I hope that the Secretary of State will be the man to put that right.
It is with regret that I find myself in disagreement with the Government about local government. Last week I was unable to support the Rates Bill because the general powers in it go too wide and are not defined, and because it is a centralising measure. Because of those characteristics, I think that the Bill will damage the independence of local government, and all for achieving a saving that will be marginal on a national scale and, for the ratepayers affected by it, rather less than their hopes and expectations. There is a need for rate capping for those authorities which can be shown to have abused and exceeded their powers, but it must be done in accordance with criteria which are clearly laid down, and there are no such criteria in the Bill.
Today we are discussing the rate support grant report and this, too, presents genuine difficulties. The high hopes of the Government of abolishing the rates, and indeed their undertaking to do so, were abandoned before the last election. Apparently, having gone into the matter in great detail, they found that all the alternatives were worse. We are therefore continuing with the rates, which remain as unfair as they have always been. In my view, in that situation, the Government ought to have set about reforming local government in other ways and not resorted to short-term expedients such as the Rates Bill.
In the 1970 Parliament there was much talk of reform of local government finance. It did not happen then and it has not happened since, and the consequence is the present unsatisfactory arrangement of rates, rate support grant and the Rates Bill. Not many people regard that as a sound basis for local government finance. It is a botched-up method that must be straightened out. My right hon. Friend must introduce better methods in future—he has made some remarks about that—but in the meantime we can use only the existing machinery.
I fully support the Government in their efforts to contain public expenditure and wherever possible to reduce it. However, whatever method they use to achieve that must be fair as between one authority and another. Local authorities approach their responsibilities in different ways. Some regard their power to raise rates as a licence for profligacy. Others believe that their duty is to spare the ratepayer as much as possible and to be as economical as possible. The object of policy ought to be to reverse the extravagance of the former and encourage the good housekeeping of the latter. Unfortunately, that has not been done in recent years and it will not be done under this report. Indeed, the Secretary of State has ackowledged some of the shortcomings.
654 I speak for the low spenders. I can tell the House about the experience of Cambridgeshire. From its inception in 1974, Cambridgeshire county council has followed the policy of economising and making savings wherever possible, and raising the minimum rate necessary to finance the services that the council and the electors feel are necessary. The policy of the county council has been to spend less than GRE and not to increase its spending by more than the rate of inflation. In 1978–79 the council introduced its own cash limit system, ahead of the Government's cash limit policy.
Cambridgeshire ought to be in the Government's good books. It should be looked up to as an example. "Here is a council that is following our guidelines, as they should all do", the Government should have said. Not a bit of it. Under this report, Cambridgeshire, for providing the services that the electors believe to be essential, and doing so in the most economical way, is to be penalised. The GRE was fixed for 1984–85 at £205.5 million, an increase over this year of 6.7 per cent. Taking all the factors into account, that was what the Secretary of State judged in his GRE. However, the block grant is based not on the GRE but on the current year's budget. On that basis, Cambridgeshire is given a target of £194.5 million, which is 2 per cent. up on this year's budget. The report states that it is an increase of 3 per cent. but in reality it is 2 per cent., because the national insurance surcharge falls to 1 per cent. in April and the target has been reduced to take account of that. Either way, it is £11 million short of GRE, and on top of that there is a further reduction in grant from 39.5 per cent. to 37 per cent.
In fact, from its first budget in 1974–75 to the current year, Cambridgeshire has seen the block grant come down from 62 per cent. in 1974 to 39.5 per cent. in 1983, a loss of income equivalent to 50p of the present precept of 129p, yet that current precept, discounted for inflation, is the same in real terms as the precept for 1974–75. That massive loss of grant has been absorbed by increased efficiency and marginal cuts in services. I think that the House will agree that that is a good record, much better than average and, I think, better than that of Her Majesty's Government. The report cuts the block grant by a further 2.5 per cent. this year.
The council's estimated budget is £198.5 million, £7 million less than GRE. If that is agreed, the result will be a penalty of £4.5 million. Although the council would spend 3.5 per cent. below GRE, a fine of £4.5 million is to be imposed. That is a tax on the electors of Cambridgeshire, and it cannot be justified. If it spent the whole of the GRE. it would have a fine of £28 million, which is impossible.
The council's proposed budget includes many savings in relation to schools and highways, privatisation and increased charges — all the things that my right hon. Friend the Secretary of State mentioned in his speech. The budget has to absorb pay awards that are above the going rate. The police and fire service awards have been agreed, and they are above not only the target but the rate of inflation. Others are to come. The budget also has to absorb the cost of new legislation, which imposes additional duties on local authorities. The Education Act 1981, the Mental Health (Amendment) Act 1982, the Criminal Justice Act 1982 and others are all sensible, progressive measures, but the cost of discharging the duties under them adds to the penalty.
655 On top of that, there is the difficult question of bus subsidies. The Government want the National Bus Company to break even, which is a legitimate aim, but we should consider the problem that that causes to local authorities. They have not been allowed the money to increase bus subsidies. The alternative is to reduce services. In the rural areas, that gives rise to serious deprivation for a minority of citizens.
All that has to be accommodated in a budget that is permitted to be 2 per cent, more than that of the current year, compared with the Secretary of State's assessment of a 6.7 percent, increase. As things stand under the report and on the assumption of the budget that I have described, the rate increase will be 11 per cent. If it were not for the penalty and for the reduction of grant, the increase would be only 5 per cent. — in other words, in line with the current rate of inflation. To put it another way, the ratepayer will have to find 5.1p for penalty and another 1.5p for loss of grant, despite the council's maintenance of very careful economy.
Therefore, this low-spending authority, with one of the highest population growths, is being fined for its carefulness. The methodology that gives rise to that cannot be acceptable. The Secretary of State is not dealing with the overspenders, as he is trying to do, but clobbering the underspenders. What is worse, that fine is based on the rates, that unfair tax that the Government have failed to abolish. It will be raised not for the benefit of the ratepayer, the ratepayer's family or Cambridgeshire, but for the benefit of the Chancellor of the Exchequer.
In some respects, the districts are even more badly affected. The targets do not operate to equalise expenditure levels. I know that in theory they are not intended to, but they should. At the moment, they are exacerbating the differences. The lowest-spending district in Cambridgeshire is spending £23.28 per head this year and is allowed to spend 70p more in 1984–85 under the report. The highest-spending district is spending £63.52 this year and next year is allowed to spend an extra £1.55. Therefore, the highest-spending council is allowed to spend more than twice as much extra as the lowest-spending council in 1984–85. To put it another way, very low-spending councils can spend less than 70 per cent, of GRE and lose all their grant, and other councils can spend in excess of GRE and still qualify for grant. That does not make sense. I do not see how it can be justified to the people who are called upon to make that payment.
On a regional basis, there is no doubt that East Anglia gets a raw deal. Its grant aid is more than 20 per cent, below the average for England and Wales, at £55 per head. That shortfall has to be made up by the ratepayer, whose average earnings in East Anglia are well below the national average. That does not seem to be very just. East Anglia is the lowest-spending local government region, with expenditure of £107 per head. However, that achievement and the careful housekeeping it represents work against the region, because past spending is the significant factor in fixing targets, and not needs.
Nationally, the targets for local authorities in England are 3.3 per cent, over GRE. In East Anglia they are 4.6 per cent, lower than GRE. Therefore, low-spending East Anglia gets low grants. That is the criticism that I make. It is inherent in the amendment on the Order Paper in the name of my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop). That is the policy that must change. The high-spending authorities should get low grants. It is 656 they that have scope for savings. In putting this case, I think that I am speaking for most, and perhaps all, of my hon. Friends who represent Cambridgeshire and those in many other counties.
The present system is unacceptable. I cannot support it. My present inclination is to vote against it. My constituents did not elect me to have a tax like this inflicted upon them. We must have a better method. The Secretary of State spoke about the future. I am grateful for what he said. He said that he could speak only in tentative terms. However, can he be more specific? Can we have some clearer undertakings in the winding-up speech? Is it possible to say that next year the Secretary of State will stop penalising low spenders? Can he give them some encouragement and incentive? Can he get away from the practice of basing targets on budgets, with all the unfairness that that entails? Will he be rigorous in dealing with overspenders, not just by capping—I suspect that that is the only weapon immediately available to him if the Rates Bill is passed—but in his allocation of the block grant? Those are the questions to which I should like an answer, as would several of my hon. Friends.
My right hon. Friend has time to make the changes before next year. I, and I think many of my hon. Friends, expect big changes before he comes to the House with a report for 1985–86. I urge him to use that time to devise a method that is fair and that we can all support.
§ 5.8 pm
§ Dr. Oonagh McDonald (Thurrock)
I am glad to be able to take part in the debate, having tried earnestly to take part in the debate on the Rates Bill last week.
I listened carefully to the speech by the Secretary of State for the Environment. Once again he made vague promises and vague statements of intention about the future for Essex county council in 1985–86. However, we are particularly concerned about the coming financial year.
Members of Parliament representing Essex on both sides of the House have made more than one approach to the Government on behalf of Essex county council asking for the special problems of Essex to be taken into account. The Government this year have had something to say about the target for Essex county council. This follows repeated pleas made by Members of Parliament supporting that county. I can do no better than to quote from the briefing sent not even by the Labour group of county councillors on that council but on behalf of the county council, which has, of course, a majority of Tory representatives, as it has had for a long time past. The official briefing says:The rate support grant settlement for 1984/85 has set the Government's target figure for Essex at £473.5 million, i.e. a £6.5 million shortfall.That leaves Essex with the plain choice of making further cuts in its expenditure or exceeding the Government target and incurring grant penalties.
We heard so much last week about the high-spending Labour authorities. We heard even from the Tory Back Benches about the so-called rotten boroughs in which the voters had the temerity continually to vote Labour and to allow for high rates payments and high spending on the services. In the view of the Government and their supporters, the voters had the cheek to appreciate this expenditure so much that they continued to vote Labour, despite the pleas of the Government and their supporters 657 to do otherwise. The irony of it all, as we have already heard from the right hon. Member for Cambridgeshire, South-East (Mr. Pym), and we shall no doubt hear from other Members of Parliament representing Essex, is that Essex, as a low-spending authority, is about to incur the displeasure of a Government who have already ignored the pleas for additional Government help to meet the manifold problems of Essex.
§ Mr. Straw
Would my hon. Friend accept the further irony and twist that some authorities picked out by the Secretary of State as profligate high spenders, including Manchester and Newcastle, have increased their spending by far less than Essex or Cambridgeshire? Manchester, for example, has increased its spending by only 66 per cent, since 1979 compared with the 86 per cent, for Cambridgeshire, and has cut its staff by five times as much as Cambridgeshire, yet it has had to suffer far higher penalties than authorities such as Cambridgeshire and Essex.
§ Dr. McDonald
I thank my hon. Friend for his intervention, which shows the incredible irony of the Government's approach. One can only assume that the Government's approach is so blinkered that they have had their eyes fixed on certain Labour authorities and have taken no account of the needs and aspirations of voters in one local authority after another up and down the land. The extent to which the Government have ignored their own supporters in this matter was shown last week when a former Cabinet Minister, the right hon. Member for Chelmsford (Mr. St. John-Stevas), voted against the Government and at least one other hon. Member representing Essex abstained and refused to support the Government, no doubt prepared to put his money where his mouth was in the consideration of needs. The Essex authority is not only a low spender but, in the eyes of many of the inhabitants of Essex, a notorious low spender.
Reference is made in a submission from Tory Members of Parliament representing Essex to an extensive management review by the former Secretary of State, now the Secretary of State for Defence, in which he could find no areas where significant savings could be achieved in the county council. Savings may be achieved under the Government's target figure and under their threats, but those savings are at enormous cost to the community.
The county council talks about the closure of nursery classes and schools, teacher redundancies, closing the adult education service, closing branch libraries, reducing the number of firemen and appliances, and so on. The submission from the Tory Members of Parliament representing Essex spelt that out in further detail by describing the reduction of teacher numbers beyond that achieved by falling rolls, even though the present Secretary of State for Education and Science advised the chairman of Essex education authority that he should be spending more money and not less on education in Essex, up to its grant-related expenditure.
Reference is made to a reduction in the number of police in spite of the fact that the M25 through Essex has now been opened and the A13 has now been dualled, two roads that make extraordinary demands on the police. In the first six months of last year, no fewer than 500 serious road accidents in my constituency were reported by the police, all of which took their toll upon the local accident 658 and emergency units. Despite the demands on the police, there has been an increase of only 10 policemen for the whole of Essex, and this from a Government who have come to office on more than one occasion with a commitment to law and order as one of their major planks. Law and order cannot be achieved without proper policing or the right number of policemen on the beat, where it matters. I am frequently in touch with community groups of all kinds in my constituency. Even local wards of my Labour party — this might surprise Conservative hon. Members — which want to see community policing in the constituency find that the county council has neither the number of policemen nor the resources to make such policing available.
Even more alarming is the possibility of Essex county council reducing its fire cover, even though, to quote again from the submission of Tory Members of Parliament representing Essex,Her Majesty's Inspector again warned that Essex is already substantially below Home Office requirements".I intend to pursue this matter with the Home Office since I am not satisfied with the reply of the Home Secretary to my question today.
As the hon. Member for Castle Point (Sir B. Braine) knows, both his constituency and mine are in areas of great hazard due to the large number of chemical and oil installations, regarding which, if there were a serious fire, both he and I would be asking questions of the Home Secretary as to why adequate cover was not provided. This is nothing but alarming from the hon. Gentleman's point of view and from my point of view. I know how deeply concerned he is to protect the health and safety of his constituents.
§ Sir Bernard Braine (Castle Point)
The hon. Member for Thurrock (Dr. McDonald) will know that not only am I concerned, but I have made the strongest possible representations on the subject both recently and for many years. I hope to catch your eye a little later, Mr. Deputy Speaker, to expand on this point.
§ Dr. McDonald
I thank the hon. Gentleman for his intervention. I hoped that I had given adequate recognition in my remarks of the work that he has done in that regard. Both he and I know that we are up against it with this kind of limit on county council expenditure in that we can no longer take for granted the safety of the constituents we represent, particularly in that part of Essex that represents the area of greatest hazard. I am alarmed and horrified —I have no doubt that the hon. Gentleman shares my feeling — with the reply that I have received to the question I tabled today concerning the Home Secretary's apparent dismissal of these anxieties and the fact that the Secretary of State for the Environment is obviously not prepared to take these serious matters into account.
Suppose that there were that sort of serious accident in Essex, which neither the hon. Gentleman nor I would wish. He and I, along with other hon. Members who may have constituents working in the area, such as the hon. Member for Brentwood and Ongar (Mr. McCrindle), would come to the House and demand to know the reasons for the failure to protect our citizens. The rate support grant target shows us the reason. It is the Government's penny-pinching, narrow-minded and ideological viewpoint. In attempting to pick out "rotten" Labour boroughs, 659 the Government are prepared to penalise vast sections of the population by putting them seriously at risk through cuts in expenditure.
Less dramatic risks are incurred by cutting social services expenditure. The county council's brief warns of the possibility of closing homes for the elderly. I regularly visit such part III accommodation in my constituency and I know of the increasing demands made on staff there by general cuts in public expenditure. Cuts in NHS spending mean that geriatric wards may be closed and patients who would normally be cared for in those wards are often put into part III accommodation. That puts enormous demands on the staff of those homes. I do not criticise them; the staff in my constituency work extremely hard, but they are not doctors or nurses and the demands made on them because of the dependency of patients are much higher than they used to be.
Another consequence is that many elderly people who ought to be in part III accommodation have no chance of getting it and are cared for by such warden services as can be provided by district councils and by the county council's home help service. Many of those elderly people live miserable lives because of the cuts that have already taken place.
Less dramatic are the effects of cuts in education. Essex county council's brief refers to cutting nursery education. Cutting nursery education in Essex would be virtually to obliterate it. There are only two nursery schools and 38 part-time nursery classes in the county. The county council reduced expenditure on nursery education to £2.80 per child last year and imposed further cuts in the current financial year.
The penny-pinching of the county council can be demonstrated by a recent example from my constituency. Herringham primary school, which I visited on Friday afternoon, was burnt down by an arsonist. There may be little that we can do to stop arsonists, but the school governors have repeatedly asked for a resident caretaker or an alarm system connected to the local fire station or police station. Those requests have been ignored, and now that the school has been burnt down the much greater expense of rebuilding it will have to be incurred. Penny-pinching may not only impose great burdens on those on the receiving end of restricted services but may prove a short-sighted policy.
Essex county council has a comparatively low achievement in secondary school examination results, even though the county is comparatively well favoured. I do not include my constituency, most of which counts as an educational priority area. There are 63 local education authorities with more than 4,000 school leavers. In the academic year 1980–81, Essex came 24th in the O-level stakes and 47th in the A-level stakes. That was a pretty poor achievement in a county where many children— not all — do not face the sort of problems faced by children in the ILEA area.
Cutting expenditure in Essex could lead not only to serious risks but to an impoverished life for children, the elderly and other groups that depend on the services provided by local authorities. Essex is not a high-spending authority; it is a low spender. It is a Tory-controlled council and 15 of the 16 parliamentary constituencies are represented by Tory Members. I hope that every one of those Members will join the Opposition in the Lobby to 660 vote against a target which they must know in their hearts Essex cannot possibly achieve without imposing intolerable burdens on all our constituents.
§ Mr. Robin Maxwell-Hyslop (Tiverton)
On Friday, I tabled an amendment to the substantive motion before us. I did so in an attempt to focus the debate on what I consider to be the principal defects of the report which can be remedied only by its withdrawal.
It is often not known outside the House to what extent Parliament lacks any power of amendment. Although the report is not a statutory instrument, it is unamendable by either House. It can only be accepted or rejected. I believe that it ought to be rejected, in the words of my suggested amendment,because it increases the proportion of local government expenditure which is financed by an unjust rating system and it embodies a system of financial penalties which are based on 'targets' which are historically based, thereby penalising consistently low-spending councils for their history of economical adminstration and expenditure.There are many other points that I would wish to make, but my principal focus is on those issues.
It is not enough for my right hon. Friend the Secretary of State for the Environment, whom I am glad to see in the Chamber, to promise us jam tomorrow. No sudden emergency has descended on him or the Government to bring about the necessity for an order that does those things.
As long ago as May 1981, my right hon. Friend's predecessor as Secretary of State—not a junior Minister— received from the Mid-Devon district council a deputation which I had the honour to lead. We drew specific attention to the defects in the rate support grant system, embodied in targets, and in the grant-related expenditure formula, as currently employed. We do not depend upon the memory of the then Secretary of State, which could not in personal terms extend to the present one. The deputation left behind a most admirable document called "Block Grant Formula" which, I suppose, was passed on to his successor. Therefore, it is not sufficient to say, "Here am I at this stage; there is nothing I can do now; let us save it all until 1985–86," or that argument becomes one of the perpetually receding future. This is the encapsulation of the doctrine of mañana", which is not acceptable to me or to a number of my right hon. and hon. Friends.
There are several reasons why the rating system is so grossly unfair, of which the principal is that it measures neither the benefit received nor the capacity to pay It is paid by between one third and one fifth of the local government electors. It is paid only by householders and, moreover, only by householders who do not have it paid for them in supplementary benefit. This factor is well recognised by my right hon. Friend the Secretary of State, because he used it as one of his main arguments on Tuesday of last week in support of rate capping. As he said, the arduous and cruel effect of excessive rates on local government electors can affect such a small proportion of them that it is not an effective antidote to excessive local government expenditure. However, that argument, which he put forward convincingly, is wholly incompatible with increasing the proportion of local government expenditure that falls on that system.
One of the ingredients of the report is the proposal to increase the proportion of local government expenditure that falls on a rating system which is universally 661 condemned, except by those who have a professional interest in maintaining it. That is the first reason why the report should be rejected, and I plead in aid the speech made by my right hon. Friend the Secretary of State on Tuesday of last week.
The second reason is that it is not even based on the highly inaccurate system of assessing needs which GRE is. It is wrong not in principle but in practice and detail, because it is based on targets. That polite word means, "As you have done, so shall you do." That means that local authorities that have been consistent low spenders because the resources of those who pay rates are tiny in national terms are penalised by having their target historically based. This cannot be right, yet it is done. Over and again we are told—not always with the full glare of publicity —that it is done because there is no way in which the full extravagance of the high spenders can be checked that will have the result that their high spending is acceptable to the Government in budgetary terms.
I am the first to say that the system, used when my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) was in government—I wish that he were here today, because his memory seems short and defective— and by the Liberal-supported Labour Government—none are guiltless in this—which is a system of clawback, directly punished everyone for the sins of the few. The clawback system resulted in a reduction in grant if the total expenditure was more than the Government had anticipated. That not only punished everybody, but it punished them unpredictably. It usually meant that it was impossible for local authorities to budget, because they did not know what their resources from Government would be after the clawback and, as they were incapable of knowing—it was unknowable — by what percentage extravagant councils would overspend, the economical councils could not estimate in advance what their revenue from Government would be.
It would have befitted my right hon. Friend the Member for Old Bexley and Sidcup, who was Prime Minister of a Government that employed clawback, to have admitted that when he was speaking and castigating central Government for interfering with local government. There could not be a greater interference than clawback, for the reasons that I have given.
However, that does not justify the target system, and cannot do so. Moreover, the target system is accompanied by another pernicious device that affects low spending, and that is the notional rate, which is not always in the forefront of the minds of Members of Parliament or Ministers when considering this system. I digress for a moment into what is in the forefront of the minds of Ministers. After correspondence and a meeting, I received a ministerial letter explaining to me the central Government basis of finance for renovation and repair grants. I received this after a meeting with a local government treasurer. As I read through the letter from the Minister concerned—my right hon. Friend the Secretary of State — I realised that the arithmetic of it was incomprehensible, by which I mean not that I could not understand it, because I could, but that it could not be right, as it was not. When I referred this back, it was agreed that it was not a correct statement and that what I had believed to be the case was the case.
662 I mention this not only because the civil servant who prepared it was clearly in error but because, if the Minister who signed it thought that it was right, he did not understand the system by which central Government finance the renovation and repair grant. It is necessary that Ministers should understand the system if they are to make value judgments about whether it needs to be altered.
The renovation and repair grants, which were advertised as being available up to and at 90 per cent., had severe repercussions on local government finances because they can be taken up any time in the year during which the local council agrees to them, but that period of a year extends beyond the financial year of the councils concerned. Therefore, the second-tier authority concerned has no means of confining the expenditure of funds on those grants within the financial year for which it has budgeted, and for which it knows what provision will be coming from central Government.
Presumably, central Government want local authorities to scrutinise the builders' tender for this work, 90 per cent. of the cost of it falling on central Government, and therefore, if local authorities do not carefully scrutinise each tender to make sure that inflated bids are not being put in because of the sudden increase in the repair and renovation work, this necessarily involves a vast increase of work that only specialist personnel can perform. Only they can know whether a tender for given work on an old thatched house built of cob, which is clay and cowhair, is or is not reasonable. Only they know whether that repair needs to be done in the terms of the tender and whether a site visit is necessary, not to prevent the local authority from being taken for a ride but to prevent my right hon. Friend the Minister from being taken for a ride. He is paying 90 per cent, of the bill. Yet that is not compatible with enjoining local authorities to reduce their staff. It is that sort of conflict between what the right hand is recommending and what the left hand is doing which causes more than a little irritation, if not despair, at local government level.
It is not only reasonable but essential that central Government must be able to budget. They must know for a given year what will be the calls on their resources in rate support grant. They cannot, therefore, have a system of percentage grants that is open-ended to local authorities and allow expenditure which affects grant. I take it as axiomatic that there must be that control. I do not object to rate capping in cases of gross extravagance, not least because there was a specific commitment by the Conservatives to do so at the previous election.
I recommend to hon. Members that they reject the report because, instead of replacing a rating system which is inherently unjust and, even by the Government, admitted to be an ineffective vehicle for controlling rate increases, the proportion of expenditure dependent on that condemned system has increased. Targets freeze, as a penalty, the practice of economic administration. That is the opposite of that which the Government should be considering. There is no remedy before the House at this stage other than to vote against the report. Unfortunately, having spent two hours pointing out the defects of the system, including GRE, it is asking too much that I should be invited to take on trust for yet another year the assurance that these defects will be remedied.
I shall give the House some examples of defects in GRE. There is an element for coastline, because coastal costs fall on local authorities with coastlines. How many 663 right hon. and hon. Members are aware that under GRE the coastline element is proportionate not to the mileage of coastline but to the population in the local authority area? The cost is obviously proportional to the mileage of coastline, yet the GRE allowance for Bournemouth is proportional to Bournemouth's population, and the same is true for west Cornwall, despite its huge mileage of coastline. It is the Minister's job to correct that nonsense. It is no good his saying that the local authority associations have not done his job for him. They are not homogeneous bodies. They represent local authorities of wholly disparate natures. Even if there is a heading under GRE for a multitude of considerations, the quantum put on that heading is even more important than the existence of the heading.
I hope that I have demonstrated within the limits of time which you, Mr. Speaker, asked us to impose upon ourselves the shortcomings of a system which we are asked to approve or negative today. I shall vote against it.
§ Mr. Gordon Oakes (Halton)
I am delighted to follow the hon. Member for Tiverton (Mr. Maxwell-Hyslop) because he made a direct, forceful and detailed speech and is not prepared to accept jam tomorrow. I hope that the right hon. Member for Cambridgeshire, South-East (Mr. Pym) will likewise reject the jam tomorrow approach. I shall try to prove to the House that they are right, especially as the Secretary of State for the Environment said that the position will be altered in view of the rate-capping Bill. The rate-capping Bill will make matters worse, not better, for prudent authorities.
I have no financial interest to declare, but I am one of two vice-presidents of the Conservative-controlled Association of County Councils. I am delighted that my co-vice-president is present, and hope that he, too, will catch your eye, Mr. Speaker. As my hon. Friend the Member for Copeland (Dr. Cunningham) said, and to my knowledge—I have been dealing with rate support grant as a member of both Government and Opposition parties for 12 years — we have a unique statement form the Conservative-controlled ACC. In a letter to me and to other hon. Members, dated 19 January 1984, the Association of County Councils said:Unless these deficiencies are remedied, the outcome would be so unfair that the Association would prefer to see the Report rejected.The main body of Conservative local government opinion would prefer the chaos of no grant at all to the chaos of the proposed legislation. The statement is unique and one that I have never heard from a local authority previously.
In his speech the Secretary of State was fond of citing profligate authorities, which were all members of the Association of Metropolitan Authorities. He did not cite one county authority. In the winding-up speech perhaps he will tell the House whether any of the Conservative or Labour-controlled county councils, which are so burdened by the rate support grant order, are considered by him to be profligate, because they will all suffer from the rate support grant whether they are profligate or not.
The Association of County Councils went on to demonstrate some of the effects of the rate support grant on members of the association. It stated:In 1983–84, 14 Shire Counties have planned to meet the Government's targets.Nothing could be fairer than that. It further stated: 664For 1984–85, they will be penalised by grant being withheld if their spending is increased by more than 3 per cent. The Treasury estimate inflation for 1984 at an average of 5 percent. Is it fair (or indeed realistic) to expect those counties to budget for a 3 per cent, increase?It is not realistic. Today negotiations are going on between local authorities and public sector unions. The local authorities, pressed by the Government, will hold out for 3 per cent., which will be unfair, since public sector workers are already slipping badly because of Government policies. They will be entitled to go to arbitration, and, if they do, I am convinced that they will be awarded at least double the 3 per cent, proposed by the Government. What will the prudent and excellent authorities, to the Government's mind, do under this measure when they face a 6 per cent., not a 3 per cent., increase in their wages bill?
The association also deals with GRE, which is Whitehall's — the civil servants'—assessment of what the spending needs of an authority should be. It states that a comparison of the calculated figures with the arbitrary targets that the Government propose to use for penalty purposesproduces surprising and disturbing results which must call into question the entire validity of the targeting exercise. Thirty-three of 39 Shire Counties have GREs above their target in 1984–85, and so would be penalised if they were to spend at the Government's own assessment of their spending need—ie, the GRE. Were they to spend at GRE, Shire Counties would lose £761 million of grant in penalty and at least one authority"—I think West Sussex—would lose all its grant.The rate support grant produces bizarre results, with the targets set by the Department at complete variance with the GREs set by the same Department for those authorities.
As a way out of the dilemma, the Secretary of State introduced his jam tomorrow argument, based on the rate-capping Bill that created so much dissension in the House last week. Representatives of the Association of County Councils, my authority of Cheshire — which is Conservative-controlled — and every district council in Cheshire, Conservative and Labour-controlled, came to London last week to ask all Cheshire Members bitterly to oppose the rate-capping Bill. One reason why the authorities oppose the Bill is that, in one calculation made by the Department of the Environment, Cheshire is 10th in the Government's hit list, and therefore might be included in the specific part of the Bill, and in another calculation it is 110th. Local authorities do not know from month to month how popular they are with the Government. Targeting has become the principal activity of their staff during the past one or two years. I suggest that it is a wasteful activity.
Cheshire is a prudent authority, and no Government could regard it, whether Labour or Conservative-controlled, as anything but normal and prudent. However, it may be on the specific list in the Bill. The district representatives who visited London were confused by the general list, and everyone was frightened of what the Secretary of State proposed to do by including that general list in the Bill, despite the revolt of many of his hon. Friends last week. The list excludes authorities whose gross expenditure is less than £10 million, but no one has yet told the authorities, or the House, whether that sum includes the housing revenue account. If it does not, only one authority in Cheshire — Warrington — would be affected. If it includes the housing revenue account. every 665 district council in Cheshire will be affected. The rate-capping Bill, which the Secretary of State prescribes as the reason why he can give jam tomorrow, is completely mistrusted by all local authorities.
Some Conservative Members may agree with me when I say that once the Bill is implemented the Government will discover that high spending is not the equivalent of a profligate council. High spending relates to the needs of the area. If the Government cap that council, it will be in great difficulty, because the statutory services must still be provided. The Government will say that the council cannot raise a penny more in rates. If it does, the rate will be void and the authority will become bankrupt—that is unheard of in local government—because it does not have the resources to pay for those essential statutory needs, unless the Government come to its rescue.
That is what the chairman of Surrey county council meant in his letter to the press, when he said that the Bill could divert resources towards, not away from, high-spending authorities. The Secretary of State's jam tomorrow argument was based on that premise, and before Conservative Members vote tonight they should bear it carefully in mind. I suggest that they cast their votes as the Conservative-controlled Association of County Councils suggests—against the Bill.
Local authorities object to rate capping and to this measure because of centralisation — the belief that Whitehall knows best. I shall prove to the House that reliance on Whitehall, whether on GREs or on rate capping, leads not to savings but to horrendous waste. Let us take a hypothetical authority in mid-Wales, Northumberland or any part of Britain where land is fairly cheap. The district council decides to spend £80,000 per unit on prefabricated council houses. What joy that would provide to Ministers and Conservative Members, who could cite that authority's spending as an example of waste that the Government could have curbed. Let us suppose, further, that the figure of £80,000 for each prefabricated unit proved to be wrong and that each unit cost £133,000 even before it had been built. What glee we would see on Conservative Members' faces. That is exactly what has happened in the Falkland Islands fiasco, yet the mandarins of Whitehall have the audacity to tell local authorities that central Government can spend money in an area better than the local council.
§ Mr. Oakes
The Falkland Islands, with such a small population, would represent only a parish council—not even a district council.
When Whitehall makes a mistake, that is the sort of massive mistake that it makes. A local authority may make a mistake that costs £10,000, £100,000 or even £500,000, but Whitehall makes mistakes with a vengeance.
If the Ministers drove on roads in many northern counties today, they would discover that those roads, including some main roads, were not gritted, because local authorities are so scared of incurring penalty that they will not pay the overtime rate on a Sunday for four or five men, for petrol for the lorry or for sand and salt. The result of that penny-pinching is tremendous delay for many people, loss of production because people arrive late at work, accidents to vehicles, thus causing enormous cost to 666 insurance companies, and, worse still, injuries to people, who then become a cost on the NHS. It may even result in death in some cases.
§ Mr. Oakes
That is a good example, but I especially quoted northern authorities because the amount of snow in London bears no comparison with the north.
A county or district council must provide insurance for the people of its area against unexpected events. In an excellent speech, my hon. Friend the Member for Thurrock (Dr. McDonald) mentioned a number of the more obvious activities—education, social services, and so on. County councils provide other services that we do not even think about unless we need to do so. My hon. Friend the Member for Thurrock said that one of those is the fire service. That is a form of insurance for the people.
In Cheshire, members of the Fire Brigades Union are currently justifiably engaged in industrial action. They are protesting against the actions of the county council, which, because of the Government's attitude towards it, is trying to reduce the fire budget by £100,000 next year. That reduction will mean that some major industrial areas, such as Warrington, Chester and Crewe, will be manned only in the daytime to save some jobs and some expense.
Rightly, the actions of those members of the Fire Brigades Union are not affecting the public. Emergency calls, whether or not they are about fires, are being accepted. In the storm trouble last week, firemen attended those who got into trouble. However, they are not undertaking fire prevention duties, the cleaning and maintenance of fire engines, and so on.
The Conservative leader of Cheshire county council has said that the reduction is necessary because the provision of fire services in Cheshire is 14 per cent, above the average of the other counties.
The Secretary of State has quoted the Auditor General and tried to compare one authority with another, but what he said is typical of the nonsensical statements that result when one cannot compare like with like.
Cheshire has three major motorways, and motorways are notorious for creating accidents that involve the calling out of the fire service. It is probably the county with the highest percentage of dangerous chemical cargoes travelling along those motorways, and any prudent council would make provision for that. It has two major petrochemical refineries, and the major centre of the chemical industry is situated in my constituency. The largest storage centre for British Gas for the whole of the north west area is located in Lymm. How can it be argued that a county with such problems should not provide 14 per cent, more than the average for its fire service, which, after all, is insurance?
When I speak of the fire service in Cheshire, I speak not of the burning down of the occasional hay rick or of a cat trapped up a telegraph pole. The fire service there must deal with major hazards and risks, of which any prudent council must take account.
The Government may well suggest that the fire service should be privatised. That has been done in the past. In the old days, each insurance company provided its own fire 667 engine. If someone was insured, he put a plaque outside his house giving the name of the insurance company, so if a fire engine arrived it could take great care not to put out a fire that was not covered by its own company. Such nonsense can result if we delve too deeply into privatisation. That is an example of what is happening to the essential services of the counties.
The Government have also asked local authorities to do many things since the last rate support grant settlement. Cheshire has been asked, and would dearly love, to set up an extensive youth training scheme, because in my area unemployment is above 20 per cent. The county council dare not do so, because, if it obeys the Government, it will incur penalties.
Halton council, my own district council, is Labour-controlled. Indeed, the Secretary of State's predecessor twice complimented it for being an excellent authority financially. Its rates have not gone up for two years. That authority wanted to accede to the Government's request to give home improvement grants, with which we all agree. Home owners need them and they are good for the housing stock and the building industry. Such grants were popular with home owners. But Halton council had to stop them in mid-stream and say, '"No more", because they were open-ended and the council did not know how many applications would be made, As a result, it did not know whether it would be penalised through the rates, even though it had kept the rates steady for the past two years.
Such nonsensical results can flow from the rate support grant proposals now in front of us. The White Paper is nonsense from beginning to end. Indeed, it is dangerous nonsense that is wasting money, time and people's lives. When the Government present such hocus-pocus, the only answer is decisively to reject it in the Lobby.
§ 6.6 pm
§ Mr. Maurice Macmillan (Surrey, South-West)
I shall be extremely brief and deal solely with the impact of this measure, combined with the Rates Bill, on the electors, ratepayers and taxpayers of Surrey. I thought that the right hon. Member for Halton (Mr. Oakes) was trying to do my job for me when he quoted the Surrey county council chairman, which I shall also do.
The present rate support grant system has probably a greater impact on county councils, especially on the shire counties, than on the districts that make them up. Broadly speaking, the amount of grant that the districts receive pretty well mirrors the amount of precept that they must pass on to the counties. Generally, the districts pay for their own expenditure out of their own rates.
This has an effect on the Minister's arguments. The Under-Secretary should address his attention to the extent to which action to reduce county council expenditure is pre-empted because so much of it goes on the wages and salaries of the education and police services — the greater part of the overall expenditure of shire counties. That gives them less room for manoeuvre than other types of authorities.
Whether or not this is a relevant factor, there can be no doubt that targets—as my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) so effectively argued and referred to in his amendment — are a bad way of assessing expenditure limits for those who have done their best to meet the Government's requirements and to economise as far as possible.
668 Surrey had been very badly done by, even compared with other shire counties. Its block grant is only 16 per cent, of the target it has been set. Even West Sussex, badly treated though it is, is to get 28 per cent., Buckinghamshire 28 per cent, and Kent 45 per cent. In the last 10 years, Surrey's block grant has gone down 10 per cent, in cash terms in a period when the retail price index rose threefold and when the national rate for grant rose by almost the same amount. For example, if Surrey were to spend its target, the grant would amount to £49 per person, whereas the average English county would get £139 per person.
Now the 1984–85 proposal is to cut Surrey's block grant by a further one sixth. That is proportionately the biggest cut of the lot, with the exception of Avon. My right hon. Friend the Secretary of State kindly gave us a small crumb of hope when he said that in the 1985–86 arrangements he would try to meet those target difficulties. However, I am a little doubtful about his ability to do so, in view of the impact on his finances of the Bill that he is now forcing through the House. But, regardless of whether he can do so, it is not quite enough, particularly for Surrey, because we are oppressed by an erroneous linkage between high rateable values and the actual ability to pay.
Surrey has a supposed greater ability than other counties to pay high rates, because of so-called "high resources". However, there is no connection between high rateable values and the capacity of ratepayers to pay. That is particularly true of counties such as Surrey where there are many elderly people whose incomes have not increased but who still live in the houses that they lived in 30 or 40 years ago. Their rates have increased spectacularly.
The Minister has accepted the discount principle for parts of Surrey that are now in the metropolitan area. At the end of the debate I hope that my hon. Friend the Undersecretary will let us know whether the Department will consider doing the same thing for other parts of Surrey. If Surrey was permitted a mere 0.95 poundage discount, it would not have to face an RSG cut next year.
One of the difficulties that we face is that it is almost impossible to debate such matters sensibly, because of the abstruseness and irrelevance—no doubt accidental—of the method of calculating RSG and the other factors in the assessment of rates. The method of presentation makes the whole issue even less clear. If I did not know my right hon. Friend the Secretary of State and his colleagues so well, I would have thought that they were deliberately trying to confuse the House. However, I know from having dealt with these matters in conjunction with members of the county council that they are inevitably confusing, however much one tries to clarify them.
That means that it is very difficult to calculate from the formulae supplied the ratio between a reduction in spending by an overspender under the new Bill and the increase in RSG that that overspender will receive as a result. It is not easy—and may not even be possible—to calculate it in advance, partly because a secondary local poundage is calculated based on area rateable values, in addition to the standard grant-related poundage. However, it is possible to make some meaningful comparison between the differential of the rate support grant and the differential of the main formula for the grant-related poundage.
In so far as the dominant force in calulating the RSG will be this main formula, at least for the initial, large reductions that the rate-capping Bill intends, we can take 669 the resulting ratio as a useful guide as to what might happen. I am saying not that this is an accurate way of assessing the link between the reduction in overspending and the increase in rate support grant but that a ratio that can be established as part of the criteria for that link is at least an indication of what is likely to happen.
Subject to what I have said, for every pound of overspending that rate capping prevents, the RSG will rise by at least about 25p. That means that if the rate-capping Bill reduces local authority overspending by £500 million altogether, the RSG will have to be increased in total by £125 million. Savings of £500 million produce an overall increase in the RSG of £125 million. However, the cash limit for the overall RSG is fixed at £9,323 million. If that is so, the only money for reimbursing the black sheep that have repented will come from the poor white sheep that have never strayed. I think that that is what led the right hon. Member for Halton to mention the letter to the Financial Times from the chairman of Surrey county council, who pointed out that in those circumstances the money could not come from anywhere other than the more prudent councils.
Therefore, I am a little wary about the assurance that my right hon. Friend the Secretary of State gave to the shire counties, and particularly to Surrey, to the effect that through the new Bill he would be able to release resources that would be available to give them a better deal next time. I hope that my hon. Friend the Under-Secretary will give an assurance that, if he is disappointed in his attempts to raise more money from the Bill, he will see that the unfairness that has been described by hon. Members on both sides of the House in respect of low spenders, and the shire counties and, of course, Surrey in particular, will be dealt with, regardless of the Bill's effects. If he cannot give that undertaking, the assurance that we have had is not very convincing. If he cannot give an overall assurance, he is basing his possibilities of doing justice to those that are now unfairly treated on something that is unlikely to happen. That is my main point.
I voted against the rate-capping Bill and, unless I receive a positive assurance that Surrey's RSG for 1985–86 will be very different, I think that I shall be forced to vote against the motion, rather than merely abstaining. However, I shall do so with great reluctance, and not because I am opposed to my right hon. Friend the Secretary of State or seek his resignation, or because I am against the great efforts that the Government are making, but because it would be wrong not to vote against two measures that separately damage all my constituents and which, taken together, could damage them very much more.
§ Mr. Simon Hughes (Southwark and Bermondsey)
After about two and a half hours of debate, it is noteworthy that, apart from the Secretary of State's opening speech, we have not so far heard a word in support of the report on the RSG. Most eminent and respectable Conservative Members from different counties in England—we have not yet heard about Wales — have clearly and graphically expressed the folly that the Government are now propounding as their policy for local government finance.
670 To misquote somebody perhaps even more eminent than any hon. Member, it could be said that the RSG saga is a tale of arbitrariness told by an autocrat, helped out by a bureaucrat, full of statistics and contradictions, signifying muddle and injustice. The anomaly is that it makes the Government's policy as a whole illogical. We are discussing the funds that local authorities spend on, for example, education, the social services and the police. For every cut in funding to education, there may be a commensurate reduction in the qualifications of those coming out of that education process, and it is likely that they will be less equipped to find jobs. As a consequence, they are more likely to be unemployed and to demand benefit from the national budget. Every time that a cut is made in social services, it is likely that a person will have to be cared for in the community by the National Health Service instead of in the home. The national costs will be greater because needs cannot be met locally.
Government policy has already created 4 million unemployed. This policy will impose even greater burdens and move the country further towards becoming a handout state. The Government set themselves against people being dependent on the state, but that is made more likely when local authorities are less able to deal with the problems and needs of our constituents and their electors.
The same policy has now been pursued for many years. The hon. Member for Tiverton (Mr. Maxwell-Hyslop) tried gently to implicate Liberal Members in shoring up the previous Labour Government's similar policy in terms of block grant and rate support grant. For many years, however, Liberals have argued that the whole edifice of local government finance is ramshackle and that the rating system needs wholesale reform. I hope that at the end of this debate it will be clear that wholesale local government financial reform is needed. Everyone knows that the rating system is inadequate because it does not charge the citizens fairly for the services that they receive or need. The old structure is no longer able to sustain the scaffolding that the Secretary of State now seeks to build upon it.
The amendment, which has not been selected, expresses the views of many inside and outside the House. It is also our view that the rating system is unjust. The system must be changed, not just tinkered with. The trouble is that the present system is simply a device that the Government engineer with more complexity each year. They try, but fail, to buy off their supporters in areas represented by Conservatives at local and Government level by reducing the penalty that those authorities incur. The system has often been amended to try to improve it where the Government are vulnerable. That tinkering and adjustment has not succeeded, and we have seen through the Government's policy.
Many hon. Members have referred to the uniquely strong view of the Association of County Councils. None the less, of the 107 authorities that the Secretary of State said on 14 December were to have their targets increased, only three are metropolitan authorities. The policy affects not only the shire counties but metropolitan areas.
Perhaps most amazing is that the policy shows that the Government have no confidence in their own party members who run the shire counties. Conservative members, standing on Conservative manifestos, have been elected to run most of the shire counties. The Government clearly have no confidence that they are competent to decide expenditure levels. The Government say, "We do 671 not accept that those are your needs. We do not accept that, although we in Whitehall work out what we think you should have and what the grant-related expenditure should be, even that is an acceptable amount to spend. We shall penalise you even if you meet our target when you think that you should spend more."
That proves that the Government have no confidence in their system. By this legislation, the Government are also condemning their own party's many elected and diligent representatives. We have heard of examples. We have heard that 33 out of 39 authorities in the Association of County Councils are complaining. West Sussex will suffer a £59 million penalty, Kent £95 million, Essex £65 million, Berkshire £30 million and Cambridgeshire £29 million. If the 33 authorities in question conform with the Government's grant—related expenditure targets—they will incur total penalties of over £750 million.
As the chairman of the Association of County Councils said, the reality facing shire counties is that they are being required to achieve targets based on arbitrary judgments. Subsequently, he said:For the first time ever, every single one of our 37 English member counties will be seriously affected by the new penalties announced by the Government. This represents a dramatic worsening of the situation.This month the same chairman said:I am astonished that local government is expected to live within an inflation rate that is substantially less than that which is facing the rest of the economy.The target for the authorities is 3 per cent., whereas inflation is projected at 5 per cent. The chairman went on:The truth of the matter is that local government will face the same level of inflation as everyone else. Therefore, on the Chancellor's own forecast of inflation for 1984, the ratepayers will face abnormally high increases or serious cuts in services, or both.
§ Mr. Charles Morrison (Devizes)
The hon. Member for Southwark and Bermondsey (Mr. Hughes) said that local government faced the same inflation as everyone else. He is not quite right. Local government faces higher inflation since it is so manpower oriented.
§ Mr. Hughes
Not only that, but a large bulk of local authority expenditure is fixed from year to year-for example, debt repayments. It is not possible in a short time to adapt budgets to targets that involve large cuts.
Today's debate has contained many illustrative examples, but substantive arguments are also involved. In September, Warwickshire made representations to each of the five Conservative Members who represent that county. The representations were also directed to the Secretary of State. The county, which has always been Tory-controlled, said:Warwickshire's position is perilous. To meet Government spending guidelines it has to make cuts of £10 million. This would mean, amongst other things, fewer teachers, much bigger classes in schools, the abandonment of school meals, the closure of old people's homes and even the closure of police and fire stations.672 Dealing specifically with the Secretary of State's exhortation of the Audit Commission and the desire to ensure an objective assessment of the economy, Warwickshire county council said:The accounts office has done virtually everything it can to make economies without cutting services. One of the country's top firms of management consultants, Coopers and Lybrand have examined the council's books and concluded that there is little or no waste and the only way big savings could be made was by making big cuts in services.The Audit Commission published a statistical profile of each authority, in which Warwickshire is shown as the lowest spender within the family of low spenders in similar circumstances. It is not surprising that this month, four months after having made those representations, the clerk to Warwickshire council writes to hon. Members representing constituencies in that county stating:In view of the support and encouragement we have received from you"—the Members of Parliament for the county of Warwickshire—and the sympathy from the Minister regarding the justice of" our case we have been very concerned to discover that the trouble we have taken with our representations has got us nowhere at all; in fact the penalty situation is even worse than had been anticipated.Since our representations the County Council has again considered its own budget plan and as a result has proposed reductions in current spending of £6.5 m. by 1985/86 rather than the £3 m. previously proposed.It struck us as ironic that when the RSG settlement was confirmed and the provisional target set at £158 m. for 1984/85, the same document gave us a Grant Related Expenditure …of £163.8 million.That is £5.8 million higher.
The letter concludes:Our main objection now must be to the proposed penalties without which it would be possible for us to keep rate increases for this and succeeding years within the rate of inflation while maintaining services at the level at which both the ratepayers and central Government would expect. If the penalties are to remain at the levels proposed then our reserves could soon be exhausted. Without large cuts in services the ratepayers would then face massive rate increases, not due to real increases in this Council's spending, but due to decisions taken by Members of Parliament about penalties.To take another example, Cornwall is having to cut its police force, despite the fact that more serious crimes were committed there last year than in any police authority outside Greater London. The cut is against the wishes of all parties representing local government authorities.
It is not true to say, as the White Paper on the rate support grant suggests, that the proposals will allow the level of services to be broadly maintained. If that is the definition of "broad", the English dictionary is being rewritten by the Government.
The ludicrous nature of the proposals can be seen in those authorities that the Government have picked as overspenders. I declare my interest as a ratepayer of the London borough of Southwark, which features variously as an overspender in different positions in lists, depending upon which arbitrary criteria the Government put together to form the list at the relevant time.
The targets for the so-called low-spending authorities are cash increases of 3 per cent., which is a loss in real terms as inflation is 5 per cent. The targets for high-spending authorities are cash cuts of 6 per cent.—a real cut in one year of probably 11 per cent. That cut does not take into account the nature of the services, as the hon.
673 Member for Tiverton said, which depend on manpower and other factors. The result is that the average statistical reduction is even less than the real figure.
The bizarre position is that the Government have accepted that local authorities overall need to spend more. The targets compared with last year have increased slightly, but inner London has a target of 2.4 per cent. less. It seems that the needs of London are recognised by the Government week after week in the form of urban aid schemes, development corporations and partnership schemes. There are any number of Government schemes which offer financial assistance to the inner city. In spite of all that, the Government are taking away the main budgetary support mechanism that they invented for supporting the inner cities.
Not only in Southwark has an arbitrary figure of population reduction of 6,000 been assessed for one year—clearly, the population has not reduced by that number — but the Government presume that when a population decrease takes place the level of services can be reduced proportionately. It is often the case that those least dependent on services move out and those who are most dependent remain. It is not correct to say, as the hon. Member for Tiverton also said, that it makes sense to use the formulae that are in the appendices at the back of the report to work out a fair grant related expenditure by multiplying the figure, which is worked out in Whitehall, by the number of people in the county or borough and say that the resulting total is the level of demand. It is not true to say that there is an equivalent amount of tourism per head of the population in Brent compared with Westminster, but the formula is the same. If one examines the list of elements which make up the grant related expenditure assessment, one finds throughout the same anomalous assessment of different elements. The system is arbitrary, illogical and totally unjust.
High rates are acceptable if people believe that they are getting value for money, and that is the test. People are prepared to pay for what they think is a good service. That is how they shop and how they will be happy to live. The rating system has all the inadequacies that I have set out. The amazing folly is that since 1979 the rate support grant system has been modified not only yearly but also during each year. Proposals were made to reform the system by way of a referendum, but they were eventually withdrawn by the Government. Now the Rates Bill is being considered.
Not only have the calculations of GRE also been revised regularly but we have been subject to an ever-changing form of calculation which no one has found either easier to understand or more acceptable as the years have passed. There is a simple method for curbing the high level of spending, if the Government believe that to be the position in, for example, Southwark. The Labour party, which runs the borough, secured 44 per cent, of the vote —53 out of 64 seats—at the previous election.
One simple legislative measure to reform the electoral system for local authorities would be more effective than tinkering with the finance system year after year. It is ironic that the Financial Times suggests today that the Government might now be comtemplating annual elections for every local authority. That has long been a Liberal view. Secondly, if the Government changed their view and trusted local representatives, perhaps local 674 authorities and their associations could work out the criteria for grant related expenditure. The system might then be acceptable as objective, and the citizens of Warwickshire or elsewhere would be charged with the responsibility of deciding their needs.
Unlike the two major parties, we believe that eventually central Government should finance not more than 30 per cent, of local government services; the remainder should be paid for out of income raised in the form of local income tax or by other local methods. I shall not discuss that issue now. The Government should examine the fundamental reforms that we and others have proposed. I refer again to Shakespeare, whom I paraphrased at the beginning. The Government are behaving like Lady Macbeth and Macbeth on their way to the murder of Duncan and then onwards to their own doom. They are wringing their hands, trying to justify their actions and can do no more to justify going on than to lament:in bloodStepp'd in so far, that …Returning were as tedious as go o'er".The Government should admit that the rate support grant system is full of injustices, that the proposals are full of anomalies and that the arguments are full of holes. They have not had any support so far. The report should not be approved.
§ Mr. Edward du Cann (Taunton)
I do not agree with the hon. Member for Southwark and Bermondsey (Mr. Hughes) who, as in his quotation from Macbeth, preached doom and blood. It is possible to read too much that is unattractive into the present position. However, I agree with the theme of the hon. Gentleman's speech when he said, as have other hon. Members, that the implications for services are substantial as a result of the measures that we are discussing this week. I am sure that he is right. My view of the matter is encapsulated in the second part of the amendment tabled by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop).
Before I deal with those matters, I wish to make a general observation. I thought that my right hon. Friend the Secretary of State was right when he said last Tuesday that at the heart of the Government's policy has been the need to curb the demands made both on individuals and businesses by the public sector by reducing the burden of public spending and taxation. The hon. Gentleman reiterated that point in different language in his speech. I believe that the whole House should support strongly such an aspiration and policy, which has lately been warmly endorsed by the electorate. I shall put the matter slightly differently. It is less important to insist on absolute levels of expenditure and more important to insist upon value for money and to be sure of getting it.
If I have a complaint about the devoted work of my right hon. and hon. Friends, it is that their policy has not been pursued with sufficient resolution, determination and success during recent years. A number of us have done our best both in debate and through the Select Committees to argue for greater emphasis on value for money in Government services, and not least for a better balance between capital an adminstrative expenditure in central and local government. We have not always been popular for doing so. I hope that my current impression is not the 675 reality. I hope that there will be no weakening of Government resolve and that a fresh effort will be made to achieve significant results.
Although I supported the Rates Bill, I did not do so because I thought it a good Bill. Indeed, it is a bad Bill. One of its weaknesses is the way in which it establishes a minimum level for expenditure, which will shortly force all authorities up to that level and become the maximum. I supported the Bill because I truly believe that Government cannot stand aloof from local authority spending or an attempt to influence it. Local authority spending encompasses a quarter of total current public spending. There are irresponsible administrations whose rate increases have been two or three times the increase in inflation. Therefore, the Government cannot stand idly by.
I have sympathy with my right hon. Friend, who has inherited a difficult problem. The system of local taxation is capricious, uncertain, unfair and riddled with inconsistencies and anomalies. As 40 percent. of the rates are provided by the disfranchised, and only one-third of ratepayers pay the full rates, local democracy is less a reality than a myth. My right hon. Friend said the other day that the link between local rates, local spending and local voting is tenuous, and that point has been reiterated a dozen times during the debate.
The worry is that, as yet, the Government have failed to grasp the nettle of reform, and that is the challenge for the future. I hope with all my heart that my right hon. Friend and my hon. Friend the Minister, the hon. Member for Bristol, West (Mr. Waldegrave) — for whom the House has so much respect — will regard the present time as an opportunity to draw fresh breath and to tackle the reforms that we all know are so urgently needed. That will not be easy and there is no single course that will meet universal approval; but reform must come.
I wish to speak tonight about my county. It is the first time in recent years that any of us has spoken about Somerset, yet year after year its representatives have met Ministers and discussed its problems with successive Secretaries of State. But the warnings that we have endeavoured to give have not been heeded, Somerset is now in a difficult position, and its problems must be expressed in public. Somerset has always followed Government guidelines closely and prided itself on standing on its own two feet, but the position is now untenable, and unless the grant rules change some extremely difficult decisions must be taken for 1985–86.
As I am sure all hon. Members know, Somerset is a typical rural county, but it has above-average problems such as the high mileage of roads and a large share of elderly people. The problems of unemployment affect Somerset as much as they affect other areas. We hear so much about areas that face huge problems because of structural change, such as the decline of coal production, shipbuilding, steel making, and textiles. But, proportionately, the problems facing a little town like Wellington when it loses its dominant industry are just as important as the terrible problems faced by Newcastle, Liverpool and Glasgow.
§ Mr. Straw
While the Opposition accept that Somerset has had a great many problems, we wonder whether it comes as a surprise to the right hon. Gentleman to learn that Somerset's expenditure has increased by 79 percent. since 1979, which is significantly faster than that of 676 Manchester, Newcastle and Liverpool — all of which have been categorised as high spenders and overspenders that need to be penalised.
§ Mr. du Cann
I shall deal with the hon. Gentleman's point in a moment.
Somerset is not a rich county. It does not have the resources of such counties as Surrey and Kent, about which we have heard so much this afternoon. The unsatisfactory local government reorganisation took away from Somerset its fastest growing and richest area to create the new aberration of the county of Avon—a wrong that I hope it will be possible to undo one day.
Historically, Somerset has always been a low spender. That is not only my opinion — it has been confirmed during the past two or three years by a report from a firm of management consultants commissioned by my right hon. Friend's Department. It is because Somerset has always been a low spender that it now faces problems.
When the block grant was devised, Somerset had a low base of spending. The block grant system has not been sufficiently flexible to allow the necessary refinements to cater for the problems of Somerset. During the past 18 months Somerset has received reports from Government inspectors that both the education service and the fire service were under-resourced. There was no complaint about standards—indeed, Somerset has high standards in both services. The chief education officer and the chief fire officer are among the best in the United Kingdom— yet the Government published reports castigating Somerset for having under-resourced its education and fire services. As a result, Somerset gave additional resources to both those services rather than reduce them, which was the only alternative. It is now attempting to fill the consequential financial gap with contributions from special funds to avoid grant penalties. That can continue for only a short period. By 1985–86 there will be little scope to continue the contributions. Spending by then is estimated to be about 6 per cent. over target.
Part of the problem is how to foretell the targets for 1985–86 and 1986–87, because the rules change so often. All we can reasonably do is to extrapolate the present rules and plan accordingly. I cannot subscribe to or endorse every one of Somerset county council's figures, but I have been through them with elected members and officers. The best present estimate is that Somerset needs to spend 6 per cent. above target, or another £8 million, in 1985–86.
If that is so, there are three options open to us. First, we could incur grant penalties. That would mean a 25 per cent. rate increase even on present scales. That is too horrendous a prospect to contemplate. We have no special grants or facilities for attracting industries to Somerset. We can only offer our natural advantages and show prudent financial management of our resources. Let it not be forgotten that high rates impose a heavy cost on industry.
The second option is to abolish the capital fund and revenue contributions to capital and start capitalising everything that can possibly be deferred. That is against the council's financial ethos, and I think that it is right to take that view. To take such a course would be to mortgage the future, which is surely not something that a Conservative Government could encourage.
The third option is to cut spending severely. That would mean reversing the recent improvements to the education service and much more besides. It would include 677 substantial redundancies and many direct services would be reduced or abolished, with all the consequential adverse publicity that these matters always attract.
It is possible to argue that there is always scope to reduce a budget. I know that there is, but by and large Somerset's budget is not great in local authority terms, being about £130 million a year. Officials came from the Department of the Environment to conduct a special inquiry at Somerset's request. The inquiry was carried out last year and the officials went through all the figures. They said, "There is no fat to cut." Before that inquiry took place, Somerset employed management consultants.
It is difficult to understand the logic of the Government's position. Somerset has been criticised by the Government for not spending enough, but it now faces the prospect of being penalised as an overspender. My right hon. Friend has said that he will reconsider targets in the light of experience over the next few months, and we in Somerset are grateful for that. That was the thrust of his remarks and it sounded fine. He has written in a letter to me that he wishes to be fair, and that was the implication of some of his remarks this afternoon. I accept that he wishes to be fair and I have every trust in him and his motives. However, the promise of consideration rings slightly hollow by comparison with experience. It is because the requests of Government have been listened to in past years and acted upon faithfully that Somerset now faces its present problems.
Somerset county council has felt it essential to set up a special panel of members to examine all possible options for expenditure cuts. It tells me that because redundancy costs are counted against expenditure definitions for determining grant penalty and because there is a long lead time in reducing some service levels, it will have to come to decisions well before the summer of 1984 to influence the 1985–86 financial year to ensure that no additional costs fall in 1984–85. I am not sure whether my right hon. Friend has taken that point on board adequately in the past.
The debate cannot be a private one. The matters that are being discussed—for example, where the cuts may fall—are bound to be matters of public discussion too. The discussions are causing grave anxieties within the county among many loyal and dedicated people. These include members of the local authority, officials and members of the public. I hope that my right hon. Friend will agree that it must be right to try to avoid these worries.
I am sure that my right hon. Friend cannot mean to penalise the Somersets of this world. However, we cannot put off decisions for as long as July, when perhaps his conclusions might be expected. I shall make a suggestion which I hope will commend itself to him. What is sauce for the goose is sauce for the gander; if rate capping is appropriate for the high spenders—I believe that it is— exemption from penalties is appropriate for local authorities such as Somerset, which have low unit costs. I hope that he will explore that avenue, as the saying is. Here is a way in which the worry that he expressed so candidly to the House could be alleviated and our problems solved. A decision to this effect could be perfectly well made now rather than some months ahead. Thereby uncertainty could be avoided and the genuine concern, which is bothering so many people, could similarly be saved.
678 I have always believed that local government should be a cornerstone of democracy. Unfortunately, in practical terms, it is not at present. I believe that there should be a natural trust and respect between local government and central Government. It seems that we are in danger of losing that old tradition and I am anxious to see it rebuilt promptly. It is not enough for any of us merely to talk with sympathy of local government. This is a practical matter and we must find practical ways of giving effect to our sympathy. Difficult though it may be, we must grasp the nettle of fundamental local government reform. That is the challenge to my right hon. Friend and those who serve with him in government. I have every confidence that he and they will measure up to it.
§ Mr. Ted Garrett (Wallsend)
The right hon. Member for Taunton (Mr. du Cann) caused me quite a few palpitations. I thought for one dreadful moment that, as Chairman of the 1922 Committee, he was about to express the same vigorous opposition to these measures as some of his colleagues who contributed earlier to the debate. However, knowing the right hon. Gentleman's style of delivery, I knew that he would never fire the fatal shot.
The Secretary of State, who unfortunately has just left the Chamber, said that the formula was complicated. He said that in a rather modest way but it certainly is complicated. None of us is surprised because each rate support grant paper produces an additional complication. It is a continuing process.
There are many of us in the Chamber who served for many years in local government before entering this place. I am a former member of the Northumberland county council. When I was serving on that authority, my colleagues and I were rather surprised when we received a Government circular from time to time and were advised to read it and to put forward our ideas. Local authorities are now snowed under with circulars. There is a certain cynicism among the elected members of local authorities and a sense of despair.
The right hon. Member for Taunton was wise and fair enough to observe that we are in danger of losing the link between central Government and local government. I venture to suggest that that link has already broken. It has been split asunder.
The Secretary of State admitted that his proposal would be subjected to some criticism. Of all the debates in which I have participated in the Chamber, I have never heard such unanimity of criticism. I am sure that those who have sat through the debate will agree with me that not one hon. Member has uttered a sentence in favour of he formula that has been applied to the 1984–85 grant settlement.
I did not like the attitude of the Minister when he said that the worst offenders were Labour councillors. He made his usual remark about Socialist republics. Labour Members are becoming weary of such smears. They are tiresome to hear when one knows how many Labour councillors throughout the country have no wish to be associated with any self-styled Socialist republic. Those councillors are as hard-working and conscientious as any member of any party serving in local government.
Members of Parliament should stop denigrating local councillors, who are doing a good job. I served for many years on a council in which there were Conservative and Liberal members in abundance. Despite our disagreements, we tried to work out what was best for the financial 679 stability and wellbeing of the authority. I believe that that is the general pattern of behaviour. I do not see why it should be any different elsewhere. What benefit is there for any councillor or group of councillors of whichever party in imposing harmful financial systems on their fellow citizens? Let us not forget the importance of the ballot box. If a system is harmful, it can be rejected by the electorate.
A great many statistics—far too many — have been bandied about today. The debate was turning into a statistical comparison of counties. The case was presented for the county of Essex and the case for Surrey was exceptionally well expounded. We have also heard the arguments for Cambridgeshire and Somerset. Conservative Central Office and the Prime Minister must be concerned about the hostility in traditional areas of Conservative support. No doubt discussions are taking place in Smith square to see what can be done about it. The Labour party has its own problems, so I cannot burden myself with those of the Conservative party. Indeed, I should not wish to do so.
The borough of north Tyneside in which my constituency lies is imposing for 1984–85 an increase of 4.8 per cent. over the previous year, based on a no-growth system. That 4.8 per cent. increase will make it subject to surcharge and it will lose £10 million a year. That may not seem much to a wealthy authority, but for one with a population of 205,000 it is a staggering blow. Moreover, the deprivation described in relation to other counties fades into insignificance compared with that in Tyne and Wear and other areas where pre-Victorian and early Victorian industries grew up. There are still two nations. The difference between the counties described so far and metropolitan counties such as Tyne and Wear are all too obvious. The metropolitan counties are grey. They lack the resources to achieve equal standards and quality of life for the people there.
§ Mr. Straw
In emphasising the burdens on such authorities, does my hon. Friend agree that north Tyneside, despite all its problems has cut its spending in real terms since the Conservatives came to power in 1979, increasing its spending by only 77 per cent. compared with 79 per cent. local authority inflation and an 89 per cent. increase in expenditure in Cambridgeshire? Is it not an outrage that such an authority should face such severe penalties?
§ Mr. Garrett
It is indeed an outrage, but north Tyneside is similar to many other responsible Labour-controlled authorities which have tried to meet the figures set by the Government. The Government's targets are physically impossible to achieve even in a no-growth situation. This situation cannot continue much longer. I do not wish to sound pessimistic, but if the nation is seen to be dividing itself in relation to its resources there will be further problems of the kind that arose in Toxteth, Manchester and Brixton. We must find a system that will equalise the burden.
I shall not detain the House any longer. I always heed the words of Mr. Speaker. We were reminded at the outset that although the debate may continue until 11.30 pm a large number of hon. Members wish to contribute. If we all discipline ourselves a full and happy debate will have taken place by that time.
I have one final question for the Minister. Will he explain why, according to annex B on page 15 of the 680 report, supplementary spending of £150 million is set aside for an urban programme and £78 million for Commmonwealth immigrants? I assume that such immigrants are members of the community who pay their taxes and live happy, normal lives in our society, so what is the reason for that figure? I have tried to find out the reason but, regrettably, I have been unable to do so. We need an answer as people in the deprived areas wish to see money well spent. If the Minister can assure me that that sum will be well spent and if he will explain the purpose of it, my fears may be allayed.
I entirely support the plea of the right hon. Member for Taunton. I hope that efforts will be made in the lifetime of this Parliament to bring the democracy back into local government so that it may take its full responsibility. The people who serve on local authorities throughout the country are responsible people. If we fail to do that, overcentralisation will make this country like East Germany, Czechoslovakia or any of the other Comintern countries — grey, drab and indecisive. Above all, the flower of this nation—ourselves—will wither away. The opportunities are there, but they must be taken If the Government continue to behave as they have this week and last week and to seek to impose a system that is inherently unfair, they are heading for very troubled waters indeed.
§ 7.8 pm
§ Mr. Charles Morrison (Devizes)
The hon. Member for Blackburn (Mr. Straw) has interrupted the debate twice to point out that the increase in rates in certain Labour-controlled urban areas has been greater than the increase in some of the counties which feel particularly hard done by as a result of this rate support grant decision. However, we do not know what went before in those Labour-controlled areas, compared with what happens in many of the shire counties where every effort is made to pare expenditure to the minimum.
Nevertheless, I admit that I have some sympathy with the hon. Member for Wallsend (Mr. Garrett). I imagine that the deprivation in his area is only too obvious, and he must see it whenever he is in his constituency. Indeed, we are faced with a stark contradiction here. On the one hand, certain Labour local authorities are, in my view, rightly castigated for overspending; on the other hand, no doubt many of those local authorities are the largest recipients of urban aid. It is difficult to reconcile the two.
Opposition and criticism of the rate support grant report has been unanimous, but perhaps even more important, in terms of political weight, length of service in the House and experience, is the number of right hon. and hon. Members who have criticised the report from these Benches. Indeed, the number of Privy Councillors who wished to speak in criticism of the Rates Bill last week, and of this rate support grant this week, has been so great that the rest of us wondered whether we might ever get a chance to speak.
My right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym) said that he supported the Government's attempts to control public expenditure. Of course I agree with him. Nevertheless, since 1979. local government has cut the share of gross domestic product that it takes, whereas central Government have increased their share no less than 2 per cent. My right hon. Friend the Secretary of State complained not so very long ago that local government had increased its expenditure by £2.5 billion above the 1980–81 level, but by the same token, 681 central Government have increased their expenditure by £15.5 billion. As the Association of County Councils—of which I happen to be a vice-chairman—said, local authorities are criticised for overspending planned levels about which they were not informed, and which were impossible to achieve, and when their performance in moving towards those planned levels has nevertheless been a great deal better than that of the Government itself.
It is not surprising that local authorities should feel hard done by. So in this debate there is a slight whiff of the pot calling the more pristine kettle black.
Even so, it is perfectly reasonable for the Government to castigate high spenders in local government, because broadly they must be extravagant and incompetent, compared with the low spenders. On the other hand, the ACC considers that the current Government expenditure provision for 1984–85 is impossible to achieve. In my opinion, the ACC is right. The Government's proposals for a cut in real terms of 5 per cent. from the 1983–84 budgets are neither realistic nor reasonable, simply—as I have implied already — because most shire counties have already reduced their provision of services to the bare minimum, and there is no more fat to be lost.
Shire counties have been making cuts since 1974, and they cannot continue to do so. So cuts in grant are bound to create increases in rates. Saving the presence of my right hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop)—I should point out, before he interrupts me, that I should have liked to qualify the statement that I am about to make endlessly, were there time — I am not against proportionate cuts in grants, as long as they are not excessive, because I believe that the consequent increase in rate-borne — or, should I say, locally borne — expenditure increases local accountability. However, I object to the Government trying to have it both ways, with low spenders in particular—cutting their grant, and then penalising them for compensating rate increases. That is what is being done. In the end, the pressure on low-rated local authorities will not only reduce the provision of services, but will destroy the foundations of local government finance.
I should like to say a few words about one low spender and one high spender in my constituency. The low spender is Wiltshire county council. In a leading article of 3 November last year, The Times said this about Wiltshire:His"—that is, my right hon. Friend the Secretary of State's—model county is Wiltshire, Conservative and frugal, not merely spending on target but spending less than the experts, who include Her Majesty's Inspectors of Schools, say should be spent.That reference to Her Majesty's Inspector is the same point as was made by my right hon. Friend the Member for Taunton (Mr. du Cann). Wiltshire, like Somerset, has been, let us say, "warned" about its expenditure on education. As in Somerset, the standard of education is excellent, but it will be difficult for Wiltshire county council to maintain that standard of education unless it increases expenditure to some extent in the future.
How is this model county treated? Currently, Wiltshire has the third lowest rate in England and Wales among shire counties, despite having to finance the infrastructure for the expansion of Swindon, which has been described asprobably the fastest growing urban area in the European Community".682 Wiltshire also has a rateable value per head of population well below the average. The amount produced from a rate of 1p in the pound is £614,000, compared with the average for shire counties of £987,054. In spite of that — or perhaps because of it—Wiltshire expenditure per head of population is lower than the average for shire counties in every respect, except on libraries. The leading article in The Times described the county as "frugal" and, not surprisingly, within the county there are people who describe their council as mean and parsimonious.
How does the county now fare? First, let us remind ourselves about GRE and its definition. I believe that the right hon. Member for Halton (Mr. Oakes) has already referred to this. He is my co-vice-president of the ACC. GRE is defined asassessment of the expenditure required to provide a normal standard of service after taking account of local factors.
§ Mr. Maxwell-Hyslop
That definition omits the notional rate, towards which all rates lower than that tend to be pushed by the GRE system.
§ Mr. Morrison
I take that point.
The GRE for Wiltshire for 1984–85 is increased by the Government by 6.2 per cent., but the target of expenditure set by the Government for this low-spending county is increased — not surprisingly — by only 3 per cent. According to the GRE definition, that must mean that the Government expect Wiltshire county council to provide a lower than "normal standard of service", and to cut it further. I am not prepared to accept that without protest.
In practice, the county council is faced with three possibilities. The situation is similar to that in Somerset, described by my right hon. Friend the Member for Taunton (Mr. du Cann). Wiltshire can reduce services. If that is done there will be a tremendous howl not only from electors and ratepayers but also from Members of Parliament. Wiltshire could reduce its balances to an irresponsibly low level. I gather that balances should amount to about 5 per cent. of expenditure. In one budget calculation for the county, it has been suggested that the balances should be reduced to about 1.5 per cent. of expenditure. In my view, that would be wholly irresponsible. Thirdly, the county could maintain services. That would mean maintaining expenditure at a level that would attract grant penalty, which in turn would necessitate an even bigger increase in the rates and an extra burden on ratepayers.
That is how the present crazy rate support grant system works in Wiltshire. That is how a model county is to be treated. Putting it mildly, those who have been responsbile and frugal are being kicked in the teeth. It is unacceptable.
The high spender in my county is the district of Thamesdown, which includes Swindon, and over 35,000 of my electors. Thamesdown is Labour-controlled. It has a very high rate — about 50p in the pound. I am prepared to accept that that is excessive. I am sure that a Conservative administration would cut expenditure by various means. It would improve the standard of administration. It would cut out waste. Probably, it would also—this would be very important in Swindon—sell some assets which are very expensive for the ratepayers to run. Nevertheless, if they are to be seen to be fair and reasonable, the Government must treat like with like.
Thamesdown expands under the control of the district council. Milton Keynes, Peterborough and Northampton expand under the control of their councils plus 683 development corporations. If district and development corporation expenditure is added together, cost per capita in all those three towns exceeds that of Thamesdown, and capital expenditure shows a similar pattern. Perhaps that demonstrates only that in fast developing areas—at least initially, until there is a return in rateable value from the investment—costs are high. However, if that is true in those three towns it is also true in Thamesdown.
§ Mr. Straw
It is true that the level of services in Thamesdown has been higher than in other Wiltshire districts historically. Since 1979, however, the expenditure of Thamesdown council has been cut in real terms, going up only 66 per cent., against local authority inflation of 79 per cent. The council has cut its level of spending in order to try to meet the Government's requests, but it still faces massive penalties.
§ Mr. Morrison
I take the hon. Gentleman's point, but I must make a counter-point. Thamesdown was formed out of the old borough of Swindon and the rural district of Highworth, which was in my constituency. Before the amalgamation and reorganisation of local government, Swindon had expanded to a considerable extent into Highworth rural district. Before the time of the reorganisation, I fought to stop the boundary of Swindon being pushed further into my constituency, because the rates there were much higher, although the services provided in the rural district and in Swindon were very similar. Swindon was pretty well run, but the rural district was run even better. I hope that the Under-Secretary of State will respond to my point about the comparison between the treatment of development corporation towns and the treatment of areas such as the borough of Thamesdown.
However we look at the present system of grant aid and local government finance we find that it is still a tangled and complex mess. This cannot continue. There should be a revaluation of rateable value. That is very important in a growing area such as Swindon—
§ Mr. Morrison
It will be important at least until we have a decent system of local government taxation.
§ Sir Bernard Braine
I am interested to hear my hon. Friend's reference to a revaluation. Has he some inside information? When is it likely to take place?
§ Mr. Morrison
I have no inside information at all. Perhaps the Under-Secretary will provide us with some. It is unfortunate that the previous valuation was cancelled.
Above all, the Government must fulfil two requirements. First, they must stop pretending that those who run local government are wasteful or incompetent or unaware of the financial needs not only of their area but of the country as a whole. They are not. Most of them are dedicated people trying to do a good job for the community and, in the face of great financial stringency, to discharge the responsibilities imposed on them not by Government but by Parliament.
Secondly, the Government must design a system of grant aid which is comprehensible and fair and provides reasonable incentives to responsible local authorities. I doubt whether more than a very small handful of people understand the present system. Therefore, the 684 Government's objective next year should be to do a U-turn. They should simplify rather than complicate. If they do so, we may be able to praise the Government next year instead of criticising them.
§ Mr. Robert N. Wareing (Liverpool, West Derby)
To Liverpool and Mersey side, the rate support grant settlement will seem as irrelevant as an attempt to sell air conditioning to Eskimos. It bears no relation to the real needs of Mersey side. Liverpool — a microcosm of all our economic and social problems—has massive social problems. If we look at what we are being offered this year in conjunction with conditions in Liverpool, it can only be described—inadequately—as inadequate.
In Liverpool, 20 per cent. of the population is unemployed. In some districts 80 or 90 per cent. of the people are out of work. In one part of my constituency, 94 per cent. of young people are without any permanent employment. The six Liverpool constituencies are among the first 28 in the league table of constituency unemployment rates. Liverpool, Riverside is at the top of that unenviable league, and West Derby is ninth.
There are 29,000 people in need of housing or rehousing in Liverpool. Their housing needs should be met. Last Friday, the Liverpool Echo published a list of 87 separate cases of announced job losses during the last two years, many in firms that are well known both nationally and internationally. Against that background, Merseyside has responded much more positively than the Secretary of State.
The Merseyside county council has set its face against further redundancies. It is determined not to make any cuts in measures for the promotion of the local economy. Conservative Members are prone to looking for wild excursions in expenditure by metropolitan counties, but they should pay due regard to the services that are provided by county councils such as Merseyside.
Until all the bankruptcies last year, the Conservative party was supposed to be the party of the small business man. On Merseyside, an increasing part of our expenditure since Labour took control in 1981 has catered for small businesses in creating enterprises and new businesses. No fewer than 7,000 jobs have been generated as a result of the County Help for Active Small Enterprises scheme, otherwise known as the CHASE scheme. It was introduced by our Tory predecessors on the county council, and has been expanded under the Labour administration. Expenditure is being used to promote co-operatives and to create confidence among ordinary working people, who are establishing their own centres to provide education and training for the unemployed. The Merseyside county council is spending its money on projects such as Merseyside Training Ltd., which is now designated by the Government as one of their information technology centres.
The Merseyside county council has set its face against fare increases. Anyone who suggests that that is where one might find the means to combat the reduction in the rate support grant for Merseyside should bear in mind that, since the Labour party introduced fare reductions in 1981, there has been a 13 percent. increase in the numbers using the Merseyside passenger transport system. That compares with before 1981, when orthodox financial methods were 685 used under the Conservatives on the county council, and when year after year, fares on the Merseyside buses were increased.
What has been the Government's response to Merseyside county council's valiant efforts not only to provide for the unemployed and to provide a bus service that caters for the disabled and for elderly people who live on the outskirts of the conurbation, but to spend £1.5 million next year to service the International Garden Festival promoted by the Government-appointed Merseyside development corporation and financed by the Government? Last week I asked the Secretary of State whether, if money is found by Merseyside county council to provide a ferry service between the Wirral and the International Garden Festival site, there will still be penalties, and the right hon. Gentleman gave me an oblique answer. As far as I know, that is not on his list of disregards, but it should be. I hope that he will address himself to that matter and to the other services mentioned in a letter from the leader of the Merseyside county council to the Government.
What are the Government doing about the rate support grant and targets? The target set for Merseyside next year is £165 million, which is a 6 per cent. cash cut. I hope that Conservative Members will remember the background against which that is set. My hon. Friend the Member for Wallsend (Mr. Garrett) acknowledged that many Conservative Members have problems in their constituencies. There are pockets of social distress. However, my hon. Friend was right to tell them that day in, day out, we face a much greater problem.
The Secretary of State for the Environment implied that the 6 per cent. cash cut is the maximum reduction that any local authority, other than the Greater London council, will be required to make. However, one cannot take the rate support grant settlement without taking into account the transport supplementary grant settlement, in which there is an arbitrary cut that requires the Merseyside county council to find an extra £5 million next year. That raises the cash reduction from 6 per cent. to 9 per cent. I am not taking into account inflation and commitments that have to be absorbed to comply with Government policy. If we comply and say that we accept the 9 per cent. reduction, £13 million will become rateborne expenditure, equal to a 7p rise in precept, which is a rise of 12 per cent.
There are anomalies in the Government's general policy on the transport supplementary grant. The TSG is to be reduced by 11 per cent. Next year, the shire counties are to have an increase of 18 per cent. The Secretary of State for the Environment and the Secretary of State for Transport, in their combined policies, overlook the legal requirement for metropolitan counties to subsidise local rail services. In the shire counties, that responsibility falls on the national Exchequer. I hope that the Under-Secretary of State will refer to my point about the TSG in relation to the RSG.
We are often told on Merseyside, particularly the Liverpool city council, that we must not break the law. There was no consultation about the arbitrary cut in the TSG with the Merseyside county council under section 60 of the Local Government, Planning and Land Act 1980. I sometimes wonder who the lawbreakers are.
Merseyside is told that it is one of the major overspenders. Hon. Members will have seen the list of 686 overspenders. Merseyside was No. 4 or No. 5. However, the fact remains that of our overspend at least 25 per cent. is expenditure on the police, the fire service and the arts —17 per cent. on the police, 3 per cent. on the fire service and at least 5 per cent. on the arts. In Merseyside we take pride in our special responsibility for catering for nationally known institutions, such as the Walker art gallery and the Royal Liverpool philharmonic hall.
If we accept money from the European Economic Community, indeed, it costs us money in terms of penalty. For every £1 million that Merseyside accepts from the European social fund, it has to spend an extra £1.2 million of its own funds because of the penalty imposed.
I ask the Secretary of State to look very carefully at the disregards that are being asked for by the Merseyside county council. In the case of police services, for example, surely nobody — not even the Government — would advocate that we should cut the Merseyside police force, where the problem is difficult enough already with the increase in the crime wave.
In answer to a supplementary question put by me to the Prime Minister on 5 July 1983 she said:the record of this Government in putting extra money into Merseyside is a good one".She went on:Somehow, the people themselves there have not been involved sufficiently in trying to rejuvenate the centre of their own city."—[Official Report, 5 July 1983; Vol. 45, c. 154.]That is precisely what the elected city council of Liverpool has been trying to do on behalf of its citizens. It aims to provide 1,000 new jobs by using MSC schemes and, I might say, by topping up the pitifully low wages that are being allowed under those schemes. Nevertheless, it is using a Government scheme to provide more houses for the people I mentioned who are in a monstrous plight, and to deal with the necessary repairs.
While on that subject, I say this to the Secretary of State through you, Mr. Speaker. When he comes to Merseyside, let him allow the Members of Parliament representing Merseyside to make up his itinerary because, if he listens only to civil servants who may be better acquainted with the Oxford and Cambridge club than they are with the problems of Toxteth or Croxteth in my constituency, he will get a very false idea of the great "prosperity" that is Merseyside under the most marvellous economic policies for which we are told the Government have been responsible. Let him go round Liverpool, escorted: I am afraid that he will need an escort, but we shall be glad to provide it. Let him go round some of the working class estates and talk to the people who count, and not the higher echelons, even of the Merseyside task force.
Any compassionate or rational Government would want to assist in a true partnership with Liverpool and with the Merseyside county council, but, since the Government came to power, that is far from being the case. Indeed, since 1981 there have been reductions in Liverpool's block grant. In 1981–82 there was a reduction of 11 per cent. A slight concession was made in 1982–83 when it increased by 0.5 per cent. In 1983–84 there was a further reduction in block grant of 1.5 per cent. It may well be said, and rightly, that Liverpool did well out of the rate support grant during the seventies. It is true that there was an increase every year under the Labour Government. In 1974–75 the rate support grant stood at £62 million. By 1979–80 it had risen to nearly £110 million.
687 The hon. Member for Devizes (Mr. Morrison) was correct when he said we should ask ourselves what went before. I shall tell the House what went before in Liverpool. during the years when rate support grant was increasing year after year under a Labour Government, Liverpool had the misfortune to be dominated by the Liberals. These were Liberals who owed more to the memory of the late Horatio Bottomley than to the late William Gladstone. [HON. MEMBERS: "Where are they?"] Hon. Members might well ask where they are. They are certainly not here; they have probably gone on a six-month holiday, taking a leaf out of their leader's book.
What did the Liberals do with the rate support grant increases? They used the rate support grant to cut the rates and to cut essential expenditure. In 1975–76 when inflation stood at 24 per cent. the rates in Liverpool were cut by 6 per cent. In 1976–77 when inflation stood at 16–17 per cent. the rates went up by only 2 per cent. How did the Liberals balance their budget in those circumstances? They did it by cutting 4,000 jobs. They did it by building no more corporation houses in an area of real need for rented property. They did it by freezing, and then cutting, student grants. They did it by every means that they could discover. They even suggested at one time that pensioners should pay £4 for concessionary bus passes. That is what the Liberals did, or threatened to do, in Liverpool. Only after tremendous demonstrations did they pull back.
We are told that local authorities are the creatures of statute and are bound by the law. That did not bother the Liberals too much. Indeed, although there are obligations to local authorities under the Chronically Sick and Disabled Persons Act 1970, they went so far as to freeze the allocation of telephones to the handicapped. They were criticised at the time by RADAR, the disabled persons' organisation. I wonder what RADAR will say when this rate support grant results in further cuts if the Government can get away with it.
We have to ask ourselves who the real law-breakers are. I suggest that ratepayers should look very carefully at what the Government now propose. I believe that, because they failed to consult properly under the 1980 Act, there may be a case through litigation against this Conservative Government. In looking for the background and what went before, one has to look at the legacy of Liberal—Tory neglect on the local council, and all of this against a background of distress and factory after factory closure in the area. It does not call for threats against Liverpool to cut the rate support grant.
I believe there is a case for a royal commission to examine what has happened in Liverpool over the last 10 years, during which time Sir Trevor Jones, the leader of the Liberal city council, was able to say:We have cut our services to the bone, we can cut no further.And that was three years ago.
It would be bad enough if it could be argued that all this is in aid of promoting the needs of the national economy, but the total overspend in the entire country is equivalent to no more than 0.02 per cent. of gross domestic product. The Government tell local authorities—this is an irony — that they will encourage capital expenditure, but capital expenditure enters into the public sector borrowing requirement and affects the target of the Chancellor, whereas current expenditure does not.
My hon. Friend the Member for Copeland (Dr. Cunningham) at the beginning of the debate indicated correctly that for local authorities to carry out the 688 Government's desires would mean 12,000 fewer teachers, 11,600 fewer places in residential accommodation in the social services, 8,300 fewer day care places and 46,200 fewer home helps. I hope that this is registering with the Secretary of State. There would be 7,100 fewer police officers—unless the Government intend to protect the police. I hope that they will do so, but not at the expense of social workers, teachers, firemen and those in other essential services.
The former Secretary of State for the Environment, the right hon. Member for Henley (Mr. Heseltine), visited Merseyside just after the Toxteth riots and told the Conservative party conference that the problems there could be tackled only by public expenditure. He was converted from the views of Milton Friedman. I suggest that the right hon. Gentleman is glad to have been moved to another post and is pleased that the present Secretary of State has to carry the burdens. I believe that the previous Secretary of State could not get his way in the Cabinet.
If the present Secretary of State is not man enough to stand up to the harsh leadership in the Government, he will be prescribing a recipe for chronic disaster in areas such as Merseyside. I do not forecast that it will come next week or next year, but there will be social catastrophe unless the Government turn away from the course that they have set themselves.
People in Liverpool are asking what the Prime Minister is afraid of. She has made only one visit to the city since the Toxteth riots and it was as if General Ustinov had arranged to visit the Gdansk shipyards. The Prime Minister came in the early hours of the morning under close police protection. The people of Merseyside believe that she and the Government have caused more devastation than any squadron of Junkers-88s or Heinkel-111s during the blitz in May 1941.
I hope that the Secretary of State will consider carefully the points that have been put to him, will consult the Merseyside and Liverpool councils and will withdraw the report. If he will not, the House should certainly reject it.
§ Mr. Michael Carttiss (Great Yarmouth)
My contribution on the rate support grant report will have to be strictly limited, as this is my maiden speech and, before commenting on the subject of the debate, I am happy to observe the convention of paying tribute to my predecessors and my constituency.
To be given the opportunity of representing Great Yarmouth, where I have spent my life and where generations of my family have lived and worked, is a signal privilege. The borough of Great Yarmouth has sent representatives to the Commons since 1294. It has been represented by many distinguished men. Some have been noted or — depending on one's viewpoint — notorious rebels.
In the early 17th century, Miles Corbett, when Member of Parliament for Yarmouth, put his signature—it is the last—on the death warrant of Charles I. By contrast, my immediate predecessor, Sir Anthony Fell, was very much a monarchist, but he was a rebel against his party when convinced that it was wrong. First elected in 1951 for Yarmouth, where his grandfather was the Member of Parliament before the war, Sir Anthony was a great champion of the role of Britain on the world's stage. He was also a great champion of the role of the House above Government.
689 One of my 18th century predecessors, Sir Edward Walpole, son of the first Prime Minister, was Chief Secretary for Ireland. I am proud that since June, the Great Yarmouth constituency has included villages from the old Lowestoft constituency, now called Waveney and represented by my right hon. Friend the Secretary of State for Northern Ireland. My right hon. Friend's compassionate approach to political issues is greatly admired, especially by his former constituents who are now within the boundaries of my constituency. I trust that I shall keep in my mind my right hon. Friend's example of public service.
My constituency combines a major seaside resort with the broadland villages for which my county is famous worldwide. Our holiday industry brings an annual turnover of about £100 million to the area. Our new marina centre, jointly developed by private and municipal enterprise, is the largest leisure and entertainments complex of its kind in the country.
Every year, Great Yarmouth attracts 2 million tourists, and the rural area is noted for its intensive and successful agriculture. In the town, we are developing year-round industry, and our port is vital to that objective. We trade daily with The Hague, only 90 miles across the North sea, which gives access to the whole of Europe. The shipping handled by our port in 1983 totalled 3.5 million tonnes. Nearly half of that was the gross registered tonnage of offshore supply vessels to the North sea oil and gas rigs. It is essential for the future of our town that Norfolk is linked as soon as possible to the national motorway network by dual carriageway routes, to enable the port to continue to grow. The Norwich and Acle bypasses on the A47 are equally important to Great Yarmouth.
Many hon. Members have mentioned the problems that the rate support grant report will cause for their local authorities. The authority responsible for major services in my constituency, Norfolk county council, is well known as a low spender. The council believes that it provides an acceptable level of local services at one of the lowest costs in the country. It frequently comes under pressure to increase spending, not least from Her Majesty's inspectors of schools.
Norfolk's grant-related expenditure assessment has been set at £231 million, but if the county council spent up to that GREA, it would incur a penalty of £36 million. I know that there is no direct link between GREAs and targets. Indeed, talking about the GREA in relation to targets is as relevant as discussing the menu in the dining room as one sinks below the icy waters on the Titanic.
The Great Yarmouth borough council, which is responsible for the other services in my constituency, is likely to be 3 per cent. over its target this year. For every pound spent over target, Great Yarmouth will lose £2.47 in grant. That is not a loss to the council; it is a loss to the people whom I have been sent here to represent.
The penalty system devised by the Government can encourage higher rates than would otherwise be levied. If a council wishes to spend less than its target, it would be unwise to do so, because the following year's target would almost certainly be further reduced, as happened to Norfolk two or three years ago. Suffolk kept its spending up and benefited from a target for the following year that recognised that fact. Norfolk's target was reduced in line with its reduction in expenditure in the previous year.
690 Great Yarmouth reduced its rate last year by 2p in the pound, in line with the Government's national policies. The borough council's position illustrates another aspect of the defects of the penalty system, which is that a council could levy a higher rate than necessary to increase balances using the added interest to decrease net expenditure and making it easier to keep within the target. In the case of Great Yarmouth, instead of reducing the rate by 2p in the pound it would have been better off to have left the rate as it was originally, and used the interest gained from the higher balances to keep its net expenditure down so as to meet the new target this year.
It must be recognised that establishing GREAs, and setting targets well below them in many local authorities, and the reverse with others, is a rough and ready form of justice. My right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym) has drawn attention to the raw deal for East Anglia, pointing out that compared with the national position of other local authorities, the East Anglian authorities have been set targets for 1984–85 that are 4.6 per cent. less than the GREAs.
With regard to my county, the Eastern Daily Press recently commented that Norfolk has played the game with the Government every year and has lost every year. However, it is one of the few local authorities in the Association of County Councils that supports the Government's rate-capping proposals, in respect to the selective powers. I have given my support to my right hon. Friend the Secretary of State on that.
To be able to support with conviction the general powers for which the Government have asked I need to see more evidence that the Department of the Environment, when arriving at rate support grant settlements such as we are discussing today, shows a better understanding of the needs of local authorities where the GREA is well above target, and spending up to the GREA brings a heavy and unacceptable penalty. I noted my right hon. Friend's assurances, when he opened the debate, that he will be taking greater account of the record of those authorities that cannot be described by any stretch of the imagination as high spenders, to use my right hon. Friend's words, when drawing up targets for next year.
I understand the problems to which my right hon. Friend the Secretary of State is addressing himself. These problems arise from the past few years of gross overspending by a handful of large councils. With respect to the hon. Member for Liverpool, West Derby (Mr. Wareing), when one hears arguments such as those propounded from the Opposition Benches, one is driven more and more into the Lobby with my right hon. Friend. This consistent overspending has been to the detriment not only of the interests of local government generally but to the achievement of the economic objectives set for the nation as a whole. Because of that and the need to control that problem, I shall have no hesitation in joining my right hon. Friend in the Lobby. However, I point out that if he is not able to find a more equitable approach to consistent low-spending authorities such as Norfolk during the coming year I may not be in the Lobby with him in 12 months time.
§ 8.3 pm
§ Mr. Tony Banks (Newham, North-West)
It falls to me to congratulate the hon. Member for Great Yarmouth (Mr. Carttiss) on his first speech in the House. I wish that 691 I could say that I agreed with every word that he uttered, but I am afraid I cannot do that, and he would be surprised if I could. The hon. Gentleman put the boot into his right hon. Friend the Secretary of State most gracefully, and criticised him. as most right hon. and hon. Members have done. The hon. Member spoke with great feeling and conviction, which comes from his long service in local authorities. The House listened with great respect to the authority that he brought to his speech.
Criticism has characterised much of the debate so far, and by my reckoning the Secretary of State is about nine and a half down at the moment. He has not been able to find much support on either side of the House. It must be clear, with all the experience of local authority on both sides of the House criticising what is being proposed, that he has got himself a report that should be withdrawn and rethought. It would appear to many of us that he is being badly advised by his civil servants.
I am reliably informed that there was a time in the House when local government issues surfaced only intermittently. However, since the general election of 1983, such matters have dominated our proceedings and are likely to continue to do so throughout the whole of 1984 as we witness an intensification of the struggle between central and local government.
I see two reasons for this development. In Britain two sets of national institutions stand between working people and the full impact of the Government's monetarist lunacy. The first is the trade union movement, and the second is the Labour-controlled local authorities. It is little wonder that both are under sustained attack from the Government. British capitalism can no longer buy off working class demands, as it did in the past, so it must resort to coercion to survive. That means imposing declining living standards and mass unemployment on growing numbers of British people. British capitalism is morally corrupt and in economic decline. During the 1980s as that crisis deepens, it will be forced more and more to reveal itself in all its arrogant and brutal reality.
In his respect, we should appreciate that the Prime Minister is very much a creation of our time—a leader who can use the language of the populist while at the same time taking the country towards an increasingly authoritarian and centralised Government. That suits her nature, in which resides the second reason for the Government's current onslaught on local democracy. The right hon. Lady hates all opposition, whether it be inside or outside the Conservative party. I once saw a piece of graffiti on a wall in London — it might have been washed away by now—which said, "Get rid of Thatcher before she gets rid of you." A number of prominent Conservative Members have recently had experience of the sharp reality of that cautionary slogan, as the Tory party gradually discards its higher minded and more principled leaders in favour of the parvenus who now dominate its higher councils. Labour-controlled local authorities have dared to defy the tactics of the right hon. Lady and her ministerial poodles, and for their temerity they must go—certainly the GLC and the metropolitan councils—such is the contempt that today's Tory party has for democracy.
The Government's campaign against local councils has revealed the manipulative nature of our political system, and the technique that has been used has been that of the big lie, repeated over and over again. We are repeatedly told that local authorities are out of control in terms of their 692 public spending and must be curbed. In the recent debate on the Rates Bill we were treated to an appallingly arrogant and wholly misleading presentation of the case against local government. I hope that when the Minister sums up he will give us a slower and more thoughtful endpiece to this debate than that on the Rates Bill. For our part, we shall try to contain ourselves so that he can have the opportunity of a good run at it.
On Second Reading of the Rates Bill little attempt was made to answer the fears of hon. Members on both sides of the House about the threat to local democracy. Instead, we received the usual superficial and selective use of statistics, calculated to deceive and blind people to the truth about what is going on in local government. We are in grave danger of adding a new dimension to the saying,Lies, damned lies and statistics—namely, "Lies, damned lies, statistics and the Secretary of State for the Environment."
Ministers continually accuse local government of sabotaging the Government's economic policies. That is arrant nonsense. As hon. Members have pointed out, in the current year, 1983–84, the so-called local government overspend amounts to £771 million a year. That is 0.6 per cent. — just over half of 1 per cent. — of total Government spending of £119,600 million. Therefore, the overspend that is viewed with such alarm by Ministers is about the same amount of taxpayers' money as will be spent this year on the Government's doomed Falkland Islands policy.
According to the echoed lies in those grovelling Tory rags, the Daily Mail, The Sun, and the Daily Express, the rise in rates in recent years has been caused by profligate spending in town and county halls. That accusation has been bandied about by Conservative Members during this debate and on Second Reading of the Rates Bill. Yet between 1978–79 and 1983–84 central Government spending increased by 101 per cent., while local authority spending increased by 80 per cent. In that same period taxation increased by 94 per cent. and rates by 125 per cent. Rates increased so dramatically because of the massive reductions in Government grants to local authorities.
In effect, central Government have reduced their expenditure at the expense of ratepayers. They have used the price of local services, much as they have used gas and electricity price increases, as a form of taxation to raise money for central Government services. That is dishonest and unfair. I do not expect Conservative Members to take my word for that statement, but they may have more confidence in the Financial Times, which, in its editorial of 15 December 1983, stated:The Government cuts have taken £3.6 billion of grant away from Councils since 1978–79, nearly half of it from London. The total grant loss is the equivalent of 4p in the pound on income tax and the Government is less than just in not admitting that this switch in tax burden from central to local is at least partly responsible for rate rises.That quotation is taken not from the information division of the GLC, but from the Financial Times. It makes the point that the Opposition have consistently made and that the Government have consistently denied.
The Secretary of State said that there had been a drop in the amount of central Government funding for local government. It was a dramactic drop, and it must be responsible for the great impact on the cost of services and high rate levels. In 1978–79, the Government paid for 61 per cent. of council expenditure, but by 1984–85 that will 693 have decreased to 51.9 per cent. As my hon. Friend the Member for Copeland (Dr. Cunningham) said, that is a declining amount as well as a declining percentage. That is the true measure of the Government's attack on local authorities.
Who, then, is responsible for rate increases? All the sophistry, the statistical chicanery and Fleet street propaganda will not alter the truth, however much it alters people's perception of the truth.
From 1979–80 to 1983–84 — those years are convenient when we realise who has been in Government during that period — London lost more than £9/1/25501,700 million in rate support grant. The 1984–85 settlement means that if every London authority, including the GLC, stayed within the Government's targets, the loss would be more than £2,200 million. In practice, the cost will be much higher, since most London authorities cannot meet their targets, and the real loss is likely to be about £2,700 million.
The block grant system is biased against London, first, because it is based on the false premise that ratepayers in all areas should pay the same rate in the pound and get the same services. That produces higher rate bills in London, because London's rateable values are high compared with elsewhere. Despite the effect of the London multipliers, the rate bill of the average London house in 1982–83 was £401 compared with an average in the rest of England of £261, which represents a premium of 54 per cent. Secondly, the GREs, of which we have heard so much this evening, inadequately reflect the need to spend on local authority services in London in terms of volume and costs. Costs are much higher in London than they are elsewhere.
Thirdly, the per capita basis of equalisation is heavily biased against London. Although the cost of the standard service level in London is acknowledged by the GRE system to be 42 per cent. higher than in non-metropolitan areas, the cost of increments in the service level above that standard are deemed to be the same in all areas. Per capita equalisation is indefensible in London, and it is about time that Ministers considered percentage equalisation.
Fourthly, the perverse consequence of the use of rateable value as the measure of local government's taxable resources is that increments of expenditure in London, whether above or below GRE or target, result directly in grant losses. Outside London such increments in expenditure result in an increase in grant. Thus, the cost of marginal expenditure in London is magnified while the cost outside London is reduced.
Fifthly, the Government's expenditure targets for local authorities, which serve as a benchmark for measuring overspending, are based on crude calculations modified by arbitrary and capricious rules designed merely to achieve the Government's political aims. The Government's spending targets have hideously penalised Londoners and will continue to do so under the terms of the 1984–85 settlement. I should be most grateful if the Minister would comment upon those points as they affect London.
The GREs for the boroughs in the Association of London Authorities fell by 1 per cent. between 1983–84 and 1984–85, which means a real reduction of 6 per cent. Are we seriously being asked by the Government to accept that inner London's needs have declined by 6 per cent. in a year? That cannot be true. The index of deprivation published by the Department of the Environment shows 694 that the 10 most deprived authority areas in Britain are all in London. Newham, in which my constituency is located, although not as well known as the area represented by the hon. Member for Great Yarmouth, is second only to Hackney in the table of the most deprived areas.
The 1984–85 expenditure target for Newham is £120 million, which is an increase of 2.5 per cent. on the 1983–84 target. If Newham spends at the budgeted levels produced by its committees, the grant penalty will be £23 million. The effect is that for every pound of expenditure at the margin, there will be a reduction of about £1.60 in block grant. Every £1 of extra expenditure will cost Newham ratepayers £2.60. Yet the ratepayers may have to face those costs because there are massive social problems in Newham, which is a deprived east end area.
Hon. Members who represent similar areas can testify to the number of people who visit their advice surgeries. In my case, a constant request is to get out of the tower blocks. We have one of the highest, if not the highest, concentrations of tower blocks. I know that a Labour local authority built those tower blocks, but it was encouraged to do so because of the cost yardsticks that previous Governments of both persuasions had put forward. That does not get away from the problem that thousands of my constituents in Newham are living in accommodation that no hon. Member would wish to live in for other than a short time, if at all.
Newham needs extra resources to deal with those deep social problems. Unfortunately, this rate support grant settlement provides none of the extra resources that Newham so badly needs.
The Government have proposed a 1984–85 target for the GLC of £561 million—a 35 per cent. cash reduction in the 1983–84 budget. I declare my interest as a member of the GLC. It is asked to make a 35 per cent. reduction in one year, but realistically that cannot, and indeed will not, be done.
In an effort to show that the GLC is not thoughtless about this matter, some calculations have been made. If it was mindful, or forced by the Government, to meet its set target, it could increase London transport fares substantially above the rate of inflation by, say, 40 per cent. That would produce £90 million. It could increase rents by £5 a week above the level determined by the Government of 75p a week on all GLC retained stock in 1984–85. That would produce a further £10 million. It could limit staff recruitment and impose some redundancies. That would have a random effect on services, but would produce a saving of £10 million.
I remind hon. Members of something that they may have forgotten or do not know. It may be thought that the GLC has a large number of staff, but it should be noted that its staff levels have been reduced from 33,000 in 1975 to 21,000 now, 9,000 of whom are fire fighters or those involved in public service work. It could withdraw all support to the voluntary and community sector established by the GLC's grant aid programme. Some hon. Members may say, unkindly, that they do not like some of the bodies to which the GLC has given ratepayers' money, but the cost of funding them amounts to nothing, not even to a few peanuts. The GLC funds 2,000 community groups throughout London. They are by no means controversial. They deal with the old, the sick, the disabled and the disadvantaged. If all those bodies were eliminated, that would produce a saving of £15 million.
695 The GLC could withdraw all its support from industry and the employment programme. That would affect the 1,504 jobs that to date have been saved or created by the Greater London Enterprise Board. That would save another £30 million It could remove all concessionary travel arrangements to old age pensioners, on the assumption that they would continue to travel and pay fares. That would save another £65 million. It could then withdraw from agency agreements with boroughs to maintain roads, bridges and traffic signals, resulting in a further saving of £35 million; it could reduce the level of statutory services currently provided and save a further £10 million. It could restart borrowing for capital expenditure by reducing the revenue contribution to capital. That would save a further £15 million.
The total would amount to £280 million, which is still £20 million short of the reduction in GLC spending determined by the Government. One can imagine the impact on London services that such cuts would achieve. Yet that would still not meet the unrealistic and ludicrous targets set by Government.
I invite the Minister to say which services the GLC should cut. Apparently, Ministers want to remove all local control from local councillors. Therefore, let them say what services the local authorities should cut. I shall be interested to hear what the hon. Gentleman has to say.
A school of thought now developing within Labour groups is that we should meet the targets and impose on people the ludicrous cuts that the Government are suggesting. That will never be done, because Labour Members are far too concerned about the impact on ordinary working people. Labour councillors throughout the country seek to defend the interests of the communities they represent, yet for their pains they are abused by the Government and the lackey Fleet street press.
The Government are steadily turning councillors into stooges of Whitehall—elected enuchs who are obliged to carry out the diktats of Ministers. What is the point of standing for a local council if the ability to make decisions is to be so closely confined within artificial and unrealistic limits set by civil servants who have no personal knowledge of local circumstances and conditions?
The Government, with the aid of their Fleet street propoganda sheets, are again posing as the champion of the hard-pressed ratepayers. What utter hypocrisy! If they want to do something about rates, as they said in 1979, they should abolish them. They should come forward with a proper system of local government financing that eliminates the inadequacies and pain that rates cause to many people. Instead, the Government tinker around with the system. They resort to common abuse of both Labour and Tory councillors by suggesting that somehow town and county halls have been taken over by maverick loonies who have no concern for the welfare of the people they represent.
The Government have no interest in the welfare of the people they are supposed to represent. That is evidenced by the imposition of these riduculous and savage cuts in local and public expenditure.
Ratepayers are hard pressed. I assume that we are all ratepayers. I am a ratepayer. I know that ratepayers are hard pressed, but the Government's policy is to blame, rather than the local authorities, which are desperately trying to maintain already inadequate levels of local services and are being heavily penalised by the Government for doing so.
696 This shabby Tory Government are out to shackle local government. The 1984–85 rate support grant settlement is just a further stage along the dismal road towards the end of local democracy. That is the Government's clear objective. I trust that tonight hon. Members on both sides will unite against such a move.
§ Sir Bernard Braine (Castle Point)
As I think the House knows, I am a cheerful man by nature, but I rise to speak in this debate with a very heavy heart.
Before I say anything further, let me congratulate my hon. Friend the Member for Great Yarmouth (Mr. Carttiss) on an excellent maiden speech. It may interest him to know that I stand in the place where, on occasion, his predecessor, Sir Anthony Fell, addressed the House. He was a great House of Commons man. Those of us who knew him over the years liked him greatly, a feeling that I know extended across the Floor of the House. Like other hon. Members, I listened with great care to what my hon. Friend said, and I am convinced that he will make a notable contribution to our debates. I look forward to the occasion when he addresses us again.
I rise with a heavy heart because I recall the Conservative manifesto on which I and my hon. Friends fought the last election. It promised, among other things, to legislateto curb excessive and irresponsible rate increases by high-spending councils, and to provide a general scheme for limitation of rate increases for all local authorities to be used if necessary.When I saw those words and applauded them, it did not for one moment occur to me that when framed, such legislation would penalise low-spending local authorities that had made every effort to keep their expenditure within bounds and their rates at a reasonable level. It never occurred to me for one minute that that was in the Government's mind.
I agree with the rate-capping proposals, and I voted for the Bill last week. However, I cannot agree with what is set out in the report. There are no fewer than 14 shire counties, including Conservative-controlled Essex county council, that planned to meet the Government's target for 1983–84, but for 1984–85 will be penalised by grant being withheld if their spending is increased by more than 3 per cent. I do not know how much reliance should be put on the Treasury's estimates, but it has estimated that inflation will run at an average of 5 per cent. in 1984. Given that, it is neither fair nor realistic to expect low-spending authorities to budget for only a 3 per cent. increase.
The options open to those authorities are to make reductions in the level of services or to budget higher than 3 per cent. and to incur penalty. I will refer shortly to what that means to my county, and to why it is unacceptable to me and, I suspect, to other Essex Members. In general, the Essex Members are proud of our county council's achievements in trying to meet the call for economy. Close liaison has now been maintained with the county for several years and we have regular meetings to ensure that both sides understand what is happening. There is a close rapport between the county council and the elected Members of Parliament.
Time and again we have had to tell central Government—and as senior Member, I have had to take the lead—that our situation calls for understanding, because we are an expanding county. For that reason alone, we cannot view any reduction in services with equanimity. Although 697 our rate in the pound is relatively low, the ratepayers' bill is high because of the high rateable value of property in a county that is near London. The prospect of anything being done about revaluation is remote. No one disputes that our county is economically and prudently managed. My right hon. Friend the previous Secretary of State for the Environment, and now Secretary of State for Defence, acknowledged that. Indeed, my right hon. Friend the present Secretary of State wrote in October 1983 that he wasglad that the consultants have confirmed that Essex is running a tight and efficient ship".There can be no question about it; Essex has never been open to criticism on the score of economy. It has long been running a tight and efficient ship. We would find it less disturbing if we felt that the Government's target figures were realistic and fair, but they are not. Let us consider the record. In 1981–82, two Government figures were produced for Essex; the GRE figure of £419.5 million and the target figure of £347.7 million. At first we were told to adhere to the lower target figure, but when the implications of that were eventually grasped in Whitehall, we were told that GRE was the figure that we had to meet.
What makes the present target figure fair and realistic? On behalf of Essex Members and the county council, I wrote to my right hon. Friend the Secretary of State on 18 November. I reminded him that his predecessor had directed that an extensive management review of the county's expenditure should be undertaken. That has been done and it was confirmed that there was no area in which significant savings could be achieved. Yet, under the Government's proposals, Essex now faces an imposed target of £473 million compared with the £480 million it requires just to maintain its present level of services.
Let us suppose that that target is accepted. Of course, it is substantially below GRE, which was hitherto regarded as the Government's own best assessment of an authority's real needs. Consider then the effects on our services and on the standards required by other parts of central Government. Acceptance would inevitably entail reducing the number of teachers beyond the level achieved by falling rolls, even though my right hon. Friend the Secretary of State for Education and Science has recently advised the chairman of the Essex education committee that he should be spending more on education, and up to the council's GRE. Thus, straight away there is a conflict between my right hon. Friend the Secretary of State for the Environment and my right hon. Friend the Secretary of State for Education and Science. Acceptance would entail reducing the number of police, even though a request for a substantial increase in their numbers in Essex is now before the Home Secretary. That increase is urgently required and is supported by the Home Office provided that Essex can meet its additional share of the cost. However, it patently cannot do so because of the wholly inadequate target.
Acceptance would also entail reducing fire cover, together with the closure of fire stations and the inadequate manning of fire appliances, even though Her Majesty's inspector has warned that Essex is substantially below Home Office requirements in that regard. Acceptance would also entail reducing expenditure on social services, by closing homes for the elderly, even though Essex has one of the lowest rates of expenditure per head on the 698 social services. Essex is already 15 per cent. below the GRE for that service, and it faces substantial additional expenditure from the transfer of responsibilities from the Health Service to the social services.
How can one cut services any more? We are put in an impossible position. It is a pity that one cannot say such things to more hon. Members. However, that is not necessary, because not a single hon. Member on either side of the House has had anything to say in favour of the proposals. The fact is that the Government's left hand does not know what the right hand is doing. On the one hand, a formula is applied that militates against the advice given by senior members of the Government in respect of particular services. On the other hand, if Essex were to decide to go above target in order to maintain its services at their present level, the £7 million gap would cost its ratepayers no less than £13.6 million as a result of the harsh system of penalties. That was not envisaged in the election manifesto.
I hope that my hon. Friend the Under-Secretary will try to reconcile the election manifesto with what is being imposed on Conservative-controlled councils such as Essex. At no time did any Essex Member think that in order to curb a relatively small number of irresponsible and high-spending local authorities, councils such as Essex, which have an impeccable record of prudent management, would be so cruelly penalised.
I see no evidence in this of Conservative principles, fairness or consistency. Indeed, I fail to see evidence of logic. We are told that the object is to reduce public expenditure and to relieve the burden on industry of excessive rates. Those are desirable objectives. Hon. Members will know about the heavy burden that business and industries bear in their constituencies. The object may have been to reduce the burden, but the reality is different. Because we care about our people, it is unlikely that services will be cut. As a result, rates will go up.
The rates burden will not be reduced; it will be increased. A Government who talk about reducing taxation will receive increased revenue. Those authorities that have to pay penalties will increase the revenue but the scheme will not reduce expenditure by one title, although that is what it should be about. That is what we understood from the manifesto promise. The whole exercise was aimed at reducing expenditure and the rates burden, not only for domestic ratepayers, but for business and industry. In reality, expenditure, which is supposed to be brought under control by this crazy scheme, will be increased.
I shall listen with interest to what is said by the Under-Secretary at the end of the debate but I have to tell him that nothing has been said so far to convince me that my duty is to walk into the Government Lobby tonight. Unfortunately. my right hon. Friend, for whom I have great admiration and who is tackling an extremely difficult job, gave no sign that he would change course. He said that there may be some easement next year. That is not good enough. It does not right a palpable wrong. Unless a positive statement is made by the Under-Secretary and a helpful response is made to the constructive suggestion of my right hon. Friend the Member for Taunton (Mr. du Cann) I cannot support the Government in the Lobby.
§ Mr. Robert Litherland (Manchester, Central)
I compliment the hon. Member for Great Yarmouth (Mr. 699 Carttiss) on his maiden speech. To his credit, he selected an important debate for his first speech. I am glad that he recognises that he is a privileged person and I hope that he will continue to fight for local government democracy in his constituency.
Each authority throughout the country puts a different interpretation on the rate support grant debate, for the simple reason that each authority is different and has differing needs. The Manchester city council is different from its sister city, Salford. No two local authorities are identical, so it is farcical to make comparisons. The Secretary of State does not compare like with like. Each local authority is affected differently by the rate support grant.
Each hon. Member who contributed today referred to his own authority. We all recognise the work done by dedicated local councillors and the complexities of a system which has evolved over the centuries. A democratic system has emerged which is now a part of our lives. Any tampering which takes away responsibility from democratically elected representatives will produce an outcry of protest.
The effect of Government interference by limiting local government activity and imposing financial stringencies is different for each authority. Another drastic and vicious cut in the rate support grant for Manchester, a major inner city area with all the problems that that entails, will affect every aspect of life including welfare, education and culture. Manchester's cut amounts to 5 per cent. in real terms.
The Government set the standard in Whitehall and local government tries to meet the standards in the town hall. Grant-related expenditure assessments—new terminology—was introduced in a recent Act and was designed solely for the distribution of the rate support grant. The Government said that it was an attempt to seek a fairer distribution of the rate support grant. That attempt has failed miserably.
Manchester city council has made repeated representations to the Minister pointing out the inadequacy of the system, which does not reflect the needs of a major inner city with a population of fewer than 500,000 at the centre of a conurbation containing 2.5 million people. The assessment fails to take account of individual services, deprivation, the needs of a regional centre and the restriction of the city boundaries in relation to the size of the conurbation when compared with other local authorities. Manchester has vast historical problems. It is the victim of its industrial heritage.
My constituency faces the problem of derelict factories. The Government will have to find money to deal not only with land dereliction, but with factory site dereliction. Manchester also has to bear the impact of investment decisions still being met by the payment of debt charges. In spite of the nasty propaganda by this Government, the city council in its response to the Government's White Paper showed that its net spending had fallen by 3.4 per cent. in real terms since 1979–80. Any increase in rates arises solely from the reduction in resources from central Government.
Housing subsidies for 1983–84 will be about £30 million less than they would have been if the 1979–80 level had continued. Manchester city council would have been about £77 million better off in terms of Government support if housing subsidies and rate support grant had been maintained at the 1979–80 level. In spite of all its 700 efforts to meet Government targets, living on the assurance that if targets were met in 1981–82 things would be better in 1982–83, and if it met the targets in 1982–83 things would be better in 1983–84, and so on, the city still faces a 5 per cent. cut. It reminds one of a hurdle race with no winning post. There will be no winners in local government.
In spite of all its efforts since 1979, the Whitehall and Government mercenaries have deprived Manchester of over £250 million and 7,000 council jobs. The Government must realise that we are talking not about a high-spending local authority which ignores Government, ratepayers, tenants and the community, but about an authority which has made every effort to provide services with diminishing resources. No wonder local councillors and officers are sick and tired of attacks on their integrity and on local democracy.
Manchester has been named today by the Secretary of State as a high-spending authority. What can the people of Manchester expect from further cuts? Where will it all end if each year services deteriorate? The cuts suffered in the past four years will be trivial by comparison to those envisaged in the next four years if the city councillors try to meet the demands placed upon them.
The Government's intentions are laid down firmly and expressly in their rate-capping policy—the subservience of local authorities to the dictates of Government and Whitehall. Is it any wonder that councils are preparing for a bitter struggle? If each year they concede the Government's demands, there will be nothing in the future to struggle for. The Government must realise that local councillors cannot fulfil their basic statutory obligations if they are to comply with the rigid financial strictures being imposed.
Those who are affected in my constituency include the elderly who depend upon local social services, luncheon clubs, meals-on-wheels, warden services, caretakers and home helps to provide some dignity and comfort in retirement. All such services are targets for the Secretary of State. The cuts will also affect the under-fives for whom nursery provision and child care facilities, adventure playgrounds and swimming baths are essential to a happy and healthy start in life. The real human costs of such cuts are borne by such people whose numbers are swelling daily in my constituency. They know from bitter experience that the poverty trap is an ever-tightening vice. As community services and welfare benefits are eroded, their dependence on such sources of support increases.
The Government can shroud their measures in a minefield of financial jargon—rate poundages, grant-related expenditure assessments, multipliers, tapers and schedules: all the gobbledegook — but on the ground they will be seen as another turn of the crank and a further tightening of the vice. All the waffle and double-speaking that the Secretary of State can muster, which is formidable, will not hide the true nature of the cuts from the people of Manchester. Those are the areas in which the cuts will bite hard.
I hope that the Government listen to the eminent Members of their party who have warned the Government that we are dealing not just with the control of local government but with a sinister shift of power which is taking us down the wrong road. I hope that every Conservative Member who has any respect for democracy 701 and local electors will be joining us in the Lobby. This is not the Orwellian year of the Big Brother, but it is certainly the Orwellian year of the Big Sister.
§ Mr. John Maples (Lewisham, West)
I join in congratulating my hon. Friend the Member for Great Yarmouth (Mr. Carttiss) on his maiden speech. He stated the problem of low-spending shire county authorities extremely eloquently, and I am sure that my right hon. Friend the Secretary of State has taken the strictures on board.
The problem of low-spending county authorities has been stated by many hon. Members during the debate. I wish to lead the debate back to the inner city urban authorities and consider the problem from the ratepayers' point of view. We seem to have two problems—the long-term problem of local government finance and the short-term need to do something with persistent overspenders. It is clear that the efforts of the past four years, through reorganisation of the grant system, targets, penalties and exhortations, have achieved little with such authorities.
The only way to stop them is to put a legal limit on what they can spend, because the new generation of London's Labour councillors do not care about the ratepayers. They have found an apparently bottomless pocket to pick and they will continue to do so until they are stopped. My constituents have to pay rates not only to the London borough of Lewisham but also to the GLC and to ILEA, which is a burden that they understandably regard as excessive. The rates in Lewisham have risen from 70p in the pound to 198p—an increase of 180 per cent. Rate bills in Lewisham are staggering. Rates on a small and typical semi-detached house are about £750 a year.
During the past four years Lewisham's net revenue spending, which is under its control and has nothing to do with the grants, has risen 15 per cent. in real terms. This year it is rising by 9 per cent. and next year it is proposed to rise by 7 per cent.
§ Mr. Straw
Where does the hon. Gentleman get his figures? The figures from the Secretary of State, which were given to my hon. Friend the Member for Copeland (Dr. Cunningham) in answer to a parliamentary question, show that net current expenditure in Lewisham has increased by only 83 per cent. since 1978–79. That is four percentage points over the whole period more than the rate of inflation for local authorities, and six percentage points below the average level for local authorities. If rates have increased by 180 per cent. in Lewisham, do not the Secretary of State's figures show that the reason why rates have risen twice as fast as spending lies with the Government and not with the councillors of Lewisham?
§ Mr. Maples
I obtained my figures from written answers to questions to the Lewisham borough council. I was referring to expenditure related to the retail price index and not to an artificial index of local authority costs.
During the same period, GLC spending has risen in real terms by 65 per cent. and ILEA's spending in the past 10 years has risen by 550 per cent., of which 280 per cent. is a real rise.
§ Mr. Maples
I will not give way.
702 During the period when the real spending rose by 280 per cent., the school rolls in London fell by 27 per cent. God knows what is the increase in unit costs. This year, when school rolls are falling by a further 4 per cent., the proposed increase in expenditure is 8.5 per cent. Those authorities are not only making no effort to reduce expenditure but are actively increasing it.
So much for statistics. How is the money spent? The authorities concerned claim that they spend it on vital local services. In fact, they waste it through a combination of frivolous political expenditure and bad management. I know it is tempting to laugh when a new horror story breaks about GLC spending, but they all represent real money taken from ratepayers, which, in the opinion of most of them, is wasted.
Lewisham council says that it cannot make any savings this year. It has £5 million in rent arrears and the council has just voted never to use the bailiffs to collect a rent debt. We send problem children to school in the West Indies, we have a borough artist and extensive and expensive sexism awareness training programme for council staff. We have spent money putting up nuclear-free zone signs throughout the borough. We have 1,600 empty houses which cost £2 million a year in lost rent and rates. I am dealing with a council that cannot make any savings.
But by comparison with the GLC, Lewisham is only a beginner. The figures and the projects for the GLC are truly staggering. The GLC has recently made grants to the gay arts sub-group, the Karl Marx Centenary—it spent £35,000 of our money celebrating that —the women's art alliance, the black women's radio group, the London lesbian and gay centre, the London teenage gay group and Babies against the Bomb, whoever they may be.
§ Mr. Maples
I defy anyone to tell me why my constituents should pay taxes to subsidise those groups. Perhaps the hon. Member for Blackburn (Mr. Straw) could explain why my constituents should subsidise the gay arts sub-group.
§ Mr. Straw
As the hon. Gentleman has invited me to speak, I shall do so. What Lewisham council or the GLC spends its rates on is a matter for its ratepayers. If those councils make unacceptable decisions, they will face the proper consequences at the next election. Why does not the hon. Gentleman have faith in democracy?
§ Mr. Maples
The relationship between rates and the electorate is not democratic—only about one in three voters pay rates. As the hon. Gentleman is not a London Member, he may not realise that when people voted for a Labour-controlled GLC in 1981 the Labour group was led by a nice man called Andrew McIntosh—but 12 hours later the voters of London found that he had been hijacked by a junior people's republic.
§ Mr. Maples
I shall not give way, as the hon. Gentleman is a professional apologist for the GLC.
Most of the GLC's current activity is directed towards opposing its abolition. It spent £850,000 on that last year, and has voted to spend a further £1 million in the first three months of this year. County hall has become a giant propaganda factory. It is financing the campaign against the Police and Criminal Evidence Bill—which is none of its business — opposition to the Sizewell nuclear 703 power station, opposition to the docklands stolport—in a scandalous manner — and is even paying for advertisements in the London local press opposing the denationalisation of British Telecom. What business is that of the GLC?
The ILEA is engaged in an equally heavy, and even more disreputable, propaganda campaign designed to scare people into believing that there can be no economies in its budget without affecting education services at the sharp end. Yet ILEA is one of the most wasteful authorities of all.
§ Mr. Corbyn
Does the hon. Gentleman agree that the rates paid to ILEA by Lewisham are less than ILEA expenditure in Lewisham, which makes Lewisham a net recipient of help from the remainder of London?
§ Mr. Maples
That is true of almost every borough in inner London except Westminster and Camden. It is not a substantive point. Taxes are paid on a London-wide basis. We all know that Westminster and Camden subsidise all the other boroughs because most of London's rateable value lies in those two boroughs—
§ Mr. Maples
No, I have already given way to the hon. Gentleman, who made a rather phoney point.
Let us return to the question whether savings can be made without affecting education services. The unit of cost of educating a child in an inner London secondary school is £1,427 a year. In Bromley, just over the border, it is £979 a year, and in Birmingham it is £844. We all know that it is more expensive to do things in London, that London has special problems and that, in some respects, the education provided by ILEA is better than that provided by the two other authorities. But it is not that much better, it is not that much more expensive and the problems are not that much greater.
I shall quote some specific examples from this year's budget. In a year in which school rolls are falling by 4 per cent., the cost of recreational and community premises is rising by 22 per cent., school premises by 26 per cent., non-teaching staff by 10 per cent. and education officers' accommodation— a pure overhead, and nothing to do with schools — by 17.5 per cent. The ILEA is an extravagant authority that does not know the meaning of efficiency. It is more interested in fighting the Government than in finding savings.
All three of the authorities to which I referred are also badly managed. Lewisham does not even have a cost accounting system to enable officers to monitor expenditure against budget. Officers are not responsible for budgets, and budgets are applicable to committees, not operational functions. Therefore, if a housing manager saves money by managing with fewer people or a little less space, that is a saving not off his budget but off someone else's budget.
The results are the inefficiencies that are so obvious and so easy to see. In Lewisham, for example, the children's homes are half empty, but it still costs £900 a week to keep a child in care in the borough. The managing and maintaining of a council house cost £582 each last year and it has risen to £692 this year.
The hon. Member for Copeland (Dr. Cunningham) referred to those who knowthe price of everything and the value of nothing.704 If my memory serves me right, that is Oscar Wilde's definition of a cynic. Many Conservative Members find the attitude of Labour Members, and especially Labour councillors, to be cynical when they consider efficiency. Surely, they want to find the money to be gained from efficiency to spend on personal social services, for example, and home helps. Instead of that, we hear constant denials from Labour Members and Labour councillors that efficiency savings are possible when they are there and obvious to everyone. There are enormous potential savings to be made by proper management and there is no need to cut services. The answer is to run them more efficiently.
I agree wholeheartedly with what the Government are doing to overcome the short-term problem but I am concerned that we are not doing enough about the deeper causes. I shall briefly suggest a few ideas for longer-term reform. First, and most important, there must be a better connection between payment for local government services and votes in local elections. Everyone must contribute and everyone must realise that he or she is doing so. The Government have ruled out the various options and have not produced any new ideas of their own. I urge them to reconsider a poll tax and the relating of the rates bill to the number of adults in a household rather than to the household itself. A poll tax set at the modest rate of £50 a year would replace about 40 per cent. of the money that is now raised by domestic rating. Secondly, the rate support grant cannot continue to decline at the rate of the past few years.
Thirdly, I suggest that consideration be given to setting the maximum business rate at a national level to stop the milking that some councils have conducted of business in their areas. Fourthly, we could and should consider ending the derating of agricultural property. Fifthly, the permissible areas of local government spending must be more carefully defined so that the abuses that we have seen, of which I have given examples, are not allowed to continue. They offend many people. Sixthly, we should give serious consideration to prohibiting employees of one council sitting as elected members of a neighbouring council.
In the context of my constituency, it must be acknowledged that there are special inner city problems. For all the faults that the council has in my constituency, it attempts to tackle the problems. I concede that the problems need special provision and that they are particular to the inner city. They must be considered and provided for as such. This should be done largely outside the ambit of the rate support grant, so that specific programmes can be agreed and specifically financed.
Local government finance needs extensive reform and I hope that the Government will introduce proposals to undertake that reform before too long. In the meantime, there is a short-term problem that needs action of the type proposed by the Government. In 1975 a Labour Secretary of State for the Environment told local authorities that the party was over. Unfortunately, some of them did not get the message. For the householders of west Lewisham, the party has turned into a rake's progress. The party will not be stopped merely by withdrawing the invitation; it needs someone to turn off the tap. When there is a limit on what can be spent, councils will find savings, make the tough decisions and examine their priorities. They will not do so 705 until they are forced to take that action. The Government's policy on rate overspenders will put an end to a national scandal. I wholeheartedly support it.
§ 9.9 pm
§ Mr. Stan Thorne (Preston)
I am rather surprised by the opposition to this measure that has come from the Conservative Benches and I hope that my right hon. and hon. Friends will not be led astray by some of the speeches of Conservative Members. In a number of instances the opposition is clearly based on local factors and the concern is directed not to the needy authorities north of the line from the Wash to Bristol but to the special circumstances of Somerset, Devon, Cambridge, Essex, Surrey, Great Yarmouth and its marina, Norfolk and Wiltshire. There are not many Labour-controlled authorities in those areas. Not many Opposition Members represent constituencies in those areas. It behoves the Opposition to examine carefully the criticisms of Government policy made by Conservative Members.
I am concerned about the problems of Lancashire and of Preston in relation to the report. The Government's cash target for Lancashire is £477.362 million. To avoid severe penalties Lancashire county council would have to reduce revenue expenditure by about £20 million. In my view, the present level of services must at least be maintained and a number of services require increased resources to meet increased need. The Government's economic and industrial policies in the past five years have created increased demand for social service provision. Poverty has that effect.
In addition, the increasing number of very elderly people creates further demand for special accommodation, meals on wheels, bus passes, and so on. There is also increasing demand for nursery provision as well as for adult education and for grants to allow adults to pursue educational courses. Road repairs are urgently needed, as little attention has been paid to this aspect in recent years. A wide variety of other needs — environmental improvements, leisure centres and so on—have become more urgent due to the Government's economic policies. Lancashire also faces major problems with regard to the police and fire services.
The GRE for Lancashire — the Government's assessment of the sum necessary to provide an adequate level of services—is £495.368 million. That is £18.006 million more than the Government's target—
§ Mr. Thorne
If the hon. Member for Lancaster (Mrs. Kellett-Bowman) wishes to speak, no doubt she will manage to catch your eye, Mr. Deputy Speaker.
The Government's own calculations thus support the contention that the present level of services is not unreasonable. Yet to avoid penalty the council will have to make a reduction of £20 million. If it spent at the GRE level it would incur grant penalties of £26 million.
§ Mr. Straw
Like my hon. Friend, I represent a Lancashire constituency. Does he agree that the penalties faced by the council, or the rate increases necessary to protect services, are the more unacceptable in that 706 expenditure in Lancashire over the past four years has increased by less than the average for local authorities and by far less than central Government spending?
§ Mr. Thorne
I fully accept that. I had assumed that my hon. Friend would deal with that in winding up the debate. The reduction in the overall rate of grant from 52.8 per cent. to 51.9 per cent. in 1984–85 will mean that the county council's grant will be about £6 million less than it would otherwise have been. Inevitably, all this means hardship for the people of Lancashire.
In Preston, the situation will be disastrous in certain respects, in particular housing. Preston needs a major input into housing provision. It has large estates which have uninhabited houses, unfit for human habitation, boarded up, waiting for the resources to repair them to make them habitable. We have an enormous housing waiting list. There are many families with small children living in multistorey blocks. Many areas of Preston have become known colloquially as Dodge city — Callan, Moor Nook, Faringdon Park, and others. They are atrocious areas, of which the hon. Member for Tiverton (Mr. Maxwell-Hyslop) and other Conservative Members have no conception. In their narrow sectarian arguments, they are quite oblivious of the needs of people living in Lancashire and elsewhere in the north. People in Preston should have decent homes, and sites should be cleared to build new houses.
§ Mr. Thorne
I shall not give way. We need an input of several million pounds. A clear decision must be made: are we to increase rents by about £3.50 to £4 a week so as to carry out the necessary repairs to houses and provide for those in need—
§ Mr. Thorne
—or are we to consider an additional 6p rate to make that provision? Or will the Government will the means to carry out this radical work in Preston?
The rate support grant is supposed to aid local government in providing houses and other services. In my opinion, responsible local authorities seek, in spite of the difficulties, to meet the needs of the people who live in their areas. One could ask a question that has been asked time and again, "Is a decent home a right?" In wartime, such houses were called possible homes for heroes. In peacetime, we talk about homes for people in need. Some local authorities attempt to meet those needs. However, the Tory Front Bench, with its capacity for Newspeak, rejects the concept of need. Its past economic decisions require it to ignore need and to promote deprivation.
The Government may suggest that so far there is no major evidence of rising discontent with the Government, but it will come. History will show that the Rates Bill, the housing benefit legislation, and the rate support grant policy have had a significant quantitative and qualitative effect on the growth of extra-parliamentary activity in Britain. We shall see more of it in the none too distant future.
§ Mr. James Couchman (Gillingham)
I am not at all sure that I should speak in this debate, because I spent the weekend trying to read this document, and I confess that I am as confused as when I began. Indeed, I suspect that 707 I am not alone among hon. Members. My confusion deepens when I look at the treatment that is to be given next year to the district and county councils, affecting my constituents.
We enjoyed one another's company, Mr. Deputy Speaker, on the Adjournment debate last Friday. I recognise that this is not an Adjournment debate and that therefore I should not allow myself to take a purely parochial view. However, the state in which Gillingham borough council and Kent county council find themselves serves admirably to demonstrate what a complex mess the present rate support grant rules have created.
Gillingham borough council is one of the thriftiest councils in the country. It has a rate of 6.39p in the pound and an RSG current expenditure per head of £22.86, which is the fourth lowest in the country—easily the lowest for any urban authority—and just over half the average for all districts, which is £43.31. Gillingham's staffing ratio, at 5.71 per 1,000 people, is just three-quarters of the average for its group of 43 districts, which is 7.65 staff per 1,000.
Gillingham spends less per head on almost every service than the average, and has no unusual source of income. For 1983–84, Gillingham's budget expenditure is estimated at £2,499,000 against a GRE of £5,030,000. It is spending just 49.7 per cent. of its GRE.
Gillingham's frugality verges on parsimony. One would have thought that this thrifty, careful—almost mean — council would have been the apple of the Secretary of State's eye and been held up as an example to the many profligate local authorities. Yet, incredibly, Gillingham faces the distinct possibility this year of being penalised under the holdback scheme. Since it was allowed only a 3 per cent. rise for inflation next year, that possibility has become a near certainty.
Gillingham faces unique pressures for such a low-spending authority. The Government have closed the royal naval base and dockyard at Chatham. With that closure, 7,000 job prospects were lost. Unemployment has risen to 16.3 per cent., which can be compared with the very worst in the north. That unemployment rate alone will put extra strains on Gillingham's purse. Although the Government have taken several commendable steps to alleviate the unemployment problem, Gillingham has attempted to do so in its own way by taking measures to bring in new business, with start-up premises and involvement in a recently opened ITEC.
The burdens have been exacerbated by a high level of activity on housing improvement grants and by the administration of the housing benefit scheme, not all of which is being reimbursed and which will certainly cost more in real terms than the administration of the former scheme. An unforeseen additional burden has been placed on the council by the decision of its partner in a computer-sharing scheme to go solo. None of those tasks was the choice of the borough council, but they have all added expenditure and brought closer the prospect of grant holdback.
Kent county council is a similarly thrifty authority on a much larger scale. It seems likely that, notwithstanding major savings on education, social services, police and highways, a penalty will be incurred.
The sinister aspect of Kent's position arises from the fact that the gap between GRE and target is widening. In 1983–84 the Kent GRE was £31 million, or 6.7 per cent., above the target. For 1984–85, GRE is £37 million, or 7.8 708 per cent. above target. Kent has been given a target for 1984–85 which reflects the maximum allowable increase over the 1983–84 budget, but in cash terms Kent's target is further below GRE than that of any other authority in the country.
A further concern in a county with substantial unemployment is the Government's restriction on using capital receipts to expand the capital programme beyond the tight allocations notified by Government Departments. That will limit Kent's ability to maintain an adequate level of capital investment when capital schemes could bring a substantial injection of activity to the private sector of the construction industry.
The straitjacket in which both Gillingham and Kent find themselves demonstrates the failure of the policy of holdback to control the high-spending authorities to the advantage of the thrifty. The profligate ignore the penalty and blame swingeing rate increases on the Government, while the thrifty have long since exhausted any fat that there might have been. The effect of the holdback policy on the thrifty has led to dismay about the Rates Bill that we discussed last week. They believe that they could end up as victims of that scheme as well.
Gillingham and Kent do not want their targets lifted so that they can indulge in a wild orgy of spending. They have too much respect for their ratepayers. Indeed, it is to protect those ratepayers from the draconian financial penalties that they face that they plead for fairer and more realistic targets. They realise that GREAs are not a measure of what the Government expect them to spend, but this abstruse booklet defines GREA asan assessment of the cost to each authority of providing a common standard of service, allowing for differences in the characteristics and needs of different areas…These assessments in general relate spending needs to the cost of providing services to each 'client' in need of them or 'unit' of service provided.That method of constraining the wilder urges of local politicians was never meant to penalise authorities, such as Gillingham, for spending under half their GREA. This grotesque scheme takes Government support for local government out of wonderland and straight through the looking glass.
I shall go into the Government Lobby with a heavy heart, and diffidently, for I believe that the scheme is unfair to the councils affecting my constituents. I ask my right hon. Friend the Secretary of State to look long and hard at the scheme during the coming months. I am to some extent cheered by what he said today. I could not support the scheme unamended next year unless there were an amendment to distribute grant in a much fairer and more rewarding way to the careful and thrifty good housekeepers of local government.
§ Mr. John Cartwright (Woolwich)
Unlike other hon. Members I shall vote against the report and not just speak against it. I shall do so not because of its effects on an individual local authority but because the whole philosophy on which it rests is fundamentally wrong. I confess to being an unreconstructed localist. I believe that decisions about local spending are best taken locally. I have always been extremely sceptical about the concept of grant-related expenditure assessments, and about the idea that Ministers in Whitehall, however well-intentioned and 709 however sophisticated their computers, can tell us what it is right and proper for a local authority to spend to tackle the problems of its area.
The concept of grant-related expenditure is undermined as an objective test of a reasonable level of spending when we find that the spending targets set by the Government are not directly related to this magical grant-related expenditure. I shall quote three examples of indefensible anomalies that arise from the report and from the use of targets and GREAs. The first is about the shire counties, most of which are Conservative-controlled. Thirty-three out of the 39 have been set targets below their grant-related expenditure figures. As a result, if they were to spend at the grant-related expenditure level — the level that central Government say is a reasonable assessment of their need — the situation would arise in which the shire counties would lose £761 million in penalties. One county, West Sussex, would lose its entire grant. I cannot believe that that is a sensible and logical way of approaching the problem.
The second example I give comes from the greater London area and relates to a problem of considerable concern to Londoners at present, the question of the future of the concessionary fares scheme in greater London for the elderly and the handicapped. The London Boroughs Association — Conservative-controlled, of course — is currently looking at the problem of taking responsibility for administering the concessionary fares for the elderly when and if the Greater London Council is abolished. The London Boroughs Association is not particularly happy about the prospects. It has discovered a very large gap between the grant-related expenditure assessment on concessionary fares in London and the spending. Grant-related expenditure represents approximately half what is being spent at present on concessionary fares in London. The LBA points out that if individual boroughs that are on what is called negative marginal rates of grant—that is, if they overspend their target figure, they will lose grant —overspend on concessionary fares, not only will they get no grant for concessionary fares, but they will lose grant for many of the other services they are providing. That would involve considerable losses for a number of the boroughs concerned.
The London Boroughs Association suggests that the best solution to the problem would be to increase grant-related expenditure for concessionary fares to something near the level now being spent on that service. However, it fears that the other possibility is much more likely, that expenditure will have to be reduced to much nearer the level of the present GRE. It goes on to suggest thatthis would mean a complete reappraisal of the scheme both as to the concession granted and as to its availability. This would go against the line the Association has so far taken.Therefore, all the undertakings that we have been given by Ministers — that the concessionary fare scheme in London is safe when the GLC goes, that the boroughs will be able to take over that responsibility and that there will be no diminution in the quality of the service—look extremely doubtful as a result of the operation of GRE and target in that respect.
The third example I give relates to the question of GREs in inner London. In 1983–84 the 12 inner London boroughs had a total GRE assessment of £695 million. In the coming year it has fallen to £678 million, a fall of 2.4 per cent. 710 in cash terms. Many of us in inner London regard that as a shocking outcome. Only one inner London borough, Tower Hamlets, had an increase in its GRE assessment. The Government clearly accept that there are major social problems in inner London. The whole partnership scheme, the whole urban aid scheme, indicates that that is accepted, yet we are told that, to maintain an average level of service, it is perfectly possible for the inner London boroughs to spend less money. Against a background where local authorities as a whole will be spending 3.4 per cent. more, as judged by GRE assessments, the fall relatively in inner London is almost 6 per cent. I think most of us in inner London will regard that as unacceptable.
The other general point I wish to make concerns the effects of the rate support grant report now before the House on the total proportion of local authority expenditure to be met by central Government. We can all recall that, as recently as 1979–80, 61 per cent. of relevant spending was being met by Government grant. For the current year the figure is nominally 52.8 per cent. but, with the penalties providing a windfall to the Exchequer, the actual figure is likely to be below 50 per cent. For the coming year, the nominal figure is down again, to 51.9 per cent. and the penalties will reduce it still further.
I do not like local authority dependence on Government grants. I agree with Layfield that he who pays the piper calls the tune. Dependence on Government grant has done more to undermine the autonomy and independence of local authorities than almost anything else. However, if we are to reduce the proportion met by Government grant, we have to give local authorities a fairer and broader tax to replace that money.
I agree with Layfield that a local income tax provides the most likely solution to the problem. We are now getting the worst of all worlds. The Government are reducing their contribution and transferring more of the burden from taxes, which are broadly fair, to rates, which many of us regard as being overstretched and extremely unfair. The Government then penalise and pillory local authorities for being "wicked overspenders" because they have to raise their rates to meet the extra burdens imposed by cuts in grants.
Some hon. Members have argued that the Government's plans will have a salutary effect on local government, which will be forced to become more efficient as a result of the sudden cuts in grant income. As a former leader of a local authority, I know—and I imagine that some Ministers will have had similar experiences — that sudden cuts in resources can be extremely wasteful. The slamming on of brakes is not the most efficient way of getting a good return from investments. A sudden cut in revenue for local government will not automatically improve efficiency and may make things much worse.
I believe passionately that rate capping will remove the responsibility from many local councillors. In defending themselves against charges that services are inefficient, they will have the perfect excuse and will say, as some do now, "It is nothing to do with us. Central Government are interfering and it is their problem." We are going down a dangerous road in making local government finance even less comprehensible. God knows, the old rate support grant regression analysis system was difficult enough, but the present complex system of grant-related expenditure 711 assessments, targets, holdbacks, clawbacks, disaggregation ratios and safety nets is impossible for ordinary people to understand, and that is bad for local democracy.
Worse for local democracy is the fact that it is increasingly difficult for electors to influence the policies of their councils. Councillors will have to take more notice of the views of Cabinet Ministers and civil servants who will be breathing down their necks. We shall get the form of local democracy without the reality.
Hon. Members on both sides of the House have pointed out that we have got into this difficult situation because the Government have backed away from admittedly decisions about reforming local government finance. I understand why those decisions have been avoided. They are not easy decisions, but we are paying a heavy price for that avoidance of tough choices. We have a system of local government finance that is ever more complex, a bureaucracy that grows ever more powerful and intrusive and Whitehall interference that grows month by month and year by year. And after all that, I still do not believe that the system will work.
I agree with the right hon. Member for Taunton (Mr. du Cann) that the nettle will have to be grasped and that we must have a reform of local government finance to share the burdens more fairly and encourage responsible local decision making. The report goes in the wrong direction and I shall oppose it.
§ Mr. Michael Shersby (Uxbridge)
I am glad to follow the hon. Member for Woolwich (Mr. Cartwright). I listened with interest to his speech. Like him, I have take a close interest in local government for many years, and I have served as a councillor in two London local authorities.
In company with other hon. Members, I am once again debating the rate support grant for England and, as usual, hon. Members on both sides of the House are expressing their concern about the way it affects their particular local authorities. As we know, the amount of the grant is determined partly by Government policy and partly by the operation of the formula that has been in operation for several years. That formula is supposed to take account of the needs of each individual authority and to provide a grant that is fair and reasonable and that will enable local authorities to discharge their statutory duty. It is also intended to enable local authorities to provide local services that they consider desirable and that reflect the wishes of the local electorate, within reasonable bounds. The formula also means that those authorities that overspend unreasonably incur penalties through loss of grant.
When that formula was first devised, my right hon. Friend the Member for Henley (Mr. Heseltine) was Secretary of State for the Environment, and many of us on the Governent Benches hoped that it would 'be an improvement on the previous arrangements. We recognised that it was not perfect—I doubt whether any formula that anyone could devise could be perfect—but it was my hope, and that of many of my hon. Friends, that with some refinement and the benefit of several years' experience, it would be a good system, and informed people would be able to see how the grant was calculated and able to regard it as fair and reasonable for their local authorities.
712 I regret that my hopes have not been fulfilled, and that this year's grant has proved to be by far the most unsatisfactory, particularly for my local authority, the London borough of Hillingdon. The result of this year's settlement presents Hillingdon with difficult problems, and it is about that that I shall speak. The estimated grant for spending at target goes down this year by £3.3 million. In a settlement that involves an increase in the total amount of grant available, there should not be a cash loss for spending at target. Hillingdon's budget for 1983–84 is a mere £1.5 million over target, a small sum in terms of the total budget of £87 million.
I listened with great interest to the speech of my right hon. Friend the Secretary of State, in which he talked about the cost of providing local services and how that cost differs from one London borough to another. He might be interested to know that the cost of providing services in Hillingdon is about £350 a head. That is a little more than it is in Wandsworth, but unlike Wandsworth, Hillingdon is an education authority. However, even if Hillingdon were to spend on the same level relative to target, it would still have to find a further £2.3 million because of further grant losses.
Why is this? Hillingdon, which has been led since 1978 with considerable distinction by my hon. Friend the Member for Slough (Mr. Watts)—who I am glad to see is in his place tonight — is one of the Secretary of State's blue chip local authorities. I can say with confidence that my hon. Friend the Member for Slough, supported by my hon. Friend the Member for Hayes and Harlington (Mr. Dicks) who is deputy leader of Hillingdon borough, together with their colleagues, have achieved a deserved reputation for economic efficiency and for showing just what can be done to provide good services at a reasonable cost to the ratepayer. I pay tribute to this record, as does my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson), who wishes to be associated with my remarks.
In view of the position that has developed in Hillingdon, I wrote last week to my right hon. Friend the Secretary of State for the Environment expressing my deep concern about the settlement and the effect that it would have on my constituents and those of the other constituencies in the borough of Hillingdon. The Secretary of State has written a letter to me today which says:Hillingdon have certainly tried to find savings, but there is no question of Hillingdon having decimated their services as a result of our policies. Since 1981–82 they have increased their expenditure by 11.6 per cent. During the same period, local authority costs have increased by 13.1 per cent.On that ground, Hillingdon does not seem to have done too badly. The Secretary of State continued:I do not disguise the fact that the council will face some extremely difficult choices in setting the 1984–85 budget. Your letter clearly shows this.It is true that in Hillingdon we employ a few more staff for each thousand people than some other outer London boroughs, but that is because we provide a better service for the mentally handicapped and the elderly—a service of which we are especially proud and which is enormously important in such an outer London borough. I remind my hon. Friend the Under-Secretary of State that since 1978 Hillingdon has reduced its staff from 12,025, when it was Labour-controlled, to 10,600 this year. That information must suggest to my hon. Friend that Hillingdon authority 713 is not employing more people than it should, but a sensible number of people to provide good services at a reasonable cost.
Why, then, will Hillingdon lose so much grant? It is because of the wretched formula which increased the penalty and the consequent loss of grant for a small margin of expenditure over target. In his opening remarks, my right hon. Friend the Secretary of State referred to the problem faced by authorities spending a little above target, and gave the impression that that would not cause enormous problems, although he mentioned that those authorities would incur penalties because of the total national expenditure. That would not be too bad if Hillingdon had ample reserves, but that is not the case. Because it has heeded the Government's call for the utmost efficiency and to cut expenditure, there are no lush balances to cushion the effect of the penalty. That shows that the imposition of the penalty on Hillingdon results from the inflexible nature of the formula and the failure of the Department of the Environment to take account of Hillingdon's outstanding record of success.
My right hon. Friend has been most kind and considerate, as he always is, but he has not been well served by those who advised him who have apparently failed to draw attention to the effect of the loss of grant in this and similar cases. In other words, there is no evidence that my right hon. Friend is aware that those authorities that have backed him loyally year after year will now face this difficulty, and no effort is being made to overcome that.
It is not for me to detail the various cuts in services which Hillingdon may have to make to avoid a rate increase of about 20 per cent., and instead to levy an increase no greater than the current rate of inflation of 5.3 per cent. My hon. Friend the Member for Slough and his colleagues rightly believe that any increase in rates in that borough should not exceed the rate of inflation. Like me, they listen to the views of domestic, commercial and industrial ratepayers. In my constituency, the latter are represented by the Uxbridge Industrial Estate Association and other organisations, who have made it clear how important it is to maintain the rate at a reasonable level because they must bear the added cost of the GLC rate, whatever that may be.
The problem must be faced by the much-respected councillors in the borough who must, unless the Secretary of State undertakes to amend the formula, make some uncomfortable and unpleasant choices in the weeks and months ahead. The authority faces a difficult problem and it will have to present a bleak picture to my constituents. That position cannot possibly be justified.
In the circumstances, I must consider the position not only as it affects Hillingdon but as it affects the other outer London boroughs. The London Boroughs Association has drawn to my attention the fact that the outer London boroughs gained only 0.8 per cent. in GRE which, with inflation running at 5 per cent., represents in real terms a loss of 4 per cent. How can that be justified? How could I be justified in voting for the settlement that is offered to the House tonight?
I do not feel able to support the Government in the Lobby tonight, which is a matter of great regret to me. My hon. Friend the Minister cannot consider me as one of those Members who constantly kick over the traces against 714 the Government, but I hope that he will feel that, when people such as I do so, there must be something seriously wrong with the system. It is about time that the Government reconsidered the matter and began to do something about it. If they do not, not only will people such as I kick them on the shins, but my constituents and many others will say that they will no longer put up with it. We need action now to amend this crazy formula and to ensure that councils such as Hillingdon do not suffer such unjust and damaging penalties and consequent cuts in services.
The Government would be wise to take account of the fact that during this debate, which will continue until 11.30 pm, we have yet to hear a speech from a Conservative Member congratulating the Government on the policy which they are pursuing and on the benefits which they are bestowing on local government. Instead, we have listened to a catalogue of the great difficulties experienced by hon. Members on both sides of the House. I hope that my hon. Friend the Minister will realise that there is grave disquiet about this settlement, and that urgent action must be taken. We cannot wait until next year, and we cannot wait until Parliament has considered and either enacted or rejected the legislation on rate capping. We cannot wait until the Government believe that they are in a more satisfactory state to be able to improve the grant settlement.
Important services are likely to be truncated now, and although I fully support the Government's policy of reining back public expenditure, there are other ways of doing it. The Government are trying to rush it, but they cannot produce a grant settlement that affects good local authorities and expect them to decimate local services and to revive some next year. That is not practical politics, and I do not believe that the settlement has been properly thought through by the Department of the Environment.
It is with great regret that tonight I am in the unusual position of having to say that I cannot support the Government. It is urgently necessary for the Government to think again and to try to get us out of the crazy position in which I and many other hon. Members find ourselves on this unhappy and unpleasant occasion.
§ Mr. Jeremy Corbyn (Islington, North)
I have the honour to represent part of the borough of Islington. There can seldom have been a local authority that has been more maligned and vilified by Ministers and their friends in the press than Islington since the 1982 elections. It is strange that they should mount such an attack against a democratically-elected council, when that council's efforts are directed to carrying out the manifesto on which it was elected.
The Labour party in Islington drew up a long and comprehensive manifesto because it believed that the borough council had a role to play in solving the terrible housing problem of thousands of my constituents, protecting and creating employment in the borough and providing good social services. There is a link between the three matters. If a borough has high unemployment and many social needs—housing, meals on wheels, home helps, nurseries, play groups or after-school clubs for children—it can solve two problems at one stroke. It can create jobs by providing for the needs of its people.
The people of Islington are angry that since 1979 they have been fined nearly £40 million by the Government.
715 That money has been taken away through penalty clauses, cutbacks, loss of grant and a general lack of regard for the problems faced by those living in a typical inner city borough.
It is incredible to relate that at the same time the Government, wearing a different hat in the Department of Transport, propose to spend upwards of £30 million on a one-mile stretch of motorway to bring traffic into a borough that cannot cope with it. It is a weird sense of Government priorities that condemns a council for trying to provide services while at the same time giving it a road that no one wants.
Apart from the problems faced by my constituents, this debate is part of a more serious and sinister process that the Government have followed since their election in 1979. Instead of accepting the needs of inner city areas—that people living in those areas have suffered from high unemployment, long housing waiting lists, multiple deprivation, inferior environmental conditions and all the other things associated with inner city life — the Government continually cutback local authority support. In spite of the principle that if an area is in need it is the job of central Government to provide some resources to solve its problems, there has instead been a steady catalogue of penalties, discrimination against areas of high stress and high need and central Government spending on areas in less need.
We now have the fantastic situation that the education service for the whole of inner London receives not a penny of central Government money for its schools expenditure. It is the only education authority in the country in that position. That is a product of nearly five years of the Tory Government's attitude towards the poor people of the inner-city areas.
Those of us who represent areas of multiple deprivation are angry at, and feel nothing but bitterness towards, the Government for their attitude to local government. Not only have they consistently taken money away from local government; as proposed in the Rates Bill, they intend to introduce central Government control over local government. That is a dangerous centralisation of power in the hands of a small number of people.
Conservative Members may smile, but they will regret it when they try to get local decisions made for their constituents and find that they are blocked by a Minister. No genius on either side of the House has such a breadth of vision that he is fit to run local government, yet that is where the Rates Bill and this rate support grant lead.
It would be bad enough if the Government's restrictive legislation affected only the inner city areas, but we must also take account of the other forms of restrictive legislation, such as the civil defence regulations now going through the House. That adds up to a dangerous concentration of power in the hands of Ministers, many of whom spend little time addressing the House in their attempts to get such legislation passed.
I have a long circular from the London chamber of commerce. Every few months, certainly at rate-making time, it writes to say that, because some Labour-controlled authorities are putting up the rates whereas certain Tory-controlled authorities are not, business is driven from one borough to another and the economic life of the city is being destroyed. Yet it always fails to mention that central Government expenditure has gone up by 101 per cent. at the same time as local government expenditure has gone up by 80 per cent. It fails to mention that local government 716 spending has increased because needs have increased, because unemployment has been increased by that very same Government. It also fails to mention that local rates in London have increased because of the penalty clauses imposed on councils every year by a system which it is claimed is fair and logical.
I have spent nearly 10 years serving on a local authority. Every year, about this time, locally elected councillors sit far into the night trying to devise ways to carry out manifesto commitments. They find an incomprehensible series of regulations has been sent down to them by central Government, telling them that they cannot do this, that or the other, and that if they try to increase the number of home helps, for example. it will put them over the GREA formula. Consequently, a further penalty will be incurred, because they have tried to help others. That is dictatorship, not democracy, and the rate-capping Bill last week was the final straw for local democracy.
In 1979–80 the volume of central Government spending on local government was about 61 per cent. That figure has now fallen by more than 10 per cent. However, the penalties have continued to rise. I hope that Conservative Members will read some of the material that they have been sent by the Association of Metropolitan Authorities. After all, in our long debate, only half a Conservative Member has spoken in favour of the Government 's RSG settlement. Perhaps Conservative Members will think for a moment about why some of us are so bitterly opposed to it and its effects.
A circular sent out by the Association of Metropolitan Authorities states that in real terms the cash cutback in this year's RSG means 12,000 fewer teachers, 11,600 fewer social services residential places, 8,300 fewer day-care places, 46,200 fewer homes attended by home heaps, 52,800 fewer meals on wheels per week, 2,500 fewer children boarded out and — this might interest Conservative Members—7,100 fewer policemen, 7,150 fewer civilian support staff, together with fewer firemen and road workers. Every grade of council worker is being cut.
These days, in the poorest parts of the country, should not the Government be thinking about providing more home helps, more meals on wheels, better day nurseries and better after-school clubs instead of persistently attacking local democracy and the right of people to elect councils in the knowledge that they will be given the freedom to carry out the manifesto on which the election campaign was fought?
I am sponsored by the National Union of Public Employees. I have spent some years negotiating with local authorities and health authorities on behalf of public sector workers. Conservative Members lecture us in their high-handed and arrogant manner about local government efficiency and efficiency in the National Health Service. However, I should like them to consider the efficiency of administering local government in this way, and the inevitable waste from continual stop-start policies. They should also consider the social and public spending consequences of making people unemployed. The Government could tell Islington, or any other district, borough or metropolitan authority to sack all their meals-on-wheels workers and home helps. By doing so, thousands of elderly people would be condemned to a life of misery and loneliness. They would not be at all dependent on the public sector, but nobody else would 717 look after them. In addition, a few thousand women workers would become unemployed and have to line up each week in the unemployment queue instead of working and providing a good service. If they work, they are paid instead of being a charge on the state through unemployment pay.
Most public sector workers, particularly manual workers, are paid disgracefully low wages through the decision of central Government. It is the Government who impose penalties on local government if they try to pay their manual workers a reasonable wage. Yet at the same time the Government lecture public sector workers on the need for efficiency and privatisation, which mean poorer services for lower wages so that the Government can give the profits to their friends who operate the private cleaning companies, gardening companies and the incompetent refuse collection service in Wandsworth, which Conservative Members have been so keen to tell us about.
Conservative Members talk about business people being disfranchised because they cannot vote in local elections and therefore on the rates. I know of no legislation which prevents anyone who is eligible from voting in a parliamentary election or in a local election where they are registered to vote. Business people are not prevented from voting, and I do not see why they should have two votes just because they have the money to set up a business. We abolished that system many years ago, and I do not want it back.
Perhaps we should be talking about the lack of democracy in public employees not being allowed to stand for election to the local authorities for which they work. They are denied access to their democratic rights because they are public employees. Conservative Members say that such employees should not even be able to stand in local elections anywhere else. Is not that another attack on democratic rights?
I hope that Conservative Members who tonight and in the rate-capping debate a few days ago said that they were worried about the centralisation of power and the attack on democracy that goes with it will have courage to vote down this monstrous rate support grant proposal. I hope that they will put a flea in the Secretary of State's ear and say, "What we need is a Government who care for the people, for local democracy and for local services and who are prepared to provide the necessary money.".
Islington has been told on many occasions that it is spending too much money. Most weeks The Sun the Daily Express or the Daily Mail carry stories by journalists who are sent to look for dirt about Islington council and to follow councillors around. They even camp outside the council leader's house. An orchestrated campaign against Islington is taking place.
Many of the people in Islington are poor and rely heavily on council services. Many of them tell me at my weekly surgery, as I am sure they tell my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith), that they need more home helps. They want it to be easier for elderly relatives to find a place in an old people's home. They want a better street-sweeping service. They think that the rates are high, but they do not think that the council is profligate. The rates are high because central Government have penalised Islington council for attempting to carry out its manifesto pledges on which it was democratically elected in 1982.
718 It may surprise some hon. Members to learn that Islington council would have to increase its expenditure by only £12.9 million for it to be in receipt of no rate support grant from central Government. That sum is not large when one considers the people's needs. Would it not be a scandal and a condemnation of the Government if, in an area of above average unemployment, homelessness and deprivation and below average wages, the council received no money from central Government because it attempted to meet the needs of the people.
Even to maintain services and to keep within the guidelines imposed by the Government the borough of Islington, keeping spending within inflation, would have to put 25p on the rates. Because of the way in which the clawback system and the attack on local democracy operates, Islington would be fined. I am sure that many other councils are in the same position. The iniquitous system is designed to attack any local authority that attempts to meet the needs of the people who elected it.
People come to my surgery week in, week out, including children aged 11, who take valium because they are depressed and distressed by their housing conditions. They have been told that accommodation is not available because the council does not have the money with which to build houses for them. Some children under the age of 10 go into hospital with bronchitis—the hospital does its best to cure them and make them well, despite the cutbacks—but they return to privately rented, damp and putrid flats, and the bronchitis returns and the illness continues. Is it any wonder that the health of people in the inner city areas is considerably worse than that of those who live in rural areas or more fortunate suburban communities?
We are dealing not just with a cutback in spending by those councils that are attempting to meet the needs of their people and provide good services, but with an attack on local democracy. We are also dealing with an attack on local authorities which are providing the services that people need. To many of my constituents—I am sure the same applies to other hon. Members who represent inner city areas—the services provided by councils, be they meals on wheels, home helps, libraries, day centres for the disabled and the elderly, represent the thin line of survival.
If my council does as the Government say, many such services will go and many of my constituents will literally be murdered by the policies being pursued by the Government. That is what their attack on the social services means. If one adds to that the attack on Health Service spending in my constituency, as well as in other constituencies, one has a cycle of deprivation, of cutbacks in public spending by local authorities, cutbacks in health services and longer waiting lists and unemployment queues.
At the same time we receive lectures about efficiency and against profligacy in local government from Conservative Members who can find £8 billion to spend on cruise missiles and, apparently, more than £100,000 per prefabricated bungalow in the Falklands because they do not give a damn about the poorest people in the country.
The debate is about democracy and survival for the poorest people in the community. Above all, it is about the purposes of central Government, which should be to redress imbalances in society and provide help for those who need it, not for those who are well-off and doing very nicely because of the economic policies pursued by the Government.
§ Mr. Churchill (Davyhulme)
The hon. Member for Islington, North (Mr. Corbyn) will not expect me to follow him in his attack on the rate-capping powers that the Government are seeking to obtain. Councils such as Islington, by their profligacy with ratepayers' money are driving industry and commerce out of their boroughs and are directly responsible for increasing unemployment. It is essential for industry and local ratepayers to be protected from such councils.
The squandermania of Islington and other Marxist-controlled boroughs knows no bounds. The hon. Member for Islington, North has treated the House to a synthetic plea concerning the plight faced by his constituents. How does the borough to which the hon. Gentleman referred find the resources to send people swanning around the Caribbean, poking their noses into Grenada and trying to scratch at anything that they can to throw against the United States of America—
§ Mr. Churchill
I shall be happy to give way if the hon. Gentleman will tell us where the finance for that visit came from. I believe also that he accompanied several councillors from the borough.
§ Mr. Corbyn
I am happy to tell the House about that. The hon. Gentleman is not giving a factual account of what he believed may or may not have happened. A delegation from Islington, Haringey and Sheffield, including myself, recently visited Grenada, but not one penny of that visit was paid for by the ratepayers of Islington.
§ Mr. Churchill
It is interesting that the hon. Gentleman does not say who paid for his trip. I know that he is being pressed by the press to reveal that, but he has thus far refused to do so.
§ Mr. Churchill
It is nice to be assured that the ratepayers of Islington will not have to pick up that bill —although we are still not clear who will have to do that.
Last year's rate support grant settlement was so catastrophic for the Manchester borough of Trafford—I have the privilege to represent part of it—that I and my hon. Friend the Member for Altrincham and Sale (Mr. Montgomery) had no choice but to vote against the Government. Following our representations, the Government acknowledged that Trafford had been unfairly treated and £1.2 million was restored to our grant —£750,000 in respect of falling school rolls. We now find that the limited ground—and more— made good since last year's rate support grant has been lost. The 1984–85 grant is based not on last year's adjusted grant. but on the original grant that the Government conceded was wrongly calculated.
In consequence, we find ourselves facing a reduction of nearly £2.5 million in rate support grant, which has been reduced from £22.5 million to barely £20 million. In terms of block grant as a percentage of target, Trafford fares worse than any other metropolitan district at 27.9 per cent., the next lowest being Newcastle at 33 per cent. Our notified grant for 1984–85 represents the loss of 11 per cent. in cash compared with last year, and 15 per cent. in real terms — again, the largest reduction of any metropolitan district.
Our target is well under GRE. Were we to spend at the prescribed standard level, we would be penalised to the tune of more than £500,000. The safety net that previously existed, and from which Trafford benefited in respect of falling school rolls, has now been removed. Trafford believes that it is suffering from delays in revaluation. That is based on a statement contained in the White Paper, which declares that older industrial properties in the north and the midlands are now over-valued. That means that industry in the established industrial areas is paying too much in rates. Trafford, by the same token, is losing too much of its grant.
We in Manchester feel strongly that the discount of 30 per cent. on rateable values given to the London boroughs, including Islington, should either be extended to other high resource areas or be abolished completely. There is no justification for treating the London boroughs in a privileged way compared with areas such as the Trafford district of Manchester.
Although many of my right hon. and hon. Friends have had cause to make complaint to the Minister on behalf of the local authorities in our constituencies, which have been careful with their expenditure and have kept within the Government's guidelines—they have been kicked in the teeth and penalised for their pains—several of the high-spending local authorities have had their grants increased for 1984–85 in spite of all the Government's rhetoric. I do not understand what the hon. Member for Islington, North was belly-aching about. Islington has gained 2.3p in the pound in grant. Doncaster has gained 4.2p, Cleveland has gained 4.9p but Trafford has lost 2.7p. Where is the justice in that? Where is the sense in that?
In 1981–82, the first year in which the present system of block grant was in operation, Trafford received £25.1 million. Its grant is now down to £20.1 million, a loss of £5 million, or 20 per cent., in cash terms over four years. In real terms the grant should have been £29.5 million this year to maintain its 1981–82 value. This year's settlement 721 represents a reduction of 32 per cent. in grant since 1981–82. Were we to go back to the previous grant system, allowing for the transfer of grant to the Greater Manchester council, I estimate that our present grant would be found to be well under half the 1975–76 level. All the cuts are well in excess of any reduction that has been imposed nationally.
It cannot be right that a council such as Trafford, which has so loyally implemented the Government's policy of restraining expenditure and seeking efficiency wherever it may, should so repeatedly be done down by the formula that Ministers use. Last year I warned Ministers that if they continued to give prizes to those who so openly flout their injunctions and guidelines while penalising those who do the Government's bidding, they would be undermining their own policies. Last year I begged Ministers to reconsider the formula upon which the rate support grant settlement is based. They have done nothing. They have ignored all the warnings. When will my right hon. and hon. Friends get a grip of the situation? When will they insist, with their civil servants, that the flawed formula be changed?
It gives me no pleasure to find myself unable to support the Government this evening. Unfortunately, I have been left with no other means of making clear on behalf of my constituents that Trafford is not prepared to accept a fundamental injustice.
§ Mr. Jack Thompson (Wansbeck)
This has been a fascinating debate in that it has been completely unbalanced. The arguments against the Government's proposals have outweighed the few arguments that have been advanced in their support. One or two shots have been fired across the bow of the Secretary of State and one or two have been put through the bow. More seriously, one or two shots have been put through the waterline. The right hon. Gentleman will probably have to examine the holes that have appeared in his ship after the debate has concluded.
About two hours ago I telephoned my home, which is in my constituency in the north of England. I wanted to ascertain the weather conditions. I could not contact anyone directly because it appeared that they are all engaged in clearing the snow. This bears on the arguments that have been advanced on behalf of the London boroughs and local authority services.
Currently my local authority is out in force trying to clear the snow. If it were possible for Members to go on a magic carpet trip 300 miles north of here, they would not see my county because it is white from end to end. That is not the case in London, but London has its own problems. Inner city problems are quite different from the problems of Northumberland. That is why local government exists—to deal with local affairs at the local level. The Government's local government Acts and their latest rate capping and rate support grant proposals are destroying the basis of local government.
Before 1979 my political aspirations did not include membership of this House. I was heavily involved in local government and still am. Since then, however, it has become increasingly clear that the situation has changed. Local people have less and less autonomy to make local decisions and more and more decisions are made in 722 London. I was not sure then whether they were made in Westminster or in Whitehall, but it is now clear that they are made in Whitehall. It became increasingly obvious that any decisions, arguments and debates must take place in Parliament as local opportunities constantly diminished.
From 1979 until the last general election I was on the receiving end of Government policy. The erosion of local democracy in that period was dramatic. If the recent rate capping and rate support grant proposals go through, I believe that the process will have passed the point of no return. Since 1979 major efforts have been made to curtail local government powers by all possible means. culminating in the Government's latest proposals.
The theme is clear—the final removal of local autonomy and the right of local people to provide for local people. In the past, our system was an example to the rest of the world of how real democracy should work, from the national arrangements and the two Houses of Parliament to the democratic arrangements for local government. It is perhaps a sad reflection on the population of Britain that the proposals now going through Parliament will not come to their notice for many months to come because they do not realise what is happening until it hits them locally. Too often the popular misconception has been that council operations are typified by workmen leaning on shovels. Nowadays the workmen are not even there and very soon there will be no shovels either.
A great many statistics have been given today. They have been useful in making the arguments for various areas. I shall adopt a different approach. My county is known for its moderate local government, whether it be Conservative or Labour-controlled. Control seems to change over a 15-year period. Labour has been in control for about two years and it is likely to continue for 15 years. Before that, we had 15 years of very moderate Conservative rule. I am the first to concede that the Conservative councillors were reasonable people, prepared to talk to their opponents about what was best for the county. They were Northumbrians — and very responsible ones. I am proud to have been associated with them—not all of them, but many of them. We had the determination to share in the common defence of our county.
I was involved both as a council leader and as a Member of Parliament, in what was defined as a Northumberland action group. It consisted of the county council, all six district councils, only two of which were Labour-controlled, and the Members of Parliament. It was established originally to consider the 1980 and 1981 Bills, which later became Acts. Its primary function in 1983 was to examine the White Paper, Cmnd. 9008. Following that examination, they all reconfirmed their attitudes. The one principle that they supported was that no matter what form of political or non-political control the council had, it was the right of the people of Northumberland to determine the range and level of services in Northumberland because they understood the needs of the county and districts—unlike civil servants in London. That is the important principle that all Northumbrians in local government adopted.
One matter has not been mentioned tonight. Local government operates because thousands of people in this country do what I still call voluntary work in that sphere, because the recompense they receive for the work that they do is so small that their work can only be described as voluntary. What will the Secretary of State do if many of 723 those responsible people decide that they have had enough? What will he do if the local government workhorse—the councillor—decides to stop work before he is killed between the shafts of the cart of the local authority? The load on that cart is increased day by day by the Government. The time will come—I predict that 724 it will come at the next local elections, or the ones after that—when people in local government say, "We will not take any more. We will pack it in, and leave it to someone else." The people who take their jobs will come for all the wrong reasons. That is what worries me, and that is where democracy will disappear.