Rate Support Grant (Scotland)

HC Deb 17 July 1984 vol 64 cc187-96 4.32 pm

The Secretary of State for Scotland (Mr. George Younger)

With permission, Mr. Speaker. I wish to make an announcement about local authority expenditure and rate support grant in Scotland.

Scottish local authorities are planning expenditure in 1984–85 which is some £114 million, or 4.2 per cent. above the current expenditure guidelines that I issued to them. When I met the Convention of Scottish Local Authorities on 22 June, I said that I was disappointed that authorities were not much closer to the expenditure provision made in the rate support grant settlement. Having considered the budget returns of authorities I said that I had decided not to take selective action to reduce the rates of any individual local authority this year, although I will not hesitate to use the power again if an individual authority plans excessive and unreasonable expenditure.

However, since there was only marginal improvement on last year in the general level of expenditure I made it clear that there would have to be a substantial general abatement of rate support grant. It is apparent that the abatement which I imposed last year was not sufficient to impress upon authorities the very real need to bring their spending into line with Government guidelines.

In my consideration of the level of abatement required I was very aware of two arguments which the convention and individual authorities had raised with me.

The first was the distribution of the abatement. Previously grant reductions for excess over guidelines bore no relation to the level of excess over guideline. Authorities were penalised in proportion to their share of grant rather than on the basis of their degree of overspend. This, I acknowledge, was not fair. During the parliamentary proceedings on the Rating and Valuation (Amendment) (Scotland) Act 1984 it was made clear that I intended to use my powers under the Act to ensure that the amount of reduction for each authority was directly related to the extent of its overspend.

Secondly, COSLA has for a number of years represented to me the unfairness of a system which did not recognise reductions in overspend at outturn and thus gave no incentive to respond to an abatement by economies in the current year. This year, I have decided that the amount of the grant reduction will be adjusted when information is available about actual expenditure in 1984–85. Any authority whose expenditure at outturn is below guidelines will have its grant penalty cancelled. An authority which while still above guideline reduces its expenditure at outturn will have its penalty reduced. Conversely, of course, an authority which increases its excess will find its penalty on outturn increased.

In the light of these two significant improvements to the system, which have removed the basic unfairnesses which have previously existed, I have had to consider whether to seek a grant reduction equal to the full amount of the overspending of £114 million.

I have decided, however, that a penalty of this scale would be too steep an increase on last year's total penalty of £64 million. I have decided that for 1984–85 the appropriate reduction would be £90 million. I will lay the necessary rate support grant order shortly, and grant reductions will start on 1 August I have today placed in the Library a paper showing how the abatement will affect each local authority, and letters of notification to them are being posted today.

I accept that this penalty will be regarded as severe. At the same time the new system will allow authorities to reduce their penalty in part or in entirety by taking positive action now to bring their spending down. The solution lies in their hands. In the interests of their ratepayers and of the economy as a whole, I hope that this opportunity will not be missed.

Mr. Donald Dewar (Glasgow, Garscadden)

I begin by welcoming one feature, and one feature only, of an otherwise deplorable statement. It is right that those authorities whose outturn is less than the budgeted expenditure on which the penalty was calculated should have a reduction in that penalty. But if there are to be such reductions—and that seems likely—I assume that that will mean a reduction in the total of £90 million which is to be clawed back and that it will not mean an increase in the burden to be shouldered by other authorities. It is important that that should be made clear.

The Secretary of State is right on only one other thing —that this abatement will be seen as severe. It is clear that the clawback is punitive and that there is no justice, no sign of social conscience and no appreciation of the damage that will be done to basic services by the announcement. A clawback of £90 million on an excess of £114 million means that the Government will be taking back 79 per cent. of the total overspend.

My understanding is that the equivalent percentage in England was 66 per cent., and in Wales 54 per cent. In 1982–83 there was an excess of £203 million and the penalty was £57 million. I am fairly including the individual hit lists—the section 5 procedures—as well. In 1983–84, the excess was £121 million and the penalty was £64 million.

When put in that context, it seems that the present figure of £90 million on an excess of £114 million is vindictive, unreasonable and unreasoning. The consequences will be further cuts in services, fewer teachers and home helps, a less effective social work service and a poorer transport service. The only way in which that can be avoided — surely the Secretary of State recognises this—will be an increase in rates.

I understand, and will the right hon. Gentleman confirm, that the £90 million clawback is the equivalent of about 7.5p on the rates across the board in Scotland? How does he expect Strathclyde to find £39 million half-way through the year, Lothian £12.5 million, and Edinburgh—which under a Tory Administration had the largest excess over guidelines—£3.9 million?

Is it not sadly inevitable that this will mean a continuation of the tension between central and local Government which has marked the last few years — a tension which has degenerated to confrontation and for which the Secretary of State and his policies bear a heavy responsibility? In view of his party's humiliating reverses in the district council election, which show what the people of Scotland think of the policy lines that he is pursuing, will he reconsider his policy? Will he recognise that his insensitivity and prejudice are doing real damage to everyone in Scotland?

Is not the Secretary of State ashamed of the fact that, despite the obvious and genuine need to improve, not cut, services, if he takes the whole £90 million in the cuts in this financial year the grant table in 1984–85 will be £20 million less in cash terms than it was two years ago? Is that not a recipe for disaster, and something that he should undo before the damage becomes irreversible?

Mr. Younger

The hon. Gentleman, I know, has not had a great deal of time to study my statement, but he has greatly underestimated the effect of the two major changes that I have made in how the grants will be applied. They introduce a wholly new principle, and councils will now have a direct incentive, and one from which they can profit, to reduce expenditure in their budgets. I confirm that if, as I hope, local authorities reduce their excess over guidelines, and therefore get reduced penalty, that does not adversely affect any other authority as it is a reduction in the total amount that is recovered.

Secondly, as to the comparison between Scotland and England and Wales, I make it clear that it is impossible to compare two wholly different systems. For instance, a large number of English authorities—about one third—have penalties that are over 100 per cent. of their excess. We have always set our face against that in Scotland, and the one thing that COSLA does not wish is to have the English system. The English penalty for 1984–85 has gone up 63 per cent. from the 1983–84 figure, whereas the Scottish penalty that I announced this afternoon has gone up by only 40 per cent., so it cannot be said that this is unfair to Scotland.

As to the effect on rates, I would be most astonished if Scottish local authorities took the view that the way to achieve their budgets was to go ahead, irrespective, and put the increase on the rates. There is a direct incentive to make the savings people want to see and thereby get recompense through reduced penalties.

It is the case that this announcement comes part way through the year, and that makes it more difficult for local authorities to make savings. We all know that, but I remind the hon. Gentleman that I clearly and positively reminded local authorities as long ago as June that there would be a large abatement, and that they would do well to start looking for economies then. The more sensible of them did so, and about one quarter of all our authorities are in any case well within the guidelines and will not suffer penalties.

Sir Hector Monro (Dumfries)

I warmly welcome my right hon. Friend's continuing efforts to keep extravagant authorities within bounds in the interests of ratepayers. What positive incentive is there to local authorities, such as Dumfries and Galloway and the four districts within it, who keep their expenditure within guidelines? Will my right hon. Friend switch resources from extravagant authorities to those who deserve an incentive to keep within the guidelines?

Mr. Younger

I can appreciate my hon. Friend's point, and I am grateful for his comments. The main incentive for authorities such as Dumfries and Galloway — to whom I pay a warm tribute for the way that it has successfully achieved the difficult task of getting its spending down—is that they, unlike other authorities, can go ahead with their plans, secure in the knowledge that no penalty applies to them.

Mr. Gordon Wilson (Dundee, East)

Will the Secretary of State accept that this craven surrender to the Treasury leads many of us to believe that he wishes promotion, and there is no sacrifice that he would make to achieve that? Secondly, as it has been shown that the increase in penalty in Scotland is far greater than it is in England and Wales, will he come clean and confirm that as part of the Treasury's instruction, there is a progressive reduction in the amount of money available to the Scottish Office, and that that is one of the reasons why these impositions are placed on our constituents year after year?

Mr. Younger

I am sorry to say so, but the hon. Gentleman is wrong on both counts. First, it is expected that there will be a smaller increase in the general abatement this year in Scotland than the equivalent English amount, which is 63 per cent. as against 40 per cent. for Scotland. As to general abatement, I thought that the hon. Gentleman knew that Scottish expenditure en bloc is worked out by a formula, which has not changed.

Mr. Albert McQuarrie (Banff and Buchan)

I congratulate my right hon Friend on penalising those authorities that have overspent on guidelines. Will he assure me that it is not his intention to penalise the Grampian region, which has kept within the guidelines despite the problems that it had with snow clearing and so on during last winter? Will he also assure me that Banff and Buchan district, which has done its best to keep within the guidelines, will not be penalised?

Mr. Younger

I am grateful for my hon. Friend's comments. I can confirm that Grampian regional council, which has done extremely well in getting its expenditure down, is not subject to penalty as it is well within the guidelines. Unfortunately, I cannot say the same about Banff and Buchan, which has an excess this year, and will therefore have a penalty to pay. However, that penalty will now be fair, which it was not this time last year.

Mr. Bruce Millan (Glasgow, Govan)

Is not today's statement part of the Secretary of State's continued vendetta against Scotland's local authorities? Deny it as he will, are not these penalties more savage than in the past two years, and considerably more savage than those being imposed in England? At the moment, the total penalty there is £450 million, while that for Scotland at £90 million is proportionately much higher.

If the local authorities were to carry out the reductions in services that these penalties will impose on them—I am confident that they will not because they have too much concern for the ratepayers of Scotland and the people for whom they provide services—there would be savage reductions in many social services in Scotland. Is that rot the kind of measure that the Secretary of State is trying to enforce on Scottish local authorities?

Mr. Younger

The right hon. Gentleman is exactly the person to ask that question. The last year when he had responsibility as Secretary of State was 1978–79, and local authority budgets this year are still 2.6 per cent. in real terms above what he allowed in that year. That is the complete answer to the nonsense that he has just put out about wholesale cuts in services, because the services that he approved would be 2.6 per cent. below what local authorities are proposing in their budgets this year. Secondly, as to grant reductions, the right hon. Gentleman has a bit of a cheek. We all remember an article in The Scotsman that he wrote, in which he strongly recommended to me that the way to control local government expenditure was to make reductions in grant. If that was his advice, I do not not know why he is complaining now that I have to do it.

Mr. Gerald Malone (Aberdeen, South)

My hon. Friend will be aware of the relief felt by Conservative Members that he is at last able to reduce local authority spending across the board and does not have to penalise councils that keep within budgets. I reiterate that Grampian regional council is a good example. Will he remind Labour Members that in the case of councils such as Aberdeen district council, which I suspect will be overspending, there are two solutions? One would be to reduce the budget, and the second would be to proceed with policies initiated by this Government, such as the sale of council houses, which will increase their receipts and improve services at reduced cost, while allowing them still to come within their budget? Is it not a fact that there is no necessity to reduce services as a result of my right hon. Friend's statement?

Mr. Younger

My hon. Friend is right. In particular, he will remember very well that Aberdeen council forwent a considerable sum of money that it could have had for its housing if it had wished.

Mr. James Wallace (Orkney and Shetland)

Does the Secretary of State agree that, because of the abatement, the level of rate support grant will be cut in cash as well as real terms from what it was in 1982–83? Is he not surprised that councils are still overspending? Is that not because many councils have cut away all the fat there is to cut and cannot eat into the muscle and the bone?

Does he not accept that it must be very galling to councils such as the Shetland islands council, which will suffer an abatement of almost £500,000 when it has cut expenditure responsibly as and where it can and maintained basic services, that the Government are giving money to Liverpool council in spite of its irresponsible militant action?

Mr. Younger

The hon. Gentleman's latter point is not true, as he ought to know. He might have found a word of good to say about Orkney, in his constituency. The council is well within guidelines and will not suffer penalties. In the absence of the hon. Gentleman's congratulation, I congratulate the council.

Lord James Douglas-Hamilton (Edinburgh, West)

Is my right hon. Friend aware that there will be much interest in his decision that the reduction should be limited to overspend? How will Edinburgh and Lothian region be affected?

Mr. Younger

Both Edinburgh and Lothian region are considerably over budget and they will undoubtedly have to pay large penalties.

Mr. Alexander Eadie (Midlothian)

The right hon. Gentleman must be aware that he came to the Dispatch Box to make a statement this afternoon with much-weakened political authority, in the light of the local government elections in Scotland in which his party was soundly trounced.

Will he be a little more forthcoming than in his rather ominous statement to his hon. Friend the Member for Edinburgh, West (Lord James Douglas-Hamilton) that Lothian region has overspent? Will he translate that in terms of teachers' and home helps jobs and other local authority services? The right hon. Gentleman owes it to the House to tell us what redundancies may be expected in services in Lothian region.

Mr. Younger

I appreciate the hon. Gentleman's point, but if Lothian region had not had such high levels of expenditure in the past, it would be easier to reduce spending. I recall that three years ago, when the previous administration in Lothian region was faced with a penalty for the first time, it declared that at least 15,000 redundancies would result. I understand that no compulsory redundancies resulted from the imposition of that penalty.

Now that the system is fair, I hope that that will be an incentive to Edinburgh, Lothian region and other authorities. Reductions in budgets will be reflected in a lower penalty. I hope that authorities will respond to that incentive.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

Will not the Secretary of State admit that this is an artificial accounting exercise and that the guidelines are artificial? Will he give examples of the profligacy of Cumnock and Doon Valley district council, which has low overheads? Is it burying too many people or cleaning the streets too much? Will the Secretary of State give examples of the profligacy on which he is encouraging the council to cut down?

Mr. Younger

The general answer to the hon. Gentleman's question is that if local authority expenditure as a whole is in real terms 2.6 per cent. above its level of five years ago, all the talk about slashing services wholesale is just a load of rubbish.

Services are better and bigger than five years ago. We must all face the fact — with respect, the hon. Gentleman would need to do so if he was likely to be in government—that only a certain amount of money is available for all services. If local authority expenditure is allowed to run ahead of what the country can afford, other services would be reduced. Hon. Gentlemen would resent that, too.

Mr. Robert Maclennan (Caithness and Sutherland)

Will not the Secretary of State acknowledge that the real increase in expenditure of 2.6 per cent. since he took office, to which he referred in his answer to the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes), is minuscule against a background of deindustrialisation and social despair, which puts much greater responsibilities onto local authorities than when the right hon. Gentleman took office? Will he accept that much of the difficulty faced by local authorities flows from his constant changing of the guidelines, which have been changed about seven times since he took office? It is all very well for him to sit in his ivory tower re-jigging the formulae and increasing abatements, but local authorities on the ground have to translate his paper work into cancelled programmes.

Mr. Younger

With respect, the hon. Gentleman is not right. The guidelines are built up with much care and generosity, and many allowances are written in for special needs.

The hon. Gentleman might be interested to know that Sutherland district council will have a small penalty of about £3,800 to pay for its overspend, which I hope it will manage to reduce.

On industrialisation, our businesses and industries in Scotland have found the going so tough partly because of high rate increases. That case has been made clear in many areas of Scotland.

Mr. David Lambie (Cunninghame, South)

It is no wonder that so few Tory Back Benchers from Scottish constituencies are present to support the Secretary of State for Scotland in this further attack on the people of Scotland because they continue to vote Labour.

Before the Secretary of State imposes penalties on local authorities, will he take into account areas such as Cunninghame, where every fourth man is unemployed and we have a serious problem of long-term unemployment with people out of work for two, three or four years? Those factors create social problems needing more money. Is the Secretary of State prepared to receive representations from areas such as Cunninghame, with its high unemployment rate, before he imposes penalties on that district?

Mr. Younger

The hon. Gentleman has not examined the picture that he tries to describe. The result of the Government's policy has been substantially to reduce the level of rate increases in the past five years. They have been reduced from a peak of about 35 per cent. at their highest level to about 5 per cent. last year.

Services are higher in real terms, than five years ago. The hon. Gentleman's description does not tie up with the figures.

Mr. Harry Ewing (Falkirk, East)

Does not the Secretary of State appreciate that he is left without credibility, in Scotland, as the ratepayers and electors demonstrated in two recent elections? Does the Secretary of State not accept some small responsibility for creating an additional 300,000 unemployed during his time as Secretary of State and agree that teachers and home helps are fewer?

Does the Secretary of State not believe that he has the responsibility to feed in additional resources to help to deal with the problem? Does he not accept that we should be talking not about abatements and reductions in Scottish authorities, but about the allocation of additional resources to every district, region and island authority in Scotland?

Mr. Younger

I am trying to put over the point that additional resources are being allocated right now and that services are 2.6 per cent. higher in real terms than five years ago.

There are slightly fewer staff working for Scottish local authorities than there were five years ago, but considerably more staff per head of population than south of the border. I believe, also, that there are more home helps than there were five years ago, so the hon. Gentleman's song makes no sense on any count.

Mr. Norman Buchan (Paisley, South)

The tenor of the Secretary of State's remarks is that he would prefer to have more rather then less unemployment in Scotland. When will he realise that his policy is cruel and stupid and that he will force local authorities into confrontation with the Government? He is imposing a legal obligation upon authorities by means of his punitive policy, while they have a statutory duty to carry out services. The Secetary of State will create conflict. We are dealing with real hardship and real poverty, and he is increasing the gravity of the situation.

Will he take it from us that, if he were to be promoted, the whole of Scotland would be delighted to see him go?

Mr. Younger

The hon. Gentleman's conclusions do not meet his facts. I would understand the hon. Gentleman's point if local authorities had been forced successfully to slash expenditure in the past five years, were spending much less now, and if many services had been slashed beyond recognition as a result. As none of his conclusion are true, his whole case falls.

Several Hon. Members

rose——

Mr. Speaker

Order. I shall call all those hon. Members who have been standing in their places, but I remind them again that there is an important Back-Bench debate to follow. May I ask for brief questions, please?

Mr. John Maxton (Glasgow, Cathcart)

Given that the Secretary of State's party has been rejected in election after election and twice within the past three months, how can he continue to impose his extremist political philosophy on the people of Scotland? Does he agree that he has no mandate or moral authority to do that? How can local authorities make these savings without creating massive unemployment in Scotland?

Mr. Younger

The answer is simple. A quarter of local authorities have already made the savings and will consequently suffer no penalty. A further five or six local authorities — making about one third in all — face no penalty or a very small penalty. That is the answer—if they can do it, why cannot all the others?

Mr. William McKelvey (Kilmarnock and Loudoun)

Will not the Secretary of State for once come clean and accept that this thinly disguised and vicious attack on the democratic rights of the people of Scotland has been carried out because Scottish people have consistently elected Labour-controlled authorities? As I have asked before, why does not the Secretary of State throw off the shackles of the lunatic monetarist policies that he follows so slavishly in accordance with the Prime Minister's diktat? Will he——

Mr. Speaker

The hon. Gentleman must be brief.

Mr. McKelvey

Will the Secretary of State not sober up, throw off the opiate of monetarism, and agree that he is making nothing more than a vicious attack on those people in Scotland who have consistently voted Labour?

Mr. Younger

The only point that I should answer is the hon. Gentleman's suggestion that I am picking on people because they vote Labour. I suppose that Opposition Members will agree that Glasgow is the best example of a consistently and thoroughly Labour-controlled authority. This Government have poured money into that city. I need name only the exhibition centre, the St. Enoch's centre, job dispersal into the centre of Glasgow, new buildings for the courthouse and the Royal Scottish Academy of Music and half the cost of the Burrell gallery. Glasgow is a Labour-controlled authority, but there is not much evidence there for what the hon. Gentleman has suggested.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

Is the right hon. Gentleman aware that for the Borders, this dose of agony is more palatable as it affects only one district council? I think that he will confirm that Berwickshire district council is being penalised to the tune of £26,000. Is it not a mark of his policy's failure that Berwickshire district council, which is Conservative-controlled, which is labouring under the great difficulties involved in having a rural area to administer, and which has in the past adopted progressive policies, should be penalised by the Government in this way?

Mr. Younger

The hon. Gentleman has fairly raised a very good point. I shall use the broadest definition of the Borders. With the exception of Berwickshire, I can say that Borders regional council, Dumfries and Galloway regional council, Ettrick and Lauderdale district, Roxburgh district, Tweeddale district and Nithsdale district face no penalty as they have kept within the guidelines. If they can do it, why cannot the rest of Scotland?

Mr. Tam Dalyell (Linlithgow)

May I contrast the statement made this afternoon with what was happening 24 hours ago in this House in the debate on the Gower committee report, when we discussed the Stock Exchange, the bullion market——

Mr. Speaker

Order. Does the hon. Gentleman's question have anything to do with the statement on rate support grant? I called him to ask a question on that, but if he is raising a point of order I shall call him later.

Mr. Dalyell

It is a question.

Mr. Speaker

Very well.

Mr. Dalyell

May I contrast the huge amount of money that the City operates on with the comparatively small amounts needed in Scotland. The £12.5 million for Lothian means redundancies for roughly 800 teachers and 1,200 home helps. Does the Secretary of State or his officials have any calculation of how much it costs in terms of unemployment benefit to render those people unemployed? What is the very lowest cost of that to the Government?

Mr. Younger

If the hon. Gentleman wants to ask me specifically about the figures, I can try to discover the answer. In general, however, his case does not stand up to analysis. In 1978–79, Scottish local authorities spent £2,684 million, and in 1984–85 they will spend £2,754 million. Those are huge sums by any standard, and of course they have to be to maintain the vast range of services provided by Scottish local government. However, the burden of paying more than that is more than Scottish ratepayers and the Scottish people can manage at the same time as keeping Scottish industries going.

Mr. Ernie Ross (Dundee, West)

In 1981, the Secretary of State took £975,000 away from Dundee district council by order of the House because he alleged that it was being excessive and unreasonable. However, he made no effort to claw back any more money from the council until this statement. How can we encourage local authorities to be reasonable if they still suffer when they are reasonable? How can the right hon. Gentleman explain the £5 million penalty on Tayside region when, since coming into being, it has bent over backwards to do what both Labour and Tory Governments have suggested? Local authorities will have to make 20,000 people redundant if they are to keep within the new guidelines for the last five months of the year. Which one of his own family would he like to see made redundant?

Mr. Younger

The hon. Gentleman was not correct in his first statement. Like all other Scottish local authorities, Dundee has paid a share of the general abatement each year. In the past year and previous years it has paid a share of an unfair general abatement. From now on, it will pay a share of a fair general abatement, under which the amount of money that it has to pay in penalty is directly related to the amount of its overspend. The hon. Gentleman should welcome that. Of course, I hope that savings can be made with the maximum care for economy while at the same time making no more redundancies than necessary. However, the ordinary ratepayers and taxpayers have to pay for those services and so they must be entitled to obtain them at the lowest possible cost.

Dr. Norman A. Godman (Greenock and Port Glasgow)

I readily acknowledge that there are major differences between the English and Scottish systems of local government, and that that may make comparisons difficult, but why is the Secretary of State aiming so much higher in his penalties than is his English counterpart?

Mr. Younger

It is not quite like that. I shall explain briefly. The penalty systems north and south of the border are entirely different. The objective is the same—to bring expenditure down—but the approaches to it are different and comparisons cannot be made easily. In England and Wales a penalty tariff is announced in advance. For substantial numbers of authorities—about a third of English authorities—the loss of grant under that tariff is over 100 per cent. of their overspend, and for some authorities it is over 200 per cent. of their overspend. Some authorities receive no grant. No Scottish authority is in that position. In addition, the English penalty has increased by 63 per cent., whereas the Scottish penalty has increased by only 40 per cent.

Mr. Dewar

As the Secretary of State is obviously so well briefed on the situation in England, perhaps he will give us the total English penalty figure, as that is the comparison for which we are looking. Will he give an assurance that as the subject is obviously of great interest to hon. Members— many of my hon. Friends have tried to make points already— the debate on the order will not be confined to one and a half hours late at night?

Mr. Younger

The hon. Gentleman's latter point is a matter for my right hon. Friend the Leader of the House, and I shall draw his attention to the hon. Gentleman's remarks. If the hon. Gentleman wishes to know any of the figures for England, I shall be happy to write to him.