Rate Support Grant Supplementary Report

HC Deb 20 March 1984 vol 56 cc983-1021 9.18 pm

The Under-Secretary of State for the Environment (Mr. William Waldegrave)

I beg to move, That the Rate Support Grant Supplementary Report (England) (No. 2) 1983–84, which was laid before this House on 12th March, be approved. This is the third debate on rate support grant matters since the general election. Last July the House approved the first supplementary report for 1983–84, which implemented holdback of block grant in the light of local authorities' budgets. At the same time, it approved the third supplementary report in respect of 1981–82, which adjusted local authorities' grant entitlements to reflect their outturn expenditure in that year, and on 23 January the House approved the main rate support grant report for 1984–85.

The debate focuses on the second supplementary report relating to 1983–84. It is a short, single-topic report, which simply alters the total of block grant payable to local authorities in the current financial year to reflect the latest estimate of interest rates payable by local authorities in 1983–84 of 10.85 per cent. compared with the 11.5 per cent. that was assumed at the time of the 1983–84 rate support grant settlement in December 1982. The overall effect of the report is to reduce the total of block grant by £44 million. That is equivalent to a reduction of less than three quarters of a penny rate.

Hon. Members may wonder why, at this late stage in the financial year, we do not yet know the actual interest rates paid by local authorities in 1983–84. The interest rates paid by local authorities in any year are a mixture of current and historic interest rates. We shall not know the final picture until August or September, when local authorities will provide the information on the level of interest rates actually paid by authorities in 1983–84.

It is somewhat unusual to have a debate on a supplementary report in March. For the future, I hope that we shall establish a pattern whereby there are no more than three supplementary reports in respect of each financial year—a first, in June or July of the grant year, to implement holdback of block grant in the light of local authorities' budgets and to make adjustments for any changes in variable items as appropriate; a second supplementary report 18 months later to revise authorities' grant entitlements to reflect their outtum expenditure for the year; and a third and final supplementary report the following summer, 27 months after the end of the grant year, to close the books on that year in the light of audited outtum expenditure information.

I should emphasise two points about the proposed timetable. First, we have discussed it in a preliminary way with the local authority associations. They are in favour of fewer supplementary reports, and they would like to close the books on each year as soon as possible after it has ended. The Government share that view. Secondly, however, achievement of the timetable will depend upon local authorities submitting their outturn expenditure information promptly. I believe that the Government and local authorities can work together to ensure that the grant to which local authorities are entitled on the basis of their spending is paid to them as early as possible.

Hon. Members may reasonably ask why we are making a second supplementary report in respect of 1983–84 at this juncture. There are two reasons. First, the Government's financial management has succeeded in bringing down interest rates faster than we expected, local authorities have been overpaid grant in relation to the current financial year. It is therefore necessary to adjust grant entitlements to reflect the latest assessment of interest rates. Secondly, the House faces the prospect of three further supplementary rate support grant reports in the summer, to which I shall refer briefly in a moment, and all hon. Members may agree that there is advantage in dealing with one now to avoid having four in the summer.

Hon. Members may ask why we are not yet making the second supplementary report. The hon. Member for Blackburn (Mr. Straw) will undoubtedly ask. We have been closeted for a number of weeks in the Rates Bill Committee, in which we work by a process of telepathy, so that we do not need to—

Mr. D. N. Campbell-Savours (Workington)

Are we to get copies of the Minister's book?

Mr. Waldegrave

I should explain, for the benefit of the assembled masses, that the hon. Member for Workington (Mr. Campbell-Savours) was referring to copies of my book, which was much quoted in the Rates Bill Committee. As stocks seem likely to remain high for an indefinite period, rather like some of the stocks in the nuclear plant to which the hon. Gentleman and I refer from time to time, I shall be happy to send him one with my compliments.

The second supplementary report for 1982–83 will revise local authorities' grant entitlements to reflect their outturn expenditure. The reason why we have not yet made the report is that we believe that grant entitlements should not be adjusted to reflect outturn expenditure until the Department has received audited information for the great bulk of total expenditure. The returns that we have so far account for only about 53 per cent. Moreover, we would not want to make a supplementary report when numbers of audited outturn forms are being returned to the Department each week.

There is another reason. When we come to make the second supplementary report for 1982–83 in the summer it will entail paying some £100 million grant to the Greater London council. The GLC is eligible for the grant because its outtum expenditure is a staggering £177 million less than its budget for 1982–83, showing the customary financial efficiency of that authority under its present regime. It made a complete nonsense of its planning for that year. Because the total of block grant is cash-limited, all other local authorities will contribute to the GLC's £100 million gain. We have delayed making the report, to enable authorities to take account of that contribution in setting their rates for 1984–85. We have now given them notice of the change. Treasurers have known of the situation for some months now.

Mr. Robert Rhodes James (Cambridge)

When my hon. Friend is not binding the leviathan of the GLC and arranging for £100 million to go to it, will he think for a moment of the misfortunes of the people of Cambridgeshire?

Mr. Waldegrave

Hon. Members representing Cambridgeshire, Huntingdon and other neighbouring counties, some vociferously and others with a silent prayer, make their concerns well known. I accept my hon. Friend's point and recognise the problem faced by authorities as the block grant is cash-limited. When an authority makes a hash of its affairs, as the GLC did in that year, that presents subsequent problems for other authorities. When the system was set up, no one conceived that an authority could miss its budget by £100 million.

Mr. Jack Straw (Blackburn)

If, for example, the Government had produced a public sector borrowing requirement of about £5,000 million under their estimate, surely the Prime Minister would applaud the Government's good housekeeping, not their rashness.

Mr. Waldegrave

When the hon. Gentleman worked for the right hon. Member for Bethnal Green and Stepney (Mr. Shore), he became exceedingly learned in these matters. He will be able to explain to the House how the public sector borrowing requirement is the residuary of two large numbers. The GLC managed to miss its target by a high proportion of its total budget. A comparable example would be for the Government to miscalculate the PSBR by about £25 billion, not £6 billion.

I promised the House a trailer for the three supplementary reports, which the Government propose to make in the summer. I have already mentioned the second supplementary report for 1982–83, to adjust grant so as to reflect local authorities' outturn expenditure. There will also be a first supplementary report in respect of 1984–85, to ensure that grant entitlements follow authorities' formal budgets, which we shall receive after the grant year has started in April-May, and to implement holdback of grant as necessary in the light of those budgets. Finally, there will be a fourth and final supplementary report to close the books in respect of 1981–82.

From what I have said, the House will realise that the report that we are debating tonight is modest. As the Secretary of State is bound to do, we consulted the local authority associations about its proposed content last month, and they raised no objection.

Since we are having this debate in March, the House would be surprised if I fail to mention the prospects for rate levels in 1984–85. The newspapers have been full of reports in recent weeks about individual authorities' rating decisions. First, however, I invite the House to look back at what local government and the commentators were predicting at the time of the rate support grant settlement shortly before Christmas. The headlines were of a "Shock Horror" nature. "Hefty rate increases expected" said The Guardian. The Financial Times said: Sharp rises in rate bills predicted by local councils. The Daily Mirror said "Tories drop rates bombshell". The Association of Metropolitan Authorities was as forthright as ever, and said: the Government is creating a rates crisis that will hit ratepayers in towns and cities throughout the country. It will fuel inflation, enrage ratepayers, and threaten crucial services". The Association of County Councils was reported to have predicted rate increases far in excess of inflation, and major cuts in essential services. The hon. Member for Copeland (Dr. Cunningham) predicted: a major increase in rates that will be well above the rate of inflation. Individual authorities joined the chorus. The finance committee chairman of Greater Manchester issued a press notice claiming that the Government were presenting his authority —along with scores of other councils—with an impossible housekeeping problem. He forecast an increase of 28 per cent. just to stand still on services. I invite the House to consider the relationship between the predictions and the reality. In fact, the chairman of Greater Manchester's finance committee has eviaently solved the impossible housekeeping problem: his council has now decided on a precept increase of just 4 per cent. next year, and apparently boasted that it had done so without hitting manpower or services. This is but one of the death-bed repentances sweeping the metropolitan counties and the GLC, whose abolition we shall bring before the House in due course.

The West Midlands county council has gone for a zero precept increase. The GLC has even managed a reduction—although it is something of a con trick. It could and should have been much larger, since it overrated in previous years. In the event, Cumbria's precept is set to rise by 4 per cent., Avon's by 6.5 per cent. and Northumberland's by 5 per cent. All that shows what can be done when the will is there.

The general picture is now almost complete. Only a handful of authorities, albeit large, have yet to reach final decisions. On the basis of the returns we have, we can be fairly confident that the average rate increase in England next year could be less than 6 per cent., not even one percentage point above the current inflation rate. It will be the lowest figure since the reorganisation of local government undertaken by the Government of my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath).

Mr. Campbell-Savours

Why should that rate of increase be higher than the forecast wage increases in the public sector?

Mr. Waldegrave

Wage increases amount to 65 per cent. of the total cost of authorities. I agree with the hon. Gentleman that it is a perfectly good question to ask of any local authority which has put up its rates by more than the average cost of its wage bill. It is perfectly fair to ask how it is that other expenses increase faster than the wage bill. The hon. Gentleman and I often agree on such matters. It would be a good test of the efficiency of local authorities, and the relationship between their increase in expenditure and their average wage bill. That would be worth exploring.

Mr. Campbell-Savours

Perhaps the Minister misunderstood what I was getting at. Why should those increases be any greater than the increases in wages which can be expected by the consumers who work in the public sector?

Mr. Deputy Speaker (Mr. Paul Dean)

Order. We are beginning to get a little wide. This is a fairly narrow report and it would not be appropriate to debate local government finance generally or, indeed, to discuss future years.

Mr. Waldegrave

I believe, Mr. Deputy Speaker, that it is partly my fault that we have widened the debate. I can perhaps pursue the matter with the hon. Gentleman subsequently. We have had a certain amount of crying wolf from local authorities in the past year. We must remember that when we hear wolf being cried in other areas.

At the time of the settlement, before Christmas, we said that if local authorities met their expenditure targets average rate increases should be low, and they have been. The remarks were greeted with derision when we predicted what has now happened. Commentators have been driven to say that we are embarrassed by the low figures. If that is embarrassment, please let me have more of it.

Even including the GLC and ILEA, the total of local authorities' budget for 1984–85 is likely to be only 2.5 per cent. above the corresponding figure for 1983–84, which is a pretty remarkable performance. It is below the expected rise in prices over the same period. Up and down the country municipal minds are being concentrated, and the best is yet to come.

The rate support grant supplementary report is a relatively automatic part of the whole machinery of the rate support grant, whose objective is the maintenance and support of the Government's central economic strategy of seeking ever greater efficiency from all the great state institutions. I quote the rate and expenditure figures for 1984–85 to show that for all the stresses and strains, all the justifiable comments and all the improvements that we must still seek, the basic strategy of slowing the growth in local authority current expenditure is now beginning to work. That strategy, of which the report is but a small cog is alive and well. I commend the report to the House.

9.31 pm

Mr. Jack Straw (Blackburn)

It is an entirely unexpected pleasure to be replying to the Under-Secretary. I am not sure whether the adjective "closeted" is correct, but we have been thrown together for 30 or more sittings on the Rates Bill, so his words are familiar to me; as I dare say mine will be to him. He kindly offered my hon. Friends on the Committee copies of his book "The Binding of Leviathan", which I think we have used to great effect against the Government's justification for the Rate Bill.

I am looking forward to my autographed copy of that book, which I have not yet received. Perhaps that is my punishment for having dared to raise the matter in the first place.

Mr. Waldegrave

I assure the hon. Gentleman that a copy is on the way so he can refresh himself with the arguments that I deployed, which I think are unanswerable, as to why the Labour party is in terminal decline.

Mr. Straw

It is proof of the wisdom of the Under-Secretary's views, which were expressed in 1977, that we have weighed his words with care. Apart from a minor hiccup at the 1983 election, far from being in terminal decline, we are re-invigorated; that will be proved to the discomfiture of many Conservative Members at the next election.

One of the points made by the Under-Secretary related to the dangers for parties in departing from their principles. The great dangers in that, are all too apparent in the government's present policy towards local Government finance, as the right hon. Member for Daventry (Mr. Prentice) has warned his party only too well. A party which is committed to, and was formed out of, the idea of local democracy, based on the principle that power should be decentralised and that too much government is bad—notions of the diffusion of power—is sowing the seeds of its own destruction when it takes upon itself more centralised power than we have seen during peacetime in the 20th century.

Mr. Barry Porter (Wirral, South)

Rubbish.

Mr. Straw

The hon. Member says "Rubbish", but there are many wise—

Mr. Simon Hughes (Southwark and Bermondsey)

He always says that.

Mr. Straw

He does not always say that. He was so confused by the speech of the Under-Secretary that he was sitting there with his eyes gradually narrowing. I think he found it even more confusing than the Chancellor's elucidation of the difference between M1, M3, PSL2 and MO during the early part of his Budget speech, an elucidation which had even the Secretary of State for Industry completely foxed.

I have not on this occasion come armed with the full texts and prophetic notions of the Under-Secretary but I would refer him to "The Binding of Leviathan", which—

Mr. Porter

I bought it.

Mr. Straw

There is a man who thought the market was going up when it was going down. If only he had sat on his hands and taken proper account of the nature of the market, he would have been able to get a remaindered copy cheap or, if he had sat on his hands even longer, he could, like the rest of us, have benefited from the largesse of the Under-Secretary. However, I ought to say that this largesse is being reciprocated with autographed copies of that excellent work, "Putting Blackburn Back to Work".

The Under-Secretary referred to the forecasts of rate increases which are likely this year. The relevance of the increases to this report is that the Under-Secretary was claiming that the lower rate increases have arisen because of the Government's policy on local government finance. I think the Under-Secretary speaks with forked tongue. He condemns local authorities when they put up the rates above the level of inflation; he then seems to condemn local authorities when they put up the rates by an amount below the level of inflation. He cannot have it both ways.

If the hon. Gentleman is not speaking with forked tongue, we must accept that he is commending Labour Avon county council, in which county his constituency lies, for putting up its rates by only 5.5 per cent. arid that he is commending Cumbria for putting up its rate by only the level of inflation. I hope that he is commending the noble county of Lancashire; its rate is to go up by 7.7 per cent. but over half that increase is due to cuts in rate support grant and not to levels of expenditure. I hope too that he will condemn thoroughly the Conservative-controlled district council of Torbay, which is putting up its rates by 20 per cent., and the adjoining authority of South Hams, which is putting up its rates by nearly 30 per cent., as I discovered when I visited that area only three weeks ago.

Mr. Simon Hughes

What is Liverpool going to do?

Mr. Straw

What Liverpool will do is an interesting question. I am sure that you, Mr. Deputy Speaker, would rule me out of order, were I to seek to answer, much as I would wish to. Should the Government decide to provide time for a debate on Liverpool, we should be delighted to participate. More to the point, if the hon. Member for Liverpool, Mossley Hill (Mr. Alton) believes that Liverpool has such a fine record over the last 10 years, I suggest that the Liberal party uses one of its Supply days, with which it is amply provided, to mount a full debate on the record of Liverpool, which has brought the council to such a state of financial crisis.

Mr. Simon Hughes

I look forward to the excess number of Supply days which we will get to debate this matter, because it might at least allow people outside the House the opportunity to understand the rate support grant supplementary report, as well as give us an opportunity to put some of the arguments that we otherwise do not have time to put.

Mr. Straw

I am sure that both Conservative and Labour Members would agree that Liberals whinge on almost any excuse. They have many more Supply days than they deserve. One of their Supply days should surely be devoted to the Liberal record in Liverpool, that being the principal factor that has brought the city to its current financial crisis.

Mr. Robert B. Jones (Hertfordshire, West)

What about the Liberals' attendance record here?

Mr. Straw

I am glad to hear the hon. Member for Hertfordshire, West (Mr. Jones), fresh from smiling at me when I recommended the rerating of agriculture to the Standing Committee, asking about the Liberals' attendance record here. It is a good question. I should point out that the question that is asked in Rochdale—the alternative, as it were, to the question that we are often asked—is not, "Why are you not in your constituency?" but, "Why are you not in Westminster representing our people there?"

Mr. Robin Maxwell-Hyslop (Tiverton)

There is an interesting point in connection with the Committee considering the Rates Bill today. Is it not true that the Liberals voted for the rating of agricultural land this morning?

Mr. Deputy Speaker

Order. This debate is ranging very wide. I hope that the hon. Member for Blackburn (Mr. Straw) will not be provoked into going off into highways and byways that have nothing to do with the debate.

Mr. Straw

I would never be provoked, and I am sure that, had a point of order been put to you, Mr. Deputy Speaker, you would have said that how the Liberals or anyone else voted is a matter for the record. No doubt, Hansard for the Committee will be available tomorrow, and I am sure that the hon. Member for Tiverton (Mr. Maxwell-Hyslop) will be the first at the Vote Office to get a copy, hot off the press, to check on the Liberal voting record on the Rates Bill. I hasten to add, however, that the vote was not on the introduction of the rerating of agriculture but on the more modest proposal to introduce a report on that proposition.

As the Under-Secretary said, the scope of the second supplementary report for England is limited. It implements the effects of changes in interest rates between the rate estimated at the time of the original settlement and the revised estimate in the rates for 1983–84. I turn to page 1, paragraph 4, of the report. I give that information for the benefit of my three hon. Friends the Members for Worsley (Mr. Lewis), for Burnley (Mr. Pike) and for Knowsley, South (Mr. Hughes), who I know are following this with great assiduity, and who I know are anxious about their reselection, because the constituency parties are thinking of nothing but the Rate Support Grant Supplementary Report (England) (No. 2).

Mr. Allan Roberts (Bootle)

Is my hon. Friend aware that not only his hon. Friends are following the matter with great interest, but also the electors in Bootle? In fact, all the electors in the Sefton metropolitan district authority are following it with great interest. That Conservative-controlled authority, which I have described before as a paragon of underspending virtue, lost nearly £2 million in rate support grant this year from its own Conservative Government, and is likely to lose even more money now as a result of this settlement.

Mr. Straw

As ever, I am grateful to my hon. Friend the Member for Bootle (Mr. Roberts), to whom I defer. He is the chairman of the environment committee of the parliamentary Labour party and he is an expert on these matters.[Interruption.] I know that he has almost learnt this report by heart, including the many tables on multipliers in annex 4.

Mr. Roberts

When my hon. Friend said that I was chairman of the parliamentary Labour party's environment Back-Bench group, Conservative Members seemed to be disparaging. However, the Secretary of State quoted our minutes regularly in the Committee considering the rate-capping proposals. So at least he treats us seriously.

Mr. Straw

That is quite true. In fact, we are conducting our own leak inquiries to discover who has been leaving around copies of our confidential minutes. It is one thing for Civil Service officials or for Ministers to leak minutes, but it is quite another matter when Opposition minutes are leaked. That is much more reprehensible.

As I was saying to my three hon. Friends, they will know that the gravamen of this report arises because the estimated interest rates paid by local authorities have been reduced from 11.5 per cent. to 10.85 per cent. for 1983–84. I am glad to see that my hon. Friend the Member for Knowsley, South, whose constituency party made an excellent choice, if I may say so, is nodding in agreement.

Mr. Porter

I am delighted to help the hon. Gentleman, as I am one of the few people who have actually been ruled out of order once today and have bought my hon. Friend's book, which I found incomprehensible after the second chapter. I also find it incomprehensible, speaking on behalf of the ratepayers of the Wirral district council, when Wirral has been a paragon of virtue, following Government guidelines, both Labour and Conservative. I have received some letters from the Department that my hon. Friend represents which are as incomprehensible as his book. It would appear that this report today will make me even more bewildered about what is likely to happen to those people who try to run a tight ship, as far as expense is concerned. The tighter the ship, the less one gets. Perhaps the hon. Gentleman will tell me how I am to explain that to my constituents.

Mr. Straw

I am grateful to the hon. Gentleman. The Under-Secretary referred to what I picked up when I worked, as he once did, as a hack for the Government—different Governments of course, but a similar function. If I may have the hon. Gentleman's rapt attention for a second, the only thing that I learned about the rate support grant when I was at the Department of the Environment is that it is like the Schleswig-Holstein question: only three people have ever understood it. One has emigrated, one has died and the third has gone mad. All three are to be found incarcerated in Marsham street. It is a capricious system which often produces quite unintended effects, which is why the hon. Member for Cambridge, (Mr. Rhodes James) was complaining about the effects that the system has had on Cambridge. It is also why, when one part of it is pushed—it is like a sausage-shaped balloon—another part pops up.

The Under-Secretary again is trying to have it both ways. When the Greater London council anticipated, partly because of its forecasting of the habits of the travelling public in London, that the level of expenditure in London would need to be, as it turned out, £170 million higher than it thought, it was roundly condemned by Conservatives for alleged overspending. Now that, for reasons that I shall detail shortly, the council has spent £170 million less than it thought and is, therefore, within grant and very much closer to the Government's target, the Under-Secretary condemns it again.

The problem for the hon. Gentleman is that he and the Government were really very pleased when the Greater London council went so far above its target as to come outside grant altogether, because that meant that there was more grant for Conservative authorities; he wept crocodile tears when he complained about the Greater London council's budgeting. Now that it has come back into grant and has apparently been a good boy, it means that, because grant is cash-limited, the amount allocated to other authorities will be reduced. The blame for that lies not at the door of the Greater London council but at the door of the Government for cash-limiting the rate support grant in the way they have and for adopting the present formula.

Before I embarked on this small digression—

Mr. John Maples (Lewisham, West)

Is the hon. Gentleman suggesting that the rate support grant should not be cash-limited?

Mr. Straw

No, I was qualifying what I said by talking not only about the fact that it was cash-limited but also about the formula that was applied. I certainly do not believe, however, that it should be cash-limited with the rigidity that the Government suggest. I also believe—I hope that the hon. Gentleman for Lewisham, West will share this view—that when an authority such as the Greater London council which is condemned for overspending and going outside grant, turns out, for perfectly legitimate reasons, to have spent far less than it thought, and a sum much closer to the Government's target, it should be the subject of approbation by the Government.

The Government should explain to authorities that have been gratuitously penalised by the fact that the GLC has underspent that that is the result of the operation of the rate support grant system that the Government have constructed, and not a result of decisions taken by the GLC. The money that other authorities, including my authorities of Lancashire and Cumbria, will lose is money that they would not have had in any event had the GLC spent near target or within target when it first decided to budget.

As my hon. Friends on the Back Benches will say, reducing the estimated level of interest from 11.5 per cent. to 10.85 per cent. will mean that authorities in England will lose more than £44 million, or 0.7p in rate poundage terms. We make no particular point, as the proposed reduction is a result of the welcome reduction in interest rates. However, we complain that the Government do not show the same alacrity in bringing forward reports that reflect increases in local authority costs as in bringing forward reports that reflect decreases in costs. It is a matter of great regret that they have not used the opportunity of this report to do a number of things that they could have done.

First, the report does not make any changes to the grant-related expenditure assessments. This means, for example, that allowances for debt charges are still based on estimated capital allocations instead of actual ones, although the actual ones, as the Under-Secretary will accept, have been known for almost 12 months. This and other changes have not been made, and as a result there will be a continued mis-allocation of grants between local authorities until at least next year, when the next supplementary report for 1983–84 is planned.

The Under-Secretary did not explain satisfactorily why it is not possible for the GREAs to be changed to reflect actual capital allocations rather than estimated ones. I hope that the Under-Secretary will deal with that, as well as my other points. I hope that he will deal with the 20 per cent. or 30 per cent. increase in Torbay and South Hams.

Certainly the report does not grant any additional disregards for spending against target. All hon. Members, especially those who wish to reflect the concern of their local authorities, know that authorities continually complain that they have forced upon them national decisions over which they can have no control. These are not reflected in the GREAs or in the targets imposed on them.

One good example is that of police pay. This is negotiated nationally, and there is nothing in practice that local authorities can do about it. It would be wrong if they were to be penalised for increases in police pay above those estimated when the RSG settlement is made. In fairness to the Government, they have accepted in principle that the final RSG settlement should reflect the increase in police pay above that anticipated when the RSG settlement for 1983–84 was approved by the House in early 1983. The Home Office wrote to the official side secretary of the police negotiating board on 18 July as follows: For 1983–84, the total of relevant expenditure and the block grant cash limit will be increased to take account of the cost of the police pay settlement in excess of the amount already allowed in the RSG settlement"—

Mr. Porter

What does that mean?

Mr. Straw

It means what it says. The total relevant expenditure is more or less what local authorities spend, and the total of what local authorities spend is a matter of arithmetic. If the hon. Gentleman wants a precise definition of "relevant expenditure", he will have to look in section 56 of the Local Government, Planning and Land Act 1980. I think that what I have read, by the standards of officialese from the Department of the Environment, is pretty clear.

The letter from the Home Office went on: If representations are made by a local authority association or a local authority, the Government will ensure that no local authority incurs grant abatement because of the additional expenditure due to the pay award. "Grant abatement" means penalty as a result of a county authority's increasing its expenditure above its target to take account of this pay award, for which it has no responsibility.

This report was an opportunity to honour that pledge by the Home Office, and I hope that the Under-Secretary will explain why the opportunity has not been taken.

There are other disregards which could have been granted in this report. It is known to at least some hon. Members that increased expenditure on urban programme schemes is disregarded for partnership and programme authorities, but is only disregarded for those two categories of authority that take part in the urban programme and not in respect of all the many other authorities that also take part in the programme. Nor is it disregarded for those schemes where urban aid grant is no longer paid and the local authority is expected to find the full cost of the scheme plus grant penalties.

One of the continuing complaints of urban authorities is that their rate support grant, their main programme grant, is reduced, but then the Government say they are a deprived area and will be given urban programme money or other money from special central pools. That is all right—we are pleased for at least a few crumbs from the Secretary of State's table—but the problem for the authorities is what happens when the special grants under the urban programme and partnership schemes run out and the authorities have to pick up the tabs from their mainstream and mainline expenditure. In those cases, at the moment, the authorities do not receive any disregards in respect of those schemes.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

It is not a closely kept secret that I have not always agreed with the Government's local government policy. Indeed, only a couple of hours ago we finished an interesting debate. Much as it may have increased personal friendships, it has not increased my regard for the Bill. Would the hon. Gentleman agree that this particular matter is one of those time-honoured systems whereby, had the interest rates gone up, there would have been an automatic ratchet system whereby more interest would have been received? As interest rates have gone down, because of an excellent Budget and an excellent economic situation, this money automatically comes away. Is not the hon. Gentleman spoiling a good case on one Bill by trying to say something entirely irrelevant on this issue?

Mr. Straw

I am chastened by the suggestion by the hon. Member that I am saying something irrelevant to this report. I do not know how I can continue with that.

Mr. Beaumont-Dark

If I have hurt the hon. Gentleman's feelings, I withdraw.

Mr. Straw

I will forbear to continue, not least for reasons which had better not be mentioned in polite company across the Floor of the House.

I said—and I am sure that the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) was listening with rapt attention—that I took no point on the claim by the Under-Secretary that rate support grant ought to be reduced by this amount as a result of the anticipated reductions in interest rates. We believe that the Goverment have not shown the same alacrity in reflecting increases in costs which local authorities have had to bear, through no fault of their own, in rate support grant supplementary reports.

Secondly, authorities have benefited by the reduction in interest rates but they have been penalised by the increases in police pay. Some authorities have been penalised by increased expenditure on the urban programme and inner city programmes. Many of those authorities have not been allowed disregards by the Secretary of State while having their grant reduced to take account of reductions in costs which flow from the reduction in interest rates.

As the Secretary of State announced in the rate support grant settlement for 1984–885, he has granted a new disregard for increased expenditure on schemes that are jointly financed by local authorities and area health authorities. The right hon. Gentleman could have used this report as an opportunity to backdate the relief to 1983–84, but he has not chosen to do so. That is the third matter to which I hope the 'Under-Secretary of State will address himself.

Fourthly, the report does not take account of changes in local authority expenditure levels since last year's Budget. I understand that in two months' time, revised estimates would have become available. If the Secretary of State had waited until then, he would have been able to restore penalties, or the sums that were taken away by penalties, to authorities which reduced their expenditure from their anticipated budget levels. As a result of the supplementary report, authorities which have been wrongly penalised because their budgeted expenditure was considerably in excess of their outturn will probably have to wait until June 1985 to restore their grant for the year ending March 1984.

The final issue that I wish to raise was answered in advance by the Under-Secretary of State. It concerns the curious fact that this is a second supplementary report for 1983–84, yet it is being debated before the second supplementary report for 1982–83. The Under-Secretary of State, as candid as ever, said that the reason for the leapfrogging is that the second supplementary report for 1982–83 would implement the £100 million addition to the GLC's resources because the GLC has budgeted much closer to its target than was originally expected.

I understand the paranoia of Conservative Members about the Labour-controlled GLC. That paranoia is reflected in the abuse and vitriol which poured forth from the Secretary of State for Trade and Industry when addressing a rag-bag of representatives from assorted Conservative associations.

Mr. Beaumont-Dark

Tut, tut.

Mr. Straw

The hon. Gentleman may "tut, tut" but I hope that some of the Conservative representatives "tut, tutted" as they listened to the abuse of the political process by the Secretary of State. The right hon. Gentleman will always reduce any debate to its lowest possible level and get out of the gutter through the sewer whenever the opportunity arises.

As two Conservative councillors on the GLC said yesterday, the real reason why the Government dislike the GLC is that a Labour group is in control and is implementing faithfully policies which have the support of the majority of Londoners. It seems that they are not concerned about the GLC spending at a different level or having different policies. If Conservative Members wish to challenge what I have just said, and are confident that the GLC's policies do not have the support of Londoners, why are they abolishing elections in London and denying Londoners the opportunity to have their decisions and choices put to the vote? Why are they not putting their judgment to the test as well?

Mr. Beaumont-Dark

While I understand the hon. Gentleman's worry and concern, Mr. Ken Livingstone, if I may say so, has had more ego trips on other people's money than anyone since Genghis Khan. Would the hon. Gentleman not agree that it is not that one wants to abolish the GLC, because it is there, but that there are some people in such great authorities who look upon them as vehicles for building themselves up as people more than as a service to the people by whom they were elected? Ken Livingstone, therefore, has not just become a bogey for us; he has become a menace to the hon. Gentleman, and to the future of local government.

Mr. Deputy Speaker

Order. We must not debate legislation which is not yet before the House.

Mr. Straw

I am grateful to you for that direction, Mr. Deputy Speaker.

Dr. Keith Hampson (Leeds, North-West)

This is specific, because the hon. Gentleman has been so selective. The point he makes about the GLC is extraordinary. As I understand the comments of my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), under this report the GLC will gain the sum of £100 million. I agree with my hon. Friend, therefore, that other local authorities will be asked to contribute and will have this sum deducted in order for it to be paid back to the GLC. The GLC managed at long last to spend £100 million less than its budget—what it intended to do—and it seems to me very positive. That is the reason for the report. I would have thought it was just as appropriate not to single out the GLC argument which my hon. Friend put forward. The argument for doing this is that, so far, the Government have had 53 per cent. of returns from local authorities; that is why they cannot at this point bring in the supplementary report for 1982–83. It is a much more reasonable argument and explanation than the hon. Gentleman is trying to put forward.

Mr. Straw

It was not I who singled out the GLC in the first place, but the Under-Secretary of State, who is very sensitive to criticism on this point—and rightly so. I speculate about what would have happened if the reverse had been the case and if, as a result of changes in local authority budgeting, the GLC had been due for a £100 million deduction from its rate support grant. I wonder whether there would have been all this delay then if the shire counties, instead of losing grant which is rightly the GLC's, were going to gain grant. I rather fancy—I am glad to see the Under-Secretary of State smiling, I think in potential agreement with the point—that, if the boot had been on the other foot, the second supplementary report for 1982–83 would already have been presented to, and passed by, Parliament, with £100 million taken out of the pockets of the GLC. The truth is that, as with all other policy decisions of Government in relation to the GLC, this decision is motivated by political spite, and not by proper consideration of the merits of a great city.

Mr. Waldegrave

The money belongs not to the GLC, but to the ratepayers of London, from whom the GLC took it under false pretences.

Mr. Straw

If it belongs to the ratepayers of London, all the more reason why it should be given to the GLC, so that it can hand it back all the faster. It certainly does not belong to central Government, who have been sitting on it for nearly three years.

Mr. Cecil Franks (Barrow and Furness)

Will the hon. Gentleman accept that two thirds of the ratepayers are totally disfranchised in the present system, and that 33 per cent. of ratepayers—roughly the number paying domestic rates in the metropolitan counties—have 100 per cent. of the vote? In the same way that we lost the British colonies in America, the colonies in London will be lost.

Mr. Straw

I doubt very much whether you, Mr. Deputy Speaker, would approve if we debated a major part of the Rates Bill, which is what gives business men the vote. I note that an awful lot of business men are represented in the Conservative group of the GLC, and that Lancashire county council is packed full of business men. There are more business men on Lancashire county council than any other occupational group. It is arrant nonsense to suggest that business men do not have votes.

On the strength of the hon. Gentleman's argument, I look forward to his either supporting the re-rating of agriculture or proposing that votes should be taken away from farmers.

Mr. Franks

Can the hon. Gentleman confirm whether ICI has a vote? Can he confirm whether Marks and Spencer has a vote, whether Lewis's or any of the other major ratepayers have a vote? Does he accept that a company such as Lewis's in the city of Manchester can pay £2 million in rates yet not have one vote? That is the equivalent of 15,000 families with an average rate of about £400.

Mr. Deputy Speaker

Order. I hope that the hon. Gentleman will resist the temptation to go very wide.

Mr. Straw

Sir Derek Rayner has a vote, as far as I know, and so does every employee, director and shareholder of Marks and Spencer. Mr. Harvey-Jones, the chairman of ICI, has a vote. Are Conservative Members suggesting that Sir Derek Rayner and Mr. Harvey-Jones should have two votes?

Mr. Christopher Hawkins (High Peak)

We are not suggesting that some people should have two votes, but that—

Mr. Deputy Speaker

Order. I have already ruled that this matter is wide of the debate. I must ask the House to come back to the subject of the report, which is comparatively narrow.

Mr. Straw

As I was saying before I was diverted by Conservative Members who are anxious to use the debate to press their case for two votes for business men in a most disorderly way, the Minister argued that we cannot have a second supplementary report for 1982–83—which is leap-frogged by this report—because of lack of information about the full effects of the draft 1982–83 supplementary report which was circulated to all authorities on 3 February. We do not believe that that argument carries much weight. It would have been possible for the Secretary of State to bring that report forward in about one month and have laid this report to take account of the disregards and increases in costs on local authorities that I have already mentioned and the reduction in costs that flow from the reductions in the level of interest rates.

My hon. Friends the Members for Newham, North-West (Mr. Banks) and for Liverpool, Broadgreen (Mr. Fields) may want to comment, so I shall bring my brief preliminary remarks to a close.

10.12 pm

Mr. John Maples (Lewisham, West)

I do not intend to follow the hon. Member for Blackburn (Mr. Straw) down the various pathways of the Committee that is considering the Rates Bill. I shall bring the debate back to just one aspect of the report. My remarks will be more in the nature of a question than a speech as I do not fully understand the report and hope that I can get from the Minister an explanation of its effects. If the hon. Member for Blackburn is right and there are only three people in the world who understand the block grant system, I can only hope that the Minister is one. I used to think that the hon. Member for Blackburn knew something about these matters until I discovered that he was expert on the system for everywhere except Lewisham. Every time that I think that I understand GRPs, GREs, targets and block grant, I have only to pick up one of these reports and read it to discover that I probably do not.

I should like to explore what effect the redistribution of the £44 million will have. In the first supplementary report to the 1983–84 rate support grant, block grant was reduced by £280 million because of a £771 million overspend by some authorities. Although that £280 million reduced the total of the Government's rate support, it came from authorities that were being penalised and had overspent. That was fine as it came from them in proportion to their overspending, according to predetermined formula about which they all knew in advance. In this report we are considering a reduction in block grant by £44 million because of an £84 million notional shortfall in interest or a saving that local authorities are assumed to have achieved. I imagine that that is very close to the figure that they have achieved. One would therefore expect that £44 million to be taken from the block grant for different authorities in proportion, in some way, to their net interest costs. However, it seems that that is not what is happening. The reduction of £44 million is being used to recalculate the grant-related poundages of all the different authorities, and by that mechanism to redistribute the whole £11 billion of block grant. If I am wrong, I hope that the Under-Secretary will explain the true position. If I am right, the impact will be very unfair. Interest charges are not proportional to the way in which the block grant was originally allocated; they are proportional to the debt of the various local authorities. However, the different local authorities will be treated as a category. For example, the inner London boroughs will all be treated together by the use of the same adjusted GRP, which has been increased.

It could be that one London borough had twice the debt of another and was paying twice the interest, and yet that the reduction in the block grant of the two authorities was exactly the same. The local authority with the high interest charges would get a bonus, because its interest payments would have been reduced, while the second local authority—whose interest charges would not have fallen so far because it had smaller debts—would receive the same reduction in its block grant.

We are always telling local authorities to be more efficient. I often join vociferously in making that call. They could and should be more efficient. One aspect of greater efficiency and better management control in local authorities is the implementation and enforcement of a budget. If an authority is to produce a budget, it must know about the external factors that are operating on it. It is not reasonable to change those external factors more than is absolutely necessary during the course of a year. However, if I am right about the redistribution, the adjustments will bear very little relation to the saving achieved by the different local authorities. The benefits and penalties will be somewhat arbitrary.

I suspect that my understanding of the situation is correct, and I hope that the Minister will explain why the system has this effect and whether it could be changed.

10.17 pm

Mr. Simon Hughes (Southwark and Bermondsey)

My neighbour across the borough boundary, the hon. Member for Lewisham, West (Mr. Maples), has raised one of the many issues that will be relevant in the accounting and financial context within which local authorities will have to work as soon as they receive news that the report has been approved by Parliament.

As the Under-Secretary has announced, what we are discussing is the second supplementary report in relation to the past year. It is an interim report designed to deal with an additional factor which is not to be provided for in the normal sequence of reports which we are to receive in the future. The report caters simply for the change in interest rates.

The hon. Member for Lewisham, West has rightly pointed out that the report takes authorities in each grouping together for the purposes of rate support grant and of all the other factors which determine central Government financing of local government, and treats them all equally. It deals with the change in interest payments and therefore the reduced amount of rate support grant generally available by cutting up simply according to category and dividing the amount that the Government are clawing back between groups of local authorities.

This morning I received the rate demand from my own local authority for the coming year. The authority had set out, as it is now bound to do, exactly how the figures were arrived at.

One change in the coming year's grant-related expenditure, which affects the whole of budgeting and, therefore, the rates each Southwark resident pays, is the Government's different assessment of interest charges. It is always difficult for local authorities to know at the beginning of the year the exact changes in GRE, because they do not receive the full report until later. Southwark has been told that its assessment will be reduced because of interest charges. Why can there not be a catching-up operation, which will correct something that has happened?

I take the point made by the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) that we are doing a ratchet job on an overall financial change. We should consider a catching-up operation rather than a supplementary report on the GRE—if we must have such a horrible beast governing local authority finance—for the following year. Why can we not take account of changes in interest rates from one year to another? Local authorities would then at least know the factors affecting the amount of money they will receive from the Government. They could budget in advance rather than look over their shoulders while they are unable to complete their audit accounts for the past year.

I welcome the timetable proposals because they will at least be a marginal improvement on the present system whereby reports often are presented at times unrelated to each other. Local authorities can close their books some months after the end of their financial year. It is vital that this occurs as soon as possible. It would be sensible if balancing measures for different years took into account assessments for future years. That would be better than protracting and delaying the settlement of local authority finances for 18 months or two years after the end of the financial year under consideration. This technical point deserves comment. If the Under-Secretary of State cannot say that we should examine this matter now, I hope that he will at least say that he will consider ensuring that changes in, for example, interest rates can be carried forward. We can, therefore, ensure that local authorities have the advance information they need rather than be required to adjust their books retrospectively.

This aspect reflects a fundamental point. Each day local authorities in areas affected harmfully—that is true of most areas, Tory or Labour—by the Government's local government financing arrangements complain that it is impossible to budget and to plan. They complain of the unclear and muddled changes often imposed halfway through the financial year or imposed retrospectively at the beginning of the next financial year. Local health authorities find the Chancellor's cuts almost impossible measures for which to cater, because they come in the middle of a financial year and alter their budget plans. Local authorities find increasing difficulties, even if they understand local government financing, grant-related poundages, grant-related expenditure assessment and holdback, let alone the proposal for changing the multipliers, to which we have just become accustomed, to a new combined multiplier and another set of changes. The local authorities cannot have any type of budgeted planning, because it will last for only a couple of months. The Government's insistence on upholding this mechanism is a fundamental defect in the system. The Government uphold that defect each time another report is tabled.

The hon. Member for Barrow and Furness (Mr. Franks) intervened to ask the naive, simplistic and undemocratic question: why do businesses not have the same rights as individual citizens in the rate-making process? He asked, to put it another way, why businesses contributed such a large part of the rates. The answer lies in the actions of his party, although he has not always been associated with that party. I believe that he started with the Labour party and changed sides.

For about 10 years the Conservative party has been pretending that it will reform local government finance, but it has not done that. I notice, according to a report in the Daily Telegraph about an inquiry into domestic rates, that the Government are toying with the idea of reviewing ways in which the amazing discrepancy between flat owners and house owners, as reflected in the rating and valuation system, might be tackled.

I urge the Government to get the basics right and to stop tinkering with the edges. They should stop introducing bureaucratic measures such as we are discussing tonight, which create not only supplementary reports but supplementary No. 2, No. 3 and even No. 4 reports, extending for years after the financial year has ended, extending for longer than it takes even Members of Parliament to sort out their budgeting, let alone the time it must take the Prime Minister and the Chancellor to sort out the nation's budgeting. The Government cannot go on in such a muddled way and expect local authorities to survive, let alone respect a Government who impose such measures on them.

Mr. Franks

The hon. Gentleman said that the argument that business should have a vote represented a simplistic and undemocratic suggestion. So that I may have the benefit of his great experience, will he explain why it is simplistic and undemocratic?

Mr. Deputy Speaker

Order. For the hon. Gentleman to answer that would be straying beyond the terms of the instrument which we are discussing, a point which I have made more than once during the debate.

Mr. Hughes

The point which the hon. Member for Barrow and Furness raised has been argued elsewhere. I accept your ruling, Mr. Deputy Speaker, and I am sure that we shall have an opportunity to debate the issue later in the year when other measures come before the House.

The Minister gave his assessment, based on the latest reports reaching his Department, of the average level of rate increase. It is much lower than we might have expected. But it is considerably higher than any of the figures that he mentioned for all the boroughs in inner London, and for most of the boroughs in London irrespective of the party which controls them.

That applies whether we are referring to the Liberal-run borough of Richmond; Tory-run boroughs such as Westminster or Kensington and Chelsea, which have considerable rate increases for the coming year; or Labour boroughs such as mine in Southwark, which has a rate increase of 16.5 per cent. All of those authorities suffer from a particular disadvantage. Why must all London authorities have such a considerable rate increase this year? I believe the answer to be that their needs are not reflected in any of the criteria that the Government have set out.

Mr. Waldegrave

I hope that I can put the hon. Gentleman out of his agony. There is the argument which he has just adduced, but that is a different one. This year, in particular bacause of a number of changes in the handling of interest receipts and other matters, the share of grants between upper and lower tier authorities—not just in London but outside London as well; this answers the point raised by the hon. Member for Blackburn (Mr. Straw) about Teignmouth and other areas—has been altered in such a way that one must look at the total impact of rates, upper and lower tier together, to get a proper picture.

Mr. Hughes

I accept what the Minister says, but he will have seen the figures and will know that the rate requirement in my borough last year was 116.59p in the pound. Inflation will cater for another lop in the pound this year. Two elements are reflected in the reduction in Government funding, housing subsidy and block grant. Elements such as that eat away at the infrastructure of any inner city borough in London, irrespective of control, because they do not take account of the starting point needs when a higher level of local investment has been adjudged to be necessary by a succession of local administrations, irrespective of party. It is no argument to say that if one adds the GLC, the inner London education authority and the Metropolitan police, they account for the differences, because most of their precepts have not been increased, and, as we have debated, there was a decrease in the GLC precept this year.

From the supplementary report, it is clear that the most substantial part of the money that the Government allow local government reflects spending on education. It is £9 billion as opposed to a total of £19 billion allowed for the calculation of the rate support grant—nearly half that total. A long way behind, in second place, comes the money for police and environmental services. There is a factor in that calculation for interest receipts. Needs in respect of police, education and other matters vary from year to year, and are different from one local authority to another. Interest rates do not differ in the same way.

I ask the Under-Secretary to make sure in future that at least local authorities can all have in advance a figure to put into their budget balances calculations for interest receipts and interest rates which will allow them to budget for one element with certainty. The Government's policies completely undermine any certainty of planning. All that the report does is to reinforce the feeling that, although technically the report may produce a justified result, it comes in the middle of a series of reports which together result in a bureaucratic muddle that the Government do nothing but compound by each report that they introduce.

We need a new start, and three phased reports in future are a beginning, but nothing like sufficient to relieve the enormous bureaucratic burden that the Government and their predecessors have imposed increasingly on local authorities in England.

10.31 pm

Dr. Keith Hampson (Leeds, North-West)

I hesitate to start with the thought that the debate has a feeling of déjà vu. It sounds pretentious to say that, having been 10 years in the House and having attended many rate support grant debates, I have heard it all before. The hon. Member for Southwark and Bermondsey (Mr. Hughes) made a great cri de coeur about three supplementary reports. The hon. Member for Blackburn (Mr. Straw) belaboured the same point, asking why we are having this report before we have dealt with last year's. Superficially, there is an absurd logic about that, but that is the nature of the business that we are in. It has always been like that.

Mr. Allan Roberts

Have not the Government started a new tradition of introducing rate legislation and rate Bills as often as previous Governments used to introduce interim orders?

Dr. Hampson

Without commenting on whether that is so, that is an irrelevant point. Under the old system, when Governments did not introduce changes every year, this still happened. I think that I am right in saying that never in my 10 years in the House have there not been at least three rate supplementary orders each year.

The old system had the same problems. The basic point is that there is no real problem. In a sense the whole rate support grants system is about equity. If anybody is concerned about equity, it should be the hon. Member for Blackburn. Supposedly, that is the kernel of the Opposition's beliefs. Whatever the formula, we are trying in the rate support grant system to even out our resources so that those parts of the country that are more wealthy and have a higher rateable value do not have a disproportionate quality of service compared with those that have low rateable values. That is what it is all about. It would be easy for a Government to say—I am not saying that when we came into office in 1979, it was not a tempting prospect—"Let us do something simple and try to do something with a broad brush," and to ask, "How much should you give per capita, district against district, county against county?" That is not the nature of the game that this or any other Government have been in. The Government have been trying to find a formula that would produce equity in the distribution of resources.

For better or worse, whether under the present block system of GREs or under the old system of multiple regression analysis, one faces the problem of having supplementary reports and trying to catch up. The hon. Member for Southwark and Bermondsey said that local authorities are looking over their shoulders. That has always been the case. They have always had to look over their shoulders because central Government, whatever the system—under this Government, the previous Labour Government, or with multiple regression analysis or block grant—have always been in the business of clawing back, making adjustments or using multipliers. They have all been part and parcel of the system.

Mr. Nicholas Baker (Dorset, North)

Does my hon. Friend agree that, thanks to the irresponsibility of councils such as the GLC and this complicated system, there are a number of low-spending local authorities that, under the clawback system, find it difficult to run a competent accounting system?

Dr. Hampson

Local authority treasurers are skilful at telling people like my hon. Friend and me that they do not understand the system, that it is incredibly complex, that they have inordinate problems in bringing down their costs, and that the whole thing is made more difficult by the way that Governments are constantly changing. That is par for the course for almost any council treasurer. We have heard it all before. Treasurers manage perfectly well to understand the ground rules. Their political masters are sometimes relatively ignorant and sometimes they are shrewd.

We all know that when it comes to election year, which is what we face with the GLC and the metropolitan counties, the treasurers and their political masters find the system remarkably straightforward to understand, and can find the cuts necessary to keep their rate increases within tolerable bounds. At other times in the political cycle they find it impossible to do so and there are exorbitant increases. At the moment it happens to be expedient to have low increases. I do not accept that they do not understand the ground rules or the system.

Mr. Simon Hughes

Does the hon. Member accept that, none the less, there could be a simpler way, which would be more acceptable to him and to local authority treasurers?

Dr. Hampson

The hon. Gentleman will have to accept what I say. I spent four years in the Department of the Environment, and I believe that the principles of the GRE system are more understandable than those of the old system.

The hon. Gentleman shakes his head, but there were no truer words than those spoken by the noble lord, Lord Wilson in his heyday when he said that a week was a long time in politics. People have extraordinarily short political memories. Nothing is shorter than financial memories in local government. People have forgotten the old system. One of the great flaws of the old system, which is why we are here today, is that regardless of what local authorities spent there was an automatic ratchet that ensured that the Government paid out pro rata in accordance with what local authorities spent.

I do not deny that the subject is complex, but since the Government came to office in 1979 they have tried to break away from that system to try to force reality. One of the realities that the Opposition fail repeatedly to understand is that inflation has come down in the past few years and interest rates have decreased progressively.

Opposition Members have been accustomed year after year under their Government to follow the opposite trend, where inflation and interest rates were perpetually going up. Because they have fallen, we can say to local authorities that they have to face reality, that they will not automatically get a Government grant to cover what they have spent, and that they have to accept that pro rata the Government will put in less because local government has fewer overheads and reduced costs.

Whatever hon. Members on the Opposition Front Bench or on the Liberal Benches say about this being confusing and about people not understanding things like multipliers, they understand the system perfectly well. We have gone through it all with the old system and the new. The new system is marginally or, some would say, very much, better than the old. We are dealing with a very simple issue. Because of an adjustment in interest rates we are considering £44 million. All sorts of red herrings have been brought in, such as the GLC and so on.

The question has been raised as to why we are not dealing with the 1982–83 report before the 1983–84 report. The reason is that only 50 per cent. of the audited figures for the previous report have come in. At the end of the day the GLC is the great beneficiary for 1982–83 by £100 million. It is only right that everyone should know in advance, before making decisions, what they will contribute to the finances of the GLC. At long last the GLC managed to cut £170 million off what it had budgeted for, which only goes to show what can be done if there is the will to try.

Apart from all the red herrings, the issue is about £44 million out of what? It is out of £8 billion. That is what we are talking about, despite all the hoo-ha. The hon. Member for Blackburn, who has passion, emotion and eloquence at his disposal, seemed to be extraordinarily ill at ease. I am not surprised, when all he could was marshall the arguments he did to defend his position on this, when it boils down to £44 million out of £8 billion.

10.42 pm

Mr. Allan Roberts (Bootle)

I am pleased to follow the hon. Member for Leeds, North-West (Dr. Hampson), because he addressed himself to the issue we are debating—the fact that the Government wish to alter the rate support grant settlement for 1983–84 and to take £44 million off local government. It is a drop in the ocean compared with the moneys that he says local government is spending, £8 billion, and compared with the £10 billion to £15 billion that the Government will spend on Trident alone.

Dr. Hampson

Exaggerating again.

Mr. Roberts

It increases in price as inflation continues, each time the Secretary of State for Defence produces another assessment.

In the statement on the rate support grant settlement for 1984–85 on 14 December the Secretary of State for the Environment said that relevant current expenditure of £20,389 million was about £44 million more than the provisional figure proposed in October. He heralded that as a great gift. That is exactly the amount that is now being taken away from local government. Why is it being taken away? Because of the reduction in interest rates.

The fact that they have managed to reduce interest rates is heralded by the Government as a great achievement. Everybody will benefit. The owner-occupier who has borrowed money will benefit. Industry will benefit because it has borrowed money. However, the Government will not allow local government to benefit. When I was in local government and we were planning for the future, we made assessments about interest rates; if interest rates came down we thought that the public sector would benefit and we could do more. I am sure that business and the owner-occupier say the same thing.

So why does not the Chancellor come back with Budget interim statements to readjust his Budget, take some more money out of the private sector, take it away from industry, and take it off the owner-occupier? The council tenant is no different from the owner-occupier. He pays the interest to the moneylenders in his rent, because part of the cost on housing revenue account is money borrowed by the local authority to build houses. It is in exactly the same position as the owner-occupier who has borrowed money to buy his house.

Mr. John Powley (Norwich, South)

Does he pay for the repairs?

Mr. Roberts

Indeed he does—in the housing revenue account. The hon. Member for Norwich, South (Mr. Powley) is about 30 years out of date. He does not realise that the Tories are allowing local authorities to make profits out of their housing revenue account, that the cost of debt charges, maintenance and management is less than the money that is collected in rent income these days, and that the council tenant pays for the repairs, maintenance, management and debt charges—as well as subsidising the ratepayers and allowing the Government to claw back from the housing revenue account.

Mr. Straw

Is my hon. Friend aware that, in Torbay, the district council has made so much money out of council tenants that it is using a £2.5 million surplus on its housing revenue account to subsidise the building of a great white elephant of a new conference centre?

Mr. Roberts

I am pleased to have that illustration. The Government are saying, "We will introduce policies that we say will benefit society, as long as they do not benefit the poor and the needy, the people in need of local authority services". Those people will not be allowed to benefit as a result of the Government's so-called success when interest rates go down. Those who benefit will be the private sector, the owner-occupier and the rich—not the poor, whom the local authorities are there to help. That is what this is about—a mere £44 million that is being taken from the people who need it. It is not being taken from Labour councillors—their attendance allowances, the time they put in, or the effort that they make; it is taken from the needy.

Mr. Waldegrave

The hon. Gentleman is making a wonderful speech, but it does not relate to reality. The Government give grants that are supposed to pay for some of the interest charges. Interest charges are lower, so the Government does not give so much grant. I do not see what the problem is.

Mr. Roberts

The Government make all kinds of assessments. If the situation were as simple as the Minister claims it is, that would be fine. However, the Government give grants on all kinds of assumptions, not just on the assumption of interest rates. They give them on the assumption of what inflation will be. Regularly, Governments determine what the rate of inflation will be, what the rate of pay settlements will be, and what the rate support grant settlement will be. They change over the years, but the Government come back only for a justification to claw back more money from local authorities. The Government's assumptions on what pay levels will be in the public sector determine the rate support grant settlement. The Government do not change that.

However, the Government are not having much success. They claim success on inflation and interest rates.

Mr. Franks

rose—

Mr. Powley

rose—

Mr. Speaker

Order. Two hon. Gentlemen are getting up. To which hon. Gentleman is the hon. Member for Bootle (Mr. Roberts) giving way?

Mr. Roberts

I give way to the hon. Member for Barrow and Furness (Mr. Franks).

Mr. Franks

The hon. Gentleman was asked a short time ago whether he would comment on the housing revenue account in Torbay. Will he comment on the housing revenue account in Manchester? When he left that city council, as chairman of the housing committee, the housing revenue account had gone from £200,000 to £41 million.

Mr. Roberts

I do not know what the hon. Gentleman is talking about. He did not say what he meant. If he says that we were building and improving a lot of houses and spending a lot of money and getting a very good HIP allocation from the then Labour Government, he is right. If he is saying that the rate fund contribution to the housing revenue account was relatively high in respect of rate fund contributions from Tory authorities, he is right again, because we did not put the rents up when I was the chairman of housing in Manchester. We were quite proud of all that. But it has all altered now.

I can comment on the housing revenue account of Sefton, with which I am more involved at the moment. In the last financial year, the authority made a £100,000 profit out of council tenants and subsidised the ratepayers of Southport. It helped to contribute to the building of a statue of Red Rum, put fairy lights up in Lord street and things like that—quite an effective way of spending the money of the needy council tenants in my constituency who are unemployed.

The point that I was making, which related directly to the taking away of £44 million, because of the fall in interest rates, was that that is the only factor that the Government are cashing in on. They are not taking account of a higher rate of inflation and pay settlements that are higher than originally expected.

The Government do not take account of the levels of unemployment. They are not having much success in that direction. These falls in interests rates, these signs of an turnround in the economy, are not having much effect on the level of unemployment. As unemployment increases in local authority areas such as Sefton and Liverpool, where the needs of the people dependent on local authority services increase, they do not come forward with a rate support grant settlement to alter that, to give more money to take account of levels of unemployment.

Dr. Hampson

As always, the hon. Gentleman is interestingly selective. How does he justify—he has mentioned the odd example—the fact that in this particular year authorities such as Greater Manchester, which I am sure he lauds, West Yorkshire and other noble Labour metropolitan county authorities have managed to have a deathbed repentance and hold their rate increases so low? I believe that in both West Yorkshire and Greater Manchester the increase is down to 4 per cent. and that in the West Midlands, the Birmingham area, the metropolitan county has actually managed a zero rate increase. If they are capable of doing it this year, why did they not do it last year, the year before or the year before that, when they had 20 per cent. or 30 per cent. increases?

Mr. Roberts

In his speech, the hon. Member for Leeds, North-West pretended to understand the way in which the system worked and how, in relation to grant-related expenditure, grants and so on, local authorities were dependent upon the situation that they had inherited. Wisely, Labour local authorities, where there was a continuity of Labour control in the past, built up reserves and put up the rates significantly in years when they were not facing the electorate—something of which the hon. Member accused them only a minute ago. Those reserves can be used now because of the situation that they inherited; the vagaries of the system that his Government introduced in the last or last but one—or was it the one before that?—piece of rating legislation enable them to do just what he describes.

Liverpool is in a different position. It did not build up any reserves because it had been run by Liberal Tories—mostly Liberals, who are the same as the Tories—and it did not maintain any services but cut them to the bone. Now, because of the pattern of past expenditure in relation to the way that the hon. Member's Government assesses things, it gets no grant and has an inadequate target. That is why it faces a massive rate increase and cuts in the rate support grant, and why the Labour local authorities to which he referred and which have enjoyed continuity of Labour control do not. If he does not understand that, his claim to understand the rate support grant system is bogus.

It is bogus in any event, however, because the hon. Gentleman tried to equate what is happening now with what happened previously, under successive Governments and successive rate support grants. He described the system that used to operate before the block grant was introduced—the needs element and the resources element in the rate support grant—whereby local government decided on a global figure of rate support grant, through negotiation with local authority associations, and then distributed it to local authorities according to a certain formula which took account of resources and needs—a very fair system.

If you had high rateable values in an inner-city area such as Liverpool or Manchester, where office development used to take place—it still does in Liverpool and to some extent, in Manchester—and if your resources were high in terms of the likelihood of collecting rates, and if you were a town like Bootle, which did not have the same commercial development as its neighbour, Liverpool, or like Salford, next door to Manchester, then the way in which the rate support grant settlement was distributed, through the resources element, took account of that. There was a needs element then, but it is now done in reverse.

The old system, before we got what this Government are doing, took account of the needs of an area and how they were distributed. Now, it is done differently, and the greater the need, the more penalties, clawback and holdback there are, and the opposite is done—which is not fair at all. The assessments by previous Labour Governments were to correct the imbalance and to help the people that we support and represent, not the business men whose votes you want to get in, and for whom you are spending all this paraphernalia, bringing £44 million back from local authorities. It is nonsense.

You only have to look at the circumstances today, where the local authorities are being penalised and being brougth into the penalty box and victimised by the Government. They represent not the overspending, profligate local authorities, but the green pastures of Britain. One or two hon. Members got in by mistake and represent areas with needs, and try to compensate now and again. The local authorities that you want to penalise are the ones that you—

Mr. Speaker

Order. The hon. Gentleman keeps bringing me into this; he must not do that.

Mr. Roberts

The local authorities that the Government want to penalise are the ones with the highest percentage of the under-privileged, of those in need, of the disadvantaged, of people who are homeless, of people—[Interruption.]

Mr. Speaker

Order.

Mr. Roberts

I am delighted with the behaviour of the hon. Member for High Peak (Mr. Hawkins). The more he does that, the better. He is one of the ayatollahs—Tory Back Benchers who have no regard or compassion for those in need, and who are interested only in those whom they were elected to represent. That is what this £44 million clawback is about. They do not understand, as has been clear from their speeches, the system that their Government have introduced or the injustice of it. They are interested only in the result, and the result is that those who have will receive, and those who have not will have it taken away from them, including the £44 million.

11.57 pm

Mr. Tony Banks (Newham, North-West)

As I understand it, this supplementary report is not exceptional. It seems to us that the Government are moving rather quickly to reclaim this money. A number of hon. Members, particularly the hon. Member for Leeds, North-West (Dr. Hampson), have asked why we should complain when this report comes before the supplementary report for 1982–83. I can give a good reason why we should be concerned about it. It is that in the 1982–83 report the GLC was to receive the £100 million that the Government owe it. Will that supplementary report be put before us in June or July of this year? For budget-making purposes in the place the other side of the river that is an imporant consideration.

Dr. Hampson

Will the hon. Gentleman put it on the record that the only reason that the GLC is the beneficiary to the tune of £100 million is that it has managed to spend £177 million—an amazing amount—less than it said that it would? It is only because of that that the Government are retrospectively obliged to pay that £100 million. Will the hon. Gentleman accept that?

Mr. Banks

No, I will not. The hon. Member, in view of his background, should not believe the propaganda that is now being put out by the Department of the Environment.

Dr. Hampson

What is the truth?

Mr. Banks

Very few hon. Members of this House have ever understood local authority finance. There might have been three. Two of them are now dead, I think, and one of them is speaking.

This loose expression of the variance of £177 million, which the hon. Member for Leeds, North-West mentioned, is taken in conjunction with the words "spend" and "expenditure" and there is a failure to highlight the fact that, first of all, block grant is calculated on the basis of the statutory definition of total expenditure, which is, inter alia, the sum of gross revenue expenditure on services, less income from grants and charges, plus the cost of financing capital expenditure adjusted for the effects of any surplus or deficit on trading operations, interest and balances.

Secondly—and I would ask the hon. Gentleman to think about this—if the variance of £177 million is properly displayed in the context of the true influence of total expenditure, the GLC spending per se was within some 2 per cent., or £28 million, of its budgeted figure for gross expenditure on spending programmes. I should be delighted if the hon. Member for Leeds, North-West would comment on that at some other time.

Why are we waiting for the 1982–83 supplementary report? Most regrettably, I missed what the Under-Secretary said in his opening remarks. I have heard him speak on many occasions in the House, so I can probably guess from experience what was said. I do not suppose it will have spread a great deal of illumination with regard to local authority financing.

The DOE's alleged reason for not publishing the 1982–83 report earlier is that it is awaiting the audited outturn expenditure returns from local authorities. But as I understand it—and again I should be grateful if the Under-Secretary would tell me whether I have got it wrong—by 22 February of this year the DOE had received 408 outturn expenditure forms, which represented about 99 per cent. of total expenditure. Of these, 249 have been audited, which covers about 47 per cent. of total expenditure.

I do not know why over half of all local authorities have not submitted audited figures almost a year after the end of 1982–83, but I do know that the Greater London council submitted its figures in the autumn. It surely must be wrong for Londoners now to suffer delay and cost because of the dilatoriness of others. I should like to know, when the Under-Secretary is winding up the debate, when we can expect the second supplementary report for 1982–83, because it is very important for the GLC.

I should like to go into much greater detail on the various propaganda sheets that have been put out by the Department of the Environment recently. I can only assume—and I apologise if, so young in this Parliament, I sound over-cynical—that the reason we are not dealing with the 1982–83 supplementary report is that the Minister wants to cause as much doubt, problem and confusion as he possibly can within the budgeting processes of county hall. This fits very well into the general approach that the Government are taking towards the GLC. It is an example of the sheer political vindictiveness that they adopt regarding the affairs of the GLC. They have made a number of totally misleading statements about the budget processes within county hall. I ask the Under-Secretary to give us this evening a categorical assurance that we shall see the 1982–83 supplementary report in June and July of this year.

11.5 pm

Mr. Terry Fields (Liverpool, Broadgreen)

It is said that it is an ill wind that blows no one any good, and my hon. Friend the Member for Bootle (Mr. Roberts) spoke of the possible effect of the overall saving of £44 million for some local authorities. Labour Members who represent Liverpool constituencies think that it may provide a small windfall for Liverpool. There is all-party acknowledgement of the size of the problem facing the city, its people and the city council.

The Minister has expressed sympathy for Liverpool, but the people want something more tangible than sympathy, from whichever quarter it is expressed. It is an insult to the intelligence of the people to suggest that it is the so-called evil Marxists who are responsible for the city's demise. The Labour party has been in control of the Liverpool council only since May 1983. That is when it inherited the terrible legacy that is causing the present difficulties. It is the Tory Government and their pale-blue shadow in Liverpool, the Liberal party, who are responsible for the city's enormous problems.

We are all aware of the Goebbels-type propaganda from the Government and the Liberals. We are familiar with the attempts to rewrite history. We know the truth, which is being hidden from the people.

Mr. Simon Hughes

Will the hon. Gentleman give way.

Mr. Fields

No.

Environmental problems abound in Liverpool. There are bad housing conditions and no council houses have been built for four years. That is the Liberal party's housing record. There are 220,000 people on the housing waiting list and 1,000 are recognised as requiring special medical priority. These are matters of great concern to us in Liverpool.

We are looking to the Government to assist us in overcoming our problems. I find myself with strange bedfellows, including the Prime Minister, who in 1974 was a Front-Bench member of the Conservative Opposition. In a debate on a rate support grant order she said: I agree with the right hon. Gentleman that the debate on the Rate Support Grant Order tends to be a technical debate— although, because of his action, this will probably be the liveliest debate we have had for many years—but our constituents do not come to us with technical points. That is especially true of the elderly. The right hon. Lady continued: It is no good trying to explain to them an increase in rates by reference to the resources element, the domestic element, the needs element, the relevant expenditure and so on. They say 'I still have to bear a certain percentage of the increase in rates, and what are you going to do about that?' That is what many constituents and many hon. Members will be saying to the right hon. Gentleman today."—[Official Report, 25 March, 1974; Vol. 871, c. 62.] Statistics can be thrown at me, but I am talking about the terrible conditions in which many of my constituents and many others live in Liverpool. If the Government are genuine in wanting to help resolve Liverpool's problems, they will find that they are able to be flexible and generous against the background of decades of deprivation and industrialisation. We have suffered and we continue to suffer. If the Government are genuine and are not merely making hypocritical announcements, they can do something tangible this week or this day.

Ways and means can be found to assist the people of Liverpool. On its revised figure, the Department has savings amounting to £44 million. That is the opportunity that is presented to the Government. The Chancellor of the Exchequer was able, at a stroke, to raise tax thresholds for high income earners. In so doing he gave away £35 million to 650,000 people. Liverpool has half a million people and we are asking for only £30 million of the £44 million to help us overcome our terrible problems.

In the debate on the Scottish rate support grant order, the right hon. Member for Western Isles (Mr. Stewart) said that his constituents would need £2 million to resolve their problems. The population of the Western Isles is 3,884 and Liverpool's population is 503,770. That means that if the city is treated on a par with the Western Isles it will require £31,600,000. The £30 million for which we are asking is a modest sum despite the criticism that has been expressed.

Mr. John Heddle (Mid-Staffordshire)

Will the hon. Gentleman allow me to intervene?

Mr. Fields

No. Statements have been made in the House over the past week or more about the people's right to work.

Mr. Heddle

I should like to intervene on that very point.

Mr. Fields

Liverpool people want to work, but business interests deny them the right to do so. However, Liverpool city council has courageously provided jobs for as many as it can. The panacea to Liverpool's problems and crisis extolled by the Minister will not receive the universal support that he might suggest or believe. Tory politicians locally, at least tenuously in touch with the real world of Liverpool, have said that the Minister's solution is an irrelevance to the needs of Liverpool, and has no bearing on its problems.

For the first time, the debate on Liverpool, in the television programme "World in Action" last night, has raised—

Dr. Hampson

On a point of order, Mr. Speaker. I hesitate to say this, but the hon. Gentleman is debating Liverpool broadly, and now he has moved on to Liverpool as covered on television, but—

Mr. Speaker

I am not certain that that is a point of order. The hon. Member is disagreeing with something that has been said, but I do not think that it is a point of order.

Dr. Hampson

Further to that point of order, Mr. Speaker. My point is that the report affects Liverpool to the tune of £400,000, not £30 million.

Mr. Speaker

That is still a point of argument, I think.

Mr. Fields

The point I am trying to make concerns Liverpool and its crisis. The programme last night raised the issue from the crude gutter politics point of view of seeking to crucify individuals and personalise attacks on Liverpool city councillors. The disgraceful diatribe this afternoon from the Leader of the House was an absolute insult to decent people. [Interruption.] For the first time, on television last night, the truth and the reality of the situation was exposed for people to judge. Independent economists—

Mr. Richard Hickmet (Glanford and Scunthorpe)

rose—

Mr. Fields

No, I shall not give way.

Independent economists and academics have partially analysed the problem, and the Government's proposed solution and figures. In their view, the Minister could not even scratch the surface with his policies. For this reason, too, the courageous stand taken by Liverpool city councillors, the work force, the district Labour party and the people of Liverpool is being vindicated, and will be vindicated in future.

Liverpool's problems will not go away, and will only increase—

Dr. Hampson

rose—

Mr. Speaker

Order. I hope that the hon. Member will raise a point of order that I can answer, but I suspect that it will be a point of argument.

Dr. Hampson

On a point of order, Mr. Speaker. It is strictly a point of order. This is a debate concerning a supplementary report, limited to a small amount of money. The hon. Gentleman is speaking to a general debate about the problems of Liverpool. There are other times and places for the hon. Gentleman to speak on such matters.

Mr. Speaker

The hon. Member is entitled to say that he thinks that Liverpool should have a greater share of the grant.

Mr. Fields

Thank you, Mr. Speaker, for protecting me from Conservative Members.

In my maiden speech on 24 June last year, I warned that the Government's policies would provoke a reaction among decent working people. I give further warning tonight that, in Liverpool and elsewhere, this latest attack on democracy and the living standards of the working people will provoke even further social turmoil, because of the anger about the flagrant disregard for people generated by the Government's policies.

The guilty men reside not at the municipal buildings in Liverpool. They reside at No. 10 Downing street, No. 11 Downing street, the Department of the Environment—in every place that the Tory party occupies, pursuing policies disastrous for working people.

Having been exposed to the nation on television, will the Minister and his cohorts on the Front Bench come clean and admit that they are wrong? Will they also, in an act of magnanimity, extend to the people of Liverpool a lifeline and draw back from the brink of confrontation over rates? Will they give us part of the £44 million saved to give the deprived people of Liverpool a little bit of dignity, because up to now they have done nothing in that direction?

11.14 pm

Mr. Peter Pike (Burnley)

It is a privilege to follow an hon. Member representing Liverpool, because I do not underestimate the problems faced by my hon. Friend the Member for Liverpool, Broadgreen (Mr. Fields). I certainly do not envy Liverpool city council in dealing with the problems that it inherited from those previously in control, resulting from the policies of the Government.

My hon. Friend the Member for Blackburn (Mr. Straw) has referred to the designation of councils as inner urban area authorities, and the fact that partnership authorities receive more favourable financial treatment than other authorities that have only designated status. It should be recognised that councils designated under inner urban area schemes all represent deprived areas. Councils should all be treated equally favourably, whatever status they may have under inner urban area programmes.

I recently received a written answer from the Under-Secretary. I had asked the Secretary of State for the Environment: if he will estimate the cost to local government for 1983–84 of additional duties placed on local government by Government legislation since 1979 excluding unified housing benefits. The answer was remarkable. It was that: The likely expenditure effects of new proposals affecting local government are not available centrally and would be too costly to obtain."—[Official Report, 1 February 1984; Vol. 53, c. 221.] It is gross negligence on the part of the Government if they pass legislation and have no idea what the revenue implications are to be for local councils. Either the Government are dodging answering the question or they are incompetent to pass legislation with financial implications for local government.

I turn to the grant-related expenditure assessment scheme. One accepts that some scheme or formula for grants is necessary, but it should be fair and understandable. The present scheme is neither. I can give two examples. First, allocation of transport grant does not take into account whether a local authority runs its own transport undertakings or depends on the services of the National Bus Company or any other body. Secondly, the allocation for museums and art galleries is based on a factor that has nothing to do with museums and art galleries at all. An authority is awarded grant on the same basis whether or not it is responsible for any museums or art galleries. I could give further examples of similar nonsense, if time permitted. The scheme is unfair and incomprehensible.

11.17 pm

Mr. Straw

This has been a more spirited debate than we had expected when the debate on the Public Accounts Committee collapsed early. There have been incisive contributions from my hon. Friends the Members for Bootle (Mr. Roberts) for Newham, North-West (Mr. Banks), for Liverpool, Broadgreen (Mr. Fields) and for Burnley (Mr. Pike).

I asked the Under-Secretary of State a series of questions about why the report does not make changes to grant-related expenditure assessments, particularly those related to capital allocations, and why it does not grant additional disregards against target, particularly to take account of the increased level of police pay. My hon. Friend the Member for Burnley asked why it did not deal with other disregards, particularly those related to the urban programme.

My hon. Friend the Member for Liverpool, Broadgreen asked what would happen to the £44 million that is to be retrieved from the local authorities. Is it simply to return to the Treasury, or will local authorities benefit from it in some other way? My hon. Friend the Member for Newham, North-West asked why the Government have done the conjuring trick of producing the second supplementary report for 1983–84 before the second supplementary report for 1982–83. I hope that the Under-Secretary can answer that question more convincingly than he did at 9.15 this evening.

Other than that, the Government act most disgracefully whenever the GLC is mentioned. All of their actions towards the GLC are inspired by political malice of the worst kind.

11.20 pm

Mr. Waldegrave

I never cease to be amazed by the House's capacity to make what look like devious and boring subjects into interesting and major debates. We can congratulate ourselves on that.

Perhaps I can deal first with the couple of points that have been relevant to the report. The first point, which was made by the hon. Member for Blackburn (Mr. Straw) and taken up by my hon. Friend the Member for Lewisham, West (Mr. Maples), was why we have not adjusted the GREs to reflect the position in individual authorities with regard to their interest payments. It would have been possible to reduce the amount of block grant payable to each local authority by adjusting GREs to reflect the effect of lower interest rates on each component but that would have been a relatively lengthy and complicated process. Instead, as my hon. Friend the Member for Lewisham, West correctly said, we have done it in a fairly broad-brush way by adjusting the grant-related poundage for spending in GRE. I think that I can console the hon. Member for Blackburn and my hon. Friend on this point because GREs will be adjusted later in a supplementary report in respect of 1983–84. Therefore, if there are any injustices for authorities, it will come right in the end. There has been no pressure from local authority associations to do it differently.

The hon. Member for Blackburn asked about disregards. We shall take into consideration the disregards that have been urged on us. I might be able to encourage the hon. Gentleman about the police. On the police pay award of September 1983, the Government have given assurances that the cost of the excess of the settlement—8.4 per cent. compared with the assumption in the 1983–84 settlement of 6 per cent.—will be disregarded and this will be implemented in the supplementary report which closes the books on that year. I hope that that meets the hon. Gentleman's point.

The hon. Member for Newham, North-West (Mr. Banks) was kind enough to say that he was not here when I made my first speech. I can only repeat the real arguments that I used then. As other local authorities have to contribute to the payments of the GLC in respect of its slightly fortuitous underspend for that year, it is fair to give them a chance to rate for it in 1984–85. My hon. Friend the Member for Leeds, North-West (Dr. Hampson) made that point clearly. As the hon. Member for Newham, North-West said, it is true that only 53 per cent. of the audited figures are in. He might wish that it were otherwise, but that is the case.

Mr. Tony Banks

What does that represent in terms of total expenditure? That was my point.

Mr. Waldegrave

I do not have that figure with me, but I shall write to the hon. Gentleman. It would be most odd to give some audited and some unaudited figures. The hon. Gentleman need not fear a conspiracy. There has never been any question about London ratepayers' money going back to the GLC. I am sure that the House would have more pleasure in returning it if there were some hope of some of it going back to the ratepayers. However, I can give the hon. Gentleman the assurance for which he asked—the second supplementary report for that year will be laid in June or July this year. There is no secret about that.

The point of the hon. Member for Southwark and Bermondsey (Mr. Hughes), is a regular Liberal refrain—why can the world not be different and simpler? Why can everything not be easy? My hon. Friend the Member for Leeds, North-West made an exceedingly clear statement. The hon. Member for Southwark and Bermondsey may be arguing that we can do without an equalisation element in the rate support grant system. I am sure that he is not, although the hon. Member for Bootle (Mr. Roberts) appeared to think that no equalisation was left in the system. Of course there is. Under any equalisation system, there are bound to be complex flows from one authority to another and complicated mechanisms for equalising resources. That is inherent in any system, for example, a local tax system. The hon. Member for Southwark and Bermondsey was fair in saying that the Government are looking for ways to simplify the system. I outlined how we propose to go to a more predictable series of three-year reports, and I believe that the local authorities welcome that measure.

I have another point of encouragement for the hon. Member for Southwark and Bermondsey. With the local authority associations, we are looking at the future treatment of the variable items. Perhaps the system can be altered to give authorities more certainty—for example, about interest rates—at the time of the settlement. En so far as local authorities have had to pay out less, they have not suffered. This measure merely prevents them from getting a windfall gain.

It is a long time since I have had the pleasure of the support of my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) on a local government matter, but his contribution was no less useful and pleasurable for that. He pointed out that we have been making rather heavy weather about a simple report. The order makes an adjustment which would have been made the other way if interest rates had been higher than expected. A great deal of the sound and fury we have heard has been based on a misunderstanding or on a desire to make moving speeches—a desire always apparent among Opposition Members.

I do not take the hon. Member for Liverpool, Broadgreen (Mr. Fields) to task for using this opportunity to make another speech about Liverpool's problems, which I am sure exercise the attention of all hon. Members. The report has an extremely minor effect on Liverpool, as it does on other authorities. I do not believe that the hon. Gentleman would expect me to respond to his points, except in the most general terms.

Mr. Eddie Loyden (Liverpool, Garston)

Will the Under-Secretary of State respond to the question about the responsibility of the Government, who have created unemployment in areas such as Merseyside? The Government's complete disregard of those problems has something to do with the needs in that area. The Government should start to respond to those needs.

Mr. Waldegrave

The hon. Gentleman probably knows better than I do that, since 1979, the Government have invested almost £1,000 million in Liverpool in capital flows of one kind or another. Ministers in my Department often come under pressure from other parts of the country for saying that there have been great flows of money towards Liverpool.

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

Will the hon. Gentleman give way?

Mr. Waldegrave

I am coming to the end of my speech. I did the hon. Member for Broadgreen the courtesy of referring to his speech, but this is not a Liverpool debate. We understand the passion and anxiety that all Members representing Liverpool constituencies and other hon. Members must feel. That is why the Government have directed huge flows of money to Merseyside during the past year. I do not believe that anyone can say that the Government have not been aware of the region's problems. In the months ahead, there will be plenty of other opportunities to debate Liverpool's problems. All hon. Members support the Labour Front Bench in urging the Labour group in Liverpool to draw back from the brink of what might be a disastrous and irresponsible course of action. I know that many Conservative Members want to pay tribute to the stand taken by the Leader of the Opposition on this matter. I am not so sure that he is receiving all the support he wants from Labour Back Benchers.

The principle in my first speech involved the evidence of the rating increases across the country. I pay tribute to the local authorities that have achieved the Government's aim. The expenditure increase as a whole, which looks like coming about between 1983–84 and 1984–85, show that the pressures brought to bear to restrain the growth of local authority expenditure are beginning to pay off. That expenditure is now much slower than it was. The rate increases are likely to be at their lowest since the reorganisation of local government brought about by my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath). The level of rate increases in the next year will be within touching distance of the inflation rate. That has not happened during the past 10 years. We can congratulate ourselves on that aspect.

The order is only a small part of the system which is beginning to bring about that satisfactory state of affairs. The debate has been wide-ranging and has touched on many different aspects of the local authority financial system. I hope that I have responded to those points that bore some relation to that order. They were not—

It being half-past Eleven o'clock, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted Business).

The House divided: Ayes 244, Noes 171.

Division No. 196]	[11.30 pm
AYES
Adley, Robert	Finsberg, Sir Geoffrey
Aitken, Jonathan	Fookes, Miss Janet
Amess, David	Forman, Nigel
Ancram, Michael	Forsyth, Michael (Stirling)
Arnold, Tom	Fox, Marcus
Ashby, David	Franks, Cecil
Aspinwall, Jack	Fraser, Peter (Angus East)
Atkins, Rt Hon Sir H.	Freeman, Roger
Atkins, Robert (South Ribble)	Fry, Peter
Baker, Rt Hon K. (Mole Vall'y)	Gale, Roger
Baker, Nicholas (N Dorset)	Galley, Roy
Baldry, Anthony	Gardiner, George (Reigate)
Banks, Robert (Harrogate)	Gardner, Sir Edward (Fylde)
Batiste, Spencer	Garel-Jones, Tristan
Beaumont-Dark, Anthony	Glyn, Dr Alan
Bellingham, Henry	Goodhart, Sir Philip
Bendall, Vivian	Goodlad, Alastair
Benyon, William	Gow, Ian
Berry, Sir Anthony	Gower, Sir Raymond
Best, Keith	Grant, Sir Anthony
Bevan, David Gilroy	Greenway, Harry
Biffen, Rt Hon John	Gregory, Conal
Biggs-Davison, Sir John	Griffiths, Peter (Portsm'th N)
Blaker, Rt Hon Sir Peter	Grist, Ian
Bonsor, Sir Nicholas	Ground, Patrick
Boscawen, Hon Robert	Grylls, Michael
Bottomley, Peter	Hamilton, Neil (Tatton)
Bowden, A. (Brighton K'to'n)	Hampson, Dr Keith
Bowden, Gerald (Dulwich)	Hanley, Jeremy
Boyson, Dr Rhodes	Hannam, John
Brandon-Bravo, Martin	Hargreaves, Kenneth
Bright, Graham	Harris, David
Brinton, Tim	Haselhurst, Alan
Brooke, Hon Peter	Havers, Rt Hon Sir Michael
Brown, M. (Brigg & Cl'thpes)	Hawkins, C. (High Peak)
Browne, John	Hawksley, Warren
Bryan, Sir Paul	Hayes, J.
Buck, Sir Antony	Hayhoe, Barney
Budgen, Nick	Hayward, Robert
Bulmer, Esmond	Heddle, John
Burt, Alistair	Henderson, Barry
Butler, Hon Adam	Heseltine, Rt Hon Michael
Butterfill, John	Hickmet, Richard
Carlisle, John (N Luton)	Hicks, Robert
Carlisle, Kenneth (Lincoln)	Higgins, Rt Hon Terence L.
Carttiss, Michael	Hind, Kenneth
Chapman, Sydney	Hirst, Michael
Chope, Christopher	Hogg, Hon Douglas (Gr'th'm)
Churchill, W. S.	Holland, Sir Philip (Gedling)
Clark, Dr Michael (Rochford)	Holt, Richard
Clark, Sir W. (Croydon S)	Hooson, Tom
Clarke, Rt Hon K. (Rushcliffe)	Hordern, Peter
Colvin, Michael	Howarth, Alan (Stratf'd-on-A)
Conway, Derek	Howarth, Gerald (Cannock)
Coombs, Simon	Howell, Rt Hon D. (G'ldford)
Cope, John	Hubbard-Miles, Peter
Corrie, John	Hunt, David (Wirral)
Couchman, James	Hunt, John (Ravensbourne)
Dicks, Terry	Hunter, Andrew
Dorrell, Stephen	Hurd, Rt Hon Douglas
Douglas-Hamilton, Lord J.	Jackson, Robert
Dover, Den	Jenkin, Rt Hon Patrick
Durant, Tony	Johnson-Smith, Sir Geoffrey
Dykes, Hugh	Jones, Gwilym (Cardiff N)
Edwards, Rt Hon N. (P'broke)	Jones, Robert (W Herts)
Eggar, Tim	Kershaw, Sir Anthony
Emery, Sir Peter	Key, Robert
Evennett, David	King, Roger (B'ham N'field)
Eyre, Sir Reginald	King, Rt Hon Tom
Fairbairn, Nicholas	Knight, Gregory (Derby N)
Favell, Anthony	Knight, Mrs Jill (Edgbaston)
Fenner, Mrs Peggy	Knowles, Michael

Knox, David	Ottaway, Richard
Lamont, Norman	Page, John (Harrow W)
Lang, Ian	Page, Richard (Herts SW)
Latham, Michael	Parris, Matthew
Lawrence, Ivan	Patten, John (Oxford)
Leigh, Edward (Gainsbor'gh)	Pawsey, James
Lennox-Boyd, Hon Mark	Peacock, Mrs Elizabeth
Lester, Jim	Pink, R. Bonner
Lewis, Sir Kenneth (Stamf'd)	Pollock, Alexander
Lightbown, David	Porter, Barry
Lilley, Peter	Powell, William (Corby)
Lloyd, Peter, (Fareham)	Powley, John
Lord, Michael	Prentice, Rt Hon Reg
Lyell, Nicholas	Proctor, K. Harvey
McCrindle, Robert	Raffan, Keith
McCurley, Mrs Anna	Raison, Rt Hon Timothy
Macfarlane, Neil	Rathbone, Tim
MacGregor, John	Renton, Tim
MacKay, Andrew (Berkshire)	Rhodes James, Robert
MacKay, John (Argyll & Bute)	Rhys Williams, Sir Brandon
Maclean, David John.	Ridley, Rt Hon Nicholas
McNair-Wilson, P. (New F'st)	Ridsdale, Sir Julian
Madel, David	Rifkind, Malcolm
Major, John	Rumbold, Mrs Angela
Malins, Humfrey	Sainsbury, Hon Timothy
Malone, Gerald	St. John-Stevas, Rt Hon N.
Maples, John	Shaw, Giles (Pudsey)
Marland, Paul	Shepherd, Colin (Hereford)
Marshall, Michael (Arundel)	Shersby, Michael
Mates, Michael	Skeet, T. H. H.
Mather, Carol	Spicer, Michael (S Worcs)
Mawhinney, Dr Brian	Stevens, Lewis (Nuneaton)
Mayhew, Sir Patrick	Stewart, Allan (Eastwood)
Mellor, David	Stewart, Andrew (Sherwood)
Meyer, Sir Anthony	Stokes, John
Miller, Hal (B'grove)	Tapsell, Peter
Mills, lain (Meriden)	Thompson, Donald (Calder V)
Miscampbell, Norman	Thorne, Neil (llford S)
Mitchell, David (NW Hants)	Thurnham, Peter
Moate, Roger	van Straubenzee, Sir W.
Monro, Sir Hector	Viggers, Peter
Moore, John	Wakeham, Rt Hon John
Morrison, Hon C. (Devizes)	Waldegrave, Hon William
Moynihan, Hon C.	Walker, Bill (T'side N)
Mudd, David	Wall, Sir Patrick
Neale, Gerrard	Waller, Gary
Needham, Richard	Ward, John
Nelson, Anthony	Warren, Kenneth
Newton, Tony
Nicholls, Patrick	Tellers for the Ayes:
Norris, Steven	Mr. Archie Hamilton and Mr. Michael Neubert.
Onslow, Cranley

NOES
Adams, Allen (Paisley N)	Clark, Dr David (S Shields)
Alton, David	Clay, Robert
Anderson, Donald	Cocks, Rt Hon M. (Bristol S.)
Archer, Rt Hon Peter	Cohen, Harry
Ashley, Rt Hon Jack	Coleman, Donald
Ashton, Joe	Concannon, Rt Hon J. D.
Atkinson, N. (Tottenham)	Cook, Robin F. (Livingston)
Banks, Tony (Newham NW)	Corbett, Robin
Barron, Kevin	Corbyn, Jeremy
Beckett, Mrs Margaret	Craigen, J. M.
Bell, Stuart	Crowther, Stan
Benn, Tony	Cunliffe, Lawrence
Bennett, A. (Dent'n & Red'sh)	Cunningham, Dr John
Bermingham, Gerald	Dalyell, Tam
Blair, Anthony	Davies, Rt Hon Denzil (L'lli)
Boothroyd, Miss Betty	Davies, Ronald (Caerphilly)
Bray, Dr Jeremy	Davis, Terry (B'ham, H'ge H'l)
Brown, Gordon (D'f'mline E)	Deakins, Eric
Brown, Hugh D. (Provan)	Dewar, Donald
Brown, N. (N'c'tle-u-Tyne E)	Dobson, Frank
Brown, R. (N'c'tle-u-Tyne N)	Dormand, Jack
Callaghan, Jim (Heyw'd & M)	Douglas, Dick
Campbell, Ian	Dubs, Alfred
Campbell-Savours, Dale	Duffy, A. E. P.
Canavan, Dennis	Dunwoody, Hon Mrs G.
Carter-Jones, Lewis	Eadie, Alex

Eastham, Ken	Maynard, Miss Joan
Ellis, Raymond	Meacher, Michael
Evans, John (St. Helens N)	Meadowcroft, Michael
Fatchett, Derek	Michie, William
Field, Frank (Birkenhead)	Mikardo, Ian
Fields, T. (L'pool Broad Gn)	Miller, Dr M. S. (E Kilbride)
Fisher, Mark	Mitchell, Austin (G't Grimsby)
Flannery, Martin	Morris, Rt Hon A. (W'shawe)
Foot, Rt Hon Michael	Morris, Rt Hon J. (Aberavon)
Forrester, John	Nellist, David
Foster, Derek	Oakes, Rt Hon Gordon
Foulkes, George	O'Brien, William
Fraser, J. (Norwood)	O'Neill, Martin
Freeson, Rt Hon Reginald	Orme, Rt Hon Stanley
George, Bruce	Owen, Rt Hon Dr David
Gilbert, Rt Hon Dr John	Park, George
Godman, Dr Norman	Parry, Robert
Gould, Bryan	Patchett, Terry
Hamilton, James (M'well N)	Pendry, Tom
Hamilton, W. W. (Central Fife)	Penhaligon, David
Hardy, Peter	Pike, Peter
Harman, Ms Harriet	Powell, Raymond (Ogmore)
Harrison, Rt Hon Walter	Prescott, John
Healey, Rt Hon Denis	Randall, Stuart
Heffer, Eric S.	Rees, Rt Hon M. (Leeds S)
Hogg, N. (C'nauld & Kilsyth)	Robinson, G. (Coventry NW)
Holland, Stuart (Vauxhall)	Rogers, Allan
Home Robertson, John	Rooker, J. W.
Howell, Rt Hon D. (S'heath)	Ross, Ernest (Dundee W)
Howells, Geraint	Rowlands, Ted
Hoyle, Douglas	Sedgemore, Brian
Hughes, Dr. Mark (Durham)	Sheerman, Barry
Hughes, Robert (Aberdeen N)	Sheldon, Rt Hon R.
Hughes, Roy (Newport East)	Shore, Rt Hon Peter
Hughes, Sean (Knowsley S)	Short, Mrs H.(W'hampt'n NE)
Hughes, Simon (Southwark)	Silkin, Rt Hon J.
Janner, Hon Greville	Skinner, Dennis
John, Brynmor	Smith, C. (Isl'ton S & F'bury)
Jones, Barry (Alyn & Deeside)	Smith, Rt Hon J. (M'kl'ds E)
Kaufman, Rt Hon Gerald	Soley, Clive
Kilroy-Silk, Robert	Spearing, Nigel
Kirkwood, Archibald	Stott, Roger
Lamond, James	Strang, Gavin
Leighton, Ronald	Straw, Jack
Lewis, Ron (Carlisle)	Thomas, Dr R. (Carmarthen)
Lewis, Terence (Worsley)	Thompson, J. (Wansbeck)
Litherland, Robert	Thorne, Stan (Preston)
Lloyd, Tony (Stretford)	Tinn, James
Lofthouse, Geoffrey	Torney, Tom
Loyden, Edward	Wallace, James
Macfarlane, Neil	Warden, Gareth (Gower)
McKay, Allen (Penistone)	Wareing, Robert
Mackenzie, Rt Hon Gregor	Welsh, Michael
McNamara, Kevin	White, James
McWilliam, John	Williams, Rt Hon A.
Madden, Max	Winnick, David
Marek, Dr John	Young, David (Bolton SE)
Marshall, David (Shettleston)
Martin, Michael	Tellers for the Noes:
Mason, Rt Hon Roy	Mr. Frank Haynes and Mr. Don Dixon.
Maxton, John
Maxwell-Hyslop, Robin

Question accordingly agreed to.

Resolved, That the Rate Support Grant Supplementary Report (England) (No. 2) 1983–84, which was laid before this House on 12th March, be approved.

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1. BUSINESS OF THE HOUSE 60 words
c1021
2. PROCEDURE 97 words