§ 'The Secretary of State shall be required to bring before both Houses of Parliament in each financial year a report showing the effect on total public expenditure in the previous financial year of the operation of Parts I and II of this Act as appropriate. Such report shall include a statement of the overall saving, if any, in the previous financial year as a result of the Act'. — [Mr. Straw.]
§ Brought up, and read the First time.
§ Motion made, and Question proposed, That the clause be read a Second time.—[Mr. Straw.]
§ Mr. Chris SmithWe have already touched on the issues that lie at the heart of new clause 12 as they relate to the Government's real purpose in bringing forward the Bill. The Government speak with a forked tongue. Sometimes they say that it is designed to curb the activities of only a handful of so-called profligate Labour-controlled authorities to introduce some efficiency and supposed sanity into their affairs, and at other times they say that it is designed to achieve reductions in public expenditure. We know that the second reason — admitted by the Under-Secretary of State today—is paramount.
New clause 12 probes the issue a little further and challenges the Government to make the matter clear to both Houses of Parliament. Both Houses of Parliament are involved. The other place has an extremely important role to play in such constitutional matters and I hope that it will exercise it soon. New clause 12 requires the Government to bring before both Houses of Parliament a report on the overall level of savings that have been achieved by the operation of the measure. The Under-Secretary of State said that it will reduce the level of public expenditure. That is a self-evident and simplistic truth, but it ignores the balance between local expenditure that is raised through the rates and Government expenditure that is drawn on the public sector borrowing requirement. It ignores that crucial distinction that the Under-Secretary of State constantly ignored in questions that were put to him earlier. It does not reveal what the Government have consistently refused to reveal — the exact extent of reduced public expenditure that they envisage resulting from the Bill.
The nearest guess that we had came from the Secretary of State in Committee. He constantly assures us all that he wants to rate-cap only 15 to 20 authorities. His best estimate is that, if those authorities are rate-capped, about £250 million will be saved in any one year. We should compare that £250 million with the reduced public expenditure that the Treasury envisages in local government spending in its most recent White Paper, the predictions in the Green Paper that was published on the same day as the Budget, and the extravagant claims made by some Conservative Members about the effect of the 188 Bill. If we make that comparison, we see clearly that the £250 million falls far short of the Treasury's expectation and claims of what the Bill will achieve.
6.45 pm
How much money do the Government expect to save? How much of that money will come from the 15 to 20 Labour-controlled authorities which, it is claimed, are the only ones that will be rate-capped? To what extent do the Government expect the general powers to be implemented to achieve the size of savings that they expect? Will the Government put before both Houses of Parliament each year a proper report on how effective or, more probably, ineffective the Bill will be in achieving anything like the savings that have been claimed? If the claimed savings were made, the consequences would be disastrous. I hope that the Government will be honest enough to accept new clause 12 and report to Parliament properly on the impact of the Bill.
§ Mr. Patrick JenkinThe hon. Member for Islington, South and Finsbury (Mr. Smith) has rehearsed well-traversed ground which was covered at length in Committee. I do not complain about that, as it appears that he and some others still labour under the misapprehension that has been assiduously fostered by some of our critics in the national and specialist press who have argued that part. I will not achieve savings. The Opposition have consistently argued that any savings will be small or nonexistent. I refute that.
It is interesting that the hon. Gentleman, whose debating skills we came to admire in Committee — I hope that he will allow me to say that—has changed tack remarkably. The Opposition argued consistently 3,n Committee that there would not be any savings. I took down the hon. Gentleman's words as accurately as I could. He said that we claim that the overall level of public expenditure will be reduced and described that as a self-evident and simplistic truth. He is quite right. Not only is it self-evident and simplistic, but it will happen.
§ Mr. Chris SmithThe right hon. Gentleman is right, but he has completely missed my point. The point that my right hon. and hon. Friends have consistently made—I support it—is that the level of expenditure required by the Exchequer will not necessarily be reduced by the Bill.
Earlier the Under-Secretary referred to the overall level of spending by central and local government put together. That is a supposed definition of public spending, although in economic terms it is relatively meaningless. However, under that definition the right hon. Gentleman is correct, and no Labour Member has ever denied that. We have pointed to the expenditure of the Exchequer. That would not necessarily fall.
§ Mr. JenkinI am extraordinarily grateful to the hon. Gentleman. I am only sorry that some of my hon. Friends, who earlier cast doubt on the proposition that we would make savings, are not here to listen to him. He has properly explained the definition of public expenditure —the sum of spending by central Government and local authorities, and the borrowing requirements of the nationalised industries. That, broadly, is the definition.
The hon. Gentleman has now acknowledged —perhaps we do not need to dwell on it—that it will be reduced by the Bill. He will remember that on Second Reading and in Committee I put forward the proposition 189 that had there been rate capping in 1983–84, had no more than 18 authorities been chosen, and had we sought expenditure reductions of no more than 3 per cent., we would have saved up to £350 million below what it otherwise would have been.
As the purpose of the Bill is to keep spending below what it would otherwise be, by capping the spending and rating figures of up to 20 or so local authorities, it seems to me that the hon. Member for Islington, South and Finsbury — who approaches these matters with a freshness and intelligence that we have come to admire — has now seen the light and recognised that it will achieve savings. He has therefore conceded our point.
The hon. Gentleman went on to say that we had declined to reveal the exact amount. Inevitably, we are precluded from doing so. First, savings can be judged only against what would have been spent had there been no rate capping. That must always be a matter of hypothesis. Secondly, we are not yet in a position to say which authorities will be selected for limitation. We will not know that until we have their full budget figures. Thirdly, we are as yet unable to give the amount by which spending would be limited. Fourthly—this is most important—it is quite impossible to quantify the shadow effect. In fact, a number of other authorities will not be selected but will keep their spending down so that they will not be selected in a future year.
I remind the House of one of the most revealing moments in Committee, when my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Merchant) made a bull point which no hon. Member sought to refute. He said:
Much has been said about the deterrent effect of the general powers. It is said that the power will be important, not in its implementation, but because it could be implemented in future.The hon. Member for Islington, South and Finsbury will remember that he then quotedfrom the recent budget proposals of the Newcastle city council. Paragraph 20.5 says:'when considering financial adjustments and the general level of expenditure the Committee should bear in mind that the "ratecaping" legislation has been given its second reading in the House of Commons and is now in its Committee stage which the Government hopes will be completed by Easter. The Secretary of State for the Environment has produced illustrative criteria by which authorities might be chosen to be capped. On the basis of 1983–84 budgets this Council—the Newcastle city council—'fails 7 of the 11 tests quoted'.My hon. Friend the Member for Newcastle upon Tyne, Central rightly went on to say:That illustrates that councils are already aware of the deterrent effect of this part of the Bill. Even if it is not implemented, it forms a a vital part of the Bill."—[Official Report, Standing Committee G, 8 March 1984; c. 1029–30.]
§ Mr. CowansI am blessed with having two councils in my constituency, one of which is Newcastle upon Tyne. The right hon. Gentleman defeats his own case, because later in Committee I answered the argument of the hon. Member for Newcastle upon Tyne, Central (Mr. Merchant). Because of the Local Government, Planning and Land Act 1980, exactly the same kind of terms were contained in the budget minutes of Newcastle city council at that time. How can the right hon. Gentleman claim that Newcastle is taking account of the Bill when even he 190 cannot say what criteria or principles he will use? Therefore, how can he claim that Newcastle city council knows what he does not know?
§ Mr. JenkinThe hon. Gentleman must clearly bear in mind that in the document referred to by my hon. Friend the Member for Newcastle upon Tyne, Central I produced the chart which I circulated to all members of the Committee and which was made available to the press. That listed the 33 or so authorities whose spending was 20 per cent. or thereabouts over GRE as well as a whole series of tests. Even though Newcastle city council did not know, the point was made that it failed seven of the 11 tests, and the city treasurer thought that that was a sufficiently important factor to bring to the notice of the finance committee when drawing up its budget and rate proposals. I have no wish to embarrass the leaders of that council, but, as is well documented in the press, it is making efforts to reduce its spending.
As part of the savings that the Bill will produce we are, therefore, perfectly entitled to refer to the shadow effect which is likely to lead to a reduction in expenditure which the hon. Member for Islington, South and Finsbury has said is a self-evident and simplistic truth.
That is what we will achieve. The question, therefore, is whether we need a special report—the subject of the new clause. From what I have said, I am sure that the House will recognise that it would be quite impossible to put a firm, precise or accurate figure on the savings that will be achieved. We cannot know what the level of expenditure would have been, and it is difficult to estimate the shadow effect.
Each year the Government publish their public expenditure White Paper. That clearly shows the history of expenditure over five earlier years and gives planned figures for the future three years. The present White Paper records estimated outturn expenditure for years up to 1983–84, and the overspend represented by those figures can readily be seen when compared with earlier White Papers.
Once rate limitation under part I has had a chance to bite, the expenditure of the highest overspending authorities will be brought under control, and that should lead to a noticeable reduction in the level of overspend reported in all the recent White Papers, or even perhaps the disappearance of that overspend altogether.
§ Mr. Chris SmithWith respect, the right hon. Gentleman is trying to have his cake and eat it. On the one hand, he is saying that it is impossible to estimate the reduction in overall public expenditure which will be achieved by this legislation, and in the next breath he says that a considerable reduction in the expenditure of the high-spending authorities will be achieved. If he cannot report that each year to Parliament, as the new clause seeks to ensure, how can he confidently claim that there will be a considerable reduction?
§ Mr. JenkinI do not think that there is very much between us. For the benefit of those of my hon. Friends who have only just come into the Chamber, I should point out that the hon. Gentleman said that the Bill would produce a reduction in the overall level of public expenditure and that that was a self-evident and simplistic truth. The Bill will reduce spending, but I cannot precisely estimate that, for the reasons that I have explained. What would otherwise happen cannot be defined and it is 191 difficult to quantify the shadow effect. For that reason, it is not sensible to impose on the Government an obligation to produce a precise figure, which we will have to say cannot be precise.
However, the public expenditure White Paper will contain the figures that are the necessary raw material for people to form a judgment. Therefore, that will meet the only realistic purpose of the new clause — to enable people to form an estimate of what the savings are.
This debate has served an admirable purpose in that we have now had from one of the most articulate Opposition spokesmen in Committee a clear recognition and acknowledgment that the Bill will produce public expenditure savings. The hon. Member for Blackburn (Mr. Straw), who was commendably brief in moving the new clause—he did so formally—has served a splendid purpose, and we are grateful to him. However, I fear that I cannot advise the House to accept the new clause.
§ Question put and negatived.