HC Deb 22 January 1985 vol 71 cc956-64

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Peter Lloyd.]

10.17 pm
Mr. Tarn Dalyell (Linlithgow)

I am a passionate believer in the authority in their own sphere of local authorities. I refrain from public comment on local authority matters unless invited to do so by councillors, and in agreement with them.

However, at the end of a long and serious meeting on 7 January at the council chambers in Bathgate with councillor Dominic MacAuly, councillors Robert Lee, Alastair Mackie and Donald Stavent, district chief executive David Harrison, treasurer Stanley Stirton and housing director John Spraggon, my hon. Friend the Member for Livingston (Mr. Cook) and I were so invited.

First, however, I would like publicly to thank the hon. Member for Edinburgh, South (Mr. Ancram) for his consideration of the special housing needs of West Lothian and for awarding supplementary housing capital allocations for the current financial year and enhanced capital allocations for the year 1985–86.

Secondly, the debate is neither a diatribe nor even a groan, because I do not believe that there has been deliberate bias by Scottish Office officials against West Lothian.

Our difficulty emanates from the unique circumstances surrounding the growth in the financial circumstances of the 1970s and 1980s of Livingston new town. The purpose of the debate is to concern itself with the future rather than past recriminations.

I therefore ask the Minister to address himself to the following questions of which I have given him notice.

First, does the Secretary of State realise that West Lothian district is facing its highest rate increase for several years simply because of his action in reducing rate support grant from £2.5 million to £1.1 million? The district council would have been faced with a rate increase not exceeding 5 per cent., yet thanks to this gram loss the rate increase will now be of the order of 20 per cent. This does not say much for his idea of maintaining rate stability.

Secondly, does the Secretary of State realise that the council is being supported by some of the non-domestic ratepayers, notably the National Federation of Self-Employed and Small Businesses, which has been impressed by the soundness of the council's policies and has readily given its support to the council? The federation is appalled at the loss of grant being contemplated and recognises that this has placed West Lothian in an impossible position. It is, indeed, a situation of some irony when one of the foremost representative bodies for non-domestic ratepayers recognises that the Secretary of State, by his actions on rate support grant, is causing the local rate problems. The council is, in fact, singled out for some approval by the body concerned.

Thirdly, why does the Secretary of State consider it equitable that in 1985–86 West Lothian, with a population of 141,000, should receive £1.1 million, with a further fall of £400,000 likely to come later, when Argyll and Bute council with a population of 65,000 is to receive more than £2.5 million? That is a puzzling comparison, which greatly interests the West Lothian representatives. Why does the Secretary of State place such great emphasis on the burdens caused by tourists and inward commuters? Surely any reasonable person would recognise that far more severe burdens are caused by the effects of severe unemployment and increasing population throughout the year than result from short-term responsibilities caused by tourists. As for commuters, again I should have thought that a council faced with the provision of services to residents, many of whom are commuters, faces a more serious problem. In short, the logic of the distribution system is considered to be grossly unfair and unreasonable to West Lothiam council.

Fourthly, why did the Secretary of State consider it necessary to make a 72 per cent. reduction in the grant payable to West Lothian council? An increase would certainly be more relevant, particularly in the light of the forecast inflation level. Why was it necessary to contemplate such severe reductions in rate support grant to district councils in general and West Lothian council in particular? Do the Government accept that this reduction in grant will be the cause of the council's first major rate increase?

Fifthly, as overall grants to West Lothian council have dropped by more than 90 per cent. in four or five years, with untold damage to the economy, will the Secretary of State accept the need to revise the distribution plan for West Lothian and similar councils? The loss of more than £6 million is a major economic factor for shops and businesses in West Lothian in terms of lost purchasing power. The council therefore appeals for reconsideration of the rate support grant proposals.

Sixthly, having previously made an appeal for equity on behalf of the council on the matter of its spending level as compared with the figure for expenditure need determined by the Secretary of State, I urgently repeat that appeal. The council's spending is likely to be 4 per cent. below the expenditure need figure of £9,376,000. Yet the Secretary of State proposes further penalties in the future due to the arbitrary level of the revenue guideline. Surely that is grossly unfair to the council and the Government should now wish to reorganise their thinking.

Finally, I refer once again to the report and recommendations of the Bathgate working party. In the light of the obligations placed on the council by Leyland and by Polkemmet, it is to be hoped that the Secretary of State will look favourably upon West Lothian council when he deals with the general services capital allocations in some days' time. The same report identified the problems at Murrayfield, Blackburn. I hope that the Minister of State will accept the council's invitation to look at this scheme and to allow a special grant to be paid to remedy the severe deprivation.

The Scottish Office has had notice of those questions since Friday. I look forward to the Minister's replies.

10.22 pm
Mr. Robin Cook (Livingston)

I congratulate my hon. Friend the Member for Linlithgow (Mr. Dalyell) on securing this debate, and, as a Member for a neighbouring constituency, I am grateful to him for allowing me to take part.

I wish to make three points as briefly as I may. My hon. Friend asked a number of very pertinent questions, and I hope that the Minister will answer them; I certainly intend to give him adequate time to do so. I wish to force those questions home with a number of points which add to their force and explain the reasons for seeking this debate.

First, there can be no doubt whatever that West Lothian needs additional financial resources. That need can be justified on two grounds. It is justified, first, by reference to the deprivation in the area. The Bathgate-Livingston travel-to-work area, which contains most of West Lothian, has the third highest rate of unemployment of any travel-to-work area in mainland Scotland. For reasons which my hon. Friend has hinted, all the signs are that the problem will get worse before it starts to get better. I shall not elaborate on that today, save to cite a chilling fact that emerged from a survey in my constituency last month. There is a council estate in my constituency in which the rate of unemployment among teenagers is now a staggering 77 per cent. Against the background of social dereliction on that scale, additional resources are plainly needed.

Secondly, the need for additional resources is abundantly clear, due to the population explosion in the area. In my constituency the population has grown faster in the past decade than that of any other constituency in Scotland, with just one exception. The rate support grant makes much of the additional expenditure on commuters and tourists. I am prepared to recognise that there is a marginal increase in the burden on local authorities from those two sources, but the burden from commuters or tourists can be as nothing compared with the burden from the residents in the area who make demands on services. Those residents have been increasing rapidly in the West Lothian area.

People in West Lothian, even those who are sufficiently skilled to understand the rate support grant formula, view with incomprehension the fact that Argyll, which has half the population of West Lothian, will in a couple of years recieve four times the RSG that will be received by West Lothian if the order goes through the House on Thursday.

Thirdly, West Lothian is in a distinctive position. As a result of the adoption of the client-group method of assessment, there was a sharp increase in the Government's allowance calculation of the expenditure needs of West Lothian. The Government then arbitrarily reduced the expenditure need figure to arrive at a guideline figure. We are now in the curious and clearly anomalous position that the guideline for expenditure in West Lothian is less than the amount the Government assess us as needing to spend to meet our needs. If West Lothian spends up to the expenditure need figure, it will incur penalties. I invite the Under-Secretary of State to justify that curious position.

West Lothian, having stuck to the guideline, having not sought to spend up to the expenditure need figure, having an expenditure in the past year almost spot on its guideline and, by the Minister's definition, being a responsible authority, faces a cut in grant of up to three quarters over two years. Plainly such a cut cannot be faced without a significant increase in rates or a significant reduction in services.

If one takes a longer-term perspective and looks at the past five years and the coming two years, a clear picture of a sharp reduction in resources emerges. In 1980, West Lothian received in total from housing support grant and rate support grant £7 million. It now does not receive a penny in housing support grant. That source, which once provided 45 per cent. of the council's housing budget, has totally disappeared. In two years, under the proposals in the rate support grant order, West Lothian will receive a mere £700,000.

In six years, we shall have moved from a position of receiving £7 million in external support to a mere £700.000—a 90 per cent. drop. That cut represents a sharp reduction in the purchasing power of the West Lothian economy. It means that the people of West Lothian are poorer and that an element of the increase in unemployment we have witnessed during the past five years is attributable to that reduction in Government support.

I remind the Under-Secretary of State that the conclusions about the unemployment rate in the area are set out clearly in the Government's approved working party report on Bathgate which was produced in response to the closure of the British Leyland plant. The report contains a number of recommendations which, if implemented, would mean additional expenditure by the West Lothian district council, for instance, on environmental projects and recreational schemes and on an increased subscription on which to base support for enterprise, all of which would increase rather than reduce the demands on the district council.

The final paragraph of the report reads: It must be for the public agencies and local authorities responsible for the measures we have recommended to finance them from within their existing resources and allocations, possibly by the reordering of their priorities, or, where appropriate, to seek in the normal way the augmentation of those resources

The tragedy of the position faced by myself and my hon. Friend the Member for Linlithgow is that we are not asking for an augmentation of those resources — although we could justify such an augmentation, given our needs. Given the clear analysis in the report of the need in West Lothian for additional support, we are asking the Government at least not to go ahead with the proposed sharp reduction in support. I hope that the Under-Secretary of State will tell us that he is willing to reconsider.

10.30 pm
The Parliamentary Under-Secretary of State for Scotland (Mr. Michael Ancram)

I listened with great care and attention to the hon. Members for Linlithgow (Mr. Dalyell) and for Livingston (Mr. Cook). As the hon. Member for Livingston made clear, the points that they both raised paralleled one another. I hope that during my remarks both hon. Members will feel that I have tried to answer their questions, if not in the order in which they were posed.

I am grateful to the hon. Member for Linlithgow for his comments about what the Government have managed to do for housing in West Lothian. I am well aware of the particular housing problems within that authority, as well as the difficulties with this year's housing revenue account block because of an expected shortfall against earlier estimates of capital receipts, due in large measure to a reduction in applications to purchase council houses. Last month, the Secretary of State decided to issue the council with a supplementary allocation of £1 million, increasing the council's net allocation for 1984–85 by 80 per cent., to £2,252,000 to compensate for the expected shortfall in receipts.

In setting the provisional allocations for 1985–86, we have again taken account of West Lothian's particular problems and issued a gross provisional allocation of £6.3 million, incorporating a special condensation and dampness allocation of £300,000. That represents a 29 per cent. increase over the March 1984 allocation for this year, and meets 90 per cent. of the council's bid for resources on this block.

On the non-HRA block, West Lothian received a small supplementary of £20,000 last month to cover a forecast, legally committed overspend on the block. The council's provisional allocation of £900,000 for 1985–86 represents an 84 per cent. increase over last March's allocation for this year, against—and I must put it in this perspective — a national reduction of 33 per cent. in the total resources available on this block. That should enable West Lothian to make substantial inroads into the backlog of applications for discretionary grants, as well as to plan for further approvals.

In terms of supplementary allocations for the current year and provisional allocations for next, not only have we treated West Lothian more than fairly, but we have recognised the serious points raised not least by the hon. Member for Linlithgow on previous occasions.

The hon. Member for Linlithgow set out fully and clearly the points on which West Lothian district council is concerned about the present arrangements for local authority current expenditure. In particular, he raised questions on the way in which current expenditure guidelines and rate support grant are calculated.

Current expenditure guidelines were first issued in 1976–77 by the then Labour Government to help authorities plan expenditure compatible with the Government's plans for total local authority expenditure. The guidelines for individual authorities were heavily influenced by their existing levels of expenditure, and the hon. Member has pointed out on other occasions the consequences of this for West Lothian, whose level of expenditure per head has been lower than that of a number of comparable authorities.

We accepted that the method of constructing guidelines, which we inherited from the Labour Government was not fair to authorities such as West Lothian, and for 1982–83 we changed the basis to a method based on client-group assessments of relative expenditure need. These assessments are based on a service-by-service examination of the factors that determine an authority's expenditure needs relative to other authorities. In using those assessments as the basis of an authority's guideline, we have, of course, to recognise that some authorities have a history of high spending and that it is necessary to add to their assessments to give them a realistic target for the year immediately ahead.

Also, since it is the Government's policy to reduce local authority expenditure, it does not make sense to give authorities guidelines which imply significant increases in expenditure in real terms. That has meant that some authorities have to receive guidelines below their assessment of need. For those authorities, which include West Lothian, we were able to allow some movement towards client-group assessment in the 1984–85 guidelines with figures implying a marginal increase in real terms. However, we could not allow this latitude in 1985–86, and no authority has a guideline which allows it to increase its expenditure in real terms without penalty.

West Lothian, I know, welcomed the move to the client-group method of calculating guidelines, and in 1984–85 in particular it benefited in the form of more generous guidelines than the majority of authorities. The increase in guidelines from 1983–84 was nearly 35 per cent. as West Lothian was among the 21 authorities that had guidelines marginally above their previous year's budget in real terms. For 1985–86 it is among 27 authorities that can maintain their 1984–85 budgeted expenditure in real terms without suffering grant penalty.

In October, the Secretary of State fixed the guidelines of West Lothian and other authorities in the same position at a level which, on the current estimates of inflation, would allow them to maintain expenditure in real terms. When the estimate of inflation was revised in the Chancellor's Autumn Statement, my right hon. Friend increased the guidelines of West Lothian and of those other authorities to ensure that that position was maintained. For the remainder of authorities not in West Lothian's position real term cuts are needed if severe grant penalties are to be avoided in 1985–86. thus, on guideline calculation, West Lothian has always come out better than the average since we changed to the client-group method.

I know West Lothian would like a guideline that is much higher. However, it would be quite inconsistent with our policy of expenditure reduction to set a guideline implying a significant increase in expenditure. Scottish local authorities, despite our requests to them to spend in line with what the nation can afford and the action we have taken to bring down rates and expenditure, are still spending more than they did in 1978–79. It is essential that increases should stop and reductions should take place. The best that any authority can expect in these circumstances is a guideline which allows it to maintain its expenditure in real terms—as West Lothian has.

Mr. Robin Cook

I hope that the Minister appreciates that as a result of the reduction in grant, West Lothian district council can only maintain its expenditure according to the guideline figure during the coming year by a rates increase of 20 per cent. An increase of less than 20 per cent. will not allow it to meet the guideline expenditure that has been fixed for it by the Government.

Mr. Ancram

I shall be dealing with those figures. If the hon. Member for Livingston investigates this point, he will find that, if his authority comes down to the guideline, there will not have to be a rates increase of 20 per cent. However, I shall come in a moment to the rate support grant and its effect on rates. I am very much aware of the point that the hon. Members for Linlithgow and for Livingston made about the special problems which face West Lothian with its increasing population. The Secretary of State, in a letter to the convenor of the district council in December, said that he would bear in mind this and the other points that had been made.

It would not be logical either, as the hon. Member for Linlithgow has previously suggested, to penalise only that expenditure above the client-group assessment. Guidelines are designed so that they total to the Government's expenditure provision for the year concerned. Penalties are designed to put pressure on each authority to spend in line with its guideline with the objective of bringing the total of local authority expenditure into line with the Government's plans. If for some authorities no pressure was applied until expenditure was well above guidelines, there would be no prospect of our bringing local authority expenditure under control.

West Lothian budgeted to spend in 1984–85 £117,000, or 1.44 per cent. above its guideline. With modest savings, the authority could have its £83,000 grant penalty returned to it in the next financial year. If it then maintains its expenditure in real terms and makes no increase, it should, on present forecasts of inflation, be able to avoid penalties in 1985–86. I do not think that that is setting the authority an impossible task, given our overall policy of reducing local authority expenditure.

Reference has also been made to the way in which the distribution of rate support grant for 1985–86 would affect West Lothian. We shall, of course, be debating this fully on Thursday. Therefore, I do not intend to go into the detail of next year's settlement.

In brief, we decided that it was necessary to put further pressure on authorities to reduce their expenditure by cutting the percentage of rate support grant. That mechanism for restraining expenditure was accepted by the Labour Government, and the amount by which we are cutting the grant percentage in 1985–86 still falls short of the cut made in the percentage by the right hon. Member for Glasgow, Govan, (Mr. Millan) in 1977–78.

We also had to reach a decision on whether that reduction should fall on regions and districts in proportion to their present share of grant or whether the proportion of grant between regions and districts should change. There is again nothing new in that. The Labour party changed the proportions when it was in power. We decided that it was important to keep to a minimum grant loses amoung regional councils since regional rates account for by far the largest part of the bill that ratepayers have to pay. Therefore, we increased the regional councils' share.

That has led to reductions in the amount of rate support grant paid to districts. However, it is important to make two points about this. First, there is a limit in the amount of grant which any district council will lose in 1985–86, as compared with 1984–85. No district will lose more than the equivalent of a 4p rate. That, therefore, is the maximum by which the rates will go up as a result of changes in the amount of needs element for whatever reason.

Secondly, district ratepayers are regional ratepayers, too, and the district rate is only a quarter of the regional rate. Thus, district ratepayers will benefit from the emphasis put on limiting regional grant losses, and what may sound like large percentage changes in district terms will not be so large when looked at in total rate bill terms, especially if authorities spend at guidelines.

If both Lothian regional council and West Lothian district council spend in line with guidelines in 1984–85 and 1985–86, taking account of revaluation, the total rate burden on West Lothian ratepayers will go up by only 1 per cent. That is very different from the 20 per cent. figure which the hon. Member for Livingston mentioned.

Because of revaluation, the effect on different groups of ratepayers will vary. Domestic ratepayers on this basis would see the rate bills go up by 11.5 per cent on average. Industrial ratepayers would see their bills fall by 6 per cent. on average. That is a point worth bearing in mind by the hon. Members for Linlithgow and for Livingston, who rightly made play of the need for jobs and industry in their area. The answer is that if the authorities spend at guideline, industrial rates will on average go down. Thus, I hope that West Lothian ratepayers, both domestic and non-domestic, will put their regional and district councils under strong pressure to bring their spending into line with guidelines because that is the key to keeping rate increases down.

The hon. Members for Linlithgow and for Livingston made a comparison between the amount of needs element paid to Argyll and Bute district council and the amount paid to West Lothian. However, I think that even the hon. Member for Livingston would agree that there are considerable differences between those two district councils. They are strikingly different in density of population. There are 3.3 persons per hectare in West Lothian, and only 0.1 in Argyll and Bute. On any view that is a huge difference. Argyll and Bute has to provide services to the islands off its coast, several of them with small populations. Those are important factors in pushing up the costs of a service such as cleansing which accounts for a substantial part of district council spending. Those factors are reflected in the assessments of need which underlie the grant distribution. The use of population figures adjusted for tourism and commuters which have been referred to do not have a major impact on the assessments in the way that sparsity does.

In addition to the assessments of need, the grant distribution takes account of loan charges—an area in which Argyll and Bute has a much higher figure than West Lothian. Income from specific grants, another factor which is taken into account, also goes some way to explain the difference. Therefore, to make the kind of simple comparison which has been made can be misleading. I hope that I have explained the reason for the apparently large difference in the figures.

On capital, the final allocations for 1985–86 are still being considered, but the figure decided upon ought to allow some scope for spending in accordance with the recommendations of the Bathgate working party, as well as certain improvements to basic services identified in the council's financial plan. I hope that authorities will be notified of their allocations in the next few weeks. I have noted the points that have been made tonight.

The provision for local authority capital expenditure has to be balanced against other sectors of the overall public expenditure programme, the total of which must be tightly constrained as part of the Government's overall economic strategy. Capital consent allocations have to be determined in the light of the relative need and competing claims of local authorities as shown in their financial plans. But inevitably the total bids are well in excess of the limited total resources available and some authorities will be disappointed.

The Government's view is that the first priority should be the adequate provision of basic environmental services, and that leisure and recreation services, though important, have a lower priority, but it is, of course, for each authority to decide to which projects to give priority in the light of the consents issued.

The hon. Members for Linlithgow and for Livingston presented West Lothian's case persuasively, but I cannot accept that its position is unique or that it has been unfairly treated by central Government. I hope that, in the light of what I have said this evening—

Mr. Dalyell

The Minister says that the position is not unique, but it is unique in that there is an increasing population. In the capital allocations for 1985–86, do we have the clear assurance that the increase in population will seriously be taken into account?

Mr. Ancram

The hon. Member is clearly referring to the effect that the population has on the guidelines and rate support grant distribution. Those points have been made before and we have them firmly in mind. The West Lothian authority is not unique in that respect. I hope that the hon. Member will feel that West Lothian has been fairly treated by the Government.

Question put and agreed to.

Adjourned accordingly at fourteen minutes to Eleven o'clock.