HC Deb 10 April 1986 vol 95 cc357-63

4.8 pm

The Minister for the Environment, Countryside and Local Government (Mr. William Waldegrave)

With permission, Mr. Speaker, I shall make a statement about a complex technical matter to do with the operation of the block grant system established by the Local Government, Planning and Land Act 1980. I hope that the House will bear with me.

Generally, block grant is paid to compensate authorities for differences in their expenditure needs and in their rateable resources. But, in addition, subsection (6)(a) of section 59 of the 1980 Act gives the Secretary of State a power to determine block grant multipliers to limit changes in the grant entitlements of individual authorities from year to year. In every year since 1981 my right hon. Friend and his predecessors have used this power to set safety nets to protect local authorities against undesirable losses in any one settlement. In two years it has also been used to set caps on increases, to prevent undesirable gains by some authorities at the expense of all other authorities.

Each year since 1981 my right hon. Friend and his predecessors have used the power to safety net grant losses arising from particular features of successive settlements. In 1981–82 a cap was also applied to grant gains resulting from the introduction of the new grant system.

As far as 1986–87 is concerned, my right hon. Friend the then Secretary of State made it clear in his provisional announcement to the House in July last year that he proposed to use these powers to restrict windfall gains resulting from the decision to dispense with expenditure targets. We also stated on many occasions our intention that the grant effects of abolishing the GLC and the metropolitan county councils should be neutral at ratepayer level. We gave effect to these intentions in the multipliers set out in the RSG Report which the House approved in January.

Thus, in each year since 1981 the Secretary of State interpreted the powers in subsection (6)(a) of section 59 of the 1980 Act in such a way as to limit certain factors affecting grant entitlements, but not others. For example, we have made changes to the way grant-related expenditure assessments are calculated—often as a result of representations made by local government. In every year, successive Secretaries of State have proposed that the effect of these changes should be mitigated by the setting of safety nets. What we have never sought or agreed to do is to protect authorities from the grant effects of their own expenditure decisions. It would have run counter to one central purpose of Government policy in this area to do so.

This approach had the general support of the local authority associations. It has been embodied in the RSG reports for each of the six years 1981–82 to 1986–87, all of which have been approved by this House. It has not previously been challenged.

However, this year for the first time a handful of authorities have questioned whether subsection (6)(a) of section 59 can be used to achieve the objective I have just described. They maintain that the Secretary of State's power is restricted to limiting changes in the overall amount of grant payable to an authority for one year compared with the previous year. One authority has already taken court action on this, and I understand that a number of other authorities are considering similar action.

I must make it clear that I do not believe that the powers could be used in any sensible, praticable fashion under this alternative interpretation. For example, it would require the Secretary of State to include within any safety net the effect of grant reductions arising solely because authorities' own rateable resources had increased. It would also require the Secretary of State to take account of grant which authorities had lost solely as a result of their own expenditure decisions. That would he nonsense. No reasonable authority would expect the Secretary of State to operate the powers in this way.

Such an interpretation would cast doubt on the grant entitlement for every local authority for 1986–87 and for every previous year back to 1981–82, under the RSG settlements which the House has approved. It would clearly be most unsatisfactory if a procedure which has been followed since 1981–82 were to be overturned, particularly since throughout this period there has been a broad measure of agreement on what the subsection meant between the Department and the local authority associations, many of whose members would face wholly unmanageable losses of grant if any other interpretation of the 1980 Act were to become accepted. The Government are not prepared to allow that to happen and believe that we must take action to preserve the status quo.

Obviously the position must be clarified. The Government will therefore be bringing forward a short Bill during this Session of Parliament to remove any doubts about the interpretation of the Secretary of State's powers in relation to multipliers for past years and for the future.

4.12 pm
Mr. Jack Straw (Blackburn)

In the light of the news on the tapes earlier today that the Conservative spokesmen in Fulham were complaining that voting by Conservatives has been slow, the Opposition were wondering what secret weapon the Government would use to encourage voters to the polls. With this statement on block grant multipliers, we know what the secret weapon will be. The voters will be electrified and galvanised into voting, especially as Hammersmith and Fulham, which is controlled by Conservative and alliance councillors, has a multiplier of 0.701790, which the voters know means that they have been given extra grant by the Government.

Is the Minister aware that, behind the sheer farce to which successive Conservative Secretaries of State have reduced the system of rate support grant and behind the smokescreen of technicality which the Minister tried to raise today, his statement raises a serious constitutional issue—a bare-faced attempt by the Government to interfere with the judicial process? By this one-clause Bill Ministers propose to use their majority in the House to preempt decisions of the courts.

The Minister said that one authority had already begun court action. Will he confirm that the authority involved is Birmingham city council and that the use of the past tense in his statement in relation to the city council is wholly misleading, since Birmingham's case against the Secretary of State for the Environment is set down for a three-day oral hearing next Tuesday? Since the Government propose, whatever decision the courts may make, to overturn that decision retrospectively, will the Department of the Environment seek to defend that action in the Divisional Court next Tuesday? How much is at stake for Birmingham city council and its ratepayers?

Occasionally, legislation has been introduced in the House retrospectively to change decisions of courts, for example, with the War Damage Act 1965 and the more recent decision by the Government to overturn the defeat that they suffered at the hands of the Greater London council over London Regional Transport. Can the Minister name one occasion on which a previous Government have introduced or announced the introduction of legislation during the pursuit of a case in the courts?

The Minister said that the approach which the Government had previously adopted has the general support of local authority associations and that there is a, broad measure of agreement … between the Department and the local authority associations.

Mr. Dennis Skinner (Bolsover)

That is a pack of lies.

Mr. Straw

My hon. Friend, from a sedentary position, says that that is a pack of lies, but you will not have heard that, Mr. Deputy Speaker.

Mr. Skinner

I will stand up and say it. It is a lie.

Mr. Straw

Does the Minister accept that this is grossly misleading and that the Association of County Councils has received legal advice in similar terms to that given to Birmingham city council and is supporting Birmingham city council's action and that the Association of Metropolitan Authorities has submitted affidavits in support of Birmingham's position? Which local authority associations have expressed general support for the Government's approach?

The Minister claimed that the purpose of using multipliers was to introduce neutrality into the system, especially in relation to the abolition of the metropolitan county councils. Could he explain why the rates in the metropolitan councils have shot up by such vast amounts, for example, by 27 per cent. in West Yorkshire, when expenditure has increased by a tiny amount? Could he also explain why the Conservative-controlled district council of Gillingham in Kent has received so much rate support grant this year that it has not levied a rate at all? Not a single penny has been levied in Gillingham, despite a 25 per cent. increase in expenditure. Is that what the Minister means by "neutrality" when he talks of using these multipliers?

Will the Minister confirm that he failed to say in his statement that the one-clause Bill would have to be retrospective in effect to 1980? What does he think of the view of the former Secretary of State for the Environment—the right hon. Member for Wanstead and Woodford (Mr. Jenkin)—who said in the House in 1965:

Retrospective legislation is a damned slippery slope. Let the House dig its heels in and say that it will have no more of it."—[Official Report, 2 March 1965; Vol. 707, c. 1264.] Will the Minister confirm that this panic statement was rushed out only because the Department of the Environment has been advised that it will lose in court next week? It has been advised that it has been acting illegally for the past six years and it wishes to cover that up with a simple abuse of power. Is the Conservative view of freedom under the law the freedom to change the law whenever the Government expect defeat in the courts?

Mr. Waldegrave

The hon. Member for Blackburn (Mr. Straw) is good at getting into a rage, but this is not a good opportunity to do so. The case that is coming to court next week is the Birmingham city council case—

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

Will the Government defend it?

Mr. Waldegrave

As to the handling of that case, consultations continue and we have not yet decided.

The hon. Member for Blackburn spoke about retrospection and was somewhat unwise to introduce an example of disgraceful retrospection—the War Damage Act 1965, which changed people's rights retrospectively. Our proposition would maintain the status quo. If, over the years, the hon. Gentleman, who is a sharp Member of the House, had noticed that the powers were in doubt, he would have drawn our attention to the matter, but he worked under this framework, as did all the local authority associations. All the representations that have been made to us—for example, by the Association of London Authorities—were made on the assumption that the powers meant what everyone thought they meant. There have been plenty of occasions when the House has acted to clarify the law and confirm people's understanding of it, for example, in many Finance Acts, as the hon. Gentleman pointed out in debates on the Local Government (Interim Provisions) Act 1984. No authority will gain or lose money from the change that we shall make. They will all have the position, as they thought it to be, confirmed.

The hon. Gentleman introduced the subject of west Yorkshire. Rates are going up much too far in the successor councils in the west Yorkshire area, largely because the outgoing metropolitan council suppressed the rate last year to make an artificial increase this year. That was not very clever but it was trying to make a political point. In bringing forward this measure we shall simply be maintaining the status quo as all the practitioners in the field thought it to be.

Mr. Patrick Jenkin (Wanstead and Woodford)

Is not the distinction a perfectly clear one—that it is perfectly legitimate to legislate in this way in order to implement settled expectations and it is unacceptable to legislate retrospectively to defeat settled expectations, as the Labour Government did under the War Damage Act 1965?

Mr. Waldegrave

My right hon. Friend is right. The hon. Member for Blackburn (Mr. Straw) rather shot himself in the foot by introducing the example of the War Damage Act 1965.

Mr. John Cartwright (Woolwich)

Is the Minister aware that his statement today will confirm the widely held view that these famous multipliers are simply a sophisticated means of ensuring that the Government grant is shared out in whatever way suits the whims of the present occupier of the Secretary of State's office? How can he go on complaining, as he does, about the spending record of local government when he now accepts that there is such doubt about the legality of the block grant distribution that he is forced to come to the House of Commons to change the law after six years' operation?

Mr. Waldegrave

I agree that the workings of the block grant system are now far too complicated to be maintained into the future, but I challenge the hon. Gentleman or anyone else to come up with any proposals for reform other than those of my right hon. Friend who started the process whose results we now put before the House. We have proposals for simplification and I sympathise with the hon. Gentleman's desire to see those brought forward.

Mrs. Edwina Currie (Derbyshire, South)

Does my hon. Friend agree that court action is threatened not only by Birmingham council, of which I am still a city councillor, but by other Labour-controlled local authorities, and will he join me in congratulating those Labour-controlled local authorities on their new-found respect for so-called Tory judges and their determination to abide by a court order if they can get it? Will he further agree that the current state of the law is intolerable and that without legislation all we shall have will be a muddle and the fiddling around of grants going back to 1981? His action is wise, necessary and will be welcome.

Mr. Waldegrave

I am grateful to my hon. Friend. She is right. I do not believe that the hon. Member for Blackburn (Mr. Straw) is serious in opposing the legislation. There will be just as many Labour losers as Conservative losers. It would be almost impossible to predict who would be the losers if the system had to be redone back to 1981. I do not think that is what he wants. He is entitled to have his day of teasing me across the Dispatch Box, as he is good at doing, but the serious matter here is, as my hon. Friend says, that it must be a matter of good administration to clarify the law in this area.

Ms. Clare Short (Birmingham, Ladywood)

Is not the truth of the matter that Birmingham has discovered that the Government are cheating us out of a considerable sum of money and, having been found out, the Government are changing the law and that is outrageous? How much money is at stake? The Government are entitled to change the law for the future and to make whatever settlements should be made about the misapplication of the law in the past, but to move in quickly and change the law before the case comes to court is an outrageous way to proceed. How much is Birmingham losing by this action?

Mr. Waldegrave

The trouble is that the hon. Lady is wrong. If it were to be proven that Birmingham's interpretation was right, Birmingham's starting position this year would he different, and for the year before, and for the year before, and for the year before that. So goodness knows whether Birmingham would gain or lose in the end.

Sir Dudley Smith (Warwick and Leamington)

I appreciate the difficult and intricate nature of the block grant multipliers, but does not the situation underline yet again the need for a full reorganisation of local government finance and the raising of rates? Does my hon. Friend agree that the sooner we move to that, the sooner we shall get away from this position?

Mr. Waldegrave

I wholeheartedly agree with my hon. Friend.

Mr. Robin Corbett (Birmingham, Erdington)

Is not the fact of the matter in plain English that the Government have been advised that they are fiddling the books and to that extent they have been caught with their fingers in the till? Is it not the case that, as a result of the decision, Birmingham is set to lose about £7 million? Will the Minister repeat from the Dispatch Box that the effect of abolition on ratepayers should be neutral and then acknowledge Birmingham's case that abolition is costing city ratepayers money?

Mr. Waldegrave

That is good rhetoric but poor logic. If the hon. Gentleman considers the matter a little further, he will find that neither he nor I nor anybody else can predict what the final outcome will be for Birmingham because there will be complete uncertainty about starting points over the past four years. A large number of other authorities would lose and I have no doubt that many would write to the hon. Gentleman and object and then he would be in some difficulty.

Mr. John Townend (Bridlington)

Does my hon. Friend agree that the working of the multiplier this year in some areas has produced nonsense? Does he further agree that there is a feeling of unfairness among many small district councils in east Yorkshire, which, having done everything that the Government have asked and kept spending down—not only last year but, in the case of Holderness in my constituency, for nearly 10 years—have lost grant? Do I take it that what he said today will do nothing to remove the injustice that those councils have suffered this year?

Mr. Waldegrave

I am aware that several of my hon. Friends are unhappy with the rate support grant settlement this year, but I regret that they cannot look to the proposed Bill to give them any relief. We shall be confirming the RSG settlement this year as it stands.

Mr. Skinner

Is not the real scandal that the Government—a Government who believe in law and order—have now been found out by Birmingham and are intent on being cruel and vindictive to the people of Birmingham, and, who knows, many others who might follow in their wake, which sought to improve its balances by several million pounds in order to provide services for the old and disabled? The Government, who do not care, are so hell bent on stopping that that they are not even prepared to allow the law courts to proceed in order to find a settlement. Retrospective legislation—the Minister ought to be ashamed of himself.

Mr. Waldegrave

Even the hon. Gentleman's unequalled capacity to discover outrage under every stone has been over-tested in this matter. It is not such an exciting matter as he hopes.

Mr. John Watts (Slough)

Does my hon. Friend agree that, despite the ritual protests about retrospection from the Opposition Benches, the vast majority of sensible authorities will be relieved to have the protection that he is proposing against the retrospective overturning of a settlement going back as far as 1981? Will my hon. Friend take steps to ensure that all local authorities are made fully aware of the consequences of the course of action urged from the Opposition Front Bench which would turn local government finance into chaos for six years back?

Mr. Waldegrave

That is exactly what, as I understand it, the Opposition are proposing. I have more respect for the hon. Member for Blackburn than to think that he is seriously proposing that. There would be a tremendous caterwauling from all the losers if the other interpretation were to succeed. I have no doubt that we would then be urged to bring some clarity and certainty into the situation.

Mr. Tony Marlow (Northampton, North)

Is not the synthetic and bogus hysteria which the hon. Member for Blackburn (Mr. Straw) tried to generate unsuccessfully in his remarks somewhat sad? Is not the reality that if the hon. Gentleman were sitting in the place of my hon. Friend the Minister he would have attempted to make exactly the same statement, if not with the same force, clarity and eloquence?

Mr. Waldegrave

Conservative Members need no lectures, certainly not from the hon. Member for Bolsover (Mr. Skinner), about retrospective legislation, since I believe that he is keen on retrospective legislation for a number of cases. Unfortunately, this is not retrospective legislation of the kind that he likes. As has been said, this confirms people's expectations about what the situation is and was and does not change them.

Mr. Peter Bruinvels (Leicester, East)

While settlements will be re-established by the new Bill, does not my hon. Friend agree that it will be irresponsible of any of the other local authorities now to consider any further kind of legal action against the Government? Will he also confirm that in the past four or five years the local authority associations have gained quite a lot under the old system? Lastly, will he look again at the multiplier for Leicester to consider whether a reduced amount could be given to Leicester because, of course, it has overspent for so long?

Mr. Waldegrave

My hon. Friend never misses an opportunity to have a crack at the villains who run Leicester, and I congratulate him on taking yet another opportunity to get the political villains, as he would see them. The fact of the matter is that this legislation, rather less exciting than had been hoped for by the Opposition, simply confirms the situation as we have all believed it to be.