HC Deb 16 December 1986 vol 107 cc1063-70 4.12 pm
The Secretary of State for Wales (Mr. Nicholas Edwards)

With permission, Mr. Speaker, I wish to make a statement about the Welsh rate support grant.

I will deal first with the implications for Wales of the statement which has just been made to the House by my right hon. Friend the Secretary of State for the Environment. The definition of relevant and total expenditure adopted in rate support grant reports for Wales since 1981 with the agreement of local government in Wales is, for the reasons outlined by my right hon. Friend, now seen as not meeting statutory requirements and being incorrect in law. Until this is put right, I am unable to make further RSG reports. The urgent legislation being brought to the House will therefore validate for Wales as well as for England all past decisions involving the use of total or relevant expenditure and allow future decisions to be taken in line with previous practice.

I wish to do everything possible to minimise difficulties for local government so that it can proceed with budgeting and rating for the coming financial year. I am today giving to the Welsh Consultative Council on Local Government Finance and to all Welsh county and district councils full details of my intentions for the main report for 1987–88 and the supplementary report for 1986–87. A copy of my statement has been placed in the Library. The supplementary reports for 1984–85 and 1985–86 will be the subject of further consultation. My intentions take account of the views expressed to me by the Welsh local authority associations and individual councils during consultations. They are, of course, dependent upon the approval by the House of these reports, which will be laid upon enactment of the Local Government Finance Bill.

It is very important that councils should feel able to proceed with their planning over the coming months in the knowledge that my intentions are firm. They therefore have my assurance that it is the Government's intention not to take into account in the main report for 1987–88 and the supplementary report for 1986–87 any new data or representations received after 3 December; the Bill will provide for this. It can therefore be assumed for the purpose of calculating grant entitlements that the information I am making available today will be reflected in those reports. New or revised data will be taken into account in supplementary reports for the years concerned, as will be any additional resources for teachers' pay.

I turn now to the detail of my intentions for 1987–88. Provision for relevant expenditure will be £1,734 million or over 6 per cent. higher than budgeted spending in 1986–87, and current expenditure will be 4.8 per cent. higher or more than 1 per cent. above the expected rate of inflation. Aggregate Exchequer grant will be £1,157 million, unchanged from that announced in July; domestic rate relief remains unchanged at 18½p in the pound. Block grant will be £901.7 million.

The local authority associations have stressed the need for stability between years in the grant distribution mechanisms. With this in mind I intend to retain the same basic block grant mechanisms used in the present year with no expenditure target for individual councils, and to leave unchanged the slope of the grant-related poundage schedule. The total of authorities' GREs will be set in line with overall provision. The general consequence is that decisions to increase spending will result in a cash reduction in grant for most authorities, while decisions to reduce spending will produce considerable rating benefits.

Grant recycling was justified in 1986–87 as an interim measure during the first year of operation of the new mechanisms following the abolition of targets. This measure is no longer appropriate and I intend that the settlement for 1987–88 should give the further certainty of ensuring that each authority's grant entitlement will depend solely on its spending decisions and not be affected by decisions taken by other authorities. My right hon. Friend the Secretary of State for the Environment and I have already said that we propose to introduce legislation in the near future to abolish recycling.

In the first supplementary report for the current year, 1986–87, I intend to recycle block grant in full. Changes to aggregate relevant expenditure following from increases in police pay, expenditure on midday supervision in schools and GCSE will increase block grant by £1.3 million and the total of specific grants will be increased to £174.7 million. The contribution of Welsh local authorities to the England and Wales further education pool will be £3.5 million. The total of local authorities' GREs for the year will be amended in line with provision, but authorities' block grant entitlements will not be affected.

The settlement that I intend to make for 1987–88 is a very good one for Wales. The increases in all the main components—relevant expenditure, current expenditure, aggregate Exchequer grant and block grant—are well above the forecast rate of inflation.

I am sure that there will be general agreement that central and local government should work together to ensure that spending and rating decisions for next year are not hindered by the delay in our being able to make RSG reports. Today's announcement of my intentions will enable Welsh local authorities to reach their decisions in an orderly way. There can be no doubt that in so doing they must have regard to the interests of ratepayers and taxpayers. I am confident that the Welsh local authority associations and all Welsh councils will recognise this and will respond constructively to the opportunity they now have to budget for very low rate rises indeed.

Mr. Barry Jones (Alyn and Deeside)

When did the right hon. Gentleman first know that the decisions concerning relevant and total expenditure were illegal? Has he known for six weeks? Will two supplementary reports consequently be queried? What sums of cash are involved? Is it not the case that there have been five Acts of Parliament of which the right hon. Gentleman—uniquely and exceptionally—has been a sponsor, and is it not also the case that he stands condemned of being a sponsor of legislation that creates chaos?

In relation to the statement made by the Secretary of State for the Environment, may I remind the Secretary of State that local authorities in Wales have used transfers between funds to achieve the best results for ratepayers? Does he understand that if local accounts are reopened it is possible that they will be liable to grant penalties? That would be unjust, because it will have been done in good faith. Will the right hon. Gentleman be absolutely clear in his response and grant indemnity to Welsh local authorities?

If the Government do not comprehend their own rules and legislation, what hope is there for the local authorities? They are innocent. I remind the right hon. Gentleman that time and again we urged him to ensure that Wales was exempted from the Government's authoritarian local government legislation. He ignored us every time that we made that point.

At the last minute, the Secretary of State for Wales resolved to come to the House with his statement. It was very prudent of him to ditch his plan to release the statement by the shabby device of a written answer. Is it not the case that the apparent increase over last year's settlement shows how unrealistic those figures were? Is he not aware that nothing extra is provided to meet the substantial backlog of needs that has built up in recent years as a result of his inadequate funding and the 125 per cent. increase in unemployment since he took office? Does the right hon. Gentleman know that specific grants are taking up an increasing share of the total grant figure and that major uncertainty continues to cloud the teachers' pay restructuring proposals?

The greatest bone of contention is the decision to end grant recycling. It is disgraceful for the Government to propose to legislate to empower the Welsh Office to withhold grant. Is it not a return to the worst aspects of the target and penalty system that the Secretary of State boasted recently he had abolished? Only the Treasury will benefit by this dubious sleight of hand.

Having talked today to the Welsh districts on their receipt of the RSG statement as the right hon. Gentleman made it, the average rate increase for district councils will be at least 10 per cent., flowing as it does from his statement today. Do not his own Department's figures show rate rises for half the 37 Welsh districts in excess of 10 per cent? I am informed there are likely to be increases individually of up to 20 per cent. That is the calculation of the Welsh districts.

The Government are claiming to be generous today, but, in fact, they are only putting right the shortcomings of last year's settlement. The 1 per cent. margin ahead of England which the right hon. Gentleman claims is illusory. In detail, Wales seems to have done less well, and in total that is quite clear. This statement is a confidence trick, and when Labour wins the election we will give Wales a fair deal.

Mr. Edwards

The hon. Member for Alyn and Deeside (Mr. Jones) asked me when I knew. I knew shortly after the Secretary of State for the Environment knew. The hon. Gentleman talked about sums of cash being put at risk for local government and reopening past reports. There is no question of reopening the issues. The whole point is that the Bill will place local authorities in the position in which they would have been and in which they thought they were. It will validate the position as we have always operated it. As the hon. Gentleman said, we followed that path at the request of Welsh local government because it thought that it was to its benefit to make the transfers to which he referred. The accounts, therefore, are not being reopened. We are merely ensuring that local government can proceed in the way in which it wished to proceed.

The hon. Gentleman described me as authoritarian with local government, but the very fact that we sought to meet the wishes of Welsh local government in this respect disproves that allegation.

The hon. Gentleman referred to teachers' pay. The position on teachers' pay has been made clear. The Government have made known their intentions and the fact that the ratepayer and the taxpayer will contribute to the additional costs involved.

The hon. Gentleman referred to the relative scale of the settlement compared with England and whether it was a good settlement. The increase of relevant expenditure of 6.1 percent., the increase of current expenditure of 4.8 per cent. and the increase in aggregate Exchequer grant of 8.4 per cent. are all way ahead of expected inflation. Indeed, the increases in relevant expenditure and current expenditure are higher than in England. In addition, there has been an increase of 14 per cent. in capital expenditure for Welsh local authorities, and those authorities have done exceptionally well out of that.

The hon. Gentleman referred to the balance between district authorities and counties. There has been a higher rate of increase in expenditure by counties in recent years than by districts, arising from such items as police and teachers' pay. The GREs that I am now announcing simply reflect that historic fact. As far as we can, we are producing firm estimates of what the actual position is, based on the actual expenditure of the Welsh counties and districts, and we hope that as a result of making those estimates we will have to make less substantial adjustments in future when we produce the supplementary reports.

The hon. Gentleman referred in an alarmist way to district rate increases. He talked about figures of 10 and 20 per cent. He was talking about poundage increases. In no case will the rate bill in districts increase by anything like that figure. Indeed, I see no reason, in the great majority of cases, why those increases should not be in single figures, even low single figures. The hon. Gentleman also knows that the rate bill that people pay comes through from counties and districts, and by far the largest element is the county part of it. In every authority except West Glamorgan—which used balances very substantially last year, had a lower than average settlement last year and is a high spender—I would expect rate increases to be very low. Indeed, there are counties where it should be possible to have a reduction in the rate bill, and that includes my county of Dyfed.

Sir Anthony Meyer (Clwyd, North-West)

My right hon. Friend and I have had our differences in the past. May I take this opportunity to salute him as a great Secretary of State and ask him whether he is aware of how much sadness and dismay his announcement yesterday that he is to retire at the next election has caused on both sides of the House? Is he aware that never more clearly than today has he demonstrated the skill and authority that he exerts in guiding us through the morass of local government finance, which has been revealed by the two ministerial statements today?

Is my right hon. Friend further aware that the relevation of the incredible complexity of that morass does not in itself suffice to quell the doubts of some Conservative Members who believe that the system of a community charge, which is to be introduced, although it will no doubt be simpler, may turn out in the end to be nearly as difficult to work as the present system?

Mr. Edwards

I am extremely grateful to my hon. Friend for his remarks. Indeed, a number of people have said similar kind things, to such an extent that I almost think I must repeat the process of saying that I will not stand at the next election. It is the only occasion that has prompted a lot of nice things to be said to me in political terms for a long time. I must also say that, although it might have been, it was not the complexity of the rate support grant system that prompted my decision.

My hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) is a long-time critic of the present system. However, I must say that when the Government, after careful consideration, come forward with a major proposal for the reform of local government he cannot simply turn around and say that that will not work either, without producing an alternative. I believe that in the face of the difficulties of a complex system, which he has fairly criticised, the Government are absolutely right to come forward with a firm commitment to introduce legislation immediately after the election to introduce the new system and to follow the route rightly taken by our Scottish colleagues.

Mr. Alex Carlile (Montgomery)

Does the Secretary of State agree that it is extremely regrettable that for the past five years he and his colleagues in the Welsh Office have acted unlawfully? Does he also agree that it is disgraceful for restrospective legislation to be introduced now to try to get the Secretary of State out of that corner? Is it not as disgraceful as the retrospective legislation that has been proposed to help out Liverpool councillors? Will the Secretary of State tell the House what precedents there are, if any, for retrospective legislation of this sort? Further, will he tell the House what difference his intentions will make to the high level of unemployment in Wales?

Mr. Edwards

I am sorry that, as a lawyer, the hon. and learned Gentleman was unable to spot the difficulties himself and that it had to be the Government who brought them to his attention. I look forward very much to the hon. and learned Gentleman going to Welsh local authorities, and to those whom they serve, and telling them that he and his party will oppose this legislation. Welsh local government will be shocked and dismayed by such an attitude. We are seeking to validate what local government in Wales wanted, and what it still wants.

Mr. Barry Jones

That is not true.

Mr. Edwards

It is absolutely true. Then we shall be able to take the necessary decisions on rating and expenditure as quickly as possible. It is absolute nonsense for the hon. and learned Gentleman to threaten to delay this legislation. That could only do grave damage to local government in Wales.

Mr. Keith Raffan (Delyn)

May I congratulate my right hon. Friend on yet again obtaining such a favourable settlement for Wales. I said that last year, the year before that and also the year before that. No Secretary of State has done more for the Principality than has my right hon. Friend. That is recognised outside the House as well as inside it—on both sides, I believe.

Is my right hon. Friend able to give a further assurance to the House that the increase in teachers' pay will not be allowed completely to distort the 4.75 per cent. that he has allowed for pay and prices? Will he continue to emphasise, to Clwyd in particular, the need to tackle the problem of surplus school places? Tackling just 40 per cent. of the 16,000 surplus school places in Clwyd, as the director of education proposed, would release £750,000 for books and equipment.

Mr. Edwards

I entirely agree with what my hon. Friend has said about the need to remove surplus school places. He is absolutely right to emphasise that point. Without the consequences of the teachers' pay settlement, if it goes through on the basis that the Government have urged and the accompanying contributions that will have to be made by ratepayers, there would have been a fall in rates in Clwyd. If one makes a reasonable assumption about the contribution of local ratepayers to such a settlement, there is no need for rate increases in Clwyd, or they should be very small. That confirms that the settlement is a very good one for Welsh ratepayers.

Mr. Donald Coleman (Neath)

The right hon. Gentleman and the Secretary of State for the Environment have revealed once again this Government's illegal behaviour. Has this not come about because the Government have pursued local government over penalties and targets? What confidence can Welsh local authorities have that the right hon. Gentleman got it right this time?

Mr. Edwards

The action that we took and which has caused these difficulties was not because we pursued local government. We responded to local government representations; they wished the Government to do this. Now that we have found that the law does not permit us to do it, we are seeking immediately to validate the matter so that we can meet the wishes of Welsh local government. I hope that in doing so we shall have the support of the House of Commons; otherwise Opposition Members will have to explain why they want to damage and destroy Welsh local government by making it impossible for Welsh local government to proceed in the way that it wishes so to do.

Mr. Gwilym Jones (Cardiff, North)

Last night's news came as a great surprise, even as an unwelcome surprise. Wales is losing the best Secretary of State that it has ever had. Is my right hon. Friend able to reassure me that he will do all that he possibly can to ensure that the uncaring South Glamorgan county council will not again land my constituents with the highest rates increase in Wales?

Mr. Edwards

I am sure that all Welsh local authorities should aim to keep down their rates bills and to respond to the representations made to them by industry and domestic ratepayers. Although it is likely that the effect of the switch between district councils could lead to a relatively high increase in Cardiff rates, there is no reason why domestic rate bills in South Glamorgan should rise significantly in the period ahead.

Mr. Ray Powell (Ogmore)

Can the Secretary of State claim any legal knowledge of the statement that was made by his right hon. Friend the Secretary of State for the Environment, who claimed that only he had legal knowledge of this issue? Does the right hon. Gentleman have legal knowledge that would enable him to answer on the legal aspect of this issue? The right hon. Gentleman said that Welsh local government had not suffered because of the cuts in rates and that the House should support future legislation. If we look at the Government's record during the last seven years, we realise that local authority councillors all over Wales will be clapping their hands with joy because he sneaked to Pembroke last night to announce his resignation. Although we wish the right hon. Gentleman well and hope that his health will improve, we should be demanding his resignation today rather than at the next general election.

Mr. Edwards

I do not know that to go down to meet one's executive is to sneak anywhere. I told the executive in my constituency what I intended to do, and I hope that in similar circumstances the hon. Gentleman will do the same. However, I doubt whether the executive of the hon. Gentleman's local Labour party bothers to meet.

The hon. Gentleman asked me whether I have legal knowledge. I claim no more specialist legal knowledge than I suspect the hon. Gentleman has. I take the legal advice that is available to the Government. The hon. Gentleman referred to the consequences for local government if the validation is not carried out. If the Bill is not passed, the consequence will be that local government will have no money; it will have no grants from central Government. We shall be unable to make grants to local government. I leave it to the hon. Gentleman to work out whether that will be good or bad for local government.

Mr. Stefan Terlezki (Cardiff, West)

I echo what was said by my hon. Friends about my right hon. Friend the Secretary of State, who is to resign as a Member of Parliament at the next general election. The Opposition must surely acknowledge that my right hon. Friend is one of the best Secretaries of State for Wales that we have had. He will be missed by industrialists and local authorities and by all those whom he has served so well in the Principality. What advice is my right hon. Friend able to give to local authorities to enable them to spend more capital on house repairs?

Mr. Edwards

Of one thing I am absolutely certain. It is that my hon. Friend will be representing his Cardiff constituents in this House after the next general election and that he will be doing it as well and as vigorously as he has always done.

As for more expenditure on house repairs, this Government have made substantial allocations to Welsh local authorities for housing. I have spoken about the overall capital increase of 14 per cent. If Welsh local authorities continue to keep down current spending, which has been done far better in Wales than in England in recent years, we shall be able to continue to make additional capital available to them, because there is a relationship between keeping current expenditure down and having more money to spend on capital projects.

Mr. Allan Rogers (Rhondda)

Apart from party political issues, I wish the Secretary of State a healthy retirement. In fact, I hope that his health improves. Why has the Secretary of State not made a specific allowance within the grant settlement for educational development? In South Wales in particular, a massive re-education and training programme has to be undertaken because of the complete restructuring of our economy. My hon. Friends and I cannot find any money within this settlement that has been set aside specifically for the educational development that we so desperately need.

Mr. Edwards

I am grateful to the hon Gentleman for his opening remarks. When I meet Welsh local authorities they always argue that there are too many specific grants and that they do not want to go further down that particular route. However, I note the hon. Gentleman's advocacy of a specific grant for education.

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)

Will the Secretary of State make absolutely clear his position on teachers' pay? Does he assume that there will be a Government-imposed solution of the teachers' pay dispute, of the kind proposed by the Secretary of State for Education and Science? If that is so, parents will be very concerned about the possible turmoil that it will cause. What part of this settlement will lead to smaller classes, in particular for core subjects leading to the general certificate of secondary education? We want to make that system work, but there is insufficient money at the moment to make it work.

Mr. Edwards

On the last point, the hon. Gentleman knows perfectly well that we made additional sums of money available for the new examination system and, of course, local authorities have it within their power to vote further resources, not least by cutting down on surplus school places, as my hon. Friend the Member for Delyn (Mr. Raffan) has already said. I trust that the Government will not have to impose a settlement, because I hope that those engaged in negotiation and consultation will meet the requirements which the Government believe are essential if we are to have an education structure in this country that fully meets childrens' needs. That is what our priority should be.

Dr. John Marek (Wrexham)

Is the Secretary of State aware that local government will regard his statement as one of gross incompetence on the part of the Government, and that for the past seven years the local authorities in Wales have been fighting the depredations of the Secretary of State and the Government in trying to cut education, housing and social services? The Government's gross incompetence can be put right only if the legislation to be introduced by the Secretary of State frees local government to look after all the people in Wales. Does the Secretary of State understand that the legislation will be judged on that basis by the Opposition? It will be scrutinised with care to see what it does to let local government serve the people of Wales once again.

Mr. Edwards

The validity—or lack of it—of the hon. Gentleman's remarks is perhaps borne out by the facts. Education expenditure in Wales during the past five or six years has been virtually stable in real terms, although there has been a substantial reduction in pupil numbers, and expenditure on social services by local government in Wales has increased. The Bill that we propose to introduce will put local government back in the position that it thought it was in and will enable it to proceed with this rate support grant settlement. If such legislation is not passed promptly, there will be a delay in paying grant to local government, and that can only be damaging to it.