Rate Support Grant (Wales)

HC Deb 20 January 1986 vol 90 cc136-60 11.37 pm

The Secretary of State for Wales (Mr. Nicholas Edwards)

I beg to move, That the Welsh Rate Support Grant Report 1986–87 (House of Commons Paper No. 100), which was laid before this House on 18th December, be approved.

Mr. Speaker

Order. I ask hon. Members to leave the Chamber quietly.

Mr. Edwards

This is the sixth main Welsh rate support grant report that I have put to the House. It is a settlement which marks an important stage in the Government's strategy for local government finance in Wales—a strategy which aims to bring local authority spending into line with Government plans and to provide councils with the certainty that they require in order to manage their affairs efficiently and effectively. The fact is that this settlement is a very good one for Wales; but that it is good is largely due to the fact that authorities as a whole in Wales have virtually succeeded in 1985–86 in bringing their spending into line with the resources that were made available. Expenditure is now back at broadly the same level in real terms as in 1979–80, the level which we inherited from our predecessors. Since 1979 the total increase in rates has been kept to seven percentage points below the change in the RPI, and this has brought considerable advantages for ratepayers in Wales.

To achieve this, local authorities have had to reduce their overspending against the Government's targets from around £50 million in 1981–82 to £4.6 million in 1985–86.

Only five authorities out of 45 in Wales have budgeted to overspend this year. On the strength of this performance, and in the expectation that local authorities in Wales will continue to exercise restraint in setting their budgets for 1986–87, I have decided to dispense with expenditure targets. This does not signal any relaxation of the Government's spending strategy. On the contrary, the Government remain determined that local authority spending in Wales should not exceed the level allowed for in the settlement.

I have acknowledged that local authorities will face difficult decisions, but they know that if they succeed it is not the Government's intention to ask for a further reduction in the level of their spending. They will therefore be in a position to plan ahead, secure in the knowledge that they can expect the degree of stability in expenditure which they have asked me to provide. They should also remember that success in constraining current expenditure has enabled me to allocate more resources to capital expenditure in the past, and that the capital allocations that I announced on 3 December for 1986–87 are higher than those for the current year. I hope that we can build on this and continue to release resources for capital expenditure because of good performance on current account spending.

I turn now to the 1986–87 settlement. I announced the main details in my statement on 18 December, and hon. Members have since had the opportunity to examine both my statement and the rate support grant report. I do not, therefore, propose to repeat what I said then but simply to refer to the major features.

Total relevant expenditure is increased from local authorities' budgeted expenditure in 1985–86 by about £75.3 million to £1,597.1 million, an increase of 4.9 per cent. Current expenditure is £51 million or 3.8 per cent., higher than the comparable 1985–86 budgeted figure. Aggregate Exchequer grant is £54 million, or 5.3 per cent., higher than the sum in the Welsh rate support grant supplementary report 1985–86, and represents 66.8 per cent. of relevant expenditure compared with an effective percentage of 66.6 per cent. for the current financial year.

Mr. Keith Best (Ynys Môn)

Rose—

Mr. Edwards

Perhaps I might finish this point. The proportion of spending met by grant has, therefore, been maintained. Block grant is £44.3 million, or 5.5 per cent., higher than in the supplementary report for 1985–86.

Mr. Best

I thank my right hon. Friend for giving way. I welcome the 5.3 per cent. increase in aggregate Exchequer grant. Can my right hon. Friend say, therefore, why it is that the Association of District Councils, in its memorandum, which he will have seen, sent to Welsh Members states: The total of Aggregate Exchequer grant has been held at the same cash level as in 1985–86. This is a real reduction in total grant of at least 4.5 per cent. taking the Government's current view of inflation"? Has the association left something out? Can my right hon. Friend enlighten the House?

Mr. Edwards

The figures that I have been quoting are percentages. The percentage grant has not been reduced. The proportion of spending met by grant has not just been maintained, but has been marginally increased in Wales, because that produces a comparable rating consequence of the same poundage effect in England, and because Welsh local authorities have come close to meeting the Government's targets. I have just spelt out to my hon. Friend the actual percentage increases on relevant expenditure and on current expenditure, and he knows the expected inflation rates over the period. He can therefore see that the information which, as I understood it he quoted from the district authorities misinterprets the position.

Hon. Members will note that total expenditure—I think this is the point that my hon. Friend was pressing—aggregate Exchequer grant and block grant have all been increased in excess of the forecast rate of inflation projected by any of the main forecasters. To any fair-minded appraisal, this represents a realistic and balanced settlement package.

Some local authorities have criticised the fact that the increase in provision for current expenditure—that is, spending on wages, salaries and other running expenses—is below the expected level of inflation. Others argue that the settlement does not fully take into account the levels of pay increases already agreed within local government and the expected levels of future pay awards. I have to say this in response to that kind of argument. No organisation, whether in the public or the private sector, should seek simply to pass on the costs of higher pay rises to its consumers, or, in the case of local government, to the taxpayer and the ratepayer. Local authorities must concentrate on achieving more moderate pay awards. Where awards exceed inflation, they should seek to absorb the excess costs by greater efficiency. It is not the intention of central Government that such awards should be paid for at the taxpayer's expense.

Dr. John Marek (Wrexham)

If the right hon. Gentleman is trying to argue that case when he makes allowance for wage awards that are well below the rate of inflation he is arguing for depressing the standard of living of thousands of people in the Principality.

Mr. Edwards

If the hon. Gentleman is arguing that those wage settlements above the rate of inflation should be passed on to the ratepayers, he is asking that the standard of living of ratepayers should be depressed. If he is producing an argument that we should be concerning ourselves because wage settlements are running below the grant settlements that I have announced for the general rate of inflation, I wish that that was the situation, but that is a wholly hypothetical situation with which he confronts the House and I do not think that we need pursue it much further.

I am of course aware of the special circumstances surrounding the teachers' pay dispute. I deeply regret that this dispute has gone on for so long, but the blame for that must rest with the unions, which have refused to negotiate. The Government have a responsibility to balance the interests not only of pupils and teachers, but of taxpayers and ratepayers. The Government have made it clear that we are prepared to make available for this purpose up to £1.25 billion additional resources over a period of four years—equivalent to about £75 million in Wales. Already part of that total—£40 million—is being made available in 1986–87 to implement the new midday supervision arrangement in England and Wales. The remainder continues to be available for a new salary structure if the conditions for its release are met. This additional provision would, of course, be reflected in GRE and block grant for 1986–87 and future years. That is a reasonable offer and councils should allow for it in setting their rates. Throughout this dispute the Government have done what they can to secure an outcome which is fair to all.

I refer now to the mechanisms for distributing the resources allowed for in the settlement and for maintaining downward pressure on spending. Expenditure targets for individual local authorities have been replaced by a tough block grant system. This will provide a fairer way of encouraging councils to constrain expenditure. The precise mechanisms have been developed in close consultation with the local authority associations and in particular take account of proposals put forward by the Welsh counties committee. Under those arrangements, for most authorities, for any given increase in expenditure there will be a reduction in grant resulting in a significantly higher proportion of costs being borne by the ratepayer. But, perhaps more importantly, the new system also offers positive financial rewards to ratepayers in those authorities where spending is held down.

If authorities in general spend in line with the settlement and draw on their reserves to the same extent as in the current year, rate rises need not, on average, exceed 3 to 4 per cent. For those authorities which budget to spend below the level of increase allowed for in the settlement, there will be very significant rating benefits. The level of rate increases is vital not only to domestic ratepayers but to business and commerce. Commercial and industrial ratepayers contribute approximately 40 per cent. of rate income and there is evidence that high rates reduce the profitability of firms, threatening existing jobs and deter growth. Councils should recognise that and rate in line with the settlement—a settlement which allows revenue spending to grow in aggregate by broadly 5 per cent. or, as I have already stressed, by rather more than the likely rate of inflation.

Mr. Dafydd Wigley (Caernarfon)

The right hon. Gentleman has again been misleading the people of Wales as well as the Chamber by saying that we can expect rates to be held at the present level or even reduced. Does the right hon. Gentleman not realise that in the county of Gwynedd a rate increase of 20p out of the 23p that it has announced was needed just to maintain the services at the current level? He has just announced that that level is satisfactory because it is in line with the targets that were announced by the Welsh Office in 1985. If it is acceptable to have that level of services this year, why does he expect Gwynedd either to reduce the service next year or have such a massive increase in rates?

Mr. Edwards

I do not agree with the hon. Gentleman. I have been talking about the average percentage increase across Welsh local authorities as a whole. Clearly that varies from one county and district to another. I made that clear in a previous statement to the House. I take the opportunity of apologising to the hon. Gentleman, because in the press handout there was an error that affected the forecast rate increase on certain assumptions in one of his districts. Having said that, it is also clear that if the settlement in Gwynedd is in line with the assumptions that I have spelt out there need not be a large increase for ratepayers. Indeed, it could be below the general level for Wales. Gwynedd has done well out of the settlement.

I move on to say what happens to grant if authorities do not spend in line with the settlement. If authorities can hold their spending broadly in line with the settlement, the amount of grant claimed will equal the amount of grant available. However, if aggregate spending exceeds the level of expenditure provision there could well be an underclaim of grant. The hon. Member for Caernarfon (Mr. Wigley) tabled a question about that, and I have answered it. I have already told the House that the amount of any such underclaim will be retained in Wales for the benefit of local authorities. I shall await the 1986–87 budget returns before deciding the method of distribution. In setting their budgets, individual councils will therefore be most unwise to assume that they will necessarily benefit from the distribution of any resources unclaimed as a result of overspending. We will take the decisions when we have the budget returns.

Against that background, I am surprised and extremely concerned by press reports which suggest that some authorities are planning what appear to be wholly unreasonable increases in expenditure and rates in 1986–87. Apparently some councils are contemplating expenditure increases of almost double the likely rise in costs in the economy as a whole. In some Welsh counties there is talk of rate increases approaching 20 to 30 per cent.—between five and seven times the rate of inflation. One authority, Dyfed, is, I understand, considering rate increases of 30p in the pound—almost 20 per cent. If it goes ahead with such a proposal, I believe that many ratepayers in Dyfed will think it disgraceful. If that authority budgeted in line with the forecast rate of inflation its rates could, in fact, actually fall. Media reports have suggested other examples of proposals for increases in expenditure and rates which, if the reports are correct, I can only regard as totally irresponsible. These councils are well aware that such action would result in unacceptable overspending, which would certainly jeopardise future stability and the opportunity that the settlement provides for progress in later years. Local authorities have a duty to act responsibly in setting their budgets and in controlling their expenditure. I urge them to think again if they are considering the sort of figures that I read about in some newspapers.

If local authorities act irresponsibly in 1986–87, they will inevitably create major difficulties for the future. If they want more capital expenditure, and they all say that they do, and if they want the ceiling of expenditure to rise in line with inflation, which is the result that they have asked us to produce, they should not throw away the opportunity that the settlement gives them. There is no need for overall expenditure in Wales to exceed the amount allowed for in the settlement. As in any organisation, there are real opportunities in local government, given the will for greater efficiency and better use of resources.

In its report published in 1985, the Audit Commission identified considerable scope for efficiency savings within local government. Over £1 billion of potential savings have been identified for England and Wales. While no separate estimates have been made for Wales, there can be no doubt that opportunities for savings exist, and those resources should be made available for other use, including the development of priority services.

Mr. D. E. Thomas (Meirionnydd Nant Conwy)

The Secretary of State might recall that when he made his initial statement to the House I took up with him the issue of the Audit Commission's sample in Wales. Will he review that matter and ensure that separate figures are produced for Wales so that we can see the so-called savings in Wales and ensure that the costs of Welsh local government are reflected in them?

Mr. Edwards

As the hon. Gentleman will be aware, I do not run, and cannot dictate to, the Audit Commission, but in due course it hopes to be able to produce such figures. I agree that it would be helpful to have them. The Audit Commission has made it clear in presentations that I have attended that it thinks there is plenty of scope for savings in Wales, as in England. The general statements that it makes are as valid there as elsewhere. Members of the Audit Commission, Mr. Banham and others, have come to Wales to spell out to Welsh local authorities ways in which they could make savings. They have identified a number of such areas.

Already good examples have been set by some authorities in Wales, and there is every reason why ratepayers should expect all authorities to seek efficiency savings on their behalf. I have seen correspondence from the treasurer of Clwyd county council in the past few days. I would have rather more sympathy if it were not one of the counties which has increased rather than decreased the number of employees, as many other councils and even more districts have done. [Interruption.] I want efficiency in local government and the best possible return—that is in the interests of employment in the area—and the best use of resources. I cannot think of a way more guaranteed to create unemployment than for local authorities to waste their money and have excessive rate burdens for local industry. Ratepayers should demand evidence from their councils that there is a continuing programme of efficiency reviews and action to implement them. They should seek evidence that those reviews have produced savings and that the resources thus released have been put to good use. In every local authority area it would be of great benefit to everyone if a series of questions on those issues were repeatedly asked.

In education, for example, the real educational benefits for children, which arise as a consequence of rationalisation and taking surplus places out of use, are accompanied by substantial revenue savings which can be redeployed to advantage elsewhere. One example of that is my area of Dyfed, where Her Majesty's inspectors have revealed that in the primary sector there are 11,000 surplus places. If some of those were redeployed, there would be more resources for other parts of the education service.

Mr. Alex Carlile (Montgomery)

May we take it from the hon. Gentleman's use of the word "rationalisation" that he is now giving official blessing to a policy to close village schools in rural Wales?

Mr. Edwards

Liberal Members are trotting around Powys saying that there should be no closure of rural schools. The decision on which schools should close must be taken by the local education authorities. I say to the hon. and learned Gentleman, especially coming from an area with the highest level of spending in England and Wales relative to GRE, which has a low rate burden and which has a very good settlement compared with any other local authority, that I hope I never hear him complain about inadequate education provision in schools in other areas when he is not prepared to contemplate any change in the education structure in his area despite there being a substantial reduction in the numbers being educated. That is the sort of double standard that we have come to expect from the Liberal party. His comments do not deserve to be taken seriously.

Mr. Keith Raffan (Delyn)

Does my right hon. Friend agree that surplus places mean not only bad finance but bad education? How can we justify one teacher teaching four age groups in one classroom? How can that be good education?

Mr. Edwards

What is absolutely and undoubtedly clear is that if there is a substantial reduction in school numbers in one area, but we do not alter school provision, in other areas the standard of education will not be as good as it might otherwise be. As the Government have maintained provision substantially unaltered—there has even been an increase in some areas—during our period in office, there can be no complaints from those who have refused to accept rationalisation.

Some authorities have been very slow to grasp that opportunity, and they should be invited to explain why. There are many other examples of where savings can be achieved, including improved maintenance of buildings, efficient use of energy, better management of vehicle fleets and better use of resources generally. I hope that during this debate hon. Members will encourage their councils to take the necessary action to achieve savings. We all have a responsibility to identify and eradicate waste and extravagance.

I repeat what I said at the start. The settlement for 1986–87 is a very good one for Wales. Anyone who listened to the earlier debate will recognise that fact. Welsh local authorities have a much easier task than their English counterparts. That is the reward for sensible behaviour. Welsh local authorities have now been given an opportunity to set local government finance on a secure base. If councils choose to ignore that opportunity and unnecessarily increase their expenditure and add to the burden of rates, they will be guilty of abdicating that responsibility. I hope that hon. Members on both sides of the House will join ratepayers in discouraging such behaviour.

Mr. Roy Hughes (Newport, East)

That speech lasted 25 minutes.

Mr. Edwards

The hon. Gentleman complains, so I shall never give way to him if he seeks to intervene in a speech that I am making.

I commend the settlement to the House.

12.3 am

Mr. Barry Jones (Alyn and Deeside)

The Secretary of State is very testy tonight. I hope to make a shorter speech than his. He has delivered his sixth local government budget, and again he has waved a big stick. It is bitter medicine for both the professional and elected local government leaders in Wales.

Last month, John Morgan of the Western Mail, wrote: Welsh Secretary Nicholas Edwards will today open the final chapter in his campaign to bring local government expenditure down to 1979 levels. That report exposes the unpleasant objectives of Ministers for Wales and local government. It is a matter of pride to the right hon. Gentleman that he has dragged expenditure down to 1979 levels in real terms, but we regard it as a failure by the Government to comprehend the huge demand made on local government services by hundreds of thousands of Welsh citizens.

We say that the Government are blind and deaf to the real needs of our truly beleaguered communities. It can also be argued that the policy that the Secretary of State has outlined today is unworkable. There has been a cut in grant in real terms. The latest calculation by the House of Commons research staff is that the overall cut in real terms between 1978–79 and 1986–87 is as high as 12.4 per cent. The right hon. Gentleman has robbed our local government system and taken away its independence.

In six years of office, the Government have presided over Welsh district councils increasing their budgeted spending by only 46 per cent. During the same period, the retail prices index rose by 74 per cent. Beside the widespread bitterness at this proposed settlement, there are two strong and justifiable criticisms. The first is that even local treasurers say that the settlement is too complex with many quirky consequences, and the second is that the settlement does not take account of pay awards well in excess of inflation.

I shall quote Mr. Morgan of the Western Mail again, this time from 20 January, when he wrote: With the growing feeling that the Welsh councils have been 'taken for a ride' has come a veiled threat from the Welsh authorities that they will not knuckle down indefinitely without positive action from the Welsh Office to offer even greater incentives for doing so … the question that is being asked behind closed doors is why should the Welsh cut back while the English continue to spend? Nothing that the right hon. Gentleman has said today will make Welsh local authorities change the view that Mr. Morgan so accurately chronicles. There is another criticism, which is encapsulated in an answer given to me on Monday 20 January. The Secretary of State replied: On 12 December 1985 there were 181,496 unemployed claimants in Wales. The corresponding figure in December 1979 was an estimated 78,476 and the increase between the two dates is 103,020 or 131.3 per cent. The right hon. Gentleman forgets too easily that mass unemployment puts huge pressure on the services provided by our councils, and the Government are not responding effectively to the social and economic emergency that is creating throughout Wales. The right hon. Gentleman has today ignored the crucial problems that bother local authority leaders of all parties in Wales when it comes to facing the problems that he is setting.

I should like to make a plea on behalf of my own county of Clwyd. I ask the right hon. Gentleman to receive a deputation from Clwyd urgently to try to head off a financial crisis. So serious is the matter that chief officers have met hon. Members who represent the county. I have confidence in the county's chief executive and the vice chairman, Mr. Elwyn Conway, a responsible county council leader who has left me in no doubt about the problems that the county faces. Clwyd does not want a rate rise of more than 10 per cent. Will the right hon. Gentleman respond sympathetically and urgently?

I shall quote from a letter that the county treasurer has sent to hon. Members, and I know that a letter was sent to the right hon. Gentleman. The treasurer writes: Clwyd will receive in 1986–87 a much worse grant settlement than in previous years and the basis of the Welsh settlement has been altered to Clwyd's specific disadvantage, and the legal and technical changes introduced by the Welsh Office will produce a situation where there is now every likelihood of a larger increase in the County precept. The problem for Clwyd is caused by technical changes in the Rate Support Grant allocation where the Government is assuming that Welsh County Councils will be spending about 5% more next year than in the current year and for this they have provided an average increase throughout Wales in block Grant of the order of 5%. This will represent"— this is the crunch for Clwyd— a Clwyd increase of only 1.8% and will mean the loss of Grant amounting to at least £2 million.

That is not the end of the tale. The county is trying to cope. There is widespread parental unease about the cuts in schooling provision. Many parents are sick with worry. I will detail in brief the cuts in the education service. They are not peculiar to Clwyd. There is reduced provision for nursery education, 47 teachers and 39 nursery assistants; a reduction in the education technology budget; deletion of secondary teachers required to maintain curriculum level; increased prices for school meals; delete the net cost of 60 teachers seconded for training; a cut in further education colleges; a reduction in ancillary staff; and a reduction in the number of primary teachers. That totals £1,130,000.

When we on the Opposition Benches hear public schoolboys telling us that, it is rather hard to take, because we know that more grants than ever before are being given to support private education in Wales. In reply to the charge that local authorities in Wales do not save as much as they should from falling school rolls and surplus places, it must be pointed out that in many cases, especially perhaps in rural areas, the local school is more than a school. The prospect of closing it, if not unthinkable, carries all sorts of social and community difficulties. The plan by the Secretary of State might be an economist's dream, but it is not what the community wants. The trouble with this rate support grant settlement is that it is not what our communities need and it is not what they deserve.

I have a brief point to make about Gwynedd and Clwyd and the police force. We all want to see the restoration of the policeman on the beat. Rural and community policing is declining, and elderly people are increasingly afraid of break-ins, muggings and harassment. The right hon. Gentleman knows and might even agree with that. I am seeking support from the right hon. Gentleman for the joint approach of the Clwyd and Gwynedd county councils to the Home Secretary. The chairmen of both councils believe strongly that rate borne increases in the police authority budget at a time when other local government services are being severely restricted and reduced, starkly illustrate the inadequacy of the resources made available to the two counties in the rate support grant.

Mr. Best

Does the hon. Gentleman accept that provision is made in the settlement for a 7.5 per cent. increase in police pay? How does he square that with the gloom and doom that he has been spreading about this settlement?

Mr. Jones

The hon. Gentleman has shot the Government's case apart. One of the fundamental defects is that within the settlement there is insufficient provision for the 7.5 per cent. police pay rise. In his intervention the hon. Gentleman is arguing against his right hon. Friend.

Powys county council received an increase of just 1.8 per cent. I am informed by the council that in real terms that represents a cut in grant of more than 4 per cent., or £2 million. The council tells me that this underfunding is made more injurious because Powys is sparsely populated and highly dependent upon rate support grant.

Powys says that there will be a precept increase of up to 25 per cent. The Secretary of State must have it wrong. Several counties with potentially astronomically high increases in April have been mentioned and the right hon. Gentleman must bear the burden of the blame. There could be a cut of £600,000 to the education authority in Powys.

In Mid-Glamorgan, because of the penal nature of this settlement, the education department will be forced to cut £750,000 next year. The social services department is being forced to cut £150,000. It is said that the likely rate precept increase will be at least 10 per cent.—probably more. I have been told by Mid-Glamorgan that the education cuts will mean more teaching heads in schools and a further reduction in the number of teaching staff.

Mid-Glamorgan exemplifies the terrible problems of coalfield and valley communities. I plead with the Secretary of State to be more generous, because the socioeconomic problems are growing by the month. The environmental health chiefs are monitoring the health of pupils returning to school after the Christmas shutdown. Cases of dysentery are being reported. New figures show that last year there were 572 cases in Wales compared with 48 in 1982. In a recent article in the Western Mail, Mr. Roger Dobson wrote: Dr. Elizabeth Roberts, medical officer in Mid-Glamorgan, believes that social conditions must be a factor in the return of dysentery cases. We have not seen so many cases since before world war 2. I urge the Secretary of State to look carefully at the predicament of Mid-Glamorgan county council. I remind the Secretary of State of what the district councils have been saying about the settlement, which he discribed tonight as being better than usual. The Municipal Journal states: 'Disappointing' is the verdict of Cllr Tyssul Lewis, chairman of the ADC's Welsh Committee, on the annual rate support grant settlement … 'The Welsh Secretary described the settlement as a challenging one—it certainly is', he said. Cllr Lewis said that despite the abolition of targets the RSG system is 'just as complicated and involves as much Government interference'. He added: 'The settlement means that either services will have to be cut drastically or many district ratepayers will face rate increases of over 10 per cent. next year'.

I shall give just one instance of a district council problem. Afan has been unjustly penalised because of the change in the grant mechanism. If Afan increases expenditure by the rate of inflation, it will face a rate increase of more than 11 per cent. I am informed that, because of the anomaly, tenants may face council house rent increases of more than the Government's suggested 65p.

There is a question mark over nursery education in Wales. Class sizes are bound to increase. Joint financing schemes between the health authorities and county councils may fall apart. We all want local authorities to cope with child abuse. We therefore need more, not fewer, social workers. There is fear in the counties that services for the elderly are at risk. The recent public expenditure White Paper gives us no respite. The cuts continue apace.

The Secretary of State has attempted to sell his settlement as one better than usual. That is not good enough. The settlement's complexity has been denounced by local authorities. It is a mean settlement because it in no way copes with the challenge of pay increases above the rate of inflation. I want the Secretary of State to convene an urgent meeting with local authorities to discuss a less complex and more generous approach. The settlement is not acceptable because council rates will rocket. We shall oppose it.

12.20 am

Sir Anthony Meyer (Clwyd, North-West)

The hon. Member for Alyn and Deeside (Mr. Jones) did not make much more of a fist of picking holes in the settlement this time than he did on 18 December. It is generally regarded as acceptable throughout Wales.

We have a problem in Clywd, to which my right hon. Friend the Secretary of State made a cursory reference, and on which the hon. Member for Alyn and Deeside dilated at some length. When my right hon. Friend announced the rate support grant settlement to the House on 18 December, it was generally received as a fair one, unlike the reception accorded to the English settlement. The hon. Member for Alyn and Deeside was hard put to it, then as now, to find any solid criticism. Such vague complaints as he had to make did not relate specifically to his county of Clwyd. My hon. Friend the Member for Delyn (Mr. Raffan), the hon. Member for Wrexham (Dr. Marek) and I had no reason to make any particular point about the treatment of Clwyd. Indeed my right hon. Friend told me: If … Clwyd can limit the year-to-year growth in its spending to 5 per cent., I expect that it will have a similar increase in rates."—[Official Report, 18 December 1985; Vol. 89, c. 333.]

The county treasurer, Mr. Greening, when he saw the actual figures, saw at once that something was wrong— so wrong that he thought that it must be a misprint. The Christmas holidays were upon us and it was too late to warn hon. Members or to get an answer from the Welsh Office until after the holiday. The matter is hugely complicated, and I am not sure whether even the chief executive understands it.

What seems to have happened is that the block grant has been calculated on the 1985–86 budget figures instead of, as hitherto, on the 1986–87 notional figures, which were the figures used last July by the Welsh Office in the exemplifications that it gave to the county councils of the sort of level of grant that they could expect for any given level of increase in expenditure. Moreover, as far as I can make out, these were the figures that my right hon. Friend was using when he told me on 18 December that Clwyd's precept would not need to rise by more than 5 per cent.

Perhaps my right hon. Friend will tell me that the county council freely chose that method of calculation, and it is true that it did. However, it did so on legal advice from the Welsh Office, legal advice that would have been well founded for England but which for Wales has had greatly distorting consequences. Because of the altered base of this purely technical change, Clwyd will get a mere 1.8 per cent. increase in grant compared with a Welsh average of 5.3 per cent. and 11.8 per cent. for some counties such as Dyfed.

Mr. Nicholas Edwards

My hon. Friend has given an accurate technical account of the basis of the figures, and I am glad that he has acknowledged that he was aware of the technical change, which was discussed in detail with the Local Authorities Association. However, my statement about the rate consequences in Clwyd was not based on outdated figures—I believe that that statement was true and is true.

Sir Anthony Meyer

I accept what my right hon. Friend has said. It is not part of my case that Clwyd is guiltless in this matter. However, the altered basis means a loss of no less than £2.2 million, compared with what the county had quite reasonably budgeted for. In those circumstances, there is not a hope in hell of keeping the rate increase to 5 per cent.—it is unlikely that the council will be able to keep it to 15 per cent.

I am not going to argue that Clwyd has been invariably prudent in the management of its finances. I do not share all the criticisms made by my hon. Friend the Member for Delyn. In particular, I think that the expenditure on Bodelwyddan castle is, on balance, justified. However, many economies, particularly at shire hall, should have been made, but have not been—not always, or even usually, because of any failure by officers to prepare economies but because, with a hung council, there is no disciplined party with the electoral courage to carry through measures that raise a storm.

However, on the present issue I believe that all Clwyd Members are more or less at one. The county has an unemployment level that is as bad as any in Wales. It desperately needs infrastructure developments, training schemes and expanded education. To push the county into a position where it has to make sharp increases in rates, thus running the risk either of driving more jobs away or of facing rate capping, leading to a cut in essential services, is completely unacceptable.

The reply sent by Mr. Morgan of the Welsh Office on 14 January to the county treasurer, blandly admitting that Clwyd had lost £2.2 million and that this was "unfortunate", cannot possibly be the Welsh Office's last word on the matter. Perhaps my right hon. Friend the Secretary of State for Wales will tell me that later in the year there may be some unused grant that can be reallocated to Clwyd, but that will be far too late. Unless we know now more or less how much it will be—and by the nature of things we cannot—it will be pretty well useless if the object of the exercise is, as I understand it to be, to get councils to budget more carefully.

My right hon. Friend rightly made much of the need for certainty. What has happened in Clwyd's case has had exactly the opposite effect.

12.25 am

Mr. Alex Carlile (Montgomery)

Writing in this morning's edition of the Western Mail John Morgan said this: One minute the Welsh Office signals local authorities to spend more and the next minute it slams down the shutters and imposes a moratorium. That is a correct assessment of the situation. It appears that the Secretary of State for Wales has become so involved in the astonishing complexity of his own formulae that he has lost sight of what is really happening in the counties and districts of Wales.

In general terms, the effect of the 1986–87 settlement can be summarised very simply. The block grant fails to take into account the real level of expenditure that is necessary even to maintain existing services. As a result, even in what the Secretary of State dubs fortunate counties like Powys—later I shall take issue with him on that point—the authorities face a virtually impossible and unbridgeable shortfall. It is part of the pattern of declining Government support.

In real terms, there has been an overall cut in grant of 12.4 per cent. between 1978–79 and 1986–87. The settlement for 1986–87 fails to take into account adequately the settlements to local authority workers—settlements reached by these local authorities on the basis of the best advice and of their knowledge and assessment of the situation—and it wholly fails to take adequately into account the effects of the eventual settlement of the teachers' strike.

The result is that the Welsh counties are facing cuts in services. I said earlier that the Secretary of State dubbed Powys a fortunate county, which apparently receives a great deal of money from the Government. Let us consider the effects upon schools in that so-called fortunate county, which happens to be the one in which my Montgomeryshire constituency is situated. I have to declare an interest. I have three children in Powys county schools. Indeed, I believe that I have more children in state schools in Wales than have the whole of the Conservative Benches added together. We know what is going on in Powys schools.

I must remind the House that I am referring to an apolitical county council. It has no political axes to grind. It is trying to make an honest endeavour to meet the needs of the population. Tomorrow the education committee for the county of Powys will have some extremely difficult decisions to make. There is no doubt, as the county treasurer would tell the right hon. Gentleman if he were listening, and as county councillors would tell him if he were listening, that the Government's policy means that now they have to choose whether to abolish nursery education in Powys. What a disgraceful indictment that would be of this Secretary of State and this Government. He referred to county councils abdicating their responsibilities. The sooner he abdicates his responsibility the sooner their might be some possibility of services at least being maintained in the Welsh counties.

Powys county council education committee has to decide, too, whether to close down village schools. Tonight we have heard the Secretary of State use the word rationalisation in the context of education. Having heard that, we know that the Government set no store by the place of village schools as part of the community. The Government do not understand villages that are threatened by the closures of their schools, such as Llanerfyl, Llandinam and Bausley—only three of many threatened in my constituency. The closure of an effective and popular school will severely damage community life.

The Minister will no doubt fall back on the long discredited Gittins report, which concluded that small village schools were not good for children's education. The parents in my constituency do not doubt that village schools work, not only for the village, but for the children. They provide an excellent education.

Powys county council education committee will have to decide whether money should be made available for textbooks in high schools. The Government refuse to believe the truth of that assertion. Yet I have told the Minister before that in one high school in my constituency the head teacher allows his heads of departments 80p per child per year for the purchase of materials and equipment. In the high school that one of my daughters attends that figure of 80p is increased to the sum of £1. For example, the head of the French department has £1 per child per year to spend on resources and materials. That is the reality of what is happening in the so-called lucky county in Wales, and the reality of what the Government are doing to local government in Wales.

The schools are even dirtier than they were before. In Powys the council has had to cut down on the amount of cleaning carried out, because of the Government's policy. The council cannot afford to employ enough cleaners to clean the schools to their former standard.

The parent-teacher associations whose traditional role has been to provide extras for the schools—the things that turn a successful school into a successful community school—are now being forced to agonise about whether they should buy the books, the money for which the taxpayer has already paid the Government—but which the Government are not returning to the local authority.

In addition, all other county council services are affected. If the right hon. Gentleman cares to drive over the rural roads of Powys he may find them bumpier than he would have believed possible. If he believes that the lessons of the Beckford inquiry should be learnt, he will discover that social services departments in Wales do not have the money to put them into effect.

If the Secretary of State believes that consumer protection and trading standards departments should exercise their delegated powers to bring to book those who cheat the public, he will discover that in many Welsh counties they cannot afford to consider most prosecutions. If he believes that the county smallholdings policy which Powys has successfully operated for so many decades is worth anything, he should give more money to that county so that the policy can be perpetuated and enhanced. If he continues as he has been doing, counties with smallholdings will be forced to sell them off, which will toll the death knell for more young farming prospects.

The Government are dismantling the rural infrastructure. We can draw only one small crumb of comfort from the appalling statement that we heard from the Secretary of State tonight. The people of rural Wales have rumbled him, and he will learn his lesson in due course.

12.34 am

Mr. Keith Raffan (Delyn)

May I follow the remarks of my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer). To make my points about the current predicament of Clwyd county council, I must refer to the background to the settlement. At the time of last year's settlement, Clwyd county council was given a provisional expenditure figure for 1986–87 of £161.3 million. In July last year, my right hon. Friend the Secretary of State said in his provisional statement that if Clwyd's spending could be contained to its 1985–86 budget level plus 5 per cent.—or £164.6 million—grant entitlement would be £94.6 million. Then in December last year, in the final statement on the rate support grant, the spending figure was adjusted to £163.7 million, which was a reduction of £900,000, giving rise to a grant of £91.9 million, which was a massive reduction of £2.7 million.

In July, Clwyd understood that it would not be penalised if its spending was contained to its 1985–86 budget level plus 5 per cent., but now its grant has increased by only 1.8 per cent., whereas the average for all the counties of Wales is 5.3 per cent. and Dyfed is receiving 11.2 per cent.

I, too, wish to quote from the letter to the county treasurer, Mr. Ralph Greening, from Mr. Morgan of the Welsh Office. On 14 January he wrote: We have adopted the practice of issuing in July provisional figures for the RSG settlement to assist local authorities. How can provisional figures possibly assist local authorities when they are so way out? No one expects provisional figures to be confirmed exactly, but Clwyd county council is entitled to expect something near to the provisional figure.

To recap, may I say that Clwyd was initially led to expect a lower grant than it was given in the provisional statement in July. It was encouraged to expect a higher grant in that statement, on the basis of which it budgeted, only for the grant to be lowered once again in December. The county council is now in a serious financial crisis, admittedly aggravated by its own inability to control its spending. I repeat my hon. Friend's quote from Mr. Morgan's letter. He said: Because we"— the Welsh Office— also had in 1986–87 the uncertainties caused by the introduction of a new GRP schedule"— that is a grant-related poundage schedule— to replace targets the figures were inevitably more likely to change than usual, and I agree that it is unfortunate that this year Clwyd's figures changed to the extent that they did. It is not just unfortunate, it is disastrous. The GRP schedule has had a devastating effect on Clwyd, with a loss of £2.2 million in grant.

I should be grateful if the Secretary of State would explain to the House, not in the technical jargon beloved of the Treasury, but in layman's language so that I and the House can understand it, the grant-related poundage schedule. If we do not understand it—I admit I do not—how can we explain it to our county councillors, let alone to the ordinary man in the street?

Dr. Marek

For years the hon. Gentleman has argued that Clwyd county council could make massive savings in its administrative costs and that there is much waste. Is he now arguing that this cut in grant for 1986–87 is disastrous for the council, and that it cannot make savings in administration or anything else? If so, it is a different argument from the ones that he put previously.

Mr. Raffan

The hon. Gentleman has jumped the gun. I was about to make some points—as I always do—about Clwyd county council's spending. I adhere to the position that I have consistently expounded, and I am glad that the hon. Gentleman remembers it so well. The GRP schedule, when added to the fact that the county council has allowed its spending to get completely out of control, has had a disastrous effect. I shall expound on that in more detail in a minute.

My understanding of the consequences of the GRP schedule, as opposed to how it works, which I do not begin to understand, and which I do not believe most county councillors understand—unfortunately I was not present at the meeting with the chief executive of Clwyd last Friday because I was attending a debate here, but I believe he made it clear that he was not sure whether he understood it, for which I do not blame him—is that they hit authorities whose spending is out of control. That is why Clwyd is so hard hit. If, like the districts within Clwyd, Clwyd were a reasonable spender, it would be in a much more favourable and a much happier position. Nevertheless, that does not explain why the July provisional figure was so way out. It cannot assist a local authority to be encouraged to budget on the basis of a considerably higher grant than it receives. That causes chaos for it.

Clwyd's position is of course severely aggravated by the fact that it has allowed its spending to get so out of control. Last year's settlement for Clwyd was widely regarded by hon. Members of all parties, if not publicly, certainly privately, as generous. Indeed, the county treasurer, Mr. Greening, conceded as much. At that time the county council had a real opportunity to bring its spending under control, but it ducked the issue. It has only itself to blame for the consequences.

The irony is that many of those Clwyd county councillors who strongly criticise supposed central Government interference in their affairs, as soon as they face critical financial problems largely of their own making, are only to happy to try to pass the buck back to central Government. The message must go out strongly from this debate, from the Front Bench, that Clwyd must now, without further delay, put its house in order.

I was glad to see in the minutes of the policy finance and resources committee meeting on 21 November that Clwyd is coming round to my view on the need to bring in management consultants. According to the minutes, it discussed possible benefits of using independent organisation management consultants in a detailed review of council services"— I hope council staffing will also be included— with a view to reducing overall expenditure levels …It was agreed the matter be investigated further. I hope that the matter will be investigated further, quickly and thoroughly, and that action will be taken on the basis of that investigation. I also hope that the full education committee will reverse the irresponsible decision taken last week by a narrow majority of the education (development and general purposes) sub-committee not to put out to consultation the director of education's "Review of primary schools' accommodation." How can such action be justified when there are 16,000 surplus places in Clwyd, when the teachers' unions agree that there must be action to deal with the situation and when it is widely agreed that the surplus places are bad, not just for finance, but for education? One teacher, however good—and the teachers in our small rural schools are second to none—cannot properly teach four age groups in one classroom. Not putting the review out to consultation cannot be justified when an estimated £640,000 could be saved on a recurring basis if the report was implemented.

Finally, with the county already paying £8 million a year in interest and repayment of capital, capital spending must be strictly limited to statutory obligations.

Even before the loss of grant, it was generally estimated that Clwyd faced a 17p rate rise due largely to the council's failure to bring its spending under control. That rise would be devastating for local industry and jobs, let alone an intolerable burden on domestic ratepayers. It is no use the chief executive of Clwyd county council expressing in a letter to me, as he recently did, his anxiety about the council's high unemployment figures, when the council's own spending policies are ensuring that unemployment not only remains high but increases.

12.45 am

Mr. Allan Rogers (Rhondda)

It is with great trepidation that I intervene in a Freudian dispute. Perhaps I had better leave it to the hon. Members for Clwyd, North-West (Sir A. Meyer) and for Delyn (Mr. Raffan) to fight out between themselves what is the true position in Clwyd. I am sure that the fight will be developed considerably in north Wales over the next few months.

The Secretary of State for Wales told us that we have reached an important stage in his financial strategy for Wales. I agree that it is an important stage in the continuing reflection of the Government's hypocritical policies that in Wales have created private wealth and public squalor.

In the limited time that is available I shall take up the Government's repeated claim that they are spending more money on local government, the Health Service and education than in previous years. Welsh Office Ministers reiterate the claim, and recently the Secretary of State told a Welsh Joint Education Committee deputation that there were 12 per cent. fewer schoolchildren and that education expenditure in real terms was as high in 1984 as it was in 1979. He said that he could not understand why there were so many complaints of deterioration in education provision. It is not true that expenditure in real terms is at the same level now as in 1979.

Mr. Nicholas Edwards

It is higher.

Mr. Rogers

We do not accept the calculation of the Welsh Office of expenditure in real terms. The fiddlers of the figures on the Government Benches are constantly changing the basis on which grants are calculated. If anyone with any sense examines the figures he will realise that what is being claimed by the Government is manifestly not true. My colleagues and I believe that the deflator that is used in the calculations is especially inappropriate for education as it does not take into account factors such as the Clegg award for teachers' salaries in 1980, for example.

The comparisons that are made by the Welsh Office between expenditure in 1979 and 1984 do not cover the full education budget. They exclude the school meals service, mandatory awards, net contributions to other authorities, debt charges, urban programme expenditure and career services. The Secretary of State is continually changing the basis of the calculations and telling us that expenditure has increased.

A more accurate estimate of what has been expended in real terms shows that in Mid-Glamorgan there was a reduction in expenditure of £10 million from 1979 to 1984. That view is shared by Mr. Tettenborn, who is the financial adviser to the Welsh Counties Committee. He stated recently that between 1979 and 1980 the local authorities in Wales have reduced their expenditure on the education service by 3 per cent. in real terms, a reduction of about £20 million.

The fundamental flaw in the Government's so called generous settlement is the ludicrous allowance for inflation. Current expenditure is up by 3.8 per cent. over the level of spend in the 1985–86 budgets for Welsh authorities. Yet pay settlements, which are more important than price inflation, although that is well above 3.8 per cent., are well above the inflation rate. Manual workers settled their 1985 claim and the cost has worked out at about 9.5 per cent. for Mid-Glamorgan. Teachers were offered 6.9 per cent. for 1985 and the cost would be 7.5 per cent. in 1986–87. They are looking for much increased salaries next year. The administrative, professional, technical and clerical staff are seeking a 12 per cent. increase next year. It is clear that the unions will not get all that they want, but none will settle for 3.8 per cent., which is well below the inflation rate.

The Government will respond by saying that staff levels should be reduced. That will mean that in local government and the Health Service we shall see services reduced. That will happen because both sectors are labour, or people-intensive.

The limitation on time does not allow us to examine the complexities of the formula that the Secretary of State is using to arrive at the settlement.

A good many arguments have been put forward for the rural parts of Wales. I accept the very real needs of areas like Powys, particularly in relation to the closure of village schools, with the huge problems of transport that these people face, especially with the new Transport Bill—there may well be severe difficulties, compounding what is already a very difficult situation. This is something that has not been taken into account, incidentally, in this settlement.

Coming to the most populated part of Wales, however, the area that I and some of my hon. Friends on the Opposition side represent, the south Wales valleys area, Mid-Glamorgan has one of the worst employment rates in Great Britain. The Rhondda, Merthyr, Cynon and Rhymney valleys are district council areas which, on national figures and estimates, score highest on usually accepted indicators for social deprivation. We are certainly not proud of this, but it demonstrates that this is an area of great need. In one sense, it means—and I wish that the Secretary of State would really take this on board, coming from the area that he does—that the education budget in a county such as Mid-Glamorgan is part of the county council's provision for the social services, with high expenditure on free meals, education maintenance allowances and necessitous clothing grants. The social welfare expenditure component in the education budget has increased sharply over the past five years because of the industrial policies of this Government.

One other factor, and we are all proud of this development—[Interruption.] The hon. Member for Ealing, North (Mr. Greenway) may find it very amusing to consider the difficulties that we suffer in the South Wales valleys. Maybe if we can get back into power we can direct some industry to where the people live and where they need it. Meanwhile, we have to live with the difficulties that we have. In this, we would expect some help from the Secretary of State for Wales. We do not want him crawling back to the Cabinet, making excuses from Wales; we want him to get back there and fight. But he does not fight for Wales, and the best favour that he could do the Welsh people would be to resign tomorrow.

Mr. Wigley

On a point of order, Mr. Deputy Speaker. Why have you, as the Deputy Speaker, not called representatives of each party in the House on a matter that is of such vital importance to the people of Wales?

Mr. Deputy Speaker (Mr. Ernest Armstrong)

I quite understand the hon. Gentleman's concern, but it is a very short debate, and I regret very much that I have been very limited in the number of Back Benchers whom I have been able to call.

Mr. Wigley

Mr Deputy Speaker—

Mr. Deputy Speaker

Order. I just want to say that it is always a very difficult exercise, but it is within the discretion of the Chair and I try to be as fair as I can.

Mr. Wigley

This is not acceptable, Mr. Deputy Speaker. This is the second time that the Chair has done this in the past few years. It was within the discretion of the Chair to call fewer Members on the Government side of the Chamber, in view of the length of time taken by the Secretary of State to open the debate. Hon. Members on the Opposition side have not had much time. It is totally unreasonable and unacceptable to my party that we should be gagged on the matter when a 23p rate was announced last Thursday in my county of Gwynedd, and not one Back Bencher from Gwynedd has been called. Now you are not giving an opportunity for any voice to be heard in this Chamber on this issue. It is just not good enough, Mr. Deputy Speaker. Will you please get Mr. Speaker here so that the matter can be resolved.

Mr. Deputy Speaker

The hon. Gentleman is quite right. It is within the discretion of the Chair to decide, and there are ways and means, of course, if hon. Members are not satisfied with the jurisdiction of the Chair, but—

Mr. Wigley

Mr. Deputy Speaker—

Mr. Deputy Speaker

Order. I am on my feet. It is not a time for calling Mr. Speaker. Mr. Roy Hughes.

Mr. Wigley

I am sorry, but this is the only recourse that I have available. This is not acceptable. I ask you if you will now call Mr. Speaker into the Chamber at this moment, so that we can have his ruling on the matter.

Mr. Deputy Speaker

The answer to the hon. Gentleman is no. We are going to proceed with the debate. Mr. Roy Hughes.

Mr. Wigley

I am sorry, Mr. Deputy Speaker, but I am not prepared to accept that as a ruling, when the Chair—

Mr. Deputy Speaker

Order—

Mr. Wigley

—when the Chair is gagging the voice of the Chamber for the second time in recent years on the same debate. It is not good enough. I have no confidence in anyone in the Chair who does this.

Mr. Deputy Speaker

Mr. Roy Hughes.

Mr. Wigley

Mr. Deputy Speaker, I am asking you to call Mr. Speaker.

Mr. Deputy Speaker

Order. I have already indicated that—

Mr. Wigley

I am sorry, I am asking you—

Mr. Deputy Speaker

Then I am sorry, but I must warn the hon. Gentleman. He must resume his seat.

Mr. Wigley

I want an undertaking that you will get Mr. Speaker into the Chamber now.

Mr. Deputy Speaker

I must ask the hon. Gentleman to leave the Chamber.

Mr. Wigley

I will remain on my feet, Mr. Deputy Speaker, until you get Mr. Speaker into the Chamber.

Mr. Deputy Speaker

I am sorry, but it is a difficult exercise. I assure the hon. Gentleman that there is no question of the Chair gagging an hon. Member. I have to carry out the orders of the House and the proceedings of the House. In my discretion, I decide who is called in the debate. I understand the hon. Gentleman's strong feelings, but I say to him that he has made his protest. It will certainly be taken note of. Indeed, I shall discuss it with Mr. Speaker, but I do not regard this as an occasion for calling Mr. Speaker. That would be unusual conduct and I ask the hon. Gentleman to bear in mind the consequences if he persists in defying the Chair. I must ask the hon. Gentleman to resume his seat.

Mr. Ray Powell (Ogmore)

On a point of order, Mr. Deputy Speaker. May I try to be helpful in this regard? It is not really the fault of the Chair but the fault of the Secretary of State who opened the debate. He knew that we had only 90 minutes yet he took 26 minutes to deliver his speech.

Mr. Deputy Speaker

I regret not being able to call more Back Benchers, but I am in the hands of the House, and I must ask the hon. Member for Caernarfon (Mr. Wigley) to resume his seat. He has made his protest. It will certainly be conveyed to Mr. Speaker. If he persists, he must face the consequences. I must name him.

Mr. Wigley

I am afraid that I do persist. This is the second time that this has happened. Those assurances were given two or three years ago when exactly the same thing happened, and now here it is happening again. It is within the control of the Chair and it is time that the Chair controlled what is happening.

Mr. Deputy Speaker

I am sorry, but I must name Mr. Dafydd Wigley.

Motion made, and Question put forthwith pursuant to Standing Order No. 25 (Order in debate), That Mr. Dafydd Wigley be suspended from the service of the House.—[Mr. Biffen.]

Question agreed to.

Ordered, That Mr. Dafydd Wigley be suspended from the service of the House. The hon. Member withdrew accordingly.

12.56 am

Mr. Roy Hughes (Newport, East)

It is an open secret among Members of Parliament that the rate support grant issue is rather complex. Therefore, it is interesting to me that senior people in local government are now also protesting about the complexity of settlements in this area.

Tonight we have had the long and usual dose of dogma from the Secretary of State. Nevertheless, the settlement being debated seems to show an unrealistic provision for local authority spending in Wales in 1986–87. The Secretary of State, on page 3 of the report, has said that he is determined to keep local authority spending within the level of expenditure provision set by the Government. He points out that the grant mechanisms adopted are aimed at discouraging higher levels of expenditure. Yet people in local government know only too well that greater resources are needed if important public services administered by them are to operate at an efficient level.

In appendix 1, page 14, total expenditure is set out at £1,420.9 million, which is a 5 per cent. increase over the existing 1985–86 local authority budgets. But within that, total current expenditure, at £1,368.1 million, is only 3.4 per cent. above the 1985–86 budgets. That is out of line with inflation trends affecting local government.

I remind the Secretary of State that assumptions on pay for 1985–86 were 3 per cent. The reality is that pay costs in 1985–86 are up by 7 per cent., with the teachers' dispute still to be settled.

Throughout local government in Wales there is concern about the expenditure provision for county services which are most likely to be affected by inflation, such as education, social services, police and the fire service. The feeling is that the expenditure provision leaves a gap of over £50 million—about 4.5 per cent. The discrepancy is likely to provide serious problems for our county councils in Wales. For example, the eventual settlement for teachers' pay is hardly likely to fit in with the rate support grant settlement. My contention is that additional resources should be made available to county councils to settle the teachers' dispute. So far there has been no sign that such resources will be forthcoming. The National Union of Teachers, the biggest union in the profession, believes that its members' pay should be determined by application of the Houghton principles used in 1974. The relative level of teachers' pay has declined, but we all know that the demand on teachers is greater than ever. The NUT is determined to fight for proper recognition of the job of teaching.

Where does that leave our county councils? What provision should they make for the pay award due on 1 April next? Teachers' pay increases are hardly likely to fit in with the guidelines in the rate support grant settlement. Will there be additional financial assistance? parents are naturally worried about the dispute, which affects the future of their children. My belief is that the nigger in the woodpile is the Secretary of State for Education and Science. He is supported by his junior Cabinet colleague, the Secretary of State for Wales. If there was the will, the dispute could be settled quickly. Meanwhile children suffer.

In discussing the rate support grant settlement there is concern about penalties. The position is made difficult because the system is not operating at a realistic level of expenditure. There is a gap of 4.5 per cent. below what our treasurers feel to be necessary. A strong argument can be put for an upward adjustment of the settlement. Treasurers and many local councils, with vast experience of their communities, are calling for a 7 per cent. increase. They believe that that would be more realistic.

Questions are asked about local authorities that underspend. The Welsh Office has suggested that the surplus revenue will be recycled to benefit councils which will then budget for a modest increase in expenditure. The Government are adopting a carrot and stick policy. What a way to treat dedicated people in local government who administer important public services. Such a system restricts freedom of action and curtails local authorities in providing the services they know to be necessary. The response we are getting is that Whitehall knows best. That was the attitude of the Secretary of State tonight.

Today throughout Wales there is a backlog of service inadequacies, particularly from the growing social need caused by rising unemployment. At Question Time we were reminded that unemployment in Wales is 17 per cent., and there is no hope of the figure coming down, especially when the Chancellor presides over a base lending rate of 12.5 per cent.—the highest figure of the century. People are calling for improved social services. The recent Brecon and Radnor by-election bears out that contention. The Chancellor has, nevertheless, repeatedly promised tax concessions. They have become a mirage in the desert. What is needed is a more realistic settlement to enable local authorities to maintain and, where possible, to improve local services. Such action would be of considerable benefit to the people of Wales.

1.5 am

Mr. Nicholas Edwards

The hon. Member for Alyn and Deeside (Mr. Jones) asked why expenditure in Wales should be cut, when England overspends. He seems to have failed to observe that because of the Welsh record the grant percentage has not been cut as much as in England, that the Welsh share of the grant has increased and that Welsh local authorities have received additional capital.

A central issue mentioned by the hon. Member for Alyn and Deeside and by my hon. Friends the Members for Clwyd, North-West (Sir A. Meyer) and for Delyn (Mr. Raffan) relates to the position of Clwyd. Clwyd, of course, is a relatively high spender, with a budget 2 per cent. above GRE for 1985–86. The matters which were well described by my hon. Friend the Member for Clwyd, North-West changed the position between July and the final settlement when we announced it in December.

Throughout the summer we consulted closely with the local authority associations and they should have kept Clwyd, one of their members, fully informed of those discussions, which were based on the need to cap the changes that would affect local authorities. As it happened, West Glamorgan benefited from those changes and Clwyd suffered from them. I do not accept that the position of Clwyd ratepayers has been severely damaged, as has been suggested. If the increase in expenditure is kept in line with the settlement, the precept could be kept under 5 per cent.

As my hon. Friend the Member for Delyn has repeatedly said, Clwyd had the opportunity to cut expenditure. It has not cut the numbers employed and it is now facing some difficulties as a result, but I believe that they are exaggerated.

The settlement for Wales as a whole is extremely good. Welsh local authorities know that as a result of good performance in the past they have a settlement that gives them a great deal.

It being one and a half hours after the commencement of proceedings, MR. DEPUTY SPEAKER put the Question pursuant to Standing Order No. 3 (Exempted Business).

The House divided: Ayes 280, Noes 167.

Division No. 42]	[1.10 am
AYES
Aitken, Jonathan	Currie, Mrs Edwina
Alexander, Richard	Dickens, Geoffrey
Amess, David	Dorrell, Stephen
Ancram, Michael	Douglas-Hamilton, Lord J.
Arnold, Tom	Dover, Den
Ashby, David	du Cann, Rt Hon Sir Edward
Aspinwall, Jack	Dunn, Robert
Atkins, Robert (South Ribble)	Durant, Tony
Atkinson, David (B'm'th E)	Edwards, Rt Hon N. (P'broke)
Baker, Nicholas (Dorset N)	Eggar, Tim
Baldry, Tony	Evennett, David
Batiste, Spencer	Eyre, Sir Reginald
Bellingham, Henry	Fallon, Michael
Bendall, Vivian	Fenner, Mrs Peggy
Best, Keith	Finsberg, Sir Geoffrey
Bevan, David Gilroy	Fletcher, Alexander
Biffen, Rt Hon John	Fookes, Miss Janet
Blackburn, John	Forman, Nigel
Blaker, Rt Hon Sir Peter	Forsyth, Michael (Stirling)
Body, Sir Richard	Forth, Eric
Bonsor, Sir Nicholas	Fowler, Rt Hon Norman
Bottomley, Peter	Fox, Marcus
Bottomley, Mrs Virginia	Franks, Cecil
Bowden, A. (Brighton K'to'n)	Fraser, Peter (Angus East)
Bowden, Gerald (Dulwich)	Freeman, Roger
Boyson, Dr Rhodes	Fry, Peter
Brandon-Bravo, Martin	Gale, Roger
Bright, Graham	Gardner, Sir Edward (Fylde)
Brinton, Tim	Garel-Jones, Tristan
Brittan, Rt Hon Leon	Glyn, Dr Alan
Brooke, Hon Peter	Goodlad, Alastair
Brown, M. (Brigg & Cl'thpes)	Gorst, John
Browne, John	Gow, Ian
Bruinvels, Peter	Gower, Sir Raymond
Bryan, Sir Paul	Greenway, Harry
Bulmer, Esmond	Gregory, Conal
Burt, Alistair	Griffiths, Peter (Portsm'th N)
Butcher, John	Grist, Ian
Butler, Rt Hon Sir Adam	Ground, Patrick
Butterfill, John	Grylls, Michael
Carlisle, John (Luton N)	Hamilton, Hon A. (Epsom)
Carlisle, Kenneth (Lincoln)	Hamilton, Neil (Tatton)
Carlisle, Rt Hon M. (W'ton S)	Hanley, Jeremy
Cash, William	Hannam, John
Channon, Rt Hon Paul	Harris, David
Chapman, Sydney	Hawkins, Sir Paul (N'folk SW)
Chope, Christopher	Hawksley, Warren
Churchill, W. S.	Hayward, Robert
Clark, Hon A. (Plym'th S'n)	Heathcoat-Amory, David
Clark, Sir W. (Croydon S)	Henderson, Barry
Clarke, Rt Hon K. (Rushcliffe)	Higgins, Rt Hon Terence L.
Colvin, Michael	Hill, James
Conway, Derek	Hirst, Michael
Coombs, Simon	Hogg, Hon Douglas (Gr'th'm)
Cope, John	Holland, Sir Philip (Gedling)
Couchman, James	Holt, Richard
Crouch, David	Howard, Michael

Howarth, Alan (Stratf'd-on-A)	Patten, Christopher (Bath)
Howarth, Gerald (Cannock)	Patten, J. (Oxf W & Abdgn)
Howell, Ralph (Norfolk, N)	Pawsey, James
Hubbard-Miles, Peter	Percival, Rt Hon Sir Ian
Hunt, David (Wirral, W)	Pollock, Alexander
Hunt, John (Ravensbourne)	Portillo, Michael
Hunter, Andrew	Powell, William (Corby)
Hurd, Rt Hon Douglas	Powley, John
Jackson, Robert	Raison, Rt Hon Timothy
Jessel, Toby	Rathbone, Tim
Johnson Smith, Sir Geoffrey	Rees, Rt Hon Peter (Dover)
Jones, Gwilym (Cardiff N)	Rhodes James, Robert
Jones, Robert (Herts W)	Rhys Williams, Sir Brandon
Joseph, Rt Hon Sir Keith	Ridley, Rt Hon Nicholas
Kellett-Bowman, Mrs Elaine	Rifkind, Rt Hon Malcolm
Key, Robert	Roberts, Wyn (Conwy)
King, Roger (B'ham N'field)	Robinson, Mark (N'port W)
Knight, Greg (Derby N)	Roe, Mrs Marion
Knight, Dame Jill (Edgbaston)	Rossi, Sir Hugh
Knowles, Michael	Rowe, Andrew
Knox, David	Rumbold, Mrs Angela
Lamont, Norman	Ryder, Richard
Lang, Ian	Sackville, Hon Thomas
Latham, Michael	Sainsbury, Hon Timothy
Lawler, Geoffrey	Sayeed, Jonathan
Lawrence, Ivan	Shaw, Giles (Pudsey)
Lawson, Rt Hon Nigel	Shaw, Sir Michael (Scarb')
Lee, John (Pendle)	Shelton, William (Streatham)
Leigh, Edward (Gainsbor'gh)	Shepherd, Richard (Aldridge)
Lennox-Boyd, Hon Mark	Shersby, Michael
Lester, Jim	Silvester, Fred
Lewis, Sir Kenneth (Stamf'd)	Sims, Roger
Lightbown, David	Smith, Tim (Beaconsfield)
Lilley, Peter	Soames, Hon Nicholas
Lloyd, Peter (Fareham)	Spence, John
Lord, Michael	Spencer, Derek
Luce, Rt Hon Richard	Spicer, Jim (Dorset W)
Lyell, Nicholas	Spicer, Michael (S Worcs)
McCurley, Mrs Anna	Squire, Robin
MacGregor, Rt Hon John	Stanbrook, Ivor
MacKay, Andrew (Berkshire)	Stanley, Rt Hon John
MacKay, John (Argyll & Bute)	Steen, Anthony
Maclean, David John	Stern, Michael
McNair-Wilson, M. (N'bury)	Stevens, Lewis (Nuneaton)
McQuarrie, Albert	Stewart, Allan (Eastwood)
Major, John	Stewart, Andrew (Sherwood)
Malins, Humfrey	Stewart, Ian (Hertf'dshire N)
Malone, Gerald	Stokes, John
Maples, John	Stradling Thomas, Sir John
Marland, Paul	Taylor, Teddy (S'end E)
Marlow, Antony	Terlezki, Stefan
Maude, Hon Francis	Thomas, Rt Hon Peter
Mawhinney, Dr Brian	Thompson, Donald (Calder V)
Mayhew, Sir Patrick	Thompson, Patrick (N'ich N)
Mellor, David	Thorne, Neil (Ilford S)
Miller, Hal (B'grove)	Thornton, Malcolm
Mills, Iain (Meriden)	Thurnham, Peter
Moate, Roger	Townsend, Cyril D. (B'heath)
Monro, Sir Hector	Tracey, Richard
Montgomery, Sir Fergus	Trippier, David
Moore, Rt Hon John	Trotter, Neville
Morris, M. (N'hampton, S)	Twinn, Dr Ian
Morrison, Hon P. (Chester)	van Straubenzee, Sir W.
Moynihan, Hon C.	Vaughan, Sir Gerard
Mudd, David	Viggers, Peter
Neale, Gerrard	Waddington, David
Needham, Richard	Wakeham, Rt Hon John
Neubert, Michael	Walden, George
Nicholls, Patrick	Walker, Bill (T'side N)
Normanton, Tom	Waller, Gary
Norris, Steven	Ward, John
Onslow, Cranley	Wardle, C. (Bexhill)
Oppenheim, Phillip	Warren, Kenneth
Oppenheim, Rt Hon Mrs S.	Watts, John
Osborn, Sir John	Wells, Bowen (Hertford)
Ottaway, Richard	Wells, Sir John (Maidstone)
Page, Sir John (Harrow W)	Wheeler, John
Page, Richard (Herts SW)	Whitfield, John
Parkinson, Rt Hon Cecil	Whitney, Raymond
Parris, Matthew	Wilkinson, John

Wolfson, Mark	Younger, Rt Hon George
Wood, Timothy
Woodcock, Michael	Tellers for the Ayes:
Yeo, Tim	Mr. Carol Mather and
Young, Sir George (Acton)	Mr. Robert Boscawen.

NOES
Adams, Allen (Paisley N)	Cunningham, Dr John
Anderson, Donald	Dalyell, Tam
Archer, Rt Hon Peter	Davies, Rt Hon Denzil (L'lli)
Ashdown, Paddy	Davis, Terry (B'ham, H'ge H'l)
Ashley, Rt Hon Jack	Deakins, Eric
Ashton, Joe	Dewar, Donald
Atkinson, N. (Tottenham)	Dixon, Donald
Bagier, Gordon A. T.	Dobson, Frank
Banks, Tony (Newham NW)	Dormand, Jack
Barnett, Guy	Douglas, Dick
Barron, Kevin	Dubs, Alfred
Bell, Stuart	Dunwoody, Hon Mrs G.
Benn, Rt Hon Tony	Eadie, Alex
Bennett, A. (Dent'n & Red'sh)	Eastham, Ken
Bermingham, Gerald	Evans, John (St. Helens N)
Bidwell, Sydney	Ewing, Harry
Blair, Anthony	Fatchett, Derek
Boyes, Roland	Field, Frank (Birkenhead)
Bray, Dr Jeremy	Fields, T. (L'pool Broad Gn)
Brown, Gordon (D'f'mline E)	Fisher, Mark
Brown, Hugh D. (Provan)	Flannery, Martin
Brown, N. (N'c'tle-u-Tyne E)	Foot, Rt Hon Michael
Brown, R. (N'c'tle-u-Tyne N)	Forrester, John
Brown, Ron (E'burgh, Leith)	Foster, Derek
Buchan, Norman	Foulkes, George
Caborn, Richard	Fraser, J. (Norwood)
Callaghan, Jim (Heyw'd & M)	Freeson, Rt Hon Reginald
Campbell-Savours, Dale	Garrett, W. E.
Carlile, Alexander (Montg'y)	George, Bruce
Clark, Dr David (S Shields)	Gilbert, Rt Hon Dr John
Clarke, Thomas	Godman, Dr Norman
Clay, Robert	Gould, Bryan
Clelland, David Gordon	Hamilton, James (M'well N)
Clwyd, Mrs Ann	Hardy, Peter
Cocks, Rt Hon M. (Bristol S.)	Harman, Ms Harriet
Cohen, Harry	Harrison, Rt Hon Walter
Coleman, Donald	Hart, Rt Hon Dame Judith
Conlan, Bernard	Haynes, Frank
Cook, Frank (Stockton North)	Hogg, N. (C'nauld & Kilsyth)
Corbett, Robin	Holland, Stuart (Vauxhall)
Craigen, J. M.	Home Robertson, John
Crowther, Stan	Howell, Rt Hon D. (S'heath)
Cunliffe, Lawrence	Hoyle, Douglas

Hughes, Roy (Newport East)	Radice, Giles
Hughes, Simon (Southwark)	Randall, Stuart
Janner, Hon Greville	Redmond, Martin.
John, Brynmor	Rees, Rt Hon M. (Leeds S)
Jones, Barry (Alyn & Deeside)	Richardson, Ms Jo
Kilroy-Silk, Robert	Roberts, Ernest (Hackney N)
Lambie, David	Robertson, George
Lamond, James	Rogers, Allan
Leadbitter, Ted	Rowlands, Ted
Leighton, Ronald	Sedgemore, Brian
Litherland, Robert	Sheldon, Rt Hon R.
Lloyd, Tony (Stretford)	Shore, Rt Hon Peter
Lofthouse, Geoffrey	Short, Ms Clare (Ladywood)
Loyden, Edward	Silkin, Rt Hon J.
McDonald, Dr Oonagh	Skinner, Dennis
McKay, Allen (Penistone)	Smith, C.(Isl'ton S & F'bury)
MacKenzie, Rt Hon Gregor	Smith, Rt Hon J. (M'ds, E)
McNamara, Kevin	Snape, Peter
McTaggart, Robert	Soley, Clive
McWilliam, John	Spearing, Nigel
Madden, Max	Stott, Roger
Marek, Dr John	Strang, Gavin
Marshall, David (Shettleston)	Straw, Jack
Martin, Michael	Thomas, Dafydd (Merioneth)
Maxton, John	Thomas, Dr R. (Carmarthen)
Maynard, Miss Joan	Thompson, J. (Wansbeck)
Meacher, Michael	Thorne, Stan (Preston)
Michie, William	Tinn, James
Mikardo, Ian	Wallace, James
Millan, Rt Hon Bruce	Wardell, Gareth (Gower)
Miller, Dr M. S. (E Kilbride)	Wareing, Robert
Morris, Rt Hon A. (W'shawe)	Weetch, Ken
Morris, Rt Hon J. (Aberavon)	Welsh, Michael
Nellist, David	White, James
Oakes, Rt Hon Gordon	Williams, Rt Hon A.
O'Brien, William	Winnick, David
O'Neill, Martin	Woodall, Alec
Orme, Rt Hon Stanley	Wrigglesworth, Ian
Park, George
Pavitt, Laurie	Tellers for the Noes:
Pendry, Tom	Mr. Ray Powell and
Pike, Peter	Mr. Ron Davies.
Prescott, John

Question accordingly agreed to.

Resolved, That the Welsh Rate Support Grant Report 1986–87 (House of Commons Paper No. 100), which was laid before this House on 18th December, be approved.