HC Deb 22 January 1986 vol 90 cc397-422

10.5 pm

The Secretary of State for Scotland (Mr. Malcolm Rifkind)

I beg to move, That the Rate Support Grant (Scotland) (No. 4) Order 1985, dated 18th December 1985, which was laid before this House on 19th December, be approved.

It might be for the convenience of the House if we were to debate at the same time the second motion, That the draft Revaluation Rate Rebates (Scotland) (No. 2) Order 1985, dated 18th December 1985, which was laid before this House on 19th December, be approved.

Mr. Speaker

Is that with the leave of the House?

Hon. Members


Mr. Rifkind

We have before us two orders. One is the main rate support grant order, which we debate each year at about this time. The other is the order continuing the scheme of revaluation rate rebates which my predecessor introduced last year to provide a welcome relief to those most affected by revaluation, since there is clearly a close connection between these two orders.

As the House knows, it is this Government's objective to reduce local authority expenditure. Since coming to office we have asked authorities to co-operate in that objective. Some have done so, but increasingly the Government have been forced to bring pressure to bear on authorities, through the level of grant, and in some cases by means of selective action, to achieve those objectives. We still have not achieved a reduction in volume terms in what local authorities are spending. Local authorities in 1985–86 were still planning to spend 1.8 per cent. more in volume terms than they spent in 1978–79. It is worth examining the figures in more detail because of the claims of unacceptable cuts which are frequently made by local authorities.

The main component of local authority expenditure is education. It accounts for 45 per cent. of relevant expenditure, and of course the main part of that —almost 90 per cent. —is school education. For demographic reasons the school population is falling. Between 1978–79 and 1984–85 primary pupil numbers fell by 23 per cent. and secondary numbers by 8 per cent. With the demand for a major component of expenditure falling significantly one would expect expenditure to fall, and to say that one expects that is not to ask for unreasonable cuts.

There have indeed been reductions in education, but only 3 per cent. in volume terms over that period. Without these savings on education, local authority expenditure would not be 1.8 per cent. above its 1978–79 level, but 8 per cent. above it. This is the real measure of the extent to which local authority expenditure has in fact increased from its 1978–79 level, despite all that the Opposition and the authorities claim about unacceptable cuts. The volume of local authority expenditure expressed in real terms is still significantly higher than it was when the Government came into office. The claim that there have been unacceptable cuts is difficult to believe.

Mr. Jim Craigen (Glasgow, Maryhill)

How many teaching posts would have to disappear to conform with the Secretary of State's guidance?

Mr. Rifkind

The important point that I emphasise is that, even if the local authorities met the Scottish Office's Red Book requirements, the pupil-teacher ratio would still be extremely healthy. As the hon. Gentleman will be aware, it is better than it has ever been in the history of Scottish education. That is despite the so-called unacceptable cuts to which he has referred.

Putting aside the relatively minor reduction in educational spending, which is far less than the demographic changes would have implied, the actual volume of other expenditure of local authorities has increased, not by 1.8 per cent. but by 8 per cent., over the past six or seven years. That is very significant.

Thus, the financial background to this order is one of local authority expenditure still above its 1978–79 level, despite demographic factors which make possible expenditure reductions without unreasonable cuts in services. This being so, there remains the need to apply pressure to authorities to spend in line with the Government's plans.

There are, I am glad to note, signs that local authorities are making greater efforts to bring their spending into line with these plans. In 1984–85, 15 authorities budgeted in line with guidelines. In 1985–86 the number doubled from 15 to 30, including over half the regional and island authorities. Clearly this was in part a response to the much more severe grant penalties for 1985–86, of which authorities were given ample warning. The effect of these penalties has also been to force authorities still above guidelines to look closely at their budgets in order to find savings. One region plans to halve its planned overspend. Others are looking closely at ways of reducing or eliminating their overspends. This is good news for ratepayers, in two ways. There are savings in expenditure, and there will be refunds of grant penalty as authorities bring their expenditure nearer guideline at outturn. Authorities can calculate what grant refund they will get, and, together with the expenditure reductions, this should help to keep rates down.

Mr. Dennis Canavan (Falkirk, West)

Does the Secretary of State agree with the Convention of Scottish Local Authorities that, if all the rate support grant which the Government have cut from local authorities over the past five years were to be restored, ratepayers in Scotland could have a year completely free of any rate payments? Instead of that, because of the further cuts contained in this order, domestic ratepayers face an average increase of 10 per cent. in 1986–87. Does this not prove to the Secretary of State that his Government are largely responsible, not just for cuts in local authority services, but for rates increases?

Mr. Rifkind

I disagree entirely with that, for one very good reason. The implication of what the hon. Gentleman says is that if central Government kept their contribution to local authority expenditure stable that would somehow help the ratepayers. The evidence does not support that view. For four years the rate support grant contribution from central Government was kept at 68.5 per cent. No change was made, yet during that period local authorities in Scotland increased their expenditure in real terms by no less than £240 million. That is what happened when central Government did not apply pressure through the rate support grant system. When the Government apply pressure, we begin to get results. It may be very sad indeed that it should require that sort of pressure to bring about the results that we seek, but the hon. Gentleman, and indeed the convention, cannot deny that that is historical fact, and it is something that they should bear in mind.

Sir Russell Johnston (Inverness, Nairn and Lochaber)

I am sorry to pursue this point, but what the hon. Member for Falkirk, West (Mr. Canavan) has just said is what we on this Bench were assured by the COSLA representatives today was the case. They said quite specifically, and in terms, that if the amount of the rate support grant in 1981, which at that time was £1,775 million in present terms, was restored, it would be the equivalent of having a rate-free year for every local authority in Scotland. Is the Minister flatly saying that COSLA is deceiving us?

Mr. Rifkind

Yes, it is deceiving the House, for this simple reason. The implication is that if these funds were available the expenditure plans of local authorities would not be changed. If the expenditure plans of local authorities were not changed, it goes without saying that any increased central Government grant would go towards reducing rates. Of course that is right, it has to be true, but from all our experience—and the hon. Gentleman is a fair man—we know perfectly well that when central Government give more in grants to local authorities the increase is rarely passed on to the ratepayer. What happens is that those local authorities which wish to increase their expenditure feel that they can do so quite happily without putting an increased burden on the ratepayer, but at a cost to the taxpayer.

That is not theory, but what has happened in those years when the rate support grant has not been reduced as a percentage. That is the point that I made earlier, and it is a sad fact of life. All that COSLA is saying is that, if all other things are equal, the more central Government pay, the better it is for the ratepayer. Obviously, that is true, but it is not very good for the taxpayer, and it is not a remarkable observation.

My predecessor issued expenditure guidelines for 1986–87 to authorities at the beginning of October. These included an increase of £59 million over the provision originally made in the White Paper. After taking account of the completion of the transfer of two colleges to central institution status, the provision for 1986–87 is 4.3 per cent. ahead of that made for 1985–86. As in each year since 1982–83, guidelines were based on the client group method of needs assessment, but with limits on how far authorities were expected to change their expenditure in one year. My predecessor had particular regard to the problems of authorities with guidelines below assessed need and to the performance of authorities in relation to their present guideline and assessed need. Authorities whose assessed need was higher than their 1985–86 budget were allowed guidelines up to 7 per cent. above what they budgeted to spend this year.

Mr. Tom Clarke (Monklands, West)

The hon. Member for Strathkelvin and Bearsden (Mr. Hirst), who is indisposed and unable to be present, asked me to raise a point with the Secretary of State. Perhaps in another debate he will be able to speak for himself. Strathkelvin district council now has new headquarters—Tom Johnston House. Within the guidelines, no allowance has been made for that district council, which means that ratepayers, including my constituents and those of the Secretary of State's hon. Friend, will be faced with a higher bill. Will the right hon. and learned Gentleman bear that in mind?

Mr. Rifkind

I have not yet received direct representations from my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Hirst). I appreciate the fact that the hon. Member for Monklands, West (Mr. Clarke) is speaking on his own and on my hon. Friend's behalf. There is no doubt that this is a matter that can properly be considered. The administrative costs of a local authority would not normally result in a change in the guidelines, which are based on assessed need. However, the matter will be considered to see what is appropriate.

Every authority that kept within guideline or assessed need this year received a cash increase of at least 0.5 per cent., and no authority was set a guideline more than 1.8 per cent. below this year's budget. There will again be severe penalties for ovespending in 1986–87, but the guidelines are not unreasonable, and I urge authorities to spend in line with guidelines, in the interests of their ratepayers. Failure to spend at guidelines will again lead to severe penalties.

Turning to the rate support grant order, aggregate Exchequer grant for 1986–87 will be £2,008.65 million, including an addition of £3.65 million to take into account the transfer of financial responsibility for list D schools, the grant figure is £100 million more than the figure that my predecessor first announced for 1985–86.

Mr. Michael Forsyth (Stirling)

On the matter of additional resources for list D schools, is my right hon. and learned Friend aware that some authorities, such as central regional council in my constituency, having received the money, are shutting the door in the face of the list D schools? They are not providing the support that they should be providing but are saying that it is a problem for central Government?

Mr. Rifkind

We are watching with careful interest the discussions that are taking place between regional authorities and the list D schools. Most of the discussions have not yet been completed. I hope that there will be a sensible resolution of the matter to ensure that the needs that are at present met by the list D schools will be accommodated. The Government are making reasonable provision for financial applications. The onus is on the regional councils to obtain a satisfactory outcome in the interests of those who need the provisions of the schools.

I mentioned that the grant figure is £100 million more than the figure that my predecessor first announced for 1985–86. It is £43 million more than the final grant figure for 1985–86 once account is taken of the generous increases in grant made to increase domestic rate relief and offset the effects of revaluation. The 1986–87 grant figure is 56.1 per cent. of relevant expenditure. This is a reduction on the grant percentage in the current year, and it is in order to put further pressure on authorities to bring their spending into line. Authorities claim that cuts in grant merely increase rates, but where reductions in spending can be made, there is no reason why that should be the case. The historical examples that I mentioned earlier prove that point. If all authorities spent in line with the Government's plans in 1986–87, the overall level of rates should fall. There should be no overall increase.

Aggregate Exchequer grant consists of rate support grants and specific grants. The Convention of Scottish Local Authorities generally prefers money to be allocated to rate support grants rather than to specific grants. This reduces administration costs and gives authorities greater freedom to decide on priorities between services. The existing specific grants were reviewed with the convention, and it was agreed that five grants—list D schools, planning development, town development, sewerage and open space—should be discontinued. The resulting increase in needs element has been distributed in such a way that changes in total grant income for individual authorities are minimised. My predecessor, also with the agreement of the convention, introduced a new specific grant to promote Gaelic. This is part of the implementation of my response to the Montgomery report on the functions and powers of Islands councils. The amount allocated to this specific grant for the first year is £250,000, and I hope that it will provide useful assistance for the Gaelic language.

Rate support grants comprise three elements: domestic element, resources element, and needs element. Domestic element reduces the rate poundage for domestic ratepayers compared with other ratepayers. It was increased massively in 1985–86 from 1p in the pound to 8p, to offset the effects of revaluation. The cost was increased from £14 million to £102 million, largely by the extra grant that my predecessor made available. It is now proposed to reduce domestic element by a small amount from 8p to 7p, reducing the costs to £91 million. This is still a substantial amount. Since domestic element is found from within aggregate Exchequer grant, this means that more grant will be available to help all ratepayers, without any serious effect on the domestic ratepayer.

Resources element compensates authorities which have less than a standard amount of rating resources per head. Resources and needs element have been in the ratio 1:7 for some years. However, since resources element distribution is based on actual rate poundages, it is possible for high-spending authorities to attract more grant by high spending. It is now proposed to reduce the amount of resources element available by reducing the ratio to 1:8. This results in a resources element of £185.2 million.

The largest component of rate support grant is the needs element. The amount payable to each authority is shown in schedule 2 to the order, and appendix E to the report sets out details of the calculation.

The client group method of needs assessment continues to be the basis of distribution of needs element. Full implementation of the method would, however, mean substantial gains and losses for individual authorities. It is, therefore, proposed to set limits on the maximum grant gains and losses for any authority. These limits are 15 per cent. on gains and 7 per cent. on losses. The limits are symmetrical around the 4 per cent. increase in needs element generally. —[AN HON. MEMBER: "Does the Secretary of State know what that means?"]—I shall be happy to explain that, if it would be helpful to the House. I could not have explained it last week, but I can happily explain it tonight.

A number of authorities, mainly small rural districts, are worried that full implementation of the client group method would mean their using all their entitlement to needs element. For that reason, a minimum grant entitlement of £11 per head has been set, subject to the limit on gains that I have mentioned. I understand that this has been the subject of some criticism, but I would point out that the arrangement applies to district councils only, and that the £11 minimum is a modest amount when one considers that other district councils receive grant of up to £55 a head. As in previous years, Orkney and Shetland have been treated as special cases because of their extremely high rating resources. They have been given the average grant increase over what they received this year.

I mentioned earlier that the order included changes to grant for back years. Rate support grant for 1985–86 is increased by £19.6 million to compensate for interest rate changes and £239,000 as a consequence of the latest police pay award.

Mr. David Lambie (Cunninghame, South)

Will the right hon. and learned Gentleman give us information on the level of interest rates that the Government are looking for in the next financial year?

Mr. Rifkind

This is a debate on the rate support grant, and I do not think it would be relevant to have a discussion on the normal national level of interest rates. The hon. Gentleman will be aware that local authorities are compensated for any changes that come about as a result of changes in interest rates, and that local authorities do not suffer if there is a change in interest rates. The Government compensate them for that, and that is right and proper.

Grant penalties for 1984–85 were revised in July this year, restoring £29 million in grant to local authorities because provisional expenditure returns were below budget. The penalties were revised again when final figures were available, and it was hoped that this would show a further reduction in expenditure. Final outturns were above provisional outturns for many authorities, with grant penalties overall standing to be increased by £1.1 million, although some authorities such as Lothian region, had further reductions in expenditure and in penalties.

Sir Russell Johnston

The right hon. and learned Member rightly said that this is a highly complex matter. Will he confirm that his civil servants, in making the final determination in these matters, are alleged, if there are discrepancies, to apply the "Athine" formula—"Ach, to hell is near enough"!

Mr. Rifkind

I appreciate the hon. Gentleman's intervention. The final decisions are made not, by civil servants, but by Ministers. The hon. Gentleman's final observation is near enough to be correct.

Mr. Barry Henderson (Fife, North-East)

Does my right hon. and learned Friend recall the words of the distinguished civil servant who gave evidence to the Select Committee on Scottish Affairs in explaining the rate support grant system to Scottish Members of Parliament? When it was put to him that these were subjective judgments, he pointed out that these were objective criteria which, on occasion, might be applied subjectively.

Mr. Rifkind

No doubt the distinguished officials who serve the Scottish Office will apply the most acceptable criteria when they give advice to Ministers. Ministers always accept their advice if it is sufficiently convincing as to the merits of the case.

The Revaluation Rate Rebates (Scotland) (No. 2) Order 1985 is I am relieved to say, a much simpler document. The recent revaluation increased the rateable values of some domestic and commercial subjects by considerably more than the average change. To mitigate the effects of this, my predecessor introduced special relief under the Rating (Revaluation Rebates) (Scotland) Act 1985 for domestic and commercial ratepayers whose new rateable value was over three times more than their old one. Those receiving relief would face large increases in their rate Bills if it were ended next year. My predecessor therefore announced on 3 December that the relief would continue for 1986–87, but at a rate of 75 per cent. The maximum relief on any one property will be £7,500. This order gives effect to that decision. The cost of the relief in 1986–87 will be about £20 million, compared with £26 million this year. I consider this to be a generous continuation of the assistance to the ratepayers most affected by revaluation. While obviously they would have preferred continuation of 100 per cent. relief, I am sure that they will welcome its continuation at 75 per cent. I believe that the Opposition will recognise that as viable assistance to Scottish ratepayers.

Taken together, I consider that these two orders constitute a very reasonable basis for local authority expenditure and rates in 1986–87. If local authorities spend sensibly, there is every reason why rate increases should be low. If they spend in line with guidelines, there will be no grant penalties and the overall level of rates will come down. On behalf of ratepayers, I strongly urge local authorities to follow this course. If they do not, it is the ratepayers who will suffer. I commend both these orders to the House.

10.30 pm
Mr. Donald Dewar (Glasgow, Garscadden)

I extend my congratulations yet again to the right hon. and learned Member for Edinburgh, Pentlands (Mr. Rifkind) on his appointment to the Scottish Office. I extend also my condolences, as I see that he is still having some trouble with his notes. No doubt, his reading will improve with time.

The speech by the Secretary of State shows that someone who has understood the subtleties of city government in the root of his previous job cannot necessarily be expected to understand the Scottish rate support grant settlement. I understand that the right hon. and learned Gentleman is suffering from some difficulties.

A rate support grant debate is not a place for civilised pleasantries. I hope that the Secretary of State will merely accept that we wish him well in his new job. He has taken the post of the right hon. Member for Ayr (Mr. Younger), and I notice that he has taken over his speeches as well. I am not sure that that bodes well for the future.

The bare facts are there for every hon. Member to see. The relevant expenditure has increased, I believe, by 3.9 per cent., but I accept that there may be some pleading on the margins. However, I suspect that it has still fallen short of the rate of inflation. It is undeniably true, when one looks at the relevant expenditure in conjunction with the reduction in RSG percentage, that we are left with an unsatisfactory position.

Th RSG has decreased by 1.6 per cent. As that is on the basis of last year's 57.7 per cent., that is a decrease of about 3 per cent. The result is a total cash settlement up by only 2.2 per cent., according to my calculations. It is therefore down substantially in real terms. The only defence for that is that it is perhaps not as dramatically as bad a settlement as in some previous years. It cannot be taken in isolation. We must look at the inheritance of the Secretary of State—what has happened in the past four or five years. The rate of Exchequer support for local services has been reduced below the danger point, and we are reducing it even further in the order. The House should not accept this in any sense. I very much regret that the Government are railroading through a totally inadequate RSG settlement.

My hon. Friend the Member for Falkirk, West (Mr. Canavan) has referred to the RSG settlement. If the 1980–81 percentage is applied to the relevant expenditure in each year, we can assume that between £1.5 billion and £1.7 billion cumulatively would have been available to local government in Scotland. If one applies the 1980–81 percentage to this year, there would have been an additional £433 million.

It is interesting that the Secretary of State made the perfectly valid point that it is perhaps unfair to assume that all that money would have gone to reduce the rates. I accept that a balance would have been struck—no doubt, a varying balance from authority to authority—between improving services and protecting the ratepayer.

The Secretary of State did not for a moment dispute the arithmetic. Undoubtedly, those funds would have been available had it not been for the predatory raid by the Treasury, which has been repeated every autumn in the past five years. The total of this rate support grant is miserably inadequate. A look at the way in which the RSG has been divided shows something that amounts to chaos and confusion.

I was interested to note the Secretary of State's delicate descriptive reference to what happened to the rural resources element. The ratio has been reduced from 1:7 to 1:8. I know that it has happened, but I am not sure why. COSLA certainly did not want it. I understand that the working party on local government finance, which is a joint official working party did not recommend it. It may be a somewhat simplistic approach, but I assume that there is a reason behind the changes. It might be helpful for the Government to tell us what it is.

There have been some strange happenings with the needs distribution formula and something nasty has been happening at St. Andrew's house. The regions have some cause for complaint. I recognise that there will always he difficulties, but the regions seem to have come out of this year's distribution rather badly. The Minister will know that Strathclyde has seen an increase of 1.8 per cent. while the Central region and Lothian have had increases of 0.6 and 0.5 per cent., respectively. Those are small increases when we consider the services that the regions have to support and the impact of inflation.

The districts have come out of the distribution rather better than the regions, but it is interesting to note how the client group approach has been applied. The Scottish Office has done its sums and taken the client group approach, which is supposed to be an equitable and fair method of deciding on need, but it has not liked the results. There have been unintended consequences. The Secretary of State has told us that, when the needs of certain small district councils were assessed, it was decided that they would get nothing from the needs element provision. It has been decided arbitrarily that there should be provision of £11 per head. That has been of enormous help, and I do not complain about any authority receiving help to provide its services. The provision has helped Banff and Buchan, Wigton, Inverness, Moray, Badenoch and Strathspey. A number of small and largely rural authorities have been helped, and I think that they will be the first to say that it is unfortunate that that has happened at the expense of many of the urban authorities.

If the client group approach is applied, authorities such as Glasgow, Renfrew and Edinburgh emerge with high settlements only to be cut back by the imposition of the 15 per cent. cut-off point. The Minister will probably tell me that such authorities have done very well because they have received 15 per cent., but, on the basis of need and the client group approach, they would have received considerably more. For example, Glasgow would have received £49.5 million, and it has been given only £40.7 million. In that sense, the client group approach has been manipulated to take out the peaks and troughs, but that has led to a redistribution through the formula, which the Government have endorsed, which has gone against the large urban authorities.

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

During the rate support grant debate that took place last year, the hon. Gentleman complained about the cuts in RSG for district authorities. Is he seriously suggesting that a 15 per cent. increase in the needs element is paltry.

Mr. Dewar

I am saying that if we take the Government's client group approach—presumably the Minister has read the memorandum which has been published to accompany the order—and follow it through, we find that the large urban authorities are receiving less than the undiluted client group approach would give them.

The moral of the story is that the Government do not want to apply the client group approach because they realise that if it is implemented simpliciter there will be unfairness. Why is it impossible to have the client group approach in its entirety in the distribution of the needs element when there is no holding back of guidelines, which are basically the client group approach? The guidelines—

Mr. Rifkind


Mr. Dewar

I shall allow the right hon. and learned Gentleman to intervene in a moment, so that he may receive a briefing from the Under-Secretary of State.

The guidelines are the basis on which the penalties are enforced. The refusal fully to implement the client group approach in operating the distribution formula serves to underline the way in which the section 5 machinery and the general abatement has been adminstered in the past year or two.

Mr. Rifkind

It seems that the hon. Gentleman was not listening to my speech with his customary care. If he had, he would have heard me say explicitly that limits have been placed on the extent to which the client group approach will apply to guidelines. There is a maximum increase of 7 per cent. and a maximum reduction of 1.8 per cent.

Mr. Dewar

I thought that the right hon. and learned Gentleman was referring to the 15 and 17 per cent. peak and trough in the distribution of the needs element. I shall look at that point, but I believe that my general point holds good. We shall have an opportunity to argue it later. I leave it on record.

Mr. Ancram

The hon. Gentleman is wrong.

Mr. Dewar

If I am wrong, many others are wrong, too. I believe in precedent. When I am told by the Parliamentary Under-Secretary of State for Scotland that I am wrong, I tend to think that I must be right.

As for the Secretary of State for Scotland's point about the education expenditure guidelines, I accept that school rolls have dropped. However, every education authority in Scotland overspent its guidelines in 1984–85. Whether they were loyal Tory authorities or, from he Secretary of State's point of view, unsatisfactory Labour authorities, none of them could meet the guidelines. We have not yet received the outturn figures for 1985–86, but it looks as though exactly the same will happen again. I am told that Grampian will probably overspend by 4 per cent., even though it has remained within the guidelines. That is only one example. I could give others.

Therefore, it can be demonstrated that the education guidelines cannot be attained. The education service, unsatisfactorily funded though it is, is surviving, despite ministerial advice, because it is being financed at the expense of other services in the regions. I understand that if the regions were to meet the 1986–87 guidelines, it would mean a 6.6 per cent. cut, in cash terms, on 1985–86 —a cut of over £78 million. If the Secretary of State believes that such a policy should be implemented, he has scant respect for the crisis in the schools and the crisis of morale that is facing teachers.

Mr. Michael Forsyth

Will the hon. Gentleman give way?

Mr. Dewar

No. I am very conscious of the time, and I want to make progress.

It is important to get across the point that we are referring not to money that may or may not be made available for settling the pay dispute but to the general budget for education. We are facing very substantial cuts. Any teacher would say that there are overwhelming problems over the implementation of the 16 to 18-year-old action plan because of the lack of resources.

The Secretary of State often comes forward as the ratepayers' champion. That is a very doubtful claim. We have referred to the cuts that have been made in rate support grant settlements in the past few years. Even a reduction of 1p in the domestic element is, I am told, the equivalent of 2 per cent. on the rates. It will have that impact.

The second order is another example of the hypocrisy of the claim that the Tories are the champions of Scottish ratepayers. The order is designed to provide special help for those who are particularly hurt by revaluation in the domestic sector. The Secretary of State for Scotland was no doubt a horrified spectator when his predecessor shot himself in both feet last year and got into a terrible, panic-stricken muddle. The Opposition remember clearly that in order to defuse the revaluation crisis the right hon. Member for Ayr produced £50 million out of the hat, paraded it, flaunted it and was widely believed to have provided that measure of help for the domestic ratepayer. Then the scheme was unveiled. It provides 100 per cent. relief, but it relates merely to that proportion of the rates that is represented by the excess over an increase of 300 per cent. in rateable value. It was a fraud. The Scottish Office became the patron saint of poster sites and lock-up garages. As the figures are beginning to show, they are the major beneficiaries.

Whatever rubbish may or may not be spoken tonight, the Secretary of State will agree with me about one fact: that the £50 million turned out to be £25 million or £26 million. The reduction of 100 per cent. relief to 75 per cent. relief means that that figure is further reduced to £20 million. In effect, therefore, the Government are getting two years for the price of one. That should not be a cause for congratulation. I hope that the Secretary of State will look into the causes of the initial concern in his ranks. For example, I remember that the Solicitor-General for Scotland, who has left the Chamber, went public in his constituency and said that there must have been some mistake. The Minister said that it could not possibly be £50 million; that only £25 million or £26 million could be paid out. The Solicitor-General said that he would use his influence, reported the Dundee Courier, to ensure that the whole £50 million was disbursed. We heard nothing more about the Solicitor-General's influence. The Minister should make available the money that the Government advertised.

I should like to raise two small but important matters. First, I understand that the administrative cost of the scheme in the first year was £500,000. As far as I know, no reimbursement was made and there is no intention of making any in the coming year. That is a charge that falls directly on the ratepayers, and it should not.

Secondly, reimbursement for the money paid out has been made retrospectively at the end of the financial year. Why should it not be done at the beginning, or at least in staged payments? That might be planned. Perhaps the Minister could say something about it.

The consumer is interested in rates and services and the combination of the two. There is no doubt about what has happened to rates under this Administration. They have gone up and up. In 1981, the average domestic rate bill in Scotland was £199. This year it was £329—an increase of 97 per cent. Services have crumbled. Despite the Government's claims about profligacy and extravagance, expenditure has remained largely static, certainly in volume terms.

The inescapable conclusion is that the main determining, and by far the most significant, factor has been the cut in the rate support grant, which has had the cumulative effect that can now be seen in every part of Scotland.

I understand that the Secretary of State will unveil his rating reform package next week. We are deeply sceptical whether the reports are in any way correct. He knows that we regard a poll tax as utterly unacceptable. No doubt we shall carry on that debate when the time comes.

Whatever the reform package might be, until present trends are reversed, until the Exchequer contribution is adequate for the needs of the services that it has to support and until the oppressive legislation that has been put on the statute book is scrapped, the situation will continue to deteriorate. Our objection to the order is that it gives no hope of that reversal and shows no sign of a reprieve. It shows that, apparently, no lessons have been learnt. That is why we shall vote against this settlement.

10.47 pm
Sir Hector Monro (Dumfries)

I warmly congratulate my right hon. and learned Friend on his first speech in his new capacity. He has given us a first-class lead and presented a very good rate support grant.

It seems to be my misfortune, as night follows day, to follow the hon. Member for Glasgow, Garscadden (Mr. Dewar).

Mr. Canavan

Day follows night.

Sir Hector Monro

I can also see the dawn. The hon. Gentleman's speech reminded me of that old Irish saying, that the man who is not confused simply is not well informed. The hon. Gentleman was even more off the rails than he usually is on the rate support grant.

Tonight is good news night for Dumfries and Galloway. My right hon. and learned Friend announced today the new Dumfries bypass. I am glad that my hon. Friend the Member for Edinburgh, South (Mr. Ancram) has been so involved and that he followed the recommendation of the regional council and of myself. We therefore had the right line. It is warmly welcomed in my constituency.

The rate support grant settlement is good news too. I hope that we shall consider the housing orders next week, or the week after. Rural areas have at last received fair treatment in the housing revenue account and capital allocations. I hope that in the future we can look forward to relatively low rent increase and further housing developments.

Tonight we are discussing the rate support grant order. [HON. MEMBERS: "Ah."] Opposition Members do not understand that, in real terms, local authorities are spending more than ever before on providing the services that ratepayers require. There is continual talk of cuts, but the cuts are on the budgets that local authorities would like to have if there were unlimited spending. Hon. Members must recognise that if we had unlimited spending we would be back with the roaring inflation that was bequeathed to us by the Labour Government in 1979. It is because local authorities have that inclination that Governments have to restrict the amount of money available for the rate support grant.

For years I have said, on the record, that I have felt that the formula for the rate support grant—although we are now using the client group method—was unfavourable to the rural areas. Tonight I can say that the trend has at last been substantially reversed. I am grateful to my hon. Friend the Member for Edinburgh, South, who has been much involved in these negotiations. I am glad to see from the statistics that the region that I represent, along with my hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Lang), has had a 15 per cent. increase in its need grant. That is particularly welcome. The four districts in Dumfries and Galloway have all had an increase. Annandale and Eskdale are up by 13.5 per cent., Nithsdale by 13.2 per cent., Stewartry by 13.1 per cent. and Wigtown by 13.3 per cent. That is good news for rural areas, and all hon. Members should be glad that at last the trend towards substantial increases in the central belt of Scotland has moved further away, to where the money will be welcome.

Mr. Dewar

The hon. Gentleman no doubt accepts that the overall cash settlement is up by only 2.2 per cent., which in real terms is a substantial cut. If these small rural authorities have done so well, is it not clear that it is at the expense of someone else?

Sir Hector Monro

Yes, and it is about time, too. For a long time I have been saying that we want the rural areas to get fair treatment, and now at last we have it. That is why I congratulate the Government on accepting the argument that I and my hon. Friends have been making for years. With good housekeeping and authorities that are prepared to be careful in public expenditure, there should be no need for an increase in rates. Councils should have enough income to increase their expenditure and still keep the rates down to the level of inflation. Nithsdale has already said that the rates must be up a ha'penny, or 7 per cent. Good housekeeping and a little pruning would mean that they could keep the rate increase to the rate of inflation, or even to nothing.

The relationship between guidelines and needs assessment is moving in the right direction. I am glad to know that my right hon. and learned Friend the Secretary of State has been able to keep 75 per cent. of the increase that was obtained last year for ratepayers following the substantial revaluation. That is important, as is the domestic relief at 7p. A year ago it was standing at 1p, it increased to 5p and then to 8p, so my right hon. and learned Friend has done well to keep a domestic relief rate of 7p this year. When councils are careful, they should be nearer to a nil increase than in past years.

There is much criticism from the Opposition about the rate support grant, but they tend to forget that the settlement of 56.1 per cent. is substantially better than the settlement of 47 per cent. in England and Wales. They should also remember that there is a substantial increase in the Scottish settlement, whereas in England and Wales there was a nil increase, or a standstill, for rate support grant.

I hope that this will be the penultimate rate support grant order under the present system. I am glad to know that my right hon. and learned Friend will be presenting new proposals later this month. I am sure that they will be widely welcomed by the public, who will at last see that the Government are determined to sort out te nonsense of rates which has existed since they were introduced many years ago. The sooner my right hon. and learned Friend can introduce the changes, the greater the welcome they will receive.

10.56 pm
Mr. Donald Stewart (Western Isles)

Local authorities in Scotland are at their wits' end to maintain essential services. To anyone who is aware of the problems they have had to face for the past two years, the idea that it could be improved, as the hon. Member for Dumfries (Sir H. Monro) suggests, by good housekeeping and a little pruning makes one wonder what country he has been living in.

This year's rate support grant makes up only 56 per cent. of the Scottish local authorities' relevant expenditure. In 1976 it amounted to 76 per cent. of relevant expenditure and over 10 years there has been a decrease of 20 per cent. Since the Government took office, control over the action of local authorities has amounted to a virtual strangehold. They have taken powers to claw back rate support grant, to determine rate levels and to determine council house rent increases. We all know that the Government's formula for determining what is reasonable expenditure is weird and wonderful. I do not wish to cover that ground again. I want to deal with the Government's actions and the effect they are having.

The levels of rate support grant in recent years have not been sufficient to keep up with inflation. In 1984–85, the increase was only 3.1 per cent. In this financial year, the increase is 4.9 per cent. The amount offered for next year represents an increase of only 3.9 per cent. Every year, the level of grant is being cut in real terms.

I have already said that grant has been steadily reduced as a percentage of relevant expenditure. Scottish Office Ministers often say that local government expenditure is in some way excessive and out of control. That is nonsense. In this financial year the local authority budget, after adjustment for clawback, is only marginally larger than it was in 1978–79. The increase has been in the region of 0.5 per cent. When one considers the level of inflation in the past six or seven years, it is clear that local authorities cannot possibly be expected to maintain services at a reasonable level unless they inflict large rate and rent increases upon the population. That is what has happened. It is because of the vindictiveness of the Government that Scottish ratepayers are having a hard time. It is not because of what local authorities are doing. The fault lies with the Government.

On the subject of overall expenditure, it is worth noting that, if all the Scottish local authorities kept within the guideline figures set by the Government for this year, expenditure in volume terms would be 2 per cent. lower than in 1978–79. Is that a realistic proposition? The Government expect the local authorities to bear the brunt of their attempt to keep public spending down, although the Government's spending in certain areas has rocketed. I shall give some examples.

Because of the failure of the Government's economic policies, spending on social security will increase by 25 per cent. between 1983–84 and 1987–88. Over the same period, defence spending will increase by 22 per cent. and spending on law and order by 21 per cent. Taking all Departments into account, the Government's expenditure will increase by 18 per cent. over that period.

The fact is that local government is doing a good job in keeping its spending under control, and the Government are in no position to point the finger at it in that regard. However, because of the Government's policies, local government is being made the scapegoat.

On a different but equally serious point, the level of grant for this year does not show that education authorities in Scotland will be in a better position next year than at present to make an offer to settle the teachers' dispute. It has been said that not one local authority can meet the education guidelines. What has the Secretary of State to say about that? It is very worrying, because none of us wants the dispute to carry on into 1986–87. If the Government have any intention to make extra cash available, we should be told. Otherwise, the prospect is not good.

The Secretary of State referred to the £26 million for the relief of rates. The figure announced at the Tory conference was £50 million for one year. That was the implication. but then the figure was apparently cut in half.

I wish to comment upon one interesting aspect of rate support grant clawback. Apparently clawback money in Scotland goes straight back to the Treasury. In England any such money is redistributed among other local authorities. Perhaps the Secretary of State can verify or deny that. If that is so, it is pathetic. Not only does the right hon. and learned Gentleman have to carry out the orders of the Prime Minister, but, having done so, he is not allowed to keep any of the spoils.

The previous Secretary of State has now been rewarded for his faithful, lackey-like service by being promoted out of the political graveyard that is the Scottish Office. The new Secretary of State has demonstrated in the past—over the devolution issue for one thing—that he is capable of making up his own mind. However, if he continues to allow Scottish local authorities and the Scottish people to suffer as much as at present, he will be no better than his predecessor.

11.2 pm

Mr. Barry Henderson (Fife, North-East)

The right hon. Member for Western Isles (Mr. Stewart) said that local authorities are at their wits' end to maintain services. I wonder whether that stands up to examination. When the Labour Government were in power, both manpower levels and spending were lower than they are now. During this Government's period of office, local authorities have increased their spending in real terms, and most particularly and unarguably, have increased their manpower levels at a time when the number of pupils has been falling and education is the largest consumer of manpower. That is a measure of the extent to which the local authorities seem not to be at their wits' end.

I shall take Fife regional council as an example, as I know more about it than other local authorities. It is trying to ram a brand new swimming pool down the throat of Kirkcaldy district council, which does not want it. Fife regional council has no business doing that— [HON. MEMBERS: "What?"] In case hon. Members are not aware, recreation and leisure are the responsibility of district councils nowadays. The regional council is taking on 100 more social workers. One can see the advertisements in any appropriate newspaper. Although there are fewer pupils and fewer teachers it has increased substantially the education directorate. It is also expanding the strategic planning department. Those are the kind of things that Fife regional council is doing. When the right hon. Gentleman says that councils are at their wits' end to know how to continue services, it does not add up.

I welcome the rate support grant settlement. I was glad to read in a local newspaper that North-East Fife district council was pleasantly surprised at its allocation for next year. I understand that the district council has calculated that the saving to the ratepayer will be 1.7p in the pound because the district council will benefit in the needs element by the addition of 7.1 per cent. compared with what it had last year.

As that high-spending Labour authority, Fife regional council, has said nothing about the settlement, I can only assume that it is content, because it is always quick to complain when something does not suit it. I understand that it will benefit by an increase of about 6.1 per cent. in the needs element. That is perhaps why it has not said anything about the rate support grant settlement this year.

According to the figures I have worked out on the back of an envelope—my hon. Friend will correct me if I am wrong—if the expenditure of both North-East Fife district council and Fife regional council is at or anywhere near the guidelines, it should result in a rate reduction for the ratepayers in my part of the world. I hope we will get that. I am sure that neither of those local authorities will give any credit to a Tory Government if that is the result.

I hope that Fife regional council, at least in this election year, will try to do something to curb its outrageous demands upon the ratepayer and perhaps just for once seek to make a reduction in rates. None of us will complain if the council takes the credit for itself, where it least belongs. It was only last year that it increased the ratepayer's burden by 10p in the pound. In the last 10 years it has moved from being the lowest to the highest spending local authority in Scotland. I welcome warmly the thrust of what my right hon. and learned Friend has done in the rate support grant settlement.

On the whole business of the client group formula, I recognise the desire of everyone to achieve a more objective way of determining the distribution of rate support grant. The client group formula is a useful tool to that end. As the formula has been increasingly used to determine needs and guidelines, and as the guidelines have become increasingly important in determining the distribution of rate support grant, they come close to being a cash limit. It puts a spotlight on the formula, which its perfections may not be able to deal with.

There are dangers in blindly following a mathematical formula. That is recognised by what my right hon. and learned Friend has done in the settlement. [Interruption.] I am sorry that some hon. Gentlemen do not understand that the client group formula is important in the determination of rate support grant. Given the fact that the Government have recognised the need to limit the effect of the mathematical purity of the formula to be fair to authorities such as North-East Fife and Fife region, I hope that my right hon. and learned Friend will consider other ways in which the formula can be improved for the future.

One other problem for local authorities as they approach their budgets for the coming financial year is that, in the wake of the revaluation, I understand they will find it difficult to be certain of the exact product of a penny rate. In general that is a problem, but in Fife it will be a particular problem, given the uncertainty about the valuation to be placed on Moss Morran, which is a large, single rateable property. The relationship between the exact product of a penny rate and what I understand is the national average penny rate can have substantial effects on the way local authority finance is determined in the coming year. I hope my hon. Friend will pay attention to that when he is looking at the budgets put forward by local authorities. I thank him for what he has done in making a more just settlement this year than we have seen in recent years.

11.12 pm
Mr. David Lambie (Cunninghame, South)

This has not been a happy year for Scottish ratepayers and next year will be even worse if this rate support grant order is passed. That is why I will vote against it tonight, as I have voted against every rate support grant order, irrespective of the party in power. I have made that speech before, but there is nothing better than repeating a good speech and showing that some hon. Members vote according to their consciences and not according to a party line.

Local authority independence has been eroded by continual attacks. This order is a continuation of that attack. During the period of office of this Government, the rate support grant has gone down by 12 per cent. That is a direct attack on the ratepayers of Scotland. My local authority, Cunninghame district council, has managed to control its expenditure on its own services. It is budgeting for an increase next year of only 1.8 per cent., at a time when the rate of inflation is around 5 or 6 per cent. That local authority has done its best to contain expenditure, but it has not been able to control the cost of money.

When fixing its budget last year, the Labour authority in Cunninghame believed in the statement by the Prime Minister and the Chancellor of the Exchequer that economic policies were succeeding and that interest rates would gradually go down. Cunninghame district council estimated in last year's budget that rates of interest would go down. Now it finds, when balancing the books at the end of the half year, that it is £1.5 million out, not because of any extra expenditure by the council, but because the Government's economic policy is a shambles and in ruins, and local authorities have been asked to pick up the tab.

Not only is the council £1.5 million out—that was the figure I was given last week—but with the increase in rate of interest over the last two days and the increase that will come tomorrow, the authority will face an even greater deficit at the end of the financial year. I asked the Secretary of State what allowance for interest the Government made this year in the rate support grant. He told me that that did not really matter because local authorities would be compensated. I hope his hon. Friend will tell me what allowance within the rate support grant formula was made for rates of interest for the next financial year.

Mr. Ancram

I am glad to give the hon. Gentleman the answer to his question. An interest rate of 11 per cent. has been applied. As in past years, as my right hon. and learned Friend pointed out, the aggregate of rate support grant will be revised when actual interest rates are known.

Mr. Lambie

I am grateful for that information. It shows that the Government are estimating that during the next financial year interest rates will average about 11 per cent., yet we know that if the Government carry on with their present policies we shall have another year of high interest rates, and local authorities going to the open market will need to borrow at the rate of 15 per cent. or 16 per cent. There will be another deficit next year when we start to balance the books again. Will the Secretary of State make greater allowances for the increasing rates of interest on all local authorities in Scotland?

Not only has the Secretary of State reduced the percentage of the present rate support grant; he has also dealt with the rate fund contribution to the housing account. Not only will the ratepayers in Cunninghame be faced with substantial increases in rates; according to the figures given for the rate fund contribution of just over £2 million, we are facing rent increases of £2.62 per week. That applies not only in the local authority area but in the Scottish special housing association area which has rent increases of 11.28 per cent. at a time when the rate of inflation is about 5 per cent. At a time when the people who stay in the new towns, especially in Irvine new town, are facing unemployment on a scale that we have never known before, the development corporation has also increased rents, but this time by only 6.5 per cent.

If the hon. Member for Dumfries (Sir H. Monro) is happy about how his ratepayers will be affected, my ratepayers and my constituents are not. They will face substantial increases of over £5 a week in rents and rates because of the Government's policies.

I was surprised to hear the hon. Member for Dumfries say that he was happy that the Government were going to reform the rating system and introduce a poll tax. I remember that a year ago the hon. Gentleman told us that we did not need to worry about the effects of revaluation because the Government would introduce help in order to do away with the effects of revaluation in Scotland. We know that that has not come about.

When we were dealing with the differential between the valuation in Scotland compared with that in England, the hon. Gentleman said that that would be changed and that Scottish ratepayers would be allowed to make direct comparisons with similar properties in England and Wales. Again, the Government conned us. Now I am receiving letters and representations from the Scottish Rugby Union. a deputation came down yesterday from Kirkcaldy rugby club complaining about the fact that they were conned two years ago, not only by the hon. Member for Dumfries but by the Government.

The former Secretary of State caught himself on a hook. In order to overcome the uproar in Scotland following revaluation last year, he said that he would reform the rating system. The new Secretary of State was not party to that and I hope that he will look at it. In the past, whenever Scotland has gone it alone on local government matters and valuation we have always suffered. We have carried out revaluation nearly every five years in Scotland since 1973 and England and Wales has the sense to stop it in 1973. We know the ratepayers who are paying for that and who are feeling the effects of this continual revaluation of property in Scotland when there was a standstill in England. We know what those effects are.

If rate reform for Scotland is so good, why are they not having it in England and Wales? Why does it take the Cabinet only 20 minutes to decide that it will reform the rating system in Scotland by introducing a new poll tax? All that will happen is that when the Scottish people pay more under the new system, English ratepayers will be walking to the banks to bank their money.

Mrs. Anna McCurley (Renfrew, West and Inverclyde)

Scotland, for once, may be in the van of innovation, but that is something that the hon. Gentleman seems to resent.

Mr. Lambie

I do not mind being in front when dealing with public investment, reductions in unemployment and extra expenditure on better facilities for education, but I object to being in front if it means that Scotland will be paying more and the English will be paying less. That is the point that I am making. We were conned last year by the Tory Government over revaluation, and we shall be conned again this year if they reform the rating system. The new Secretary of State has a chance to make his name and he should make it by scrapping the proposed system. If the Government are going to make changes, they should do so by giving 100 per cent. Government grant. That is the only way to reform the rating system. The Government should leave local democracy and allow local authorities to decide their priorities locally, and they should not interfere with the amount of money that they give.

11.22 pm
Mrs. Anna McCurley

As the report from COSLA said, last year was not a happy one for Scottish ratepayers. This year looks a good bit better. I am pleased that the Government are retaining relief for domestic ratepayers, irrespective of the fact that it is lower at 75 per cent. We were promised £50 million. We spent £26 million last year. We shall spend £20 million this year. Does that mean that we will have two years for the price of one? Is that a good form of accounting?

I was pleased that this year I did not receive the same volume of protests about the rate support grant as I received last year. I appreciate the way in which my right hon. and learned Friend has been influenced by the vigorous representations that he has received from my district councils. I hope that those vigorous representations included mine. It seems to have paid off for the Renfrew and Inverclyde district councils because my right hon. and learned Friend and the Government have done nicely by us with the needs element, as both councils have achieved the maximum gains available. I notice that they are moving much closer to the guidelines, which must mean that they are indulging in better housekeeping.

The COSLA document this year was much more restrained than last year. That is a welcome change. There is a curiously worded passage in the document. It exhorts us to recognise local government's achievements, as if local government were an endangered species, instead of a greedy and burgeoning one.

A covering letter to the report states that the Government should not interfere in local government, as if we were in the process of disturbing the balance of nature by doing so. At the same time, it asks for our support in force-feeding funds to local government which seems to me a curious paradox. It is time that local government in Scotland accepted the need to abide by its creator's plans, though it may be a matter of regret to it.

I have said in the past that the Government have been a bit tough on local government, but I have never disputed the need for tighter controls of public expenditure, principally because there was too great a degree of uncertainty in the annual round of financial adjustments which, I believe, caused unnecessary friction between the parties concerned. Co-operation between the two layers of government is very desirable, and is something at which each in turn should aim. It has, however, always been a sad feature of the existing system that the public duty to call local government to account has had to be assumed by central Government, to the detriment of local government, despite its support for the ratepayer.

We are all extremely anxious to know what will happen next Tuesday with the advent of the Green Paper. I do not believe that it will necessarily lead to a restoration of bygone levels of rate support grant, but I think I can safely assume that the basis of calculation will be linked with a wider and more equitable spread of financing from the public. I hope that the new-look ratepayer will be freed from what is tantamount to an élite status. Ratepaying has become a hallmark of material success, or, rather, mythological material success. This is clearly nonsense for those on fixed incomes.

In thanking my right hon. and learned Friend tonight for what he has done at district level, I am conscious of the fact that there are some critics who will never be satisfied, but I am putting on record the fact that our Conservative Government have acknowledged the needs of my constituents, at any rate, even within the bounds of restraint.

11.27 pm
Mr. Charles Kennedy (Ross, Cromarty and Skye)

Listening to the contributions from the three Tory Back Benchers, and to the tenor and substance of the orders that the Secretary of State seeks to have passed by the House tonight, I find it very sad that these demoralised troops have at their head a new general, who has apparently decided that it is in the best interests of both the Scottish Office and Scotland as a whole for the war of attrition with local government to continue. I think that the right hon. and learned Gentleman will find, in many of his other policies as well as these, that the recent indications of public opinion in Scotland, showing the alliance in second place and the Conservatives languishing at the bottom of the poll, will be reflected in the ballot box at the next general election.

Turning to what the new Secretary of State is proposing tonight, on the issue of the guidelines, it is apparent—[Interruption.] I am sure that the hon. Member for Grantham (Mr. Hogg) is an absolute expert on Scottish politics; he is geographically well placed to be so.

The first difference that distinguishes these ventures, as indeed the Opposition generally, from the Government is that—[Interruption.] I think that there would be more respect for the hon. Gentleman had he bothered to be here during the debate—the assessment of needs locally is surely a fundamental priority and principle of local government. The way in which the guidelines have been administered by the Scottish Office has done much to erode that principle and, therefore, to erode local government in practice.

On revaluation, the £50 million relief package announced last year by the Scottish Secretary has, as the hon. Member for Renfrew, West and Inverclyde (Mrs. McCurley) pointed out, been shown to be nothing more than £25 million in two lots, spread over two years. The effect of that, when we add the clawback by the Scottish Office from local authorities of £126 million last year, makes it an exercise in fraud for Scottish Office Ministers to try to pose as friends of Scottish ratepayers.

The Green Paper, which we expect shortly, gives the Secretary of State an opportunity to break new ground. He may feel that his predecessor has handed him a poisoned chalice in that respect. If he is to break new ground and go it alone without England and Wales, he would be well advised to take advantage of the computerised Inland Revenue system, and restore accountability to local authorities by coupling both greater financial autonomy through local income tax with reform of the electoral system through proportional representation. That is what he should do, if he wants to be radical and innovative. If he does that, he will have our support. The Saatchi and Saatchi so-called community charge, which is a poll tax under another name, is something that we would not support. In the same way, we shall not support the orders tonight.

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

We are all interested to hear the alliance when it produces its policies, and, although it took only 10 seconds to deliver, we heard something purporting to be a policy tonight. I found it difficult to hear, but I thought I heard the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) say that the alliance would take second place in Ross, Cromarty and Skye. We shall look forward to that.

Owing to the shortage of time, I hope that hon. Members will forgive me if I do not answer the debate in detail. I am grateful to my hon. Friends the Members for Dumfries (Sir H. Monro) for Renfrew, West and Inverclyde (Mrs. McCurley) and for Fife, North-East (Mr. Henderson) for their welcome to this year's settlement. Hon. Members may remember that last year there was a great deal of anxiety on conservative Back Benches. Obviously, this time the settlement has operated more fairly in respect of the district councils about which my hon. Friends were worried last year.

What fascinated me about the speech of the hon. Member for Glasgow, Garscadden (Mr. Dewar) was that last year he asked us to give help to the authorities that have received help under this settlement. Last year he was critical of the scale of grant movements, and he told us that we were moving too fast towards the client group approach on grant distribution. One year later, when suddenly he finds that his strictures, if not listened to, have been applied in the new settlement, he changes his tune. He now accuses us of political bias. Those who have gained by the maximum limit of 15 per cent. are headed by Midlothian, Edinburgh and Glasgow, which are not Conservative administrations as far as I know. As the hon. Gentleman represents a Glasgow constituency, I am surprised to hear him complaining that a 15 per cent. increase in rate support grant is insufficient.

More interesting, the logic of the hon. Gentleman's argument was that we should apply the client group approach for grants because it would give Glasgow more. It would have other interesting effects. Looking at the list of authorities still well above the client group approach, this year Cumnock and Doon district council lost 7 per cent. on its needs element, but it is still 159 per cent. above its client group for grant purposes. Following the hon. Gentleman's argument, he would expect that grant to be reduced by that amount in future. Other councils will be interested to hear his argument. Stirling is 127 per cent. above client group for grant, Aberdeen 105 per cent. and East Lothian 112 per cent. All those authorities and West Lothian would lose a considerable amount of grant if we adopted the hon. Gentleman's strictures. It was precisely because we have tried to avoid such reductions and variations that we have fixed the limitations, which the hon. Gentleman criticised.

As the hon. Gentleman knows, the rate relief order is based on a formula, and its cost is calculated on the basis of those who qualify under it. He asked about the payments that were made. They were staged this year, and will be staged again in future.

The hon. Member for Garscadden will have to wait until next week to find out about the rate reform suggestions. It is clear from what we have heard that if there is one part in the Chamber that has no intention of reforming the rates in any way. it is the Labour party. That is because the existing rating system suits high-spending Labour councils. It will never be in the interests of the hon. Member for Garscadden to reform the rates.

Question put:

The House divided: Ayes 221, Noes 180.

Division No. 45] [11.35 pm
Aitken, Jonathan Forth, Eric
Alexander, Richard Franks, Cecil
Alison, Rt Hon Michael Fraser, Peter (Angus East)
Amess, David Freeman, Roger
Ancram, Michael Fry, Peter
Arnold, Tom Gale, Roger
Ashby, David Galley, Roy
Aspinwall, Jack Gardner, Sir Edward (Fylde)
Atkins, Robert (South Ribble) Garel-Jones, Tristan
Atkinson, David (B'm'th E) Goodlad, Alastair
Baker, Rt Hon K. (Mole Vall'y) Gow, Ian
Baker, Nicholas (Dorset N) Grant, Sir Anthony
Baldry, Tony Greenway, Harry
Banks, Robert (Harrogate) Gregory, Conal
Beaumont-Dark, Anthony Griffiths, Sir Eldon
Bellingham, Henry Griffiths, Peter (Portsm'th N)
Bendall, Vivian Grist, Ian
Bevan, David Gilroy Ground, Patrick
Biffen, Rt Hon John Grylls, Michael
Biggs-Davison, Sir John Gummer, Rt Hon John S
Blaker, Rt Hon Sir Peter Hamilton, Hon A. (Epsom)
Body, Sir Richard Hamilton, Neil (Tatton)
Bonsor, Sir Nicholas Hampson, Dr Keith
Boscawen, Hon Robert Hanley, Jeremy
Bottomley, Peter Hannam, John
Bottomley, Mrs Virginia Harris, David
Bowden, A. (Brighton K'to'n) Harvey, Robert
Bowden, Gerald (Dulwich) Hawkins, Sir Paul (N'folk SW)
Bright, Graham Hawksley, Warren
Brinton, Tim Hayes, J.
Brooke, Hon Peter Hayward, Robert
Brown, M. (Brigg & Cl'thpes) Heathcoat-Amory, David
Browne, John Henderson, Barry
Bruinvels, Peter Hickmet, Richard
Bryan, Sir Paul Higgins, Rt Hon Terence L.
Buck, Sir Antony Hogg, Hon Douglas (Gr'th'm)
Budgen, Nick Holland, Sir Philip (Gedling)
Bulmer, Esmond Holt, Richard
Burt, Alistair Howard, Michael
Butcher, John Howarth, Alan (Stratf'd-on-A)
Butler, Rt Hon Sir Adam Howarth, Gerald (Cannock)
Carlisle, Kenneth (Lincoln) Howell, Ralph (Norfolk, N)
Carlisle, Rt Hon M. (W'ton S) Hubbard-Miles, Peter
Carttiss, Michael Hunt, David (Wirral, W)
Cash, William Hunter, Andrew
Chalker, Mrs Lynda Jackson, Robert
Chapman, Sydney Jessel, Toby
Chope, Christopher Jones, Robert (Herts W)
Churchill, W. S. Jopling, Rt Hon Michael
Clark, Sir W. (Croydon S) Kellett-Bowman, Mrs Elaine
Clarke, Rt Hon K. (Rushcliffe) Kershaw, Sir Anthony
Cockeram, Eric Key, Robert
Colvin, Michael King, Roger (B'ham N'field)
Conway, Derek Knight, Greg (Derby N)
Coombs, Simon Knowles, Michael
Cope, John Knox, David
Cranborne, Viscount Lamont, Norman
Crouch, David Lawler, Geoffrey
Currie, Mrs Edwina Lawrence, Ivan
Dorrell, Stephen Lee, John (Pendle)
Douglas-Hamilton, Lord J. Leigh, Edward (Gainsbor'gh)
Dover, Den Lennox-Boyd, Hon Mark
du Cann, Rt Hon Sir Edward Lester, Jim
Dunn, Robert Lewis, Sir Kenneth (Stamf'd)
Durant, Tony Lightbown, David
Dykes, Hugh Lilley, Peter
Eggar, Tim Lloyd, Peter (Fareham)
Evennett, David Lord, Michael
Fallon, Michael McCurley, Mrs Anna
Favell, Anthony MacGregor, Rt Hon John
Fenner, Mrs Peggy MacKay, Andrew (Berkshire)
Finsberg, Sir Geoffrey MacKay, John (Argyll & Bute)
Fletcher, Alexander Maclean, David John
Fookes, Miss Janet Major, John
Forman, Nigel Malins, Humfrey
Forsyth, Michael (Stirling) Malone, Gerald
Maples, John Powley, John
Marland, Paul Proctor, K. Harvey
Marlow, Antony Rathbone, Tim
Marshall, Michael (Arundel) Rees, Rt Hon Peter (Dover)
Mates, Michael Rhodes James, Robert
Mather, Carol Rhys Williams, Sir Brandon
Maude, Hon Francis Ridley, Rt Hon Nicholas
Mawhinney, Dr Brian Rifkind, Rt Hon Malcolm
Meyer, Sir Anthony Roe, Mrs Marion
Miller, Hal (B'grove) Rossi, Sir Hugh
Mills, Iain (Meriden) Rowe, Andrew
Mitchell, David (Hants NW) Sainsbury, Hon Timothy
Moate, Roger Sayeed, Jonathan
Monro, Sir Hector Shaw, Giles (Pudsey)
Montgomery, Sir Fergus Silvester, Fred
Morris, M. (N'hampton, S) Speed, Keith
Moynihan, Hon C. Stern, Michael
Mudd, David Stevens, Lewis (Nuneaton)
Neale, Gerrard Stokes, John
Needham, Richard Taylor, John (Solihull)
Nicholls, Patrick Thompson, Donald (Calder V)
Norris, Steven Thompson, Patrick (N'ich N)
Oppenheim, Phillip Thurnham, Peter
Oppenheim, Rt Hon Mrs S. Townend, John (Bridlington)
Osborn, Sir John Twinn, Dr Ian
Ottaway, Richard Viggers, Peter
Page, Richard (Herts SW) Wakeham, Rt Hon John
Parkinson, Rt Hon Cecil Walker, Bill (T'side N)
Parris, Matthew Wardle, C. (Bexhill)
Patten, Christopher (Bath) Warren, Kenneth
Patten, J. (Oxf W & Abdgn) Watson, John
Pawsey, James Yeo, Tim
Peacock, Mrs Elizabeth
Percival, Rt Hon Sir Ian Tellers for the Ayes:
Pollock, Alexander Mr. Michael Neubert and
Porter, Barry Mr. Ian Lane.
Powell, William (Corby)
Adams, Allen (Paisley N) Coleman, Donald
Alton, David Conlan, Bernard
Anderson, Donald Cook, Frank (Stockton North)
Archer, Rt Hon Peter Cook, Robin F. (Livingston)
Ashdown, Paddy Cox, Thomas (Tooting)
Ashton, Joe Craigen, J. M.
Atkinson, N. (Tottenham) Crowther, Stan
Bagier, Gordon A. T. Cunliffe, Lawrence
Banks, Tony (Newham NW) Cunningham, Dr John
Barnett, Guy Dalyell, Tam
Barron, Kevin Davies, Rt Hon Denzil (L'lli)
Beckett, Mrs Margaret Davies, Ronald (Caerphilly)
Beith, A. J. Davis, Terry (B'ham, H'ge H'l)
Bell, Stuart Deakins, Eric
Benn, Rt Hon Tony Dewar, Donald
Bennett, A. (Dent'n & Red'sh) Dobson, Frank
Bermingham, Gerald Dormand, Jack
Bidwell, Sydney Douglas, Dick
Blair, Anthony Dubs, Alfred
Boothroyd, Miss Betty Dunwoody, Hon Mrs G.
Boyes, Roland Eadie, Alex
Bray, Dr Jeremy Eastham, Ken
Brown, Gordon (D'f'mline E) Evans, John (St. Helens N)
Brown, Hugh D. (Provan) Fatchett, Derek
Brown, N. (N'c'tle-u-Tyne E) Faulds, Andrew
Brown, Ron (E'burgh, Leith) Field, Frank (Birkenhead)
Bruce, Malcolm Fields, T. (L'pool Broad Gn)
Buchan, Norman Fisher, Mark
Caborn, Richard Flannery, Martin
Callaghan, Jim (Heyw'd & M) Foot, Rt Hon Michael
Campbell, Ian Forrester, John
Campbell-Savours, Dale Foster, Derek
Canavan, Dennis Foulkes, George
Carlile, Alexander (Montg'y) Fraser, J. (Norwood)
Clark, Dr David (S Shields) Freeson, Rt Hon Reginald
Clarke, Thomas Garrett, W. E.
Clay, Robert George, Bruce
Clelland, David Gordon Gilbert, Rt Hon Dr John
Clwyd, Mrs Ann Godman, Dr Norman
Cocks, Rt Hon M. (Bristol S.) Gould, Bryan
Cohen, Harry Hamilton, James (M'well N)
Hamilton, W. W. (Fife Central) Morris, Rt Hon A. (W'shawe)
Hardy, Peter Morris, Rt Hon J. (Aberavon)
Harman, Ms Harriet Nellist, David
Harrison, Rt Hon Walter O'Brien, William
Hart, Rt Hon Dame Judith O'Neill, Martin
Heffer, Eric S. Park, George
Hogg, N. (C'nauld & Kilsyth) Parry, Robert
Holland, Stuart (Vauxhall) Patchett, Terry
Home Robertson, John Pavitt, Laurie
Hughes, Robert (Aberdeen N) Pendry, Tom
Hughes, Roy (Newport East) Penhaligon, David
Hughes, Simon (Southwark) Pike, Peter
Jenkins, Rt Hon Roy (Hillh'd) Powell, Raymond (Ogmore)
John, Brynmor Prescott, John
Johnston, Sir Russell Randall, Stuart
Jones, Barry (Alyn & Deeside) Redmond, Martin.
Kaufman, Rt Hon Gerald Rees, Rt Hon M. (Leeds S)
Kennedy, Charles Richardson, Ms Jo
Kilroy-Silk, Robert Robertson, George
Kirkwood, Archy Rogers, Allan
Lambie, David Rooker, J. W.
Lamond, James Ross, Stephen (Isle of Wight)
Leighton, Ronald Rowlands, Ted
Lewis, Ron (Carlisle) Ryman, John
Litherland, Robert Sedgemore, Brian
Lloyd, Tony (Stretford) Sheerman, Barry
Loyden, Edward Sheldon, Rt Hon R.
McKay, Allen (Penistone) Shore, Rt Hon Peter
MacKenzie, Rt Hon Gregor Short, Ms Clare (Ladywood)
Maclennan, Robert Silkin, Rt Hon J.
McNamara, Kevin Skinner, Dennis
McTaggart, Robert Smith, C. (Isl'ton S & F'bury)
McWilliam, John Smith, Rt Hon J. (M'ds, E)
Madden, Max Soley, Clive
Marek, Dr John Spearing, Nigel
Marshall, David (Shettleston) Steel, Rt Hon David
Martin, Michael Stewart, Rt Hon D. (W Isles)
Maxton, John Stott, Roger
Maynard, Miss Joan Strang, Gavin
Meacher, Michael Straw, Jack
Michie, William Thomas, Dafydd (Merioneth)
Mikardo, Ian Thompson, J. (Wansbeck)
Millan, Rt Hon Bruce Thorne, Stan (Preston)
Miller, Dr M. S. (E Kilbride) Tinn, James
Mitchell, Austin (G't Grimsby) Torney, Tom
Wallace, James Winnick, David
Wareing, Robert Woodall, Alec
Welsh, Michael
White, James Tellers for the Noes:
Williams, Rt Hon A. Mr. Don Dixon and
Wilson, Gordon Mr. Frank Haynes.

Question accordingly agreed to.

Resolved, That the Rate Support Grant (Scotland) (No. 4) Order 1985, dated 18th December 1985, which was laid before this House on 19th December, be approved.