Rate Support Grant (Hansard, 23 July 1986)

§ 4. Mr. Fisher
asked the Secretary of State for the Environment when he proposes to announce details of the 1987–88 rate support grant settlement.

§ Mr. Ridley
I announced details of my proposals for the 1987–88 rate support grant settlement to the House yesterday.

§ Mr. Fisher
Is it the Secretary of State's intention to set a deliberatly inadequate level of grant-related expenditure in order to force many local authorities to spend beyond it and so incur millions of pounds worth of loss of grant? In practice, would that not be a rather devious way of reintroducing a penalty system in another form? If it did happen like that, would not much, or perhaps all, of the £1 billion that the Secretary of State talked about yesterday be offset by such loss of grants?

§ Mr. Ridley
It is the Government's intention, after consultation, to set grant-related expenditure totals at a lower figure than the total of provision. The consequences that will flow from that are not those suggested by the hon. Gentleman. There will be a slightly different allocation of resources in a better direction, and I doubt whether it will make much difference to the amount of grant forfeited.

§ Mr. Powley
Does my right hon. Friend agree that, following his generous settlement of the rate support grant yesterday, there should be no excuse for any local 327 authority to engage in extravagant and unnecessary spending? Does he also agree that the settlement should be used to keep rate demands down to their lowest possible level and that money should be spend only on that which is necessary and essential?

§ Mr. Ridley
The in word is "realistic" rather than "generous". However, I am grateful to my hon. Friend. I confirm that the results of yesterday's announcement should be that councils which spend reasonably and moderately in accordance with their needs will suffer little, if any, need for increasing rate bills.

§ Mr. Tony Banks
Is the Secretary of State aware that the London borough of Newham is still in dispute with his Department about the outturn of the borough's budget for 1985–86? As that obviously very much affects the calculation upon which he has based Newham's rate capping, it means that less agreement can be reached in favour of Newham. Next year the London borough of Newham, which is the second most deprived local authority area in the country, will have to make a reduction of about £20 million in its budget. Will the Secretary of State please tell the London borough of Newham, since he has taken over control of local government, where it should make the cuts in expenditure? Is he aware of the enormous social and economic problems in Newham, or does he not care? We pay.

§ Mr. Ridley
I have the deepest sympathy with the inhabitants of the borough of Newham when I think who represents them at local government and parliamentary level. So great is it that if they were to come to me with an application for redetermination of their expenditure level, we would consider it in accordance with the legislation.

§ Mr. Simon Hughes
Is the Secretary of State aware that the considered view of some of the associations of local authorities is that, having received approximately £1 billion of new money, £630 million will be lost by the abolition of recycling? Is that because the Chancellor of the Exchequer has told the Secretary of State that that will allow a half penny in the pound to come off income tax, or is it because the Secretary of State will make sure that the money lost will he put hack into the kitty and the Government will not suffer a net loss, despite the announcement made yesterday?

§ Mr. Ridley
The hon. Gentleman has mixed up two different years. The figure for the current year is £628 million of lost grant, but, with a great increase in both provision and aggregate Exchequer grant next year, the figure of grant lost must, by definition, be much smaller than that. If authorities do not spend up at all, it will be zero. It is up to them.

§ Mr. Peter Bruinvels
I recognise that my right hon. Friend the Secretary of State was unable to rate-cap Leicester, because, as he said in his statement yesterday, there was something wrong with the formula. However, I reassure him that the people of Leicester are sad that they have not been re-rate capped. Will he look at the formula again and possibly include Leicester later, because the council is borrowing money unfairly? Rates are shooting up by the 80 per cent. I mentioned yesterday, and the people of Leicester feel let down.

§ Mr. Ridley
The people of Leicester have one consolation for the unfortunate nature of their local authority, and that is that they are extremely well represented in Parliament.

§ Mr. Straw
I sympathise with the Secretary of State's problems in relation to Leicester, and particularly the hon. Member for Leicester, East (Mr. Bruinvels), but is he aware that his statement, that the amount of holdback under the system is hound to be less than the £628 million last year, shows how little he understands the system over which he presides? The amount of holdback could be more than £628 million for this year if he sets the levels of GREA substantially below the £25.2 billion at which he has set current expenditure. Will he come clean and tell the House at what level he will set the GREA?

§ Mr. Ridley
I made it clear that the Government thought that an increase in the totals of GREAs by the amount of the GDP deflator would be appropriate, although we have increased the total provision by 8.5 per cent. The figures are 3.5 per cent. on GREAs and 5 per cent. extra provision above that, which means an increase of 3–75 per cent. over this year's budgets. If authorities have provision to spend at 3.75 per cent. over this years budget, not this year's provision, they are able to survive without forfeit of grant. The cash figure for GREA is 95 per cent. of the cash figure for provision.