HC Deb 05 November 1986 vol 103 cc1031-54 8.50 pm
The Parliamentary Under-Secretary of State for Scotland (Mr. Michael Ancram)

I beg to move, That the Rate Support Grant (Scotland) Order 1986, dated 22nd July 1986, a copy of which was laid before this House on 24th July, be approved. The order has two purposes. The first is to reduce the grant payable in respect of 1986–87 by £125.3 million. The second is to adjust the rate support grant payable to Scottish local authorities in respect of 1985–86, the overall effect being an increase of £69.2 million. My right hon. and learned Friend the Secretary of State announced his decision to make these changes in grant in his statement of 23 July and the order was laid the following day.

Local authority current expenditure budgets in Scotland, as measured for comparison with guidelines, come to more than £3,100 million. Thus, even before including their capital expenditure programmes, which are substantial, local authorities account for about half the expenditure for which my right hon. and learned Friend is responsible. That is a very large sum by any standards. I will not detain the House with a recital of our general policy on public expenditure. That policy, and the reasons for it, are well known. So is the success which it is achieving. The continued success of the policy will depend in some measure on our continuing to exercise careful control of local authority expenditure. In 1978–79, the year before we took office, the volume of local authority current expenditure grew by almost 7 per cent. from the previous year. Therefore, in 1978–79, local authorities increased their expenditure by 7 per cent. more than the amount required to cover increased costs.

We have now, after seven years' hard effort, stabilised the volume of expenditure. Local authorities' budgets for 1986–87 show a small reduction — in volume terms—compared with 1978–79. This is welcome and demonstrates the good sense of an increasing number of local authorities. This increasingly responsible approach by local authorities has enabled us to make the generous and realistic provision for the next financial year, 1987–88, which my right hon. and learned Friend also announced on 23 July.

However, this is no time to slacken our efforts to keep spending under control, and indeed the greater the number of local authorities that are willing to play by the rules, the more important it is that their efforts should not be jeopardised by a few irresponsible authorities. Penalties for overspending will therefore continue to have an important role until the new system of local government finance, set out in the Green Paper "Paying for Local Government", is in place.

Before I go any further, I should say something in general terms about the penalty system. I do not like it any more than do the local authorities, nor I suppose any more than Opposition Members, whose colleagues set up the system in the 1970s. But I must recognise, as did the Labour Government of that time, that expenditure has to be contained within the levels of provision that the Government have made. The penalties system is therefore designed as a righting mechanism which will put this aspect of public expenditure back on course, when a breach is threatened; and the penalty tariffs provide a strong disincentive for sensible and reasonable authorities attempting the breach in the first place. All that has changed since the Labour Government introduced the idea is that the system now operates in a much more selective and fairer way. Previously, grant abatement affected all authorities whether or not they were high spenders. Now abatements are related clearly to the extent of an individual authority's overspend and those that keep within guidelines are unaffected by it.

The majority of authorities take heed of the guidelines that the Government set for them. The number of authorities budgeting within guidelines stood at 15 in 1984–85. This increased to 30 in 1985–86 and to 40 in the current year out of a total of 65. Several more are only just over guideline. This is clearly relevant to the Government and to the ratepayers who benefit directly from it. There remains, however, a hard core of authorities that spend well in excess of guidelines. In total, Scottish local authorities planned overspend for 1986–87 is £118 million or 3.9 per cent. Only four authorities account for £107 million or 90 per cent. of this overspend. It is right that the consequences of their action should be brought home to them and that penalties should be concentrated on those authorities. Our arrangements ensure this. I will have more to say in a moment about those authorities.

I shall now deal with the details of the order. The order falls into two parts. First, it reduces rate support grant for 1986–87 for those authorities which have planned to overspend. The needs element of rate support grant has been reduced by £125.3 million. This reduction is concentrated entirely on the 25 overspenders. As for last year, a tariff has been applied relating the reduction in grant to the overspend. This year the tariff starts at zero and rises to a reduction of 10 per cent. of the overspend for a 1.5 per cent excess. It then rises more steeply to 70 per cent. for a 3 per cent. excess and more steeply again to 110 per cent. for an excess of 3.5 per cent. or more. Annex 2 of the report contains a graph of the tariff and the calculations of penalties for individual authorities. The penalties are listed in column 7 of page 9.

The four authorities which I mentioned earlier will attract 94 per cent. of the penalty. I emphasise that it is, of course, still possible for them to recoup those penalties for their ratepayers, by reducing their overspends, and hence their penalties, at outturn. For example, an authority with a budget overspend of 6 per cent. which then halves its excess will have its penalty cut by two thirds. If it reduces its excess to 2 per cent. the penalty will be reduced in cash by 90 per cent. There is still time for those authorities to take the necessary steps, and if they do so they will be acting clearly in the interests of their ratepayers. I hope that they will take heed of this opportunity and I urge Opposition Members, if they have the ratepayers' interests at heart, to join me in urging those authorities to revise their expenditure plans now. They have of course had full notice of our intentions since 23 July, and should have been planning revised budgets since then. Indeed, in the past local authorities have reduced their expenditure substantially at outturn as indeed they did last year.

In fact, turning to the second part of the order, the effectiveness of grant penalties is demonstrated by the return of provisional outturn for 1985–86. At the budget stage 30 authorities kept within guidelines and the total overspend was £90.7 million. Provisional outturns show 37 authorities within guideline and the total overspend down to £47.2 million. The effect of this is to bring penalties down from £126.6 million to £57.4 million, a saving of £69.2 million. Authorities, I am glad to say, clearly took heed of our exhortations. I was particularly pleased to see that Edinburgh came down to guideline last year after our selective action to reduce its rates, though it subsequently submitted a grossly extravagant budget for 1986–87, thus bringing selective action on itself again.

Details of the 1985–86 penalties are given in annexes 3 and 4 to the report. For those authorities affected, the revised penalties are shown in column 7 on pages 12 and 13 with the adjustments that will be made to grant payments in column 9.

On 23 July, my right hon. and learned Friend the Secretary of State announced the totals for relevant current expenditure provision and aggregate Exchequer grant for 1987–88. In recognition of the efforts made by increasing numbers of authorities to come down to guideline, provision was set at local authority budgets, adjusted for the interim teachers' pay award, plus 3.75 per cent., a total figure of £3,277 million. Aggregate Exchequer grant was set at £2,160 million. On 1 October we issued current expenditure guidelines to all authorities. The effect of those decisions is that there is in general no reason for rate increases next year, unless local authorities increase their spending above inflation or fail to bring their spending to guideline in the current year.

The generous overall settlement means that no authority can claim that its guideline is unattainable. Every authority has a guideline which is at least a real terms freeze on its present guideline and no authority is being asked to make a cash reduction on its present budget. Several authorities have made representations to us because they have been set guidelines below assessed need in the past. The number of authorities with guidelines below assessed need has been reduced from 30 to 19; for most of those still below assessment the gap has been narrowed and for none is it wider. It is now up to the local authorities to respond by budgeting within those guidelines. I give authorities due warning that any that do not do so will face severe penalties again next year.

Hon. Members may be wondering whether the order we are considering this evening has any implications for the discussions now taking place on teachers' pay. There are two points to make. If a settlement of the teachers' dispute is reached on the basis proposed by my right hon. and learned Friend, the costs of an additional 8.2 per cent. on the pay bill from January to March 1987—that is the part of the financial year we are dealing with in this order — will be met fully by additional provision and a corresponding increase in grant. There would be a further order in respect of the grant.

Secondly, we have indicated our willingness to meet the Convention of Scottish Local Authorities' request for a disregard in respect of £27 million of expenditure it estimates to incur this year as a result of the interim pay award of April 1986, and which is in excess of its budgeted provision. In fact, my right hon. and learned Friend and I had a useful meeting yesterday with representatives of COSLA. They were worried about the threat of renewed disruption in the classrooms if the teachers do not accept my right hon. and learned Friend's proposals for settling the dispute. The Government share that concern.

My right hon. and learned Friend's proposals are generous, offering teachers a prospect of average increases of 30 per cent. between April 1985 and October 1987. What is of concern for us tonight is the consequences for rates. COSLA obviously shares that concern and is, so far as I am aware, entirely content with our proposals, which I have mentioned, on disregard and on additional resources and grant.

Indeed, my right hon. and learned Friend and I were also encouraged yesterday by COSLA's clear agreement on the need to secure a proper deal covering conditions of service, its concern to avoid further disruption in the classrooms, and its concern to take all possible steps within the limits of my right hon. and learned Friend's offer to secure a settlement to the dispute. We regard COSLA as having a major responsibility in the weeks ahead in encouraging the teachers to consider my right hon. and learned Friend's proposals in a moderate and sensible way.

Grant penalties are an essential part of the present system of local government finance. We inherited them from the Labour party and have made them fairer and more effective. In the present system of local government finance the disparity between those who pay rates and those who vote requires this form of constraint on local authority spending. The new system that we shall shortly introduce will be designed to improve local accountability and to remove the need for such penalties. Meanwhile, we must work within the present system. I hope that authorities which have bugeted above guideline will try to reduce their excesses. Given both the level of provision and guidelines, no authority will have an excuse for budgeting over guideline next year and thus creating a greater burden on their ratepayers. It is my sincere hope that they will not. I commend the order to the House.

9.4 pm

Mr. Donald Dewar (Glasgow, Garscadden)

There is, I am afraid, a certain familiarity about these debates. We have heard it all before from the Parliamentary Under-Secretary of State. The most depressing thing was his suggestion that he might have the opportunity of making another such speech. I sincerely hope—"sincerely" was overused in his speech — that that turns out to be unfounded.

The trouble is that the Government have got it wrong over a number of years, but they persist in their error. There is always a danger of a certain resigned acceptance among Opposition Members: Ministers are incorrigible, they are set in their ways and the only hope is that at some reasonably early date they will be summarily dismissed. That is an understandable feeling on Opposition Benches, but we have a duty to argue the case and explain and underline our opposition to the order and the general abatement that it represents.

We are discussing a form of penalty. The Minister engagingly referred to its origins under a Labour Government, but I suggest that there is one large distinction. That is that it is now being used with particular relish which, on occasions, amounts almost to venom. It has done a great deal to destroy any chance of a working relationship between the Government and local authorities. There has been scant regard for principle and, more importantly, for the needs of the community which, to some extent, depend upon the services provided by local government.

The trouble is that the penalty is based on arbitrary guidelines and is set at a level that follows no obvious or logical pattern. This year we are being asked to claw out of the budgets halfway through the financial year the substantial sum of £125 million. We are entitled to protest about the impact and about the wrong-headed approach that the Government are displaying.

I am glad that the Minister referred to the difficulties over teachers' pay. That gives an air of particular uncertainty to what is happening at the moment. Not only are local authorities suffering from the cumulative pounding of recent years but one of their major items of expenditure under the rate support grant settlement is clouded in uncertainty. We know that the teachers' salary bill is likely to be £500 million or more, but no one knows how much more, or what will happen.

I am glad to see the Secretary of State in his place. He knows that I make no secret of the fact that we have been dismayed by the recent turn of events. I understand and recognise that there was a meeting yesterday between COSLA and the Secretary of State. It is taking the artificial conventions of dialogue beyond any useful point to describe it as a useful meeting. Having talked to some of those who were at it, I have not been given that impression. What appears to have happened— I regret this as well—is that COSLA was told in no uncertain terms that any initiative that it might want to pursue in terms of the financial aspects of the package was ruled out with a finality that does something to snuff hope of an early solution to the problem.

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

The hon. Gentleman will, I presume, have read the reported remarks of Councillor Fagan, the president of the convention, this morning. He said that suggestions that had come from some quarters that the local authorities might top up the costs of the Main report above the level of phasing proposed by the Government were, in his word, "preposterous".

Mr. Dewar

I have spent much time in the past 24 hours not only with Councillor Fagan but with several other local government figures who were at the meeting. Whether it is preposterous or not, let us get it on the record and clarify the situation. As I understand it—if I have misunderstood, it is important that that is made clear—even if there was such an intention or willingness to consider that possibility, the right hon. and learned Gentleman made it clear that it would not be allowed and that COSLA was told in no uncertain terms that it would meet the strongest possible opposition, and a series of barriers, financial and otherwise, which would rule out that possibility.

Mr. Rifkind

I am happy to confirm that. That is indeed what I said. I also asked the convention whether it wanted to support the suggestion of the convenor from Dumfries and Galloway region, which was that local authorities might wish to finance the difference between the phased award and a full immediate payment. I was told that, irrespective of the Government's view, the convention did not wish to put forward such a proposal.

Mr. Dewar

I am aware that Councillor Jameson of Dumfries and Galloway, who is not a member of my Parliament—sorry, party — [Interruption.] The right hon. and learned Gentleman can laugh—he is entitled to do so—but I take these things fairly seriously in view of the crisis. I am aware that that idea has been floated. I do not speak for COSLA, and it would not be right for me to say what COSLA's attitude on these matters is, but I am clear that it sought to establish the Government's stance.

Irrespective of whether COSLA would have considered such an initiative, the right hon. and learned Gentleman and I are at one, at least, in establishing that the Government rule out that possibility. The major role for COSLA, which the Under-Secretary of State referred to, in the Government's mind at least, is simply to support the Government's departure from the financial package in the Main report. That seems a strange way in which to treat a group who are the employers and which, when, as we all hope, there is a settlement, will be faced with funding a substantial proportion of the costs.

One thing is clear. The Government have set up a confrontation — I regret that—by the decision on the Main report which was announced recently. As for local government, the Secretary of State is determined that nobody will rescue him from that confrontation. My earnest hope is that parents, pupils and the education system will not be asked to pay too high a price for the Treasury's intransigence and possibly the right hon. and learned Gentleman's pride.

On the 1986–87 figures, we are all aware that some £27 million is part of the financing of the 5.5 per cent. interim settlement and has not been budgeted for in the present figures. I am aware that there was an agreement that if a settlement was reached that sum would be disregarded in terms of penalities and measurement against guidelines.

I take it from what the Under-Secretary of State said that, even if, sadly, we do not reach a settlement in the teachers' dispute in the near future, that £27 million will be fully disregarded. I put that to him because my impression as a result of talking to people who were at the COSLA meeting—I am sure that it may just have been a misunderstanding— was that that was not clear to them.

I want to know quite clearly whether the £27 million— the fag-end of the 5.5 per cent. pay increase will be disregarded, whatever happens to the teachers' dispute. I take that to be the case from the Minister's remarks. If I am wrong, I hope that he will intervene. He does not, so I take it that I am right. I am grateful for that, and I think that COSLA will be as well. I put it to the Minister—I am right about that?

Mr. Ancram

Wait until my reply.

Mr. Dewar

We shall wait for the hon. Gentleman's reply with more interest than usual.

I must move on as there are other important matters to consider, although they do not have quite the same sharp topicality. The Minister argued that the penalties have been working and have done a great deal to restrict local government expenditure. Reasonably, from his point of view, the Minister drew attention to the fact that some £69 million of the clawback for the previous financial year has been paid back. There is, of course, an impact as a result of that type of penalty. Most extortion rackets have an impact on their victim. Of course local authorities have been forced to cut services. They have been forced to contemplate retrenchment when often social need demands expansion, but that is no defence for this form of policy. It is equally irrelevant to say that the Government are penalising only 25 authorities when those authorities represent 73 per cent. of total local government expenditure in Glasgow.

I was not clear about the four authorities that together account for £107 million of the £125 million. I make it three authorities, but perhaps simple arithmetic is not the Minister's strong point—[Interruption.] That may also apply to myself, but I think that at least I have got it right.

I speak for every Labour Member when I say that it is unreasonable to expect the Strathclyde region to find £76 million of savings within its budget this year. Inevitably, when that is squashed into the last six months of the year it will put jobs at risk and threaten services. It will mean that the delivery of those services that can be maintained will be dangerously stretched. These are not theoretical matters or some sort of accountancy exercise. This is a threatening situation for those who are working on the ground and those who rely on such services.

Similarly, it is right to say that the situation in Lothian is thoroughly unsatisfactory to many people who have nothing to do with my political standpoint. Lothian has been penalised by £25 million, yet the Minister knows that that penalty is based upon a Conservative budget. The author of this profligacy and financial irresponsibility is Councillor Brian Meek and his Conservative colleagues. The Minister is somewhat hard on poor Councillor Meek who, after all, is an electoral victim of the Government's well-earned unpopularity — despite Councillor Meek's efforts to distance himself from the Government. It is a bit hard that he should now be condemned by Ministers for overspending. It is even harder on the people of Lothian who will see the cuts biting and taking effect.

My own city of Glasgow, which is penalised by £5.5 million, has enormous problems that are self-evident and pressing. I need not say much about them tonight, because they are in the mind of every hon. Member who represents a Glasgow constituency. It is extremely sad that we should be faced with these additional and quite unnecessary problems.

A fourth authority that is quite outwith the figures that the Minister mentioned is Edinburgh, which finds itself in a very odd situation. It has been penalised under section 5 of the 1966 Act. That is odd, because most of us thought that the section 5 procedure was no longer relevant and that it would not be used. It was, and the strange comparators of Kirkcaldy and Motherwell resulted in a difficult situation where the excess over guidelines at £9.6 million was reduced by agreement to £6.3 million.

To anyone following these matters carefully that would mean that the penalty would come down from £10.6 million to £3.6 million. That is a reasonable assumption, but, predictably, with this Government it turns out to be unsound. In fact, the penalty remains at £10.5 million and the gap of almost £7 million will have to be closed by borrowing during the year until the money that we all know will ultimately he repaid is repaid by Government. The result will be an additional charge, which in terms of interest rates will, I am told, be about £750,000. To me that is a Gilbertian situation that is impossible to defend. There is no real excuse for it.

The Minister knows that he will have to pay that money back. There was plenty of time because the adjustment that led to the diminution on the excess over guidelines was agreed on 18 June, yet the order was not laid until 24 July. I am advised that there is no legal impediment as that would have prevented the logical and sensible step of calculating the penalties on the reduced excess over guidelines being followed. The outcome will be an additional burden on the ratepayer that is not needed. I am afraid that the reason is a rather vindictive approach to the particular problems of Edinburgh.

Mr. Ancram

I am grateful to the hon. Gentleman for giving way. This is an important point, and I am sure that he would wish to be fair. As he knows, penalties are drawn on budgets, and penalties that follow in the given financial year come from the budgets and can be readjusted on outturn if the expenditure is either lower or higher than that budgeted for. The hon. Gentleman is in effect making the case that Edinburgh, which set a very high budget because of the series of procedures, has now reduced its expenditure and, therefore, should attract a reduced penalty during this financial year. Would the hon. Gentleman be happy for Edinburgh to have that reduced penalty, in the knowledge that other authorities, such as Strathclyde, which may also make reductions in its expenditure during the current year, will have to suffer the same penalties as it suffers now that it will obtain the reduction only, as in Edinburgh's case, when the outturn is known?

Mr. Dewar

That is a very feeble argument. All my hon. Friends understand that there is a clear distinction to be drawn. Strathclyde may or may not make reductions, perforce, during the financial year, but we shall not know whether it does so until the outturn figures are known. We know that there has been a big reduction in Edinburgh. Both rates and expenditure have been adjusted, but that applied well before the order was laid.

If the Parliamentary Under-Secretary of State is asking me, triumphantly, whether I should be happy if Edinburgh were treated in this way and whether, by implication, that would be unfair to other authorities, the answer is that I should be happy if Edinburgh were treated in that way. I am sustained in that view by the fact that the Convention of Scottish Local Authorities unanimously—I stress and underline the word "unanimously", because it included all political groupings — backed Edinburgh on this point. Therefore, to pray in aid unfairness to other local authorities when they want the Minister to come into line with logic and reality seems to me to be very poor.

The Minister said that he has been able to be more generous than he was in 1985–86 regarding clawbacks. I suppose that the argument is that the robbery has been committed again but that the take is considerably smaller. That is very doubtful. The Minister will have seen COSLA's figures. The budgets, in volume terms, of three of the largest authorities have been taken for 1986–87 and the increase over 1985–86 has been calculated. The increase in penalty between 1985–86 and 1986–87 has then been examined.

In Glasgow's case, between 1985–86 and 1986–87 the budget, in volume terms, dropped by 2.7 per cent., but the penalty increased by 3.8 per cent. In Strathclyde, the budget, in volume terms, decreased by 2.5 per cent., but the penalty increased by 12 per cent. In Lothian there was an increase, in volume terms, but it was very modest— 0.3 per cent. However, the penalty increased by 190 per cent. That represents a very large vote of no confidence in the Minister's complacent defence. This is thoroughly unsatisfactory. The clawbacks are unnecessary, in the circumstances, in that they are unsound in their methodology and unpredictable and capricious in their consequences.

I welcome the fact that the basis for the compilation of guidelines for 1987–88 has been changed. The basis will be the budgets for the previous year, plus an inflation rate of 3¾ per cent. We shall dispute whether that is an adequate percentage figure to apply. However, I welcome the fact that the previous year's budget is now being used as the basis for calculating the guidelines.

If the guidelines for 1987–88 are priced back to 1986–87, and if the abatement penalty in this order is then applied, one discovers that the total penalty to be paid is only £12 million, not £125 million. That puts into perspective some of the hysterical charges that are still being made in Government circles.

To put that proposition even more clearly and relevantly, we are in the quite extraordinary position that next year's guidelines will be based upon this year's budget, plus inflation. That is believed by the Minister to be a reasonable basis for next year's expenditure. However, the same base budget starting point for this year is attracting a massive penalty of £125 million. There is no conceivable explanation for that policy. The only difference is the addition of an inflation factor. Next year it will be completely acceptable, although this year it is believed to be financially irresponsible.

If one looks at the fine detail, is it not extraordinary that three of the 25 authorities that have been penalised have budgeted for expenditure in 1986–87 that is less than their assessed need? Much good it has done them, because at the end of the day they are to be penalised, together with the other authorities. It is an illogical, depressing but, I am afraid, an all too typical performance by this Government, and we shall certainly vote against the order tonight.

9.24 pm
Sir Hector Monro (Dumfries)

It is very nice that many Opposition Members have come tonight to listen to reality rather than to what we have heard in the past 20 minutes. I welcome the order.

Year by year, I have complained, but tonight I want to thank my hon. Friend the Minister and the Government. For ages I have felt that rural areas with a reputation for good housekeeping have been penalised by some obscure, incomprehensible formula. Tonight, at last, reality has prevailed and some of the figures that I shall mention are certainly welcome.

I find the observations of COSLA most unhelpful. It would be of benefit to local authorities if they tried to work a little harder with Government instead of trying to oppose everything root and branch. If COSLA showed a little leadership instead of a great deal of self interest, Scotland would benefit enormously from constructive advice. But all we get is pages of criticism in the document that they have sent us. With an attitude like that it is no wonder that nobody in Scotland wants an Assembly.

I wish to consider annex 2 of the guidelines. I am glad to note that Dumfries and Galloway has an 11.6 per cent. increase in its guideline. That is the highest increase in Scotland. Indeed, that is good news for southwest Scotland and a just reward for sensible finance over many years. The district councils within Dumfries and Galloway—

Mr. Donald Stewart (Western Isles)

The hon. Gentleman is taking the same line as the Minister. He speaks as if this was just part of a balance sheet in a vacuum. What does he know of the effect that these cuts have had on the services to which people are entitled? Those services have been drastically reduced and, in some cases, completely destroyed. That is the other side of the legend.

Sir Hector Monro

The right hon. Gentleman must not exaggerate in his usual way. It is ridiculous to say that services have been completely destroyed because obviously they have not. I wish that he would realise that the root cause of most local authority problems is that they over-budget. Their budgets are high up in the clouds, and when they must reduce those budgets they talk of cuts. The budgets are merely being reduced back to reality.

The four district councils within Dumfries and Galloway have all had an increase of 9.5 per cent. which is the fifth highest in Scotland. That will, indeed, be most welcome. It shows that the formula is now weighted much more favourably towards authorities which have tried to keep within their guidelines and have not overspent in the past or planned to do so in future.

Mr. James Wallace (Orkney and Shetland)

As I read the calculations, if one put next year's guideline for Nithsdale, for example, in real terms for the present financial year, Nithsdale would not incur a penalty. How can the hon. Gentleman justify Nithsdale incurring a penalty this year when on an equivalent level of expenditure next year it will not incur a penalty?

Sir Hector Monro

I am welcoming the fact that Nithsdale has an increase of 9.5 per cent. for the year. That is something which both the local authority and I welcome.

We are discussing budgeting tonight, and it is important to realise that, in real terms, local authorities are spending more now than in 1979. That shows that there has been a steady increase in expenditure in real terms. The hon. Member for Glasgow, Garscadden (Mr. Dewar) held up his hands in horror and said that Strathclyde could make no savings at all when it is £76 million over budget, which is incredible in local authority financing.

There is no more important issue than the serious position of education in relation to the teachers. We must try to resolve that as soon as possible. I was extremely disappointed at the attitude of the teaching profession and the view taken by the newspapers at the weekend. To say, as the Educational Institute of Scotland seemed to say, that Main is dead is absolute rubbish. It is a good report and we must use it as a basis for settlement.

Earlier this year, my right hon. Friend broke the log jam by setting up the Main committee to produce a report —something that the Opposition did not think possible. My right hon. Friend and the Main committee set a fine example to England, which will welcome the committee's recommendations as much as the House did.

So much seems to depend on the argument whether or not the package is indivisible, in the sense that pay and conditions of service must go together, as the Main committee recommended. I am firmly of the opinion that pay and conditions of service go together and are indivisible. If we are trying to find a solution, it is not so ludicrous to think that we can phase in pay and conditions of service. Surely we can rise above the nit-picking of the EIS, which said that because it did not get the whole lot by 1 October it would not consider the Main committee recommendations.

The EIS did not like the conditions of service and jumped at the opportunity to reject the report. I trust that teachers and Opposition Members will look at the pay proposals carefully. My right hon. and learned Friend the Secretary of State for Scotland achieved the 16.4 per cent. from the Treasury recommended by Main—8.2 per cent. to be paid at the end of next month and 8.2 per cent. in October next year. That is on top of the 5.5 per cent. paid in April and the 9 per cent. in 1985–86. That is very nearly 30 per cent in less than three years. What other profession has been offered nearly 30 per cent. during the past three years, or even the past five years? The offer is worth the most careful consideration as it is an increase far above the rate of inflation and, importantly, an increase that recognises the worth of the profession, as recommended by Main. I certainly welcome the Main recommendations.

Sadly, the teachers seem to be in orbit about the phasing in of the award. May I remind Opposition Members about Clegg, which is often held up as the key to all educational advance? That was phased in in two stages. In 1984, the armed forces award of 7.6 per cent. was also phased in in two stages. In 1984, doctors and dentists achieved 6.9 per cent. — not the 16.4 per cent. recommended for teachers—and that was phased in in two stages. In 1985, nurses' pay was reviewed and the award phased in also. In 1984, the Top Salaries Review Body's recommendations were phased in.

Surely teachers could not have expected the 16.4 per cent. award to be paid on 1 October while they are working to rule or even on strike. Surely they should have been prepared to give much more consideration to the recommendations.

Hon. Members should look at what Main has offered by way of salary increases. As the hon. Member for Garscadden rightly said, such increases have a great deal to do with this order because the money has to come from the rate support grant. Under the proposals, the average salary of a primary school teacher will be £12,300. A secondary teacher will receive £13,745, and 60 per cent. of secondary school teachers will receive over £13,700. For head teachers it rises to £28,500. Those are significant increases and they should have been welcomed by the profession. Only 2 per cent. of teachers in Scotland would receive less than £8,000. We should bear in mind as well that 33 per cent. of all secondary teachers will have over £15,000. The teachers should not have turned down this settlement but should have given it much more careful thought than they have.

The huge sum which will come from taxpayers and ratepayers towards this settlement gives a wonderful chance to the profession to enter into a new era. The teaching profession desperately needs leadership from the EIS in an effort to find a solution. The EIS seems to have its head in the sand because it refuses to give leadership. It says it will depend on a ballot and will not give a firm indication of all the advantages available to the teaching profession in this recommendation.

I hope that teachers will read the reports of the debate and take on board what is on offer and pay less heed to what they have so often been told by the Opposition. Children and parents have gone through a miserable period. The future of our children depends on qualifications obtained at school and it is high time they had an opportunity to reach their full potential. I hope that the EIS will come off the fence and will negotiate through the proper channels in an effort to resolve the dispute. The Secretary of State has played a brilliant and constructive part in reaching this point. It is now up to the teachers to come forward and reach a settlement.

9.38 pm
Mr. James Wallace (Orkney and Shetland)

I appreciate the need of the hon. Member for Dumfries (Sir H. Monro) to get something on record about the teachers' dispute so that it can be reported in next week's Dumfries and Galloway Standard and the Moffat News and Times. In so doing he went somewhat wider than the terms of the debate. I shall try to keep my remarks about that dispute within the terms of the debate. Today I met representatives from COSLA and discovered that there would be no scope for COSLA or for individual local authorities to reach a separate settlement. The Secretary of State assures me that the Government do not want that either and in that sense there seems to be some agreement.

COSLA is confused about the future of the rate support grant relative to the interim settlement that has already been agreed. I noted that the Under-Secretary of State did not give an immediate response when invited to do so and we look forward to hearing what he has to say on that point because that problem is greatly exercising the minds of local authorities.

In the report attached to this order there is a reference to 1985 orders Nos. 3 and 4. Presumably that means that Nos. 1 and 2 went before. A feature of the rate support grant is the system of penalties and guidelines that the Government operate in a fairly hard-line way. That means that time and again they have to come back to the House for topping-ups and taking-aways.

In introducing the order the Minister seemed like an early-day Santa Claus trying to pretend that he was giving £69 million back to local authorities for 1985–86. However, he was only giving back what he had taken away in one of these orders that we debated last year. In the interim period the local authorities that have lost that money have had to pay interest on it. With interest running at the rate of 10 to 11 per cent. I estimate that that represents a loss of £7.6 million to the ratepayers of the local authorities concerned. Because the system operates inflexibly, that is a loss to the ratepayers.

There is a suggestion that the guidelines are invested with some sort of magic. We are told that they are not intended to be mandatory, but because of the way in which the system works, they are, to all intents and purposes, just that. The Minister assures us that the total is one of those odd things, and is nothing to do with the sum of the parts. I have discussed with the Minister the individual guidelines for services with regard to the police allocation. He and I were in substantial agreement, but I was assured that that was not what that local authority was expected to spend on the police. Nevertheless, when everything was added up, the local authority had to stay within the total sum. Consequently, the individual parts bore no relation to the sum which would, nevertheless, be binding on the local authority.

It has been pointed out that if next year's guidelines were converted into real terms for the current year they would show a minimal overspend, resulting in a penalty of about £12 million rather than £125 million. Indeed, if the Edinburgh anomaly is taken into account, the penalty would be £5 million instead of £125 million. The hon. Member for Dumfries did not pick up that point with regard to Nithsdale. This year it has no doubt been accused of irresponsible overspending in incurring penalty, despite the fact that the same spending next year would in real terms be the height of financial rectitude and would not incur penalty. Furthermore, this year it is incurring a penalty for spending a sum that does not even meet its assessed need on the Government's own estimate. The hon. Gentleman did not comment on that, although I gave him the opportunity to do so. I am sure that his electors will take due note of that.

Under this order, 25 local authorities are now to be penalised. We are not simply talking about penalising local authorities, because that burden will be passed on to the ratepayers, and will often affect the services provided by those authorities. The Government cannot raise the spectre of irresponsible, high-spending authorities for much longer. Three of the local authorities to be penalised tonight have an assessment of expenditure need — the Government's own assessment — that is greater than their guideline. Some authorities that spend the same in real terms next year will not be deemed irresponsible high spenders.

Reference has been made to the Lothian region, and the hon. Member for Glasgow, Garscadden (Mr. Dewar) pointed out that a Conservative administration had put forward a budget that incurred penalty. I am sorry that he did not also pick on the alliance. I would plead guilty as well, because it was a Conservative administration in alliance with the Liberals and Social Democrats that put forward that budget, because they did not feel that they could cut their expenditure any further. That shows that we are now reaching the bone. Most of the fat has been cut away, and the Government now expect local authorities to dig into the bone in order to meet their arbitrary spending guidelines.

The Government are obsessed with public expenditure. The Minister did the House a service by saying that he would not go into detail again on the Government's policy on public expenditure. We all know it well, but their obsession leads to rough justice, as is demonstrated by the order.

Mr. Tony Favell (Stockport)

I hope that the hon. Gentleman will forgive an Englishman for intervening in this debate—[Interruption.] Will the hon. Gentleman spare a word for the taxpayer who has to fund these feckless Scottish local authorities?

Mr. Wallace

With due respect, I forgive an Englishman many things, but we are no longer dealing with feckless and irresponsible local authorities. It has been admitted today that local authorities are now spending less in total volume terms than in 1978–79. Indeed, some of the local authorities penalised in the order are spending substantially less in volume terms than in 1978–79.

The guidelines reveal a lack of flexibility. The hon. Member for Garscadden has already mentioned the anomaly relating to Edinburgh, and so I shall not dwell on that. But I had thought that the Minister would argue that he could not have done anything about it for legal reasons. I was astounded by his answer that there was no legal impediment, and that it was just another arbitrary decision.

There is a distinction between Edinburgh and other local authorities because Edinburgh's budget was agreed in plenty of time for fixing a penalty. Interest charges on that sum will have to be borne by Edinburgh's ratepayers.

The city of Aberdeen is an example of the Government's inflexibility because under the order it will suffer a penalty. Central Government lacked comprehension of what was going on and what was needed when oil was booming. The Government now lack sensitivity about Aberdeen's problems caused by the recession in the oil industry. Job losses are today running at a level which it was predicted would apply by the middle of next year.

Strains and pressures are put upon a local authority when it has to cope with a less buoyant economy. This is a time when one might expect to look to central Government for support, but instead such authorities are penalised further. That leads to cuts which result in even more job losses and a further spiralling down in economic activity.

The anomalies in the guideline system have been well illustrated in tonight's debate. I heave a sigh of relief that my constituency authorities are not to be singled out for penalties. However, the local authorities in my area know that their assessed needs are in excess of their guidelines.

The Minister assured us, as if it were something of which to be proud, that for no local authorities will the gap be any wider. That is not much consolation to local authorities who have been assured that there will be steady progress towards bridging the gap. Very little progress has been made for local authorities in my constituency. They have been prepared to put up with that, but I doubt whether they will be prepared to put up with it for much longer. Ratepayers and services will suffer.

It is incumbent upon any Government which replaces the present Government to restore the relationship between central Government and local government, so that central Government no longer dominates.

The Minister said that he wanted greater local accountability. As a principle, I would not disagree with that, but fundamentally I disagree with the ways in which the Government are going about achieving increased accountability. In social security legislation, the Government are trying to ensure that everyone pays, under the principle that there is no representation without taxation. Many people find that obnoxious.

The proportional representation system at local government level would ensure that local authorities are more representative of the people. That would be a more effective way of controlling expenditure at local level and of reflecting an area's needs. In that way local democracy can best be restored.

9.48 pm
Mr. Michael Hirst (Strathkelvin and Bearsden)

I regret the need to spend time this evening on discussing the order. I look forward to the day when we have reformed local government expenditure and when such orders are unnecessary. I certainly defend the Minister's action in bringing forward the order because history shows clearly that local authorities will overspend if they are not constrained by central Government. Tonight we are discussing the latest action by central Government — action started by the Labour party and continued by the present Government.

The evidence is clear. When constraints and pressures are applied by central Government, local authorities are able to contain expenditure without services collapsing and without the great embarrassment about which we have heard so much from the Opposition.

The accusation about cuts in local government expenditure is without foundation. In spite of all that this Government have done over the past seven years, spending in volume terms is higher than it was in 1978–79.

The hon. Member for Glasgow, Garscadden (Mr. Dewar) referred to the pounding that local government in Scotland has received under the Government. If he had been in the House, I wonder what adjectives he would have used to describe the actions of the Labour Government when they made the most swingeing cuts in local government expenditure that there have ever been in the history of Scottish local government.

It would be fair to say that the policy which has been followed by my right hon. and learned Friend the Secretary of State and his predecessor has been a successful one.

Mr. Dennis Canavan (Falkirk, West)

Tell that one to Strathkelvin district council.

Mr. Hirst

I shall come to that presently, if the hon. Gentleman can contain himself.

The scorn which the hon. Member for Garscadden poured on the policy pursued by the Government is simply not merited. Two years ago, when I was a comparatively new Member of the House, 15 authorities budgeted within guidelines. Last year there were 30, and this year there are 40—many of them controlled by the hon. Gentleman's party—which can start out with a budget that is within guidelines, and 11 authorities are just above guidelines.

When one looks at the provisional outturn for 1985–86, one sees that many of the authorities that budgeted to overspend last year managed to bring their spending back within guidelines. I do not know whether the hon. Member for Falkirk. West (Mr. Canavan) is listening, but I shall mention Strathkelvin. It budgeted to spend beyond guidelines last year and I am happy to say that it managed to bring its expenditure not just to guidelines but some thousands of pounds under them. In so doing it avoided any penalty being imposed upon the ratepayers.

I believe in giving credit where credit is due, and I give Strathkelvin credit for planning a budget this year which is only modestly above guidelines and much less of an over-budgeting exercise than was done the previous year.

Mr. Canavan

Before the hon. Gentleman entered this place, I had the privilege of representing part of Strathkelvin district. It is now Labour-controlled and all I hear from the people at the coalface of local government —the councillors—is that they are having to suffer the effects of the Government's cuts in local authority services, housing, and everything else. How on earth will the hon. Gentleman manage to explain that before he is out on his neck at the next general election?

Mr. Hirst

It is a pity that the hon. Gentleman has not been listening to the debate. If he chose to go back to his old stomping ground he would see that in the years since I became a Member a great deal more money is being spent on that portion of West Stirlingshire than ever was spent when he was a Member there. [Interruption.] The hon. Gentleman's former constituents showed good sense in voting the way they did at the last election and I am sure that they will do so next time.

This year's guidelines are fair and reasonable. In percentage terms, they offer local authorities the opportunity of making an increase in real terms in what they can spend, and that is welcome. Moreover, the increasing number of local authorities that are budgeting within guidelines this year is confirmation of the success of my right hon. and learned Friend's policy.

Overshadowing all consideration of rate support grant must be the effect which there would be upon the pattern of spending by local authorities if the teachers accept the proposals that are on offer to them which were announced in the House by my right hon. and learned Friend last week.

I welcome the report which my hon. Friend the Minister gave of his discussions with COSLA. I was sorry that since I was not a fly on the wall I could not intervene in the interesting exchanges between the Secretary of State and the shadow spokesman on Scottish affairs. However, I know which version of events I would be prepared to believe.

I am heartened by the assurance that the Minister has given the House this evening that grant will be provided in full to meet the cost of the settlement which will fall to be borne in the 1986–87 financial year. I hope that teachers in Scottish schools will recognise that a fair and reasonable offer has been made to them when they consider it in the cool of their living rooms rather than in the heat of the staff rooms.

The House should recognise that since my right hon. and learned Friend has been Secretary of State for Scotland he has done a great deal to promote the interests of Scottish teachers and to promote peace, stability and progress in Scotland's schools. It is interesting that what we have heard from Opposition Members so far has fallen short of any recommendation that the terms that have been offered should be rejected. That is something that should be welcomed by all fair-minded Members irrespective of the side of the House on which they sit. Parents and the public generally, either as ratepayers or as taxpayers, will have to find the money to finance the deal. They will be right to expect that the teachers should accept a fair and reasonable offer.

It may sober many people to discover that two thirds of Scotland's teachers will have gross pay of over £1,000 a month. I regret to say that many of my constituents would give their eye teeth for that sort of pay. As my hon. Friend the Member for Dumfries (Sir H. Monro) said, when we consider what has been achieved for teachers' salaries over the past 30 months, it is clear that they have made progress. It is fair to say also that much more remains within their grasp.

I do not share the synthetic indignation that we have heard from some quarters about the so-called phasing of the pay increases that are part of the offer. I believe that the offer is fair and I am glad to have had the Minister's assurance that the Government will be meeting in full the costs of any of the impact of the settlement in the current financial year in terms of rate support grant.

9.57 pm
Mr. David Lambie (Cunninghame, South)

I do not intend to take up the arguments of the hon. Member for Strathkelvin and Bearsden (Mr. Hirst) and for Dumfries (Sir H. Monro) on the teachers' dispute. I would say as a member of the Educational Institute of Scotland, and as secretary of the Westminster branch of the EIS, that I have always been brought up to believe that when gentlemen agree to go to arbitration to put their case for a pay review before an independent tribunal they should agree to accept the findings of the tribunal. There is no use appointing a referee and then saying, "We are not accepting your findings and we shall play the game again", when he does not award the goal to our side.

I say to the Secretary of State that he should pay the money to the teachers now. If he does so, I believe that the teachers will vote in the ballot to end the dispute. If he does not pay the money now, I believe that the teachers, by a majority, will vote for a continuation of the industrial dispute. The right hon. and learned Gentlman has won only half of the battle in the Cabinet. Let him return to the Cabinet and, along with his right hon. Friend the Secretary of State for Education and Science, win the second half. If he does that, we shall not have a continuation of the industrial dispute in the schools of Scotland and of England and Wales. Secretary of State, pay the money now and let us have a settlement.

I smiled when my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said, "We have heard it all before." As a member of this place since 1970, I have heard it all before. Indeed, the speech that I am making now is one that I have made from time to time since 1970. There were occasions when I was not lucky enough to catch the eye of Mr. Speaker or Mr. Deputy Speaker, because in the past there has been more interest in these debates than there appears to be this evening. As a Member with a family local government background, I have always spoken and voted against the rate support grant settlement, and I shall be consistent this evening and take the same course. I have done so irrespective of the party in power.

I shall vote against the settlement with great fervour because this happens to be a Conservative Government. The Tories in Scotland are thin on the ground. In the House they are thinner on the ground. After the next election, they will be even thinner on the ground. But, although the Labour party won the debate in Scotland, and although we are winning the debate in the House, we will be defeated because the result of the Division will be determined by English Members of Parliament, especially those from the south of England, who are all Conservative Members. We see not democracy but a steamrollering of the power of English Tories from the south of England who dominate what is happening to local government in Scotland.

After the next election, if Scotland continues to have a predominantly Labour representation that is dominated by the Tory majority from the south of England, not only the Scottish people but the Labour party will need to examine the situation.

We are dealing with an order to reduce the rate support grant by £125.3 million—from £1,761 million to £1,636 million. Tomorrow the Chancellor of the Exchequer will make his autumn statement — [HON. MEMBERS: "Oh."] According to reports appearing in the various newspapers today, he will say how well the country is doing and how we are going economically from strength to strength. He will not mention that the annual cost of unemployment is about £22 billion — £22 billion to pay people not to work. On average, that is £6,438 for each unemployed person. My district council of Cunninghame is penalised by more than £50,000. We have a cash excess over guidelines of just under £200,000 for 1986–87. But, worse still, in 1985–86, because of over-expenditure on unemployment in the area — an unemployment black spot—the council incurred an initial penalty of about £180,000. Because of that over-spending, we faced a grant penalty of 138 per cent. We now face a revised penalty of more than £400,000 in addition to the £50,000 for this year.

In my constituency of Cunninghame, South the September unemployment figure was 7,295 — 22.6 per cent. of the insured population. That figure was reached after 17 or 18 fiddles to determine the level of unemployment. In my constituency, the annual cost of unemployment is about £40 million—that is, it costs the Government £40 million to keep just over 7,000 people unemployed in my constituency. That is, on average, £1,553 for every working person in the constituency.

Mr. Gordon Wilson (Dundee, East)

What does that have to do with the order?

Mr. Lambie

We are discussing a cut in expenditure by local authorities at a time when the Government are prepared to increase expenditure on the unemployed. Local authorities such as mine — Cunninghame district council—spent about £10 million in 1985–86 and about £11 million in 1986–87. That money provides services and employment for the people of the area. The Government are saying to the district council "You are wasting money by spending £10 million or £11 million providing services and employment", yet the local authority is not saying to the Government, "You are prepared to spend £40 million in the constituency to pay people not to work."

Based on the 1986–87 budget, my regional council of Strathclyde has had a penalty of more than £76 million imposed on it. That can only mean a further cut in services and employment, increasing the numbers of the unemployed in Strathclyde. It means an increase in the amount that the Government are prepared to find to keep those people unemployed.

This is why I cannot understand the Government. They attack local councils which are providing services and employment—something that the Government are not prepared to do. I hope that the people of Scotland will recognise that, unless we get people back to work and get the £22 billion which is being wasted on unemployment money spent on building up the country and providing employment and services, we shall never get this country going again. I hope that the one or two decent Tories will vote for the Opposition and oppose the order.

10.7 pm

Mr. Gavin Strang (Edinburgh, East)

I feel compelled to say a few words as an Edinburgh and Lothian Member of Parliament because it is important that we should support my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) in relation to Scotland as a whole and especially the position in Lothian and Edinburgh.

The penalty imposed on Lothian is severe and unjustified. It will destroy jobs and services on a scale that will be damaging to my constituents and, ironically, the constituents of the Under-Secretary of State for Scotland —the hon. Member for Edinburgh, South (Mr. Ancram) — and the Secretary of State. I must say in passing that I wonder whether the penalties applied to Lothian and Edinburgh have something to do with the feeling that they will be helpful electorally to the Government to try to save the three vulnerable Conservative seats and will force local authorities either to cut services and reduce jobs or to raise rates.

The Secretary of State said from a sedentary position — I am not sure whether it is in Hansard — that Edinburgh district council was making a donation to Robert Maxwell, or words to that effect. I say in passing again, because this is not central to the debate, that it would be a disgrace to Scotland if the Commonwealth games company were allowed to go into liquidation. I support Edinburgh district council in its efforts to avert that. I hope that the Government will not hold that against Edinburgh. I believe that, even at this stage, the Government should be prepared to look at the matter again and to avoid the damage to the companies that provided products for the Commonwealth games and the damage to Scotland's reputation and that of its capital city.

I hope that the Government will respond to a narrow point raised by my hon. Friend the Member for Garscadden about the penalty imposed on Edinburgh district council. That penalty relates to the excess over guidelines which would have prevailed had the district council not reached an agreement with the Secretary of State to reduce its expenditure. It must be unfair, by any test, that Edinburgh should be required to carry a £7 million penalty for an entire year. It must lose perhaps £500,000 on the interest payable on that sum.

I have two questions to which I hope the Government will respond. First, is it true that the Secretary of State has discretion in this matter and that there is no statutory requirement on the Government to penalise Edinburgh in that narrow respect? Secondly, if there is no statutory requirement on the Government to act in that way, will they at least agree to reconsider the matter?

10 11 pm

Mr. Ancram

I wish to comment briefly on some of the points made in the debate. I shall start by congratulating, as I always do on such occasions, the hon. Member for Cunninghame, South (Mr. Lambie) on giving his rate support grant speech its twice-yearly airing. We look forward to hearing it again in January when we debate the Main settlement order.

I also thank my hon. Friend the Member for Dumfries (Sir H. Monro) for his strong and helpful speech. I am grateful to him for welcoming the guidelines that have been issued to his regional authority. He and I have had some arguments about the way in which the formula worked in his authority, but this year he has seen that my prophecies of last year have been fulfilled. I listened carefully to his comments on the teachers. I hope that he will forgive me if I do not follow him down that road, but I agree with his comments on that matter. Opposition Members may not like the facts, as they showed while my hon. Friend was speaking, but it is only on the facts that sensible decisions can ultimately be reached.

The hon. Member for Orkney and Shetland (Mr. Wallace) raised several points. It is surprising to hear someone whom I always considered to be perspicacious say that local authorities cannot make savings in any area without cutting services. I am sure that if he considers his authority and other authorities across Scotland he will discover that savings can be made in some obvious areas where duplication takes place and where other ways of providing the same service to the same standard could be found.

The hon. Gentleman referred to Nithsdale, pleading on behalf of a small rural authority which is below its assessed need. Does he accept that the Government have a responsibility for the overall spending by local authorities in Scotland? If he accepted that, would he suggest that bigger increases should be given to small authorities al the expense of bigger authorities which have higher spending at the moment? That is the logic of his position, and I am sure that when he considers it he will discover that that would not be the case.

My hon. Friend the Member for Dumfries was accused by the hon. Member for Orkney and Shetland of not having considered Nithsdale's case. However, Nithsdale received a budget-to-guideline increase of 6.6 per cent. and a guideline-to-guideline increase of 9.5 per cent. this year. I am sure that Nithsdale will be grateful for the guidelines that have been given.

My hon. Friend the Member for Strathkelvin and Bearsden (Mr. Hirst) raised several points. I agree that it is ironic to hear accusations of reductions from Opposition Members. Certainly in terms of capital spending the Labour Government were the major reducers. The difference between this Government and the Labour Government was that we decided that, as a matter of policy and economic responsibility, it was important to keep public expenditure under control. They had to be forced into doing that by the International Monetary Fund because of the profligate spending that had gone before.

The hon. Member for Glasgow, Garscadden (Mr. Dewar) raised many points, one of which was also raised by the hon. Member for Edinburgh, East (Mr. Strang). Edinburgh knew precisely what it was doing when it budgeted in March this year. It knew that the penalties were imposed on the budgets struck in March and it knew what would happen if there was selective action and it was required to reduce its budget. Edinburgh knew all that because it had been through the procedure last year. There is no question of Edinburgh being able to say that it was surprised at the way in which the system operates. It would be wrong to tell one authority that it could have its penalty reduced because the Government made it reduce its expenditure and, at the same time, tell other authorities which are reducing their expenditure voluntarily that they must bear the whole penalty until the position is worked out at outturn. If we have a system, it must operate fairly. It is operating fairly in Edinburgh's case and I hope that the hon. Gentlemen will accept that.

The hon. Member for Garscadden also raised the question of Lothian region. The Conservative administration in Lothian region had an outstanding record. It restored Lothian from the financial shambles that Labour had left and reduced expenditure by 12 per cent. in volume terms while maintaining services. The remarkable thing is not so much that the administration was still budgeting over guidelines but that it achieved so much in bringing expenditure under control within that period. It was certainly to the benefit of the ratepayers in my constituency and the constituency of my right hon. and learned Friend the Secretary of State.

I will not give the hon. Member for Garscadden a mathematics lesson. However, I am informed that there are four authorities responsible for the £107 million overspend. If the hon. Gentleman presses me I will take him through all the details. I am sure that he will find that on this occasion his mathematics are less accurate than mine. When the debate is over I shall let him know how those figures are made up.

I think that the hon. Member for Garscadden may have unintentionally misunderstood the basis of the guidelines. He suggested that the guidelines for 1987–88 were based on budgets plus 3.75 per cent. That is true globally, but individual guidelines are based on assessed need. The basis of the general settlement of the resources has enabled us to ensure, among other things, that every authority has a guideline increase of at least 3.75 per cent., a minimum of a freeze in real terms on guidelines. However, there are other guidelines which are increasing by considerably more than that amount.

Mr. Dick Douglas (Dunfermline, West)

On that point in relation to Fife, if one backdates the 1987–88 figure it would show Fife to have a current guideline of about £172 million. Fife is being penalised now to the tune of £3 million. However, it would be under the guidelines if one made the relevant adjustment. How can we, as public representatives, explain that bizarre arithmetic to the electorate?

Mr. Ancram

At this hour I am not going to take the hon. Gentleman through the complicated system of how the guidelines are drawn up. It was set out in the letter that was sent to the authorities. If the hon. Gentleman has any problem relating to the basis on which the guidelines for Fife were drawn I shall deal with that for him if he writes to me.

The hon. Member for Garscadden also raised the subject of the teachers. I indicated in my original remarks that we were willing to meet COSLA's request for a disregard in respect of the £27 million expenditure it estimates it will incur this year as a result of the interim pay award of April 1986, which is in excess of its budgeted provision. The hon. Gentleman asked what that meant. That disregard is being offered to COSLA on the understanding that both COSLA and the local authorities continue to work with us to persuade the teachers to avoid further disruption. That is something they are doing at the moment and we would expect all local authorities to be doing that in the future. I am sure that nobody, including Opposition Members, would wish to see further disruption in the classrooms.

Mr. Dewar

The Minister has opened up an important point. He has not clarified the issue, but seems to have clouded it. May I try to understand what I have just been told? First, the £27 million will be disregarded for guidelines purposes, in exactly the same way as it would have been if a settlement of the teachers' dispute had been achieved. Secondly, he has put in the caveat that that is conditional on the authorities continuing to co-operate with the Government, as—he ended by saying—they are doing at the moment. In other words, he is satisfied with the policy that they are following at the moment. He is not looking for anything else. He is not setting any other bench-marks against which to apply a test before agreeing to that disregard.

Mr. Ancram

I accept that definition. I said that so long as local authorities and COSLA continue to try to persuade the teachers not to return to disruption in the classroom, which they are doing at the moment, because it is in nobody's interests to return to disruption in the classroom, the disregard will be payable. As far as I am concerned, that situation exists at the moment, and as long as it continues, the disregard will be payable.

Mr. Wallace

Will the hon. Gentleman give way?

Mr. Ancram

I have said what I have to say on that, and I hope that hon. Members—

Mr. Wallace


Mr. Ancram

—will accept that I am saying that at the moment authorities are, in our view, taking the correct approach to future disruption in schools. On that basis, if they continue to do that, the disregard will be payable when it is appropriate so to do.

Mr. Wallace

I seek further detailed clarification. If it should transpire that some local authorities do not match up to what the Government would expect of them, will the Government discriminate between different local authorities in the disregard, depending on what attitude they strike?

Mr. Ancram

The hon. Gentleman is now beginning to hypothesise. [HON. MEMBERS: "No."] I said that at the moment authorities — and I hope that Opposition Members take the same view—are concerned to see no resumption of disturbances and industrial problems in the classroom. I hope that Opposition Members will continue to press local authorities to do the same. Local authorities are doing that at the moment and on that basis the disregard would be paid.

Mr. Dewar


Mr. Ancram

I have said what I have to say, and the hon. Gentleman must allow me to finish my speech.

The final accusation made by the hon. Member for Garscadden and others was that there was something wrong with the principle of reducing rate support grant to control local authority spending. The hon. Member for Orkney and Shetland made the same point. I say again to the hon. Member for Garscadden that that was not invented by this Government. I was looking at the report on the Rate Support Grant (Scotland) Order 1976, and I read that the Secretary of State, who I understand to have been the right hon. Member for Glasgow, Govan (Mr. Millan), has informed local authorities that the amount of grant in the increase order will be reduced by £5 million below what it would otherwise have been. This action has been taken because local authority budget estimates for 1976–77 were still some £45 million in excess of the level assumed by Government in fixing the rate support grant for 1976–77, despite exhortations by the Secretary of State to local authorities to reduce current expenditure in the national interest. That was the Labour party's view then. The principle is the same today. The system is fairer. On that basis, I ask the House to support the order.

Question put:

The House divided: Ayes 178, Noes 97.

Division No. 309] [10.23 pm
Aitken, Jonathan Heddle, John
Alexander, Richard Hickmet, Richard
Alison, Rt Hon Michael Hirst, Michael
Amess, David Hogg, Hon Douglas (Gr'th'm)
Ancram, Michael Holland, Sir Philip (Gedling)
Ashby, David Holt, Richard
Atkins, Robert (South Ribble) Howarth, Alan (Stratf'd-on-A)
Atkinson, David (B'm'th E) Howarth, Gerald (Cannock)
Baker, Nicholas (Dorset N) Hubbard-Miles, Peter
Beaumont-Dark, Anthony Hunt, David (Wirral W)
Bellingham, Henry Hunt, John (Ravensbourne)
Bendall, Vivian Hunter, Andrew
Bevan, David Gilroy Jessel, Toby
Blackburn, John Johnson Smith, Sir Geoffrey
Bonsor, Sir Nicholas Jones, Gwilym (Cardiff N)
Boscawen, Hon Robert Jones, Robert (Herts W)
Bottomley, Mrs Virginia Kellett-Bowman, Mrs Elaine
Bright, Graham Kershaw, Sir Anthony
Brinton, Tim Key, Robert
Brooke, Hon Peter Knight, Greg (Derby N)
Brown, M. (Brigg & Cl'thpes) Knight, Dame Jill (Edgbaston)
Bruinvels, Peter Knox, David
Bryan, Sir Paul Lang, Ian
Buchanan-Smith, Rt Hon A. Latham, Michael
Budgen, Nick Lawrence, Ivan
Butler, Rt Hon Sir Adam Lee, John (Pendle)
Butterfill, John Lennox-Boyd, Hon Mark
Carlisle, John (Luton N) Lloyd, Peter (Fareham)
Carlisle, Kenneth (Lincoln) Lord, Michael
Carttiss, Michael Macfarlane, Neil
Cash, William Maclean, David John
Chalker, Mrs Lynda McQuarrie, Albert
Chapman, Sydney Madel, David
Chope, Christopher Major, John
Clark, Dr Michael (Rochford) Maude, Hon Francis
Clarke, Rt Hon K. (Rushcliffe) Morrison, Hon C. (Devizes)
Colvin, Michael Moynihan, Hon C.
Conway, Derek Neale, Gerrard
Coombs, Simon Neubert, Michael
Cope, John Newton, Tony
Couchman, James Nicholls, Patrick
Currie, Mrs Edwina Parkinson, Rt Hon Cecil
Dorrell, Stephen Pollock, Alexander
Douglas-Hamilton, Lord J. Portillo, Michael
Dover, Den Powley, John
Dunn, Robert Rhodes James, Robert
Durant, Tony Rhys Williams, Sir Brandon
Dykes, Hugh Rifkind, Rt Hon Malcolm
Edwards, Rt Hon N. (P'broke) Roberts, Wyn (Conwy)
Evennett, David Robinson, Mark (N'port W)
Eyre. Sir Reginald Roe, Mrs Marion
Fallon, Michael Rowe, Andrew
Favell, Anthony Ryder, Richard
Fenner, Mrs Peggy Sackville, Hon Thomas
Finsberg, Sir Geoffrey Sainsbury, Hon Timothy
Fletcher, Alexander Sayeed, Jonathan
Forman, Nigel Shaw, Giles (Pudsey)
Forsyth, Michael (Stirling) Shaw, Sir Michael (Scarb')
Forth, Eric Shelton, William (Streatham)
Fox, Sir Marcus Shepherd, Colin (Hereford)
Franks, Cecil Silvester, Fred
Fraser, Peter (Angus East) Sims, Roger
Freeman, Roger Skeet, Sir Trevor
Gale, Roger Soames, Hon Nicholas
Galley, Roy Speed, Keith
Garel-Jones, Tristan Spencer, Derek
Griffiths, Peter (Portsm'th N) Spicer, Jim (Dorset W)
Ground, Patrick Spicer, Michael (S Worcs)
Hamilton, Hon A. (Epsom) Stanbrook, Ivor
Hamilton, Neil (Tatton) Stern, Michael
Hampson, Dr Keith Stewart, Andrew (Sherwood)
Hanley, Jeremy Stradling Thomas, Sir John
Hargreaves, Kenneth Taylor, John (Solihull)
Harris, David Taylor, Teddy (S'end E)
Harvey, Robert Temple-Morris, Peter
Haselhurst, Alan Thompson, Donald (Calder V)
Hayward, Robert Thompson, Patrick (N'ich N)
Heathcoat-Amory, David Thorne, Neil (Ilford S)
Thurnham, Peter Wells, Sir John (Maidstone)
Townend, John (Bridlington) Wheeler, John
Tracey, Richard Whitfield, John
Twinn, Dr Ian Whitney, Raymond
van Straubenzee, Sir W. Wilkinson, John
Waddington, David Winterton, Nicholas
Wakeham, Rt Hon John Wood, Timothy
Waldegrave, Hon William Woodcock, Michael
Walden, George Yeo, Tim
Waller, Gary
Ward, John Tellers for the Ayes:
Warren, Kenneth Mr. Gerald Malone and
Watts, John Mr. David Lightbown.
Anderson, Donald Hughes, Simon (Southwark)
Atkinson, N. (Tottenham) John, Brynmor
Barnett, Guy Kaufman, Rt Hon Gerald
Beckett, Mrs Margaret Kirkwood, Archy
Bermingham, Gerald Lambie, David
Bray, Dr Jeremy Lamond, James
Brown, Gordon (D'f'mline E) Leadbitter, Ted
Brown, N. (N'c'tle-u-Tyne E) Lewis, Ron (Carlisle)
Brown, R. (N'c'tle-u-Tyne N) Lofthouse, Geoffrey
Brown, Ron (E'burgh, Leith) Loyden, Edward
Buchan, Norman MacKenzie, Rt Hon Gregor
Caborn, Richard McWilliam, John
Callaghan, Jim (Heyw'd & M) Madden, Max
Campbell-Savours, Dale Marek, Dr John
Canavan, Dennis Marshall, David (Shettleston)
Carlile, Alexander (Montg'y) Martin, Michael
Clark, Dr David (S Shields) Maxton, John
Clarke, Thomas Maynard, Miss Joan
Clay, Robert Michie, William
Clelland, David Gordon Millan, Rt Hon Bruce
Cocks, Rt Hon M. (Bristol S) Nellist, David
Cook, Robin F. (Livingston) O'Brien, William
Corbett, Robin Park, George
Corbyn, Jeremy Patchett, Terry
Cox, Thomas (Tooting) Penhaligon, David
Craigen, J. M. Powell, Raymond (Ogmore)
Crowther, Stan Randall, Stuart
Cunliffe, Lawrence Raynsford, Nick
Davis, Terry (B'ham, H'ge H'I) Redmond, Martin
Deakins, Eric Robertson, George
Dewar, Donald Ross, Ernest (Dundee W)
Dixon, Donald Rowlands, Ted
Dormand, Jack Shields, Mrs Elizabeth
Douglas, Dick Skinner, Dennis
Dubs, Alfred Smith, c. [Isl'ton S & F'bury)
Duffy, A. E. P. Spearing, Nigel
Eadie, Alex Steel, Rt Hon David
Eastham, Ken Stewart, Rt Hon D. (W Isles)
Fields, T. (L'pool Broad Gn) Strang, Gavin
Fisher, Mark Thompson, J. (Wansbeck)
Forrester, John Wallace, James
Foster, Derek Wardell, Gareth (Gower)
Freud, Clement Wareing, Robert
Godman, Dr Norman Welsh, Michael
Gourlay, Harry Wigley, Dafydd
Hamilton, W. W. (Fife Central) Wilson, Gordon
Hardy, Peter
Hogg, N. (C'nauld & Kilsyth) Tellers for the Noes:
Home Robertson, John Mr. Allen Adams and
Howells, Geraint Mr. James Hamilton.
Hoyle, Douglas

Question accordingly agreed to.

Resolved, That the Rate Support Grant (Scotland) Order 1986, dated 22nd July 1986, a copy of which was laid before this House on 24th July, be approved.