HC Deb 23 July 1987 vol 120 cc496-511

4.4 pm

The Secretary of State for the Environment (Mr. Nicholas Ridley)

With permission, I should like to make a statement about local government finance for 1988–89.

With the passage of the Government's forthcoming legislation, this will be the penultimate rate support grant settlement. By 1990 the new system, which will be both fairer and easier to understand, will take its place. The level of an authority's spending will be clearly and directly reflected in the level of its community charge.

We must, however, bear with the present arrangements for two more years and my proposals for 1988–89 are as follows.

I propose to set current expenditure provision at £27.538 billion. This is a cash increase of £838 million on the provision for 1988–89 published in the 1987 public expenditure White Paper, and represents a 7 per cent. increase on the gross amount provided for the current year. It will allow non-rate-capped authorities to hold their spending broadly level in real terms. Rate and precept-limited authorities will be set expenditure levels which imply real reductions in spending in most cases.

Authorities continue to spend more than I believe they need to. I therefore propose to maintain a margin between the total of grant-related expenditure and expenditure provision. Authorities owe it to their ratepayers — and prospective community charge payers — to do all they can to keep spending down. The measures now before the House in the Local Government Bill will make a big contribution. Authorities need not wait for enactment to start implementing more cost-efficient practices and contracting out more services. Authorities should concentrate on reducing their payroll bills — both by negotiating settlements which reflect the continuing low rate of inflation, and also by reversing the recent steady upward drift in manpower, which has risen by about 0.75 per cent. over the last year.

I propose to provide authorities with £13.775 billion in aggregate Exchequer grant. This is a cash increase over 1987–88 of £750 million or 5.75 per cent. It will maintain the grant percentage at the same level as this year after taking account of the additional grant we made available for teachers' pay — 46.2 per cent. of relevant expenditure. I do not propose any major changes in the mechanisms for grant distribution and, as this year, authorities spending up will lose grant.

I believe that those proposals provide a fair framework in which authorities can operate next year. It will mean that if they do not spend more than the realistic provision that I have announced that we propose, the average increase in rate bills for non-rate-capped authorities should be around the rate of inflation, though as always there will inevitably be considerable variations around that average. Ratepayers in rate-capped authorities can expect lower increases, or, indeed, reductions. For the position of individual authorities, hon. Members will need to wait until the announcement of my detailed proposals in the autumn, but I emphasise that actual rate bills will depend on the spending decisions of each individual authority.

I am today laying before the House a report setting out how authorities will be selected for rate limitation next year. I am selecting authorities not selected in 1987–88 whose budgets are at least 12.5 per cent. above GRE and show growth of at least 6 per cent. since 1986–87. I am reselecting those authorities that were selected in the current year whose budgets are at least 12.5 per cent. above GRE. On those criteria, five authorities not selected in 1987–88 — Ealing, Kingston upon Hull, Liverpool, Manchester and Waltham Forest—are selected. Twelve authorities are reselected — Basildon, Camden, Greenwich, Hackney, Haringey, Lambeth, Lewisham, Middlesbrough, Newcastle, Southwark, Thamesdown and Tower Hamlets. Together with the authorities subject to automatic precept control under the Local Government Act 1985, this will mean that, in all, the Government will next year be limiting the rates or precepts of 37 authorities with expenditure totalling over £4 billion.

I am today also setting the expenditure levels for the 17 rate-capped authorities. For reselected authorities, there will be a cash standstill on implied expenditure levels for 1987–88 with an allowance for the full-year costs of the 1987 school teachers pay settlement. All the five newly selected authorities have budgeted in 1987–88 for a significant increase in spending. Therefore, I am setting their expenditure levels at a 6 per cent. increase over their 1986–87 budget with again an allowance for teachers' pay.

I am, of course, open to representations for redetermination of expenditure levels. Last year, I said that, where an application for redetermination of an expenditure level was made on certain limited grounds, I did not intend to use my powers under the Rates Act either to reduce the expenditure level or to impose conditions following an increase. The Rates Act procedures are now well established, and I should make it clear from the start of this year's round that I will not be giving any such undertaking.

My right hon. Friends the Secretaries of State for the Home Department, for Education and Science, and for Transport will be making separate announcements about expenditure levels for the Inner London education authority and the joint authorities which are subject to precept limitation under the Local Government Act 1985.

Dr. John Cunningham (Copeland)

What a contrast this statement is from that of last year, when the Secretary of State said that he wanted to be realistic and even generous with the rate support grant settlement. We are continually told by Ministers that the economy is stronger than ever—indeed, they claim that Britain is booming—but this settlement falls £1.2 billion short of the unanimous view of all local government associations, with support by Tory as well as Labour Members for that figure.

Why is this shortfall necessary? What a contrast it is with last year, before an election. This year, after it, the Government revert to their long-standing policy of increasing the burdens on ratepayers and failing to match the cash needs to maintain essential services, leaving councils with the option of either increasing the rates or cutting the quality, flexibility and sensitivity of the services that so many people desperately need and rely on.

How can the Secretary of State pretend that local authorities can maintain expenditure in real terms when there is a major shortfall in the cash that he is making available in the settlement? Have not, just this week, Her Majesty's inspectors of education made it clear in their report that one in five of all classes in our schools are working in such awful conditions that it is having an adverse effect on the quality of work that children and teachers are able to produce?

Does not this settlement imply further cuts in education budgets at a time when most people recognise that we should be increasing expenditure? How does the Secretary of State square that and his penalties on authorities which he claims overspend with the Secretary of State for Education's boast about increased expenditure in education in some authorities? Who has got it right? Whom are we to believe?

Does not the statement also make nonsense of the Government's claim to be making the inner cities a priority for support, when this shortfall and the controls on rates will make it even more difficult for exactly those authorities to make a more effective contribution to solving the problems that millions of their people face? Will not this settlement mean that all authorities, including many Tory-controlled councils, seeking simply to maintain their existing levels of expenditure and services, will be penalised and forfeit grant to the Treasury? What has the Secretary of State to say to those Tory councils, and to his hon. Friends who represent them and those communities?

Have not some police authorities and chief constables, like James Anderton most recently, already made it clear that they cannot meet the requirements of proper policing? How will they be able to do that and find the money for the latest police pay award with this settlement?

Although we do not accept the principle, we recognise the Government's determination to press ahead with rate limitation, but why has the Secretary of State decided this year not to have any discussion on the basis of partial redetermination? He did that last year. He made it clear in his statement that he would do so. Will he reconsider this? We are not aware of any particular problems caused by partial redetermination. On the contrary, it seems to have worked reasonably well for both sides. I ask the Secretary of State to reconsider that matter because it would be to his advantage, as well as helpful to some local authorities that are affected.

Does not this inadequate settlement mean that the very poorest people in Britain who, from April next year, for the first time under the new social security regulations will have to pay 20 per cent. of their rates bill, will now face even bigger charges? Is this not typical of the unfairness of the Government's approach to the sharing of burdens in our society? As the Secretary of State in his statement said that this already unfair system will be replaced with a flat-rate poll tax, how does he square his claims of fairness in a poll tax with the Prime Minister's statement some time ago that any system that replaces rates should be based on the ability of people to pay?

Mr. Ridley

I do not know whether the hon. Gentleman understood my statement. I would be happy to repeat it, but I think that that would be tedious for my hon. Friends, who clearly did understand it. This is not a reduction in grant. The hon. Gentleman might he interested to know that the Government have made provision that is 7 per cent. greater than the provision for this year, and grant that is 5.75 per cent. greater than the grant for this year,

when inflation between the two years is expected to be 4 per cent. That is both provision and grant greater than the rate of inflation.

The Association of Metropolitan Authorities went on record last week as saying in a newspaper: This year, anything less than £1 bn would be quite tough. Anything less than £500m would be very difficult. We have got it exactly between the two at £750 million, so I imagine that the AMA finds it quite tough but not very difficult. I am grateful for its support, expressed in advance of the Government's settlement.

The hon. Gentleman asked about grant forfeit. I remember well last year how the hon. Gentleman predicted that local authorities would forfeit about £500 million of grant due to the abolition of recycling. He will be interested to know that the figure that I have is about £270 million, which shows the extent to which the abolition of grant recycling has persuaded authorities to moderate their spending.

I repeat to the hon. Gentleman that if local authorities next year hold their spending level in real terms, then they need have on average no greater rate bill increases than the rate of inflation. Surely it is not too much to ask of the authorities that they should make those economies that are available to them and keep their spending within the rate of inflation, in which case, nobody who pays rates will have to pay more rates, on average, but what they actually pay will depend entirely on how much their local authority spends

The hon. Gentleman asked about the undertaking in relation to the redetermination of rate limits. Undertakings were given in the past two years that if authorities applied for redetermination on grounds as to how to accommodate mainly their creative accounting, we would not contemplate either conditions or reductions in rate limits as a result of that further negotiation. I merely withdraw that undertaking for the year in advance because it is no longer necessary. We are withdrawing not redertermination but conditions.

Mr. David Howell (Guildford)

Does my right hon. Friend accept that much the best thing that he can do with the rate support grant is to do away with it altogether, and that his plans to do just that are therefore welcome? Will my right hon. Friend also undertake, in his future plans for reform, to aim to see that local authority services and functions are tailored and limited as far as possible to what can be raised in local taxation, so that the mechanism and arrangements for subvention from the central taxpayer to the local authorities are limited to what is genuinely needed, and no more.

Mr. Ridley

I could not agree more strongly with my right hon. Friend that the way to deal with the complicated and unfair system of rate support grant, as it has become over the years, is to abolish it and start again. I assure my right hon. Friend that the new system of needs grant, standard grant and the national non-domestic rate will be much easier to understand. Its incidence will be much fairer on authorities. The burden that local authorities should he asked to cover financially can be adjusted up or down by reducing or increasing the amount of Government grant commensurate with the functions that local authorities have to fulfil. It would not be right for me to go into that wider and philosophical question, on a technical statement on the rate support grant.

Mr. Alfred Morris (Manchester, Wythenshawe)

What assessment has the right hon. Gentleman made of the job losses that will arise from what will widely be seen as a vindictive decision to rate-cap Manchester? Is he aware that job losses in the public sector, in a city where unemployment is already unacceptably high, will immediately lead to further job losses in the private sector? How can the right hon. Gentleman possibly defend a decision that makes a complete nonsense of all the Government's sloganising about regenerating our inner cities?

Mr. Ridley

In answer to the right hon. Gentleman, I should like to tell him that Manchester city council's spending has increased by 38 per cent. and that the rates have gone up by 26 per cent. since last year. The result of that is to threaten massive job losses. It is the most cruel and cynical way to create unemployment in that city. The right hon. Gentleman should be ashamed to say what he has done this afternoon. The way that we can help him, against his own city council, to create more jobs in Manchester is to limit rates so that businesses can survive and continue to employ his constituents.

Sir George Young (Ealing, Acton)

Is my right hon. Friend aware that his decision to rate-cap the London borough of Ealing will be warmly welcomed by domestic and industrial ratepayers in the borough, who are appalled at the extravagance and irrelevance of much local government expenditure and made their views known at the general election? Will my right hon. Friend deal robustly with any application for redetermination from Ealing, as all ratepayers know that huge potential savings can be made without any reduction in services? Can my right hon. Friend tell us by how much the rates would go down if he stuck to his announced expenditure target?

Mr. Ridley

The local rate in Ealing this year went up by 72 per cent. I agree with my hon. Friend that there could even be a connection between that and the majorities of my hon. Friends who represent that borough. I do not think that it is a direct ratio, but there might he an even greater relationship between the majorities and the community charge if that were in place. I cannot forecast the rate for Ealing at the moment. The effects of the settlement on individual authorities cannot be predicted until later in the autumn. However, I shall be happy to see any authority that applies for redetermination. Of course, I cannot say in advance what the result might be.

Mr. David Blunkett (Sheffield, Brightside)

Will the Secretary of State confirm that, every time the local electorate in a borough, city or county votes Labour instead of Conservative, the people may expect the following year to be rate-capped until the Government introduce the poll tax, which will be based purely on the ability to pay and not on citizenship, which has been accepted as democracy over the past 100 years? Does the right hon. Gentleman accept that the system of rate-capping authorities, which completely dislocates the financial planning process, is anathema to the financial experts and treasurers in local authorities throughout the country because his decision mean a reduction one year and the lifting of rate capping from some authorities the next, which makes planning almost impossible?

Will the right hon. Gentleman confirm that the ability of local authorities to meet the needs of their areas, particularly in inner cities, about which the Prime Minister, he and the Secretary of State for Trade and Industry have pledged their concern, is made impossible by not allowing local authorities to determine for themselves what to do? Finally, will the right hon. Gentleman confirm that the figures that he mentioned in relation to the Association of Metropolitan Authorities anticipated the consolidation of the teachers' pay and the subsequent grant increase, not its withdrawal, so the figures that he suggests will initiate a substantial rate increase in many authorities, which he will then hold up as a reason for introducting the poll tax next spring?

Mr. Ridley

The effect of the teachers' pay settlement restructuring has been included in the figures that I gave, as I imagine the figures that I quoted from the AMA have been, too. The hon. Gentleman started philosophising at the beginning of his supplementary question about the relationship between rate capping and high spending, and electing various parties, but I should have thought that, from the London experience, he might see it this way. Once a Labour council is elected, the next stage is extremely high rate increases, the next stage is rate capping and the next stage is the election of a Tory Government or of a Tory council in its place.

Sir Anthony Grant (Cambridgeshire, South-West)

Is my right hon. Friend aware that the best part of his statement was the information that all the nonsense of the rate support grant and the absurd rating system has only two more wretched years to go? I appreciate that this is a local statement, but does my right hon. Friend recall that a promise was made some years ago that in the rate support grant there would be much greater fairness to the shire counties? Can he therefore give an assurance that when the details are worked out, they will not be expected to subsidise incompetent local authorities? In particular, can my right hon. Friend assure me that no excuse will be provided for incompetent and inefficient county councils, such as the Lib-Lab Cambridgeshire county council, to use the settlement as an excuse for further inefficiency?

Mr. Ridley

I can only share with my hon. Friend the joy at the thought that this is the penultimate rate support grant settlement. I might be even more enthusiastic about that prospect than him and my other hon. Friends because I have to do it. I cannot predict the effects of the Local Government, Planning and Land Act 1980 working through as a result of the general statement that I have made. A formula in that Act operates on the needs formula as well as on the rateable value of each authority. That combination has taken grant from the shire counties on the whole and moved it to other authorities. That cannot be arrested until our mutual dream of the abolition of the system is achieved.

Mr. Simon Hughes (Southwark and Bermondsey)

Will the Secretary of State correct one misapprehension, that when and if the community charge is introduced, there will still be Government support for local government? The right hon. Gentleman is not saying, is he, that in two years' time all taxpayers' contributions to any local government services will end under the community charge, because that is far worse than anybody anticipated. Will the right hon. Gentleman confirm what the hon. Member for Copeland (Dr. Cunningham) said, that his officials and local authority officers agreed that the amount needed for services to be sustained at their present level was £29 billion, £1.5 billion more than the right hon. Gentleman has accepted, so there is a necessary underfunding?

Lastly, if the Government are committed to the inner city, why have eight inner-London boroughs been rate-capped, along with Liverpool, Manchester and Newcastle, reducing their funds in coming years, when they are just the places where homelessness and unemployment are greatest and where regeneration depends on money coming from the Government and those who can afford to pay?

Mr. Ridley

The hon. Gentleman kindly asked me to remove his misapprehensions, and I am happy to remove all three of them. First, if he had read the Green Paper, the Conservative party's manifesto and other documents, he would have known that Government support will continue, but instead of being in the form of a rate support grant it will be in the form of a needs grant together with a standard grant—not the same thing, and based on a different principle.

Secondly, if the hon. Gentleman has any misapprehensions about the expenditure groups to which he referred, I can tell him that those are merely the bids of local authorities for extra spending and are in no sense agreed by Government.

Thirdly, I invite the hon. Gentleman to consider whether the rates in his and similar boroughs are inimical to the regeneration of the inner city rather than a help, in the sense that they drive away employers and businesses, causing the loss of jobs and income, and the very problems for which we are trying to find solutions.

Several Hon. Members

rose—

Mr. Speaker

Order. I remind the House that we have two further statements before an important series of Northern Ireland debates. I shall endeavour to call every hon. Member if questions are brief, but it may be difficult.

Mr. Charles Morrison (Devizes)

Can my right hon. Friend give me an assurance that within the allocation of the rate support grant there will not be a switch to metropolitan districts at the expense of shire counties, which traditionally have run much better managed budgets?

Mr. Ridley

I cannot give my hon. Friend that assurance because the rate support grant formula is enshrined in statute and works according to the rateable values and needs figures for each authority. He will have to await the results in the autumn to see such effects.

Mr. Robert Parry (Liverpool, Riverside)

How will Liverpool city council be affected? Are the Government seeking confrontation with the newly elected Labour council? Is that why the Prime Minister has changed her mind about visiting Liverpool during the summer recess? Does she not have the guts to meet the people of Liverpool? If the Prime Minister will not visit Liverpool, will the right hon. Gentleman at least pay a visit to see things at first hand?

Mr. Ridley

The hon. Gentleman has his answer in the fact that Liverpool has the third highest domestic rate in the United Kingdom at 304p. That is damaging to those who would set up in business there and provide jobs. I know that the hon. Gentleman does not care, but we do, and that is why it is convenient and helpful that Liverpool falls within the criteria. I hope that that will encourage businesses to return to that city.

Mr. John Heddle (Mid-Staffordshire)

Does my right hon. Friend accept that the majority of ratepayers in local authorities which play the game will see today's announcement as a sensible settlement? Does he agree that it is the duty of local councils to manage their affairs as efficiently as possible? If so, what does he propose to do to bring to their senses those local authorities that are allowing rent arrears to rip to over £200 million in the past 12 months? Furthermore, will he ensure that local authorities such as Manchester city council and others do not revert to bogus leaseback schemes and other forms of deferred purchase to get round his guidelines?

Mr. Ridley

I thank my hon. Friend. The settlement is fair, but it is fairly tough in the sense that it does not simply acknowledge local authority spending sprees. Only prudent authorities which contain their spending will find it easy to live with. However, as my hon. Friend says, help is at hand through the Local Government Bill and the many possible savings of up to £2 billion which the Audit Commission's report has identified. I cannot say anything at this stage about creative accounting, but I have noticed some signs that the lenders are finding lending less attractive than they used to, and they are wise to do so.

Mr. William O'Brien (Normanton)

Does the Secretary of State accept that his statement today will be seen as real poppycock by those who serve in and work for local government? Is he aware that, when he talks about holding expenditure in real terms, he must realise that he is starting from a low base? Is he also aware of the damage to roads and so on, and of the problem of community care? Will he have a word with the Secretary of State for Social Services, who is sending people, such as the disabled, the mentally ill and the elderly, from hospital into he community? Will he ensure that there is no shortfall in the provision for community care which is being taken over by local government?

Mr. Ridley

I have no idea what the hon. Gentleman is talking about when he speaks of a low base. This year, as far as we know, local authorities are spending 3 per cent. more than the rate of inflation compared with last year. If one goes back further, since 1981–82, real local authority spending has increased by 14 per cent. whereas in the same period real Government spending has increased by only 6 per cent. We are not seeing a settlement from a low base. The Government are waiting to see whether local authorities can take the necessary measures to cut out waste and extravagance and bring their budgets under control. If they can, they can easily live with the settlement.

Mr. Jerry Hayes (Harlow)

I give my right hon. Friend's statement a guarded welcome, but when he abolishes this travesty of a system which is unfair to counties such as Essex, will he reward those counties which are prudent and efficient and penalise those which are not?

Mr. Ridley

Did my hon. Friend give a Guardian welcome, or did I mishear him? [HON. MEMBERS: "Guarded."] My hon. Friend is right about the unfairness of the system on counties such as Essex, but Essex could do more to contain its spending. It will be able to keep a low rate increase if it can keep a low spending increase.

Mr. Jeremy Corbyn (Islington, North)

Will the Minister take his nose out of the works of Adam Smith for a moment and look a little wider? Let me put to him an argument that he might understand—

Mr. Speaker

Order. Will the hon. Gentleman ask his question, please?

Mr. Corbyn

Will the Minister consider that the laws of supply and demand — which he may well understand because he knows a lot about that — cannot be met under his proposals because the necessary social services for elderly people cannot be met by rate-capped local authorities any more than the housing needs of the homeless can be met without a massive increase in capital building? Instead of trying to control local government expenditure by Government diktat, will the right hon. Gentleman examine the needs of inner-city areas and be prepared to pay the money necessary to take out of the lives of millions of people the misery caused by the Government.

Mr. Ridley

The hon. Gentleman would be welcome at a teach-in on the laws of supply and demand. He will know that supply and demand are equal when the price is such that the market clears. In the case of local authority spending, there is no such price and many of the services about which he is talking are not paid for, so there is no conceivable possibility of the market clearing. Therefore, there must be a limitation on the total expenditure. On this occasion I have produced a limitation that is well in excess of inflation. I should have thought that the hon. Gentleman would welcome that rather than make such grudging comments.

Mr. Irvine Patnick (Sheffield, Hallam)

Will my right hon. Friend explain the total amount of overspend for local authorities and the effect that that is having on other authorities? What news can he give me for the residents of Sheffield, Hallam'? Although I realise that the city is not rate-capped, the last time that rate capping occurred, the hike in rates was penal and extra rates were levied by my hon. Friend the Member for Sheffield, Brightside (Mr. Blunkett) who, I believe resigns his leadership of Sheffield city council at midnight tonight?

Mr. Ridley

I am sorry to hear that the hon. Member for Sheffield, Brightside (Mr. Blunkett) has become my hon. Friend's hon. Friend. The hon. Member for Brightside should remain an hon. Member because of the different views that he nd my hon. Friend hold about what is good for business in that city. I hope that the possibility of rate limitation might have a slight deterrent effect, and that those who cannot be limited might fear such limitation and have in mind the possibility that keeping their rates low may help business and jobs in the city.

Mr. James Lamond (Oldham, Central and Royton)

Is the Secretary of State aware that in a constituency such as mine, which is an older metropolitan borough, surgeries are crowded, not by irate ratepayers telling me that they pay too much in rates, but by people who demand improved services, more home helps, better roads and pavements, and more nursery school places? Why does the right hon. Gentleman see his duties as Secretary of State for local government in such a one-sided fashion that he is concerned only about trying to keep down, as far as he can, the expenditure of councils such as Oldham, which has never overspent? Why does he not concern himself instead with the real duty of local government, which is to meet the demands of the people who have elected the council, and who are prepared to pay the rates to sustain those services?

Mr. Ridley

I quite accept from the hon. Gentleman that his surgeries are not crowded with irate ratepayers. However, I advise him that mine are, because about £1 billion of rate support grant has been taken from the south of England and given to the north. The people who must pay that £1 billion are represented by many of my hon. Friends, and they go to their surgeries asking whether it is fair. The least that the hon. Gentleman can do as a result of that massive switch of resources from south to north is to avoid supplementary questions as griping and ungrateful as the one that he has just put.

Mr. Patrick McLoughlin (West Derbyshire)

Does my right hon. Friend realise that the biggest source of complaints that I receive in my surgery is high rates? What satisfaction have my constituents in Derbyshire received when our county has not been rate-capped? Does my right hon. Friend accept that we are the highest-rated county in the country and that my constituents will be extremely disappointed by his statement today that we have not been rate-capped?

Mr. Ridley

The only consolation to the citizens of Derbyshire is that my hon. Friend was elected, and that the chairman of the county council was not. I congratulate my hon. Friend, but advise him that authorities can be rate-capped only if they fall within the criteria that I have set forth. It is not selection. Rate capping applies only to those authorities that fall within the criteria, and Derbyshire does not.

Mr. Max Madden (Bradford, West)

What help will the statement bring to the city of Bradford, which has had its rate support grant cut by the Government by more than £70 million since 1979? If the Prime Minister has chickened out of a visit to Liverpool, will the Secretary of State suggest that he and she visit the city of Bradford, and when they arrive, will they announce a substantial increase in rate support grant for the city so that more of my constituents can live in decent homes, have their children attend schools that are not falling down, and live in an environment that is not decaying before their eyes?

Mr. Ridley

The hon. Gentleman cited three examples: schools, the environment and housing which, of course, are not covered by the rate support grant. They are capital items in the local authority's budget and in no sense does the statement that I have made today refer to them. However, I have some good news for the hon. Gentleman. On average, rate support grant has increased by 5.75 per cent., which will benefit his constituents and those of all other hon. Members.

Mr. Harry Greenway (Ealing, North)

Will my right hon. Friend accept the thanks of the people of Ealing for his decision to rate-cap them? I advise him briefly that pensioners are going without food to find the 65 per cent. rates increase. Many jobs are being lost in industry and the purchasing power which is taken out of the economy means that there is less money available for shopkeepers to sell their goods, and that they themselves have higher rates to pay. Haircuts to pensioners are up by 60p. Will my right hon. Friend tell the House what the rate in Ealing would be if the formula that he has mentioned were applied?

Mr. Ridley

I have received congratulations about this from practically every resident in Ealing, with the exception of the Leader of the Opposition. Perhaps that has been delayed in the post and will be with me soon. I cannot give my hon. Friend the figure for which he asked without some notice, but I shall give him as much information as I can immediately. I agree that high rates cause poverty and deprivation among the poor and drive away jobs. The loss of jobs drives away income, and that limits the ability of an area to generate wealth for itself.

Several Hon. Members

rose—

Mr. Speaker

I repeat that I am anxious to call all hon. Members, but I must ask for brief questions, or that will not happen.

Mr. David Clelland (Tyne Bridge)

Is the Secretary of State aware that, although the decision to release the metropolitan borough of Gateshead from rate capping will be welcomed, given the financial regime that the Government have imposed on local government, that council can protect its services and jobs only at a cost to the ratepayer? Is he also aware that the continued rate capping of Newcastle, which shares inner-area partnership status with the metropolitan borough of Gateshead, gives the lie to the Government's crocodile tears for inner-city problems?

Mr. Ridley

The hon. Gentleman must understand the point. He seemed to miss it again. He said that Gateshead could protect jobs and services only at the expense of the ratepayers. That is to put jobs at a low priority because jobs are provided by people who pay rates. Until he and his hon. Friends understand that high rates cause unemployment — [Interruption.] When the hon. Gentleman has taken that point on board we shall be making a little progress.

Mr. David Madel (Bedfordshire, South-West)

Does my right hon. Friend recall that, as a result of representations that some of us made to his ministerial colleagues last autumn, he changed the way in which the safety nets operated and that that was of some help to counties such as Bedfordshire? Is similar help over safety nets built into the proposals that he has announced this afternoon?

Mr. Ridley

We have not yet done further detailed work on the unallocated margin, the safety net, the cap on gains, or on the service distributions. Until that further work is done, it is impossible to analyse the possible results on each authority. That announcement is usually made in the early autumn.

Mr. Robin Corbett (Birmingham, Erdington)

So that I may, with greater accuracy, take this so-called good news immediately to the city of Birmingham, will the Secretary of State say exactly how much new and extra money the city will receive from this settlement to maintain and develop needed services and to give greater attention to the increasing demands of inner-city decay?

Mr. Ridley

I cannot predict the result for individual authorities. However, the total extra Government grant is £750 million gross to the whole country.

Mr. Phillip Oppenheim (Amber Valley)

Is my right hon. Friend aware that Derbyshire used to be one of the lowest-rated counties in England and Wales, but is now one of the highest-rated counties? Is he further aware that that is solely due to the profligacy of Derbyshire county council? Is it not time to put an end to the long suffering of the ratepayers in Derbyshire, to draw the teeth of the little Lenins at Matlock, and to rate-cap Derbyshire immediately?

Mr. Ridley

I would not like to interfere in the adjectives that my hon. Friend uses. I can only say that this year Derbyshire does not fall within the criteria of rate capping. Equally, it would be helpful if at the next elections the county council was called to account for the rates that it has imposed.

Mr. Tony Lloyd (Stretford)

If the Government have any conception of the problems of the inner cities and genuinely intend to resolve them, which jobs and services does the right hon. Gentleman want Manchester council to cut?

Mr. Ridley

Obviously, I shall not discuss the detailed possibilities of any given authority. I can only tell the hon. Gentleman that authorities which keep a low rate and run efficient services are doing very much better at attracting jobs and solving problems than those which believe that the future lies only in taking on surplus council staff as a sort of bogus way of creating jobs in the inner city.

Mr. Graham Riddick (Colne Valley)

Can my right hon. Friend give the House any indication about the effects of his announcement today on northern metropolitan district councils? Can he confirm that if councils such as my local authority of Kirklees were quickly to contract out local services and to improve efficiency, they could probably reduce the rates?

Mr. Ridley

My hon. Friend is entirely right. The opportunities for savings exist through providing council services more cheaply after putting them out to competitive tender—whether contracted out or not: that is not the point — even in advance of the Local Government Bill. Once it is on the statute book, they will have to do that. It is intolerable for councils to complain that they have insufficient money when it is well known that more than £2,000 million could be saved by councils increasing their efficiency. They must attend to that first.

Mr. Keith Bradley (Manchester, Withington)

Does the Secretary of State realise that the people of Manchester have completely rejected the Government's policies on rate support grant by kicking out the last Tory from Manchester council? Does he realise that our spending is based on the needs of the people, of whom over 50 per cent. live in poverty? Will he explain why he will attend the Cabinet Committee meetings on inner cities although he does not understand the link between local government finance and the need to regenerate inner cities? Finally, will he withdraw the despicable answer that he gave my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris)? Does he not understand that thousands of jobs have been lost in the public and private sectors because of rate-capping Manchester?

Mr. Ridley

I hope that the hon. Gentleman, together with some of his hon. Friends, will get the point that Manchester, with a rate of 336p in the pound, has the highest rate in the country. Any business which is thinking of choosing a location and providing jobs is unlikely to pick the council with the highest rate in the land; it is the last place they will go. The difficulties created by the hon. Gentleman and the city council are among the main causes of inner-city problems.

Mr. Robert Key (Salisbury)

I know that my right hon. Friend is sensitive to the fact that in areas where the economy is expanding, such as in Wiltshire, a great deal of development, much of which is opposed by the local authority, leads to compulsory infrastructure expenditure. Does he agree that the time has come for the developer to pay for that infrastructure, thereby releasing the burden of expenditure from the local authority?

Mr. Ridley

I have heard of arrangements between developers and local authorities where something of that sort takes place, but I do not think that we should get into the position where there seems to be a payment for planning permission of that sort. Local authorities receive grants and capital allocations tailored to their needs to provide for the infrastructure. The trouble is that the total of those needs throughout the whole country is inevitably greater than the money that can be afforded.

Mr. Tony Banks (Newham, North-West)

When will the Secretary of State get it into his head that it is not high rates that cause unemployment but high interest rates, low investment and over-valuation of the pound? Those are the major causes of unemployment in the inner cities and elsewhere. Will he begin to understand that no local authority likes to increase the rates? Local authorities increase rates to meet the needs of the community — needs which have been exacerbated by the Government's policy. Before the right hon. Gentleman, with his hon. Friend the Member for Ealing, North (Mr. Greenway) and others starts criticising, will he realise that the substantial rate increases in those boroughs were caused by years of dereliction when the Conservatives controlled those councils? When will he start defending the system of local democracy and local government accountability instead of coming here and acting like some Stalinist bootboy on the orders of—[Interruption.]—No. 10?

Mr. Ridley

I understand that I have to congratulate the hon. Gentleman on being made a Whip. Having listened to him on many occasions, I hope that Opposition Whips are not like Government Whips in the sense that they cannot talk, because every time he opens his mouth he helps us greatly. Naturally, interest rates are extremely important. If the Government were to increase the grant, as the Opposition seem to want, or local authorities were to increase spending, as they are talking of, there would be massive increases in interest rates which would indeed be damaging to jobs in all hon. Members' constituencies, not just the hon. Gentleman's.

Mr. Kenneth Hind (Lancashire, West)

I represent a constituency on the edge of Liverpool and I am a Mancunian born and bred. Does my right hon. Friend recognise that the one thing both those communities need is jobs and that the one thing likely to create them is the rate capping of those two profligate authorities, which he has just done? In the light of the Audit Commission's recommendations that £1.5 billion-worth of savings can be made by local authorities, what action will he take to encourage them to make those savings?

Mr. Ridley

During my hon. Friend's question I thought that I almost heard the ghost of Mr. Robert Kilroy-Silk, but my hon. Friend is much more eloquent.

His figure of £1.5 billion of savings being possible for local authorities is an underestimate. The Audit Commission has estimated that perhaps £2 billion could be saved. Certainly, there is considerable confidence that the Local Government Bill alone could result in savings of up to £500 million.

Mr. Dennis Skinner (Bolsover)

Why do the Government not treat other public institutions in the same way as they treat local authorities which are rate-capped, such as Manchester and Liverpool? Why, for example, should the Prime Minister's costs at No. 10 Downing street have increased 100 per cent. beyond the rate of inflation since Jim Callaghan left, as we have been informed in answers this week? Why has she not been rate-capped? May we have a guarantee that the right hon. Gentleman's statement today will stand up in a court of law? [HON. MEMBERS: "Come on."]

Mr. Alistair Burt (Bury, North)

Is my right hon. Friend aware of the considerable damage done to the reputation of the north-west and its vital capacity to attract outside investment by the activities of such councils — once great city councils — as Liverpool and Manchester? Is he aware that his decision today to rate-cap Manchester will be seen as a welcome warning of good sense and will be welcomed by many outside the city who love it and have mourned its decline in recent years?

Mr. Ridley

I agree with my hon. Friend. The more I hear from Opposition Members about the problems of Manchester and Liverpool, the more I am beginning to think that they are the problem.

Mr. D. N. Campbell-Savours (Workington)

In the light of the calls he made in his statement for local authorities to address the 0.75 per cent. drift in manpower which he identified last year, is the Secretary of State saying that local authorities such as Cumbria should not appoint social workers to pursue people who abuse children, should not appoint lollypop ladies, teachers for nursery schools, and the people who play a vital part in underpinning every community? Why should they not have the right to appoint those people when they know that the general public want those appointments made?

Mr. Ridley

The hon. Gentleman will agree that there is a distinction between the needs of people to be in grace and to perform desirable functions and the need to have the right number of those people and not an excessive number. During the past eight years the Government have reduced the Civil Service by about 135,000 people, while at the same time they have provided much better quality government. That is an example which local authorities should follow.

Mr. James Couchman (Gillingham)

Is my right hon. Friend aware that his answers to my hon. Friends the Members for Devizes (Mr. Morrison), for Bedfordshire, South-West (Mr. Made!) and for Cambridgeshire, South-West (Sir A. Grant) will not reassure either the leaders or residents of careful counties such as Kent, and the residents in my district authority, which is the most careful district authority in the country, that there will be no artificial shift of money from the shire counties to the cities. Will he reassure them that, when he says there will be no major changes in the mechanism for distribution, he means that there will be no artificial shift of resources from the shires to the cities?

Mr. Ridley

When I was talking about there being no major changes in the mechanisms, I was referring to the slopes, the forfeit of the grant and matters of that sort. A further set of mechanisms is the unallocated margin, the service distribution and the multipliers. When they are determined, we will be able to give hon. Members a more accurate forecast of the grant entitlement of each authority. I cannot do that now. I have to be frank with the House and say that, as in all previous years under this system, the increase in rateable value in certain areas results in the loss of grant to areas with high need, and there is nothing that the mechanism can do to arrest that. That is a problem with the system, and it is why the system has to be scrapped. We must wait to see the exemplifications before giving my hon. Friend a better answer.

Mr. Bob Cryer (Bradford, South)

That sneering and cynical statement will be met with apprehension in cities such as Bradford which are struggling to maintain services and to repair schools, many of which were built in Victorian times. The Tory Government are fond of Victorian values. Does the Secretary of State not understand that councils are trying to maintain services against a background of massive rate support grant cuts? He could do the nation a service by restoring some of those cuts and ensuring that councils can maintain the services which, by and large, help the poorest people in our community. If he wants the money, he can persuade the Cabinet to cancel the £10 million Trident programme.

Mr. Ridley

The return of the hon. Gentleman to this House was the true cause of apprehension in Bradford.

Mr. Tony Baldry (Banbury)

Will my right hon. Friend confirm that, while we have the present formula for allocating grant, it is inevitable that high rateable value councils such as Oxfordshire will have grant taken away, which is why such counties will warmly welcome our proposals for reforming the rating system? Until that happy day, if counties such as Oxfordshire spend disproportionately above GRE, they will inevitably see rates go through the roof to the detriment of pensioners, jobs and others in the county.

Mr. Ridley

My hon. Friend assessed the situation entirely correctly. There is no way that the switch of grant from high rateable value areas to high need areas can be arrested by any of the mechanisms, although it can be moderated. We will have to see what we can do about that later. Such situations are grossly exacerbated by high spending.

Mr. Jeff Rooker (Birmingham, Perry Barr)

At some time, probably during the recess, will the Secretary of State place in the Library his analysis of the connection between jobs and rates so that we can have this debate on the basis of common knowledge? Contrary to the very first question he was asked by the right hon. Member for Guildford (Mr. Howell), the penny-pinching that has taken place in towns such as Guildford has led to the town being strewn with litter all weekend. People wonder why, get annoyed and complain. There is a connection between false penny-pinching by local authorities and services.

Given that the word "people" does not appear in the Secretary of State's statement, I wish to ask him a question about the rising elderly population in the country. Are the local authorities that he claims are spending too much the same local authorities that are not training care assistants for old people's homes, or that are not able to inspect private sector old people's homes, with the tragic consequences that have ensued recently? Whatever the jargon involved in this kind of statement, it is about people. I ask the Secretary of State to address himself to these points, which have been raised by some of his hon. Friends and all of mine.

Mr. Ridley

Starting with Ciuildford— I notice that my hon. Friend the Member for Guildford (Mr. Howell) is no longer with us— one of the difficulties for councils in areas such as Guildford is that such a tremendous cut is made in the grant that they have very high rates for a very low spending performance, because so much money is transferring to constituencies in the Manchester and north-west area. So, for the hon. Member for Birmingham, Perry Barr (Mr. Rooker) to come and criticise what is happening in Guildford on top of that is a little disparaging, when he remembers the subsidy that is going to areas further north. Of course, that is the point: rates and jobs are intimately connected. That is why areas such as Guildford have tried so hard to keep their rates as low as they can, because they fully understand the relation between high rates and jobs — even if the hon. Gentleman does not.

Yes, the statement is about people, but the people are separated from the statement by their local authorities. I hope that the local authorities will remember that this statement is about people, and the people who pay the rates as well.