§ 5.7 pm
§ The Secretary of State for Wales (Mr. Peter Walker)
With permission, Mr. Speaker, I wish to make a statement about my proposals for the 1988–89 rate support grant settlement for Wales.
Local authorities in Wales are beginning to plan their budgets for next year. In order to assist that process, I am today announcing the key elements of my proposals for the RSG settlement. I shall shortly be circulating, as is customary, more detailed information to Welsh councils, and I shall place copies of that material in the Library and in the Vote Office.
In framing my proposals for 1988–89, I have taken account of the demands on Welsh local authorities. Again, this year, Welsh councils have a settlement which provides a realistic base, enabling them to maintain and develop services while keeping spending within the Government's plans. While there is competition between services for resources, there is also tremendous scope for maximising the effective delivery of those services, through improved efficiency and greater awareness of the potential to achieve cost savings by adopting the best practices currently developed. Not enough is done to ensure the rapid and effective dissemination of improvements in efficiency, and I want to work in close co-operation with local government to increase the pace of progress in that area and to realise the savings that are waiting to be made.
I turn now to my proposals for the 1988–89 settlement. Provision for local authorities' relevant current expenditure in 1988–89 in the public expenditure White Paper published in January 1987 was £1,589 million. I now propose to set current expenditure provision at £1,640 million— £51 million, or 3.2 per cent., more than the White Paper figure, £82 million, or 5.3 per cent., more than authorities have budgeted to spend this year, and £113 million, or 7.4 per cent., more than provision in the 1987–88 settlement. This allows all authorities to hold their spending broadly level in real terms, and in addition provides an allowance for key county services. In the autumn I shall give details of the distribution of this sum between services.
Total relevant expenditure for RSG purposes is estimated to be £1,886 million, which is £105 million, or 5.9 per cent., more than authorities have budgeted to spend this year, and £122 million, or 6.9 per cent., above the assumption for total relevant expenditure in the 1987–88 settlement.
As for aggregate Exchequer grant in support of relevant expenditure, I propose that it should be £1,256 million, an increase of £82 million, or 7 per cent., on the level in the main report for 1987–88. The grant percentage will be maintained at 66.6 per cent., the same level as in the main report last year after allowing for grant provision for the teachers' pay increase. This generous increase in grant should lead to very low average rate rises next year.
The local authority associations have made it clear to me that they favour stability and certainty in grant entitlements. I therefore propose to leave the basic grant distribution mechanisms unaltered, although I shall review this proposal during the course of further consultations with them in the autumn. The slope of the grant-related poundage schedule and the 10 per cent. threshold will remain unchanged, and I propose to leave in place the 513 mechanisms used in the current year to limit grant gains and losses. This will enhance stability while exerting the necessary downward pressure on spending. For most councils, increases in spending will result in a loss of grant and this will not be recycled. Equally, reductions in expenditure will attract extra grant. Councils thus have an opportunity to plan ahead with certainty in the knowledge that their grant entitlement will be a direct result of their own spending decisions. I remind councils that there is also extra grant available in 1987–88 if they bring their spending closer to plans.
I have no doubt that my proposals for 1988–89 offer local authorities in the Principality a realistic base. They will be able to develop services whilst improving the efficiency and effectiveness of the services under their control. They know that if they work within the Government's expenditure plans their taxpayers will benefit from the extra resources that I have provided. I look forward to further discussions with the Welsh Consultative Council for Local Government Finance, not only about my proposals for the 1988–89 settlement, but about how best to further our joint objective of achieving the best possible services for Wales.
§ Mr. Alan Williams (Swansea, West)
Stripped of its verbiage, we have just heard from the Secretary of State an admission of his failure. The only welcome we can give is for the fact that there has been no change in the mechanisms and for the fact that he has dropped the detailed schedule that caused so much confusion last year. Behind the symbols and the hieroglyphics of the rate support grant lie for Wales the sad realities of crucial, but crumbling, services, and essential, but inadequate, resources. The statement is really about houses and house repairs, or the need for them; about social services, home helps and services for the elderly, or the lack of them; and about books for schoolchildren and repairs for schools, or the absence of them. Does the right hon. Gentleman realise that, in the past eight years, in all those aspects Wales has fallen behind social need at a time when that need has been increasing, because of the extra 75,000 unemployed and the aging population?
The cost increase assumption in the statement is critical because, self-evidently, if the costs are not covered by the increases, cuts must be made or rates must be increased. Will the right hon. Gentleman confirm, therefore, that in his statement he assumes cost increases and a GDP deflator of 4 per cent.? Does he recognise that this is not only completely inadequate but completely unrealistic? Surely he is not unaware that costs for councils, because they are labour-intensive, rise far more rapidly than the cost of living index? They are essentially geared to the changes in salaries and wages.
The police have just had a 7.75 per cent. increase — an increase awarded by the Government — which councils will have to pay. Teachers have just had an increase—again an increase awarded by the Government — which councils will have to pay. The firemen have just had an increase. Those increases alone will need an extra £86 million of expenditure, and there are still the manual, administrative and clerical workers to come. None of those is likely to settle at the 4 per cent. implicit in the right hon. Gentleman's assumptions.
514 Is the Secretary of State aware that the district councils estimate that they need to increase expenditure by 7 per cent. just to stand still, just to maintain the existing levels of provision and commitment? The county councils estimate that they need 10 per cent. just to stand still. Is the Secretary of State the only one in Wales who does not know what all Welsh people know, which is that merely sustaining the existing levels of service in Wales is not enough? In fact, this statement leaves a gap of 3 to 4 per cent., a £16 million under-provision of the levels needed just to sustain inadequate services at their present level.
Does the right hon. Gentleman agree that, although at first sight this settlement appears to be better than the English settlement—5.3 per cent. compared with 4 per cent. — that comparison is deceptive, because 37 of the English authorities, which account for about one third of the total spend in England, are rate-capped or otherwise subject to spending limitations'? If we take the English shires, such as the area represented by the Secretary of State, we find that the settlements are virtually the same in England and in Wales.
Has the Secretary of State looked at what has happened to local government finance in Wales since the Conservative party came to office? Is he aware that this Government have robbed Wales of £672 million of rate support grant—the extra amount that would have been received over the life of this Government if only the rate support grant had been kept at the 1979 level? Does the right hon. Gentleman realise that that represents a loss of £650 for every Welsh household, or a loss of £268 for every Welsh man, woman and child? A figure of £672 million is difficult to visualise, but, put in capital terms, it would provide 20,000 houses or 280 new schools.
Does the Secretary of State accept that, because rate support grant has fallen since 1979 under this Government from 75 to 67 per cent. of total spending, the Welsh councils have had to find from rates 33 per cent., instead of 25 per cent., of expenditure? Is it not hypocritical of the Government to throw up their hands in false surprise when councils inevitably have been forced to increase their rates? Does the right hon. Gentleman realise and accept that this poor settlement means more rate increases for Wales in the coming year, or is that perhaps what the Government want? Is this to soften up the public in preparation for the introduction of the poll tax?
The Secretary of State says that he has maintained the percentage of grant. [Interruption] His statement leaves more questions to be answered than it answered. Does the right hon. Gentleman not understand that to say that he has maintained the percentage of grant is meaningless, because the percentage on its own is meaningless? What really matters is what it is a percentage of. The same per cent. of too little still remains too little, and this grant is £60 million below what is needed just to stand still.
The Secretary of State talks of greater efficiency. Is he aware that the chairman of the Audit Commission cut by 75 per cent. his predecessor's estimate of the scope for efficiency savings in local government'? Is he aware that Wales has suffered eight years of neglect and disinterest and that this statement does nothing to reverse that deprivation and nothing to restore the £672 million stolen from the people of Wales? It will be a cause of alarm and despondency in Wales. It will mean rate increases far beyond anything that the Secretary of State is projecting. This is the right hon. Gentleman's first real decision for Wales. What Wales needed was a champion, a fighter, in 515 the Cabinet. Instead, we have a Secretary of State who is strong on charm but utterly, disastrously and pathetically weak on performance. Today he has failed the people of Wales, but it is the people of Wales who will pay for that failure.
§ Mr. Walker
That was a third-rate statement by the third choice shadow Secretary of State. No wonder it was greeted throughout in such dismal silence by the Opposition. To string along previous cuts in local government expenditure is wrong. Perhaps the right hon. Gentleman would like me to go over the period when the Labour party was in power and to refer to his total silence as the Labour Government slashed education and health services and plunged into debt to the International Monetary' Fund. Perhaps the Labour party recognises that the shadow spokesman was a silent spokesman on these topics when the Labour Government were cutting services such as those that he now mentions as being so passionately dear to his heart.
The statement says that next year the Government grant will increase ahead of the estimated rate of inflation. The expenditure accepted for grant is equal to £1,800 per household in Wales, of which £1,200 will come from Government grant—an increase of 5.3 per cent. on the amount that local authorities have budgeted for this year. I should have thought that most people taking a sensible and objective approach would recognise that this is a sound and sensible settlement. The Opposition are not interested in improved efficiency in local government.
As for the suggestion that the Audit Commission considered that only a proportion of my predecessor's forecast savings could be achieved, the fact is that the Audit Commission and LAMSAC, the local authorities' own management advisory service, have come forward with dozens of proposals to improve efficiency in local government in Wales and, indeed, throughout the United Kingdom. Some local authorities in Wales have done some of these things — some have done much more than others —but the potential for improvement in efficiency is very considerable.
It would be irresponsible to say that one will increase grants without expecting improved efficiency. Therefore, I strongly defend a settlement in which we get a 66 per cent. grant compared with 46 per cent. in England, and a 5.3 per cent. increase on this year's budget, which is 1.5 per cent. more that has been obtained for England. It is a just, sensible and good settlement.
§ Sir Anthony Meyer (Clwyd, North-West)
Is my right hon. Friend aware that he has secured an excellent settlement, which will be warmly welcomed by local authorities of all political colours, in contrast to the prolonged and unworthy whingeing that we have heard from the right hon. Member for Swansea, West (Mr. Williams)? Is he further aware that local authorities in Wales are keenly looking forward to working closely with him on the basis of the approach that he has demonstrated in this statement and previously?
§ Mr. Walker
It is a sensible settlement, and I am grateful for my hon. Friend's remarks about it. The settlement will be welcomed in the Principality. I very much look forward to working closely with local authorities throughout the Principality.
§ Mr. Richard Livsey (Brecon and Radnor)
What allowance is made in the rate support grant for inflation? There seems to be some controversy about this. The right hon. Member for Swansea, West (Mr. Williams) said that there was a GDP deflator of 4 per cent. If that is accurate, the rate support grant for Wales is underfunded. Indeed, Powys county council estimates that a 6 per cent. increase is required simply to stand still. Will the right hon. Gentleman put us right on that? Does he believe that the rate support grant settlement is adequate for education, social services and housing, all of which are in a state of crisis in Wales?
§ Mr. Walker
There will always be scope for increased expenditure in all those spheres, but in Wales we must also consider the importance of attracting jobs and businesses, and the level of rates. If they soar, as they have in parts of England, they will have a detrimental effect on the expansion of the economy.
When the Liberals were in partnership with the Labour Government, they, too, found that there were practical problems associated with enormous increases in expenditure, for which they usually ask. When they supported the Labour Government, they had to support cuts in most of these sectors. The hon. Gentleman said that local authorities calculate that it will cost an extra 6 per cent. to stand still, but they have agreed wage increases substantially above the rate of inflation. Whether that is done in the private or the public sector, one has to improve productivity and efficiency to help meet part of the extra wage cost. That applies as much to local government as to anyone else.
§ Mr. Keith Raffan (Delyn)
I congratulate my right hon. Friend on his statement. I am sure that the people of Wales will attach far greater credibility to the statement of a Secretary of State within the Cabinet than to a third choice outside the shadow Cabinet. At least we, unlike the Labour party, have a fighter where the power lies.
Does my right hon. Friend agree that the result of this generous settlement and the drive for efficiency that he has called for will be not only low rate increases but a real improvement in local services, provided that local authorities concentrate on their statutory obligations? Will my right hon. Friend exert his influence on Clwyd county council to get it to divert resources from non-statutory spending to skill building and the maintenance of the school libraries' stock, in view of growing concern over the scandalous neglect of both?
§ Mr. Walker
I note what my hon. Friend said about his county council. He is right in saying that improving efficiency is an important factor. It is of benefit because it means that the amount of money available is used more sensibly and to greater purpose, and it stops unnecessary increases in the rates. I wish to discuss with the local authorities in Wales how we can introduce machinery whereby if one local authority finds a managerial process or makes a technological breakthrough which is important in improving efficiency it can quickly be transmitted to all the others and applied.
§ Mr. D. E. Thomas (Meirionnydd Nant Conwy)
Does the Secretary of State accept that his response to my hon. Friend the Member for Brecon and Radnor (Mr. Livsey) was hardly relevant to his tenure of the Welsh Office? The right hon. Gentleman attacked the high-spending 517 authorities but, whether we like it or not, in terms relevant to England, there are no high-spending authorities in Wales. He must accept that. Our problem in Wales concerns the effective delivery of services to meet needs. Will the right hon. Gentleman accept that, whatever the Government transfer of funds to local authorities, he requires a mechanism that establishes needs? The rate support grant mechanism does not do that. We have a graduated expenditure calculation, but that does not necessarily reflect the reality of the social and economic needs of the areas or the services.
In his statement the right hon. Gentleman stressed the need for additional allowance for key county council services. Will he identify to the House and to Wales what he regards as the key local authority services in Wales? Do they include social service provision, through the personal social services, for the elderly, the provision of education services for the under-fives, or the provision of housing services by local authorities, which are substantially underfunded?
§ Mr. Walker
The most important service in the distribution, and the one involving the greatest expenditure is, of course, education. The increased costs will be involved in the recent settlements in education.
On the question of needs and services, of course all concerned with the distribution of money throughout the local government system will be anxious to identify quickly and sensibly the difference in needs and requirements. Politicians of different political parties and, indeed, within the same party, will always have different priorities in defining the needs that are the most urgent. The very fact that the Government are to provide 66 per cent. of total local government expenditure in the Principality, compared with 46 per cent. in England, illustrates that we have identified the differences in both the rateable value base and the needs in Wales, and therefore that we need the reallocation. I am anxious to discuss with the local authorities any improvements that we can make in identifying the needs.
§ Mr. Gwilym Jones (Cardiff, North)
I applaud my right hon. Friend for coming forward with a very generous settlement—7.4 per cent. more than last year. The ball is now in the local councils' court, and my constituents in Cardiff are very concerned about the rates that they have to pay, after last year's excessive rate increase of 24 per cent. Given that next year is again not a local council election year, we dread another savage rate increase. Will my right hon. Friend use all his efforts to ensure that local councils minimise the burden to the ratepayer, perhaps by publishing the savings that might be made by each council in Wales if they contracted out local services?
§ Mr. Walker
The new Local Government Bill, which is going through the House at the moment, contains important provisions on that issue. There is no doubt that in a whole range of activities—and this certainly applied to energy efficiency when I was in my previous post as Secretary of State for Energy — the difference in performance between one local authority and another is dramatic. Millions of pounds are wasted through the inefficiency of some local authorities. As my hon. Friend pointed out, people in Cardiff and elsewhere in Wales are 518 interested in keeping rates at a low and sensible level and that applies particularly to the business community, especially new businesses and enterprises.
§ Mr. Alun Michael (Cardiff, South and Penarth)
Will the Secretary of State accept that local authorities in Wales —particularly Cardiff, to which he has just referred— have had great success in attracting jobs and improving efficiency? Will he give us answers to some specific questions? In his statement he said that he would state in the autumn how moneys would be distributed among services. Does he not recognise that local authorities need to know that distribution now, so that they can work on their rating strategy? Does he not recognise, too, that the requirements are well in excess of the figures that he gave?
Let me offer the right hon. Gentleman some figures for Cardiff. In order to stand still, Cardiff requires 13 per cent., 8 per cent. of which is to allow for wage increases, on which the local authority has no choice because the settled increase for administrative staff is 6.75 per cent. and the settlement for manual workers is likely to be about 10 per cent. Will he accept that that is well in excess of the increase that he has offered the Welsh authorities, which is less than 6 per cent.?
Does the right hon. Gentleman recognise that there are other costs that fall on local authorities and that he has made no allowance for the expenditure that will be necessary to prepare for the poll tax if he and his colleagues insist on proceeding with that foolish and expensive tax? Does he realise that no sum is provided to prepare for the change in housing benefit and that there are other expenditures, to which I shall refer on another occasion, for which he has failed to allow in opting for a settlement that is slightly in excess of general price inflation and bears no relationship to the needs of local authorities?
§ Mr. Walker
The settlement is 5.3 per cent. above the local authorities' budgets for last year. When local authorities mention the sums that they will need to spend if they are to stand still, as it were, they tend not to include a large element to reflect improved efficiency.
The hon. Gentleman rightly says that manual and administrative workers have received pay increases that have been way above the rate of inflation. If local authority associations negotiate with manual workers and give them an increase that is double the rate of inflation, I hope that their intention is to absorb a substantial part by means of improved efficiency. Local authorities cannot continue saying "We shall agree to a pay increase that is double the rate of inflation," without looking for improved efficiency and performance. That is important.
§ Mr. Nicholas Bennett (Pembroke)
Is my right hon. Friend aware that this extraordinarily generous settlement for Wales will be greeted with acclamation and that the points made by the right hon. Member for Swansea, West (Mr. Williams) in his well-prepared carp, which he obviously had ready before hearing the details of the settlement, will not be accepted? When we press for greater efficiency, can we ensure that local authorities in Wales do everything that they can to put services out to tender and to privatise wherever possible? That will mean that there will be scope for rate reductions this year.
§ Mr. Walker
My long experience enables me to assure my hon. Friend that no Government and no Minister will 519 ever receive acclamation for a rate support grant. It will always be suggested that the settlement is wrong, that it should be more generous and that certain parts of it are ill-founded. However, I believe that this is a fair and reasonable settlement. It is important for local authorities throughout the Principality to look to the authorities that have succeeded in improving their efficiency and to consider why they have been able to do so, and where possible copy their example.
§ Mrs. Ann Clwyd (Cynon Valley)
I am glad that the Secretary of State mentioned his previous office, which was that of Secretary of State for Energy. Why should we be expected to swallow his strictures when he talks about cost-efficiency and controlling prices, when he has recently been rapped over the knuckles for spending £23 million of taxpayers' money unnecessarily on persuading people to tell Sid, during his tenure as Secretary of State for Energy?
It is difficult for Welsh local authorities to take the right hon. Gentleman seriously in the light of his record. How can we be expected to take seriously his statements in the Welsh Grand Committee when he says that the sorts of problems that face the inner cities are those faced by the Welsh valleys and that the ways of dealing with inner-city problems should be applied also to the Welsh valleys? At the same time he is expecting local authorities in the valleys, which face high unemployment, bad housing and pressures on social services and the Health Service, to accept the rate support grant that he has announced. Does the right hon. Gentleman really expect us to take him seriously?
§ Mr. Walker
I was not the subject of any great strictures about telling Sid. I suggest that the hon. Lady reads fully the relevant report, in which it suggested that there is the possibility of a division of view. I am delighted to say that throughout the country 5 million people took advantage of being able to become participants in an important industry. I have no regret whatsoever about the manner in which that was done.
There are problems in the valleys and resources are needed if they are to be tackled. The resources that will be made available in allocations and increases in expenditure and on the budgets of last year are above the rate of inflation. We shall do better than England, because there are parts of the Principality with problems that are worse than those to be found in England.
§ Mr. Paul Flynn (Newport, West)
We have heard a statement that will be received with great resentment by Welsh local authorities. The Secretary of State has already confessed his lack of interest in and understanding of RSG, and nothing illustrated that more than his delivery of the statement and his answer to questions. Practically no illustrations have been drawn from Welsh local authorities and it seems that the right hon. Gentleman is suffering from the caricature of local authorities that has been presented by the Government. The right hon. Gentleman shows no understanding of the splendid work of many local authorities, including Newport borough council, which for many years has provided key services of great value. Will you look to your own Department, which was condemned only last week by the Public Accounts Committee for showing no serious concern for mismanagement, collapse of control and the financial anarchy of a body over which you have sponsorship and control?
§ Mr. Speaker
Order. The hon. Member for Newport, West (Mr. Flynn) had better learn that I am "you".
§ Mr. Flynn
I ask the Secretary of State to consider the position of local authorities in Wales and to understand that the missing word in his statement is "cuts". The grant percentage is 66.6 per cent. Does he agree that the percentage for every previous year has been above that? It was 66.7 per cent., and in 1980–81 it was 73.4 per cent.
§ Mr. Walker
The hon. Gentleman has put on display his ignorance of the rate support grant mechanism. If he reads my statement carefully he will find that the percentage grant is identical to that which applied last year. The reason for that is the change that has taken place in the provision for teachers' salaries. The reality is that the settlement is sensible and generous. I have met local authority representatives today to discuss these matters with them, and I am glad to say that their approach is far more constructive, objective and sensible than that displayed by the hon. Gentleman.
§ Mr. Roy Hughes (Newport, East)
We are told that our local authorities are beginning to plan their budgets for next year, and I note that the Secretary of State wishes to assist in the process. Will the right hon. Gentleman appreciate that his offer can be interpreted as a threat, bearing in mind that the Government have taken £672 million from our local authorities in Wales since 1979? When will the Government provide the revenue that local authorities in Wales need so that they can provide the level of social services that are needed by the people? There is an aging population, and there was a transfer recently of certain responsibilities from the Department of Health and Social Security to local government.
Does the Secretary of State recognise that Wales has a greater proportion of older houses than any other area of the United Kingdom? When will the Government unleash the purse strings, bearing in mind especially the receipts from the sale of council houses, and enable local authorities to tackle this important social issue? Is there any need for me to remind the right hon. Gentleman of the mass unemployment with which Wales is afflicted, which is not disguised by restart programmes or by fiddling with the figures? According to the Government's recent submission to the EEC, the activity rate of Wales is lower than that of any other part of the United Kingdom. Does the right hon. Gentleman recognise that our local authorities could play a major part in rectifying that problem?
In reality, our local authorities need a 10 per cent. increase on the previous settlement if they are merely to continue with their existing policies. The bulk of such an increase would be taken up by the justifiable teachers' settlement, and, as my right hon. Friend the member for Swansea, West (Mr. Williams) said, there are other major settlements in the pipeline, including those of the police, the firemen and local authority manual grades.
Finally, will the right hon. Gentleman recognise that he has a major task to justify his appointment and to provide our local authorities with the wherewithal that they need? Instead, it seems that they can look forward only to a poll tax and the decimation of education and other vital services.
§ Mr. Walker
In the coming year, local authorities can look forward to an allocation of £105 million more than 521 they budgeted to spend this year. A great tale of woe and misery comes from the Opposition. Such a constant, mournful tone does a lot of damage to the atmosphere of the Principality. It is time that the Opposition cheered up. I agree that housing is a serious problem. That is why I am pleased that my predecessor managed to do much more about home improvement than the previous Labour Government did.