Rate Support Grant (Hansard, 5 March 1987)

§ The Secretary of State for the Environment (Mr. Nicholas Ridley)
With permission, Mr. Speaker, I should like to make a statement about rate support grant.
I have today appealed against the court judgment in a case brought by Greenwich borough council. That judgment would mean that I could not correct an acknowledged error in the 1986–87 settlement, which deprived some London authorities of their full grant entitlements. As a result of that judgment, it is necessary now to amend the rate support grant figures I announced in January for 1986–87 and 1987–88 so that grant can be paid from the beginning of April. I have sent the revised figures to local authorities today. They are available in the Vote Office and the Library.

§ Dr. John Cunningham (Copeland)
Is the Secretary of State aware that his statement is completely inadequate in that it seeks to disguise the serious nature of the situation resulting from the incompetence of this Government in their handling of local government finances? This is truly unprecedented. The Secretary of State has now announced to the House that all the figures for the current financial year and the coming financial year are again to be affected by changes as a result of Government and ministerial ineptitude. Is he not trying to disguise, by his lack of candour and of detail in the statement, the reality of the wide-ranging implications of what he has had to say?
When, if ever, will there be an end to the legal defeats for this Government in the courts, resulting from their continuing incompetence in this crucial sector of local government finance? If the Secretary of State intends to carry through his appeal against the Greenwich decision, why is he already announcing his decision to amend the rate support grant figures? How many changes result from his decision today? How many local authorities will be affected?
Do the Government intend to make more grant available in total, and how many authorities are likely to lose grant as a result of what he has announced today? Does he recall that in July last year the Minister for Environment, Countryside and Planning, the hon. Member for Bristol, West (Mr. Waldegrave) said that the legislation introduced then was necessary to provide local authorities with certainty about present and past entitlements? Since then there have been three more local government finance Bills, and countless statements by the Secretary of State on the same subject.
Is it true that the Conservative borough of Bromley, having made its rate and announced its budget, will be in an unlawful position if the changes that the Secretary of State has announced today are carried through? Are not many other local authorities likely to be in the same difficulty, because of the necessity to fix precepts by 10 March, which is next week, and to fix their rates by 1 April?
Is the Secretary of State aware that the changes that were sneaked out in a letter last week resulted in major confusion? For example, the city of Newcastle upon Tyne had to make no fewer than 160 changes in its budget. The Tyne and Wear fire authority had to call an extraordinary meeting last week, costing hundreds of pounds, because of 1043 this incompetence. The London borough of Hounslow incurred almost £1,000 in administrative costs because of those changes.
Today, further massive changes and their costs will fall on local authorities in England and Wales. Even as we speak, the Greater Manchester fire authority, having met today to fix its precept, cannot take any decisions because of the confusion caused.
Does the Secretary of State stand by today's announcement by the Tory Reform Group, in a press notice, which is endorsed by the right hon. Members for Mole Valley (Mr. Baker), for Henley (Mr. Heseltine) and for Witney (Mr. Hurd), by the right hon. and learned Member for Rushcliffe (Mr. Clarke) and by Viscount Whitelaw: Government was acting in a haphazard way, making up these decisions as it went along. It had no clear idea as to why it had to intervene so constantly, what was so fundamentally wrong in local government and how to put it right. Does the right hon. Gentleman think that he retains the confidence of his colleagues who put their names to that statement?
Is the Secretary of State aware that any other Minister with such an abysmal record of unlawful action, defeats in the courts, administrative incompetence and lack of frankness with the House would be considering his position?

§ Mr. Ridley
I thought you were tolerant of the hon. Gentleman, Mr. Speaker. Not only did he range over matters irrelevant to the statement, but he described it as a legal defeat. I made it clear that I have appealed—the appeal papers were lodged. The hon. Gentleman is wrong, and he is prejudicing the appeal by saying such things. Until the appeal is determined, the law is as it is left by the High Court judgment. It is for that reason, and that reason alone, that it is necessary to amend the rate support grant figures in accordance with the judgment. I have to tell him, because he got it wrong again—he gets so many things wrong that I do not know where to start—that this is the result not of what he called Government ineptitude, but of a court judgment. If he cannot make the distinction between those two things, I suggest that he has much to learn.
No more grant will be available as a result of this judgment. The hon. Gentleman knows that the system is close-ended. Certain boroughs will lose as a result of this judgment. Grants that will properly be paid to certain London boroughs for maintaining their roads will be switched to other boroughs which do not have responsibility for maintaining those roads. That is a quite inequitable situation, and I regret that the judgment means that I have to enshrine it in the new rate support grant figures. I am not clear how many of the authorities have actually made their rates, although I do not think that many have done so yet. If any have made their rates, they can apply to the court to quash a rate if they find that it is insufficient, in the light of the revised information deriving from this judgment.

§ Mr. Colin Moynihan (Lewisham, East)
Does my right hon. Friend agree that it is disgraceful that Greenwich has sought to find a loophole in the law to hold on to money which does not belong to it, to the detriment of other authorities?

§ Mr. Ridley
I agree with my hon. Friend that it is inequitable that grants which this House has determined 1044 should go to authorities for specific purposes should have been changed to go to authorities which do not have to discharge those responsibilities.

§ Mr. Sydney Bidwell (Ealing, Southall)
Does this Greenwich victory mean that the hard-pressed Labour-controlled borough of Ealing, where people are facing a steep rates rise as a consequence of the local authority's battle to meet the needs of the hard-pressed people of the borough, especially in Southall, can expect better behaviour by the Government and a higher rate support grant?

§ Mr. Ridley
I do not believe that the borough of Ealing is affected by what I have just announced. However, I believe that it has set an enormously high rate increase, which has nothing to do with my announcement.

§ Mr. John Hunt (Ravensbourne)
Is my right hon. Friend aware that Bromley's rate calculations for last year and this year have been made on the basis of the clearest commitments given to me and to the council by Ministers and the Secretary of State's officials? Will he confirm that if the amendment to the rate support grant to which he has referred this afternoon means that Bromley is now to be deprived of the money that it expected—which would have a catastrophic effect on the ratepayers — he will endeavour to compensate ratepayers in some other way for the loss that will be incurred?

§ Mr. Ridley
I confirm what my hon. Friend has said. Bromley has lost about £3 million as a result of the interpretation of the law in the judgment. I have appealed against that judgment. We must wait and see the result of the appeal. However, I share his view that it is completely inequitable for grants determined for one purpose for one authority to be switched to another authority that does not have the same responsibility. I have always said that that is wrong with regard to Bromley. We will have to wait for the result of the appeal.

§ Mr. Michael Meadowcroft (Leeds, West)
Is not the Secretary of State showing a rather desperate disingenuousness in trying to hang an appeal on a reported need to clarify the whole process of reallocating grants? Would it not be better for him to accept the court's judgment and receive the support of hon. Members on this side of the House to enable the matter to be clarified rather than go through the extended process? Is it not bizarre that he should accuse local authorities of inefficiency, yet write to them on 3 March presenting the relevant expenditure limits and telling them that he may be writing to them again in the near future with different relevant expenditure limits? Now apparently he will have to go through the whole process of appeal and the delay that that involves, and presumably there will be a third change of relevant expenditure. Surely local government is showing more efficiency than central Government.

§ Mr. Ridley
The Greenwich case was not about the specific allocation of grants; it was about a narrow interpretation of a point of law in the Rate Support Grants Act 1986. It is against that interpretation that I have appealed, and I suggest that we should not discuss the merits of that appeal until it has been heard. The inter-reaction of this constant litigation about points of law with the delicate timetable of the rate support grant mechanism causes a great deal of trouble. That is one of the reasons why we intend to abolish the rate support grant 1045 mechanism and the rates, and we hope that we have the hon. Gentleman's support in that. Depending on the result of the appeal, it may be necessary to go back on the rate support grant, but that is an inevitable consequence of litigation that takes place that can have such an effect, affecting the whole totals.

§ Mr. Peter Lilley (St. Albans)
Does my right hon. Friend agree that this problem arises from inaccurate legal advice, creative interpretation of the law by the courts, and excessively complex legislation? Would he consider following the advice of Shakespeare: The first thing we do, let's kill all the lawyers"— exempting, of course, my right hon. and hon. and learned Friends? If he is not prepared to be Shakespearean about this matter, will he at least privatise the provision of legislative advice? Secondly, would he submit draft legislation to the Simple English Campaign'? Finally, will he rapidly introduce a measure to restore the situation to the status quo ante?

§ Mr. Ridley
We have to go through the legal processes to determine the precise meaning of the Rate Support Grants Act 1986, which was checked by outside counsel and was the result of a privatised lawyers' agreement. I do not think that that point would hold up. It is right to proceed to the appeal and learn the detailed result before making any comment on further action.

§ Mr. Nigel Spearing (Newham, South)
Is not the real reason for the Government's continuous embarrassment by litigation their basic policy? Is it not clear that mechanisms such as clawback, which replaced the historic system of local government support grant, show that the Government, instead of meeting the real needs of communities—especially those that are hard-pressed — are in principle against any local government expenditure? Will the Minister admit that that is the real reason behind his continuous series of inefficient legislation?

§ Mr. Ridley
No, the hon. Gentleman is quite wrong. This matter is about the allocation of the total of rate support grant through the GREA system; it is not about clawback. An error was made two years ago in the allocation of the grants for road maintenance between certain London boroughs and others. The attempt to correct that error has been upset by the judgment. It will not rest there. We have appealed, and it is highly questionable whether we might not prove to be right in our interpretation.

§ Mr. Roger Sims (Chislehurst)
Further to my right hon. Friend's reply to my hon. Friend the Member for Ravensbourne (Mr. Hunt), does he accept that he gave a firm unequivocal undertaking to the London borough of Bromley that it would receive grant to offset the costs of looking after GLC roads? From what my right hon. Friend has said this afternoon, he has reneged on that undertaking. He has left Bromley in the position where, after making a rate, it is now likely that it will have to find a further £3 million, and the whole issue will turn on the whim of the appeal court. Surely my right hon. Friend can take steps to ensure that his undertaking that Bromley will receive the money will be kept.

§ Mr. Ridley
No. Whatever undertaking my predecessor gave, I must say that I have not gone back on that. The judgment of the court has meant that I am unable to do 1046 that. I have gone to the length of appealing against the judgment in an endeavour to fulfil the undertaking given by my predecessor. It was never an undertaking that extra Government cash would be provided for Bromley. That would be quite wrong, because the rate support grant is close-ended. The activities of one borough have resulted in it and others receiving a share of the grant which was destined to go to Bromley and other boroughs. We are not talking about new cash; this is a redistribution of existing cash. I repeat that I remain concerned that the result of the judgment provides an inequitable situation for Bromley and other boroughs. I am seeking to put that right, but first I must have the Court of Appeal decide; otherwise the position will not be clear.

§ Mr. Peter Pike (Burnley)
Does the Secretary of State agree that, apart from the political implications of what the Government have done about rates recently, they have caused utter chaos to officers and treasurers of local authorities who are trying to fix a rate? Does he believe that, in a democracy, locally elected representatives and local government officers have a duty, if they think that there is something in the law which enables them to provide a better service for their community, to challenge the Government's interpretation through the legal system?

§ Mr. Ridley
Yes. Large numbers of authorities are taking cases to the courts for the reasons that the hon. Gentleman has given. They are perfectly free to do that, and I do not complain about it. It is odd how the Opposition are gleeful every time authorities succeed. The result of that process, however, is delay, uncertainty and confusion. That is not the Government's fault. It is the fault of those who insist on litigation on every possible occasion.

§ Mr. Michael Latham (Rutland and Melton)
Is my right hon. Friend aware that in one month's time the new financial year will begin and rate demands will be sent out? When will local authorities know their entitlement to grant? Is this not a Kafkaesque situation? For how much longer will litigation go fiddling on?

§ Mr. Ridley
Because, as my hon. Friend rightly says, rates and precepts have to be set, I have today published a new settlement and sent it to local authorities. Because of the court judgment — it is not my choice, but I naturally comply with court judgments—I have to allow a short period for local authorities to comment on the changes. We are still in time to make the settlement by the end of the financial year and for precepting authorities to set their precepts. I must draw attention to the difficulty of sticking to the timetable and giving local authorities the time that they need to take their decisions against a background of constant litigation, some of which successfully upsets the orderly organisation of the rate support grant.

§ Mr. John Cartwright (Woolwich)
What impact will the Secretary of State's statement have on the hard-pressed ratepayers of Greenwich, which is planning to jack up its spending by about 25 per cent. this year? Can the right hon. Gentleman confirm that the borrowing, the creative accounting and the financial juggling that is going on in Woolwich town hall, will eventually have to be paid for by my constituents and those of my hon. Friend the Member for Greenwich (Mrs. Barnes)?

§ Mr. Ridley
I agree that the ratepayers of Greenwich are extremely hard pressed. The new rate support grant that I have announced today will give them increased grant as a main settlement and in the first supplementary report for 1986–87. If the appeal goes another way, it will be necessary to revise the figures once again. That is what is unsatisfactory about litigation which affects rate support grant figures for several years and means changing them during the rate support grant cycle.

§ Sir Anthony Grant (Cambridgeshire, South-West)
Is it not clear that the fault lies not with my right hon. Friend but with the ridiculous rating system with which we have been burdened for far too long, which nobody understands—least of all the Opposition—and which is grossly unfair to ratepayers? When the Abolition of Domestic Rates Etc. (Scotland) Bill is passed, everybody will be eternally grateful for the early introduction of a similar Bill for England and Wales.

§ Mr. Ridley
My hon. Friend is quite right. [Interruption.]

§ Mr. Speaker
Order. The hon. Member for Glasgow, Cathcart (Mr. Maxton) must not draw attention to people who are not in the Chamber.

§ Mr. Ridley
The hon. Member for Copeland (Dr. Cunningham) understands very little indeed. He even gave a press conference yesterday announcing his decision that the Government would not appeal against the Greenwich judgment. I have not heard one word of abject apology, which is what is needed, from the hon. Gentleman. I should be grateful if in future he would leave statements on behalf of my Department to me. It will be many years before he has an opportunity to have anything to say on behalf of any Government Department.

§ Mr. David Winnick (Walsall, North)
How many court cases has the Secretary of State now lost while he has held various ministerial positions? Was it because of his incompetence that he was sacked by the previous Conservative party leader in the early 1970s, or were there other reasons of which we are not aware?

§ Mr. Ridley
On the latter point, the hon. Gentleman is wrong. I resigned. On his first point, I do not keep the statistics for which he asks, but I believe that a question about that subject was answered quite recently.

§ Mr. John Heddle (Mid-Staffordshire)
I accept that my right hon. Friend's statement relates to London, but does he agree that there is something rotten in the state of local government when the Leader of the Opposition's local authority—Ealing—meets tonight to set a rate which is about 80 per cent. higher than last year's and when the chairman of the independent Audit Commission identifies eight Labour-controlled inner-London boroughs which are inefficient and profligate? Does my right hon. Friend agree that now is the time for a root and branch reform of the local government finance system?

§ Mr. Ridley
My hon. Friend is right. This rate support grant system has got to he replaced. The Leader of the Opposition will be one of our most enthusiastic supporters when we introduce a new system, because it will save him an absolute packet of his good money which the borough in which he lives wastes in the profligate manner that my hon. Friend described. I understand that Ealing is to increase its rates by about 80 per cent. That, not the system, is the real disgrace.

Several Hon. Members
rose—

§ Mr. Speaker
Order. I remind the House that we are operating under a timetable today. I shall allow questions to run for a further four minutes and then I will call the Front Benches.

§ Mr. Eric Deakins (Walthamstow)
What will be the impact on the rate-making process in London boroughs which are affected adversely or advantageously by the court judgment if the Secretary of State wins his appeal after rate notices have gone out to ratepayers?

§ Mr. Ridley
The rates will have to be set long before it is likely that any judgment will come from the Court of Appeal. The rates will therefore have to be set on the basis of the new figures that I am publishing and sending to local authorities today. If there is a change in those figures, due to the result of the appeal court's judgment, adjustments will have to be made in the first supplementary report, or, possibly, the second supplementary report. The hon. Gentleman knows full well that grant figures are adjusted in supplementary reports year after year. We are still dealing with supplementary reports for several years ago.

§ Mr. Harry Cohen (Leyton)
Does the Secretary of Slate agree that the Government have denied millions of pounds to ratepayers in Waltham Forest and elsewhere? Does he further agree that the Government have penalised especially heavily Labour-controlled councils which are trying to make good the problems that they inherited from their Tory predecessors who left the financial cupboard bare? How much will Waltham Forest get back because of the court action taken by a Labour-controlled council?

§ Mr. Ridley
I do not think that has anything to do with the statement. The borough of Waltham Forest is barely affected and the hon. Gentleman's question was not about that. I can confirm, however, that he is living in an extremely inefficient and extravagant borough which is increasing its rates by, I think, 68 per cent. for no good reason whatever.

§ Mr. Allen McKay (Barnsley, West and Penistone)
Does the Secretary of State agree that, following this week's statement on local government and local government finance, he should take this opportunity to consider resigning? Should the Secretary of State not step back, without falling over, and seriously consider stopping this vendetta against local government? The only thing wrong with local government is central Government, We should return to the sensible financial arrangements that we had prior to 1979.

§ Mr. Ridley
On this occasion the London borough of Greenwich is conducting a vendetta against other boroughs. It is trying to extract money for grant to boroughs that do not need to spend it. That has nothing to do with me and I am not responsible for the actions that have been taken. The result of the judgment leaves an inequitable situation.

§ Mr. Nick Raynsford (Fulham)
Instead of giving waffling and evasive answers, interspersed with political propaganda, will the Secretary of State tell the House precisely what the financial impact of the statement that he has made today will be on the London borough of Hammersmith and Fulham? If he is not in a position to give that statement clearly and unequivocally, will he admit that that is the product of his own and his 1049 predecessor's absurdly complex system of local government finance which would make Byzantium look simplicity itself by comparison?

§ Mr. Ridley
The London borough of Hammersmith and Fulham is not affected in any way by the statement that I have made. The hon. Gentleman can quickly check that when he considers the papers that are in the Vote Office. There may be a small effect on the borough, but it will certainly not be a major one.

§ Mr. Jack Straw (Blackburn)
Is the Secretary of State serious in describing proceedings before courts of law in this country as vendettas? Does he not understand that vendettas are carried out by the Mafia in Italy as an alternative to court proceedings? Is he trying to suggest that the learned judge in the court, Mr. Justice Taylor, is to be likened to a Mafia boss? Is that his view and his contempt for the judicial processes of this land? Will he confirm that Greenwich and every other borough has a right to take the Secretary of State to court for his failure to observe the law? Does he agree that another reason why he has been so rattled today is that he had to explain to the Prime Minister this morning that Barnet was to lose more than £1 million as a result of his failure, Bexley £500,000, Bromley more than £3 million, Kingston £1.5 million, Merton £600,000, Harrow £1 million and Redbridge £1 million? Finally, will the Secretary of State stop squealing, because once again he has been found out by the court, and accept the word of the judge in that court that he had been hoist with his own petard"?

§ Mr. Ridley
The hon. Gentleman's comments go very close to prejudicing the appeal. He is quite wrong to come to conclusions about the eventual decision in this matter, which is now before the Appeal Court. I was accused of pursuing a vendetta against local government. If that colourful language is not thought to be offensive when it is used against me, I can hardly believe that the London borough of Greenwich would feel it offensive if I described it in that way. The borough has every right to go to court, as I said earlier, but it is going to court not to my disadvantage or loss, but to the disadvantage and loss of other boroughs in London. As I have said, it has created an inequitable situation in those boroughs.

§ Mr. Barry Jones (Alyn and Deeside)
On a point of order, Mr. Speaker. As we share the same legislative root, may I ask what doubts this raises about the legal basis of the Welsh rate support grant? Have not the Welsh local authorities reached the most sensitive time for their rate-setting duties?

§ Mr. Speaker
Order. If the hon. Gentleman has a long list of questions, he must take them up with the Department concerned. It really is not a matter for me. On a point of order, he should ask me whether there will be a statement, or something like that.

§ Mr. Jones
I was about to make my point of order, Mr. Speaker. In the absence of the Secretary of State for Wales, who should have been here showing courtesy to the House and who should have made a statement about the consequences of this serious statement, is it possible for the Secretary of State to come to the House and make a statement, tell us where we stand in respect of the rate support grant in Wales and say whether any changes are 1050 to be made? The Secretary of State for Wales is a Cabinet sidekick of the Secretary of State for the Environment, and we have lost confidence in him.

§ Mr. Speaker
That comment will have been heard by the Front Bench. Patently, these are not matters for me. I cannot answer whether Wales will be affected. That is not a matter of order.

§ Mr. Harry Greenway (Ealing, North)
Further to that point of order, Mr. Speaker. I apologise for being late for the statement that was important for my constituents. I should like to explain to you, Mr. Speaker, and to the House—

§ Mr. Speaker
Order. The hon. Gentleman must not do that. I should have called him if he had been here.

§ Mr. Donald Coleman (Neath)
Further to that point of order, Mr. Speaker. The Secretary of State for Wales left the Chamber without staying to hear what the implications would be for Wales, and that is a discourtesy to the Chamber.

§ Mr. Speaker
That is not a matter of order, and it is not a matter for me.