Rate Support Grant (England)

HC Deb 05 May 1987 vol 115 cc619-46

6.3 pm

The Minister for Local Government (Dr. Rhodes Boyson)

I beg to move, That the Rate Support Grant Supplementary Report (England) 1987–88 (House of Commons Paper No. 330), a copy of which was laid before this House on 30th April, be approved. It was the writer of Ecclesiastes who said: of making many hooks there is no end; and much study is a weariness of the flesh. Misquoting him a little, I might say that of the making of many rate support grant reports, there is no end. Here we have to consider the fourth RSG report within six weeks. This must be a record. No doubt the people from the "Guinness Book of Records", who avidly observe these things, will be watching events closely.

This is the rate support grant supplementary report which my right hon. Friend the Secretary of State laid before the House on 30 April. The debate is taking place an unusually short time after the laying before the House of the report because we have been urged by local authorities and all their associations to bring it forward and to pay the extra grant which it gives as soon as we could.

The report is concerned principally with school-teachers' pay. My right hon. Friend the Secretary of State for Education and Science announced to the House on 2 March his proposals for teachers' pay under the Teachers' Pay and Conditions Act 1987. We promised that the national taxpayer would make a significant contribution towards the extra cost that would result in 1986–87 and 1987–88. This would he in the form of block grant over and above that already provided for in the relevant RSG settlements. Most teachers will get their increased pay at the end of May and, if the House approves this supplementary report tonight, education authorities will have before then the block grant that it makes available.

Mr. Jack Straw (Blackburn)

The Minister said a moment ago that the Government had decided that the taxpayer should make a significant contribution to the cost of the teachers' pay settlement. If that is so, can he explain why the Inner London education authority is to get nothing from central Government to help pay the £20 million cost of the award and why in the borough of Richmond the additional cost of nearly £1 million will mean a loss of grant of £81,000? How does that square with the statement which he has just made?

Dr. Boyson

I am grateful to the hon. Gentleman for raising that matter. I intended to deal with it later but it is always more interesting to do so in answer to a question because it gets me away from my brief, to the enjoyment of myself and other hon. Members.

The basis on which the allocation is made is the presumption that, in addition to the 3.75 per cent. in the original RSG settlement, local authorities would have to have a 4p poundage to meet the increased cost of teachers' pay. Local authorities which can pay for the increase with a 4p poundage will get nothing or practically nothing. If they need more than a 4p poundage, they will get an additional grant. The hon. Member for Blackburn (Mr. Straw), for whom I have great regard, has a sense of equity and justice and he will realise that the money is going to those who need it. I am sure that there will be approval, even from the hon. Member who used to represent Stockport.

Mr. Andrew F. Bennett (Denton and Reddish)

Denton and Reddish.

Dr. Boyson

Yes, Denton and Reddish. The change of name of his constituency is longer and no doubt slows him down. No doubt he will also 'welcome the fact that this is being done in equity.

Mr. Straw

Where is the equity in the London borough of Richmond facing an increase of nearly £1 million and losing £81,000 in grant?

Dr. Boyson

Like the Inner London education authority, the borough of Richmond has large resources. The payment is being made through the normal system of block grant; that is why ILEA and Richmond are being treated in that way.

The report we are now considering deals with 1987–88. We aim to deal with 1986–87 as soon as we can and we expect to be laying a supplementary report for that year in early June. The House will recall that the 1987–88 settlement provided for a general increase in local authority costs, including teachers' pay, of 3.75 per cent. above local authorities' own budgeted expenditure in 1986–87. On top of that, the Government agreed to increase provision by £460 million in England, the estimated extra cost of the teachers' pay rise.

This is reflected in an increase of £460 million to education grant-related expenditure assessments. I should explain that the supplementary report does not change the way in which education GREAs are calculated, as I mentioned earlier. It increases the schools' grant-related expenditure control totals by the £460 million that we promised. That extra grant-related expenditure is then allocated to individual education authorities by the methodology adopted in the main report. Thus, each education authority obtains its share of the extra GREA according to the same method of measuring educational needs as was used before.

At the same time, the Government promised to make a significant contribution to the extra costs. We said that we would ask the taxpayer to pay £183 million to increase block grants to English education authorities in 1987–88. For that purpose we assumed that all authorities in England would spend at the levels that are assumed in the main report, increased for education authorities by the estimated extra cost of the teachers' pay rise above the 3.75 per cent. already allowed for in the RSG settlement. We have made good that promise in this supplementary report by increasing aggregate Exchequer grant — the total of Exchequer grant made available by the Government in support of local authorities spending—by £183 million, bringing the total up to £13,025 million. Estimates of specific and supplementary grants are unchanged since the settlement, so RSG increases to £9,732 million. As domestic rate relief grant is also unchanged at £717 million, the amount of block grant available for distribution is increased in the report from £8,832 million to £9,015 million.

We have, of course, consulted local authority associations about our proposals for the supplementary report, and have taken account of the views that they expressed, as well as those that were expressed by individual authorities. All authorities were concerned to obtain the money quickly. That is why the supplementary report is being debated at such speed. At £13,025 million, aggregate Exchequer grant is 9.2 per cent., or £1.1 billion, more than last year's total. That illustrates again how good this year's RSG settlement is. I expected to hear sounds of approval at that point in my speech. We should have practised earlier. I note the cheerfulness of certain Opposition hon. Members, but the "Hear, hears" were slow in coming. Perhaps the House should have a break at some stage so that we all come back refreshed and reinvigorated, if not always with the same cast.

I wish to tell the House and ratepayers that an extra £1.1 billion is available this year. More than £250 million of that is not being claimed by authorities. For example, the London borough of Ealing has claimed only £51.6 million grant, whereas £72.7 million is available under the settlement, so it is losing £21.1 million in grant. Again, the London borough of Waltham Forest is claiming only £65.2 million whereas £75.5 million is available and thus is losing £10.3 million. Outside London, Cleveland is claiming only £90.4 million whereas £102 million is available.

Mr. Straw

Is the Minister implying that all that the boroughs need to do is to send a postcard to the Minister to have the money? Is he not being uncharacteristically disingenuous? Those boroughs cannot have the money because of the level at which their budgets have been set. If they reduced their budgets to the point at which they could have the money, they would have to sack many teachers.

Dr. Boyson

The hon. Gentleman has suggested that the boroughs send a postcard—we shall await the arrival of that postcard. It all depends what is said on the back of it. That is the magic method. The card does not need invisible ink, or even my quotation from Ecclesiastes. It should say merely, "We have seen the truth; we are now spending at settlement; we are reformed characters, and we shall be counting the money in the cellars and dungeons of the Department of the Environment."

The aggregate of grant not claimed by Cleveland is £11.6 million. Overall, whereas £12,775 million is being claimed now, local authorities could have had £13,025 million if they had filled up their postcards at the right time and in the right way.

Mr. Andrew F. Bennett

Only by sacking people.

Dr. Boyson

I do not think so. It is a pleasure to have the hon. Gentleman here. He and I have served many times on Committees considering education Bills and other Bills. The reports of the Audit Commission make many suggestions on how to save money without sacking anyone. If the boroughs sent a postcard asking for extra copies of the Audit Commission's suggestions, we would send them some.

Why are ratepayers in some areas losing the benefit of Government grant? The answer is that those authorities, and many others that are controlled by the Opposition or which are under no overall control—and others under the control of other Opposition parties, such as that of which the hon. Member for Truro (Mr. Taylor) is the only representative present—have put up their spending well above the rate of inflation. Ealing, for example, has done so by 14.6 per cent., Waltham Forest by 12.3 per cent. and Cleveland by 10 per cent. The settlement provided for a 5.25 per cent. increase in current expenditure, which is well above the likely level of inflation of 4.5 per cent. Local authorities as a whole have planned to spend 7.3 per cent. more than last year, and are consequently losing their grant. The cost to the ratepayers in Ealing is a local rate rise of 71.8 per cent. instead of 12 per cent. Ratepayers in Waltham Forest face a local rate increase of 67.2 per cent. instead of 11 per cent., and those in Cleveland one of 7.2 per cent. instead on 2.1 per cent.

The full £9,015 million block grant that is made available by the supplementary report is not being claimed because of the high spending policies of authorities controlled by the Labour party, the alliance or those without overall control. I urge such councils to think again, to make savings and to reap the rewards of the grant that is available.

Some authorities seem to do less well than others in grant terms out of the mechanism that we have adopted for injecting the Exchequer's contribution to the extra cost of schoolteachers' pay, about which the hon. Member for Blackburn asked me a question. This point is an important one. The principle underlying the rate support grant system is the equalisation of needs and resources. It aims, subject to certain constraints, to enable authorities to provide services at a standard level at equal poundage cost to their ratepayers. Our aim in increasing provision and block grant in the supplementary report is to enable all education authorities to finance the extra cost of teachers' pay at a broadly equal poundage cost to their ratepayers. That cost is about 4p.

Those education authorities with high pupil numbers in schools, and hence high education GREAs, or with low resources, can raise only a small proportion of the extra cost of teachers' pay by levying 4p. Such authorities get larger amounts of extra grant. Others, which have smaller numbers of pupils in schools, and hence smaller education GREAs, or higher rateable resources, can raise a much larger proportion of what they need to finance the extra cost of teachers' pay by levying 4p. They receive smaller amounts of extra grant. The result is equitable at the ratepayer level.

The report makes two other changes, both small by comparison with teachers' pay. It revises GREAs to take account of later information on capital allowances for personal social services and waste disposal that was not available in December, when the first report was made. It also takes account of boundary changes that took place on 1 April 1986 and 1 April 1987.

As I have said, the report is largely concerned with providing the extra money for the increase in teachers' pay, and I commend it to the House.

6.20 pm

Mr. Jack Straw (Blackburn)

The Minister began by quoting Ecclesiastes and said that this was the fourth rate support grant report that had been debated in as many weeks. Two weeks have elapsed during which we have not met across the Chamber or across the Committee Table. However, we meet with increasing frequency elsewhere because both of us are rising in the ratings put out by the television companies. We have had two weeks during which there has not been a debate across the Table and I was beginning to suffer withdrawal symptoms for want of such a report.

A revealing statement is contained in paragraph 18 on page 3 of the report: This Report is laid before the House of Commons by the Secretary of State for the Environment in accordance with Part VI of the Local Government, Planning and Land Act 1980, as amended by Part II of the Local Government Finance Act 1982, the Local Government Act 1985, the Education Act 1986, the Rate Support Grants Act 1986, the Local Government Finance Act 1987 and the Rate Support Grants Act 1987. That apparently innocent paragraph tells its own story about the chaos into which the Government have plunged the present system of rate support grant. I gather that the Minister does not have a copy of the report. If he wishes to borrow mine, I shall happily lend it to him.

Forty-three Bills have been brought forward in the two Parliaments of this Conservative Administration, and far from each Bill clarifying the law, each one has made the present system less workable and less fair. As the Minister has said, the principal purpose of this supplementary report is to finance the teachers' pay settlement. If it financed that settlement fairly between all authorities, we would have no hesitation in supporting it, just as we supported the previous Bill. However, the report works very unfairly for some authorities. I know the technical reasons why it works unfairly, but that does not alter the fact that four authorities are faced with the same percentage increase in the pay bill for teachers as that faced by every other education authority.

Those four authorities receive nothing like justice or equity in terms of the contribution from central Government. Hounslow faces an increased pay bill of £2,044,000 towards which it gets the paltry sum of £53,000 by way of additional grant. Newcastle has an additional pay bill of £2,383,000, towards which it gets the trivial sum of £189,000. The Inner London education authority faces an increased pay bill of £20.5 million. It receives not a penny piece extra towards what is, on any calculation, a major additional item.

We debated this matter in considerable detail in Committee on the Local Government Bill, which I gather will not now receive Royal Assent this side of the election. [Interruption.] The Secretary of State says he has information that we will have an October election. If he were as keen on the Bill as we were led to believe, he would have laid it before the House last week or a week or two before that, and he and I would not have withdrawal symptoms about the absence of a debate. [Interruption.] I am told that it is scheduled for the week after next. We look forward to that debate with great interest.

The Minister may say that I am being partisan in supporting ILEA, Hounslow and Newcastle because, as I recall, they are all Labour authorities. However, Richmond is controlled by the Liberal party.

Dr. Boyson

It is a Lib-Lab pact.

Mr. Straw

Richmond has never been on any of our target lists and we do not believe that the advent of the next Labour Government will depend on success in Richmond.

Mr. J. F. Pawsey (Rugby and Kenilworth)

The hon. Gentleman will have a long time to wait.

Mr. Straw

We would have a long time to wait if we depended on Richmond. I do not think that we won Richmond even in 1945. Richmond is in a worse position than any of the three Labour authorities that I mentioned. As I told the Minister, Richmond has an additional pay bill for teachers of £971,000. It will lose grant to the tune of £81,000. There is no equity whatever in that. I am grateful, as I am sure Richmond and the other three authorities are, to the Association of Metropolitan Authorities for preparing these calculations arid for drawing them to our attention.

When the Under-Secretary winds up, he will have to explain to ratepayers in Richmond why an increase in the pay bill that is apparently to he financed partly through the generosity of Government will lead to a decrease in rate support grant and therefore to an overall net cost of £81,000. I know that the system is supposed to be mad, but it should not be that mad and the Minister should have used one of his multipliers to adjust the position for Richmond and the other authorities.

We heard a good deal from the Minister when he went into the part of his speech prepared by Conservative Central Office rather than by his officials. We had the bit prepared by Church house at the beginning of his speech — the prayer. He finished up with the hit from Conservative Central Office about so-called profligate authorities. The Minister ought to be clear about which tune he is playing, because Conservative Members usually play two tunes at the same time about education spending, and they jar.

On the one hand, as the Prime Minister has done, Conservative Members complain that Labour authorities are large spenders. On the other hand, they go around the country praising their record on education spending. I should like to quote from the Prime Minister's unsuccessful letter to Mr. Neil Balfour, the Conservative candidate in Ryedale dated 3 April 1986: In education too this Government has a better record than any other. More money is being spent per pupil than ever before. Why is more money being spent? More money per pupil is being spent than ever before because Labour authorities, and authorities in which there is no overall control, have had to ignore Government instructions to cut spending and, in order to meet the needs in their areas, they have increased spending. The record shows that to be the case.

In successive public expenditure White Papers, the Government planned to cut spending per pupil in real terms from £706 in 1980–81 to £674 in 1985–86. These are in constant 1979–80 prices. However, expenditure has gone up from £687 to £741. The Government planned to cut expenditure by 3.8 per cent. in real terms, but expenditure has risen by 8 per cent. in real terms. What is the Minister saying? Is he saying that this increase in spending which the Prime Minister now praises should not have occurred? If he is not saying that, he has to accept that that spending had to be financed. It has had to be financed by way of rate increases, because the Government have refused adequately to increase rate support grant to pay for those authorities' spending plans. We heard from the Minister about the increase in spending by some authorities.

The Minister complained that in Ealing the increase in expenditure was 14.3 per cent., in Cleveland the increase was 10 per cent. and in another authority it was 7.3 per cent. He and his colleague, the Under-Secretary, know that they answered a parliamentary question only last weekend in which I asked Ministers to rank the increase in spending of authorities this year compared with last financial year. It is a very revealing table because, of the 17 local councils that have increased their spending by 50 per cent. or more in 1987–88 over 1986–87, 14 are Conservative-controlled and not one is Labour-controlled.

So which authorities are profligate and which provide value for money? When will we hear the Minister complain that Conservative-held Brentwood has increased its spending by 655 per cent.—certainly a world record—in a single year? When will one word of criticism about that pass the Minister's lips?

The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope)

Will the hon. Gentleman make it clear whether by spending he is referring to total expenditure or to current expenditure? Most hon. Members would assume that he is referring to current expenditure, which is the normally accepted increase in spending. Will he confirm that he is referring to total expenditure, which is often notional expenditure for grant purposes and which is subject to wide variations depending on the use of special accounts?

Mr. Straw

The Under-Secretary sensibly knows the answer, or he wisely would not have asked the question. The table that I think he, rather than his colleague, the Minister, provided for me was ranked for certain increases in total expenditure for 1986–7 to 1987–88. He provided those figures. If he felt that they gave a wholly inaccurate account of the authorities, he could have provided another set of tables. The Minister ought to look at alternative figures and, if he prepares further tables, I will be happy to receive them.

Of the 17 authorities that increased their spending by over 50 per cent., if 14 of those had been Labour authorities and if one of those had increased its expenditure by 655 per cent., we would never have heard the last of it. I daresay that we also would not have heard the last of it from The Sun. It would have been blazoned across the top of the newspaper.

As they are all Conservative-controlled authorities, everybody is quiet about it. Rutland increased its spending by 173 per cent., Melton increased its spending by 153 per cent., and so it goes on—in places such as Windsor and Maidenhead, which increased its spending by 77 per cent. and St. Albans, which is now alliance-controlled since the Chancellor of the Exchequer's private secretary got to work in the area. Bath increased its spending by 64 per cent.; Oadby and Wigston increased its expenditure by 60 per cent.; Chelmsford—alliance-controlled—increased its spending by 58 per cent.; Charnwood increased its spending by 61 per cent.; Wansdyke increased its spending by 51 per cent.; and Castle Point down in Essex, another good Conservative area, increased its spending by 50 per cent.

As the Minister and the Under-Secretary will recognise, these figures provide some relevant indication of increases in spending. The much maligned Waltham Forest, for example, on total expenditure, not on relevant expenditure, which the Minister was quoting, is proposing to increase its spending by 19.2 per cent., compared with 19.9 per cent. by adjoining Conservative Epping. One could go on and on. If one went on far enough, one would find that the efficient Labour-controlled borough of Blackburn has an increase in total expenditure of only 2.2 per cent. The borough of Copeland is planning a reduction in total expenditure of 1.8 per cent.

Over the last eight years, the Government have plunged the system of rate support grant into chaos. They have also cut the grant that goes from the taxpayer to the ratepayer by £18,000 million, which is £1,300 for every family in the land. It is because of the cuts in rate support grant by this Conservative Administration that rates have risen twice as fast as inflation. The spending record of local authorities, Labour, Liberal and Conservative, is better than that of central Government. Local authorities as a whole have increased their spending by less than that of central Government, but rates have gone up because of the Government's cuts in the support which they have given to the ratepayer.

To twist the knife further, should Ministers be reelected, they are planning to compound the chaos and inequity of the last eight years by introducing a poll tax. I am glad that at least the Prime Minister, in answering questions today, referred to this by its proper name, the poll tax, and not by the euphemism "community charge" dreamed up in the Department of the Environment.

The poll tax will lead to swingeing increases in what families pay. It will lead to major increases in local tax bills for average families in all the metropolitan areas—in urban Lancashire, in Cumbria, in Durham and in inner London. The Prime Minister today suggested that the poll tax would be the greatest in areas which had Labour-controlled councils. That is simply untrue. As the Government's figures suggest, there is no area where there will be a greater increase in bills paid by average families than in the London borough of Wandsworth. The average rate bill at present is £185 per adult and that will increase by no less than 115 per cent. to £397 per adult.

Mr. Chope

ILEA, not Wandsworth.

Mr. Straw

The Under-Secretary says from a sedentary position that that is ILEA. ILEA exists at the moment. The ILEA rate is levied across London at the moment, as he knows very well. ILEA has not been invented simply to increase the burden on ratepayers in Wandsworth. It is a constant; it is there now and it will be there after the general election. The reason why the local tax bill will double in Wandsworth is because of the crazy position of the poll tax that Ministers have proposed and with which the Under-Secretary is saddled.

I know that he had nothing to do with the original decision to introduce it and I daresay that he would like the whole system torn up. He would be mad if he does not think that. If he wants to rise and tell me that he thinks it is a wonderful system in Wandsworth, where it will be doubled, I will give way.

Mr. Chope

Will the hon. Gentleman tell us what the effect in Blackburn would be of his party's proposals for capital value taxation and some magic regional formula?

Mr. Straw

I will not, except to say that any change in capital valuations would take place over a long period and would have only a marginal impact upon ratepayers. As the Under-Secretary would know if he studied the matter, a move to capital values need not necessarily lead to any change in relative rate bills provided that proper adjustments are made in the transfer to capital values.

The idea that a move to capital values will lead to the sort of swingeing disruption in the bills that people pay at present is quite untrue, as the hon. Gentleman's own internal exemplifications ought to show. They take place over a long period. The idea of capital values is simply that present domestic rate bills are based upon rental values which are now of only notional worth.

In the days that the Minister remembers, in Lancashire at least, the objective was to live in one house and own two others, as he told us in Committee. In those days, 90 per cent. of people lived in houses that they did not own and there was an active market in private rented housing that was not controlled. Therefore, the rental values set by rating officers had a direct relationship to the natural rental values that people had to pay and, through those, there was a direct relationship with the capital value, just as with business rates. Business rates are based upon rental values, but they could easily be based upon capital values, because the two are directly connected.

We know that, for all sorts of reasons, a free rental market for private housing does not and cannot exist because it is the aspiration of most people in the country and of all parties that people should live in homes that they own. Therefore, it is sensible to move to the value of the houses as properly reflected in capital values. As I said—the Minister will know this, since he has studied the matter — a change to capital values, while a sensible technical change, would not lead to any disruption or significant changes in the amount that individual families were paying.

I noticed that the Minister did not say that the poll tax was a wonderful idea. He will know from Mr. Chris Mockler, an adviser to the previous Secretary of State, that the poll tax was dreamed up by Ministers in a panic just before a Conservative party conference to get themselves out of a hole. As Mr. Mockler has told an interested British public, that was one of the rare occasions when a Conservative party conference actually influenced Conservative Government policy. It shows how sensible Ministers have been in the past to ensure that Conservative party conferences do not influence Conservative policy, because it leads the party into cul de sacs and unpopular policies such as this.

Even in the areas where the poll tax will not lead to an increase in average local tax bills, it will hit a great number of families very hard. It will certainly hit the poor. The poor widow who at the moment gets a 100 per cent. rebate on her rates will he paying a poll tax, albeit at 20 or 25 per cent. of the total. Ministers will rue the day that they were ever committed to the poll tax.

The report is principally about the teachers' pay settlement. It is also about other matters. We oppose it because, once again, it highlights the unfairness of the present system of block grant. Although we want the Government to be paying their fair contribution to the teachers' pay settlement, we do not think that it is fair that in many areas the Government are not paying a reasonable contribution and in some areas are paying nothing.

6.42 pm

Mr. Michael Knowles (Nottingham, East)

As on previous occasions, when Opposition Front Bench spokesmen speak on rate support grant and the present system with its complications, one would think that there had been a wonderful golden day in rate support grant when everyone understood the system and it was straightforward and uncomplicated. I have to admit that I cannot recall such a day. When I was the leader of a council we had regression analysis and that left everybody totally dumbfounded. Everybody felt that that was so unfair and it was from that that all the changes have stemmed. There never was a golden day. I believe that it is beyond the wit of man to devise a system in which one can give central Government aid to 450 local authorities with so many multipliers and factors built in that take account of all the individual circumstances that would please all the people all of the time. It is not possible. Therefore, whatever system is devised, it will be subject to objections.

If we are to have local government, a substantial part of the spending by local authorities has to be raised by whatever form of local taxation is available. If one is to fund more and more from central Government, one has to ask the basic question; why have local government at all? If it is not responsible for raising the money but only for spending it, we would be better with a prefectorial system such as that in France. If one does not require local government to raise the greater part of its money and be responsible to the people for the spending of that money, one would inevitably end up with the situation in which central Government would dictate more and more of the policies. That would follow as night follows day.

Under the Conservative control of Nottingham city council back in 1976–79 — those were the days of Labour's high inflation when it was rocketing away to 25 per cent. — the rates in Nottingham were held steady. Since the Labour party took control in Nottingham, we have not stopped watching the rates spiral and increase. Indeed, from 1979 to the present they have risen virtually fourfold. I am talking about the city and council rate combined. There is a cause and effect between one's policies and what one spends money on and the effect upon the ratepayer.

The subject of community charges has been mentioned. In Nottinghamshire that will mean that the business community rate will be cut by 17 per cent. That will be good for jobs in Nottinghamshire. Homes in which there are two adults will be better off and some homes in which there are three adults will be better off and some will he worse off. It is only when one gets to four people in a house that people start to be demonstrably worse off. I still think that the change is defensible in terms of sheer justice. We have reached the point where rates are totally indefensible as a system. Opinions may differ as to what should be substituted but I have not noticed anyone willing to stand in the last ditch and defend the present rating system. [Interruption.]

The Labour party wants to switch to capital values. No one is willing to defend the rates, for a very good reason: they are totally indefensible on any basis whatsoever.

The point has been made about the unfairness of judgments during the course of the year. Supplementary grants sometimes work unfairly and to the disbenefit of one council. In Nottinghamshire last year the county council did not use any of the extra money for the relief of the ratepayers. It was stashed away in the bank to be used to lower rates in this election year. I do not complain about that; all is fair in politics and war. However, one cannot take a moral position and say that that is all terribly unfair when the boot is on the other foot.

In Nottingham city this year the rate was decreased by a vote at the final council rate budget meeting. It was decreased because the Conservatives, and one Labour councillor who had the courage to vote with them, voted to stop the insanity of some of the policies into which the money was being poured. They really were loony left policies, as they have been called, in the worst sense. In the Nottingham city council elections the Conservatives have pledged to get rid of the worst of those policies. They have to go. Even some members of the Labour party in Nottingham believe that.

The problems of the Labour party in Nottingham, indeed in my own constituency, have been the subject of some newspaper articles recently and I am not surprised. That is the latest stage of what seems to be a lemming-like rush to destruction by the Labour party in various parts of the country where it has become disassociated, not only from the electorate but from large parts of its own party. One stands in bemused amazement at the antics that take place occasionally. I suspect that in Nottinghamshire on Thursday we shall start to see the chickens come home to roost in a big way.

Spending per se—one has to get this message across—is not necessarily good. Compassion is not necessarily measured in spending terms. One has to ask, is the spending really necessary and if it is, are we getting value for money? The complaint about Labour councils and some of the things they have done, even where they are defensible as being nice ideas if not really necessary, is that they have spiralled out of control. That happens all too often.

I had 10 years as leader of the local council, as did my hon. Friend the Member for Southampton, Itchen (Mr. Chope). We were in neighbouring boroughs and learnt certain basic lessons about political and management control from that experience. One of those lessons was to sometimes be doubtful about the advice one receives from officers, because they will always be interested in building their own empires. The complaint of officers to local government members, all too often, is that members are not interested in the locality; they are interested in their political dogma. The politician's reply must be that that is just as true of the officers. The peer group they look to is not the good of the borough they are serving but their own professional interest groups. Those professional interest groups measure an officer's effectiveness by how much money he gets to spend. They are all in competition to outbid each other. If local politicians are not bright enough to stop them, they will build empires endlessly. They have done it in boroughs up and down the country.

I mentioned that at the rates meeting one Labour councillor had the courage to vote against some of the more lunatic policies. Another Labour councillor the other day discovered a racial questionnaire in the housing department in Nottingham and the chief executive is holding an inquiry into that. Unfortunately, this is the pattern more and more with Labour-controlled councils up and down the country.

A point was made in the Nottingham Evening Post the other day that lack of success for the alliance in Nottinghamshire was easily explained; both the Conservative and the Labour parties were moderate and there was nowhere for the Alliance to make a stand, but that is becoming less true with the turn the Labour party has made. I suspect that that is absolutely right. We shall see on Thursday what the result is and I suspect that we shall see it in another election shortly.

Any fool can spend money; the trick is getting value for money and questioning everything behind the spending. That is much more difficult. The charge against Labour councils concerns not just their policies but their management control. They suspect that good management is some kind of Tory conspiracy, so they throw out all controls and the spending runs out of control.

It was said 11 years ago by a Labour Secretay of State that the party was over. That is all too true, but many in authority in Labour councils do not accept that. Sooner or later either they will have to accept it or they will be swept from power. It will be one or the other; it is their judgment. I think I know what will happen on Thursday, certainly in my locality.

6.53 pm

Mr. Matthew Taylor (Truro)

I was interested to note in the introduction to the supplementary report that, before making this report and determining the amount available for grants, the Secretary of State consulted with associations of local authorities that "appeared to him" to be concerned and any local authority with which consultation "appeared to him" to be desirable. For the alliance this spells out exactly the problem—that, in the last analysis, everything is left to the Secretary of State. Each twist and turn in the Government's long and tortuous attempt to sort out the rate support grant simply emphasises the inadequacy of central control over local decision-making.

The Government have long since dropped the principle of local people deciding what to spend. Now the Secretary of State is grabbing all power over teachers' pay, but leaving local authorities with most of the burden and with the consequences of a demoralised teaching profession; a teaching profession with a new resentment for government; local authorities having to cut back to foot the Government's bill.

The alliance welcomes the pay award for teachers as a good step in the right direction, but we would still like to see more money provided for school resources, books, classrooms and so on, many of which are in poor condition. We would also like teachers to have full negotiating rights for teachers' pay awards. If these priorities are accepted, along with the many other priorities of local government, we must tackle local needs by moving back to a system that allows people to decide their own priorities locally.

The greatest problem with this proposal is that the centrally agreed pay settlement for teachers is not backed up by central finance to local authorities. Whilst the supplement previously given by the Government amounted to only 46 per cent. of expected expenditure, after this report the supplement will be equivalent to only 41 per cent. That is because the Government do not cover the pay settlement in real terms, so 5 per cent. will have to come out of local budgets from elsewhere. That will mean a reduction in services to the already over-burdened ratepayers, equivalent to the cost to county councils of, on average, £500,000 each. For example, the Government are now providing in Cheshire only 40 per cent. of the extra cost, instead of the 46.3 per cent. which was the original rate support grant for 1987–88, so the council has to cover the cost of that average figure of £500,000. There are far worse examples than that, because the burden is not being spread evenly.

No matter what the Minister says, it would be hard for anybody who looks at this to say that there has been an equitable distribution. How can it be equitable to burden the Inner London education authority with an extra £20 million or more of expenditure, yet provide nothing at all to meet that? How can it be equitable to cut support for the Richmond authority, which is faced with increased wage costs? This has occurred at a time when councils have set their budgets and cannot easily revise their budgets or increase the rates, so they are likely to be further penalised for increased over-spending.

The conclusion we draw from that is that local people must have the right to make their own decisions. Most local authorities have people who suffer from the plight of homelessness and the authorities would, if given the option, increase spending on this but the grant-related expenditure has gone down from £262 million in 1986–87 to £187 million in 1987–88. That will further restrict councils in providing the adequate housing their ratepayers are demanding, yet the Government lay the blame not at their own doorstep but at the doorstep of those local authorities.

It is even more ludicrous that while we are now settling the accounts for 1987–88, the Government have not yet settled 1986–87. If we have a general election soon—it seems, by the absence of Members from the Benches that something is in the offing—clearly it will be the summer before councils receive the supplement for the teachers' pay settlement for 1986–87. The Minister has talked in general terms about bringing forward proposals in June. Why are they not here already? The answer is that, once again, this ludicrous and over-complicated system means that councils cannot clear up their finances for a period that has already passed. How are those authorities meant to run efficiently when £50 million is missing indefinitely?

At the start of the debate a generalised attack was made on some local authorities. All that that attack did was to take the figures without any insight, knowledge or attention to the difficulties that local authorities face on the ground. That highlights the problem of the way we have divorced local expenditure in local government from local control. We must look at local government block grants and the way the rating system works. Above all, the Government should stand condemned as a cause of confusion and obstruction to local government and local democracy.

For example, a paper drawn up by Cornwall county council last month said: The grant system must now be seen as beyond the comprehension of many people dealing with it and the past year has seen a string of errors and confusions. The system has become so complicated that the very basis of local government, whereby local people bring local knowledge to decision-making at a local level, is undermined because they can no longer even understand the system within which they are trying to work, or the budget system which they are asked to operate. That undermines the principle of local control by elected councillors, representative of local people in Government. It allows the Government to confuse the issues by blaming the cuts and the rate increases, not on themselves but on the local authorities that are merely subject to the Government's whims.

A mainframe computer is needed to begin to understand how relevant are issues such as roads, population and unemployment to the determination of support, particularly in an area such as Cornwall. We heard earlier of "notional expenditure for grant purposes" having no real relevance to the grant itself. What a ludicrous system which leads us to come up with such phrases. I am sure that the Prime Minister would not attempt to run a grocer's shop in that way.

The principle of rate support grant reports means that the Secretary. of State may ignore information about expenditure and make different assumptions for different authorities, or even do so just on descriptions and hearsay. If there is any epitaph for the Government, it is centralisation of power and the removal of all but the last vestiges of local government control. That is the case either because local power has been removed in its entirety or because it is simply impossible any longer to exercise. That is compounded by the frequent changes, which cause constant problems for those councils.

Cornwall county council fixed the rate for 1987–88 on the basis of the Government's firm intentions for the rate support grant settlement for 1987–88. The rate support grant order was finally published and approved in late March, more than two months later than the usual timetable. At one stage during that process Cornwall was informed by the regional office of the Department of the Environment in Bristol that it would lose £1 million of the grant in 1986–87 only to have that statement withdrawn within the hour and the loss to become a gain of £94,000.

The system is so haphazard that no commercial concern would be run in such a manner. If it were, it would probably be liquidated. Certainly the audit would be refused. Therefore, we need to introduce comprehensive and fundamental reforms. We hear nothing of that from the Labour Benches. The Labour party sticks with the rates system, fiddles with the figures a little, tries to alter things once again and only increases our confusion and doubts about the system.

All we get from the Government is a proposal for a poll tax. Last time that was suggested it caused a peasants' revolt and it will cause a revolt again among ratepayers. It is inequitable and unfair and will be rejected. That is why the alliance alone is coming up with radical alternative proposals for basing local expenditure on people's ability to pay. We shall introduce a local income tax that directly relates people's ability to pay to the amount that they are asked to pay. Moreover, we shall move beyond that to create genuine local democracy and the genuine local control of authorities by changing the absurd electoral system to genuine community representation through local proportional representation.

If the Government or the Labour party were serious about controlling the abuses of local authorities or controlling the militants within their own parties, they would accept that the best way in which to make local government representative of the people would he to introduce proportional representation.

Mr. Straw

At what average rate would such a local income tax be set? Does the hon. Gentleman accept that the income which domestic rates produce nationally means that the average local income tax would have to be set at about 8p in the pound?

Mr. Taylor

We would set a local income tax locally on the basis of what needs to be spent. Surely the hon. Gentleman would accept that it is far better for people to pay according to their means than according to some rough and ready estimate through rates or a poll tax. I believe that such a system has the support of the British people.

We are proposing to return local democracy to the hands of the local people. The best way to tackle local problems is to let local people tackle them and to give them the resources to do so. Of course funds will be needed to help those areas that are so starved of income that they are unable to meet their needs. That is why we would have an equalisation fund. But that would be to help local democracy, not hinder it; to make it clear how local democracy can operate, not obscure it.

Our proposals are about giving local control back to local people. I draw Conservative Members' attention to the thoughts of Disraeli who said that centralisation is the death blow of democracy. That is our belief and that is why we would return control to people in their own community.

7.6 pm

Mr. Allen McKay (Barnsley, West and Penistone)

It is easy to say what one would do without saying how one would do it. The local tax, described by the hon. Member for Truro (Mr. Taylor), has been considered. The hon. Gentleman talked about people who could pay more paying more, and those who could not paying less, but it is usually those in the areas of greatest need who are not capable of paying. Therefore, Government funding is needed to overcome the imbalance in the needs of various local authorities.

We have talked about the north-south divide. Portsmouth, an area at which I look frequently because my son lives there, has high wages and a large number of people who are earning. Their ability to pay far exceeds their needs. In my area, with low wages and high unemployment, the needs are greater, yet there is no way in which, on the Liberals' policy, we could raise that money. It would be impossible.

Mr. Matthew Taylor

We accept the need for an equalisation fund based precisely on the criteria outlined by the hon. Gentleman. Not everywhere has the same income levels to generate the support that would be needed. What we must get away from is the ludicrous and complicated system that the Government are offering us.

Mr. McKay

If we talk about an equalisation fund, we must ask where the money for it will come from. People will not look favourably at a system which takes a little extra from them in order to pay for what somebody else needs without their having some say in it. I understand the ideas, but putting them into effect needs a lot more thought.

Rates are a local tax. If they are looked at as an income tax rather than as a tax people would probably understand them more. The problem is to find the right formula. You will know, Mr. Deputy Speaker, that many people have spent many years looking for the right formula. Finding a suitable rating system is like finding the Holy Grail—we have looked for it but we have not found it. Unfortunately, the Government's approach will make things very much worse. Under the Government's proposed poll tax, my constituents would pay 65 per cent. more in rates than at present, which would place many households in great difficulty.

There is something wrong with the system and with the formula and I would be failing in my duty to my constituents if I did not speak today. The present formula does not overcome the problems in my area, where it is four or five years out of date. It makes Barnsley look like a shire county, which it most certainly is not. There has to be something wrong with a system that works like that. It works against the area. We are having difficulty in trying to promote a new image now that heavy industries such as coal and steel have disappeared because of the Government's policies. While the wealth-making capacity of heavy industry has gone, the legacy remains, but we have nothing to make up for that lost spending power and to overcome our difficulties. That is why we need to examine the system again. However, a poll tax would not solve the problem.

I ask the Minister a straight question: if he brings in a poll tax, how will the water rate be calculated? At present, it is calculated on the valuation of a property. If we do not calculate the rates on the valuation of a property, how are we to calculate the water rates? How will the water authorities get their money—or have the Government decided to introduce compulsory water metering——

Mr. Andrew F. Bennett

And sewage meters.

Mr. McKay

As my hon. Friend says, and sewage meters.

There is also a line in the report that refers to payments for the environment. How are those payments to be calculated? People could not afford the standing charge for water meters. If water were metered, the largest families, who are usually the poorest, would be penalised, unless, that is, there was a water rebate. But the Government do not like rebates, so that is not likely to happen.

It seems ironic that we should be debating a Bill which, the Minister says, will give teachers more pay when we have not yet debated the teachers' pay and conditions order. If we passed a Bill that gave teachers more pay and yet turned down the teachers' pay and conditions order, local authorities would get a windfall. But there is no fear of that happening, because of the Government's majority.

Barnsley education authority has produced a very good report which says that, as has been widely reported in the newspapers, Barnsley has the highest proportion of children who do not stay at school after the age of 16. That creates a problem in trying to introduce new industries. The report also says that the area has the worst results. That is not because of the teachers, or the way in which the schools are run or the curriculum; it is because of our area and our environment and because people used to be encouraged to leave school as early as they could—at 14 — so that they could contribute financially to the household. That attitude seems to have nearly disappeared, but we must overcome the problem.

Barnsley education authority has the best record for people entering adult education. People leave school at 16 but then take up adult education. It appears that people want to get away from the school atmosphere but come back to education later. That is why we need to look closely at tertiary education. I have changed my attitude on that. I believed that sixth forms should be attached to schools. That is evidently no longer feasible, so we need money to finance alternatives. The only way to get that money is through the rates, yet if we try to increase the rates, we are rate-capped. It is a never-ending process. Local councillors are battling against the problem and I admire them for the hours that they put in and the work that they do. However, they need help to get on with the job.

As the Minister knows, because I have talked to him about it, the South Yorkshire fire service has spent all its contingency fund and is now broke. We asked whether the Government would consider that in next year's allocation. Perhaps a Labour Minister will take up the matter where the Government have left off. I therefore ask the Minister to put it on record that the South Yorkshire service will need more money next year so that the matter is passed on quickly and is not lost in the machinery.

7.16 pm

Mr. Roland Boyes (Houghton and Washington)

I was glad that my hon. Friend the Member for Barnsley, West and Penistone (Mr. McKay) ended his remarks in the spirit of optimism shared by all Labour Members — [Interruption.] Conservative Members may regret their laughter in the next few weeks. We are not fooled by the opinion polls, and I am surprised that intelligent young men such as the hon. Member for Mid-Norfolk (Mr. Ryder) are fooled.

I share my hon. Friend's concern about the taxation of water and the methods that will be used to calculate it. The Secretary of State gave what appears to have been an off-the-record briefing, in which he said that, in the event of a Conservative victory in the general election, water metering and privatisation would go ahead. The Government have spent nearly £1.5 million during the past year trying to sort out the morass of legal and financial problems involved in privatising the water industry. I suspect that if the Conservatives came back to power, privatisation would be on the agenda again but that it would be resisted as strongly as it has been resisted in the past. I am confident that those in Britain who rose against the proposals last time would do so again.

As the Minister and my hon. Friend the Member for Blackburn (Mr. Straw) said, the first supplementary report for 1987–88 distributes the additional rates support grant of £183 million in respect of teachers' pay restructuring. My hon. Friend mentioned the effect on Newcastle. It is worth underlining the fact that for Newcastle, in the north-east—the area in which I live, and an area of massive deprivation as a result of unemployment and other factors imposed on it by the Government—the estimated cost of the pay award will be £2.383 million, while the additional grant will he only £189,000. I hope that the Minister will realise the inequity of that. I hope that he will consider, too, the other authorities listed by my hon. Friend the Member for Blackburn. The Minister should examine the situation and ensure that the authorities that have been caught in that trap are adequately compensated.

It is unfair that a local authority such as Newcastle has to deal with something that has been deliberately stirred up by the Government—an unwarranted attack on the teaching profession, an honourable group of professionals dedicated to educating our young people, often in the most difficult of circumstances, with poor facilities and a lack of materials. They are educating students who are facing hopelessness in areas of deprivation and high unemployment.

The Government deliberately chose confrontation rather than conciliation with the teaching unions. They chose to remove negotiating rights on salaries and conditions. They used their hefty majority to drive the legislation through Parliament. If the news items today to which I have been listening are correct, later this evening the Secretary of State for Education and Science will announce a change. If he does and if he restores the democratic rights of teachers and their unions, I shall welcome it 100 per cent. But some important questions must be asked.

If the right hon. Gentleman is to restore those rights so quickly after taking them away, why did he take them away in the first place? Is not this change a simple bit of cynical electioneering to attract the votes of school teachers? It is clear that a general election is sharpening the minds of a number of Secretaries of State. Last week, the Secretary of State for the Environment stopped the exploratory drilling in the constituencies of four Conservative Members. Many of my hon. Friends and I suspect that that had something to do with an event that could take place within the next month or so.

Dr. Boyson

Impossible.

Mr. Boyes

The Minister says that that is impossible, but he is wrong. If I were advising the Government, I should say that they should wait a little longer. But it is not for me to advise the Government. If they want to stick their neck out and get it chopped off in the next few weeks, so be it.

I believe that the teachers will see through this cynical electionering and will neither forget nor forgive easily. They will well understand that the Government who are prepared on one occasion to take away their rights will just as easily take them away again if they are returned with a large majority. Teachers should take the Government's action as a warning that the powers that the Secretary of State can take in a Government with a huge majority are enormous. The right hon. Gentleman has demonstrated that he is prepared to use those powers in a negative way, affecting the education of our youngsters. Teachers realise that. The Secretary of State has betrayed the trust of the teachers. The Government do not deserve any votes from teachers the length and breadth of this country.

Despite the present imposed pay award, the teachers are still badly underpaid in view of the importance of the tasks that they carry out. Many other workers in the public sector will note carefully the way in which the Secretary of State took away the teacher unions' negotiating rights, the way in which, for cynical electioneering, he will make his statement later, and, above all, the fact that, if he can do it to the teachers, he or other Secretaries of State, or whoever heads the Departments, can do it to other public sector workers. Negotiating rights between employers and trade unions are the essential rights of a democratic system. All public sector workers are being warned: if the Government are returned with a working majority, wages and conditions could easily be settled by legislation in Parliament and not by negotiations outside Parliament.

We are concerned with not only the Government's attitudes towards teachers but the entire role of local authorities. The one thing that we can say about the Government's attitude to local government is that it has increased uncertainty. More than 40 pieces of legislation directly affecting local government have been introduced by the Government since they took office in 1979. That has greatly affected the officers and members of councils and the people whom they represent. Some of the legislation, in the morass that the Secretary of State has introduced, was aimed retrospectively to correct legislation that had been demonstrated to be at fault in the courts in actions taken by local authorities to test its legality. The present Secretary of State must have had more legislation taken to court, and findings against him, than any other Secretary of State in modern times.

On 25 March 1987, in the debate on the rate support grant reports for England, my hon. Friend the Member for Copeland (Dr. Cunningham) said: Since July the right hon. Gentleman has made five announcements affecting grants to councils, and during that time there have been four Acts affecting local government finance. And Ministers have the gall to criticise councils for inefficiency! The Government have demonstrated an unprecedented level of bungling incompetence, and they cannot escape responsibility for the mess." — [Official Report, 25 March 1987; Vol. 113, c. 448.] However, by using Parliament to introduce retrospective legislation, the right hon. Gentleman has made planning in local authorities almost impossible. Of course local authorities prefer to plan, as do businesses, for periods of five, 10 or even 20 years. If the Government stay in power, local authorities will be reduced to the absurdity of planning week by week. Then the use of the word "planning" will become meaningless. It is more a case of muddling through as best they can, as one chief executive said recently.

It is downright criminal that local authorities are in this position. Their services are essential to the vast majority of people. Local authority services have acted as an essential shield against the deprivation and poverty of high unemployment in areas such as the one that I represent in north-east England. No wonder the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) said on 18 December 1984 to the then Secretary of State for the Environment: Does he further understand, or has anyone advised him, about the housing decay and the infrastructure that decays by the day in our cities? … Does he not understand that, if we go on as we are now, with these voodoo economics where we stick pins in all those people who carried out the policies that most of us believed in, we shall have no freedoms left, we shall have no homes left, and we shall have no sound and sane cities left?" — [Official Report, 18 December 1984; Vol. 70, c. 170.] Responsible elected councillors have attempted to provide essential services efficiently and effectively. They are trying to cut through the mass of confusion heaped upon them over the past eight years. The attack on local authorities in an attack on our democratic processes. We have witnessed the extremes to which the Government will go with their decision to abolish a whole tier of local government without consulting the people represented by it—the GLC and the metropolitan councils. Yes, there was an opportunity to test public opinion by holding elections, but the Government abandoned elections. The abolition Bill was the first Bill on which I served, and there was no better experience for a new Member to learn about the Government's attitudes to local authorities. The 200 hours of hard debate in Committee exposed the Government's detestation of, and determination to neuter, the local government system.

Since the abolition of the GLC and the six metropolitan counties, the Government's vitriolic attacks have continued. However, as the Government's economic policies have bitten more deeply into the living standards of the people whom the Labour party represents, the greater has been the need for good local government. The harder the attacks, the more we need sound local government. The more difficult the situation, the greater the need for bodies able to make decisions at a strategic level.

It is a disgrace that London is the only capital in western Europe without its own strategic, directly elected authority. My European experience demonstrates that the United Kingdom is travelling in exactly the opposite direction to that of other European Governments in terms of the size of local authorities. That is why I so strongly support my party's proposal to introduce a regional tier of government. This innovative and exciting proposal will be welcomed by the people, who are aware that central Government are continually increasing power at the centre and yet have demonstrated time and again that they are incapable of managing the power that they are grasping into their hands.

One of the ways that the Government will attempt to reduce local government to a petty irrelevance is by abolishing the present system of rates and introducing a poll tax. The present system of local authority financing needs reform, but a poll tax is far from what is needed. The Sunday Times is not one of the favourite newspapers on the Opposition Benches because of the very strong support that newspaper has overtly given to the Government recently. However, on 12 April, 1987 The Sunday Times said in an editorial: Nothing became modern Toryism less than the idiocies of local grant penalties, targets and rate-capping, interspersed with half-baked ideas of referendums, rates abolition and community charges. Was it not the Tory Reform Group that said, in a report that it produced in September 1986: A poll tax is fair only in the sense that the Black Death was fair. It is indiscriminate, striking young and old, rich and poor, employed and unemployed alike."? A poll tax will benefit the wealthy on their large properties and will penalise the poor. Figures that have been produced by my hon. Friend the Member for Blackburn—and we are grateful for the work that he did on the poll tax analyses—demonstrate this fact most vigorously. It is another element in the Tory philosophy of the rich getting richer and the poor getting poorer.

The north-south gap, which has been analysed so much in the last few months as more people have become conscious of the difference, will become even wider. A caring Government will introduce measures to reduce the gap and the inequalities, and to help those in areas of high unemployment, bad housing and environmental decay, instead of doing just the opposite.

How anyone can make sense out of a proposal that leads to a couple, living in a small rundown property in a squalid area, paying the same as someone living in a large grand property in a nice area in the same town is beyond comprehension. How can anyone justify highly paid Cabinet Ministers paying less on their property in the south than low-paid workers in say, Rochdale? How can the Secretary of State for the Environment introduce a half-baked new system — as The Sunday Times said—that will reduce his rate bill by about £30 a week when others will be paying more?

It is another example of the Tory rule that it is important to line the pockets of the rich at the expense of others in our society. The Oppositon want to see a more equitable society, not a divided society in which some people live in decay in the cities while others live in style and pay less.

The gap between the regions must be reduced. Proposals for a poll tax will not help in any way. Our proposal, which is eminently more attractive and constructive, is to retain the existing rating system based on property but to base the payment on the capital value of homes. This will lead to those living in large executive houses in the exclusive south-east paying more. It would take a few pounds out of the pockets of the Thatcher family, when it settles in Dulwich, rather than putting a few pounds into the pockets of the Thatcher family—a pocket that is well filled already and from which it is well able to pay more.

We believe that local government should be protected from the Tory onslaught. We should provide housing, education, social, recreation and other services at local level. Local people know best and they should be elected to run local authorities and provide services for the people who need them, as they need them. We shall bring forward new policy initiatives, be innovative, tackle deprivation and provide resources to local authorities to carry out these tasks.

We believe in a fundamental democratic process whereby the people have the right to choose which political party has control over their affairs, and the equal right to remove from office any councils that do not provide services at an adequate level and cost. We in the Labour party are the true protectors of local services. We are the true democrats. That is why on Thursday—and in the general election—those who desire to maintain an open democratic society, free from centuries' constraints, will know where to put the crosses on the ballot paper, and that will be at the side of Labour councillors and Members of Parliament.

7.35 pm

The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope)

I am sure that we will not agree with the wishful thinking of the hon. Member for Houghton and Washington (Mr. Boyes), but we all sympathise with him on the debilitating illness from which he is suffering following his recent return from Nicaragua.

We have had an interesting debate. The more interesting parts of the debate have been where we have ranged further away from the rate support grant supplementary reports and into discussion of proposals being by the different political parties for reforming the rating and grants systems.

Nobody in Southampton would describe the average resident in ltchen as being well-heeled and rich. The average resident in Southampton lives in a house that may cost between £25,000 and £35,000. Those houses are not increasing in value as a result of the decisions of the occupiers, but they are increasing in value far faster than the rate of inflation.

The promises of the hon. Member for Houghton and Washington seem to be to introduce a rating system based upon capital value, which would impinge severely on my constituents. Our proposals for a community charge—not a poll tax, because it will be payable by people beyond those who are registered on the electoral register—in my constituency would result in the burden on a pensioner or a single parent being reduced substantially; the average community charge projected is about £144.

Mr. Straw

As I explained to the Minister in detail, the proposals to move to capital valuations will result in no significant change for the vast majority of ratepayers across the country. The values of houses, whether fixed on a capital basis or any other, would not change week by week or year by year. There would have to be regular revaluations every five years, but it would be nothing like what the Minister has suggested. I should be happy to give him an asssurance, since he has expressed such anxiety about the change to capital valuations, that it will make, and need make, virtually no difference at all to his constituents who are living in houses of the kind that he described.

The Minister cannot be allowed to get away with the suggestion that the poll tax will benefit single pensioners. If a single pensioner is on a low income and receiving a supplementary allowance, as a great many are in his area, that single pensioner will pay no rates at all. Under the Minister's system, that single pensioner will pay at least 20 per cent. and probably a great deal more.

Mr. Chope

I notice that the hon. Member for Blackburn (Mr. Straw) has not put any figures on his proposal. The hon. Gentleman is referring to generalisations, saying that he will switch to a system that is based on rating capital values, when we know that capital values of houses are increasing in different proportions in different areas, wholly unrelated to the income of the occupiers of those houses.

The consequence would be, would it not, if the hon. Gentleman were able to implement his proposals. that those who are struggling to pay for the repairs and maintenance on their houses would have an even greater burden than at present?

Mr. Straw

Has it not occurred to the Minister that by proper adjustment of the rate in the pound and the equalisation grant system there need to be no change in the rate bills that the vast majority of families would pay under the system of capital valuation? It is a technical change, not a change of dramatic social proportions such as the poll tax.

Mr. Chope

We have moved a long way from radical reform if we are now talking about technical change which is not really going to make any difference. We accept the fundamental unfairness of the existing rating system. That is why we are pledged to reform it root and branch

Mr. Matthew Taylor

The Minister has just accepted the fundamental unfairness, but he has also criticised the Labour party proposals as having no relation at all to the income of the occupier. Surely that is fundamentally the problem with his own proposals.

Mr. Chope

No. We have already said quite clearly that there will be a generous rebate system for those who are least able to pay. At the moment, many people on high earnings are paying absolutely nothing towards the cost of local services, and we think that that is unfair.

Mr. Taylor

Would the Minister spell out how those rebates would affect the pensioner who currently pays no rates at all, because they are rebated, and what the position would be after the introduction of poll tax?

Mr. Chope

I am quite prepared to make a very long speech about the details of our proposals, but before I do so I want to answer the questions raised by the hon. Member for Truro (Mr. Taylor) and to refer to the proposal for local income tax that he put forward on behalf of the Liberal party.

As I understand it, the hon. Gentleman is suggesting that income tax be determined locally at a level that he is not prepared to disclose, although he did not dispute the suggestion by the hon. Member for Blackburn that it might be 8p in the pound. I have heard suggestions that in some areas it would have to be as high as 13p in the pound, if not higher. That means that, instead of income tax being 27p in the pound, it would shoot up to 40p in some areas. The hon. Member for Truro says in response to that that there would be some sort of equalisation scheme. Surely that is not very different from the scheme that operates at the moment, where income tax and national taxation are contributing something over 50 per cent. towards the cost of local services.

The hon. Member for Truro has been complaining that the way of distributing that money is not as good as it should be, and certainly we are committed to fundamental reform of the grant system and the means by which the grant is distributed. But the Liberal party's policy on local income tax would have a devastating effect upon individuals. Here again, the Liberals are not prepared to spell out the details and expose to public debate the true implications of their policies.

The hon. Member for Truro asked a number of technical questions and referred to the same points as were mentioned by the hon. Member for Blackburn — why Richmond does less well out of this settlement than he would consider equitable and why the Inner London education authority gets no benefit from this supplementary report. I am bound to say that the situation is equitable, and I will seek to explain why.

Richmond is a relatively high-resource authority with relatively low education needs — in other words, its education grant-related expenditure assessment. It can finance the whole of the extra cost of the teachers' pay award at less than the standard increase in poundage. The national standard increase in poundage is about 4p, which ratepayers are expected to provide. The situation, therefore, must be equitable. Indeed, ILEA is better off than many authorities because it can meet the full cost of the settlement at far less than 4p—at 2.3p. That is why it does not get a block grant from this supplementary report.

Hon. Gentlemen who seek to suggest that this supplementary report is distributing grant unfairly are confusing the present system and do not understand it properly. The present system is designed to equalise rate poundages across the country, and that is exactly the effect of this supplementary report.

My hon. Friend the Member for Nottingham, East (Mr. Knowles) made an excellent contribution to this debate. I noticed that he was not the only hon. Member representing a Nottingham constituency here. My hon. Friend the Member for Nottingham, South (Mr. Brandon-Bravo) is also taking a keen interest in this matter. They quite rightly drew the attention of the House to what has been happening in Nottingham and the spending record in that area, contrasting the performance of the Labour council there with that of Conservative-controlled authorities.

My hon. Friend the Member for Nottingham, East may recall that, when he was leader of Kingston council, in the years 1978–79 to 1985–86, he was able to reduce current expenditure per head in Kingston by 5.8 per cent. in real terms. Closer to his present constituency in Nottingham, we see that Broxtowe council, under Conservative control, has been able to reduce its current expenditure in real terms betwen 1978–79 and 1985–86 by some 16.3 per cent. In Gedling there was a modest increase of 2.8 per cent. and in Rushcliffe a significant reduction of 20.4 per cent., while in Nottingham itself, under the control of the Labour party, there was an increase in current expenditure of 12.5 per cent.—far ahead of anything that can be reasonably justified. My hon. Friend was able to expand further upon the wasteful spending policies of the Labour council there. I look forward with interest to hearing the results after the local elections in Nottingham this coming Thursday.

I would not say that the hon. Member for Blackburn sought to confuse the House, because in response to my intervention he came clean and said that he was talking about total expenditure rather than current expenditure. I am glad that he made that clarification because he knows that total expenditure includes use of special funds. He drew attention to, and sought almost to ridicule, what had been happening in Brentwood. I have to tell him that in Brentwood, in 1985–86, some £2.2 million was taken out of special funds; in 1986–87 some £2.3 million was taken out of special funds; and in the budget for the current year, 1987–88, some £5 million has been added back into the special funds. If the hon. Gentleman looks at the details he will find that the use being made of special funds in that authority is a very large contributory factor to the high increase in total expenditure this year.

Mr. Straw

On the hon. Gentleman's figures, the expenditure has gone up from £1.5 million last year to £11.82 million this year. The Minister has accounted for about half that increase. What has happened to the other half? Is this not exactly the kind of creative accountancy to which he has taken such objection in connection with Labour authorities?

Mr. Chope

We have made no bones about the fact that we feel that the use made by some local authorities of special funds in order to attract more grant has in certain circumstances had a detrimental effect upon other local authorities. That was one reason why we abolished grant recycling, which certainly has prevented the consequences of that having an impact upon other local authorities.

We deprecate the use of special funds where this is effectively an abuse of the conventions of local government, but we are working with a definition of total expenditure that was supported by all the local authority associations and about which the hon. Member for Blackburn and the Opposition in general have not been prepared to make any complaints. Indeed, when at one stage there was a suggestion that we might change the system back, I felt that the hon. Member for Blackburn would have been the first to argue the other way.

The hon. Member for Barnsley, West and Penistone (Mr. McKay) suggested that we were putting the cart before the horse because my right hon. Friend the Secretary of State for Education is not going to open the debate on the Education (School Teachers' Pay and Conditions of Employment) Order until later this evening. The fact is that that order was laid before Parliament on 9 April and came into force on 30 April, and the rate support grant supplementary report which we are debating now was laid only on 30 April. The education order is already in force. It is likely that the attempt that may be made later this evening to annul the order will not succeed. With the greatest respect to the hon. Member for Barnsley, West and Penistone, I do not believe that his point carries any weight.

The hon. Member for Barnsley, West and Penistone also mentioned water rates. As he will probably realise, that issue is under discussion at the moment.

Mr. Straw

What is the answer?

Mr. Chope

I do not have a brief this evening to make a definitive statement about what will happen to the water rates. However, I am certain that the hon. Member for Barnsley, West and Penistone shares my experience and has many constituents who feel that the present system of water rates is inequitable. An old lady living on her own may pay the same water rates as someone in the house next door where four people may be using a lot more water than the old lady. That complaint has been made frequently. Perhaps the hon. Member for Barnsley, West and Penistone will not be against reform in that area.

Mr. Boyes

Will there be a flat-rate charge for water or will there be metering? While I am on my feet, will the Minister consider another matter regarding water? I wrote to him in November last year asking whether water authorities would be competent authorities under EEC legislation. I have not yet received a reply to my letter. As this will be a very important issue during the general election, will the Minister ask his hon. Friend the Under-Secretary of State to hire a typist to type out a reply to a very simple question that I asked last November?

Mr. Chope

I will pass that request on to my hon. Friend. I am sure that there is a good explanation why the answer has not been forthcoming in the way in which the hon. Gentleman expected.

Mr. Straw

Will it be metered or will there be a flat-rate charge?

Mr. Chope

If people want to open a book on this matter, that is all very well, hut I cannot entertain a debate about that this evening.

I want to summarise briefly the main points of this report. It makes good the Government's undertaking to find a contribution towards the cost of the teachers' pay award in 1987–88. Provision is increased by £460 million, all of which goes to education authorities' GREs. The aggregate Exchequer grant is increased by £183 million; that means that the total of block grant now available is more than £9,000 million. The report also incorporates later information on capital allocations in GREs and reflects boundary changes that took place at the beginning of 1986 and 1987.

The present system is complicated. The Government are pledged to changing that system radically. In the meantime, I commend the report to the House.

Question put: —

The House divided: Ayes 188, Noes 135.

Division No. 154]	[7.55 pm
AYES
Aitken, Jonathan	Ancram, Michael
Alexander, Richard	Ashby, David
Amess, David	Aspinwall, Jack

Atkins, Robert (South Ribble)	Henderson, Barry
Atkinson, David (B'm'th E)	Hickmet, Richard
Baker, Rt Hon K. (Mole Vall'y)	Higgins, Rt Hon Terence L.
Baker, Nicholas (Dorset N)	Hind, Kenneth
Beaumont-Dark, Anthony	Hirst, Michael
Bendall, Vivian	Hogg, Hon Douglas (Gr'th'm)
Biffen, Rt Hon John	Holland, Sir Philip (Gedling)
Biggs-Davison, Sir John	Howard, Michael
Blackburn, John	Howarth, Gerald (Cannock)
Body, Sir Richard	Hubbard-Miles, Peter
Boscawen, Hon Robert	Hunt, John (Ravensbourne)
Bottomley, Peter	Hunter, Andrew
Boyson, Dr Rhodes	Irving, Charles
Brandon-Bravo, Martin	Johnson Smith, Sir Geoffrey
Bright, Graham	Jones, Gwilym (Cardiff N)
Brinton, Tim	Jones, Robert (Herts W)
Brittan, Rt Hon Leon	Kellett-Bowman, Mrs Elaine
Brooke, Hon Peter	Kershaw, Sir Anthony
Brown, M. (Brigg & Cl'thpes)	Key, Robert
Browne, John	King, Roger (B'ham N'field)
Bruinvels, Peter	Knowles, Michael
Buchanan-Smith, Rt Hon A.	Knox, David
Buck, Sir Antony	Lamont, Rt Hon Norman
Budgen, Nick	Latham, Michael
Bulmer, Esmond	Lawler, Geoffrey
Burt, Alistair	Lawrence, Ivan
Butterfill, John	Lee, John (Pendle)
Chapman, Sydney	Leigh, Edward (Gainsbor'gh)
Chope, Christopher	Lennox-Boyd, Hon Mark
Churchill, W. S.	Lewis, Sir Kenneth (Stamf''d)
Clark, Sir W. (Croydon S)	Lilley, Peter
Clegg, Sir Walter	Lloyd, Sir Ian (Havant)
Colvin, Michael	Lloyd, Peter (Fareham)
Conway, Derek	Lord, Michael
Coombs, Simon	McCurley, Mrs Anna
Cope, John	Macfarlane, Neil
Cormack, Patrick	MacGregor, Rt Hon John
Couchman, James	MacKay, Andrew (Berkshire)
Currie, Mrs Edwina	Maclean, David John
Dorrell, Stephen	McQuarrie, Albert
Douglas-Hamilton, Lord J.	Madel, David
Dunn, Robert	Major, John
Durant, Tony	Malone, Gerald
Edwards, Rt Hon N. (P'broke)	Maples, John
Emery, Sir Peter	Marland, Paul
Evennett, David	Marlow, Antony
Eyre, Sir Reginald	Marshall, Michael (Arundel)
Fallon, Michael	Mather, Sir Carol
Farr, Sir John	Maxwell-Hyslop, Robin
Favell, Anthony	Meyer, Sir Anthony
Fenner, Dame Peggy	Miller, Hal (B'grove)
Fletcher, Sir Alexander	Mills, lain (Meriden)
Fookes, Miss Janet	Mills, Sir Peter (West Devon)
Forman, Nigel	Moore, Rt Hon John
Forsyth, Michael (Stirling)	Morrison, Hon P. (Chester)
Forth, Eric	Moynihan, Hon C.
Fox, Sir Marcus	Neubert, Michael
Fraser, Peter (Angus East)	Newton, Tony
Freeman, Roger	Nicholls, Patrick
Fry, Peter	Onslow, Cranley
Gale, Roger	Oppenheim, Rt Hon Mrs S.
Galley, Roy	Ottaway, Richard
Gardner, Sir Edward (Fylde)	Page, Richard (Herts SW)
Garel-Jones, Tristan	Patten, Christopher (Bath)
Goodhart, Sir Philip	Pawsey, James
Gower, Sir Raymond	Pollock, Alexander
Gregory, Conal	Porter, Barry
Griffiths, Peter (Portsm'th N)	Portillo, Michael
Ground, Patrick	Powell, William (Corby)
Hamilton, Hon A. (Epsom)	Powley, John
Hampson, Dr Keith	Price, Sir David
Hanley, Jeremy	Proctor, K. Harvey
Hargreaves, Kenneth	Raffan, Keith
Harris, David	Raison, Rt Hon Timothy
Haselhurst, Alan	Rathbone, Tim
Hawksley, Warren	Rhys Williams, Sir Brandon
Hayes, J.	Roberts, Wyn (Conwy)
Hayward, Robert	Robinson, Mark (N'port W)
Heathcoat-Amory, David	Roe, Mrs Marion
Heddle, John	Rowe, Andrew

Rumbold, Mrs Angela	Thurnham, Peter
Ryder, Richard	Townsend, Cyril D. (B'heath)
Sainsbury, Hon Timothy	van Straubenzee, Sir W.
Sims, Roger	Watts, John
Skeet, Sir Trevor	Wells, Bowen (Hertford)
Speed, Keith	Whitfield, John
Spencer, Derek	Winterton, Nicholas
Steen, Anthony	Wolfson, Mark
Stern, Michael	Young, Sir George (Acton)
Sumberg, David
Temple-Morris, Peter	Tellers for the Ayes:
Thompson, Donald (Calder V)	Mr. Francis Maude and Mr. David Lightbown.
Thorne, Neil (Ilford S)

NOES
Adams, Allen (Paisley N)	Cook, Robin F. (Livingston)
Alton, David	Corbett, Robin
Anderson, Donald	Corbyn, Jeremy
Archer, Rt Hon Peter	Craigen, J. M.
Ashdown, Paddy	Crowther, Stan
Atkinson, N. (Tottenham)	Cunningham, Dr John
Banks, Tony (Newham NW)	Dalyell, Tarn
Barnes, Mrs Rosemary	Davies, Ronald (Caerphilly)
Barron, Kevin	Davis, Terry (B'ham, H'ge H'l)
Beith, A. J.	Dewar, Donald
Bell, Stuart	Dobson, Frank
Bennett, A. (Dent'n & Red'sh)	Dormand, Jack
Bidwell, Sydney	Douglas, Dick
Blair, Anthony	Dubs, Alfred
Boyes, Roland	Duffy, A. E. P.
Bray, Dr Jeremy	Eadie, Alex
Brown, Gordon (D'f''mline E)	Eastham, Ken
Brown, Hugh D. (Provan)	Evans, John (St. Helens N)
Brown, Ron (E'burgh, Leith)	Fatchett, Derek
Buchan, Norman	Flannery, Martin
Caborn, Richard	Foot, Rt Hon Michael
Callaghan, Jim (Heyw'd & M)	Foster, Derek
Canavan, Dennis	Foulkes, George
Carter-Jones, Lewis	Fraser, J. (Norwood)
Cartwright, John	Freud, Clement
Clay, Robert	George, Bruce
Clelland, David Gordon	Gilbert, Rt Hon Dr John
Clwyd, Mrs Ann	Golding, Mrs Llin
Cocks, Rt Hon M. (Bristol S)	Hamilton, James (M'well N)
Cohen, Harry	Hamilton, W. W. (Fife Central)
Conlan, Bernard	Harrison, Rt Hon Walter
Cook, Frank (Stockton North)	Haynes, Frank

Hogg, N. (C'nauld & Kilsyth)	Powell, Raymond (Ogmore)
Home Robertson, John	Prescott, John
Hoyle, Douglas	Radice, Giles
Hughes, Roy (Newport East)	Randall, Stuart
Janner, Hon Greville	Redmond, Martin
Jenkins, Rt Hon Roy (Hillh'd)	Rees, Rt Hon M. (Leeds S)
John, Brynmor	Richardson, Ms Jo
Jones, Barry (Alyn & Deeside)	Roberts, Allan (Bootle)
Kaufman, Rt Hon Gerald	Robinson, G. (Coventry NW)
Kennedy, Charles	Rogers, Allan
Kirkwood, Archy	Rooker, J. W.
Lamond, James	Ross, Ernest (Dundee W)
Leighton, Ronald	Sedgemore, Brian
Lewis, Ron (Carlisle)	Sheerman, Barry
Lewis, Terence (Worsley)	Shields, Mrs Elizabeth
Litherland, Robert	Shore, Rt Hon Peter
Livsey, Richard	Short, Mrs R.(W'hampt'n NE)
Lloyd, Tony (Stretford)	Skinner, Dennis
McCartney, Hugh	Soley, Clive
McGuire, Michael	Spearing, Nigel
McKay, Allen (Penistone)	Steel, Rt Hon David
McKelvey, William	Stott, Roger
McWilliam, John	Strang, Gavin
Marek, Dr John	Straw, Jack
Marshall, David (Shettleston)	Taylor, Matthew
Martin, Michael	Thompson, J. (Wansbeck)
Mason, Rt Hon Roy	Tinn, James
Maxton, John	Wainwright, R.
Maynard, Miss Joan	Wardell, Gareth (Gower;
Morris, Rt Hon A. (W'shawe)	Wareing, Robert
Morris, Rt Hon J. (Aberavon)	Welsh, Michael
O'Brien, William	Wilkinson, John
O'Neill, Martin	Wilson, Gordon
Orme, Rt Hon Stanley
Park, George	Tellers for the Noes:
Patchett, Terry	Mr. Don Dixon and Mr. Sean Hughes.
Pendry, Tom
Pike, Peter

Question accordingly agreed to.

Resolved, That the Rate Support Grant Supplementary Report (England) 1987–88 (House of Commons Paper No. 330), a copy of which was laid before this House on 30th April, be approved.