REVENUE SUPPORT GRANT

HC Deb 21 April 1988 vol 131 cc1064-89

Mr. Jeff Rooker (Birmingham, Perry Barr)

I beg to move amendment No. 173, in page 46, line 6, at end insert and (c) shall take into account—

1. (i) the latest information available to him as to the aggregate of all authorities' expenditure.
2. (ii) any probable fluctuation in the demand for services giving rise to additional expenditure, 1065 so far as the fluctuation is attributable to circumstances which are not under the control of the local authorities;
3. (iii) the need for developing those services and the extent to which, having regard to general economic conditions, it is reasonable to develop them; and
4. (iv) the current level of prices, costs and remuneration and any future variation in that level which in the opinion of the Secretary of State will result from decisions which appear to him to be final and which will have the effect of increasing or decreasing any particular prices, costs or remuneration.'.

Mr. Deputy Speaker (Sir Paul Dean)

With this it will be convenient to consider the following amendments: No. 156, in clause 86, page 46, leave out lines 34 to 41 and insert— '86 (1) The Secretary of State shall—

1. (a) determine in relation to each charging and precepting authority notional expenditure assessments having regard to their functions and needs in accordance with principles to be applied to all authorities, and
2. (b) make report containing the basis on which he proposes to distribute among receiving authorities those amounts of revenue support grant which fall to be paid to such authorities under this Part, being a basis which has regard to the notional expenditure assessment determined under subsection (1)(a) above.

(2) Before determining the notional expenditure assessment or making the report under subsection (1) above, the Secretary of State shall consult such associations of local authorities as appear to him to be concerned and with any local authority with whom consultation appears to him to be desirable. (3) This report shall be laid before the House of Commons and shall specify the principles on which the notional expenditure assessments and basis of distribution are determined'. No. 268, in page 46, line 37, at end insert 'after consultation with receiving and notifiable authorities concerned'.

Mr. Rooker

Amendments Nos. 173 and 156 are both official Opposition amendments replicating amendments that we dealt with in Committee. In Committee the amendments were numbered 751 and 756. We make no apology for returning to the same subject in precise form. Under the problems of the guillotine, we wanted to have as general a debate as possible on the proposed English grant system.

In one and three quarters hours of this long five-day report stage, we are dealing with no less than 50 per cent. of local government revenue in England. That amounts to some £14 billion or £15 billion, give or take the odd £100 million in case I am accused of getting the figures wrong. That is an enormous sum of money and we are dealing with the way in which that is to be distributed by the Government.

8.15 pm

The Government have produced some Yellow Papers. One of those papers was on the new grant system. It is worth informing the House of what the Government said. I will not read out all the proposals but the idea that the new system will be simpler is a main feature, as is the fact that the method of distributing the grant will be more stable from year to year and that there will be full compensation for differences between areas so that local services can be provided on a common basis. In Committee the Minister constantly referred to a standard level of service. I know that some of the proposals in the documents have now changed but I understand that the grant will not be split between tiers of authority.

At one time in Committee, we dealt with a model poll tax form. It was mesmerising in its complexity and that is how it will be seen by the poll tax payers and the electorate. We look forward to the modifications and greater sophistication that will be put into that form and the proposals so that people can see the connection between the grant that the Government allow to local government, the effect of the business rate and the way in which those two figures will be manipulated in order to cause tremendous damage to the poll tax payments that citizens will have to make.

The Bill says nothing about how the grant system will operate. It says nothing about the arrangements for distribution of the massive sum of £14 billion or £15 billion. It simply sets out procedures for payment. The Department of the Environment has been dragged to court so often by local authorities to get the judges to review ministerial decisions that one might think that the Bill has been drafted without information about the arrangements for distribution or about how the grant system will operate so as to make the idea of a judicial review a non-starter. If that is the case, we are heading for real problems in local government.

The absence of detail is of major concern to all sections of local government, of whatever political complexion. One of the Yellow Papers sent out in the months before our debates dealt with the way in which a system might work. However, the powers that the Secretary of State is taking in the Bill will enable him to cobble together any system he chooses. That causes a problem for the House because we will not be able to hold Ministers truly accountable. The number of clauses, subsections and paragraphs of the Bill enabling the Secretary of State to do things as he sees fit ought to make one's hair curl. It will if one cares about parliamentary democracy and holding Ministers to account in a free and democratic Parliament, which will be extremely difficult given the way that the Bill is drafted.

One of the key points made by Ministers—I have heard it often in interviews on radio and television—when they have been explaining the poll tax is that it is only a quarter of the money. All the other money comes from progressive taxation. I am not going to go into arguments about whether it is progressive; it is slightly progressive. The broad general figures are that half comes in Government grants and a quarter comes from the business sector. So that is a quarter, a quarter and a half.

At the moment, of course, Government grants do not represent one half of local authority spending. I do not want to open up a fresh debate, but simply to put this on the record. In 1980–81, Government grants were 61 per cent. of local government spending. In 1988–89, the current year, they are 46 per cent. There is no need for the Minister to make a speech saying that I have missed out a decimal point, because I am using round figures. It is 46 per cent.—that is, less than one half.

If the grant to local government had been kept at the level it was at when the Government came to power, 61 per cent., it would this year, in cash terms, be some £4.4 billion higher. Put in terms that we can all understand, it is a poll tax of £122. That is the effect of the Government's manipulation of what we can call rate support grant, or the new revenue support grant. It is useful to keep the initials the same, if only for those who want to use the jargon and initials all the time, which I try not to do. At any rate, it is the RSG, the amount of grant that the Government pay.

If the poll tax system had been in operation when this Government came to power, leaving aside all other changes in local government expenditure, changes in the business rate and what have you, poll tax payers today would be able to say that £122 of their poll tax was additional poll tax solely because the Government had cut the grants to local government from 61 per cent. to 46 per cent. That is the effect of what has happened since the Government came to power.

It might seem that we are looking at something that is very technical—Government grants—as though the Government were doing a favour to local government and paying out a lot of money. But it is the way that that is paid out and the proportion of the total amount that is important. A slight variation in that by the Government could have disastrous effects on the amount of poll tax that individuals will be required to pay. I will come back to some of the weird ways in which that can work in a moment.

To paraphrase amendment No. 173, this simply requires the Secretary of State, before setting the amount of revenue support grant to be made available, to take account of the likely level of expenditure to be incurred by local authorities. This means, of course, that we would like the Secretary of State to think about it beforehand, and that the House and local government should be able to share his—or, after the reshuffle, presumably, her—thoughts.

It is tempting to believe that the Government do not wish to forecast the likely levels of local authority expenditure in the chargeable financial year in order to conceal the link between Government grant and the levels of poll tax. Quite clearly, the Government are not going to make a big thing of this connection when they want to change the levels of grant. If they did so it would show that the Government are keeping authorities' needs assessments artificially low by what is called the unallocated margin—that is, the gap between the needs assessment and the public expenditure provision. Secondly, it would conceal the reductions in the grant support, which I have just touched on. So the specific purpose of amendment No. 173 is to get the Secretary of State to take account of likely levels of expenditure.

Amendment No. 156 has a slightly different purpose. It requires the Secretary of State to carry out some consultation on the basis on which he proposes to distribute the grant. The amendment would change the guidelines that are in the Bill and make them mandatory for the new needs assessments. The guidelines, briefly, relate to consultation and common principles for all authorities having regard to their functions, because county councils have different functions from district councils, the metropolitan districts are different from ordinary districts, and there are other councils, such as parish councils. And there would be specification of the principles adopted in the distribution report to the House.

The existing subsections (1) and (2) in the Bill, which would be replaced by amendment No. 156, would allow the Secretary of State to prepare a distribution report without consultation and to produce a report which described only the outline of the method of grant distribution without being clear as to the principles by which the relative needs of authorities have been assessed. This is a crucial aspect, because the needs assessments of local authorities are not scientifically precise and are definitely not politcally neutral tools. To treat them as such is to deny the possibility that local councils may have genuine differences with central Government over the level of local needs.

I do not want, and I do not think that any of my hon. Friends want, all local councils to be the same. The purpose of local government is variety and choice. I would like the Minister, even though he has to use the term "the standard level of service", to share with us some of his thoughts about local government and variety. He has not done that since his appointment. If only he would say that there ought to be differences between local councils at the same level that would be helpful. I am talking about the same kind of councils, because a district council in Cornwall will operate differently and have different needs and maybe different priorities from a district council in Cumbria. We do not want all councils to be the same. If we did, we might just as well scrub the whole idea and leave it all to Whitehall. We know that that is the natural progression of this Bill, but we do not start from the same premise as the Minister and we do not want them all to be the same.

We dealt with the needs assessment aspect in Committee and I make no apology for coming back to it on Report. It is important what factors are taken into account. We understand that the system will be simpler. That is what was said in the Yellow Paper. Any system that is simple will by definition be fairly crude. When dealing with such a large sum of money and a population the size this country's is, it is inevitable. We understand from the question and answer section of the Conservative research department document "Politics Today", edition No. 11, produced last August—and I do not think that the position has changed—that The needs assessment calculated for each local authority area would follow similar principles to those used for the Grant Related Expenditure Assessments (GRE's) under block grant, but would be considerably simplified. Only six criteria will be employed. That is, there would be only six criteria for all the kinds of work that local government has to do.

We spent some time in Committee on one of the possible criteria—at least, we assume that it is a possible criteria—that of population. How is the population of each local authority to be measured? Will it be the census figures provided by the census office and updated from time to time by the Registrar General? Will it be taken from the poll tax register? One point is crucial: will it be the day-time as opposed to the night-time population? The day-time population of the local authority area in which the House is situated is considerably more than the night-time population. The hundreds of thousands who travel to work in the Westminster area mean that the local authority has to provide services which must be taken into account. At some time during the passage of the Bill we would like a statement about how the population will be counted. It is crucial not just for the needs element but because of the previous debate. I apologise to hon. Members because that was the only debate that I missed from start to finish.

8.30 pm

Mr. Butterfill

The hon. Gentleman will recall that in Committee we said that there was a problem for local authorities in holiday areas where the summer population was much larger than the winter population. The hon. Member for Caernarfon (Mr. Wigley) also made that point. It is a serious point.

Mr. Rooker

The hon. Gentleman is right. The next one on my list was the seasonal population. It is a crucial element.

The Government have to make up their mind. I presume that this will not be kept as a mystery until the last minute. Local government needs to know. The people who make the plans need to know. The proposal is that a year from now, after the House has dealt with umpteen sets of regulations, the register for England will start the process, and two years from now, assuming that the Bill goes through, the people of England will be paying poll tax. The budgets will have been calculated. Local government budgets are not fixed at a few hours', a few days' or a few weeks' notice. They are fixed months in advance. Therefore, it is crucial to know how the population will be counted.

At the second or third sitting in Committee I asked the Minister about this and he answered in the classic ministerial phrase. I think his words were, "It is under active consideration." The Committee stage started in January and that was said at the second or third sitting. As it is nearly the end of April, I think we are owed an answer on the population aspect.

Mr. Wigley

I well remember the numerous debates we had in Committee. Does the hon. Gentleman recall the difficulty we had in getting an indication of the Government's thinking, not just on the seasonal population but on the population in relation to caravans? I welcome the changes which the Government have made about caravans. Nevertheless, the Government must ensure that local authorities have grants to meet the additional cost associated with caravans or that part of the population formula ensures that adequate resources are available.

Mr. Rooker

That is a crucial point. It is obvious that all the points that should be made cannot be made before 10 o'clock. I shall make just one further point before I finish because many hon. Members, some of whom have not spoken this week, are keen to make a contribution.

My final point relates to the gearing effect which, I presume, was raised in the previous debate. If the population does not learn anything about local government expenditure, it will soon know what the gearing effect means. I attempted to explain it—inadequately, I suspect—at a public meeting in my constituency last Sunday afternoon. I am pleased that my constituents got the message about the effect of the manipulation of the Government grant on the poll tax. We have been told that a 1 per cent. shift in one part of the calculation may require them to pay 4 per cent. more in poll tax. I am using round figures.

If a local authority wishes to spend 1 per cent. more than the Government say it should, and the Government hold level the grant and the business rate, then to collect that 1 per cent., the local authority will have to add 4 per cent. to the poll tax.

Mr. Leigh

It sounds like a good idea.

Mr. Rooker

The hon. Gentleman says that it sounds like a good idea. It is designed to make sure that people scream at councils, "The gearing, watch the gearing." It will become a slogan during elections—"Don't gear us up." That will be the phrase that will be used. [Interruption.] The Minister says that that is a good one. It would be all right if it applied equally all over the country and there was logicality about it, but there is not.

A 1 per cent. change in one part of the calculation will mean a 4 per cent. increase in poll tax on average, or so we have been told. It does not work out like that. In a written answer, the Minister said: It is also the case that for each local authority there should be a 1 per cent. increase in its gross charge for each 1 per cent. increase in its expenditure." [Official Report, 21 October 1987; Vol. 120, c. 819.] I may be wrong but the range seems to go from 2.1 per cent. to 4.5 per cent. However, it does not work like that. The use of percentages for gearing is misleading. We need to use cash.

The purpose of the Government's test of accountability is that a £1 per head increase in expenditure results in a £1 increase in poll tax. That is not a percentage but money. I want to give examples of what happens in money terms for three local authorities. I shall have to stick to my text because this is technical. The gearing effect will result in a given percentage increase in expenditure having a different proportionate affect on the poll tax in different authorities. So the same percentage increase in total expenditure will not necessarily have the same percentage effect on the poll tax.

For example, if Islington spent at a level of 10 per cent. above its grant-related expenditure, it would be required to levy a poll tax 66 per cent. above that necessary for sticking to its grant-related expenditure. The London borough of Sutton, on the other hand, for spending at 10 per cent. above its grant-related expenditure, would need to levy a poll tax only 37 per cent. higher. In Reigate and Banstead the poll tax would be only 29 per cent. higher.

It is the level of service provided in relation to the needs assessment which should be the crucial factor in establishing accountability, not a simple £1 per head measure. In the examples I have quoted, none of the authorities can be said to be providing a higher level of service to the community. The needs of each authority as measured by needs assessment per head will differ. They will all be spending 10 per cent. above the Government's fixed level but the gearing effect on the poll tax will vary not by 1 per cent. to 4 per cent. but by 1 per cent. to 6.6 per cent.

Where is the accountability in that? Where is the communality of purpose and accountability in the gearing effect? The system will be more mysterious and more unfair and will have a disastrous effect on the conduct of local government. People will be bewildered and it will not take them long to begin to say, "Watch the gearing effect." The Minister may think that they will say that to their councillors at election time, but they will not. As they walk to the ballot boxes they will advise their fellow citizens to watch the way in which the Government have manipulated their council's spending and needs and grant. That manipulation will have forced up their council's poll tax unnecessarily.

If ever there was an example of the need for this Chamber to have a screen with a little laser gun— something more sophisticated than an overhead projector—this is it. We need one to show what happens with the gearing effect. It will not take more than three or four years of the operation of this system under this Government for the poll tax payments under most local authorities to spin out of control exponentially up through the roof into the stratosphere—and all because of small Government manipulations of the grant and the business rate and their consequent effect, through the gearing mechanism, on the poll tax. They will bring total discredit to the Government and the system that they are introducing.

The Government cannot say that we did not warn them. We have done so every day this week and will go on doing so until next Monday evening. If Conservative Members have any sense—many of them have a private sense of foreboding—they will join us in the Lobby next Monday and chuck out this Bill. That is the only way in which to force the Government to think again. I cannot adequately emphasise the effects of the manipulations of the Government system. We may fail to convince Ministers, but they will reap the consequences.

Sir George Young (Ealing, Acton)

Having supported the Government with enthusiasm in the last Division, I must tell my hon. and learned Friend that we have reached another part of the Bill about which I have some doubts.

The Government are staking everything on accountability. Time and again it has been maintained that under the new system everyone who gets a bill for more than the national average will know that the reason is the extravagance or inefficiency of his or her council. The Prime Minister has referred to that as the ready reckoner. The theory is that if a person lives in an area in which the standard community charge is above the national average, he can exact retribution from his local authority through the ballot box.

However, the whole principle is credible only if the Government get the grant system right. The community charge, as the hon. Member for Birmingham, Perry Barr (Mr. Rooker) has just said, will raise only one quarter of the sum to be spent. The other three quarters is accounted for by the Government, and that money will be distributed according to some formula. The Government claim that it will be so accurate that each local authority will have to raise only a standard community charge to deliver a standard level of service.

Any Minister who has been in the Department of the Environment knows that this is moonshine. No one has ever been able to devise a grant regime that accurately reflects the different needs of each local authority. The present regime takes into account about 60 factors—the number of schoolchildren, the number of road miles and so on—and it is for ever being criticised. Every hon. Member can find a reason why the present regime does not do justice to the constituents he represents.

Some hon. Members represent areas that have a growing population and can argue that the grant is based on historic population figures that are out of date. Some areas were far more badly affected by the storms of last October than others. Some have coastal erosion. Some have a big tourist population, which puts pressure on their expenditure. Some have buildings built of PRC, which costs a lot to put right. Others have a housing stock which, although relatively new, entails much expenditure. Some may have a wholly different debt position. So the argument that No. 2 Marsham street can look at all local authorities and get the grant figure right so that the authorities have only to level the standard community charge is nonsense, and anyone who has ever been in that Department knows it.

8.45 pm

The new system will be less fair than the old. Fewer factors will be taken into account under it. At one stage, it was said that there would be only six. I understand that that claim has been withdrawn and the figure will be higher. This is being done because, in theory, the system will be simpler, but local authorities will only too easily be able to claim that their charge is above average because the Government have withdrawn recognition of some pressing local problem.

At present, one can just about tolerate an unfair grant regime, for a number of reasons. If the Government get it wrong, the consequences are borne at present not only by the domestic ratepayer but by the business community. Secondly, until relatively recently, the poor were insulated against the consequences of the Government getting it wrong because they did not pay rates. The third reason why the present system is more defensible is that what was paid bore some relation—not an exact one—to ability to pay, because it was based on rateable values.

Under the new regime, these three arguments no longer apply. The consequences of error will be far more serious and the likelihood of error greater. We have heard about the gearing ratio from the hon. Member for Perry Barr. For every 1 per cent. that the Government get it wrong, the local community will have to pay 4 per cent. more. There will not be a contribution from the business community if the Government's grant regime is incorrect.

Then there will be the inequity of distribution among poll tax payers because everyone will have to pay the same and there will not be the relatively progressive system that there is now. To use a metaphor, there will be more potholes in the road and the car will have fewer springs. The notion that there will be accountability is wrong, because for the first four years the transitional arrangements will exist. Some poll tax payers will have to pay an extra £75 in year one. From years one to four no one will be able to say that his poll tax bears any relationship to his local authority's expenditure because of the transitional provisions. So in the very years when people form their opinion of the new regime, accountability will not be working.

To find an example of why the Government will have to change the grant regime from one year to the next, I have only to look at my local authority. Last July, it was announced that Ealing council would be rate-capped. That was absolutely right—it was a grossly extravagant authority. The Government came up with a figure that they thought the local authority should spend this year. It implied a reduction in the rates of 44 per cent. We were all looking forward to that sort of reduction, but in February, when the figure was fixed, the Department of the Environment announced that it had new information that was more up to date, and the rates were only going to fall by 23.4 per cent. That was a major change in central Government's perception of what a local authority needed. If that sort of change is possible within a few months, it is perfectly possible that the same magnitude of error can occur in future under the new grant regime.

Mr. Elliot Morley (Glanford and Scunthorpe)

In the argument about extravagance, in some ways a good case has been weakened by not conceding that many of local authorities' problems have been due to the changes in the rate support grant over the years. In my county, £53 million has been deducted since 1979 in changes in the rate support grant. That has added 52p in the pound to the average rateable value, which means that Humberside ratepayers pay £78 more a year under the Government changes than they should. The same danger exists with the new system. That was illustrated by the hon. Gentleman's point, but he should concede that the Government have played a role in forcing up rates and there is a danger that they will do the same under this system.

Sir George Young

I may have saved the hon. Gentleman from making a constituency speech later on.

My point is that, under the new regime, every hon. Member will be able to make the sort of contribution that the hon. Gentleman has just made and produce plausible reasons why the Government's grant regime has discriminated against his or her local authority. Local councillors will also be able to make that point. Therefore, the argument that the poll tax payer will believe the Government when they say that they have got the grant spot on and that the local authority is over the top because it is extravagant, will be negated at the local level, probably by the Member of Parliament, of whatever party, and almost certainly by local councillors and officers.

Because there will be good examples of where the Government have got it wrong, the credibility of their case will be shattered. For that reason, if there is a Division at 10 o'clock, I shall be supporting the amendment. The Government's case cannot be maintained unless the grant regime is right and the grant regime will not be right. The amendments try to sketch in some of the detail and we are entitled to that information.

Mr. Ron Leighton (Newham, North-East)

The level of the poll tax is sensitive to the Government's decisions on grant. As my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) explained, had the level of rate support grant been maintained at its 1981 level of 61 per cent., grant in 1988–89 would have been £4.4 billion extra. He told us that that was equivalent to a poll tax of £122. Instead, over the past eight years, the rate support grant has been constantly reduced until it is now only 46 per cent. The limited point that I want to make about that is that Government grant is unlikely to cover the extra cost of collecting the poll tax or to recognise the extent of the inevitable evasion.

Using the London borough of Newham as an example, I want to show what a costly administrative nightmare collecting this ugly and unfair tax will be. There will be major public disquiet over the large number of Newham residents who will have to pay more under the poll tax. At 1987–88 expenditure levels, the poll tax would be set at a level £309 per person. The average rates bill per household is currently £518. Therefore, some 88 per cent. of the population of Newham will have to pay more.

About 45 per cent. of Newham adults live in households with two adults and will have to pay about 19 per cent. extra. But the main concern is for the 68,000 adults—43 per cent. of the borough's adult population—who live in households with three or more adults who will suddenly be faced with considerably larger bills.

Newham has a particularly high proportion of large households. Over 27,000 adults—over 17 per cent. of the borough's adult population—live in households of five or more adults. The majority of those large households comprise people of ethnic minority origin. In many cases, they have decided to live in extended families to ease the cost of buying a house. We learn that from building societies such as the Halifax.

A six-adult household would have its rates increased from an average charge of £518 to a poll tax of £1,854. An ordinary four-adult household—say, a middle-aged couple with children aged 18 and 20—will have an immediate 139 per cent. increase imposed on them, a rise from £518 per annum to £1,236 per annum. The poll tax will hit hardest those who live in larger households. In Newham, that means mainly people of ethnic minority origin.

Mr. Leigh

rose—

Mr. Leighton

Time is short, so I shall not give way on this occasion, but I look forward to hearing the hon. Gentleman's speech.

A major part of the nightmare will be the compilation of the register. Currently in Newham, only 70 per cent. of those eligible are on the electoral register. How many of those not on the electoral register will voluntarily register for the poll tax? Who will track them down? The attempt to compile such a register will involve regular canvasses, inspections, information from other authorities and council departments and from other computer systems. That will be extremely complex and onerous and will need a large army of newly employed council snoopers.

It will be necessary to know how many beds there are in each house and who is sleeping in them. There is a high degree of mobility among the local population. We know that from the annual turnover on the electoral register. Some younger people may move four or five times a year. It will be difficult to establish who is resident and to ascertain responsibility for registration where there are joint or multiple tenancies. The whole exercise will involve a distasteful and massive invasion of privacy.

It has been estimated that anything up to 15 per cent. of people will not register in order to evade the charge. That will load extra burdens on those who do pay. Will that be recognised by the level of Government grant? I think that we all know the answer to that.

One certain effect of the Bill will be the huge extra cost of the vast increase in staff that will be needed to produce the register, to collect the tax and to recover debts. As all eligible adults will have to pay the tax, there will be a huge increase in the number of accounts. At the moment, Newham has 57,000 rate accounts. That will increase to 163,000 poll tax and uniform business rate accounts. That is because of the change from houses to people as a base for the tax, and because council tenants will not be able to include poll tax payments in their rent.

However, matters will be much worse because all payers must be given instalment facilities. In addition, each person must be sent a personal bill. That will increase the number of payment transactions in Newham to between 350,000 and 1.5 million. In other words, there will be an enormous increase in paperwork.

The council estimates that the number of summonses issued for non-payment will increase from 8,000 to 35,000. There will also be a requirement to collect fines from those who fail to register. That will do a great deal of damage to the council's relations with the public. Extra accounts, valuation, inspection, control, recovery and register staff will be needed. Altogether the council bureaucracy will have to be increased by 160 staff. Apart from the cost, there will be difficulties in recruiting suitably qualified staff with local authorities competing for qualified people. In addition, there will be a need for more computer systems, both hardware and software. At the moment the town hall is bursting at the seams, but extra accommodation will be required.

How much extra will that cost? Quite apart from the cost of evasion, the cost to Newham of the extra staff, accommodation, computer hardware and software, training and other overheads is put at £2.75 million. That is a heavy and needless burden in order to collect not more, but almost certainly less, revenue.

Not only is this a grossly unfair tax, it is extremely inefficient and expensive to collect. I ask, without much hope of succeeding, for extra grant to cover those costs.

9 pm

Mr. Nicholas Winterton (Macclesfield)

This is the first time that I have spoken during the Report stage of this very important Bill. It is not that the many hon. Members who have not spoken are not interested in the Bill, but unfortunately, due to the method and system of this House called the guillotine, meaningful debate is not now possible. Many amendments tabled in good faith by hon. Members on both sides of the House do not have the benefit of considered and sensible debate, and I deeply regret that.

I listened with great interest to the opening speech of the hon. Member for Birmingham, Perry Barr (Mr. Rooker) and I found myself in great sympathy with him. Sadly, I do not think that I can vote for his amendments, but I shall certainly not vote against them, because there is good sense in the hon. Gentleman's argument. Furthermore, irrespective of the precise size of the majority, what happens in this place will be a signal to the other place, which has a valuable role to play in determining the form of the Bill as it eventually reaches the statute book.

I speak particularly in the interests of the small councils, which are seldom represented in this place—although the hon. Member for Caernarfon (Mr. Wigley) will, I hope, contribute to the debate and add to my argument. My concern is with the position in which parish, town and community councils will find themselves—a subject that is very relevant. Given that we are discussing amendments to clauses dealing with revenue support grants and distribution reports on that money, it is important that the position of the small council should be fully understood.

I know that my hon. and learned Friend the Minister for Local Government is well aware that at present the whole expenditure of a parish or community council is financed by a rate levied on all properties in its area, domestic and non-domestic alike. However, under the Government's new system, the expenditure of the councils would be met out of what is known as the "collection fund" maintained by the district or borough council. Payments would also go out of that fund to the county and district and borough councils. In England, into that fund would go all the community charges and the share for the area of the national non-domestic rates and the Government grant to local authorities. In Wales, into that fund would go all the community charges. No doubt the hon. Member for Caernarfon will refer to Wales specifically.

To complaints that parish councils will no longer share in non-domestic rates, the Government reply that they will, because the fund out of which their expenditure is met is composed of the three elements of charge, non-domestic rate and grant from central Government. Parish councils, however, do not see how that has any effect on their position, because they foresee the whole of their expenditure having in the end to be met out of the community charge for their parish.

Let me cite a straightforward and simple example. In a parish—parish A—there is no significant parish expenditure. Let us estimate that the charge for parish purposes is £1 per person. The district charge is £200 per person and the county charge is £400. The non-domestic rate returned and Government grant together amount to £300 per person. Subtract £300 from £601 and one is left with £301.

Parish B, a neighbouring parish in the same county—it could be Cheshire—incurs considerable expenditure, thereby incidentally reducing district expenditure, so let us estimate that the charge for parish purposes is £20 per person. Worked out on the same formula as parish A, the total net charge per person in parish B is £320. Thus, I he whole of the parish council expenditure—not only the extra, above the amount expected by the Government to be proper for the area—falls on to the community charge. This matter is very relevant to the amendments, and it is appropriate that we should discuss it now.

To complaints that community councils have no share in the non-domestic rate, the Government say that they should not expect to have such a share because their activities are essentially what the Government describe as "person-related"—they provide playing fields, for example—and the councils should not expect businesses to pay for such expenditures. In any case, the community councils are in the same position as the parishes in the example that I cited.

I have been in local government myself and have long taken an interest in it. To me, the provisions show ignorance on the part of Ministers of precisely what is happening in local government and of the roles and functions of its various levels. If to all intents and purposes the Government want to do away with local government, they should tell us that that is what they want and let us debate it. If they want meaningful local government, they must not carry on as they are doing. I say that with some experience of local government.

Parish and community councils fear that a massive rise in payments from community charge payers will be needed to cover long-running existing expenditure. The problem is especially acute in places where there are loans outstanding or with small populations. In many places, non-domestic property accounts for more than half the rateable value in a community, parish or town council. In one area in the south of England, the rateable property value is 95 per cent.

Parish and community councils have good spokesmen in both Houses of Parliament but, unfortunately, they are not always heeded. I repeat that I do not think that the benefits of parish, community and town councils are always understood by Government. I know that in my constituency they are well appreciated and understood by the electors whom I have the honour to represent.

Parish and community councils do not see why they should not share in the money that is paid from the centre to support local government when all their functions are the same as those dischargeable by district councils, which will get such support from central Government by way of the contribution under the new system. It is said that central Government's contribution will be 75 per cent. but it is likely to be closer to 77 per cent. of the cost of local government. Central Government have a major role to play and should recognise the important role of councils down to the lowest level.

A long-term result of what my hon. and learned Friend the Minister proposes might be a reduction in cheap, effective parochial activities and a transfer of those activities to district or borough councils with their generally higher overheads. Inevitably, that will bring higher costs to the ratepayers or community charge payers, and I suspect that in the long term it will also bring higher costs to business.

Perhaps my speech will be more relevant in the House at a later time than it will be now in changing the mind and the views of my hon. and learned Friend the Minister, for whom I have immense regard and respect. I am sure that it is possible to devise a reasonably simple method by which parish and community councils can be assured by law of a proportionate share in the non-domestic rate. They are not guaranteed such a share in the legislation that we are debating and which will shortly pass to another place.

Town, parish and community councillors are the unsung heroes of local government. Those councillors do not claim the grand allowances and responsibility allowances that are costing ratepayers so much. I served in local government at a time when councillors received very modest subsistence and mileage allowances. I never received the huge allowances that make council work for many of today's councillors a full-time occupation. However, I am not arguing that matter in this debate.

My hon. and learned Friend the Minister has promised to visit my constituency towards the end of the year. He will receive a courteous and friendly welcome from many people. I plead with him to appreciate the valuable role that is played in local government by local town, parish and community councils. We would be worse off if they disappeared.

Mr. Paul Murphy (Torfaen)

I support the remarks of the hon. Member for Macclesfield (Mr. Winterton). For many hours in Committee, hon. Members on both sides of the Committee and I were very much inclined to the hon. Gentleman's point of view that community councils in Wales and parish councils in England fulfil an extremely valuable function and that, by taking the non-domestic rate away from those local authorites, they will have to rely entirely upon the community charge for their income.

In my constituency, that will mean a loss of no less than 60 per cent. of the income of community councils and in some areas the ironic situation will arise in which the community councils will have to precept a higher poll tax than the district councils which have a much greater area of responsibility. If the Minister will not listen to Opposition Members, I hope that he will listen to Conservative Members and take those matters into consideration.

I wish to refer to the effects of the changes in the grant system on the Principality of Wales. We have our own Secretary of State, and occasionally the Under-Secretary of State for Wales is present to discuss matters, although he is not here this evening. I know that the Minister, as a Llanelli boy, will undoubtedly answer some of the points that I intend to raise about Wales.

There is a separate system in Wales. The grant will be paid separately to districts and counties, whereas in England it will go only to the districts. We were told that the system in Wales would be different from that in England because the local authorities in the Principality were reasonable ones. They had never been profligate. According to the Welsh Office, they had been responsible, ideal local councils.

The reward for the good work of those councils in the past eight years has been an increasingly complex grant system which gave them ever-decreasing amounts of grant. If, as the amendment suggests, the new grant system will bring simplicity, it will also unfortunately bring unfairness because it relies on the crudest possible factors.

In Wales especially, those factors are insufficient to mitigate the worst effects of the tax. Undoubtedly, matters such as unemployment, low wages and the number of low-cost terraced houses, which have been up for almost a century in the Welsh valleys, have to be taken into account when the needs element of the grant is distributed in the principality. In Wales, the average wage for a manual worker is £204 a week, which is £20 below the British average and £50 below that in the south-east. White-collar workers earn under half what their counterparts earn in London.

We must take those factors into account and add to them the fact that, of the 37 districts in Wales, 25 will be worse off as a consequence of the poll tax. My hon. Friend the Member for Birmingham, Perry Bar (Mr. Rooker) referred to the gearing effect. It will have a great significance because, in Wales, for every 1 per cent. increase in local authority expenditure there will be over a 6 per cent. increase in the poll tax for those communities.

The Minister knows that the rateable values in the south Wales valleys are much lower than elsewhere—not only in the Principality, but in the whole United Kingdom. There are 250,000 homes with rateable values of less than £75 a year and 175,000 homes with rateable values of between £75 and £100. Because of those low rateable values, and assuming that local authorities remain responsible and their expenditure remains the same, a household of one adult will have to pay an increase in cost of 10 per cent., a household with two adults an increase of 119 per cent., a household of three adults an increase of 229 per cent. and a household of four adults an increase of 339 per cent. The only way in which we can mitigate those worst effects is by ensuring that the grants in the Principality are geared to take account of those disparities, so that the wild variations that result will disappear.

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Let us look at certain local authorities. The Rhondda, by any measure of deprivation, has to be regarded as the worst example for unemployment, low pay and bad housing. In that area, a household of two will have to pay no less than £158 a year in poll tax. The same is true of all the other south Wales valleys—for example Merthyr and Cynon. Other local authorities are much better off, although their rateable values are higher. The contrast is considerable in Cardiff, where the local authority may have to start paying £2 a year back to people, so they will be paying nothing in poll tax. Those massive variations can occur because, as a result of these changes, the resources element in the grant has gone.

The Government can do something about this. Ministers have said that they will look at the question, and they must do so and take into account the views of the district and county councils and all political parties in Wales. Some 70 per cent. or more of the Welsh people last year rejected an unwelcome tax. This phrase may be trite, but it bears a warning—the poor will get poorer and the rich will get richer as a result of this tax. That phrase will echo throughout the valleys of south Wales.

Mr. David Wilshire (Spelthorne)

When I came here for the for first time last June, I thought that my direct interest in the grant system was gone for ever, because the borough council and part of the county council that I represent are out of grant because of Heathrow airport. However, the national non-domestic rate changes will put paid to that, and bring both my borough and county councils back within the system, so I have had to put on my thinking cap and decide whether I support these proposals. Before my hon. and learned Friend the Minister gets worried, I assure him that I support the proposals, and I do so without having had my arm twisted, and for reasons I shall develop.

Before I do so, I shall touch on the points raised by the hon. Member for Newham, North-East (Mr. Leighton)—I am sorry that he is not here now. I took him to be making a plea for more grants, so that his local newspapers could report it, but he told us only half the story. Perhaps I and others would have some sympathy for it if Newham council would put its house in order first and ask for help afterwards. I can give three examples of what is going wrong in Newham so that we can judge properly whether it needs more money or needs to sort itself out.

The Evening Standard on 7 August last year said that the ombudsman had said that Newham council had no effective management of modernisation of a block of council flats. Therefore, money was being wasted. There is the ombudsman saying what happens to the grant that Newham gets. On 9 December last year, The Guardian reported that Newham was advertising for three jobs at £15,000 each for a policing unit when it has no police responsibility. That is another waste of the existing grant going to Newham. Even when it tries to use its money, things go wrong. On 7 September last year, the Evening Standard reported that Newham borough council refused to give housing improvement grants to some of its tenants because the accounts of those tenants were with Barclays bank. Let us get the whole story right if we are to have pleas for grants.

I do not need any persuasion to support these changes, because the system is useless and discredited and no one Government are to blame. When I was in local government, and particularly when I led a local authority for five years, I found the grant system incomprehensible. This was an advantage if one worked it properly, because if one asked one officer what it meant and did not like the answer, one asked another one and got a different answer.

Even if one did receive an answer that one liked, it did not matter very much because either later that year, the year after or even the year after that, one might be told that everything had changed anyway.

In the end, one tended to shrug one's shoulders. If the situation did change, people would put on their thinking caps and ask, "What can we do about this crazy system?" I confess that it was not only Labour authorities who worked the system to their advantage. My own authority, like many others, decided that it should read the small print. I make no apologies because, provided one stays within the law, the law is there to work to one's advantage.

My own authority discovered that if, towards the end of March each year, it examined how much had been spent and what were the rules for grant in that particular year, it was sometimes found that lending money to the housing revenue account increased current expenditure and made the authority eligible for more grant. In other years, it was found that borrowing money from the housing revenue account reduced current expenditure, which was again a qualification for more grant. If my hon. Friend on the Front Bench is now writing all that down so that he can put paid to it, I may tell him that it has been put paid to already—otherwise I would not have reported it tonight.

The current system is incomprehensible, unpredictable and eminently abusable. The new system, despite the reservations expressed by my hon. Friend the Member for Ealing, Acton (Sir G. Young) is comprehensible. If it has some elements that make it less refined, the understanding enjoyed by councillors of what they are doing will more than make up for any other deficiencies. The new system will also be predictable. Knowing how much money will be available before the year starts will, above all else, be the one factor that will make the work of local government a great deal easier. For that reason alone we must press ahead with it.

The new system will also be even-handed. I began by saying that I thought I had seen the last of the grant system so far as my own local authorities were concerned. I am glad that I have not, because when there are some authorities in grant and others out of grant, that is not even-handed. The wishes of the DOE affect some authorities more than others when that system prevails. I welcome the change so that the business rate is centralised and is calculated per head of population, and is not influenced by the fact that there happens to he a huge airport in the constituency. If the DOE can get it right, one hopes the system will also be unabusable.

Apart from commenting generally on the old and new systems, I should like to say something about Labour amendment No. 173. The hon. Member for Birmingham, Perry Barr (Mr. Rooker) did not say very much about it. I have a feeling that I know why. In my time in politics I have learned that one must beware helpful references and plausible explanations.

I took the trouble of looking at the small print of amendment No. 173 and paragraph (i) caught my eye, which states that the Secretary of State shall take into account the latest information available to him as to the aggregate of all authorities' expenditure. That sounds fair enough; to consider what is being spent and then calculate a figure accordingly. However, if understand that wording correctly it means taking into account authorities such as Camden, which is 50 per cent. overspent, and Greenwich, which is 41 per cent. overspent, and persuading the Secretary of State to stoke up, compound and multiply their overspending of previous years in deciding his grant. If that is what amendment No. 173 means, the quicker it is voted down the better.

Paragraph (iii) states that the Secretary of State shall take into account the need for developing those services and the extent to which, having regard to general economic conditions, it is reasonable to develop them. That provision also sounds fair enough, and straightforward, if one reads over it quickly. However, the Labour Front Bench offered no definition of "services" or "developing"—or of who is to judge what is the state of the national economy. If experience is anything to go by, that will be a Labour definition, to the advantage of local government and the lunatics within the Labour party in local government. I suspect that the amendment means more of this kind of developing service. Brent will sponsor more graffiti classes; Ealing will employ more animal rights officers; Haringey will run more training courses for women bricklayers.

I need no persuasion. I rejoice that the current system is on its way out, and I welcome a new system that will be simple, predictable and even-handed.

I shall vote enthusiastically against the Labour amendments. I will not be taken in—as I hope that the House will not—by their plausible line, which conceals gross overspending and waste in Labour authorities, major manipulation by them of the current grant system and a scandalous abuse of other people's money. The aim is to undermine our society and further the revolution, and I am against that.

Mr. Simon Hughes (Southwark and Bermondsey)

The hon. Member for Spelthorne (Mr. Wilshire) surprised no one when he said that he would support the Government. He also surprised no one with his usual argument that crude over-simplification was the way out. If he had listened properly to the debate—and, indeed, to the contributions of his hon. Friends who spoke before him—the hon. Gentleman would have recognised the strength of arguments which, even if they did not convince him, should at least have given him cause for reasonable doubt about whether the system proposed by his Government will be an improvement rather than a considerable disimprovement.

I agree that the present system cannot be supported, and that it can be validly criticised. But the way forward is to ensure that the system that replaces it is agreed with those who have to practise it: that those people are consulted, and use their expertise and practical implementation as partners in deciding on the system.

Of course I accept that central Government will decide the total amount. Thereafter, however, there should be consultation. The amendment in my name, and one of the Labour amendments, argue that there should be not only notification but consultation—that people in local government should be partners in deciding on the process of distributing whatever central Government gives out from taxpayers' resources. We shall never have a satisfactory system of allocating funds until the decision on who gets what is made jointly by the two of them, central Government and local government, and both have available to them—in a tripartite forum—the services of independent assessors and financial experts, who can advise them on the implications of the options that are proposed.

The hon. Member for Birmingham, Perry Barr (Mr. Rooker) made a valid point about gearing. The proposed system will not do what the Minister wanted his system to do: it will not render local government more accountable in that, when local government puts up the cost of its services in a given area, the poll tax will go up by the same amount. It is now obvious from a survey by the Chartered Institute of Public Finance and Accountancy that in not one local authority in England and Wales will the percentage increase in services, and in the cost of those services, be reflected by the same percentage increase in poll tax. Indeed, in some instances, the local authority will spend more in a year, and the poll tax will go down. That is hardly the accountable system that the Government have sought.

If pushed to a vote, I shall support the amendment. Because of the guillotine, I shall not be able to force a vote on my amendment. It is not perfect either, but it allows the system to take into account many more factors than the few crude factors in the system proposed by the Government. One of the concerns of those interested in local Government should be the extraordinary crudity of the proposed new system.

I have pointed out that local government will be carved out of the working out of grant distribution and will only be notified of the report. Two revisions will be possible in any one year—the calculations and additional grant. The additional grant will not, however, take account of massively increased take-up of housing benefit in a particular local authority area and other such unpredictable factors. It may allow for compensation for a hurricane, or something like that, but not for many practical matters.

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As for the transitional arrangements, which will have horrendous implications in terms of administration and practicability, the Government will be able to make such assumptions and estimates as they see fit. Even if information is sought in other cases from local government, the Government will be able to proceed without it, or with information that they have no obligation to test for accuracy. There will be enormous additional centralised power.

A system which is sophisticated need not be, by definition, incomprehensible. Part of the present system is certainly that and we could improve on it, but we need not go to the other extreme. The problem with the whole of the proposed assessment is that the needs of all the local authorities—all of which have an enormous number of different components—will not be taken into account. As the hon. Member for Perry Barr said, once one gets the basic assessment wrong, the gearing effect compounds the injustice and inequality. The Government could have learned from the mistakes of the past, but they have not.

I endorse, without elaborating, the points made by the hon. Member for Macclesfield (Mr. Winterton). Over Easter I went away for a few days and called on my family who live in Herefordshire. My mother is chair of the parish council in a small village which has seven people on the parish council. Those people are alarmed about how they and their colleagues on other parish councils will be able to do their job at that important level of local government.

That common concern has not been allayed by the Government's responses so far. In London we do not even have parish councils—would that we did—but parish, community and town councils deserve to have their voices heard. The hon. Member for Macclesfield made a good case to which I hope the Government will listen.

I should like to reflect the general tenor of the points made by the hon. Member for Newham, North-East (Mr. Leighton). There will be enormous administrative costs. We are not told how much the grant will reflect them. We could quibble about some of the figures. In a press release issued by the Department of the Environment on 13 April, the Government are said to have made a capital allocation of £25 million to help local councils in preparation for the arrival of the community charge. The hon. Member for Newham, North-East talked about the particular problems in his borough. There is no doubt that the sheer number of bits of paper will be multiplied—it has nothing to do with a local council's efficiency.

In Southwark, 66 per cent. of people are council tenants, and they pay with their rents. They will have individual poll tax forms. According to the current figures, the 40,677 rate accounts will become 185,000 poll tax accounts—355 per cent. more. The number of payments are likely to increase by nearly 2,000 per cent.—a staggering number. People will have to go on to estates, where they may well be mugged or be in physical difficulty. There are rates arrears of £30 million in Southwark, and I am critical enough of the local council for that. What will be the amount when there is the new system to police—[Interruption.] I did not hear that comment. I do not defend Southwark's £30 million rates arrears, but that is in a system in which the money is supposed to be relatively easy to collect. This is a system whereby we shall have to chase people around the boroughs.

The costs, the needs and the realities of local government will not be reflected in the new system. I hope that central Government will learn one lesson even at this late stage, even though the Minister has shown no sign of doing so. The only way in which central Government will ever be able to have a decent relationship with local government is through a partnership and not by saying, whatever the issue, "We know best. Marsham street will tell you what to do. We shall impose our system." The Bill is about a Marsham street system instead of local government choosing its own way forward.

Mr. Leigh

The hon. Member for Southwark and Bermondsey (Mr. Hughes) said that the reform would be a disimprovement on the present system. I do not know whether that is new SLD-speak, but I wish to take five minutes of the House's time before my hon. and learned Friend replies to the debate to say that I consider that the reform will be an improvement on what is without doubt a chaotic situation.

My hon. Friend the Member for Ealing, Acton (Sir G. Young) made a typically coherent speech. However, he did not mention that in 1987–88 his borough of Ealing overspent by the colossal amount of £100 per head. Of course, my hon. Friend has an advantage over me in that he was a Department of the Environment Minister. He should ask himself why he presided over a grants system that allowed Ealing to overspend by £100 per head, which allowed Ealing to return its street cleaning operation to its own work force and remove it from the private firm, with the cost of the service increasing from £900,000 a year to £1.7 million a year in 1987–88. He should ask himself why he presided over a grants system which allowed Ealing, since Labour took control in May 1986, to create 1,435 new council jobs. He should ask himself why the council is spending £16,000 a year to employ a worker with a vehicle to put up its political posters.

The hon. Member for Newham, North-East (Mr. Leighton), who made an effective speech, has to ask himself why Newham is spending £126 per adult above what it should be spending in 1987–88. The hon. Member for Birmingham, Perry Barr (Mr. Rooker) said that every £1 extra per head of local authority spending might result in a considerable loss of grant. That is true. We want local authorities to be made aware of the effects of their decisions and the real costs to their citizens of decisions such as those being made in Ealing, Southwark and Bermondsey and many others. If I had sufficient time I could quote many other examples.

Lincolnshire benefits from having enjoyed Tory control for a generation under county councillors who provide effective services that people need. However, we and our colleagues in other shire areas have repeatedly been penalised by the present chaotic rate support grant system.

In Committee my hon. and learned Friend said that the present rate support grant system resembled the Schleswig-Holstein question in the last century. It was said that only three people understood it, and that of those one was dead, one had forgotten, and one had gone out of his mind. A former Secretary of State for the Environment admitted that he did not understand the present system. [Interruption] It was not the current Secretary of State but a previous incumbent of that office, who admitted that he did not understand the system. The present system is incomprehensible, easily abused and far too complex.

So far in the debate no one has said what the new system will do. I shall attempt to do so briefly in one paragraph. It will achieve equalisation of what people have to pay in different areas to achieve a standard rate of service. Surely that is a sensible reform. Should the House turn its back on a system which is fairer, simpler, and less complex and which will provide a level playing field that the electorate can understand? I shall vote enthusiastically for the Government's proposals.

The Minister for Local Government (Mr. Michael Howard)

We have had an extremely interesting and vigorous debate on this aspect of the Government's proposals. As usual, there was an interesting speech by the hon. Member for Birmingham, Perry Barr (Mr. Rooker), but he rather overdid it when he suggested, quoting from a Central Office document, that the Government are proposing a system that relies on only six indicators. I made it plain in Committee, at column 1355, that that was a rather over-optimistic assessment. We recognised that there would need to be considerably more than six elements but considerably fewer than the 63 or so that are used in the present system. I cannot tell the hon. Gentleman how many there will be because we have not yet reached a final decision on the grant system.

The hon. Gentleman made a number of points about the effect of the system that we propose to put into place. He referred at length to the gearing effect and gave some interesting examples. But what is interesting about the Opposition's approach to gearing is that they always talk about its effect on increases in council spending. We never hear a word pass the lips of the hon. Member for Perry Barr about the effect of gearing on reductions in council spending—about the incentives to real economy and efficiency and to the provision of real value for money, to the benefit of residents, that the system that we shall put into place will offer.

The hon. Gentleman quoted a number of interesting examples that were based on percentages, but when people consider the effects of the spending decisions of their councils they are not concerned with percentages; they are concerned about the money that they will have to pay. The fact that a pound of additional spending will mean a pound more in community charge and that a pound less in spending will mean a pound less in community charge is something that they will readily grasp. They will see the importance of it and will understand its significance for their pockets.

In the interesting comparison that he made in percentage terms about the effect of increased spending on the London borough of Islington compared with the other boroughs to which he referred, the hon. Member for Perry Barr did not bring out the fact that the reason why an increase in spending led to a percentage increase in the community charge for Islington, compared with those other boroughs, is that Islington receives a much larger central Government grant than the other boroughs. It will no doubt continue to receive a much larger central Government grant than the other boroughs. The important point is not the percentage comparison but the fact that, under the new system, residents will know that for every pound increase in spending by their local authorities there will be a pound increase in community charge—and vice versa for reductions.

The hon. Gentleman asked me, as Minister for Local Government, to recognise the need for, and the importance of, a variety of approaches by local authorities because they are situated in different parts of the country. I readily accept that there can and that there should be differences of approach. There will be a variety of approaches, not simply because local authorities are situated in different parts of the country but because even side by side, there will be differences of approach. The importance of the system that we are putting into place is that differences of approach will reflect the democratic views of residents in local authorities. They will he based on true accountability. Residents will know that they will have to pay for extra spending but that, if their local authority pursues economic policies, they will save. That great element is missing from the present system.

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The one factor, above all, which will improve accountability is the comprehensibility that we shall strive to introduce into the system. The hon. Member for Perry Barr and my hon. Friend the Member for Ealing, Acton (Sir G. Young) were right when they said that there will be arguments whether the local authority has had the amount of Government grant to which it contends it is entitled. It is idle to suppose that one could ever devise a system of Government grant that would eliminate such arguments.

There will always be arguments of that kind—but only if they take place against the background of a grant that people understand can we hope to get some real democracy back into local government, so that people take decisions knowing whether their council gives them value for money. They can make their own judgments on those arguments, and on the level of spending that they want to support and think appropriate. Those judgments will be based on an understanding of the situation and the performance of the councillors for whom they will be voting.

I want to say a few words about the characteristically forthright comments of my hon. Friend the Member for Macclesfield (Mr. Winterton). I understand his concerns, but I should say at the outset that, however strongly he feels about the parish councils to which he referred, that would not afford him a reason to refuse to support the Government at 10 o'clock.

Amendment No. 156 is a Labour amendment. Despite that, as my hon. Friend the Member for Spelthorne (Mr. Wilshire) pointed out, the hon. Member for Perry Barr said precious little about it in his introductory remarks.

The amendment will do nothing at all to help ease the difficulty to which my hon. Friend the Member for Macclesfield referred, as it may affect parish councils under the new system. I listened with great interest to my hon. Friend; I know of his distinguished service in local government before he entered this House. I listened with particular interest to the example that he gave of two neighbouring parish councils with different spending levels, and the way in which that situation would affect the level of community charge paid by people in those parishes.

There will be a power for the district council to levy a lower community charge for the residents of a parish, where the parish is providing the service which the district council would otherwise have provided for a non-parished area. That I believe, would go a considerable way towards meeting my hon. Friend's concern. The service that the parish provides may not be a service that the district provides for unparished areas, and, indeed the parish may have a higher level of spending, as a result of extravagance or, perhaps, of a higher level of service.

I accept that my hon. Friend was right when he said that, in general, parish councils are a cheap and effective form of local government. But if a parish council is spending to provide a higher level of service than the district provides for unparished areas—I hope that my hon. Friend the Member for Macclesfield will reflect upon this—then it is right that in those circumstances that higher level of service should be paid for by the residents of that parish.

It is unsatisfactory that the parish should be able to offload that spending and the cost of an additional level of service to businesses that happen to be in the parish area or to non-domestic rates. That approach does not contribute to accountability. I do not think that the House would wish to support such a system.

I hope that, upon reflection, my hon. Friend will see the force of that point. Whether or not I have succeeded in persuading him, the fact remains that this matter will not he affected by the amendment that we shall vote on at 10 o'clock. Whether or not I have persuaded him on the merits, I hope that my hon. Friend may yet nevertheless join us in the Lobby.

Mr. Wigley

I failed to catch the Chair's eye earlier but I wish to make a point about community councils. Since there is strong feeling among community councils, parish councils and the organisations that work on their behalf on this point and since there are amendments tabled by the hon. Members for Macclesfield (Mr. Winterton), for Clwyd, North-West (Sir A. Meyer) and myself and my colleagues, if, those amendments come up in another place and the case is put coherently, will the Minister give an undertaking that the Government will have an open mind? There are real fears that the work of those councils may be undermined by the changes that are taking place.

Mr. Howard

Of course, we always have an open mind and we always listen most carefully to the points that are made in this place and in the other place and, indeed, in the course of meetings and discussions that take place in neither place. Therefore, I can give the hon. Gentleman that assurance.

The hon. Member for Torfaen (Mr. Murphy) rather over-egged the pudding when he discussed the different ways in which the collection fund would be treated in England and Wales. He suggested that the reason for the difference was that local government in Wales had reached some ideal state that put it beyond any sort of criticism. I do not think that I ever said anything quite as complimentary as that about local government in Wales during the course of our deliberations in Committee. We justified the difference in treatment on the basis of the different history and traditions of local Government in Wales, compared with that in England.

The hon. Gentleman concluded his remarks by saying that serious problems would arise in the Welsh valleys in particular if there were not a proper reflection of different needs in the Government grant. I understand the hon. Gentleman's point. We have at all times made it clear that there would continue to be an effective, proper needs element in the Government grant.

Of course we recognise that it costs different amounts of money to provide a standard level of service in different areas that have different needs. We have always made that plain. The arguments have sometimes been distorted by others but we have always made it plain that it is our intention to do that and we shall seek to have as effective a needs element in the grant as possible.

The overriding fact remains—it is at the heart of our approach to these matters—that we want and intend to introduce a grant system that is comprehensible. We believe that only against the background of a comprehensible system can we achieve true accountability. I understand why it is not necessarily in the interests of the Labour party to have a comprehensible grant system. If we have a system that cannot be readily understood and on which there cannot be any sensible argument because so few people understand the argument, accountability is clouded and goes out the window and we encourage and foster the sort of high-spending irresponsibility that we have seen time and again from local authorities controlled by the Labour party over recent years and earlier.

Because we wish to put an end to the way in which those authorities have been able to shelter behind incomprehensible grant arrangements and because we want to encourage true accountability, I commend to the House the grant arrangements presently contained in the Bill.

Mr. Rooker

With the leave of the House, I should like to make a couple of points. It has been an interesting debate. It has been a short debate, but that is necessary under the guillotine. Two Conservative Members spoke for the Government and two Back-Bench Conservative Members spoke against. There was the unjustified attack by the hon. Member for Spelthorne (Mr. Wilshire) on his hon. Friend the Member for Ealing, North (Mr. Greenway), in his absence. He criticised him not for the fact that he is not supporting the Government today but because when he was a Minister in the Department of the Environment he allowed—

Mr. Wilshire

rose—

Mr. Rooker

I will not give way. The hon. Member for Spelthorne criticised his hon. Friend for allowing his own council to overspend. —[Interruption.] I am sorry. I withdraw completely and utterly, with full apologies all round. I have it written down here. It was the hon. Member for Gainsborough and Horncastle (Mr. Leigh). But I think that the point was made, and it was an unjustifiable attack on the hon. Member for Ealing. North—

Sir George Young

I am not the Member for Ealing. North.

Mr. Rooker

Mr. Speaker, it has been a long week. I am prepared to concede a throw-in to the Government, because we have won four-nil every day this week. The Government have not had a good week.

One of the main points in this short debate has been the question of grant distribution, because the way grants are distributed is crucial. We are talking about 50 per cent. of local government expenditure. Going back to the point that I raised originally concerning the factors on which the grant will be based, we are told that they will be fewer than at present. The Tory document issued last August from which I quoted said that there would be only six. The Minister reminded us that he conceded in Committee that there would be, not six, but fewer than the 83 that there are now, but he cannot say what the figure will he.

The hon. and learned Gentleman has also admitted, because he has not given us the answer to the question, that the Government do not even know how to count people. It is crucial that the number of people relevant to the grant distribution is known. Is it the poll tax number, the census number, the daytime number, the seasonal number? That is absolutely crucial and they still have not made up their mind during the passage of this Bill how they will count people for the grant distribution purposes of the poll tax.

As the Minister said, people will know, there will be more accountability and they will find out. Well, the people are finding out. In February this year, 45 per cent. of the people of this country thought that the poll tax was a good idea. The figure had dropped from over 60 per cent. last autumn. We had had the Second Reading and the Committee was under way. Last week 26 per cent. thought that it was a good idea. So, yes, the people are finding out about this tax. Only 48 per cent. of Tory voters now think that it is a good idea. The more people find out about the poll tax, the more convinced they are that it is a bad idea. The percentage that thinks that it is a bad idea has gone up from 39 per cent. in February to 62 per cent. while those communication whizz-kids have been dealing with the Bill in Committee. So, yes, the people are finding out, and the more they find out, the less they like it.

It is not surprising that Ministers have not yet decided how they will count people. What happens with all the mechanisms that are being constructed if people still end up voting Labour, because it is a very political tax? We know what will happen, because the first debate on Monday will be on the mechanism for capping the poll tax. Whatever happens with the grant, the business rate or the poll tax, or indeed at the ballot box, if this bunch of dictators do not like the result, they will change it.

The Government have had a bad week and if hon. Gentlemen want them to have a better time next week they know what they can do at 10 o'clock on Monday. We do not have to whistle. More than sufficient Tory Members have already voted against the Bill to destroy the Government's majority. Every day, in every vote, this week different Tory Members have voted against different parts of the Bill. They should have the guts to do the right thing on Monday.

I cannot finish on a high note because I have to beg to ask leave to withdraw amendment No. 173 and seek a Division on amendment No. 156.

Amendment, by leave, withdrawn.