Welsh Rate Support Grant

HC Deb 20 December 1988 vol 144 cc395-411 10.54 pm

The Secretary of State for Wales (Mr. Peter Walker)

This is the first debate particularly involving Wales for some 18 years which has not had the benefit of the attendance of our former colleague Brynmor John. I know that I speak for hon. Members on both sides of the House in expressing our deep regret at his death and his loss to Parliament.

He was a distinguished Minister and an articulate parliamentarian. He represented his constituency and Wales with great enthusiasm. To all of us who had the privilege of knowing him he was a civilised, kind and compassionate man. We deeply regret his premature death. For the past few years he had not been in good health, but, typical of Brynmor, he remained optimistic, enthusiastic and energetic in all that he tried to do. His death was a great blow to his colleagues on the Opposition Benches who looked upon him, correctly, as a distinguished member of their party, but, like all great parliamentarians, he was a considerable loss to the House. I beg to move, That the Welsh Rate Support Grant Report 1989–90 (House of Commons Paper No. 32), a copy of which was laid before this House on 8th December, be approved.

I hope that it will be for the convenience of the House if we take with it the following motions: That the Welsh Rate Support Grant Supplementary Report 1988–89 (House of Commons Paper No. 33), a copy of which was laid before this House on 8th December, be approved. That the Welsh Rate Support Grant Supplementary (No. 2) Report 1987–88 (House of Commons Paper No. 34), a copy of which was laid before this House on 8th December, be approved. That the Welsh Rate Support Grant Supplementary (No. 3) Report 1986–87 (House of Commons Paper No. 35), a copy of which was laid before this House on 8th December, be approved.

Mr. Speaker

I take it that that is the wish of the House.

Mr. Walker

Hon. Members will by now have had the opportunity to examine the reports and my statement to the House on 8 December. Therefore, I do not intend to repeat the details. The settlement for 1989–90 provides a fair and reasonable basis for local authorities to plan their budgets. All the main indicators in the settlement—provision for relevant and current expenditure and grant—are increased by more than the projected rate of inflation for the year. It offers the real hope of moderate rate increases if councils can restrain expenditure to realistic levels shown in the settlement.

It is also important to recognise that provision for capital spending is well ahead too, at 8.2 per cent. Taking account of current and capital together over the two years for which I have been responsible for local government in Wales, provision for local authority expenditure has increased by no less than £298 million, or 15.4 per cent.

Tonight is the last occasion on which we shall plough through the rate support grant process. No longer will we have these supplementary reports, sprinkled liberally with jargon of an intensity to make the sponsors of the Campaign for Plain English give up in despair. From April 1990 we move to the new arrangements under the Local Government Finance Act and there will be an opportunity to debate my proposals for that financial year in due course.

The settlement includes provision of £9 million towards the revenue expenditure which district councils will incur in preparing for the new system. This is about double the Committee of Welsh District Councils' first estimate but, in fairness to it, its first estimate was based on inaccurate detail, I am glad to say pointed out by us. We disagree with their current revision up to £11 million, but I hope that the figure on which we have agreed will prove sensible.

In addition, capital allocations of £10.3 million have been distributed for next year. That sum is precisely equal to the amount that districts say that they expect to spend in the coming year on capital projects related to community charge preparation. It has been distributed in accordance with a method developed and recommended by the Committee of Welsh District Councils, and I am grateful for the manner in which the councils are preparing the arrangements for the new form of local taxation.

Local authorities in Wales know that they have an essential role to play in the task of building the economy of the Principality and strengthening its social framework. I am anxious that central Government and local government should continue to work together to ensure that those vital tasks are carried forward. Positive efforts have already been made, and the initiatives that have been taken are bearing fruit, but there is no time for complacency. We face the major challenge of the single European market in 1992, and county and district councils have a significant contribution to make in meeting that challenge.

Perhaps the councils' most important contribution lies in taking steps to ensure that the services that they provide encourage businesses in their areas to expand and develop. It is local government's attitude to planning, to the education of the work force and to the provision of essential infrastructure that underpins economic regeneration. I am confident that the good work being done by local councils in Wales in those vital areas will continue to bear fruit.

Economic development will, however, be hindered if councils fail to see that very large rate burdens deter potential investors and damage confidence. The need for further economic progress is one of our reasons for introducing the national non-domestic rate in 1990, which I believe will benefit business in Wales.

Taking aggregate Exchequer grants and rate rebates together, the Government have, in the 1989–90 settlement, contracted to meet 67 per cent. of councils' relevant expenditure. They have demonstrated a degree of commitment to meeting the needs of Wales which should now be matched by a determination on the part of local authorities to ensure that rates are held down to levels that provide the necessary services efficiently and at reasonable cost. That can best be achieved if they are lean and fit, and alert to the needs of their communities and the opportunities for progress that are open to them.

I am glad to say that the need for efficient provision of services has been recognised and acted upon by local authorities in Wales. Much has been done by them and by the Audit Commission to identify potential cost savings, but much more needs to be done to translate that potential into reality. The Audit Commission has identified possible efficiency savings of £42.4 million a year in Wales; only 28 per cent. of those savings have thus far been realised. In taking their search for savings further, I trust that councils will ensure that they secure the substantial benefits achievable through opening up appropriate local authority services to the benefits of competition. I congratulate them on the progress they have made to date, but I think they will agree that there is still a great deal more to be achieved.

Altogether, in capital and revenue, we are talking about not even hundreds of millions but billions of pounds, figures perhaps beyond the comprehension of ordinary people. It is interesting to express them in terms that people understand. My proposals for the forthcoming year mean that local authority expenditure in the Principality will be some £37 per week per household in Wales, of which £25 will come from the Government grants, £7 will come from business and £5 from the domestic ratepayer. That vast local authority expenditure will provide vital services for the Principality. but the sums involved are very substantial.

As I said when I made the original announcements, I have never known an occasion when local authorities or Oppositions, be they Conservative or Labour, have applauded any rate support grant system or settlement for any year. When one looks in balance at the inflationary trends, when one looks in balance at what is going on and when one looks in balance at what will happen in Wales compared with other parts of the United Kingdom, one cannot complain about a situation in which each household in Wales will benefit from expenditure of £37 a week by local authorities, £25 of which will come from Government, £7 from business and £5 from the domestic ratepayers.

The settlement is a good one for Wales. It will make it possible for local government to meet its obligations in providing efficient services, while keeping rate increases low. I commend my proposals to the House.

11.6 pm

Mr. Barry Jones (Alyn and Deeside)

The Secretary of State referred to our late colleague, Mr. Bryn John. He spoke about him most sincerely and with insight. That is appreciated by the late Bryn John's right hon. and hon. Friends. He was exemplary as a constituency Member and he always guarded the interests of Pontypridd fiercely. I had the pleasure of serving in the last Labour Government alongside him. He was a superb Minister. He was very decisive, he was always well-informed and he was a civilised man. He was a strong Minister and was always on top of his brief. He always gave a lead. We knew him, too, as a man rooted in his family and in his community, which he loved. Nobody denied that he had integrity and courage —plenty of it—as well as independence and culture. He valued his Welsh heritage. It is no exaggeration to say to the House that he was a truly good man and a very disinguished parliamentarian. [HON. MEMBERS: "Hear, hear."]

I know that the Secretary of State has not read the document because he has allowed paragraph 9 on page 30 to go out. It says: These formulae comprise two straight lines: one of slope 3.5 x PGRE below the threshold and one of slope 5 x PGRE above it. I could not expect him to read that, but he has put his signature to it and he deserves what he is going to get.

The Welsh counties do not see the settlement as the Secretary of State does. The Welsh counties together are not an overtly political group, although they are shrewd and professionally advised. They are perturbed by the settlement. I shall summarise their worries. They were bitterly disappointed that the Secretary of State had ignored their views as expressed in response to the Provisional Settlement and subsequently". They cannot understand how a settlement fixed in the context of comparatively low inflation and interest rates in the summer could still be considered reasonable in the circumstances which now exist". They also say—and I agree: The Settlement falls short by some £37.6m or 2.1 per cent. of the amount needed to deal with identified higher costs … and the increase in the GDP deflator from 4 per cent. to 5 per cent. They also point out: Providing for this minimum shortfall is likely to reduce the overall rate of grant from 64 per cent. to a little over 62 per cent. and to cause rate increases to be some 4 per cent. higher than they might otherwise have been. That is why, according to the Welsh counties, the settlement is not a good one, although the Secretary of State has just said that it is.

The Government have conveniently overlooked the higher costs arising from the legislative pressure of, for example, the Education Reform Act, which enables the local financial management of schools and the reform of the curriculum. Where in the settlement are the prospects for more teachers in our high schools and our primary schools? Where are the prospects for halting closures and cuts in the nursery sector, for the widespread repair, refurbishment and decoration of our schools, and for the desperately needed textbooks, scissors, equipment, stationery, glue, erasers, pencils and Biros, which the worried young mothers and fathers, the parents of the youngsters at school, are looking for? Why does the settlement leave the counties in trouble when paying the police and firemen at 8 per cent., and the lecturers at 6 per cent.?

The Welsh district councils are responsible and representative. They say that despite the efforts that the councils, counties and districts will make to reduce costs, which will involve real cuts in services, spending in 1989–90 is likely significantly to exceed Government provision. They say that they face a stark choice between reducing services and service costs and increasing local district rate levels above the 6 per cent. predicted by the Welsh Office. Boroughs and districts will face great difficulties this year in bringing their average local rate levy increases down to the single figure that the Secretary of State wants and predicts.

Things are even worse than that might suggest. Welsh Office predictions for district councils' spending at the level that the Government want show that all but seven districts out of 37 could face local rises of more than 10 per cent. Welsh Office figures show that 19 Welsh districts—half the total number—could face local rate levy increases of between 14 and 21 per cent. for the district part of next year's rate.

Welsh Office figures show that a number of district councils will have particular difficulties setting next year's local rate and determining the level of local services. There are three such districts in Clwyd—Colwyn, Delyn and Glyndwr. In Gwynedd, most districts are affected: I name Aberconwy and Arfon. In Dyfed, the districts of Carmarthen and Llanelli face especial difficulties. In West Glamorgan, the districts of Lliw Valley and Swansea face problems, as does the Vale of Glamorgan in South Glamorgan county. In Mid Glamorgan all six districts face major difficulties; particularly hard hit will be Ogwr and Taff-Ely. In Gwent, problems face Blaenau Gwent, Monmouth, Newport and Torfaen.

Overall, the Welsh associations believe that unless substantial cuts in services or savings in costs are made by councils, next year's average rate increase could be about 4 per cent. more than that predicted by the Welsh Office. If, as may happen, it is less in practice, that will be because local authorities have achieved savings, cut services or found reserves and balances to reduce their rate levies.

I remind the Secretary of State of the deep disappointment felt in the Welsh districts at his inability to come up with more money to help them face up to the challenge of the poll tax. That rankles in Wales. Even now, I ask him to reconsider, because the districts feel badly let down. No one in Wales wanted the poll tax, and the Secretary of State has told districts to implement it without providing them with the money with which to do so.

Our criticism of the settlement centres on its lack of realism. In the main, the right hon. Gentleman has today proposed the settlement that he promulgated as long ago as July. Its defect is that it has not been adjusted for the steep rise in the rate of inflation and interest rates or for the hike in wages and salaries. Our county and district councils are now stranded, sold short and facing demands to do much more on insufficient capital.

The settlement fails to provide for the higher costs arising from the legislative pressures of the poll tax and the Education Reform Act 1988 and from the increasing number of elderly and handicapped people who need ever more provision from social services departments. The settlement is at least £37 million—an important 2.1 per cent.—short of the amount needed to deal with identified higher costs. There is insufficient money to help the county and district councils to advance schemes to regenerate their local economies and to provide more jobs for local people. There is not enough money to tackle homelessness and the rapidly deteriorating and ramshackle housing in many valley communities.

The Opposition do not recognise the settlement that the Secretary of State outlined, nor do the counties or the districts, and soon our people will not. The settlement is a missed opportunity to repair and enhance the partnership between central and local government. It is a major disappointment which, because of its financial miscalculations, guarantees rate increases substantially higher than they might have been.

We have no hesitation in asking the House to reject the settlement and the Secretary of State to think again.

11.16 pm

Sir Raymond Gower (Vale of Glamorgan)

I should tell the hon. Member for Alyn and Deeside (Mr. Jones) that the settlements made by the Labour Government were not always favourable to local government. During their latter three years in office, rate support declined by 16 per cent. in real terms. The hon. Gentleman should not criticise what, on balance, is a great effort to assist local authorities to meet their obligations.

The settlement that my right hon. Friend the Secretary of State has presented to the House is justified because there are disadvantages in many areas of Wales that merit the support that has been given to the Principality. The amount provided by the Government is a high proportion of the total required, which means that a smaller burden will fall on the domestic ratepayer. But my right hon. Friend will be aware that the collapse of some of the industrial fabric, due to our former dependence on a narrow industrial base, has created peculiar problems. His support for rates in Wales is amply justified when compared with the support that is given to many other parts of the United Kingdom.

We are all pleased to see the amount of support that my right hon. Friend has announced for the valleys initiative. It is one of the biggest contributions that he and the Government could make to improving the fabric of life in the worst-affected parts of Wales. Does he believe that the councils will be able to make adequate provision for the initiative out of the amount that has been allocated to them under the rate support grant? I want the valleys initiative to succeed brilliantly, but I believe that the local authorities may need even more support if that is to be achieved. This goes to the nub of the problem of running local government. Such an initiative cannot be accomplished by central Government alone. It will require formidable support from local authorities and other bodies.

I agree with my right hon. Friend that the settlement is helpful, and I hope that it will enable the authorities in Wales not to levy excessive rates. On some occasions there have been excessive rates. I hope that that will not happen on this occasion because it would not be justified.

11.19 pm

Mr. Richard Livsey (Brecon and Radnor)

I wish to add my tribute to the late hon. Member for Pontypridd, Brynmor John. He was a compassionate man and a champion of Wales and his constituents. I got to know him when we were both agricultural spokesmen. He was well-informed and was always pleased to discuss matters with me at any time of day or late in the evening. He was a kind man and was friendly to me as a newer Member. I appreciated that. We feel his loss deeply.

There is no doubt that the rate support grant settlement is well behind inflation, although last July it was level pegging. Inflation next year is predicted at about 8 per cent. and the settlement will not match that. That must be a worry for local authorities affected by rate support grant. Inevitably, it will affect the level at which the rates are set, particularly when one takes account of the current high level of interest rates. What seemed reasonable in July seems doubtful now and will be untenable in 1989. A shortfall can be identified. About half the cost of setting up the poll tax collection system is allowed for in the settlement. Therefore, the settlement is not high enough. Why is it not higher?

The Secretary of State mentioned the national non-domestic rate. Many small businesses in Wales, particularly in rural Wales—shops, filling stations and so on—will be badly affected by the national non-domestic rate. People will be complaining about having to pay poll tax as individuals and the national non-domestic rate as a business. That will hit them hard because many of the businesses are finely balanced in terms of viability. They do not have the same volume of business as that found in some urban areas. However, some of the more rundown urban areas are also struggling. There is no doubt that it will prove to be an unpopular measure, particularly when one realises that the non-domestic rates will be aggregated —collected in Cardiff and inadequately redistributed to areas where rates are low and where the economic activity is not sufficient to sustain the loss of the current business rates.

I was glad to hear that the capital side of the rate support grant will be at 8 per cent. In the past it has tended to lag behind. There are worries in relation to sparsity factors in rural Wales. I suspect that some of the calculations done by the Audit Commission relate to what is known as spare school places. As I have argued before, many small schools in sparsely populated areas may have some spare places in theory. However, it is too much to ask small children to move from one community to another because alternative schools are 12 or 15 miles away.

The school buildings maintenance programme faces a crisis. Last week I visited the Oxford road school in Llandrindod Wells. It is a primary school; 222 children attend the school. I found that the roof was leaking and that the school canteen was on the point of falling down; it had just been propped up the week before. Too many of our schools are in a similar state. Rain is pouring on to the lunches. That is not good enough. Powys hopes to sort out that problem, but a more generous rate support grant would have been of great assistance.

Less and less support is being provided for housing. It is almost negligible now. Are Ministers able to say what grant Tai Cymru will receive on 1 April? That new body will require substantial support if it is to tackle the major housing crisis in Wales.

Sir Anthony Meyer (Clwyd, North-West)

Is there any item on which the hon. Gentleman is not prepared to spend a great deal more money, and does he have any suggestions as to where the hell it is to come from?

Mr. Livsey

The rate support grant has been declining over the years. A considerable injection of capital is required because the services that are provided to many of our communities have been run down.

Roads in Wales are among the most unsatisfactory that can be found anywhere in the United Kingdom. That is another good reason for an increase in the rate support grant in the next financial year. This is an inadequate settlement. A great deal more work needs to be done in Wales which would provide jobs for the people of Wales. They badly need those jobs.

11.27 pm

Mr. Paul Flynn (Newport, West)

The town of Newport has been uniquely punished by the settlement. Newport's block grant for 1989–90 is to be £5,810,000—a mere £245,000 higher than the grant for the current year, if the council spends precisely at the level that the Welsh Office is assuming for grant purposes. It represents an increase of 4.4 per cent. in grant, which is expected to cover inflation —the Government forecast that it will be 5.3 per cent.—the preparation costs for the community charge, which the Welsh Office estimate will amount to £450,000, and the library service in Newport, which is being transferred in April from Gwent county council at a cost of about £1 million.

Newport is sharply disappointed about the settlement. Just four weeks earlier the Welsh Office published provisional information about Newport's claim. The Secretary of State said that these sums are sometimes beyond the comprehension of ordinary people, but the extraordinary people in the Welsh Office and in Government got their figures wrong to the tune of 55 per cent. The settlement means that Newport's grant for next year will be £318,000 lower than the previous settlement.

The grant settlement implies a rates increase of 16 per cent., if we disregard the libraries. We do not know whether the county council precept is to be reduced. If it is not, there will be a 21 per cent. rates increase. But it could be even worse. The Government's assessment of inflation at 5.3 per cent. appears very optimistic, especially as local authorities are affected mostly by pay inflation. Inflation is running at about 6.4 per cent., but pay inflation is about 9 per cent. Interest rates are high and seem set to remain high for a long time.

The Welsh Office has produced an arithmetic explanation for Newport's grant, but that has highlighted and concentrated attention on the Byzantine intricacy of the scheme. It may be thought reasonable to bamboozle members of the public and ratepayers, but it is not a good scheme if it manages to bamboozle the experts who administer it so that they produce an error of 55 per cent.

If Newport increases expenditure by 5.3 per cent. for inflation and adds the community charge preparation costs, the grant settlement implies a rate increase of at least 16 per cent. The Welsh Office consoled Newport council by saying that it was no worse off than 12 other Welsh councils. How do we square that with what the Secretary of State said about modest rate increases? We have to look to the transfer of the library services and perhaps the Secretary of State can tell us something about that when he replies.

For some 18 months we have had the experience of the Secretary of State for Wales in his intensive peregrinations around the country stirring up a manic optimism which has had a considerable effect in Wales. Last Friday the first national opinion poll showed that since the Secretary of State took office support for Labour has risen by a heartening 8 per cent. and support for the Conservative party has plummeted. There is a record number of Labour councillors on Newport borough council and Labour gained four seats in this year's election. That is not entirely due to the Secretary of State for Wales and his contribution to Welsh life, although he has contributed to the resurgence and consolidation of the strength of the Labour party in Wales. It is also due to the work of the local authorities. The Newport local authority has a splendid record of fine stewardship of the town's affairs, and providing good services at good value prices.

The people of Newport will not blame the local authority for the swingeing increases. They will point the finger for the unreal and unfair settlement at the Secretary of State. He is picking the pockets of the ratepayers in Newport.

11.32 pm

Mr. Dafydd Wigley (Caernarfon)

I too associate myself with the remarks about the late Brynmor John. We offer our condolences to his family, and to the hon. Member for Alyn and Deeside ( Mr. Jones), the Front Bench spokesman for the Labour party, who suffered a bereavement recently.

Last week when the Secretary of State made his statement in the House about the settlement, I asked him why the expenditure sub-group of the Welsh Consultative Council on Local Government Finance had established a figure for the needs in Wales £13 million greater than the amount he is delivering. We are getting substantially less money than that committee thought necessary to meet the varying needs in Wales. The Secretary of State responded by saying that the sub-group did not include in its calculations the potential for improved efficiency. One can talk about improved efficiency year after year, but there is a danger of constantly expecting squeezes and cuts from local government. Ultimately that becomes counter-productive as the services that are so badly needed in Wales, particularly in areas where incomes are low and the dependency on the services is high, cannot be delivered.

Looking at the recommended settlement for 1989–90, the grant-related expenditure for district councils shows a very great variation from area to area in Wales. The average expenditure per capita is £106. Not surprisingly, the highest is Rhondda, with grant-related expenditure of £146 per capita recognising the very great needs in Rhondda. Monmouth is the lowest, spending £81 per capita. That shows a plus and minus around the mean of about 25 per cent. That is a very great fluctuation. It is surprising that in areas such as Montgomeryshire, with a figure of £81, there is rural deprivation. Areas such as the Lliw valley or Neath, which has urban problems, are well below the average.

As the scatter is so great for district functions, one is surprised at the great homogeneity in the determination of grant-related county council expenditure, to the exclusion of Powys. That is very high because of the rural nature of the area. The scatter of about £535 per capita is very tight. One wonders whether the mechanisms are sensitive enough to identify the needs of these areas and whether those needs are being met.

The Secretary of State spoke about the cost of local government services and about where the money came from. He came down to a residual figure of £5 per week per household. That may not be much in terms of the income levels in the south-east of England, but it must be related to the incomes in some of the poorer areas of Wales. In some of the housing association areas in my constituency the average income is £58 per week. To people on such incomes the figures mentioned by the Minister can be devastatingly high. I realise that such people would not pay the full rate, but even people on an income of £130 a week, which is £6,500 a year—that is the sort of average that one could find in my constituency—will pay the full poll tax. They are above the £125 cut off below which there will be some sort of reduction, and families on such incomes will find this a great imposition.

The Government will find it difficult to sell in Wales the cost of the poll tax administration to local government as well as its impact on those who will have to pay it. There will be considerable resentment.

I realise that housing benefit is not entirely the responsibility of the Welsh Office and does not come entirely within this sort of settlement. Local authorities in Wales will have to face the growing indebtedness of people who are finding it difficult to meet rent arrears. That is having a direct effect on local authority finance and must be taken on board.

The settlement deals with the future, and many social service changes will inevitably have an effect on county expenditure. We do not yet know where the Government intend to take us in response to the Griffiths and Whiteman reports. Inevitably, the Government have had to make some assumptions about that. They have also had to make assumptions about the movement of people from hospitals to community care. What are those assumptions and what additional resources will be given to the social services departments to meet them?

We also wonder about the full implementation of the Disabled Persons (Services, Consultation and Representation) Act 1986, the so-called "Tom Clarke Act." Sections 1, 2, 3 and 7 are vital and have still not been implemented. Has the money for implementing those sections been built into the settlement? There is no mention of that.

I accept that we have seen worse settlements, but many aspects of this one raise question marks, not least on the capital side. Those question marks are raised when one looks at the state of the roads, schools and buildings and the need for capital expenditure in many such areas. One wonders how long the capital side can be kept down without having to pay a long-term price.

The proposals and reports do not answer all the questions that people are asking, especially the questions about the maintenance of services for people who most depend on them. I should like to see in all parts of Wales less dependency on grants. I should like to see in each area an economy that is strong enough to allow us to be buoyant. We have not yet reached that state, but in the meantime I ask the Secretary of State to make sure that those most vulnerable do not miss out.

11.38 pm

Mr. Rhodri Morgan (Cardiff, West)

The Secretary of State's Welsh rate support grant settlement is beginning to follow a pattern established by President Lyndon Johnson about 20 years ago. President Johnson made a speech announcing the great society and said: From this moment on this Republic is going to declare war on poverty. Thirty seconds later there was a telegram on the rostrum in front of him from the governor of West Virginia. It said: "Where do we surrender?"

The Secretary of State has said that he does not expect any applause from the Opposition. As far as Cardiff is concerned he is certainly right about that. There is disbelief at the fact that the Secretary of State has said nothing that will resolve the conflict over the missing £2.3 million in the rate support grant settlement for the financial year 1987–88. The Government retrospectively removed it from ratepayers and administrators, although they abided by the Government's rules.

Following correspondence with my hon. Friend the Member for Cardiff, South and Penarth (Mr. Michael), who has more experience than I in these matters, the difference between Cardiff city council and the Welsh Office was narrowed, yet £2.3 million is at stake. Was Cardiff city council remiss in failing to send to the Welsh Office the closed books of its financial affairs for 1987–88? It sent them to the district auditor before 7 July, to the Ministers, to me as a local Member of Parliament but not to the Department. Should the Welsh Office, knowing that the council had closed its books, have shouted across the Welsh national war memorial gardens to the council, "You have the figures that we need. We are bringing down the shutters on 7 July; you have closed your books, but bring them over to us and you will receive your £2.3 million"? As it stands, because of this nit-picking point, Cardiff's ratepayers will lose £2.3 million. Should we believe those completely unbelievable circumstances? I hope that the Secretary of State will resolve the problem tonight.

11.41 pm

Mr. Paul Murphy (Torfaen)

I offer our condolences to my hon. Friend the Member for Alyn and Deeside (Mr. Jones) on the loss of his father. We recognise that it was a considerable burden for him to return to the House today.

This has been a short but important debate. The rate support grant covers the main services in Wales such as education, housing and all the other matters that affect its people. It is interesting that today and a few weeks ago, the Secretary of State used the words "realistic" and "stable". He said that Welsh local authorities would be responsible and would make low rate rises in the months ahead. Having spent a decade as chairman of a finance committee of a Welsh local council, I know that its spending depended on three major factors beyond its control. Councils' spending is affected by the grant that the Secretary of State gives, which is 2 per cent. below inflation, by interest rates, which will rise in the future, and by pay rises. Rises of more than 8 per cent. are more likely than those envisaged in the settlement.

District councils have said for many years that the rate support grant settlement is an annual lottery, and that the money they obtain owes more to chance than precision. The 1987–88 settlement has destabilised at least a dozen local authorities such as Newport and others. The Secretary of State has gone against all accountancy practice and procedure by imposing an arbitrary cut-off point of midnight on 6 July. He should have used the final budget or outturn figures, but anyone with experience in local government knows that it was nonsensical to use the half-yearly review; there was no proper reflection of what local authorities were likely to spend.

By those decisions, the capital city of Wales will be many millions of pounds worse off. My local authority will this year, at a stroke, lose a quarter of its rate fund balances and, as a result of that decision, will have to increase its rates by at least 20 per cent. County councils tell us that rate rises will be at least 4 per cent. above inflation and of the 37 district councils in Wales at least 30 will have rate rises, many of which will be in double figures.

Inevitably under this Government, a great number of those councils will be valley local authorities which, by any measure of deprivation, will most need the rate support grant. The Secretary of State is boasting about his valleys initiative. It is some initiative when the rate support grant is being taken away from our valley councils.

The mean aspect of the settlement must be the poll tax. Local authorities in Wales asked for £17 million for capital allocation to implement the tax. They got £10 million. They asked for £14 million, spread over two years, for revenue expenditure. They got £5 million. They asked for a specific grant to cover the cost of the implementation of the poll tax. They got the block grant with all its vagaries. That is the measure by which the Secretary of State considers that local authorities can afford to implement that tax.

No Opposition Members are particularly displeased that this is the last rate support grant settlement. No one will mourn them. After all, they have been over-complex and, over the years, have been full of jargon and gobbledegook. Most significantly for the people of Wales, the settlements have consistently underfunded Welsh local government. There is not a shadow of doubt about that.

The Secretary of State tells us that things will improve. We believe that worse will follow. Wales will have to face a revenue support grant which, although simpler, is unquestionably more unfair. Wales will have to face a business rate which will give the Secretary of State much more power over local authorities and will break the important link between councils and local industry. Local authorities will have to face completely new housing revenue regimes, which will put rents way beyond the pockets of Welsh people. Above all else, the people of Wales will face an unwanted poll tax which must go down in history as the most unpopular measure in the Principality.

For all those reasons, it is no wonder that the Secretary of State's party lies well down in the polls in Wales. I urge the House to turn down the proposals.

11.46 pm

Mr. Peter Walker

With the permission of the House, I will reply to the debate.

I congratulate the hon. Member for Torfaen (Mr. Murphy) on his first appearance on the Opposition Front Bench. He had a much more crowded House than I had for my first such appearance, when I was asked to wind up an Adjournment debate from the Opposition Front Bench. My hon. Friend who led the debate said that he would like me to add a few words prior to the Government replying, to give the Opposition's full support to his argument. As my hon. Friend spoke for 25 minutes of a 30-minute Adjournment debate, it was impossible for me to make any contribution. Although I disagree with much of what the hon. Gentleman said, I congratulate him on his first Front Bench appearance and the lucidity and fluency of his speech.

I join with the hon. Gentleman in extending the sympathy of the whole House to the hon. Member for Alyn and Deeside (Mr. Jones) for the personal loss that he suffered this week.

The hon. Member for Alyn and Deeside spoke of district councils and their estimates of rate rises, and quoted the Welsh Office published figures in support. I do not blame him for using those figures, because the subject is complicated. However, they do not take into account a range of factors that affect rate rises. For example. I refer to the increase in rateable values, which were up by 1.4 per cent. last year as a result of all the extra business that has been attracted to Wales; the use that local authorities make of money held in balances to the benefit of their ratepayers—they used about £9 million of such balances last year; and the £5 million in additional rate support grant in the supplementary reports that we are debating. A range of factors mean that those figures no longer apply. I am sure that it was said unintentionally that our figures took no account of interest rate increases. In fact, an additional sum of about £14 million has been made available to take account of increased interest rates since my initial announcement. As I have explained previously, higher interest rates do not have the impact on local authorities that some might think. That is because much of their borrowings are at fixed rates. Only a proportion of them are at current interest rate levels.

The hon. Member for Brecon and Radnor (Mr. Livsey) talked about education, on which in this settlement there has been a substantial percentage increase in capital expenditure. Initial capital outlay has been increased by 17.4 per cent. The hon. Gentleman constantly draws our attention to the difficulties of reorganising rural schools, but with fewer pupils taking advantage of education in such establishments there is sense in rational reorganisation in many parts of Wales. The resultant capital outlay has been met in the figures that we have announced.

An additional £10 million in need assessment has been made available to Powys to take account of sparsity of population. That amounts to £100 for every person in the county. That factor has strongly been taken into account.

My hon. Friend the Member for Vale of Glamorgan (Sir R. Gower) talked about the valleys. The rate support grant system is based upon needs assessment calculations, and the grant is already skewed to take account of areas such as the valleys. On the capital side, extra provision can be made available for certain areas. In this respect the valleys have done well this year, with extra allocations for housing and transport. Allocations have yet to be announced for the urban programme, but there will be extra provision for the valleys.

The introduction of the new business rate in the valleys will bring a benefit of about £8.5 million each year. That will be the reduction of their rating burden. That must be good news for employment prospects.

The hon. Member for Newport, West (Mr. Flynn) made his usual vigorous and lively attack on all that has taken place. If he is dissatisfied with the settlement, I dread to think what he would have said if he had been a Member of this place when Conservative Members were in opposition from 1974 to 1979. The hon. Gentleman expressed dissatisfaction with the settlement's relationship to inflation, but current expenditure during 1974–79 decreased virtually every year. There was only a slight increase—it was not large enough to offset the decreases—in the year before the general election. There was a considerable reduction in capital expenditure, which amounted to about 50 per cent. in real terms. I am glad that Newport enjoys an ever-expanding economy and considerable new inward investment.

The Newport library has had an effect on rates. Newport asked for the library to be taken from the county so that is could organise it, which means that it will have an impact on the district rate rather than the county rate. As the ratepayer pays both the county and the district rates, the ratepayer overall will benefit if Newport organises the library more efficiently and effectively. The result, however, will be an increase in rates.

I understand that Cardiff Members are aggrieved that a line drawn on a certain date had an adverse effect on their city. We have now received the final expenditure figures of 31 of the 45 Welsh local authorities, and we know that 14 will have gained grant as a result of drawing the line on that date. Of the remainder, 13 have lost grant and four have not had their figures changed.

It seems extraordinary that not one hon. Member who represents any of the 14 local authorities which have gained from drawing the line in that way has said, "For heaven's sake, do not alter that. Let us adhere to that date." I believe it was necessary to draw the line at a certain date, and it so happens that some authorities have gained and some have lost.

Mr. Barry Jones

Which local authority has gained £2.3 million?

Mr. Walker

I agree that the biggest loser was Cardiff. I do not deny that at all. But the figures were not sent in by Cardiff until long after the date, and Cardiff has been treated in the same way as every other local authority in the United Kingdom. I am glad to say that the rate support grant for Cardiff in the coming year is generous, and I do not believe there is any need for very inflationary rate rises in Cardiff this year.

As always happens on these occasions, Oppositions—be they Conservative or Labour—are, rightly, critical of the rate support grant. I would only say that in relation to inflation and the expansion of the Welsh economy, this is a perfectly reasonable and sensible settlement, and I urge my hon. Friends to support it.

Question put:—

The House divided: Ayes 237, Noes 212.

Division No. 26]	[11.56 pm
AYES
Aitken, Jonathan	Chapman, Sydney
Alexander, Richard	Chope, Christopher
Alison, Rt Hon Michael	Churchill, Mr
Amos, Alan	Clark, Dr Michael (Rochford)
Arbuthnot, James	Clark, Sir W. (Croydon S)
Arnold, Jacques (Gravesham)	Clarke, Rt Hon K. (Rushcliffe)
Arnold, Tom (Hazel Grove)	Conway, Derek
Ashby, David	Coombs, Simon (Swindon)
Aspinwall, Jack	Cope, Rt Hon John
Atkins, Robert	Couchman, James
Atkinson, David	Cran, James
Baker, Rt Hon K. (Mole Valley)	Curry, David
Baker, Nicholas (Dorset N)	Davies, Q. (Stamf'd & Spald'g)
Baldry, Tony	Day, Stephen
Batiste, Spencer	Devlin, Tim
Beaumont-Dark, Anthony	Dickens, Geoffrey
Bellingham, Henry	Dicks, Terry
Bendall, Vivian	Dorrell, Stephen
Bennett, Nicholas (Pembroke)	Douglas-Hamilton, Lord James
Blaker, Rt Hon Sir Peter	Dover, Den
Body, Sir Richard	Dunn, Bob
Bonsor, Sir Nicholas	Durant, Tony
Boscawen, Hon Robert	Dykes, Hugh
Boswell, Tim	Eggar, Tim
Bottomley, Peter	Evans, David (Welwyn Hatf'd)
Bottomley, Mrs Virginia	Evennett, David
Bowden, A (Brighton K'pto'n)	Fallon, Michael
Bowden, Gerald (Dulwich)	Favell, Tony
Bowis, John	Fenner, Dame Peggy
Boyson, Rt Hon Dr Sir Rhodes	Fishburn, John Dudley
Brandon-Bravo, Martin	Fookes, Miss Janet
Brazier, Julian	Forman, Nigel
Bright, Graham	Forsyth, Michael (Stirling)
Brooke, Rt Hon Peter	Forth, Eric
Brown, Michael (Brigg & Cl't's)	Fowler, Rt Hon Norman
Bruce, Ian (Dorset South)	Fox, Sir Marcus
Buck, Sir Antony	Franks, Cecil
Budgen, Nicholas	Freeman, Roger
Burns, Simon	French, Douglas
Burt, Alistair	Fry, Peter
Butler, Chris	Gale, Roger
Butterfill, John	Gardiner, George
Carlisle, Kenneth (Lincoln)	Garel-Jones, Tristan
Carrington, Matthew	Gill, Christopher
Carttiss, Michael	Glyn, Dr Alan
Chalker, Rt Hon Mrs Lynda	Goodson-Wickes, Dr Charles
Channon, Rt Hon Paul	Gow, Ian

Gower, Sir Raymond	Porter, David (Waveney)
Grant, Sir Anthony (CambsSW)	Portillo, Michael
Greenway, Harry (Ealing N)	Powell, William (Corby)
Greenway, John (Ryedale)	Price, Sir David
Griffiths, Peter (Portsmouth N)	Raison, Rt Hon Timothy
Grist, Ian	Rathbone, Tim
Grylls, Michael	Redwood, John
Gummer, Rt Hon John Selwyn	Renton, Tim
Hamilton, Hon Archie (Epsom)	Rhodes James, Robert
Hamilton, Neil (Tatton)	Riddick, Graham
Hannam, John	Ridley, Rt Hon Nicholas
Hargreaves, Ken (Hyndburn)	Ridsdale, Sir Julian
Hawkins, Christopher	Roberts, Wyn (Conwy)
Heathcoat-Amory, David	Roe, Mrs Marion
Higgins, Rt Hon Terence L.	Rost, Peter
Hind, Kenneth	Rumbold, Mrs Angela
Hunt, David (Wirral W)	Sackville, Hon Tom
Hunter, Andrew	Sayeed, Jonathan
Irvine, Michael	Shaw, David (Dover)
Kirkhope, Timothy	Shaw, Sir Giles (Pudsey)
Knapman, Roger	Shaw, Sir Michael (Scarb')
Knight, Greg (Derby North)	Shelton, William (Streatham)
Knight, Dame Jill (Edgbaston)	Shephard, Mrs G. (Norfolk SW)
Knowles, Michael	Shepherd, Colin (Hereford)
Knox, David	Shepherd, Richard (Aldridge)
Lang, Ian	Shersby, Michael
Latham, Michael	Skeet, Sir Trevor
Lee, John (Pendle)	Smith, Tim (Beaconsfield)
Lester, Jim (Broxtowe)	Soames, Hon Nicholas
Lightbown, David	Speller, Tony
Lilley, Peter	Spicer, Sir Jim (Dorset W)
Lloyd, Peter (Fareham)	Spicer, Michael (S Worcs)
Lord, Michael	Squire, Robin
Luce, Rt Hon Richard	Stanbrook, Ivor
Lyell, Sir Nicholas	Steen, Anthony
Macfarlane, Sir Neil	Stern, Michael
MacKay, Andrew (E Berkshire)	Stevens, Lewis
Maclean, David	Stewart, Allan (Eastwood)
McLoughlin, Patrick	Stewart, Andy (Sherwood)
Major, Rt Hon John	Stokes, Sir John
Malins, Humfrey	Stradling Thomas, Sir John
Mans, Keith	Sumberg, David
Maples, John	Summerson, Hugo
Marland, Paul	Taylor, Teddy (S'end E)
Marshall, John (Hendon S)	Tebbit, Rt Hon Norman
Marshall, Michael (Arundel)	Temple-Morris, Peter
Martin, David (Portsmouth S)	Thompson, Patrick (Norwich N)
Maude, Hon Francis	Thornton, Malcolm
Mawhinney, Dr Brian	Thurnham, Peter
Maxwell-Hyslop, Robin	Tracey, Richard
Mayhew, Rt Hon Sir Patrick	Trippier, David
Meyer, Sir Anthony	Twinn, Dr Ian
Miller, Sir Hal	Waddington, Rt Hon David
Mills, Iain	Wakeham, Rt Hon John
Mitchell, Andrew (Gedling)	Walden, George
Mitchell, Sir David	Walker, Bill (T'side North)
Moate, Roger	Waller, Gary
Monro, Sir Hector	Ward, John
Montgomery, Sir Fergus	Wardle, Charles (Bexhill)
Moore, Rt Hon John	Warren, Kenneth
Morris, M (N'hampton S)	Watts, John
Morrison, Rt Hon P (Chester)	Wells, Bowen
Moss, Malcolm	Wheeler, John
Neale, Gerrard	Whitney, Ray
Neubert, Michael	Widdecombe, Ann
Nicholls, Patrick	Wood, Timothy
Nicholson, David (Taunton)	Woodcock, Mike
Nicholson, Emma (Devon West)	Yeo, Tim
Norris, Stephen	Young, Sir George (Acton)
Onslow, Rt Hon Cranley
Page, Richard	Tellers for the Ayes:
Paice, James	Mr. Alan Howarth and
Patnick, Irvine	Mr. John M. Taylor.
Porter, Barry (Wirral S)

NOES
Abbott, Ms Diane	Archer, Rt Hon peter
Adams, Allen (Paisley N)	Armstrong, Hilary
Allen, Graham	Ashton, Joe
Anderson, Donald	Banks, Tony (Newham NW)

Barnes, Harry (Derbyshire NE)	Graham, Thomas
Barron, Kevin	Grant, Bernie (Tottenham)
Battle, John	Griffiths, Nigel (Edinburgh S)
Beckett, Margaret	Griffiths, Win (Bridgend)
Bell, Stuart	Grocott, Bruce
Benn, Rt Hon Tony	Hardy, Peter
Bennett, A. F. (D'nt'n & R'dish)	Healey, Rt Hon Denis
Bermingham, Gerald	Heffer, Eric S.
Bidwell, Sydney	Henderson, Doug
Blair, Tony	Hinchliffe, David
Blunkett, David	Hogg, N. (C'nauld & Kilsyth)
Boateng, Paul	Holland, Stuart
Boyes, Roland	Home Robertson, John
Bradley, Keith	Hood, Jimmy
Bray, Dr Jeremy	Howarth, George (Knowsley N)
Brown, Gordon (D'mline E)	Howells, Geraint
Brown, Nicholas (Newcastle E)	Hoyle, Doug
Brown, Ron (Edinburgh Leith)	Hughes, John (Coventry NE)
Buchan, Norman	Hughes, Robert (Aberdeen N)
Buckley, George J.	Hughes, Roy (Newport E)
Caborn, Richard	Hughes, Sean (Knowsley S)
Callaghan, Jim	Hughes, Simon (Southwark)
Campbell, Menzies (Fife NE)	Illsley, Eric
Campbell, Ron (Blyth Valley)	Ingram, Adam
Campbell-Savours, D. N.	Janner, Greville
Canavan, Dennis	Jones, Barry (Alyn & Deeside)
Carlile, Alex (Mont'g)	Jones, Ieuan (Ynys Môn)
Clark, Dr David (S Shields)	Jones, Martyn (Clwyd S W)
Clarke, Tom (Monklands W)	Kinnock, Rt Hon Neil
Clay, Bob	Lambie, David
Clelland, David	Lamond, James
Clwyd, Mrs Ann	Leadbitter, Ted
Cohen, Harry	Leighton, Ron
Coleman, Donald	Lewis, Terry
Cook, Frank (Stockton N)	Litherland, Robert
Cook, Robin (Livingston)	Livsey, Richard
Corbyn, Jeremy	Lloyd, Tony (Stretford)
Cousins, Jim	Lofthouse, Geoffrey
Cox, Tom	Loyden, Eddie
Crowther, Stan	McAllion, John
Cryer, Bob	McAvoy, Thomas
Cummings, John	Macdonald, Calum A.
Cunliffe, Lawrence	McFall, John
Cunningham, Dr John	McKay, Allen (Barnsley West)
Darling, Alistair	McKelvey, William
Davies, Rt Hon Denzil (Llanelli)	McLeish, Henry
Davies, Ron (Caerphilly)	McTaggart, Bob
Davis, Terry (B'ham Hodge H'l)	McWilliam, John
Dewar, Donald	Madden, Max
Dixon, Don	Mahon, Mrs Alice
Dobson, Frank	Marek, Dr John
Doran, Frank	Marshall, David (Shettleston)
Douglas, Dick	Marshall, Jim (Leicester S)
Duffy, A. E. P.	Martin, Michael J. (Springburn)
Dunnachie, Jimmy	Martlew, Eric
Dunwoody, Hon Mrs Gwyneth	Maxton, John
Eadie, Alexander	Meacher, Michael
Eastham, Ken	Meale, Alan
Evans, John (St Helens N)	Michael, Alun
Ewing, Harry (Falkirk E)	Michie, Bill (Sheffield Heeley)
Fatchett, Derek	Moonie, Dr Lewis
Fearn, Ronald	Morgan, Rhodri
Field, Frank (Birkenhead)	Morley, Elliott
Fields, Terry (L'pool B G'n)	Morris, Rt Hon A. (W'shawe)
Flannery, Martin	Morris, Rt Hon J. (Aberavon)
Flynn, Paul	Mowlam, Marjorie
Foot, Rt Hon Michael	Mullin, Chris
Foster, Derek	Murphy, Paul
Foulkes, George	Nellist, Dave
Fraser, John	O'Brien, William
Fyfe, Maria	O'Neill, Martin
Galbraith, Sam	Patchett, Terry
Galloway, George	Pendry, Tom
Garrett, John (Norwich South)	Pike, Peter L.
Garrett, Ted (Wallsend)	Powell, Ray (Ogmore)
George, Bruce	Prescott, John
Gilbert, Rt Hon Dr John	Primarolo, Dawn
Godman, Dr Norman A.	Quin, Ms Joyce
Gordon, Mildred	Randall, Stuart
Gould, Bryan	Rees, Rt Hon Merlyn

Reid, Dr John	Straw, Jack
Richardson, Jo	Taylor, Mrs Ann (Dewsbury)
Roberts, Allan (Bootle)	Taylor, Matthew (Truro)
Robertson, George	Thompson, Jack (Wansbeck)
Robinson, Geoffrey	Turner, Dennis
Rogers, Allan	Vaz, Keith
Ross, Ernie (Dundee W)	Wall, Pat
Rowlands, Ted	Wallace, James
Ruddock, Joan	Walley, Joan
Salmond, Alex	Wardell, Gareth (Gower)
Sedgemore, Brian	Welsh, Michael (Doncaster N)
Sheerman, Barry	Wigley, Dafydd
Sheldon, Rt Hon Robert	Williams, Rt Hon Alan
Shore, Rt Hon Peter	Williams, Alan W. (Carm'then)
Short, Clare	Wilson, Brian
Skinner, Dennis	Winnick, David
Smith, Andrew (Oxford E)	Wise, Mrs Audrey
Smith, C. (Isl'ton & F'bury)	Worthington, Tony
Snape, Peter	Wray, Jimmy
Soley, Clive	Young, David (Bolton SE)
Spearing, Nigel
Steinberg, Gerry	Tellers for the Noes:
Stott, Roger	Mr. Robert N. Wareing and
Strang, Gavin	Mr. Frank Haynes.

Question accordingly agreed to.

Resolved, That the Welsh Rate Support Grant Report 1989–90 (House of Commons Paper No. 32), a copy of which was laid before this House on 8th December, be approved.

Resolved, That the Welsh Rate Support Grant Supplementary Report 1988–89 (House of Commons Paper No. 33), a copy of which was laid before this House on 8th December, be approved.

Resolved, That the Welsh Rate Support Grant Supplementary (No. 2) Report 1987–88 (House of Commons Paper No. 34), a copy of which was laid before this House on 8th December, be approved.

Resolved, That the Welsh Rate Support Grant Supplementary (No. 3) Report 1986–87 (House of Commons Paper No. 35), a copy of which was laid before this House on 8th December, be approved.—[Mr. Fallon.]