§ The Minister for Local Government (Mr. Michael Howard)
I beg to move,That the Rate Support Grant Supplementary Report (England) (No. 4) 1984–85 (House of Commons Paper No. 253), a copy of which was laid before this House on 5th February, be approved.I would ask the House to take at the same time the other motion:That the Rate Support Grant Supplementary Report (England) (No. 3) 1986–87 (House of Commons Paper No. 254), a copy of which was laid before this House on 5th February, be approved.
§ Mr. Simon Hughes (Southwark and Bermondsey)
On a point of order, Madam Deputy Speaker. I think that the Minister said, "No. 2," but it is No. 3.
§ Mr. Howard
No, I think that I said, "No. 3." If I did not, I certainly should have done, but I think that I did.
As the House will be aware, I had hoped to move the approval of a report for 1983–84 also. It has emerged, however, that a number of the figures shown in the formula for calculating grant-related expenditure assessments in that report were incorrect. Although the GREs for individual authorities were shown correctly, and hence the grant entitlements were correct, we decided that we should withdraw the report. My right hon. Friend the Secretary of State for the Environment has made a new report which will be laid before the House as soon as it is printed, I hope by the end of the week.
The last time that I came before the House to seek its approval for a supplementary report was in July. I forecast then that there would be more to come, and this evening my prediction comes true with the supplementary reports now before us.
The two reports before us differ from the one that we discussed in July. Whereas that supplementary report and the one preceding it, which was approved shortly before the general election, were additional to the normal cycle of reports in that they were concerned with the extra grant that we provided for teachers' pay, these supplementary reports, and the one to follow later, are all part of the normal cycle of adjustment as further information is received on local authorities' expenditure.
The 1984–85 report reflects audited returns of expenditure in those years. The 1986–87 report deals in the main with provisional outturn returns sent direct to the Department by chief finance officers. It follows that, whereas there is at least one further supplementary report to make for 1986–87, the earlier report should be the last for 1984–85 and I am sure that the House will be grateful at least for that.
Not only do the reports take account of the latest expenditure information, they also bring up to date our calculations of authorities' grant-related expenditure assessments or GREs. As the House will appreciate, some components of GREs are based on actual expenditure. Precepts paid to water authorities for land drainage are one example, and mandatory grants paid to students are another. The reports reflect the latest expenditure figures in these components. Other components of GREs are revised to reflect, for example in 1984–85, the latest estimates of average interest rates paid by local authorities and the final cost of the police pay awards.
1110 Many right hon. and hon. Members will appreciate that the system now known as grant recycling applied to the years that we are considering. That means that the parameters of the block grant system are adjusted in each report to distribute the whole of a fixed total of block grant and I will say a word or two about grant abatement in a moment. Cognoscenti of the block grant system will know that, as new expenditure figures come in, changing the amount of block grant being claimed, the amount that authorities are assumed to collect from their ratepayers — the national grant-related poundage — is lowered or raised to ensure that the aggregate of grant payable does match the total available. The supplementary reports before the House tonight carry out this complex process by specifying new national grant-related poundages at GRE and the related amounts for each tier of authority.
In 1984–85 the Government issued expenditure guidance to local authorities. The then Secretary of State specified in the main report for that year a scheme for abating the block grant of authorities which exceeded their targets. Grant abated in this fashion was not recycled to other authorities: it was retained by the Treasury.
In 1984–85 the amount abated is now £15 million less than in the third supplementary report, but it is still the case that, taking 1983–84 and 1984–85 together, of the £17,350 million block grant made available by the Exchequer, £542 million, over half a billion pounds, was lost to local government because of overspending.
No expenditure guidance was issued for 1986–87. My right hon. Friend the Secretary of State for Education and Science, when he was Secretary of State for the Environment, abolished the system for expenditure guidance and grant abatement in that year. To maintain the downward pressure on spending, he sharply increased the amounts that authorities were assumed to raise from their ratepayers as their expenditure increased. That caused most authorities in England to lose block grant if their expenditure increased. Conversely, they could increase their grant if they were able to reduce their expenditure. Any grant that was lost by authorities which increased their spending above the levels assumed in the settlement was not returned to the Treasury. It was returned, or recycled, to all other authorities by adjusting the national grant-related poundage at GRE.
I hope that I have now given the House a reasonably brief account of what these supplementary reports do. I turn now to several particular features of them which the House will wish to consider—first, the so-called deficit financing of special funds. The House will know that one of the principal characteristics of the present system is that block grant depends upon expenditure—in fact, on what is known as total expenditure, which is calculated according to certain statutory rules.
Over the whole life of the present system, many authorities have legitimately presented their total expenditure in such a way as to maximise their grant entitlement. One way of doing this has involved the use of special funds. In anticipation of a harsher block grant regime in a future year, authorities have paid sums into special funds. Such transactions increased total expenditure for block grant purposes, and some block grant was lost. They then withdrew the sums in a later year, so reducing their total expenditure for grant purposes. This increased their grant in the following year by a larger amount, thus benefiting the authority overall.
1111 This use of special funds is not illegal; nor is it necessarily in conflict with good accounting practices. It can been seen as authorities legitimately using the rules for total expenditure to their best advantage. However, during 1986 the Department became aware that some authorities had taken the practice a stage further, causing us considerable concern. They were showing in their books transfers to special funds of moneys that they did not possess: the transfers were causing deficits on the rate fund account. In theory, there was no limit to the amount of such transfers. The practice was clearly an attempt by a few authorities to manipulate their total expenditure figures, and gain an unfair grant advantage at the expense of other authorities and of the Exchequer.
Those circumstances, together with consideration of another anomaly in an authority's expenditure return, led us to conclude that we needed the provisions that have been enacted in the Local Government Finance Act 1987. These provisions, together with the specifications that we have made under the Act, have put the traditional practice for calculating total expenditure on a firm statutory basis, and have made it clear that deficit financing and other anomalies cannot be included in total expenditure. It was those measures that delayed the 1983–84 supplementary report.
In making the reports before the House tonight, we have made use of new specifications under the 1987 Act, which re-established the definitions of total and relevant expenditure and rendered ineffective the practice of deficit financing of special funds, at least in regard to the block grant system.
Secondly, there is a minor matter concerning 1984–85. One authority, Gateshead, has drawn our attention to a change in the amount of unoccupied property in its borough. Although we did not appreciate it when the report was made, it has since been made clear that it ought to be taken into account when its grant is calculated once the report has been approved by Parliament. We shall therefore do so. But, so that the total of grant to be paid out matches the amount specified in the report, we shall use the power in section 62 of the Local Government Planning and Land Act 1980 to reduce all authorities' grants very slightly—by £2 in every £100,000.
The 1986–87 report honours the undertaking made by my right hon. Friend the Secretary of State for Education and Science that we would increase provision for expenditure by local education authorities on books and equipment for GCSE courses. In fact, the report increases education GREs by £4.2 million for that purpose.
§ Mr. Henry Bellingham (Norfolk, North-West)
Is my hon. and learned Friend aware that our right hon. Friend the then Secretary of State for the Environment made the commitment that Norfolk — which is a prudent, low-spending authority—would have a fair deal in the years ahead?
In the last financial year, it had a very fair deal. Is my hon. and learned Friend aware, however, that the GREA for Norfolk — which, I gather, is the amount that the Government states that it is reasonable to spend to match the services that should be provided—is £312 million for 1988–89? The assumed spending level is £285 million. The budget that Norfolk has had to set is £299 million, which is a reasonable increase if, for instance, inflation and wages rises are taken into account. But Norfolk will lose £5.7 million as a result of the Government's policy.
1112 Does my hon. and learned Friend not agree that it is very unfair to treat Norfolk as a high-spending authority when it is, in fact, a prudent low-spender—indeed, the third lowest-spending shire authority in the country? Will he look at the matter again?
§ Mr. Howard
The grant loss to which my hon. Friend refers relates to the rate support grant settlement for 1988–89. In fact, under the two supplementary reports that are before the House tonight, and the third one that is being remade, Norfolk will gain £3 million. I hope that my hon. Friend will agree that those two reports can mean nothing but good news for Norfolk.
Finally, I should mention the "Bromley error". My right hon. and hon. Friends representing affected areas will know that it remains uncorrected in the supplementary report before the House tonight. We have consistently made it clear that we will correct the error, despite the attempt by the London borough of Greenwich, which gained from it, to prevent us from doing so. However, that cannot be done until my right hon. Friend has wider powers to change multipliers in supplementary reports. Those powers will be available when the Local Government Finance Bill reaches the statute book. He will then bring forward a further supplementary report for 1986–87, and for the other years affected by the error, to honour our promise.
In asking the House to approve the supplementary reports, I am particularly conscious of the shortcomings of the present rate support grant system. The supplementary reports alter local authorities' grants for financial years which will have long been closed. The 1986–87 supplementary report causes significant movements of grants away from many authorities in England because of spending decisions in other authorities over which they had no control and which they had no means of predicting.
The reports contain language of daunting complexity and legalistic and other arcane jargon. I can well appreciate that they are of limited help in understanding why in some local authorities grant entitlement may have changed. These are some of the reasons why we are scrapping the present system and replacing it with a fairer and simpler one. I commend these supplementary reports to the House.
§ Mr. Jeff Rooker (Birmingham, Perry Barr)
I thank the Minister for his detailed and concise explanation of the reports. I freely admit that I am not and do not want to become a cognoscente of the block grant system. However, I can assure the aficionados of parliamentary procedure that the Opposition have studied the reports in some detail, realised that they are unamendable, and checked the arithmetic, which looks satisfactory. We did not know about the Norwich problem and, what is more, we did not know about the Gateshead problem. We were unaware of the number of empty properties in Gateshead that have been drawn to the Minister's attention. This kind of procedure would be a big switch-off for television, so I am not surprised that it is put on late at night.
I do not share the Minister's view that all will be rosy under the new system. However, as we are to debate the new system proposals in Committee, I have no doubt that we shall have a few hours between now and Easter to compare the new system with the present system. The 1113 orders come before the House under the affirmative procedure, and the Minister will know that I am the last one to knock that. It is a good procedure and, when it is needed, it is vital that the scrutiny by the House of delegated legislation and ministerial decisions is fully carried out. On the other hand, there are occasions when the time at our disposal does not need to conform to Parkinson's law. Therefore, I propose to say no more.
§ Mr. Richard Holt (Langbaurgh)
I took the opportunity to speak in a similar debate about three years ago. On that occasion I used the gobbledegook in the book to try to explain the difficulties that lay people have in understanding what the Minister admits is complex. No one knows the reasons that determine rate support grant in certain areas.
I want to bring to the attention of the House a simple matter that I can understand. Therefore, I am sure that the Minister can understand it. Last year, a deputation from Langbaurgh came to see the Minister's predecessor. We were promised that certain aspects of the rate support grant would be borne in mind when setting the rate for the following year. It did not happen, so we sent a deputation again this year. We were told, "Do not worry, we have taken the points on board again and we will look at it for next year." On current form, I imagine that Langbaurgh will send a deputation at about the same time next year when we have probably had another ministerial change and another set of promises that will not be kept.
Why is Langbaurgh persistent and consistent in this matter? It is because we believe that we are being cheated out of a certain element of GRE by the force of nature. In my constituency there are very large tracts of uninhabited, derelict, useless land. When the complex formula to
GRP = GRP at GRE+ 0.6p x threshold amount +0.75p x (total expenditure-GRE/ population -threshold amount)" —
§ that is not surprising. That is the sort of fog behind which everyone hides.
§ Mr. Holt
I accept that it is a formula.
I challenge my hon. and learned Friend to answer the question that I put to his predecessor when I spoke in a similar debate three years ago: who starts with the lump sum? Is it the Treasury? Are these formulae worked out by someone playing with computers who finds, lo and behold, that every one of those X — Y over 3 — Z calculations happens to come out exactly at the Treasury figure? Or is the Treasury figure worked backwards to find the formulae to fit it? I suspect that it is the latter, but I have no confirmation one way or the other.
I wonder what would happen if somebody found that these figures and formulae did not work out to what the Treasury had said and that there was a little bit over or under? Presumably, the computing system would have to be rewritten. We do not want that in Langbaurgh. We are simple people. We want what is right and fair; we want a recalculation of the GRE to take account of land on which not even the pigeons will sit.
§ determine GRE is worked out, this area of land is calculated on the density available in the Langbaurgh region. It is simply not usable land. To suggest that it is on all fours with usable land in other areas is totally wrong.
To his credit, the Minister admitted to the Langbaurgh delegation that he was befuddled by this, but nothing could be done about it. If Ministers cannot do anything about it, who else can? If they leave civil servants to run everything and to write the speeches that they read so fast one cannot follow them, why do delegations bother to come down? What promise is being held out to those worthy people in local government who give up their time and energy to represent people and who travel 300 miles to meet a Minister, only to be given promises, which are then reneged upon, and are given further promises for the forthcoming year, which will also be reneged upon?
Cleveland county council's rate this year is 282p, which is the highest shire county rate. If one adds the district rates for Langbaurgh, which are worse in the half of my constituency near to Middlesbrough, and the parish rates, one need not wonder why people find it so difficult to set up business enterprises in the area. The Government could
I was interested to hear my hon. and learned Friend say that this is an adjustment order. If the Government can make an adjustment order because of the cock-ups that they have found, why cannot they make an adjustment order to put right the anomalies that have been brought to their attention by the local authority? If they were to do so, we would not have such swingeing rate increases. The local authority is not a whingeing authority. It is a hung authority in which all three parties must play their part to make the borough work at all.
There are acres of land in the area that should not be taken into account in the GRE calculation. Hardly anyone understands the calculations involved. But when one sees the gobbledegook involved—12.34 am
§ Mr. Peter Pike (Burnley)
This is one of those very rare occasions when I find myself in agreement with the hon. Member for Langbaurgh (Mr. Holt). One of the problems with the present system is the formula and the way in which it has been compiled. In regard to the Minister's final remarks, I do not want to debate the new system that he believes will solve the problems of local government finance. I am totally opposed to the poll tax. We have heard many times over the past eight years that the Government have got the system right, but I do not have the same confidence as the Minister that they have got the solution this time.
I have always accepted that, whatever party is in power, the Government have the right to determine the amount of money which they are prepared to contribute as their share of local government expenditure. Local government has a right to argue that the amount is insufficient. Certainly Opposition Members may argue that the Government should give more to local authorities. When the Government have determined the figure I do not accept that they should prevent local authorities from 1115 spending additional amounts if the ratepayers are prepared to provide the money. The Government should not penalise ratepayers by rate capping.
As to the formulae, I have often referred to the formula that sets the amount of money that local government is allocated for art galleries and museums. That is a good example of how stupid the present system is. I am sure the Minister will agree that if the system is based on GRE the basis must be right if it is to work. The basis for determining the amount for galleries and museums is the area of shop floors within the local authority. Therefore, a local authority with a large floor space in its shopping centre will get a bigger allocation for museums and art galleries even if it does not provide a service, whereas a local authority with a small shop floor area may provide a much better service but will not get the same allocation.
In the report there is a revised method for calculating indicator E7, which is a big factor in the GRE calculation for housing grant. I will not deal with it in detail because it covers two pages in the report and is extremely complicated. The Government have still got it wrong, because the base year of 1980–81 is crucial to the calculation. Local authorities may still be penalised because of what happened in 1980–81. That is wrong. My local authority has been heavily penalised for many years, to the detriment of the ratepayers. Many other local authorities are in a similar position. As a Member of Parliament, as leader of the council before I was elected to the House, and as chairman of the council's finance committee, I have met Ministers and civil servants, but none of them could justify the formula.
I hope that, in any further changes, the Government will recognise that different parts of the country cannot be judged on a standard base. We need a system that takes into account local needs and many other factors on a better basis than we have achieved so far—even with the present revision. Even with the latest supplementary report for 1984–85, local authorities have been penalised and the costs have had to be borne by rent and ratepayers because the Government's system has been wrongly based. If the foundation is wrong, the system cannot possibly work.
§ Mr. Patrick McLoughlin (Derbyshire, West)
I shall not detain the House. I take great comfort in the Minister's remarks. We hope, pray and trust that the new system of grants for local authorities will not be as complicated and difficult to comprehend as the present system. I do not want to talk about the formulae set out in the document. On one occasion I heard my right hon. Friend the Secretary of State say that he was the only person in England to understand the system.
I wish to draw attention to the arrangements as they affect Derbyshire and its district councils. In 1984–85, the GRE for Derbyshire county council was £316,420,000. In 1985–86 it rose to £354,705,000 — an increase of about £38 million. Nearly all the districts in the county of Derbyshire have witnessed increases in GRE over that period. For Amber Valley the increase was £17,000, for Bolsover it was £200,000, for Chesterfield it was £1,137,000, for Derby it was £2,537,000; for Erewash, £259,000 and for High Peak, £94,000. However, in the same period north-east Derbyshire witnessed a reduction 1116 of £67,000, south Derbyshire a reduction of £11,000 and Derbyshire Dales—the district to which I wish to refer in particular—a reduction of £111,000.
Derbyshire Dales district council has been a prudent and well-run council, yet it seems from all the figures and evidence that it is the Derbyshire council most penalised under the present system. Derbyshire Dales GRE assessment has been reduced by 4.9 per cent.—£150,000 — between 1980–81 and 1988–89. During the same period, all other Derbyshire district councils have had an increase in their GRE of between 0.03 and 58.3 per cent. During the same period, the county council's GRE has risen by 54 per cent.
I take the point made my hon. Friend the Member for Langbaurgh (Mr. Holt) about Cleveland, but at the moment Derbyshire county council levies the highest rate in the country at 262p, and we do not yet know what is in store for next year. Although Cleveland may be leading us, it will not have that pleasure—if pleasure it be—for very long.
The Audit Commission's cluster of authorities similar to Derbyshire Dales — there are 34 — shows that only three councils have lost GRE in that period. Derbyshire Dales leads the table at 4–9 per cent. My message to the Minister is that we do not like systems that seem continually to penalise good, prudent authorities while allowing spendthrift, wasteful authorities to get away with continuing to spend as though there were no tomorrow. Authorities that are prudent and look after their finances are penalised all the time.
I realise that my hon. Friend the Minister may not be able to say much in response to me, but I ask him to shout a little more about the way in which we intend to change the system so that it becomes much more fair and so that the future levels of grant to councils, without a complicated formula, are more obvious to people—
§ Mr. Deputy Speaker (Mr. Harold Walker)
Order. I hesitate to interrupt, but the debate is about the past. I hope that the hon. Member will not tempt the Minister into discussing the future.
§ Mr. McLoughlin
I take your point, Mr. Deputy Speaker. We are talking about the past. We should draw lessons from the past to ensure that what has happened does not happen again in the future. What has happened in the past seems to have penalised authorities that have been prudent and that should have been able to reward their ratepayers. Instead, those ratepayers have had to bear the burden of the system.
§ Mr. Simon Hughes (Southwark and Bermondsey)
I have two general questions and propositions to put to the Minister and then I want to raise some Southwark-related matters arising directly out of the two reports.
First, I should like to confirm that by these measures the definitions of "relevant" and "total" expenditure are for the first time amended, as there is power to do under the Local Government Finance Act 1987, which was passed because of the discovery of errors in calculation. I understand that it is possible for the Government to take out transfers to special funds which give rise to a deficit on the rate fund revenue account and which are not in respect of specific liabilities, or transfers back to the rate 1117 fund account of sums transferred — the "deficit financing" transfers. I did not hear the Minister address that matter.
This appears to be a retrospective change. The 1984–85 and the 1986–87 rate support grants were made on the basis of one set of terminology and definitions, and therefore calculation. This appears to be the first time that we have a retrospectively introduced redefinition which, clearly, in some cases is disadvantageous. What are the budgetary implications of the change?
Secondly, and more simply, when we debated the first supplementary report for 1986–87, the Government guaranteed that at least £500 million of grant would be recycled. However, the expenditure for 1986–87 is now seen to be lower than originally estimated. I understand, therefore, that the grant recycled is now between £400 million and £450 million. If that is right, it is at least £50 million below the undertaking. That means that there is less money around to be distributed to local authorities. I should like to be put right if I am wrong, but if I am right I should like confirmation that the original guarantee will be upheld and that we can have the £500 million through the grant recycling process.
I should now like to put a question to the Minister which has not arisen before in this debate and on which I admit ignorance, after trying to check the details through reports and figures. It has been put to me that the reports also deal with a correction of data errors in social services grant-related expenditure. Those revisions will be to the substantial detriment of a range of authorities. Newham loses £1.1 million; Wandsworth and Waltham Forest £1 million; Hammersmith and Fulham £700,000; and Kensington and Chelsea £400,000. The biggest losers of all are Lambeth, with £2 million, and my authority — Southwark—with £2.5 million.
I have heard nothing about that. I see nothing that refers to that specifically in the text accompanying the statistics in the reports, so perhaps the advice I have been given is incorrect. I should be happy to hear that it is. If it is not, however, Southwark—the area I know best—will lose £2.5 million because of a recalculation of social services grant-related expenditure, which would be a severe blow.
I want to discuss the figures for Southwark, in the knowledge that tomorrow we shall debate the rate limits under the relevant order—including one for Southwark. Southwark appears to have suffered considerably as a result of the supplementary reports and revisions in the grant-related expenditure assessment. I make a last minute plea to the Minister on the basis of the facts and figures. Southwark deserves to have its rate limit—as set out in tomorrow's order—revised if its expenditure limit is still not to be revised.
§ Mr. Deputy Speaker
Order. I remind the hon. Gentleman that we are debating the approval of reports of the past. I do not think it would be right for the House to anticipate a future debate.
§ Mr. Hughes
I accept that entirely, and I think I can satisfy you, Mr. Deputy Speaker, by turning now to the outturn figures dealt with in the orders.
Southwark has now been rate-capped for four consecutive years. The figures for the outturn of the budget are as follows. The budget in the first two years 1118 —1984–85 and 1985–86 — was £108.437 million. Then, with the ex-GLC services added in for 1986–87 and 1987–88, and again for the coming year, the budget has been fixed at £134 million. But the reports show that for 1983–84 there has been a loss on the final report of just over £2.5 million as a result of revisions. For the 1986–87 report, there is a loss of £3.035 million. Southwark will be liable to make cash payments for those losses if the reports are approved. They amount to more than £5 million for those two years alone. In three of the past four years—1983–84, 1984–85, and 1986–87—the loss has been more than £7 million.
I accept that, to some extent, there is budgetary provision for this. However, the losses result not from Southwark having acted outside budgetary restraints, but from the reduction in grant-related expenditure assessment as a result of factors that influenced all authorities, but bit Southwark particularly hard. If, as expected, another £4 million must be paid for the financial year 1985–86, there will be massive problems.
If I am right in thinking that one of the alterations is to the social services GRE, that is a specific area in which Southwark is desperately short. it is a known fact that social workers employed by Southwark but working in the Maudsley hospital had to take out an injunction to stop their transfer to fill gaps in one of the borough's area social services teams. The imposition by these orders of what appear to be substantive additional bills will make it impossible, with any further rate-cap limit as may be imposed tomorrow, plus the budgetary constraints on expenditure limits cumulatively over the last four years, for Southwark to meet its obligations.
Last year, on behalf of and with Tower Hamlets, I asked for an increase in its expenditure limits, and that was granted. I am not saying that happened entirely as a result of my request. Southwark asked for more, and was not granted it. The evidence shows that it should have been granted. The real screw on Southwark appears to be the additional sums which these reports require Southwark to pay. Are these figures right? I am happy tomorrow to work with the Minister's officials if this request cannot be dealt with now.
There is evidence that the burden of the formula and its application in these two years bites uniquely hard on Southwark, particularly on its key services. That may mean that the Government's calculations in relation to the need for Southwark in the coming year should be looked at again, even at this late stage. There is a precedent for figures being revised at a late stage, and parts of an order can be withdrawn, debated later and put back, as the Minister accepted in relation to one of the orders originally laid before the House. The figures in the report which are uniquely prejudiced against Southwark should be revised.
§ Mr. Patrick Thompson (Norwich, North)
I am grateful for an opportunity to ask my hon. and learned Friend the Minister to clarify one or two points in connection with the supplementary reports for 1984–85 and 1986–87. In general, I support the remarks made by my hon. Friend the Member for Derbyshire, West (Mr. McLoughlin), and I do not wish to take up time repeating those points.
Between 1984–85 and 1986–87, the grant-related expenditure for Norfolk county council has been increased from £232 million to £269 million, and total expenditure has increased from £217 million to £239 million. My 1119 understanding of those figures is that in 1986–87, Norfolk county council spent £30 million below its grant-related expenditure, which was much lower in relation to GRE than in 1984–85. In spite of that, the grant payable to Norfolk county council went down. Therefore, I hope that my hon. and learned Friend will explain why, if one spends below one's GRE, one is penalised.
I then looked at the figures for Broadland district council, and found the same situation. Its GRE has been reduced from £3.98 million to £3.9 million, rounding the figure down significantly. Total expenditure went down from £2.96 million to £2.75 million, and once again, the amount by which the council was below GRE was better in 1986–87 than it was in 1984–85, but again, the grant payable was reduced.
I hope that I am being helpful here, because I know that Ministers attack this rate support grant system, say that it is unacceptable, and that they want to get rid of it as soon as possible. I hope that they will help me by explaining those discrepancies.
For Norwich, the GRE figure between 1984–85 and 1986–87 increased from £7.8 million to £9.6 million, yet for Broadland district council the GRE decreased from £3.983 million to £3.895 million. I shall not speak at great length on that, although I could. Could the Minister address that particular discrepancy and explain it to me so that I can explain that extraordinary difference in treatment between Norwich and the lower spending shire district to my constituents in Norfolk?
I support my hon. Friend the Member for Derbyshire, West in his strictures on the treatment of low-spending councils, and I hope that my hon. and learned Friend will explain those figures.
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§ Mr. Barry Field (Isle of Wight)
I should like to end this tortuous debate on a happy note by placing on record on behalf of the people of the Isle of Wight our thanks to my hon. and learned Friend the Minister and his advisers for their solution to the rating of Crown property. It would have caused considerable difficulty if we had to find the arrears asked of us which go back for many years, some of which are referred to in these supplementary reports.
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§ The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope)
We have had an interesting debate which hon. Members have been listening to with rapt attention.
My hon. Friend the Member for Langbaurgh (Mr. Holt) raised many issues which are not new to me because I had the privilege of visiting Langbaurgh last year and I met a recent deputation from the council to explain the present position and the limited way in which the Government could assist. After the last deputation, I wrote to my hon. Friend and told the council that I understood its anxiety and would be happy to meet it again this spring before we start on next year's settlement.
I share my hon. Friend's anxiety that the ratepayers of Langbaurgh are faced with a proposed rate increase of 30p by Cleveland county council. Such an increase can only be an unnecessary burden on them. My hon. Friend is particularly concerned about the definitions on density. The density factor measurements are based on definitions set out by the ordnance survey and applied to all authorities. The area of an authority covers all land, 1120 mountains, towns and derelict land. This measure is reasonable for the purposes for which it is used within the grant system. As I told my hon. Friend when he brought the deputation, we are looking for a much simpler grant system under new arrangements, but that will not be in place until 1990. I am sure he will be pleased to know that as a result of the supplementary reports, Langbaurgh benefits to the tune of £670,000.
My hon. Friend the Member for Derbyshire, West (Mr. McLoughlin thought that Derbyshire county council was receiving beneficial treatment at the expense of Derbyshire Dales. The dales under these supplementary reports benefit to the extent of £86,000 while the county council loses to the extent of £2.896 million. I am sure that my hon. Friend thinks that that illustrates the justice of the situation. Once again my hon. Friend has drawn attention to the gross extravagance of Derbyshire county council and the relative prudence of the Conservative district councils.
The hon. Member for Burnley (Mr. Pike) raised the vexed issue of E7. I believe that it is too late to explain exactly how E7 is calculated, but the hon. Gentleman seems to have as good an understanding of it as most people. As a result of the supplementary reports that we are discussing tonight, Burnley benefits by £71,000.
The hon. Member for Southwark and Bermondsey (Mr. Hughes) discussed a social services error, but I should point out that that error was contained in the supplementary report for 1983–84. Southwark gains more than £10 million from the reports under consideration and that for 1986–87 gives the authority £12.4 million. Those factors have been taken into account in the Secretary of State's proposals for the rate limit. I do not believe that the hon. Gentleman's figures are right, as they relate only to grant changes as a result of GRE changes. In 1986–87 Southwark gained £13 million of grant as a result of changes in its total expenditure and that gives the overall gain of £10 million from the two reports.
The hon. Gentleman also asked about recycling. It is always made clear that the guarantee of a certain amount of recycled grant would apply only to the first supplementary report. When there were subsequent supplementary reports it was inevitable that there might be a different outcome. That was no surprise to the local authorities concerned. Indeed, my right hon. Friend the then Secretary of State for the Environment made it perfectly clear in a letter to the local authority associations that there was no intention of increasing block grant further in subsequent supplementary reports.
§ Mr. Simon Hughes
What about the redefinition of two terms under the Local Government Finance Act 1987?
§ Mr. Patrick Thompson
It is important for my constituents to realise that I cover both Norwich city and Broadlands and that, therefore, my constituency is Norwich, North.
§ Mr. Chope
I apologise to my hon. Friend the Member for Norwich, North (Mr. Thompson). He has frequently come to see me with councillors from Broadlands, so I mistook his constituency. In visits and in correspondence 1121 my hon. Friend has tried to explain how Broadlands suffers under the present system. Broadlands is a low-spending, prudent local authority and it has much lower rates than Norwich. If my recollection is correct, I believe that this coming year the district rate in Broadlands will be about half that of Norwich. That reflects the different spending policies of those councils. Under the existing system, it is inevitable that when a council increases expenditure it forfeits grant. That applies to Broadlands and to Norwich.
We are introducing a new grant system that will be much clearer and simpler. Certainly it will be helpful in increasing accountability in local government.
I said that I would write to the hon. Member for Southwark and Bermondsey, but perhaps it would be easier if I told him that none of the specifications are in a strict sense retrospective, as they apply only to supplementary reports made after the specifications have been made. In the light of new information, it is normal practice to make further supplementary reports for a financial year well after that year has passed. I think that that answers the hon. Gentleman's point.
I hope that the House will approve the supplementary reports.
§ Question put and agreed to.
That the Rate Support Grant Supplementary Report (England) (No. 4) 1984–85 (House of Commons Paper No. 253), a copy of which was laid before this House on 5th February, be approved.
That the Rate Support Grant Supplementary Report (England) (No. 3) 1986–87 (House of Commons Paper No. 254), a copy of which was laid before this House on 5th February, be approved.—[Mr. Maclean.]