HC Deb 07 July 1988 vol 136 cc1201-13

4.2 pm

The Secretary of State for the Environment (Mr. Nicholas Ridley)

With permission, Mr. Speaker, I would like to make a statement about a number of matters that will bring local authority finance in England up to date for the introduction of the new system in 1990.

First, my right hon. Friend the Secretary of State for Wales and I are issuing a consultation document today on local authority capital expenditure. The paper has been placed in the Library and is available in the Vote Office. It will be sent to local authorities and their associations today. The new system will take effect from 1 April 1990. It will be a control on borrowing and all forms of credit, rather than on expenditure. I believe that authorities will welcome this.

Capital receipts will continue to be another source of finance for capital expenditure, but the debt attributable to past capital expenditure by local authorities in England and Wales now stands at £45 billion. We propose that a proportion of the accumulated and future cash receipts should be set aside for debt redemption or to meet future capital commitments. Local authorities will be free to spend the balance, in whatever year they like.

Local authorities will also be free to finance additional capital expenditure from revenue contributions, subject only to the discipline of the community charge. I believe that the new system will provide local government with greater assurance and flexibility in the planning of capital programmes.

Secondly, under the new system in the Local Government Finance Bill, revenue support grant is to be paid on a fixed basis, authority by authority. Authorities will have certainty about their grant entitlements. There will be no adjustment to take account of actual spending. The discipline will come from the community charge. My right hon. Friend and I have decided to pave the way towards the new system by introducing greater certainty for 1989–90. In doing so, we will remove any scope for creative accounting by an authority designed to increase its grant entitlement by reducing its reported "total expenditure", without changing its true spending. There would otherwise be a number of ways in which authorities could do that for next year, this year and, indeed, earlier years.

We therefore propose to bring forward legislation as soon as possible to alter the basis on which grant will be paid in England and Wales. For the current year, and for the previous three years, final supplementary reports have not yet been made. For some of those years, it would still be open to local authorities to undertake book-keeping transactions or financial deals unrelated to true spending, but which alter the level of reported total expenditure and therefore gain extra grant. We envisage that the Bill will provide that, for all years up to 1988–89, grant entitlements should be calculated in general using total expenditure information which was with our Departments by midnight last night.

In a normal year, grant payments would be calculated taking account of grant-related expenditure assessments, block grant mechanisms, any arrangements for limiting grant changes and authorities' reported expenditure, which I announce following consultation in the autumn. Grant payments for 1989–90 will be calculated in the same way, except that the legislation will provide that grant payments for individual authorities should he calculated not on authorities' reported total expenditure, but on a figure derived for each authority, based on information about their present levels of total expenditure and projected forward. Allowance will be made for changes in function where appropriate. In making the calculations, we shall use, in general, only that information about total expenditure which was with our Departments by midnight last night. When the RSG report has been approved, and subject to Parliament approving the new legislation, grant will be paid on the new basis.

That will provide local authorities with greater certainty about their RSG entitlements for 1989–90 and previous years. It provides a basis for an orderly transition to the new system and for bringing the existing system to a close. Without the new legislation, it would have been necessary to recalculate grant under the present system well into the 1990s. I hope that it will now be possible to make the last supplementary reports under the present system during 1989–90; otherwise I would have been asking the House to approve them up to probably 1992 or 1993.

Thirdly, let me deal with my proposals for next year's RSG settlement for England. I propose to set the level of provision for current expenditure at £29,140 million. That is 4.7 per cent. or £1.3 billion more than authorities' budgets for this year, after deducting the cost of polytechnics, which, from next April, will he the responsibility of central Government. That increase is slightly above the anticipated level of inflation.

That sum includes £110 million in respect of the current costs next year for preparing for the introduction of the community charge. That is in line with the estimate of those costs made by Price Waterhouse and is consistent with the figures put forward by the local authority associations. Since authorities continue to spend more than they need, I again intend that there should be a margin between the total of grant-related expenditure assessments and provision.

I propose that aggregate Exchequer grant should be set at £13,575 million. After allowing for the removal of polytechnics, that is £600 million more than the settlement allowed for this year, and is about £1.1 billion more than the grant which will be paid for 1988–89. That represents an increase of about 9 per cent. on the amount of grant that will be paid out. Under my proposals for closing down the system, grant payments to authorities will not be affected by their level of spending in 1989–90.

I am conscious that some local authorities will be disappointed that no grant increase will be available in recognition of any shortfall in their spending in the current year and last year. I believe, however, that if they look at the total picture they will recognise that the package I am proposing is a fair one. If spending is held steady in real terms, this settlement will enable most authorities to hold the increase in rates to less than the rate of inflation next year. I shall be discussing all these proposals with the Consultative Council on Local Government Finance on Monday.

Fourthly, let me deal with rate limitation. I am today laying before the House a report setting out how general purpose authorities will be selected next year. The selection criteria that I am adopting are the same as those I adopted last year—first, for authorities not selected in 1988–89, budgets of at least 12.5 per cent. above GRE and showing a growth of at least 6 per cent. since 1987–88; and secondly, for authorities that are selected in the current year, budgets of at least 12.5 per cent. above GRE.

On those criteria, seven authorities will be reselected for 1989–90—Camden, Greenwich, Hackney, Lewisham, Southwark, Thamesdown and Tower Hamlets. No authority that was not selected last year is being selected this year. I am today also setting the expenditure levels for the seven rate-capped authorities at the same level as in 1988–89.

My right hon. Friend the Secretary of State for Education and Science has laid a separate report designating the Inner London education authority and he will be setting an expenditure level. That completes the Government's proposals for designating authorities in England.

Dr. John Cunningham (Copeland)

Is the Secretary of State aware that this is a typical statement from him and the Government—a statement of bogus claims and, in some cases, deliberate illusions? Is he also aware that, despite his rather vain hope, rarely, if ever, do local authorities welcome any statement that he has to make about local government finance?

Will not what he has announced today force all local authorities to use the balances of their capital receipts to reduce debt? The right hon. Gentleman's previous claim was that he would slow down the rate at which they would be able to embark on new expenditure. Now he will forbid local authorities to use apparently large amounts of their own money in the way that they wish to do. Does not that mean that Conservative authorities, such as Bracknell, with £48 million worth of receipts, Wycombe with £52 million, Medway with £40 million, Shepway with £11.5 million, Nottingham with £51 million, Bromley with £45 million, Croydon with £50 million, Barnet with £47 million and Solihull with £25 million of their own money, will not be able to spend it in the way that they decide, but will have to use some of that money in the way that the Secretary of State and his Cabinet colleagues, most notably the Chancellor of the Exchequer, will determine?

Is it not also the case that to suggest that local authorities will be free to increase their expenditure in the way that they choose is deliberately misleading? The Secretary of State said that that would be subject to the discipline of the poll tax—

Mr. John Heddle (Mid-Staffordshire)

Community charge.

Dr. Cunningham

No one outside the Conservative party refers to it as the community charge.

Has not the Secretary of State ensured that the notorious gearing of the poll tax legislation means that for a 1 per cent. increase in expenditure, however important or necessary, all local authorities will need a 4 per cent. increase in the poll tax?

What can possibly be the justification for the Secretary of State's second announcement in four months of legislation by the midnight knock? He is now announcing that from midnight yesterday he will be retrospectively legislating over this year's local authority finances and the previous three years, again changing the rules and moving the goalposts long after the expenditure has been made and the decisions have been taken. There is no precedent for the way in which the Government have rigged rules on local authority expenditure and changed them so often, so capriciously and so retrospectively so many times. The record is a scandal. It is outrageous that we should be faced with that again.

What can possibly be the purpose of the Secretary of State's meeting next Monday, 11 July, with the local authorities, planned for some considerable time, to discuss his proposals for the coming year? He has announced his proposals today. It means that the meeting next Monday with the local authorities to consider this matter is a farce. Or will he confirm to the House that he will take on board the points made by the local authorities and come back and change what he has said today? Is that a possibility? If not, it makes nonsense of the consultation process.

We welcome the Secretary of State's belated admission that what he and his colleagues said in the financial memorandum to the Local Government Finance Bill was nonsense. They hopelessly underestimated the costs of implementation of that obnoxious legislation, as the Price Waterhouse report has confirmed. At least we welcome the recognition forced on him by Price Waterhouse's conclusion that he would have to make far higher allowances for the costs of implementing the poll tax.

Why does the Secretary of State waste his time, as well as that of the House, by repeating what he said last year during his statement on the rate support grant for England, that the increase in rate bills … should be around the rate of inflation"—[Official Report, 23 July 1987; Vol. 120, c. 496.] He kept repeating that last year, when in fact average domestic rate bills rose by 10.1 per cent. and, in many Tory-dominated authorities, increases were of the order of 20, 30 or 40 per cent. Shepway, in the constituency of his hon. and learned Friend the Minister for Local Government, had one of the largest rate rises in the south-east of England. Why the time of the House should be wasted again and again by bogus claims for the implications of what the Secretary of State is announcing, I really do not know.

It is also welcome that at long last the Secretary of State is beginning to wind down the arbitrary use of power in the Rates Act 1984. But what is it that the citizens of Camden, Greenwich, Hackney, Lewisham, Southwark, Thamesdown and Tower Hamlets have done—

Mr. Heddle

Vote Labour.

Dr. Cunningham

Exactly. The hon. Gentleman has given the game away. It is an action of enduring political spite by the Government towards the citizens of those boroughs that they should go on applying the Rates Act to them in that way.

The statement is as pathetic, as misleading and as obnoxious—and it should be regarded in the same way by all Conservative Members who are concerned about local democracy—as any previous statement that the right hon. Gentleman has made. I only wish that we could believe that it is the last that he will make.

Mr. Ridley

We are all becoming used to the ritual courtesies of the hon. Member for Copeland (Dr. Cunningham), with which he covers up the fact that he does not understand the subject under discussion. His views on the capital control paper, which obviously he has not yet read, were interesting. If he reads it, he will find that the prescribed proportion that may be spent from housing receipts is increased from 20 to 25 per cent., and on other local authority assets, from 30 to 50 per cent. I do not know why the hon. Gentleman thinks that local authorities will be cross about that.

The hon. Gentleman claimed that this measure is in some way retroactive. The phrase that he used was that we are moving the goalposts long after the expenditure has been made. I make it clear that the statement will stop local authorities changing the accounts long after the expenditure has been made. That is changing the goalposts, and if he understood the subject, he would know that that is liable to save his constituents, as taxpayers, a considerable sum of money, possibly.

The hon. Gentleman asked about consultation. What an extraordinary question! I am having a consultative meeting on Monday. Is it not better to have proposals about which to consult the local authorities, rather than to wait until after that meeting to announce them? The hon. Gentleman has a very odd idea of what consultation means.

As for rates, the hon. Gentleman again misunderstands the situation. Last year, and again this year, I said that if local authorities spend at the settlement assumption, their rates should just about increase by the level of inflation. This year I say that if local authorities spend at the settlement assumption, it should be necessary to increase rates by less than the rate of inflation. The hon. Gentleman does not seem to comprehend the fact that local authorities spend at a great deal higher level than the settlement assumption, which is why rates increase so much.

The hon. Member for Copeland asked why certain local authorities appear to be rate-capped year after year. The answer is simple: they spend too much.

Mr. Heddle

Does my right hon. Friend accept that all prudent local authorities who have the genuine interests of their ratepayers and local accountability at heart will not fear anything that he has said today? Will he confirm that the most eloquent expression of the need for the reform of local government finance is if any local authority has to increase its rates above the figure of 4.7 per cent. to which he has referred? Will he confirm that the £110 million included in next year's RSG settlement will be a one-off figure, and that it will not be necessary for any local authority to come back after 1990 for a supplementary order, because only then will the community charge restore real accountability and local democracy between the ratepayer and the spender?

Mr. Ridley

I am grateful to my hon. Friend and can tell him that if all local authorities were to spend at the settlement assumption, which is that they should spend about in line with the increase in inflation between this year and next, it is likely that rates increases would be about 1.6 per cent. in England, which is much less than the rate of inflation is likely to be. I confirm that, as soon as all outstanding years have been completed and supplementary reports have been presented to the House, there will be no need, under the proposals I am putting to the House for its approval, for there to be any further supplementary reports into the 1990s.

Mr. Simon Hughes (Southwark and Bermondsey)

Can the Secretary of State clarify what appears to be a contradiction? He said that capital expenditure limits are being raised, and he gave a figure, yet he said in his statement that control would be moved away from expenditure to borrowing and credit, which is something very different. Is not the reality that the Government are retaining their controls, even if easing them slightly? Local authorities are looking to spend much more, particularly on housing investment, about which he has said nothing today.

Is it not the case that, as was said by the hon. Member for Copeland (Dr. Cunningham), the Secretary of State is going for a completely arbitrary and simple system at the expense of justice? To say that rate support grant for this year and next year will be calculated on the basis of information known to the Secretary of State last night, irrespective of the reality, completely disregards real need. The reality of the situation is also apparent when one remembers that, in real terms, rate support grant since 1981–82 has been cut by the Secretary of State's announcement by 12.5 per cent.—at a time of great economic growth, according to the Government.

The inner city, which is meant to be helped, is being rate-capped yet again, so that poor boroughs such as mine in inner London and others are being told that money will not be available in the form of increased rate support grant. Is it not the case that the Secretary of State wants there to be a massive difference between the amount that local authorities currently receive and their revenue from poll tax in 1990, so that people will be penalised for being poor and will receive nothing from those who have much to give? The Minister could have distributed that money to them.

Mr. Ridley

The hon. Member for Southwark and Bermondsey (Mr. Hughes) mentioned control. The new system will control borrowing rather than spending, but that will not help us with the treatment of in-year receipts and existing cash-backed receipts, where we propose that under the new regime 75 per cent. of housing receipts should be put to the redemption of debt and the remainder should be available for spending, and 50 per cent. of receipts from other assets should go to the redemption of debt and 50 per cent. be available for spending.

We propose fixing allocations of new borrowing consents so that we can concentrate on areas of need rather than on areas of high receipts, which will give us a flexibility that we do not have at present, and ensure that allocations go to the areas of greatest need.

The hon. Member for Southwark and Bermondsey commented on the rate support grant, and I can tell him that if he and the local authorities will examine all the years concerned in my statement, they will find that the package as a whole is a very fair one, because the rate support grant for the coming year must be taken into account as well.

The hon. Gentleman suggested that the previous Labour Government provided far more in rate support grant. I shall give him the true figure. The grant I have announced for 1990 is only £1 billion less than that given in the last year of the Labour Government, brought up to date.

Mr. Ian Gow (Eastbourne)

The hon. Member for Copeland (Dr. Cunningham) would have been more honest with the House if, when naming the local authorities that had accumulated capital receipts as a result of council house sales, he had set alongside those receipts each of those council's debts, which greatly exceeds the accumulated receipts.

Dr. Cunningham

They are all Tory.

Mr. Gow

Is it not the case that the Government's legitimate attempts over the past nine years to control local authority capital expenditure have not been successful, and that my right hon. Friend's decision to control their borrowing is to be warmly welcomed?

Mr. Ridley

My hon. Friend may not have heard me say that local authorities' total debt has risen to the very high figure of £45 billion. To the extent that local authorities repay that debt from their receipts, they directly benefit their community charge payers because the servicing of that debt is reduced by the amount by which the debt is reduced. That in itself is a major way of helping their electors. My hon. Friend is of course right in his second point.

Mr. Peter Shore (Bethnal Green and Stepney)

When the Secretary of State says that the reason why a number of London boroughs, including Tower Hamlets, are being rate-capped yet again is that they spend too much, does he not himself believe that he is guilty of an oversimplistic statement? Is he aware that they are precisely the boroughs which, by all objective measures and calculations, have the greatest measurable financial and other needs? Is the right hon. Gentleman not aware that in the year ending 1987 Tower Hamlets spent £20 million simply in providing bed-and-breakfast accommodation for the homeless, and that the figure for this year cannot be much less, and will be at least £13 million? How can the Secretary of State justify continued rate-capping and grant reduction? His figures are bogus and he knows it. How can he justify taking such action for another year?

Mr. Ridley

The right hon. Gentleman talks about an objective measure of need. The nearest that we have to an objective measure of need are GREAs, which are based on need and are subject to negotiation with the local authorities over many years. Tower Hamlets is spending 23 per cent. above its GREA, or 23 per cent. more than the objective measure of its needs. I believe that that entirely justifies the statement that I made. It turns out that the inhabitants of Tower Hamlets face an implied community charge of £616, and if that is not a measure of overspending I should like the right hon. Gentleman to tell me what is.

The right hon. Gentleman asked about the reduction of grant. The settlement that I have announced today is a £1.1 billion increase in the amount of grant that will flow from the Exchequer to the authorities next year. That is an 8.9 per cent. increase against inflation, which will probably be about half that.

Ms. Mildred Gordon (Bow and Poplar)

Will the Secretary of State tell the House how he will explain his announcement to the 10,000 on the housing waiting list in Tower Hamlets and the 11,200 on the transfer list, one of whom I spoke to last week? He has had a heart transplant operation, but the results of that wonderful operation will be lost because of his housing stress and because there is no place to which he can be transferred.

How will the right hon. Gentleman explain his statement to the many others who are locked in unsuitable flats—where they cannot see daylight—because they are disabled and cannot be transferred to ground floor flats? How will he explain it to more than 1,200 homeless people and to the 35 families who have been sleeping in church halls because there was nowhere else for them to go? How will he justify the rate capping and financial restrictions with which he is punishing those people?

Mr. Ridley

The hon. Lady and her right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) are being not very complimentary to the Liberal-controlled council of Tower Hamlets, which has responsibility for such matters. I have heard of people criticising the council for wasting large sums in all sorts of directions. When it gets priorities right, I will listen to the hon. Lady.

Sir Ian Lloyd (Havant)

As the hon. Member for Copeland (Dr. Cunningham) has exhausted the vocabulary of condemnation, it is much easier for Conservative Members to frame their remarks in the vocabulary of approbation. Those of us who regard this whole area of local authority expenditure as highly convoluted and complex welcome anything that introduces simplicity and clarity.

The second paragraph of the yellow paper—the consultative document—discloses the remarkable fact that local authorities have now borrowed £45,000 million, on which the annual charge is £6,000 million, or roughly £300 per annum per family. Does that mean in effect that a considerable proportion of the community charge will go towards financing existing borrowing?

Mr. Ridley

This might be considered an occasion for rejoicing, in that it is the last time—we hope—that a rate support grant statement of the traditional type will ever have to he made in the House. I hope that next year a statement can be made about the support grant for the new system of community charge finance which will be much more acceptable and much easier to understand. I entirely sympathise with my hon. Friend about the immense complications to which, with any luck, we shall be saying goodbye today.

I confirm that the total of local authorities' capital debt is £45 billion, which costs £6 billion a year to service. That £6 billion must be met by the ratepayers at present and by the community charge payers in future, which is why we are helping the community charge payers by suggesting that some proportion of receipts should be applied to the redemption of debt.

Sir George Young (Ealing, Acton)

Is my right hon. Friend aware that many in local government will welcome his announcement because they have been pressing for control on borrowing rather than on expenditure? Any new system that enables capital expenditure to go to areas where it is needed must be an improvement on the present system, whereby it goes where the receipts are accruing.

The statement will, however, be received with a tinge of regret in the London borough of Ealing, rate-capped this year but, sad to say, not to be rate-capped next year. Is my right hon. Friend aware that the rates went up by 66 per cent. last year, and that rate capping this year reduced them by some 23 per cent.? Without the protection of rate capping next year, they are likely to go up by between 50 and 100 per cent., making it difficult for the Leader of the Opposition and me to budget. Is my right hon. Friend aware that there are real problems in boroughs that come in and out of rate capping year in, year out? Will he give some thought to the problems facing us in Ealing?

Mr. Ridley

I am grateful to my hon. Friend for what he said about the capital controls document, and I confirm his important point that it will enable us to target borrowing resources to areas of greater need. I think that all hon. Members would benefit from reading the paper carefully, because it contains a number of new ideas, many of which at least will he welcomed by local authorities.

As my hon. Friend knows, I have to set the criteria for rate capping so that they are justifiable, and then we have to see which authorities fall within those criteria. This year, Ealing has not done so. It is, in a sense, rather an irony that the more successful rate capping is in reducing rates and expenditure, the less likely the authority in question is to be rate-capped next year. This, however, is another part of the present system that I hope will disappear from the scene for ever after 1990.

Mr. Tony Banks (Newham, North-West)

Why does the Secretary of State continue his campaign against two of the three most deprived local authority areas in England and Wales—Hackney, which is the most deprived, and Tower Hamlets, which comes third? Is he aware that the second most deprived area. my own borough of Newham, has just put forward a scheme to lease some 600 private dwellings to try to house the homeless?

Will the right hon. Gentleman tell me—because this has been a long and complicated statement—whether he has changed the rules so much that the goalposts are now outside the stadium? Can he tell me that the borough council of Newham will be able to proceed with its package and will not be caught up by the right hon. Gentleman's retrospective legislation?

Mr. Ridley

I can only confirm that Hackney is spending 20 per cent. above its GREA, and therefore falls within the criteria for rate capping. The capital changes that I am suggesting are to be the subject of consultation and then of legislation, and are intended to come into effect in 1990. Even the hon. Gentleman will therefore have time to understand them and give us his comments.

Mr. Robin Squire (Hornchurch)

These are complex matters. None the less, I congratulate my right hon. Friend and echo the praise that has already been accorded to the capital spending adjustments. The control of borrowing is to be widely welcomed.

Can my right hon. Friend tell us what will be the position on revenue expenditure when a need grows in a particular borough, if distribution is to be based broadly on expenditure up to 1987–88, as I understood from his statement?

Mr. Ridley

In any system of support grant—whether it is the present rate support grant, or the new revenue support grant that will apply under the community charge—the change in population is taken into account in GREAs, and the numbers are adjusted accordingly. It will not be possible to change those numbers after the system has been closed down in the way that I suggest, but I think that my hon. Friend will find that the package as a whole will deal fairly with the problem.

Ms. Diane Abbott (Hackney, North and Stoke Newington)

How does the Secretary of State reconcile the Government's stated intention to regenerate the inner city with, year after year, rate-capping some of the poorest inner city boroughs—including my own borough of Hackney, the poorest local authority in the country? How can he see it as fair that over the years the balance of rate support grant has moved, in practice, from the poorest areas in the inner cities to the richest in the shire counties?

As the right hon. Gentleman seems to think that Hackney is spending 20 per cent. above GREA heedlessly, recklessly and unnecessarily, will he accept my invitation to come to Hackney, see the result of cuts in the past and note the cruel cuts in jobs, housing and services that will have to be made in the coming year as a result of today's announcement?

Mr. Ridley

Hackney has very high rates. It has an implied community charge of £573. When will the hon. Lady realise that community charges or rates at that level impoverish the citizens and drive businesses away, causing those problems of deprivation and unemployment which she has been talking about? The sooner relief can be brought to Hackney by bringing in the national non-domestic rate and by a reduction in spending, the more likely that borough is to prosper.

Secondly, the hon. Lady said that grant had been switched from the inner cities to the shire counties. I do not think that my hon. Friends who represent the shire counties have that feeling. Some counties are nearly out of grant because grant has been switched to the inner cities.

Mr. Simon Burns (Chelmsford)

Is my right hon. Friend aware that his statement will be greeted with a great deal of pleasure by hard-pressed ratepayers and taxpayers? Does he agree that the proposed legislation to close down the existing rate support grant system will put a stop to attempts at creative accounting to milk the taxpayers by authorities that are trying to get grants that have little relation to their spending or their need?

Mr. Ridley

I agree with my hon. Friend. The only people for whom today's statement will be bad news are some fringe banks and dubious accountants who were hoping to prosper in the future.

Mr. Harry Barnes (Derbyshire, North-East)

The Minister has taken more and more control of the affairs of local government by cuts in provisions since 1979, by grant capping, rate capping and controls on authorities to force them into privatisation, so how can he continue to blame local authorities for the shortcomings in their services when he is beginning to run it all from his office?

Mr. Ridley

The hon. Gentleman and the Leader of the Opposition tie in mathematics. An increase of £1.1 billion cannot be described as a cut.

Several Hon. Members

rose—

Mr. Speaker

Order. I shall endeavour to call hon. Members who have been rising, because I hope that it may curtail business questions, but I ask them to be brief.

Mr. Richard Holt (Langbaurgh)

Will my right hon. Friend accept from me, as I have tried to grapple with local government finances for 25 years, that few people understand them, but they understand the bottom line when they receive their rate demands—particularly in Cleveland? One way in which my right hon. Friend can help matters is to take the bull by the horns, get rid of Cleveland county council and restore to my constituents their Yorkshire heritage.

Mr. Ridley

I note my hon. Friend's views, but the first stage is to abolish the rates. After that, we shall see about other matters.

Mr. Neil Hamilton (Tatton)

Did my right hon. Friend notice that the hon. Member for Copeland (Dr. Cunningham) seemed to treat the accumulated capital receipts as the personal playthings of councillors, when the true position is that councillors act as trustees for the ratepayers? Will there not be a huge welcome throughout the country for the control that my right hon. Friend has announced today, which will reduce the accumulated debt burden of the local authorities? Just as the reduction of the debt burden centrally has been essential to the reduction of taxation, the reduction of the debt burden of local authorities will be central to the reduction of the community charge. I believe that my right hon. Friend's reputation and popularity will shortly exceed even that of my right hon. Friend the Chancellor of the Exchequer through pursuing such a policy.

Mr. Ridley

I am not entering the competition that my hon. Friend invited me to enter. The total amount that has been raised by the local authorities by selling assets since the Government came to power amounts to £17 billion, of which £6.2 billion remains unspent but cash-backed. Next year, we expect there to be a further £2.9 billion of assets. Those are very large sums indeed, and I am sure that the whole House will agree that some of that should be applied to the reduction of debt to benefit the community charge payers when the new system comes in.

Mr. Barry Field (Isle of Wight)

My right hon. Friend will be aware of the way in which the present convoluted system has always conspired against the Isle of Wight. He will also be aware that the present system includes a special factor for the Scilly Isles. When he introduces the new system, will he seriously consider giving some assistance to the Isle of Wight, on the lines of that given to the Scilly Isles, to recognise the fact that it is the only United Kingdom offshore island which has no financial recognition of its excommunication from the mainland?

Mr. Ridley

The concept of GREA for islands had not occurred to me hitherto. I should have to consider the consequences for a number of other islands round the shore of this country. I doubt whether we need to go that far; we could take into account the needs of such places through the new needs grant system.

Mr. David Wilshire (Spelthorne)

Does my right hon. Friend agree that, in the interest of fairness, the hon. Member for Copeland (Dr. Cunningham) should have included in his list of Tory authorities my own Conservative Spelthorne borough council, which cut its rate by more than 70 per cent. the last time it fixed a rate? Does my right hon. Friend accept that the great majority of councillors will thank him for his measures further to curb creative accounting, since those who play by the spirit of the law as well as the letter of the law need protecting? Will he confirm that his sensible announcement means that there will no longer be any need for councils to cut anything except rates, unless they are Left-wing councillors who want to play party politics with people's services?

Mr. Ridley

The worst evil of creative accounting is not that it enables expenditure to be increased but that the bill comes back on future generations, possibly long after the councillors who incurred it have ceased to be councillors. Mortgaging the future for which one may not be responsible is clearly something which we should seek to stop. I believe that the new system outlined in the consultative paper will have the effect of making councillors live with their decisions.

Mr. Jeff Rooker (Birmingham, Perry Barr)

May I press the Secretary of State on the point raised by my hon. Friend the Member for Derbyshire, North-East (Mr. Barnes), who spoke about what has happened since 1979–80? Twice the Secretary of State, in his statement and in answers, said that the settlement of £13.57 billion is £600 million more than the settlement allowed this year, and £1.1 billion more than the grant paid for 1988–89. I have the benefit of a calculation, carried out for me by the Secretary of State's private office, which shows that far from being an increase, the £13.57 billion settlement is £1.8 billion less in real terms than the same figure for 1979–80, taking both figures at 1989–90 prices. The precise figure is £13,575 million, and the comparative figure under Labour was £15,437 million. I am extremely grateful to the Secretary of State's private office for that calculation, which was carried out during the statement.

Twice in his statement the Secretary of State referred to the discipline of the poll tax. What does the discipline of the poll tax mean? Surely the implied discipline of the poll tax is that a local authority will not wish to put up the poll tax because of the fear of electoral consequences. [HON. MEMBERS "That is right."] If that is the case, if the council puts it up and wins the election, why do we have poll tax-capping when the Government boast about getting rid of rate-capping? There is no discipline. It is an absolute fraud and a misuse of the English language to speak in that way.

Whatever might be the consequences of the statement, it is less generous than the local authorities require. There is a cut of £1 billion on what is needed for current policies due to demographic changes and structures in the country, there is retrospective legislation and the lifting of capping on the joint boards a year before the poll tax comes in. All those unelected joint authorities will be free to precept what they like on the elected local councillors.

Those four factors come together to make the existing rating system even more unpopular than it already is, and herein lies the reason: it is all part of the plan to try and make the poll tax popular. Two thirds of the British people see a poll tax in 1990 as unpopular. What better than to try and turn that round in the last year of the present system? To twist and use bogus arguments and to make the present system even more unfair, bogus and unpopular is all part of the plan to improve the credibility of the poll tax. Well, it won't wash.

Mr. Ridley

After a rather sensible and restrained session of questions on this statement we return to what I call the ritual courtesies from the Opposition Front Bench.

I confirm that there are two figures on this matter and, equally, as the hon. Gentleman suggested, that comparing aggregate Exchequer grant in this settlement—after making adjustment for the polytechnics it works out at £13.575 billion—with the AEG in the 1979–80 settlement expressed in 1989–90 prices, that settlement is £15.437 billion, including the polytechnics, which is an increase of £1.9 billion. It depends how the polytechnics are treated. That is the simple answer to the hon. Gentleman.

The hon. Gentleman asked about the community charge. We have made it abundantly clear that we hope that it will never be necessary to cap a community charge. But, as I said earlier in relation to capital, if a local authority ceases to care about the future when an election whose conclusion is foregone is coming up, it is enabled to go berserk with the community charge in its last year of office. In those circumstances it may well be right to use the capping powers.

I have not noticed in local authority by-elections, the local authority elections in May or in the public opinion polls this strange unpopularity which the hon. Gentleman keeps suggesting. If I may suggest it politely to him, the unpopularity seems to fall on the shoulders of the Labour party.