HC Deb 27 July 1988 vol 138 cc405-12 3.31 pm
The Secretary of State for Scotland (Mr. Malcolm Rifkind)

With permission, Mr. Speaker, I wish to make an announcement about local authority expenditure and revenue support grant in Scotland for 1989–90.

I propose that the provision for local authority current expenditure in 1989–90 should be £3,930 million. This level of provision is 8 per cent. more than provision for the current year, and £240 million over provision for 1989–90 as set out in the public expenditure White Paper. The figure is also 4.6 per cent. above authorities' adjusted budgets for 1988–89. It includes full provision for the extra administrative costs of operating the community charge, as estimated by the Convention of Scottish Local Authorities.

I propose that aggregate Exchequer grant should be set at £2,500 million. This is £129.5 million or 5.5 per cent. more than the settlement allowed for this year, and local authorities in Scotland and local taxpayers should accordingly find it a very satisfactory settlement. In reaching it I have taken into account the views that the Convention of Scottish Local Authorities expressed to my hon. Friend when it met him on 8 July. The settlement is based on authorities' own budgets for the present year. Grant has been increased by more than the rate of inflation. If authorities do not increase their real level of spending next year, community charges should therefore be set at levels no higher than those that we have illustrated for this year.

I hope that authorities will respond very positively to the settlement in preparing their budgets for next year.

Mr. Donald Dewar (Glasgow, Garscadden)

I thought that there was a distinctly smug air about the Secretary of State as he made his announcement. Perhaps he has been influenced by the version of what he said that appeared in this morning's Scottish press, presumably busily leaked by his own information department.

Those reports have inevitably given a misleading gloss on the facts. As I understand it—perhaps the Secretary of State will confirm this—he has taken the 1988–89 budget and added 4.6 per cent. to cover inflation. Does he accept that pay settlements in the local authority pay sector have been running above that, and that when that is combined with the additional burdens to be met—such as poll tax administration, the establishment of school boards, the AIDS campaign and a number of other matters—the increase is wholly inadequate? Would it not be fair to say that an increase of 6 per cent. is necessary to guarantee the present level of services and the increased demands to which I have referred?

The statement refers to an increase in grant. Is it not a fact that there is a fall in the grant percentage from 55.4 per cent. in the current year of the Government's assessment of local government expenditure before penalty to under 55 per cent. in 1989–90? Is it not correct that if the grant percentage figure for the year that we are discussing had been maintained at the same level as last year, £30 million of additional grant would be available to local authorities?

Is not the Secretary of State being hopelessly complacent about the implications of the settlement for the poll tax? Will it not lead either to a further reduction in services or probably to an increase of about £30 per head for the average individual poll tax payer? Does he not accept that it now looks, unless there is a very big reduction in the services offered to often needy groups, as though the average individual poll tax in Scotland will be around the £300 mark, not the £250 mark that Ministers have been talking about?

Does the Secretary of State accept that there is no reason to welcome the new revenue support grant? Judging by today's announcement, it represents another chapter in an all too familiar and dreary story. Will the right hon. and learned Gentleman contemplate the damage that has been done by persistent and sustained cuts in the settlement, which have led to the grant percentage falling in the last eight years from 68.5 per cent. to the present miserable level, representing a cumulative loss of £3,000 million to the people of Scotland?

Mr. Rifkind

In the last two or three years, as the Government have announced generous rate support grant settlements, the hon. Gentleman's attempts to identify bad news from good news have become increasingly unconvincing. The hon. Gentleman is correct when he says that the provision is up by 4.6 per cent., but I think he will appreciate that what is more important to local authorities than provision, which is indicative of what the Government feel that local authorities ought to spend, is the level of grant. That is up by 5.5 per cent.

The hon. Gentleman asked about community charge administration. COSLA's estimate of the costs of administering the community charge is £25 million. In the current year and next year that amount is to be fully accommodated within the settlement that I have made.

The grant percentage includes factors such as loan charges and capital from current revenue. I do not have the precise figures immediately available to me, but that is the cash that local authorities have received. Apart from grant going up by more than the rate of inflation, the fact is that, because grant penalties will no longer apply, every pound of grant that goes to the local authorities will remain with them. We shall not see, as has been the case under successive Governments, a proportion of the grant being returned to the Governments because of excessive spending. The hon. Gentleman ought to recognise that fact.

I cannot for one moment understand the basis of the hon. Gentleman's predictions about community charge levels. I appreciate that the Labour party has its own reasons for making as much as possible out of the issue by scaremongering. However, as a result of the generous grant settlement that I described in my statement, unless local authorities choose to increase their real spending, community charges should be set at levels that are no higher than those that we have illustrated for this year.

Sir Hector Monro (Dumfries)

I thank my right hon. and learned Friend for his statement. Does he accept that the additional money that is being made available to local authorities will stop them criticising the so-called cuts? Does he agree that local authorities will be able to increase their expenditure while maintaining the level of community charge at no more that 5 per cent. above current rates?

Mr. Rifkind

My hon. Friend is substantially correct. The level of the community charge will vary from locality to locality, depending on the present level of spending. Only if a local authority chooses to increase its real level of spending will it be necessary to impose an additional burden on the community charge payer. The point of reforming the local government finance system is to introduce accountability between a local authority and the community in its area. If the community wishes additional services to be provided, it will have to contribute more towards their cost. That is the basis of responsible and democratic local government.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

Even for local authorities to maintain their existing level of services, assuming that the police and fire authority pay increases have to be taken from it, will the Secretary of State confirm that any pay awards above 46 per cent. in the year 1988–89 will require to be found either through additions to the poll tax or by decreasing services?

Mr. Rifkind

I hope that local authorities will take that into account. One of the problems in the past few months has been that local authorities in Scotland agreed on an increase in teachers' salaries which was considerably higher than the Government recommended and more than was agreed for teachers in other parts of the United Kingdom. If local authorities, at their own discretion, choose to increase teachers' salaries by more than the Government are recommending and more than is being applied elsewhere, that will be an additional burden on those local communities, and that must be brought home to them.

Mr. Alick Buchanan-Smith (Kincardine and Deeside)

I congratulate my right hon. and learned Friend on his generous settlement. Can he confirm that it is more generous than those for England and Wales?

Mr. Rifkind

I said that the increase in grant will be £129.5 million, which represents a 5.5 per cent. increase in grant compared with last year. The increase in grant for England was 4.6 per cent. and for Wales 51. per cent.

Mr. Dick Douglas (Dunfermline, West)

Will the Secretary of State reflect on what he has been saying? Will he come clean and admit that the proportion of revenue expenditure incurred by local authorities subvented by central Government has diminished considerably during his period of office? Does he accept that he is talking about an uptake of 100 per cent., but no one really expects a 100 per cent. payment of community charge, especially if we relate it to people like me who will not pay? The proportion is likely to be between 80 and 90 per cent. Therefore, the level of community charge in Scotland will be close to what my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said—in excess of £300. Will he confirm that?

Mr. Rifkind

The hon. Gentleman pays rates at the moment. If he refuses to pay the community charge, he is saying that he wishes to do well out of the change. He is refusing to make his contribution to the cost of local government and is expecting other people to bear the burden of that. If the hon. Gentleman describes that as a position of principle, he has some very odd principles.

Mr. Allan Stewart (Eastwood)

Does my right hon. and learned Friend agree that in their reaction to his statement today Opposition Members have brought their traditional whingeing and whining to a fine art? Is not an increase in provision of 8 per cent. and an increase in grant of 5.5 per cent. generosity almost to the point of excess? I hope that my right hon. and learned Friend will confirm that the Government are still in favour of controlling public expenditure. However, does he agree that the increases will knock on the head the wholly irresponsible so-called forecasts about the community charge to which the Scottish electors were treated before the district elections?

Mr. Rifkind

I agree with my hon. Friend that this is a very generous settlement. If he feels that it is too generous, and if he would like Eastwood district council to be excluded from its benefits, I shall be happy to consider that.

Mr. Andrew Welsh (Angus, East)

Is it not the case that this so-called generous settlement should be put in the context of the withdrawal of £2,000 million from local government by the Government since they came to office? While we are grateful for small financial mercies, is this not an admission that COSLA and the local authorities got their sums right in regard to expenses for implementing the poll tax and the Government got it wrong? When will the Government start listening to the men and women who run local authorities rather than imposing centralist solutions?

Mr. Rifkind

I wish that the hon. Gentleman would make up his mind. He started by saying that the Government were acknowledging that COSLA had got it right, yet he concluded by asking when the Government would start to listen to COSLA. The hon. Gentleman cannot make both points simultaneously, otherwise he will end up even more confused than usual; but perhaps in the case of his political party that is a perfectly legitimate position for him to adopt.

Mr. Tony Marlow (Northampton, North)

It seems that the Government are offering more individually to the constituents of Scotland than they are to my constituents and that money is being transferred from my people to the people of Scotland. Can my right hon. and learned Friend tell the House how he feels that this will reduce the invidious and malignant influence of Socialism on Scotland and, if not, what does he suggest?

Mr. Rifkind

My right hon. Friends the Secretaries of State for the Environment and for Wales have announced generous rate support grant settlements, as have I. It is not unusual for there to be slight differences between the three territories, and I do not think that any dramatic conclusions should be drawn from any differences. The real message is that the Government are playing their full part responsibly to meet the needs of local authorities throughout the United Kingdom.

Mr. Ron Brown (Edinburgh, Leith)

Is not the right hon. and learned Gentleman employing double standards when he attacks the public and hon. Members for saying that they will not pay the poll tax, or the so-called community charge? Is that not hypocrisy, bearing in mind the fact that the Government justify legalised corruption in the form of tax avoidance, which goes on among the rich? Is it not time that the working class fought back by not paying this Tory tax, which does not have any backing in Scotland or, I believe, in England?

Mr. Rifkind

I suspect that the hon. Gentleman and those of his colleagues in the Labour party and the Scottish National party who wish to campaign for a policy of ignoring laws of which they do not approve will find that they are going against the grain of Scottish opinion and will be treated with contempt by the Scottish people. No hon. Member campaigned during the last general election on a manifesto commitment to break the law. The hon. Gentleman did not tell his electorate that that is what he intended to do and I think that he would have got a pretty raw answer if he did.

Mr. John Marshall (Hendon, South)

Will my right hon. and learned Friend confirm that, as a result of this settlement, a far higher percentage of local authority expenditure in Scotland will be grant aided than is the case in England? Does he agree that the lesson of the settlement is that those who make irresponsible wage settlements should not expect to be bailed out by the taxpayer? Does he agree that it is high time that Scottish local authorities sought greater value for money through competitive tendering?

Mr. Rifkind

I agree with my hon. Friend about competitive tendering. He is right to say that the various countries of the United Kingdom receive different amounts of grant from the Government. It is not some arbitrary matter. It reflects the different needs of those countries and the revenue which can be expected from the local community if a comparable burden is put on the system of taxation. At one extreme is the Western Isles, where a high proportion of expenditure is met by grant. In other parts of Scotland, where economic circumstances are different, much less expenditure is met by grant. That principle applies throughout the United Kingdom.

Mr. Dennis Canavan (Falkirk, West)

Will the right hon. and learned Gentleman answer the point raised by my hon. Friend the Member for Dunfermline, West (Mr. Douglas)? When determining revenue support grant, what estimate has been made of the number of people who cannot or will not pay poll tax, bearing in mind the fact that an increasing number of people seem to be coming to the conclusion—the justifiable conclusion—that the only way in which to stop the poll tax is for enough people to say, "We refuse to pay"?

Mr. Rifkind

I notice that those who hold that view have decided to campaign on the interesting slogan, "Can pay but won't." It appears that the campaign is based not on hardship or allegations of inability to pay but on purely political prejudice. This and, I suspect, any other responsible Government do not make estimates based on the likelihood of the hon. Gentleman and his friends refusing to obey the law.

Mr. Phillip Oppenheim (Amber Valley)

Would these professions of poverty not be more credible if more Scottish councils showed themselves more willing to save money by contracting services out and going to competitive tender?

Mr. Rifkind

Local authorities throughout the United Kingdom are increasingly being required to do that. The process consistently shows substantial benefits for the local community, and it enables local authorities to provide better services for the community at reduced cost. That is something which all right-minded people support. Competitive tendering makes sense for local authorities and the Health Service. Everybody does it with their own personal finances, and there is no reason why representatives of the community should not apply similar criteria.

Mr. Jimmy Hood (Clydesdale)

Is the Secretary of State aware that at the last general election I campaigned against the poll tax, made no secret of the fact that I would not pay that iniquitous and immoral tax and doubled my majority?

Mr. Rifkind

No doubt the hon. Gentleman will want to continue to pay his rates or will insist on contributing a sum equivalent to his rates to some worthy cause. Hon. Members who claim to be acting on the basis of principle but who end up in the circumstances suggested by the hon. Gentleman are unlikely to gain any significant respect.

Mr. Neil Hamilton (Tatton)

Does my right hon. and learned Friend accept that English Members will be astonished by the relatively high proportion of local government spending in Scotland that is paid for by the taxpayer because that proportion is much higher than in our constituencies? Would my right hon. and learned Friend be equally as astonished at the inkling of the dinosaur mentality of the hon. Member for Glasgow, Garscadden (Mr. Dewar), who intimated that the inevitable consequence of a reduction in grant percentages —I know that my right hon. and learned Friend has not announced that today—is that the community charge would be higher or that local government services would be reduced? It has not occurred to the hon. Member for Garscadden that local authorities might be able to become more efficient. Is that the opinion of the hon. Member for Garscadden because the Labour party's paymasters in Scotland are, by and large, the local authority unions which want to keep their noses in the trough and their hands in the taxpayers' pockets?

Mr. Rifkind

Undoubtedly there is a combination of motives which sometimes leads to the effect to which my hon. Friend has referred.

Mrs. Maria Fyfe (Glasgow, Maryhill)

I did not promise in my election address to shoot the Prime Minister, but I am constantly urged to do that by my constituents. When does the Secretary of State intend to announce the share out of the grant settlement? We would be interested to know whether that will be carried out fairly according to need or whether the Government will exercise the political prejudice which they have exercised so often in the past.

Mr. Rifkind

The political prejudice to which the hon. Lady has referred has meant, with regard to distribution, acting in the closest consultation with COSLA and in the vast majority of cases accepting COSLA's proposals for distribution. If that is political prejudice, it is a rather interesting kind of prejudice which is apparently shared by the hon. Lady's friends among local authorities.

Mr. Alistair Darling (Edinburgh, Central)

What account did the Secretary of State take of rising interest rates which have a major impact on local authority expenditure? Does he not accept that, if interest rates continue to rise as they have, they will push the poll tax well above the Secretary of State's bogus figures unless local authorities begin to cut services, or is that really what the Secretary of State would like to see happen?

Mr. Rifkind

The hon. Gentleman knows perfectly well that the increase in grant that I have announced today is above the rate of inflation. He is also aware that interest rates, when they relate to the loan charges of local authorities, very often lead to adjustments in the support for local authorities. The hon. Gentleman has referred to the worst example that he could possibly have thought of in referring to changes in interest rates affecting local authorities. Traditionally those have been accommodated by central Government.

Mr. John McAllion (Dundee, East)

The level of rate support grant percentage is fairly important because if it has been reduced it represents a further shift of the burden of taxation from central Government to the backs of poll tax payers. Will the Secretary of State stop ducking the question and confirm or deny whether the level of RSG percentage this year represents a reduction or an increase over last year's?

Mr. Rifkind

As I have already said to the hon. Member for Glasgow, Garscadden (Mr. Dewar), that kind of calculation does not just——

Mr. McAllion

That means yes.

Mr. Rifkind

If the hon. Gentleman would allow me to answer his question as I allowed him to ask it——

Mr. Speaker

Order. I think it was I who allowed the hon. Gentleman to ask the question.

Mr. Rifkind

I accept your rebuke, Mr. Speaker.

The level of grant is the crucial requirement for local authorities. That is increased by more than the rate of inflation. The percentage relates to the percentage of the figure for provision. That is an indicative figure. It also takes into account loan charges and capital from current revenue. As I said to the hon. Member for Garscadden, I do not have the figures available for loan charges or capital for current revenue. However, the important point for local authorities is the actual cash that they receive. If that cash is more than the rate of inflation, it is undoubtedly one of the more generous settlements that they have received in recent years.

Mr. John Home Robertson (East Lothian)

The settlement is supposed to take Scottish local authorities through the first full chaotic year of the Government's new poll tax. Has the Secretary of State taken account of the built-in inefficiency of the tax and the fact that the majority of Scottish people do not want it to work? What advice is he giving local authorities about the level of shortfall in collection for which they should budget? Should it be 10, 15 or 20 per cent.? How can they manage their budgets in the coming year, given the uncertainty that the Government have created?

Will the Secretary of State respond to the specific point made by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar)? Is not the grant settlement a lower percentage of the Government's estimates of local authority expenditure than that for the current year?

Mr. Rifkind

The hon. Gentleman asks the Government to make estimates based on people allegedly not paying the community charge or having a lack of enthusiasm for it. [Interruption.] The hon. Gentleman referred to inefficiency and said that people do not wish to pay the community charge. Despite the Labour party's campaign to frustrate the registration process—that was one of the examples used during the passage of the Bill to show the inefficiency of the system and how it would not operate effectively—here we are, two months before the target date for the completion of registration, and it is over 90 per cent. complete in the majority of areas. As a consequence, it can be seen without fear of qualification that the Labour party's campaign has been a complete shambles.