§ The Secretary of State for the Environment (Mr. Nicholas Ridley)With permission, Mr. Speaker, I should like to make a statement about the local authority grant settlement for 1990–91 for England.
As the House will know, next April sees the introduction of the new local government finance system. The community charge will replace domestic rates, there will be a uniform national business rate, and there will be a new grant system. Those reforms bring greater accountability to authorities' spending decisions. To give local authorities the maximum time to plan their budgets, I am today announcing the Government's proposals for aggregate external finance—that is, the amount of support that will be available to local authorities in England from Government grants and business rates. I am also announcing my assessment of total standard spending and the community charge for standard spending.
In the current year, 1989–90, English local authorities have budgeted for spending of about £30.3 billion. That is £1.2 billion more than the Government had provided for in the last RSG settlement. It is £1.9 billion more than the total of grant-related expenditure assessments, the Government's assessment of the amount which authorities needed to spend. Local authorities have budgeted to increase spending by 9 per cent. compared with 1988–89, which is more than the rate of inflation. Over the last four years local authority expenditure will have increased by 13 per cent. in real terms. This is excessive.
In assessing the amount of revenue spending that is appropriate for 1990–91—known as total standard spending—I have taken account of what can reasonably be afforded. I have also taken into account the amount that authorities are spending now, and the local authority associations' views about the pressures for increased spending next year. My right hon. Friend the Minister and I discussed that with them in the Consultative Council on Local Government Finance on 12 July. I have had regard to the continued scope for local authorities to make substantial savings through controlling their payroll costs, increased efficiency, competitive tendering and, in some cases, by eliminating wasteful and unnecessary activities. I understand that the value-for-money improvements now identified by the Audit Commission could be worth more than £900 million annually, and only £350 million of them have been achieved.
Under the new system, total standard spending is my assessment of the amount appropriate for authorities to spend in providing services. I propose that this total should be £32.8 billion. On a comparable basis, allowing for technical changes such as the ring-fencing of the housing revenue account and others, that is £1.2 billion more than authorities have budgeted to spend this year. It is a significant real increase on the amount that the Government assessed authorities needed to spend this year.
I propose that the aggregate amount of support that will be available from Government grants and business rates will be £22.9 billion. In addition, I intend to provide a further £200 million of support for two specific purposes, which I shall describe shortly. That makes a total for aggregate external finance of £23.1 billion in support of revenue spending—£1.8 billion more than in the current 344 year, an increase of 8.5 per cent. I shall announce in the autumn how the £23.1 billion is to be divided between standard spending grant, the various specific grants, and the amount likely to be raised from business rates. This implies that if local authorities budget to spend in line with our assessment, just under £10 billion will fall to be raised from community charges. That corresponds to a community charge for standard spending of about £275, broadly the same as the existing average rate bill per adult; £275 is the level of charge which, apart from the safety net, each charging authority could set if spending is in line with the Government's standard spending assessment.
The actual charge in each area in the first year will, however, depend on the transitional arrangements, and the level at which local authorities choose to spend.
As the House will know, we have proposed that there should be a four-year transitional safety net in order to phase in the impact of the new system. The objective is that people living in areas which traditionally have had low rate bills will have a period in which to adjust to the greater demands on them. I believe it is right that those people should have some protection. But, as originally proposed, that protection had to be paid for by the gainers postponing receipt of virtually all their gains.
I have therefore looked again at the safety net arrangements in the light of responses to our earlier proposals, with a view to achieving a better balance between the interests of gainers and losers. It is wrong that areas which have suffered under the present unfair system of resource equalisation should have to wait a further year before seeing any relief. Equally, I think it fair that areas which stand ultimately to have higher average bills under the new system should be expected to make some adjustment from the first year.
I am therefore now proposing new arrangements. In those areas in which charge payers can expect to see their bills falling, nearly half of the gain will come through immediately. To allow this, I propose that losses of grant support equivalent to up to £25 per adult should be allowed to feed through in the first year. This will allow those who gain from the reform of the finance system to see between 40 per cent. and 50 per cent. of their gain come through to them in the first year, although the precise figure will not be known until the autumn. In this way we can begin to move more quickly towards the position we shall have once the new arrangements are fully in force. As in my earlier proposal, the maximum amount of gain deferred will be £75 per adult, but whereas before this applied to a significant number of authorities, it will now only apply to a handful of the largest gainers. In most cases the gain deferred will be significantly less.
I turn to my two proposals for extra protection for certain areas.
First, there are some authorities where, due to the historical accident of low rateable values, the adjustment to the full community charge is generally greater proportionately than in other areas. I therefore intend to provide extra protection of up to £25 per adult for charging authorities in England where the average domestic rateable value per hereditament is £130 or less and where the introduction of the new system results in a loss. This means that in these areas there will be no loss. Authorities with average domestic rateable values per hereditament between £130 and £150 will receive support 345 on a tapering scale. This support will cost roughly £100 million. I will publish in the Official Report a list of authorities which may qualify under these criteria.
§ Dr. John Cunningham (Copeland)Today?
§ Mr. RidleyYes, today.
Secondly, my right hon. Friend the Secretary of State for Education and Science has today announced that the Government will be making available a transitional grant to inner-London boroughs and to the City which will be taking over education responsibilities from ILEA on 1 April. The cost of this extra grant will be £100 million in 1990–91. It will take some time for the boroughs to eliminate wasteful expenditure inherited from ILEA. This grant will provide transitional protection for their charge payers while the savings are realised. Both these proposals will require minor legislative changes, which we will seek to enact in the Local Government and Housing Bill.
Compared to the original proposals for the safety net, these revised arrangements will enable much quicker progress towards the full introduction of the new local government finance system. A large percentage of the gains will come through to gaining areas immediately. In inner London, where community charges threaten to be highest, the proposed specific grant will help authorities to keep down charges. There will be special protection for areas with low rateable values and the maximum extra that local councils in any losing authority need impose on their local chargepayers works out at only 50p per week per adult.
In response to a parliamentary question, I am placing in the Library today illustrative charges showing how a safety net on this basis would have operated in 1989–90 had the new system been in force now. These illustrative charges reflect authorities' own 1989–90 spending decisions and show what the community charge might have been in each area. I have also exemplified the effect of a system of capital value rates and local income tax. Copies of these tables are also available in the Vote Office.
I shall be discussing these proposals with the local authority associations in September. I will bring forward full proposals for the settlement in the autumn, including details of the methodology which we propose to use to distribute standard spending grant between authorities.
Under these proposals, if local authorities control their spending and improve their efficiency, the average community charge need not be higher than about £275, and could be lower. We recognise the particular problems that some authorities face through the change to the new system, and we are providing extra help targeted on these areas. But it will be for local authorities to set their budgets, and for community charge payers to judge whether the amount they are asked to pay is justified.
§ Following is the list of areas potentially benefiting from extra protection:
| Authorities where the average domestic rateable value per hereditament on 1 April 1989 was less than £150 | |
| Domestic rateable value per hereditament (£) | |
| Burnley | 103 |
| Pendle | 105 |
| Wear Valley | 113 |
| Hyndburn | 113 |
| Domestic rateable value per hereditament (£) | |
| Barrow in Furness | 115 |
| Teesdale | 116 |
| Calderdale | 116 |
| Easington | 117 |
| Kirklees | 119 |
| Barnsley | 120 |
| Copeland | 121 |
| Blackburn | 122 |
| Rossendale | 123 |
| Derwentside | 125 |
| Kingston upon Hull | 127 |
| Bradford | 128 |
| Torridge | 129 |
| Sedgefield | 129 |
| Allerdale | 130 |
| Eden | 131 |
| Bolsover | 132 |
| Wansbeck | 133 |
| Rotherham | 135 |
| Wakefield | 135 |
| Boothferry | 136 |
| Berwick-upon-Tweed | 136 |
| York | 136 |
| Gateshead | 136 |
| Sunderland | 137 |
| Ashfield | 138 |
| Sheffield | 138 |
| Carlisle | 140 |
| Doncaster | 140 |
| East Yorkshire | 141 |
| Craven | 142 |
| Rochdale | 142 |
| Hartlepool | 143 |
| South Tyneside | 143 |
| Scarborough | 144 |
| North Devon | 146 |
| Penwith | 147 |
| Tameside | 147 |
| Kerrier | 148 |
| Oldham | 148 |
| Leeds | 148 |
| Lincoln | 149 |
| Mansfield | 149 |
§ Dr. CunninghamThe most important aspect of the statement by the Secretary of State is what he has left out. He has made no decision about, for example, the implications of national business tax and he has kept the House and the business community in the dark about it—so much for his plea in Newcastle upon Tyne last week about having debates on the basis of the facts.
The Secretary of State has introduced a new terminology to describe what he is doing-a kind of Ridleyspeak—but everything that he has announced today can be undermined at a later date by his decisions on the needs assessment for every local authority in England. He has allowed himself the flexibility to adjust those assessments by very large amounts. For example, on one set of figures in front of the Secretary of Slate, Birmingham needs £627 million to provide a standard level of finance—that is, to the Government's standards—but another set of figures for the same city shows Birmingham needing £750 million to provide a standard level of provision. Such latitude exists for every local authority, deliberately to allow the Secretary of State to exercise the 347 kind of political control that he wishes—or, perhaps more accurately, his successor wishes-to exercise over local government finance.
Contrary to what the Secretary of State has said, is it not the case that today's statement announces a major cut in Government support for local services? On the new calculation basis, total standard spending this year is £31.6 billion. The Secretary of State used old figures and the old basis. With inflation at 8.5 per cent., that means that local government needs £34.1 billion for the coming financial year, just to maintain the existing real level of spending. However, the Secretary of State is providing only for £32.8 billion—a major shortfall of £1.3 billion, simply taking inflation into account, never mind wage increases and other increases. The Secretary of State misleads the House when he describes that as a significant real increase. It is a major shortfall in what is likely to be required. His statement today increases the total by only 3.8 per cent. in real terms, which is less than half the current rate of inflation.
The Secretary of State says that local government expenditure increases are excessive, yet teachers' pay and police salaries are under the control of Ministers, not local government. Are salaries and wages to be funded in local government on the basis of a 3.8 per cent. increase, with inflation at 8.5 per cent.? Will the Secretary of State tell the House what the Government's intentions are in that regard? After 10 years of these policies, central Government expenditure has risen by 23.8 per cent. while local government expenditure has risen on the same basis by just 19 per cent. If any expenditure increases are excessive on that basis, it is central Government's not local government's.
If expenditure goes up simply by the amount the Secretary of State is talking about, where does he recommend that local authorities should make cuts? Should it be in employment, in the quality of services, or in the extension of services? How does he expect local authorities to make up a shortfall of over £1 billion with inflation running at its present rate? I am sure that the Secretary of State understands the reality, but I ask him whether he does. Inflation alone will add almost £40 per annum to each individual poll tax bill and it will be the Government, not local councils, who are responsible. How can the statement bring greater accountability to local government decision taking when over 70 per cent. of all funding is in the control of the Secretary of State? It is not in the control of local authorities and their committees. As he controls that level of expenditure, the major accountability for what is happening rests with him and his Department.
Why has the Secretary of State given no information on the likely level of the national business tax? Is it because of the already extensive fear and concern among small business people about the implications of that and the revaluation? How does he expect small business people to plan ahead without some clear idea about the burden of this new tax on their businesses?
It is all very well for the Secretary of State to talk about average poll tax, but in the real world thousands of families face massive increases in what they are likely to pay. It was, after all, the Secretary of State who asked candidly why a duke should pay more than a dustman. He 348 is planning major increases for the majority of households. If one considers my own constituency as an example, the real likely poll tax in Copeland in the next financial year will be about £350 per person. The Secretary of State says that he is expecting people to pay only an additional 50p a week. In a four-adult family, that is £100 a year and in a five-adult family, it is £125 a year. How does he think that people on low incomes will cope even with those minimum levels of increase in their taxes? The Secretary of State is not living in the real world, and he knows it.
The real explanation for the statement and its deliberate obfuscation is simple. The Secretary of State knows that his Back Benchers, the overwhelming majority of whom voted for the legislation in the first place, are now panicking at its likely impact in their constituencies. They are enmeshed in their own ramshackle safety net arrangements. On the one hand, there is not enough in the way of safety net protection—in the north-west in particular—and, on the other, some Conservative Members are complaining about the likely bills that their constituents will face to fund the safety netting in the first place. It would be far better for everyone—although perhaps too late to save the Secretary of State—if he took the legislation away altogether instead of announcing further tinkering with it.
§ Sir Bernard Braine (Castle Point)On a point of order, Mr. Speaker. I wish to raise a point of order of some substance. We have before us a statement—[HON. MEMBERS: "We have not."] We have listened to a statement which touches upon every constituency in the land. The document from the Department of the Environment giving the illustrative charges has been available to a handful of hon. Members, but it is not available to the rest of us, and apologies have already been given in the Vote Office. It may be too late to do anything about it now, on this important occasion, but I should like to protest on behalf of hon. Members on both sides of the House. Perhaps a lesson can be learned from this experience. Each of us wants to know how our constituencies are affected by the statement and by the criticism made of it. Can we be taken into Minister's confidence?
§ Mr. SpeakerAs far as I am aware, the document is available in the Vote Office—[HON. MEMBERS: "No."] Order. I shall have the matter looked into.
§ Mr. D. N. Campbell-Savours (Workington)Further to the point of order, Mr. Speaker. Should not the sitting be suspended so that every hon. Member may have access to the document? When I went to the Vote Office, I was told that some hon. Members had taken a number of copies away and handed them out on the Conservative Benches, although it seems that many Conservative Members do not have copies nevertheless. Will you, Sir, suspend the sitting so that we may all look at the document? Then we can reasonably debate this matter. The present state of affairs is most unreasonable.
§ Mr. Tim Devlin (Stockton, South)Further to the point of order. Mr. Speaker. The statement of the hon. Member for Workington (Mr. Campbell-Savours) was not accurate. A number of Conservative Members went to the Vote Office to get copies. The Vote Office will not give hon. Members more than one copy each and it has—[Interruption.]
§ Mr. SpeakerOrder. What is the hon. Gentleman's point of order?
§ Mr. DevlinMy point of order is that the Vote Office will hand out only one copy to each Member. A number of hon. Members are sharing, and no more copies are available.
§ Mr. John Battle (Leeds, West)When I asked the Vote Office for a copy of the document I was told that I was being given the last copy. There were no other copies available in the Vote Office and it seemed that there were not enough for every hon. Member to have a copy. It should also be placed on record that some of the figures to which the Secretary of State referred are in the Library but we cannot check the illustrative figures in the Library against the figures in the document.
§ Mr. SpeakerPerhaps the Secretary of State can help us by explaining why copies are not available for all hon. Members.
§ Mr. RidleyI apologise to the House. I thought that I had made arrangements for adequate copies of the document to be placed in the Vote Office. I now understand that the original supply was insufficient, and that reinforcements are coming hotfoot to the Vote Office. I apologise for the fact that there seems to have been a defect in the administrative arrangements.
§ Mr. Merlyn Rees (Morley and Leeds, South)On a point of order, Mr. Speaker. Given that arrangements have broken down on a most important issue that affects all the people of England and Wales, and given that we cannot discuss the matter properly, may I ask you to suspend the sitting for half an hour?
§ Mr. SpeakerClearly the House is in difficulty about this. We have another statement to follow. I believe that is would be sensible to take that statement first and then return to this one when, I hope, copies of the document will be available.
§ Mr. SpeakerOrder. I suggest we get on with the other statement.
§ Mr. Bob Cryer (Bradford, South)On a point of order, Mr. Speaker. As we are taking, unusually, the second statement now, may we have copies of the statement made by the Secretary of State of the Environment distributed to hon. Members because, as usual, while the Secretary of State was speaking, copies of his statement, which were not available to hon. Members, were being distributed in the Press Gallery. I object to different treatment being given to members of the Press Gallery. We should have copies of the statement on the Floor of the House.
§ Mr. SpeakerThat is not possible, but when we return to the matter I hope that the document that some Members have, but other Members do not have, will be available.