§ The Parliamentary Under-Secretary of State for Scotland: (Lord James Douglas-Hamilton)I beg to move,
That the Rate Support Grant (Scotland) Order 1990, dated 26th February 1990, a copy of which was laid before this House on 27 February, be approved.This is likely to be the penultimate order dealing with the old local government finance system. It represents good news for Scottish local authorities, and I do not think that I need detain the House long in explaining its purpose.The order adjusts rate support grant entitlements for Scottish local authorities for the three years up to and including 1988–89—the last year of the old system. That adjustment can be made in the light of more up-to-date information on expenditure during those years. The main impact is in relation to 1988–89, during which authorities further reduced expenditure, as compared with their original budget figures, by £26 million, as a result of which—if the House approves the order—we will return to them about £30 million in grant. There are also minor adjustments of grant for the two previous years, 1986–87 and 1987–88. The Convention of Scottish Local Authorities has been consulted about the contents of the order and has welcomed it.
As I suggested, one further order is likely to be required in the future to make the final adjustments to authorities' rate support grant entitlement for the years before the introduction of the new system. But those adjustments are likely to be minor, as in the vast majority of cases, we now have a clear picture of actual spending levels in the years in question. So this order represents the last significant step in the process of adjusting grant following changes in grant penalties.
Authorities' total budgets for 1988–89 were £3,742 million, which was £136.5 million above the guideline set by my right hon. and learned Friend the Secretary of State. The grant apportionments of those authorities budgeting above guideline were initially reduced in the Rate Support Grant (Scotland) Order 1988. The tariff of grant penalties imposed in that order was moderate and reasonable when compared with the huge budgeted overspend. Modest penalties were imposed on those authorities that were budgeting only slightly over guideline. The penalty tariff increased for authorities budgeting at 4 per cent. or more over guideline, because it was in relation to those authorities that the greatest pressure required to be exercised.
The initial response of authorities to the penalty tariff was well demonstrated in the provisional outturn figures for the year. Authorities reduced their overall spending by £48 million, compared with their original budget figures. That enabled the Scottish Office to return to authorities by means of the Rate Support Grant (Scotland) Order 1989—which we debated last July—the sum of £70 million. The final outturn figures for 1988–89 now show that authorities have made a further reduction in spending of £26 million.
As I said, that permits the return of about £30 million of grant penalties. It is pleasing to note that, whereas 31 authorities were subject to grant penalties at the provisional outturn stage, that number has been reduced at final outturn stage to 20. As was the case at provisional outturn stage, the authorities that have reduced their expenditure most are Strathclyde and Lothian. Those two 979 authorities are therefore the major beneficiaries of tonight's order—which, if approved by the House, will permit £10.8 million to be returned to Strathclyde and £11.1 million to be repaid to Lothian.
Other authorities that will be repaid significant amounts as a result of the order are Central and Fife regions and Aberdeen and Cunninghame districts. A small number of authorities have, regrettably, increased their spending in 1988–89 at final outturn stage by small amounts, and have had their penalties increased.
Grant adjustments in respect of 1986–87 and 1987–88 are very small, and affect only a handful of authorities. They make merely minor adjustments to those authorities' accounts in the light of recently received final information on their spending in the relevant financial years.
The overall effect of the order is to reduce grant penalties by almost £30.7 million and to increase penalties by £0.7 million. The net effect is that the sum of £30 million will be repaid to authorities with, as I said, £23 million of that total going to Strathclyde and Lothian.
The order demonstrates that, under the old system, grant penalties were effective in curbing excessive expenditure by authorities. Now, of course, we have a new local government finance system in which the discipline of grant penalties is replaced by local accountability and the need for authorities to justify their spending levels to the local electorate, many more of whom now have, as a result of the community charge, a direct stake in those local decisions.
Following this morning's full debate on local government finance matters in the Scottish Grand Committee, I shall resist the temptation to stray into discussing the new system and the alternatives to it which have been proposed by the Opposition parties. Tonight's order represents good news for Scottish local authorities and has been welcomed by COSLA, and I commend it to the House.
§ Mr. Donald Dewar (Glasgow, Garscadden)The Under-Secretary is never at his best when he is trying to sound like a severe bank manager reprimanding a profligate client. When he starts talking about huge overspending and the modest penalties imposed by this munificent Government, he tempts me into a longer speech than I had originally intended. However, I shall resist that temptation on this occasion.
I can put some hon. Gentlemen out of their misery by saying that the official Opposition have no intention of dividing on the order. It would be ungracious to do so because it marks another stage in the final dismantling of a resented and oppressive penalty system, and it will give back some £30.2 million to Scottish local authorities—£30.2 million which I believe should never have been removed from them.
This is almost the end of an auld sang. I have spent a great deal of parliamentary time during the past decade or so, usually late at night, discussing the arcane niceties of the guideline procedure—guidelines that became mandatory as the years rolled by—and discussing, with successive Scottish Office Ministers, the philosophical basis of the words "excessive" and "reasonable." I do not disguise my pleasure in seeing those words, if not expunged from the 980 language, at least removed from the common currency of Scottish politics. That is a cause for celebration among almost all hon. Members present.
Before the Under-Secretary gets the idea that we propose to give him a pat on the back and three cheers to send him on his way, I must say that in the order we are undoing damage which, predictably, did not occur as there was no huge overspend. The Under-Secretary talked about the enormous cumulative total of local authority spending. I think that he mentioned a figure of more than £3,000 million. In those terms, an overspend of £136.5 million could hardly be described as earth-shattering.
In return for that overspend—an overspend against arbitrary guidelines—we got a penalty of £140.5 million in the past year. Now we are getting a repayment because, predictably, the estimated budgets were somewhat higher than the outcome expenditure figures of the local authorities concerned. The Under-Secretary said, as Ministers will, that that showed how effective the system was. In fact, in almost every year that I can remember that has happened, and it would have happened whether there had been a penalty system or not.
The Under-Secretary is right to say that it was a modest penalty. The £136.5 million overspend attracted a penalty of just over £140 million. In previous years, it was well over that. In one year, it was 125 per cent. of the overspend, and it may even have been higher than that at one point. So, to some extent, this was less harsh,. but it was punitive and unnecessary because it runs counter to the basic process of local democracy, in which elected councils assess local need, setting a rate to meet that need—as they did in those days—and answering for what they did at the ballot box. There is no need to make a great meal of this because the system is rapidly fading from memory. This may not be the last adjustment order, but it is certainly the last substantial one that the House will have to consider.
In the corresponding order last year, there was a repayment of £69.6 million as against a penalty of £140 million. Now we are getting £30.2 million. According to simple arithmetic, and in round terms, the authorities have lost £40 million as a result of the penalty system and their alleged over-provision of services. Strathclyde has been given £10.7 million, but it is still £24 million short as a result of the exercise. As the Minister mentioned, Lothian's repayment is £11.1 million, but it is still losing £9 million because of what is regarded as its failure to comply with the Secretary of State's whims. We are better off without the system. I am glad that it is about to be consigned to the scrap heap.
The penalty system has been consistently reinforced by other Government decisions. The Minister referred to this morning's proceedings in the Scottish Grand Committee. I do not intend to refer to the arguments that were rehearsed in Committee, but it is well known that the revenue support grant figures for this year have again victimised many of the authorities that we are considering. I hope that we have seen the end of the penalty system and that it will not return under a new guise. The Abolition of Domestic Rates Etc. (Scotland) Act 1987 would allow poll tax capping. We have already entered into an interesting guessing game as to how many authorities south of the border will fall victim to that ploy. Earlier today the Under-Secretary of State suggested that the Government would not go down that road. I hope that he will be able to hold to that assertion.
981 I am glad that this oppressive machinery is to be abolished and that local authorities are to be granted some rebate. Therefore, I am perfectly happy to agree to the order.
§ Mr. Bill Walker (Tayside, North)I welcome the order. It shows that the Government are responding, as they said they would, to authorities that have made some attempt to fall into line.
Over the years, authorities have indulged in expenditure that they deemed that they required, yet when their expenditure was compared with that of more prudent authorities it was clear that the prudent authorities did not enjoy the rewards that were enjoyed by the high-spending authorities, which started from a broad base. Even after penalties had been imposed, their base was still much broader than that of the prudent authorities that started with slim budgets.
I am glad that this is the penultimate order. It is the last major order that deals with this aspect of local government activity. We have not enjoyed coming to the House late at night to deal with the guidelines, the grant penalties and all the other adjustments that were required. One had to be almost a barrack-room lawyer to understand how the figures were arrived at and how to make sense of them. I tried to do so but I failed. However, I do not think that I was the only person who could not work out how the guidelines were arrived at and, worse still, how the penalties were apportioned.
§ Mr. WalkerI have always said so. I have never understood it, and I have never pretended otherwise.
I have never understood why a good Conservative-controlled authority such as Perth and Kinross district council was penalised many years ago. Because it was good, it had to share the misery with high-spending authorities. That never made sense to me. I never understood it, and I said so at the time. I shall not bore the House, but I have said consistently that I thought that good authorities should be properly rewarded and those which had defaulted should be penalised. I am not about to change my views on that.
I welcome the fact that we have now changed to a system of much greater accountability. Whatever else one can say, there was very little local accountability under the rates systems. With the community charge, it is now certain that there will be greater local accountability.
If I can make one comment about this morning's activities in Scotland, the total absence of any demonstration was noticeable to me and, I suppose, to everyone else who attended. It is the first time that there has been a Grand Committee meeting at Edinburgh without a single protest being made. One can only presume that the old guidelines and the penalties that we are discussing tonight stirred up much interest, and the community charge is now working so well that people are no longer protesting.
§ Mrs. Ray Michie (Argyll and Bute)I, too, welcome any money which is returned to local authorities. The grant penalty has always been unacceptable and unfair and I hope that we are seeing the end of it.
982 I should like to ask the Minister two questions. First, can he confirm the figures for the years that we are discussing, the money that is being returned to local authorities that were penalised, and the money that is riot being given back? Has the Minister had the chance to query those figures, if that is necessary, or will he have an opportunity to do so in the near future? The Minister is aware of my concern that there should be a realistic formula which takes into account the needs element of support grant for Argyll and Bute district council, for example.
Secondly, in view of the delay in bringing the order to the House—it was on the Order Paper for one day last week but was postponed until tonight—can the Minister confirm that the refunds are on target for 28 March? I should be interested to receive answers to those two questions.
§ Mr. Harry Ewing (Falkirk, East)Like other hon. Members who have spoken, I shall be brief. It would be churlish not to recognise that Central region will be receiving £1.3 million out of the refund to local authorities in tonight's order. But I cannot allow the impression to go abroad that the Government's discipline on Central region has brought that authority within their spending guidelines and that Central region was surcharged because it was overspending. That was not the case, and it is important for Labour-controlled Central regional council that I put on record the fact that it was in such trouble.
I have related the story to the House before, but it is none the worse for being repeated. It has its origin in the Government's decision to remove outside plant and machinery from the rating and valuation of the petrochemical industry at Grangemouth in my constituency, thereby removing £8.5 million worth of rateable value—not rateable income but rateable value.
When I took a deputation to see the former Minister, the hon. Member for Eastwood (Mr. Stewart), who is not present tonight, he said that he was refusing to reimburse Falkirk district council, within whose boundaries Grangemouth is situated, or Central region, because surprisingly—in his words—rates in Central region were below the Scottish average per head of the population.
Therefore, the removal of £8.5 million-worth of rateable value served the purpose of bringing Central regional ratepayers and Falkirk district ratepayers up to the Scottish average. As a result, Falkirk district council had to make an increase of 4p in the pound and Central region an increase of 6p in the pound. Having done so. Central region was penalised by the Government for being an overspender.
To compound that felony, the removal of £8.5 million of rateable value did not bring Central region into the needs element of the rate support grant. It therefore suffered the worst of both worlds, because its resource element income from industry, particularly from the Grangemouth area, even after the removal of £8.5 million of rateable value, was too high to bring it within the needs element and the Government would not make good the shortfall that arose from the removal of that £8.5 million.
Over the years, Central region has maintained good services, such as the homehelp service, and it offers the only mechanised emergency care service in the country, 983 whereby elderly people can get care at any time of the day or night. The Labour-controlled council has maintained those services despite being penalised.
I should not want anyone reading the debate to think that Central region was penalised because it was a big spender. It was a prudent and responsible spender and provided outstanding services to people in the region. It therefore struck me as unjust that it should be penalised. Although I am pleased that it is being refunded £1.3 million under the order, it is right for me to place on record on its behalf the circumstances in which it was placed, not by overspending but by the Government.
§ Mrs. Maria Fyfe (Glasgow, Maryhill)I am not surprised that the hon. Member for Tayside, North (Mr. Walker) could never understand the formula for deciding the needs and resources because there was no formula by which each local authority could calculate what it would receive. During my days on Glasgow district council, when I pored over its figures and those for other authorities, I became convinced that there was an "X" factor known as the "Och to hell figure" in the Scottish Office. There was no way of accounting for the differences between authorities.
Does the Minister recall his answer to my written question in which I inquired about the cost of administering the community charge, or poll tax, in 1989–90? His answer was that the cost of administering it in the year just ending had been estimated at £43.5 million, whereas the cost of administering the last year of the rating system was £31 million.
Have local authorities been fully compensated for the extra amount that will have to be spent? I see that the Minister is looking for a quick answer to that question. If not, when will they be so compensated? Does he think it sensible to waste £12.5 million on a much-hated system? Would it not be more sensibly spent on the services for which people are crying out?
§ Lord James Douglas-HamiltonClearly the hon. Member for Falkirk, East (Mr. Ewing) asked the Scottish National party such a devastating question this morning that none of them has turned up for the debate this evening. However, I note what he said. He was discussing meetings with a former Minister. His own local authority, Central regional council, has had returned to it £1,332,632. If he wishes me to follow up any particular points, I shall be glad to do so.
The hon. Member for Glasgow, Maryhill (Mrs. Fyfe) mentioned the cost of collection. I stated correctly that the extra cost would be £14.5 million. We always recognised that the community charge would cost more to administer than rates, not least because twice as many people will pay it. She also asked about the Government making provision. I am glad to confirm that full provision for local authorities' implementation and running costs was based on COSLA's own estimates. Any hon. Member is free to 984 raise the question of running costs again in the current round of discussions in the working party on local government finance.
§ Mrs. FyfeIt is still a sheer waste of money. Even if the Government are compensating local authorities, it is £12.5 million down the drain for running a tax that no one wants.
§ Lord James Douglas-HamiltonWe considered that the advantages of increased accountability outweighed the extra costs.
The hon. Member for Glasgow, Garscadden (Mr. Dewar) mentioned the possibility of selective action. I said this morning that the greater accountability of the new community charge arrangements should reduce the need for Government intervention in the form of selective action. My right hon. and learned Friend the Secretary of State said in January that he would be reluctant to initiate such action this year. However, we shall not make a final decision until all authorities' budgets have been carefully examined.
I was pleased that my hon. Friend the Member for Tayside, North (Mr. Walker) welcomed the order. I am following up the questions that he asked this morning about flood banks. I shall write to him fully on the matter in due course.
I welcome what the hon. Member for Garscadden said. As he said, £30 million is being returned. I should also emphasise a point that COSLA has made. With this order we are now close to putting the old system completely to rest. Grant penalties are a thing of the past. The books for the years prior to the introduction of the new system in Scotland on 1 April 1989 have not yet been closed and there will be a further opportunity for final adjustments to be made to grant penalties. Hopefully, that will not take too long.
The hon. Member for Argyll and Bute (Mrs. Michie) raised a question which affects her constituency. Her authority feels that it is disadvantaged by the present system. As she knows, the system is worked out by the methodologies agreed with COSLA. The client group assessment arrangements are used in determining the relevant grant aid expenditure. It is open to any authority which feels that it is disadvantaged by the present arrangements to present a detailed case for change to the distribution committee which comprises representatives from both COSLA and the Scottish Office. It is important to emphasise that not only the Scottish Office but the convention and other Scottish local authorities have to be convinced of the case for change.
The hon. Lady also asked about the delay caused by the fact that the debate was not held last week. I assure her that we are on target for the end of March and the required date. No disadvantage will have been sustained by any local authority. With that, I commend the order warmly to the House.
§ Question put and agreed to.
§
Resolved,
That the Rate Support Grant (Scotland) Order 1990, dated 26th February 1990, a copy of which was laid before this House on 27th February, be approved.