§ That a further sum, not exceeding £333,187,000, and including a Supplementary Sum of £33,000,000, be granted to Her Majesty out of the Consolidated Fund to defray the charges that will come in course of payment during the year ending on 31st March 1992 for expenditure by the Welsh Office on residual rate rebate for the disabled grants, grants to local authorities in Wales in respect of the community charge and certain related administrative expenses.
The motions seek approval for expenditure under the Community Charges (General Reduction) Act 1991. The Act received Royal Assent on 28 March, and the expenditure is urgently needed to compensate local authorities for certain provisions in the Act. That is why we have taken the unusual step of bringing forward these supplementary estimates for the House's approval tonight.
In recent years, the burden of paying for local services has fallen too heavily on local taxpayers. We propose to ease that burden through a series of measures that will redress the balance between local and national taxation. In the longer term, we shall ensure that the council tax which replaces the community charge will need to raise less money than was raised by the rates in their last years or the community charge last year. For the short term, the Community Charges (General Reduction) Act provides for an immediate reduction of £140 in the level of community charges set by local authorities for 1991–92.
Since the Act will have a significant impact on the finances of local authorities during the current year, we are providing authorities with assistance in three ways. First, we are compensating them for the effects on their cash flow of the delay in sending out bills. Secondly, we are reimbursing them for the direct loss of community charge income as a result of the £140 reduction. Thirdly, we will 270 reimburse the reasonable additional administrative costs which they have incurred as a result of the recent legislation.
Since this year's community charge bills are being sent out late, it is inevitable that authorities will suffer losses of interest on revenue that they had budgeted to receive in the first few weeks of the financial year. We are taking steps to offset those losses. In England, we have brought forward the amounts payable to local authorities from the pool of non-domestic rates. We made an extra payment on 5 April which authorities would not otherwise have received and, overall, in the first two months of the year, we are paying out 32 per cent. of each authority's business rates entitlement for the year as a whole.
This should ensure that authorities are adequately compensated for the cash flow shortfall that they would otherwise face. In Scotland, a similar effect is being achieved by advancing payments of revenue support grant, and in Wales we are achieving the same ends by front-loading the new community charge grant which will reimburse authorities for the £140 reduction.
As I have said, front loading is only part of the picture. We also intend to use our powers under the Act to pay two new grants to local authorities; and those grants cannot be paid without the specific approval of the House. That is why the supplementary estimates are being presented to the House today.
§ Mr. David Wilshire (Spelthorne)
Before my hon. Friend pays the councils, will he make inquiries about the length of delay in issuing bills? Some councils will take longer than others. Will he also make inquiries into whether Labour councils are deliberately delaying issuing their bills until after Thursday, so that the public do not know the truth?
§ Mr. Key
Some of them have made remarkable progress. Within a matter of days of the changes being announced, they had got their bills out.
As I have already said, front loading is only part of the picture. We also intend to use our powers under the Act to pay two new grants. The first will reimburse authorities for the direct loss of community charge income arising from the general reduction in charges. Of course, we shall not know until the end of the year exactly how much income each authority has lost, but we.can make an estimate, and that is what we have done. Our estimate uses authorities' own figures for the amount of income they were expecting to raise from charges. So it takes account of their expectations about non-collection, ensuring that our grant does not simply bail out authorities that are poor collectors, and it also takes account of standard and collective charges.
Grant will be paid during 1991–92 to cover 90 per cent. of the estimate for each authority. Final payments, to bring the amount of grant up to 100 per cent. of actual losses, will be made next year. This year's payments will involve an increase in central Government support for the 271 current year of over £5 billion for Great Britain as a whole. We have already released the first instalments of community charge grant to local authorities. In order to permit that urgent expenditure, an advance of nearly £505 million has been made from the contingencies fund. That sum will be repaid to the fund when parliamentary approval for the additional expenditure has been obtained.
§ Sir Peter Emery (Honiton)
Will my hon. Friend make it quite clear to the House and to the councils generally that the advance of that money in no way releases local authorities from their responsibility to collect outstanding community charge which has not yet been paid?
§ Mr. Key
Yes, indeed. I am grateful to my hon. Friend for raising that point, and I can give him an absolute assurance that there is no question of an amnesty on the payment of tax due to local authorities. It is essential that all those in a position to influence non-payers use that influence to ensure that they pay. It would be grossly unfair to other law-abiding payers if that were not the case.
As I have said, we are paying only 90 per cent. of the grant this year. The remaining 10 per cent. will be paid after the end of the financial year, subject to any adjustments that may be necessary, on the basis of audited claims. That arrangement is based on a recognition that authorities' own estimates of the amount of charge income to be raised are subject to considerable uncertainty. In those circumstances, it would be wrong in principle to pay 100 per cent. of the estimated entitlement until an audited claim has been received. We recognise, however, that the holdback of 10 per cent. will affect the cash flow position of authorities. We have therefore taken that into account in advancing the payments from the business rate pool.
That brings me to the third measure on my list. We intend to reimburse authorities for all reasonable additional administrative costs incurred by them as a result of the recent legislation.
§ Mr. Rhodri Morgan (Cardiff, West)
I must compliment the Minister on his smooth performance, but is it not the first time that the Gerald Ratner principle has been applied to legislation? The Government has had to admit to the House that the legislation under which local government finance has operated for the past two years is, to use Gerald Ratner's phrase, nothing better than a prawn sandwich. In the light of the additional administrative costs to local authorities, does the Minister intend to deduct those funds from all the ministerial salaries that have been concerned with the fiasco over the pasi. two or three years, as Mr. Ratner would do?
§ Mr. Key
The hon. Gentleman made a particularly long intervention. I can assure him that if he were to reduce ministerial salaries by anything at all, there would be precious little left for the benefit of his constituents.
We are taking very great care to discuss with local authority associations what the basis and timing of payments should be. No decisions on that have been taken, but we expect that the cost to the Exchequer in the current financial year will be of the order of £60 million.
Apart from those three initiatives, we are taking the opportunity to adjust the public expenditure provision required for the existing community charge reduction scheme and the assistance which is given towards the preparation and administration costs of that scheme. 272 Because of the £140 general reduction, the total amount of help that will need to be given through the reduction scheme will be reduced.
The resultant savings have made it possible to make a number of improvements to the scheme. The threshold for entitlement has been reduced from £104 to £52. Allowance is now being made for people who changed their address during 1990–91, and, for the first time, the scheme will take account of as many charges as there are eligible charge payers in a property. Those changes in the rules mean that some 18 million people will still qualify for a reduction under the scheme in the current financial year.
The cost of the revised community charge reduction scheme will now be £1.38 billion, which is about £450 million less than the figure announced in the local government finance settlement in January. As with community charge grant, 90 per cent. of that sum will be paid to authorities this year, with the balance of the grant payable after the end of the year on the basis of audited claims.
The changes to the reduction scheme will also affect the preparation and administration costs incurred by authorities in relation to the scheme. We are therefore seeking additional provision to cover the extra costs of amended computer software and other administrative expenses.
§ Mr. Richard Tracey (Surbiton)
Before leaving the issue of adjustments and so on, will my hon. Friend consider a further point about the behaviour of some local authorities? Some in London say that the London borough of Lambeth has still not sent out bills for last year's community charge, and is therefore suffering a large shortfall in its community charge. It would be wise for my hon. Friend and the Department of the Environment to investigate that closely so that the truth can be found before the Government and the taxpayer make any payments to that borough. Other London boroughs may be in a similar position.
§ Mr. Key
I regret to say that my hon. Friend is right. The London borough of Lambeth has a substantial debt, not only from uncollected community charges last year but from uncollected rents and rates and a great deal of other income due to it. I suspect that it would be extremely unfair on those who live in the London borough of Lambeth if we were not to assist the borough to finance its services this year, considering that the borough receives a substantially greater grant than its neighbour—Wandsworth—because of its additional needs. I take my hon. Friend's point, and I hope that those in Lambeth responsible for these matters will take careful note of it.
The estimates will enable the Government to provide a substantial amount of additional assistance to local authorities in England, Scotland and Wales this year. They give effect to the commitment that we have made to reduce the burden on local taxpayers. I commend them to the House.
§ Mr. William O'Brien (Normanton)
The Minister said that these estimates are before the House because of the extra that people were paying, first in rates and then in massive poll tax payments. I remind the Minister that ratepayers and poll tax payers have paid more over the past few years because the Government have so drastically 273 reduced the rate support grant that it was only reasonable that someone should have to pay more. Many people need and depend on the services of local authorities. The sorry fact is that it has taken the Government 12 years to realise that that has been happening.
We are debating a contribution to help local authorities with their expenditure. However, we think that it would be better to reinstate the rate support grant as it was before the Government took office than to operate this mis-mash of resolutions and proposals.
§ Mr. Wilshire
Before leaving his point about why people are paying such large bills, will the hon. Gentleman comment on the fact that one of the reasons for that is that some of his colleagues refuse to pay their community charge and have been stoking up many other people and encouraging them not to pay, so that the law-abiding citizens have had to pick up the tab?
§ Mr. O'Brien
We hear that story a lot from Conservative Members, who do not mention that rates were increasing long before the poll tax came into effect. The poll tax has been in operation in England for only a year and in Scotland for two years. The Government have discovered that it does not work, hence the need for the estimates.
On 25 March, the Minister of State announced drastic changes and hon. Members have been awaiting announcements or additions to the Order Paper today. We hoped to hear from the Minister that, from 1 April 1991, the Government would extend the 100 per cent. rebates for the poll tax to people on income support and to those whose incomes are such that they cannot afford to pay.
In his statement on 23 April, the Secretary of State, who I am pleased to see in his place, made it abundantly clear that the Government are now aware of the hardship that people on income support, students, student nurses, apprentices and people on youth training courses experience in paying their poll tax bills. The right hon. Gentleman promised that under the new council tax, which will be introduced in 1993, the maximum rebate for people on income support, students and trainees would be 100 per cent.
If the Government now recognise the hardship that people experience in paying their poll tax bills, why should they have to wait a further two years for 100 per cent. rebates? Ordinary people want an answer to that question.
§ Mr. Malcom Bruce (Gordon)
Is not it unfair on people and absurd for local authorities to have to pursue 20 per cent. of a much reduced tax, when the cost of collection will probably exceed the revenue that will be secured? Does not that show how incompetently crazy the Government are?
§ Mr. O'Brien
The hon. Gentleman makes an important point, with which I shall deal later.
If the Government have recognised the need for 100 per cent. rebates, why not will they make them available from 1 April? Why cannot they be included in the estimates? Why does not the Secretary of State act immediately and offer them to those who are in greatest need?
The House is agreeing to expenditure of £4.8 billion from the Consolidated Fund to meet the cost of the 274 Community Charges (General Reduction) Bill. The Chancellor of the Exchequer told us that, under that Bill, poll tax bills would be reduced by £140.
§ Mr. John Bowis (Battersea)
Does the hon. Gentleman accept that the people about whom he is talking do not need to wait for two years? If Labour authorities were to produce spending plans at target or less, those people would not only receive the 20 per cent. this year; they would receive more than that through their income support level. The people the hon. Gentleman wants to protect could be protected this year if the Labour authorities that are wastefully overspending stuck to target.
§ Mr. O'Brien
Those who are requesting 100 per cent. rebates are not found only in Labour local authorities. The Association of District Councils has suggested that there should be 100 per cent. rebates for those on income support and, as the hon. Gentleman knows, the ADC is Tory-controlled. The hon. Gentleman's own colleagues are also asking for that consideration. Collecting the 20 per cent. could be more expensive than giving 100 per cent. rebates to those people. That is the craziness facing the local authorities, but it is not too late for the Secretary of State to make that adjustment and to allow relief to those who most need it while also reducing the administration costs of the local authorities.
The purpose of the three motions is to reduce the poll tax by £140 per person. They also relate to covering the cost of the changes that have been made to the poll tax reduction scheme that was announced by the Minister on 25 March. I believe that the Minister said that he would cover all the costs incurred by the local authorities that will be faced with extra work. Extra demands are being placed on their staff and resources because of making the changes that the Government have introduced.
I believe that, as part of the general reduction scheme, we should include 100 per cent. rebates for those who have suffered the greatest hardship as a result of the poll tax. That is the most important matter before the House. However, there is also the question of rebilling, to which the Minister referred, and of the delay in local authorities' receipt of the income that would enable them to meet their costs. Can the Minister be more realistic in assessing those costs?
If the cost will be met only at the end of the financial year when the audit is carried out, I must advise the Minister that that will create additional problems for local authorities, which may have to borrow to meet the cost of providing services. That will lead to interest charges, which will have to be taken into consideration when assessing the total cost of the extra charges and the extra calls upon the resources of the local authorities. I hope that that amount will be included in the total refund that is made to the local authorities. Has the Minister any updated figures for that cost? We were told that it could amount to £200 million of wasted taxpayers' money——
§ Mr. O'Brien
I am prepared to give way to the Minister of State. If he is saying that it will not be £200 million, what is his most recent assessment of the cost?
§ Mr. O'Brien
But the Minister then said that that was only an estimate. There has been no real attempt to ascertain the actual cost. I suggest that £200 million is a more realistic figure than the one that the Minister has given. [HON. MEMBERS: "Why?"] Because local authorities are now making it clear that the Government have underestimated the real cost, and that their costs will be much greater than the £1, £1.50 or £2 per poll tax payer suggested by the Minister. The Minister of State has underestimated that figure. Bearing in mind the way in which the Government arrived at the figure of £60 million, one can readily accept that they have again underestimated and that they are not being honest or fair with the House or with the people outside.
The money that we are told will be paid to local authorities for the extra billing and extra work that must be carried out would be better channelled into providing improved education facilities, community care and health care. The money that is being wasted on paper that is churned out and then destroyed, on equipment that must be purchased so that bills can be sent out and on the recruitment of additional staff to make up for the Government's mistakes could be better spent on the services on which people rely. It is sorrowful and painful to consider that people are suffering because services are not being provided and the Government are wasting money in the way that has been outlined tonight.
§ Mr. Tracey
The hon. Gentleman is right to talk about services that the public are losing, but in his capacity as a Front-Bench spokesman, what advice would he give to the Labour authorities that are not sending out bills and that like the London borough of Lambeth, which I mentioned earlier, have not even sent out the bills for last year? Lambeth is one of the new inner London education authorities, and as such has responsibility for young people. What would he say to such a borough, which is not even attempting to collect the money from last year, let alone this year?
§ Mr. O'Brien
Send out the bills. If that is the advice that Conservative Members wish me to give, I give it.
There is a doubt about how many people will qualify for, and receive, the £140 reduction in the poll tax. The Budget brief presented by the Treasury on 19 March stated that one of the main features of the Budget was that the community charge would be reduced by £140 in 1991–92. The inference was that all community charge bills would be reduced by that amount. We are now told that that is not a realistic figure and we realise that the Chancellor's statement was wholly misleading. More poll tax payers will receive a reduction of less than £80 than will receive a reduction of £140. Five million pensioners will receive less than £80; 20 million poll tax payers do not qualify for the £140 reduction. They are the Minister's figures, not mine. The people who can afford to pay—such as right hon. and hon. Members—receive the full reduction. It is grossly 276 unfair that people who receive the largest reduction are those who can afford to pay their poll tax, but that is the crazy scheme that the Government have introduced.
The Prime Minister and other Ministers have often told us that benefits that are available from Government sources and from tax sources should go to the people in greatest need, yet that principle does not apply to the poll tax relief scheme. If under social benefits the people in greatest need receive the greatest benefits, why should the same principle not apply with the poll tax rebates?
We shall not oppose the motions because money is being channelled into local government and local government needs that money. As I said earlier, that money should have been channelled through the rate support grant. That would have allowed local authorities to provide the services that are needed in their areas and that would have been a better way to provide local authorities with resources.
The £4.8 million should go to the people who need it most and the local authorities should decide how best the grants should be spent. That money could allow local authorities to provide better education and to repair and bring up to date schools that have not been painted or repaired for years because the Government have been reducing grants and resources to local authorities. We would prefer local authorities to spend the money in the way that they think fit. The money should allow local authorities to provide the community care and the sporting and recreational facilities that are so needed, particularly in rural areas. The Association of District Councils wants the resources to provide the services that are required.
We press the Government to redistribute the money and to provide other resources to allow local authorities to provide the service that people demand. On 19 March, the Chancellor of the Exchequer said:I have concluded that…the level of the communitycharge is still too high…the community charges recently announced in England, Wales and Scotland will be cut by£140."—[Official Report, 19 March 1991; Vol. 188, c. 180.]
That does not apply. The Secretary of State for the Environment has also said that the number of people receiving help will increase to more than 18 million next year. We are now told that the number of people who will receive the maximum rebate has substantially reduced. In a written answer on 17 April, the Under-Secretary of State for the Environment stated:the reduction scheme…as already planned for 1991–92, is estimated at £86."—[Official Report, 17 April 1991; Vol. 189, c. 184.]The figures show that 14.6 million charge payers will receive less than £80 and 20 million will receive less than the £140 that the Government have claimed will be distributed.
We want a better redistribution of the money available to local authorities. Local authorities should have more freedom to provide the services that their communities are demanding. A Labour Government will ensure that that happens.
§ 11.8 pm
§ Mr. Paul Flynn (Newport, West)
It was interesting to hear the Minister discuss the Welsh situation. Clearly he is the Government representative who is the expert on what has happened in Wales. However, perhaps not many other hon. Members will realise just how ludicrous has been the pantomime of the rate reduction system that was introduced in Wales. A transitional relief system has been introduced and the Secretary of State for Wales confessed, showing rather more courage than sense, that the system is his brainchild.
I shall talk generally about the system and say how the Government started out by coming to the conclusion that it would be sensible to give reductions not on the basis of what people paid individually under the old rating system but on an area basis. That works out as very rough justice indeed.
I choose an area of Wales totally at random, the county of Monmouth. Strangely enough, it has the lowest reduction in all Wales—£4, compared with £82 in the Rhondda. That is £4 for an individual. Of course, there are people in the Rhondda who are very deserving of a reduction, but there are also people in the Rhondda who do not need a reduction at all. Many areas in Monmouth are very poor and will suffer because they are not getting that reduction. That is extremely rough justice, but when the system is broken down into individual parishes and communities it becomes even more demented. There is a degree of fairness if an area is homogenous—that is, if it is wholly rural or urban. In my patch of Newport, West we have a totally perverse result. Under the previous rating system, the areas where the rates paid per parish and per community were low are rural areas. That is for the good reason that the farms were derated. Although there might be 600 dwellings there, 300 of them may have been farms, and they were derated.
When the Government did their arithmetic they came up with the absurd conclusion that areas of deprivation and need were rural areas. In my constituency—the same applies to Newport, East—all the rebate goes to rural areas. We have very prosperous rural areas getting rebates of £50 and large council estates getting nothing. That has caused considerable puzzlement and resentment throughout the constituency. My local newspaper has carried many stories of people asking why on earth they should pay the £50 David Hunt levy, as it has become known, when prosperous areas down the road are paying nothing.
To give an example, under the old rating system, two people in a five-bedroom house were paying £1,500 in rates. Two people in a caravan a field away paid £12 in rates. Under the Tory tax, as described by the right hon. Member for Henley (Mr. Heseltine), they paid equal rates—quite unfairly, with two people in each house—of £460 each. Under the brave new world of the David Hunt levy there will be the generous boon and allowance from the Government; the £53 will go to the people living in the five-bedroom house and the people on the caravan site will receive nothing.
The system needs some attention. The Minister should give some assurance to those who have lost out and are losing out. Some areas, including Rogerstone, Allt-yr-yn, 278 Bassaleg, Rhiwderin and Caerleon will get nothing. Areas such as the Christchurch road, Nash, Redwick, and the leafy world of Wentlooge are getting large handouts.
Those will be matters of some significance on Thursday, as the voters will demonstrate. Tonight we are considering a system which the Government, on their own estimate, say will cost £60 million. We can be very cynical about that figure. That is £60 million to pay for the Government's attempt to save their skin. This is really a Tory tax. If my memory serves me correctly, according to newspaper reports, that £60 million is more than the personal fortune of the Secretary of State for the Environment. Would not it be just if that money were paid not from the public purse but from the funds of either the Secretary of State or the Conservative party?
§ Mr. Malcolm Bruce (Gordon)
Nobody will oppose the motion, as people expect to benefit from this reduction—and soon. However, a number of questions that did not arise when the announcement was made are beginning to emerge. There is a specific question to which I would appreciate an answer. The total amount involved in the three motions is just under £5.7 billion. We were advised that the yield from the Budget increase in VAT would be about £4.25 billion. It would be helpful to know how the difference is made up. The exercise that began in the Budget could have gone very much further. If it had, perhaps people would be clearer as to the exact scale of the manipulation.
The Government could have abolished local taxation altogether. Presumably people would have thrown their hats in the air and said, "Wonderful." But a few months later they would have begun to wonder how it was that their children continued to be educated in schools, that the streets continued to be swept, and that other services continued to be provided. The answer, of course, is that councils depend on Government grants to pay for those services. Indeed, that is how councils will increasingly have to be run.
The Government, having steadily reduced the grants to local authorities in an attempt to squeeze them, have, at one go, reversed their policy and thrown billions of pounds back at the problem. Secondly, they have maintained that this is central Government money. I wonder how often we have heard Ministers say, "We don't have any money; it is taxpayers' money." That is not what the Chancellor said when he made his Budget announcement. He said that he had made funds available from the central Exchequer. That is the difference. At the end of the day, people have to pay, by way of one tax or another, for their services, and the VAT increase was immediate evidence of that fact.
At the weekend, I discussed with an Environment Minister one of the interesting aspects of the new system. The Government say that the new property tax will not involve revaluation resulting from extensions or improvements to houses, as happened under the old rating system. On two counts, it appears that that is wrong. First, improvement could result in a valuation moving the house up a band or two. That would have a significant effect. Secondly, the cost of any major improvement would attract a substantial extra amount of VAT.
A single person with a £58,000 house in Strathkelvin and Bearsden, if he were to undertake a £25,000 improvement, would pay a council tax that was £147 more 279 than the community charge or poll tax figure, in addition to £625 in extra VAT. All I can say is, "Eat your heart out, Michael Hirst. When you find out about that, you won't come back to this place." I could give other examples, but I shall not do so. No doubt the hon. Member for Eastwood (Mr. Stewart) will be happy if I do not go into cases affecting his constituency.
The hon. Member for Normanton (Mr. O'Brien) made a very valid and relevant point. When the Chancellor made his announcement, many people thought that they would get a rebate of £140. It is all very well for Ministers to smile and say, "We all know that that was a reduction from the headline tax," but that is not what many people thought. Indeed, Charlie Gray, the convener of Strathclyde regional council, said that many people in that area thought that the tax had been abolished. The Tory tabloid press. which many of them read, told them that, effectively, the tax had been abolished: "Poll tax goes"; "Victory over the poll tax"; "Defeat of the poll tax". Only later did people realise that the tax had not gone and that they would not get reductions such as they expected.
It is extraordinary, especially at the point of change between financial years, that the Government have not abolished the 20 per cent. rule. They have got themselves into an absurd bind. In the case of Shetland Islands council, the most extreme example, the council could be obliged to collect 20 per cent. of 97p from people who have not paid their tax. The cost of billing would be absurd. Being sensible, the council is not wasting its time pursuing the matter, although it has been suggested that the council may be in breach of the law. I only hope that there are not absolute lunatics in the Scottish Office, and that it will not pursue the council. Even where 20 per cent. is £25 to £30, the cost of collection could be out of proportion to the amount due.
I have talked before about students who have spent short periods on courses—for example, at Robert Gordon institute of technology in Aberdeen, which has been successful in attracting students from Malaysia for three-month courses. The council has had to pursue people to Kuala Lumpur and to places in the jungle for amounts of £6 or £9. Because of the cost of recorded delivery to such places, it does not make sense to try to collect the money, but the director of finance says that he is legally required to do so. That may be an extreme example, but there is no doubt that the cost of collection in many cases is out of all proportion to the revenue involved.
The wear and tear on council officials who have had to deal with the incompetence of the Government should not be discounted. The officials have wrestled with the difficulties with great commitment and success. Conservative Members should not be too sweeping in their denunciation of councils which have been dilatory in collecting the tax. There are bad examples—Lambeth is a case in point—but there are many efficient councils.
My own council, Grampian regional council, was so efficient that it got its bills out before the Budget. As a result, it had to re-bill, at a cost of £250,000 in postage alone. In those circumstances, the officials should not be attacked by the Government. They have been victims of their own efficiency. Conservative Members, including the Secretary of State for Scotland, have criticised council officials for not being diligent enough in following up non-payers.
While the Government may feel that the immediate rescue of the £140 reduction in the headline tax and the 280 introduction of the simplified council tax have got them off the hook, increasingly, as people study the proposals, they will find that there is another group of winners and losers. The Government will suffer because they will be hit by anomalies, rather unexpectedly, in their own heartlands. A growing body of opinion recognises the sheer incompetence of the way that the Government have gone about administering the tax and then the changes.
When pressed on "Newsnight" a few weeks ago, the Minister of State said that the cost of the change would be about a few hundred million pounds. When I heard that, and when I read in my local newspaper that the prospective Conservative candidate for my constituency had criticised the council for spending £9,000 on producing three editions of a newspaper giving council information during the year, I could not help but be struck by the gulf between that modest cost and the squandering of enormous amounts by the Government, which was dismissed in such a cavalier way.
§ Mr. Dick Douglas (Dunfermline, West)
Would the hon. Gentleman care to reflect on the position that persists in Edinburgh, where the university is being considerably embarrassed because of a deficit of about £20 million? Will he contrast the trauma that it is going through with the profligacy of the Government who are wasting good resources on trying to clear the poll tax problem?
§ Mr. Bruce
The hon. Gentleman makes his point. Any hon. Member could make a variety of points about what could be done with the money instead of the waste that we have suffered.
The main conclusion we have to reach is that, in spite of everything, the shambles is to go on until 1994. The problem has not been resolved; we will have to live with it until 1994. In the meantime, we have to get to grips with yet another change.
The Secretary of State for Scotland maintained in an interview recently that he had no revolt on his hands. He said that he had always regarded the events of the past couple of years as a reasonable progression from the rating system to the lessons of the poll tax and on to a reformed property tax. I suppose that he could have argued that the first world war was a necessary expedient to ensure that women were given the vote. Everyone knows that the Secretary of State for Scotland has egg all over his face. He defended the poll tax to the last ditch, as did the Minister of State. Perhaps we shall suffer, because they will have the last laugh. After all, the poll tax will be implemented through the general election until 1994.
I hope only that the people will realise how incompetent the Government have been, how crazy was the way in which they changed the system and how we have not passed through the wood to an efficient working system that will enable local government to implement a buoyant and reliable method of raising finance under which people will be charged fairly for the services that they must receive.
§ Mr. Harry Barnes (Derbyshire, North-East)
The estimates are stage 1 of the Government's inadequate attempt to remove themselves from the mess that has been created by the poll tax. There was mayhem when many local authorities had to produce a second set of bills, and the estimates take account of the costs of second billing, 281 but other problems have not been overcome. For example, when poll tax bills are sent out, assessments and calculations for poll tax payers are down and out, as it were, and there is no entry to the system. When bills are produced twice, the problems are exacerbated. For example, the circumstances of some payers will change because of alterations to their social security payments and other arrangements. During the billing, the local authority can do nothing to assist those whose financial position has changed. It is difficult for an authority to implement manual changes, because of the problems encountered in attempting to enter the system to obtain basic information. There were enormous problems when the Government plucked a new system out of the hat.
There has been talk about the 20 per cent. provision and £140. There are some who will enjoy the £140 provision under the new system, but they are the people who benefited from the introduction of the poll tax. In some instances, they were benefiting by thousands of pounds a year. At the same time, the increased prices that are the result of additional value added tax are picked up by all and sundry. In other words, there is no grand strategy to overcome the problems that were caused by the introduction and implementation of the poll tax.
Stage 2 of the Government's so-called policy lies in the dim and distant future. It might be reached by 1994, but it might not. Of course, a Conservative Government will not be in office in 1994. An alternative policy will be produced by a Labour Government. In the meantime, the Government's plans will fail to overcome the massive problems that have been caused by the poll tax.
The first motion refers to expenditure.in respect of the community charge and certain related administrative expenses".I stress again a massive problem which was created by the poll tax and which much thought is needed to put right. High expenditure is needed to alleviate the damage. The poll tax has had a disastrous effect on electoral registration. The figures show that, last year, 1.6 per cent. of the population of England, Scotland and Wales who were estimated to be over 18 were missing from the electoral register. People dived for cover because of the difficulty that they would face in meeting the demands on them. Sometimes, a member of a large household who was about to turn 18, thus becoming liable to pay the poll tax, did not sign the register.
Statistics show the numbers of 18-year-olds, of those over 18 and people on the electoral register. The number of people on the electoral register has fallen. The Government failed to produce district registration figures, although district council elections were to be held. It was apparent that electoral registration figures would not be available until after the elections. According to parliamentary answers, they were to be available on 10 May. We do not yet have the constituency figures. Theoretically, if the Conservatives do not do too badly in the local government elections, they may decide to call a general election and we would not know the electoral registration figures. That would be disgraceful.
After some pressure, the Government produced district registration figures on 25 April. They show that there is a continuing, if marginal, decline in electoral registration in England, Wales and Scotland, but not in Northern Ireland, which does not have the poll tax. Northern 282 Ireland is in a healthy position in terms of the number of 18-year-olds coming on to the register for the first time, but the position in England, Wales and Scotland is disastrous.
Money should be provided in the estimates to tackle the problem. The Government should have given attention to this point in the review. They had said that nothing was ruled out and nothing was ruled in. I wrote to the Secretary of State for the Environment offering to give information. About two months later, I received a letter from a junior Minister saying that the Department was sorry but it was too busy. Nothing was to be ruled out, but I was part of the nothing and I was ruled out.
Between 1987 and 1990, the percentage of the population on the electoral register fell by 1.5 per cent. in England and by 1 per cent. in Wales. Over a slightly longer period—because the poll tax was introduced in Scotland a year earlier—the number declined by 1.7 per cent. in Scotland. Between 1987 and 1990, electoral registration increased by 0.6 per cent. in Northern Ireland.
The position of those about to attain the age of 18 is far worse than it was at any time in the 1980s or 1990. The figure for attainers in Scotland has fallen from 52,000 last year—which itself was only 69 per cent. of the estimated population of 18-year-olds—to 47,000, compared with the 1982 figure of 70,000.
The same pattern is seen in Wales, although the reduction there is not so dramatic, probably because the effect of the poll tax in Wales has not been so marked as in England.
The attainer figure in England has collapsed between 1990—when it was at a low level anyway—and 1991 by 20 per cent., which has caused electoral chaos. Therefore, although the opinion polls may show that Labour and the Conservatives are neck-and-neck, that is not really the case. Such polls are based on random sampling and do not take account of who is and who is not on an electoral register. The 1.5 per cent. to 2 per cent. of voters missing from the electoral register are likely to be those who have most to fear from the operation of the poll tax—and you can bet your bottom dollar that they are also the people who would vote Labour.
§ Madam Deputy Speaker (Miss Betty Boothroyd)
Order. I draw the attention of the hon. Member to the motion on the Order Paper because, although it refers to "certain related administrative expenses", the hon. Member's remarks are going beyond that subject.
§ Mr. Barnes
The motion clearly concerns expenses incurred in connection with the community charge in correcting errors in the system and other administrative expenses.
§ Mr. Barnes
I was making the point that, whatever trend may be shown by opinion polls, there would be a very different result at the ballot box, with a 2 per cent. loss for Labour.
§ Madam Deputy Speaker
Order. I have heard enough about losses and gains. Perhaps we can hear more from the hon. Member about the estimates that are before the House.
§ Mr. Barnes
The estimates represent an attempt by the Government to overcome the vast problems that confront 283 them. If a Conservative Government continue in office, they will put other measures before the House to get themselves out of even more serious difficulties. Even if that is done, estimates will have to be presented to the House to ensure that something is done to defend this country's democratic system, which is based on electoral registration, and which has been seriously and deliberately hit by the Government.
§ Mr. Paul Murphy (Torfaen)
It is fitting that I should follow my hon. Friend the Member for Derbyshire, North-East (Mr. Barnes) because he, together with my hon. Friends the Members for Normanton (Mr. O'Brien) and for Barnsley, West and Penistone (Mr. McKay), served on the Standing Committee that, three and a half years ago, considered the legislation that introduced the poll tax.
That Committee often sat until 2, 3 or 4 o'clock in the morning. I suspect that it would have astounded the Ministers who piloted that legislation if they had known what would be occurring tonight. Tonight's proposals for reduction schemes, £140 relief by means of value added tax, and requests to local authorities to shred their bills and spend—or misspend—millions of pounds on putting right all that has gone wrong would have seemed a fairy tale to those Ministers.
Tonight the Government stand accused of a volte-face—of the biggest collective hypocrisy in 40 or 50 years of political history. Today's proceedings are wholly unnecessary and should not be occurring. The money that we have wasted and that we are proposing to waste is astounding. As my hon. Friend the Member for Newport, West (Mr. Flynn) said, the community charge reduction scheme must be the dottiest scheme that we have come across in many years as far as Wales is concerned.
In Monmouth, which by chance happens to be the neighbouring constituency to mine, only four areas will get any relief through the relief scheme: Llantilio Crossenny, £4; Rogiet, £19; Caerwent, £6; and Tintern, £10. The rest of the boroughs, and most of the Welsh districts, will not receive the relief that they should have, according to the needs of the people within them.
§ The Parliamentary Under-Secretary of State for Wales (Mr. Nicholas Bennett)
Two thirds will get it.
§ Mr. Murphy
The Under-Secretary of State says that two thirds of the community will get it. He does not take into account the people in those communities. The scheme makes no reference to their needs. They could be communities where many people are wealthy and a few are poor, or vice versa. At least the English scheme has the merit of considering the problems of individuals. The Welsh scheme has already been seen to be discredited, not merely by hon. Members on the Opposition Benches, but by all the Welsh local authority associations, which realise that they have made a mistake.
§ Mr. Bennett
Last year, the Welsh authorities asked for this scheme. Two thirds of all communities will get it and the £62 million available—£40 million more than last year—is all going to community charge payers. None of it will go on administration. It is a very good scheme.
§ Mr. Murphy
This year, the local authority associations have said exactly the opposite. They are saying that they 284 were mistaken. They thought that the scheme would save money on administrative costs, which might have occurred a year ago. However, what has resulted is a unique unfairness, because people are losing out. As my hon. Friend the Member for Newport, West said earlier, the justice is extremely rough.
What is more important is that the scheme should have been unnecessary in the first place. We have effectively wasted nearly £80 million in the Principality by introducing a scheme which would never have been necessary had the tax been fair and just in the first place. That is the greatest indictment of this scheme.
My hon. Friend the Member for Normanton (Mr. O'Brien) has already referred to the fact that many people will not receive the whole £140. If, under the new and revised community charge reduction scheme, they were to have obtained £140 or more, they will get nothing. People on income support will not get their money. Some will have their bills cut by just £28, including pensioners in the Principality. People with the highest incomes will get most, and those with second homes—an aspect that is especially relevant in the Principality—could get as much as £280 a week off their community charge bills.
One aspect which has not been mentioned, and which hits the valleys in south Wales, is that many thousands of people who were eligible for home improvements and repair grants before this scheme now become ineligible. When we couple that fact, as we must, with the new means-tested improvement grants, the effects upon our valleys, which are trying to improve their areas with such grants and with other schemes, is calamitous. Had the Government thought a little more about their £140 off the scheme, the considerable poverty trap that exists in Wales could have been reduced.
The greatest indictment that falls upon the Government's shoulders must be the administration costs of the scheme. The money that the Government have squandered and wasted in Wales during the past three and a half years is a disgrace. They have spent £10 million more than necessary on introducing the scheme. The Government spent another £20 million more than they had spent prior to that on administering the rates. On top of that, they spent another £80 million on sweetening the poll tax. Over £100 million has been spent in Wales that might just as well, for what good it has done, have been dumped in the Bristol channel.
Only two days ago, the Secretary of State for Wales came to the Dispatch Box and boasted to the House of Commons about the money he was spending on two new hospitals in Wales. Had he not introduced this preposterous and discredited tax in Wales, we could have had another two new hospitals in the Principality. That is a measure of the disgrace that has resulted from the mess that the Government and the Welsh Office have got themselves into over the administration of the poll tax.
We do not, of course, intend to oppose this motion, but another £3 million is to be wasted by giving our councils that sum of money to administer this latest scheme. Welsh councils have had to shred their bills, re-bill and employ extra people. They have had to borrow at least £100 million in order to cover the cash flow loss that occurred as a result of the latest scheme. They have also had to pay back another £100 million in interest rates. The Government will have to find another £3 million—rightly so—to give to local authorities. That is money that could have been spent on many other things.
285 The people of Cardiff will come to realise that they have to spend over £1 million a year—£5 for virtually every adult in the capital city of Wales—simply in order to keep alive a poll tax register that will have to linger on for another two or three years. It is a national disgrace for the people of Wales. It costs £5.5 million to administer the poll tax in the capital city of Wales—£26 for each charge payer.
The administrative cost of sending out many of the poll tax bills is far greater than the cost of the bills themselves. [Interruption.] Again from a sedentary position the Under-Secretary refers to the valuation registers. Let me tell him that only this week we discovered that the Government have asked the district valuation officers in Wales to use the 1973 valuation register as the basis for a secret valuation of properties in Wales, by means of which they can change the new banding arrangements to something different from what they announced to the House. The Welsh Office said that there should be seven bands, but it has already begun to tell the district valuation officers that there should be nine because it realises that seven is wholly unacceptable to the people of Wales. It would mean that the rich still got richer while the poor got poorer.
We are sorry that, during the past three and a half years, we have had to put up with a load of nonsense from Ministers, saying how marvellous the poll tax was. The fact is that £100 million of Welsh money has been wasted on putting through a measure that has now been abandoned. There are two years yet to go before something that is possibly even worse is put in its place.
§ Mr. Key
In this short debate we have considered the need for additional funds to cover the costs that local authorities will face as a result of the Community Charges (General Reduction) Act. I need hardly remind the House that the Act was the outcome of three days of concentrated deliberations both here and in another place immediately before Easter. The supplementary estimates for which we are seeking the House's approval also reflect an unusual procedure. This is not the time of year at which supplementary estimates are normally brought forward. I have explained the reasons. However, these unusual measures have had a most benign purpose. They will ensure that throughout the country the community charges originally set by local authorities will be reduced by £140. The speed of the House in concluding its deliberations enabled the reductions to be made. Tonight's deliberations will, I hope, authorise the payment of grant to compensate authorities for all of the £140 that they will not now receive.
The hon. Member for Torfaen (Mr. Murphy) spoke about a volte face, or an about-turn. The only about-turn being contemplated is the Labour party's return to the rates using the 1973 valuations.
My hon. Friend the Under-Secretary of State for Wales has answered many of the points about Wales. I have great affection for Wales and for the people of Wales. I congratulate my right hon. Friend the Secretary of State for Wales on carrying forward the success of his predecessor in transforming Wales into the flourishing and enterprising community it undoubtedly is.
286 The hon. Member for Normanton (Mr. O'Brien) suggested going back to the local government finance regime of 1979. That would be a profoundly disagreeable prospect and we are certainly not contemplating it tonight. The hon. Member for Newport, West (Mr. Flynn) complained that the £60 million would be going directly to the charge payers of Wales. Many charge payers in Labour-controlled authorities, such as Lambeth, would be only too delighted to receive the community charge bills being distributed in Wales.
The hon. Member for Normanton asked me to accept that the estimates for extra administrative costs were far too low, but at present they are our best estimates of the costs of computer software, staff training and so on. However, I stress that we have asked local authorities to discuss them with us, we have asked them for their own estimates, for which we are still waiting, and, as my hon. Friend the Minister of State said, we have announced that all reasonable extra costs will be met.
The hon. Member for Normanton also asked whether authorities would be compensated for the short-term costs of borrowing. Of course they would, because compensation comes through advancing payments from the non-domestic rates pool, including an extra payment date on 5 April, as I have explained. In addition, payments of the community charge grant to cover the actual income lost began on 25 April.
The hon. Gentleman also asked whether the Government had seen what he described as the error of our ways and why we did not reinstate the rate support grant. However, I can reassure him on that point. The revenue support grant for this year has already been made. It cannot be made again, so special arrangements are needed. That is the reason for the supplementary payments. Next year, the extra grant will be assimilated into the revenue support grant and distributed in the normal way.
The hon. Gentleman asked why we did not do away with the 20 per cent. minimum payment. We took the view that it was right to reduce the contribution made by all local taxpayers and hence the £140 reduction was made across the board. Those on income support continue receiving a level of support calculated to cover the 20 per cent. of charges. That support has not been reduced, so those people are getting a reasonable deal.
§ Mr. O'Brien
The abolition of the 20 per cent. minimum payment is an important issue because it will cost more to collect, particularly if it is paid in 10 monthly instalments. Does the Minister not realise that the situation is chaotic and that the minimum payment will cost more than it is worth in local authority administration? Why do the Government not accept that there is an urgent need to reconsider abolishing the 20 per cent. minimum payment by students and people on income support?
§ Mr. Key
I suspect that the hon. Gentleman is making more of a political than an administrative point. The situation is not chaotic, but is being administered extremely well throughout the country. There seems to be little point in changing those administrative arrangements when the burden is not unfair and has been allowed for in the arrangements and when we are planning to change the local tax system. We fully intend to introduce the council tax in the year from 1 April 1993 and not in 1994 or 1995—the date that Opposition Members have used in their scaremongering.
287 My hon. Friend the Member for Spelthorne (Mr. Wilshire) complained of the lengthy delay in issuing bills. Perhaps that was a bit unfair.
§ Mr. McKay
We have plenty of time for what the Minister has to say. Would it not be better for the Government to reconsider abolishing the 20 per cent. minimum payment? The treasurer of my local authority has assured me that the 20 per cent. costs much more to collect than the revenue it brings in. However, if local authorities do not collect the 20 per cent., they could be subject to surcharges. Would it not be possible at this stage to say that if it is foolish to collect the 20 per cent. and local authorities do not collect it, they will not be surcharged?
§ Mr. Key
I cannot agree with the hon. Gentleman. The fact that we have now lowered the charge by a substantial amount should address most of the points that have been raised by hon. Members. I can do no more than repeat what I have already said.
My hon. Friend the Member for Spelthorne was perhaps a little unfair. There is no evidence that any authorities have deliberately delayed issuing bills. For many, the issue of bills incorporating the £140 reduction could not be done before May, and we have had to accept that. Any authorities that delayed on purpose would be cutting off their nose to spite their face. It is simply money lost to the council, affecting the services that local authorities are keen to provide. The point about Lambeth was raised by several hon. Members. We are not compensating authorities that failed to issue bills last year. Some councillors are not aware of that. Entitlement to the new grant depends on collecting the balance due—no collection, no grant.
The hon. Member for Gordon (Mr. Bruce) spoke of £5.7 billion and the fact that my right hon. Friend the Chancellor referred to only £4.35 billion. He inquired about the difference. That is a perfectly legitimate and straightforward question with a straightforward answer. The figure of £4.35 billion is the net cost after savings on the community charge reduction scheme. The hon. Gentleman also referred to the Shetlands. He suggested that in the Shetlands there would be a need for a bill of only 20 per cent. of 97p—the personal charge remaining after the £140 reduction. As he knows, that ignores the fact that water charges are also payable in Scotland. The water charge for the Shetlands is nearly £45. Therefore, revised bills will be somewhat larger.
The hon. Member for Derbyshire, North-East (Mr. Barnes) clearly believes in conspiracy theories. The electoral consequences of the community charge are his forte. The marginal decline in the numbers on the electoral register is not the consequence of the community charge. Most importantly, there is normal demographic change. The hon. Gentleman cannot fail to have noticed that numbers in schools fluctuate. Sometimes the numbers are up and sometimes we have falling rolls. Also, the hon. Gentleman must realise that there are special circumstances in Northern Ireland.
288 I totally reject the hon. Gentleman's assertions that Labour voters are tax dodgers. That was an outrageous suggestion. I was canvassing in Derbyshire last week at the same time as the hon. Member for Dagenham (M r. Gould). We were on different sides of the same market in Ripley. I had no idea of the depth of loathing for Derbyshire county council and its Labour administration. It was an education for a Member of Parliament for a Conservative seat in the south to listen to the residents of that town speaking about their county council.
This has been an instructive and helpful debate. We must keep our eye on the fact that the consequence of what we are proposing will be a substantial relief for the local taxpayers, and I commend the estimates to the House.
§ Question put and agreed to.