§ The Secretary of State for Scotland (Mr. Ian Lang)
With permission, Mr. Speaker, I should like to make a statement about Scottish local government finance.
In the context of the additional Government expenditure which my right hon. Friend the Secretary of State for the Environment has just announced, I have secured for Scotland the full formula consequential resources. Those amount to £140 million and I propose to make the following increases in expenditure in local government.
First, I shall introduce in Scotland in April, in succession to the transitional relief scheme, a new community charge reduction scheme, payable on a similar basis to that adopted by my right hon. Friend, but allowing for the earlier introduction of the community charge in Scotland from 1989. The new scheme will be effective in Scotland from 1 April 1990. In the calculation of the amounts of relief payable I shall substitute the actual community charge level that was payable in 1989–90 for the assumed charges that have previously applied. That, together with the changes that we have already made to the scheme, will give substantial benefits to many of those who had to face the biggest increase in burdens at the time of the transition from domestic rates. It will cost an estimated further £65 million next year, with more than I million charge payers benefiting.
Secondly, I shall increase the contribution I make to reducing business rates in Scotland. The House knows of the very large excess burden that is faced by Scottish businesses and in my recent announcement on business rates I expressed the wish that more could be done this year. Now I am able to say that I can do more. I propose to take a substantial further step immediately by increasing my contribution in 1991–92 from the £58 million just announced to £100 million. That comes on top of the £80 million reduction which I have secured in the current year, and will mean an average 8.6 per cent. reduction in business rate bills below what they otherwise would have been. I shall announce the detailed poundages as soon as possible. I can, however, say that the level of industrial derating will be reduced to 30 per cent.
Thirdly, I propose to use the balance of £33 million to assist capital programmes. In the public expenditure settlement I announced last month, £25 million was transferred from the resources I had available for my block programmes to help with revenue support grant and therefore benefit community charge payers. As a result, local authority capital programmes have been hard pressed. I am glad therefore to be able to strengthen those resources in this announcement. I shall announce details in due course.
The package which I have announced today is a very substantial one and will give considerable benefits to community charge payers, to business ratepayers and to local authorities in Scotland.
§ Mr. Donald Dewar (Glasgow, Garscadden)
Any form of relief is welcome. However, there is an atmosphere of muddle and dither, make and mend, about today's announcement. The impression is that the Secretary of State is being dragged along by his English counterpart and the drive for reform is being fuelled by electoral fear.
1036 I welcome wholeheartedly the decision to base calculations for the community charge reduction scheme on actual poll tax figures in the relevant year. Does the Secretary of State remember that the Opposition have demanded such change month after month, year by year, and met with a prejudiced refusal on the ground that to abandon the make believe of notional figures would be to endorse excessive expenditure? The about-turn is mightily overdue. Why did it take so long?
Will it still be true that almost no one between the ages of 18 and 60 who has not previously been a ratepayer will benefit from the new scheme? Will people who have changed their addresses since 1989–90, and who are disqualified under the transitional relief scheme for that reason, benefit from the new arrangements? Has the Secretary of State discussed the appalling administrative complexities of what is, in effect, mark 3 of the transitional relief scheme with the unfortunate local authorities and does the cost include their administrative charges? As he knows, no applicant can be in receipt of both transitional relief and housing benefit. If someone qualifies for transitional relief, his housing benefit will be reduced accordingly. Will that apply to the new scheme, and, if so, what is the net cost to the scheme after allowing for savings from housing benefit?
Does the Secretary of State understand that there is a healthy and understandable cynicism about his claim that the new scheme is worth an additional £65 million? Does he remember his predecessor's proud boast that transitional relief for 1989–90 would be worth £30 million to the poll tax payer when, at the end of the day, only £10 million was dispersed?
Did not the Secretary of State consider taking the recipients of income support out of the poll tax system? They are, after all, the most financially vulnerable groups in our community. At a cost of just over £40 million, the Secretary of State could have abolished many of the administrative problems that have bedevilled the scheme.
I am astonished by the speed of the Secretary of State's retreat on the business rates. Only on Tuesday he announced a £58 million subvention and now, on Thursday, that is being increased to £100 million. Would it not be good to think that the hard-pressed poll tax payer could look forward to the same speed of response? While the Secretary of State may have got the full formula consequential resources, in England the total sum has gone to help the poll tax payer, but in Scotland it has been split three ways. Will he confirm that if the £140 million had been committed exclusively to the poll tax, individual bills in the coming year would have been reduced, on average, by £40?
I am anything but impressed by the capital programme. Will the Secretary of State confirm for the record that the £33 million to which he referred is borrowing consent, not cash? Is it not true that the total capital allocation in 1990–91 was £457 million—I hope that the hon. Member for Eastwood (Mr. Stewart) knew that—and the provisional figure, which is all we have had, for 1991–92, at £468 million, represents a substantial cut in real terms? There is, in effect, a good deal of sleight of hand here, and the truth is that the resources will still be cruelly inadequate.
As all hon. Members know, poll tax payers will face substantial increases next year because of Government policy. Today's desperate juggling with the figures does 1037 not remove the fact that it is an unjust system that ought to go. What is required, and what Scotland would like, is a community charge abolition scheme.
§ Mr. Lang
The hon. Member for Glasgow, Garscadden (Mr. Dewar) began his comments by referring to muddle and dither. I can only assume that he had in mind the 60 or more different variations that the Labour party advanced for funding local government, culminating in the absurdity of the roof tax. However, I am grateful for the welcome he gave our decision to base the scheme on actual, rather than notional, figures, which will be welcome now, particularly in the context of the anticipated increases being considered by many local authorities. Such increases are unwise and unnecessary, given the generous settlement of 10.4 per cent. announced for next year, when inflation is anticipated to be 6 per cent. or less. Basing the scheme on actual figures will be welcomed by hard-pressed community charge payers, to whom the benefits of the scheme will flow. The elderly and those eligible for qualification above the £104 figure will benefit from the elimination of the difference between the notional and actual levels as a result of the new scheme.
As for discussions with local authorities, the scheme has been announced at short notice. My officials are in touch with the Convention of Scottish Local Authorities. We are interested in discussing the implications with them and have made it clear that we will pay reasonable administrative costs.
Housing benefit savings are essentially a matter for the Department of Social Security, which I am sure will be able to answer the hon. Gentleman's specific questions.
The hon. Member for Garscadden asked about the cost estimate. We have the experience of the original transitional relief scheme and the enhanced scheme. Therefore, in estimating an increase in the number of beneficiaries from 550,000 under the enhanced scheme to more than 1 million under this scheme, we are speaking on a more authoritative basis.
Far from our having executed a retreat on business rates, as the hon. Gentleman suggests, I regard what we have done as a major advance. It is the Government who at long last have tackled the problems and unfairnesses faced by businesses in Scotland as a result of the high spending policies of local authorities there under which businesses were chiefly regarded as a milch cow. We have dealt with that problem and stopped the increases taking place. Year by year we are bringing in new resources to bring down the business rate in Scotland to come in line with the uniform business rate south of the border. That will be widely welcomed in Scotland.
As for the quick increase on the figure that I recently announced for business rates, of course the increase has been announced because new resources have been made available. I wonder whether the hon. Member for Garscadden would have given the same priority to businesses. I believe that the three components of this package will be widely welcomed in Scotland and will be of great benefit to community charge payers, local authorities and businesses.
§ Mr. David Lambie (Cunninghame, South)
I am afraid that I cannot congratulate the Secretary of State on his announcement tonight. The people of Scotland will be 1038 angry that he has not proposed the abolition of the poll tax. We have suffered it a year longer than have the English and we want it abolished.
Is the right hon. Gentleman aware that Cunninghame district council has been in correspondence with the Scottish Office and drawn its attention to the financial problems that the council faces fixing its poll tax following the successful appeal by a large chemical installation against the level set in the last two property revaluations in Scotland? Will he confirm that Cunninghame district council will be compensated for its loss of income under this announcement? If not, will he be prepared to meet a deputation consisting of my hon. Friend the Member for Cunninghame, North (Mr. Wilson) and me to discuss this matter before a final decision is taken? He refused to do so last time.
§ Mr. Lang
The hon. Gentleman complains about the fact that the community charge has been in force in Scotland for a year longer than south of the border, forgetting that we in Scotland have benefited from the abolition of domestic rates for a year longer too. The transitional relief scheme, the enhanced scheme and this community charge reduction scheme will also benefit Scotland—and from a year earlier than south of the border. The hon. Gentleman also knows that my hon. Friend the Parliamentary Under-Secretary with responsibility for local government has agreed to meet him and the hon. Member for Cunninghame, North (Mr. Wilson) to discuss this matter.
§ Sir Nicholas Fairbairn (Perth and Kinross)
I thank my right hon. Friend for his statement and congratulate him on the support that he has given to Scottish business. Once again, Scotland is not the guinea pig but the trail blazer.
All the political calls for the abolition of what the Opposition call the poll tax but what is really the community charge are a fraud because of their pretence that if it were abolished no one would have to pay anything. It is socialist authorities that squander the most money and it is fraudulent to pretend that abolishing the community charge would mean ordinary people pay nothing.
§ Mr. Lang
My hon. and learned Friend is absolutely right. The Labour party is keen on spending money, not so keen on clarifying how it intends to raise it. The Opposition should encourage people to pay the community charge, without which local authorities cannot be effectively funded.
I am grateful for my hon. and learned Friend's remarks supporting the changes for business rate payers. Last year we were able to reduce business rates by 6.25 per cent. and as a result of today's announcement the reduction this year will be another 8.6 per cent. That will be widely welcomed in Scotland and it will benefit the Scottish economy and assist the creation of jobs.
§ Mr. Archy Kirkwood (Roxburgh and Berwickshire)
Is the Secretary of State aware that his statement is welcome as far as it goes? Using the device of transitional relief is fraught with difficulties because the scheme has become so complicated as to be unworkable. It would have been much more satisfactory had he considered delivering some relief in the form of an across-the-board reduction or of the abolition of the 20 per cent. minimum contribution.
1039 I am disappointed that the right hon. Gentleman has not dealt with the problem facing local authorities in Scotland as a result of the haemorrhage of finance due to non-payment. In the short term they will find that difficult to cope with.
The business rates announcement is the most welcome part of the package. I hope that the right hon. Gentleman will manage to do something to reconcile the big differences that still obtain in rate poundages in Scotland, and that he will find some way of helping small businesses within the relief that he has announced.
Some areas in Scotland have suffered swingeing increases in water rates and charges. I hope that there is scope within this statement to deal with that.
§ Mr. Lang
Water charges are not covered by these provisions.
I am grateful for the hon. Gentleman's welcome for the business rates reductions that I am introducing. They will benefit small businesses as much as large. The result of applying the percentage reduction across the board will be that high-paying local authority areas will pay less in pounds and pence than low-paying ones. I made it clear in my statement early this week that I would welcome further views and opinions on how to develop the scheme in future.
As for the across-the-board reduction for all community charge payers, we could not be sure that it would not seep into higher expenditure by local authorities. The advantage of this scheme is that resources go directly to community charge payers—a major benefit.
§ Mr. Bill Walker (Tayside, North)
My right hon. Friend's statement will be particularly welcome to those who have been on transitional relief, and the new reduction scheme is a good one. The 8.6 per cent. reduction in the business community contribution is also welcome. I also thank him for the positive and constructive way in which he and his colleagues have responded to suggestions on reforming, not abolishing, the community charge. That positive attitude has helped to elicit proposals, including my own, which I hope will be understood one day by those who cannot yet fathom them.
§ Mr. Lang
I am grateful for my hon. Friend's welcome. Taking into account the previous year during which we restricted the increase in business rates to the rate of inflation, the benefit to Scottish business now amounts to £272 million—a large sum.
I wish that the Labour party would play a more constructive role in the review of the community charge and would help us consider the options so that we can introduce a system that will benefit local authority funding in Scotland and those who contribute to it.
§ Mr. Norman Hogg (Cumbernauld and Kilsyth)
Does the Secretary of State recall that Conservatives used to say that Governments had no money of their own: they just had other people's money? If that is true, are not the hard pressed poll tax payers facing massive increases next year being bribed with their own money? Is it not true that nothing will prevent councils being caught in a pincer movement between cuts in central funding and the non-payment campaign irresponsibly organised by the Scottish National party? Does the right lion gentleman 1040 realise that my council is faced with the prospect of cutting the fire service and being unable to build a new school at a time when charges for local authority services are rising? How does the statement help with that?
§ Mr. Lang
I am surprised at the hon. Gentleman, who, along with the rest of his party, continually urges us to contribute more taxpayers' money to local authority funding and then complains when we do. We are doing it in such a way as to benefit those who pay for local authorities, not those who decide on their spending policies.
I can only agree that it is highly irresponsible of any political party to encourage non-payment. Not only does it lead individuals—usually those least able to defend themselves and look after their interests—into financial difficulty and legal trouble; it undermines local authorities' capacity to deliver local services effectively.
§ Mr. Dick Douglas (Dunfermline, West)
Will the Secretary of State calm himself a little? For those of us who have been—[Interruption.] I wrote to you, Mr. Speaker, in response to the assertion made by the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes), and you know perfectly well that the assertion that he made and has just repeated is completely false.
§ Mr. Douglas
I know that you did not, Mr. Speaker, but I repeat that that assertion is completely false. I shall try to continue on a serious matter.
Those who have heard the three statements on the poll tax this afternoon will be utterly amazed at the air of unreality that surrounded them. Three Ministers supported the concept of the poll tax and gave the impression that everything was in order when in fact there was almost no support for them among Back Benchers.
Local authority finance is in a parlous state, and the Secretary of State knows it because he has met COSLA. He knows that it is not a case of the Scottish National party organising non-payment. The vast majority of those who are not paying cannot pay, and the reality is that the poll tax should be abolished. The Secretary of State is simply juggling the figures. He is taking money from people on an income-related basis and transferring it to a head tax.
§ Mr. Douglas
Will the Secretary of State face reality and consider abolishing the poll tax and replacing it with a local income tax which is related to ability to pay? That is the only solution to the crisis that is facing local authorities.
§ Mr. Lang
The hon. Gentleman talks about an air of unreality. If he wants to look for an air of unreality, he need look no further than his own party and his party colleagues who seem to think that local authority services can continue to be paid for without members of the public contributing to their cost. That is the height of irresponsibility and the height of unreality. The hon. Gentleman cannot expect to be taken seriously in debates on this matter when he bases his attitude on such postures.
§ Mr. John McAllion (Dundee, East)
Does the Secretary of State understand that not least among the many 1041 shortcomings of the poll tax is the fact that it has proved to be uncollectable by the methods which are allowed for in the legislation? Is he aware that Tayside regional council has set up an in-house advice system to give advice to those who genuinely cannot pay without resort to warrant sales and sheriff officers? I understand that that is costing the council about £250,000. Has the right hon. Gentleman made an allowance in the settlement for that expenditure? If not, does that mean that he prefers sheriff officers and warrant sales to the negotiated settlement of outstanding debts?
§ Mr. Lang
Substantial allowances have been made in the funding of local authorities to take account of the cost of community charge administration. I do not believe that it is as uncollectable as the hon. Gentleman implies. The signs are that the collection of rates will run at something over 90 per cent. of budgeted sums and that local authorities, by adapting their expenditure profiles by a relatively small proportion, need not expect to increase the burden on those who have paid to cover those who have not. But it is important that local authorities use the powers available to them to collect the community charge. Not to do so is in breach of their statutory obligation.
§ Mr. David Marshall (Glasgow, Shettleston)
I welcome the Secretary of State's announcement of the additional help for businesses, but is he aware that the eight constituencies with the highest unemployment in Scotland in December were all in Glasgow, which has only 11 constituencies? When will the right hon. Gentleman give enough money to Glasgow district council and Strathclyde regional council to enable them to do something to reduce the scandalously high unemployment in the city? When will he realise that Glasgow is a special case requiring special measures?
§ Mr. Lang
It is the high-spending authorities covering Glasgow that have led to so much unemployment and the loss of so many businesses from Glasgow. I worked for nearly 20 years in Glasgow and I saw businesses driven out of the city by high rates. The rescue that we have mounted will save businesses in Glasgow and throughout Scotland from the depredations of local authorities over the years. No longer will local authorities be able to treat them as they did in the past as an easy source of funds. Now the business community will be protected by the uniform business rate that we are introducing and today is a major step in that direction.
§ Mr. James Wallace (Orkney and Shetland)
Since the Government's Green Paper in 1986 on the reform of local government finance there has been a suggestion that special arrangements would be made for businesses in Orkney and Shetland where the oil terminals dominate local government finance. On a number of occasions, the Secretary of State's predecessor and other Scottish Office Ministers have reassured me that that is being discussed between Government and council officials. When will some colour be given to those bold proposals made back in 1986?
§ Mr. Jimmy Wray (Glasgow, Provan)
Does the Secretary of State know the percentages that have been collected in Scotland? It is false to say that 90 per cent. has been collected. Up until last month 63 per cent. had not been collected in Strathclyde alone—a total of £285 million. The only way in which the local authorities will be able to compensate for that loss is by cutting the services, for which there has been no provision. The authority is still suffering from last year when £47 million remained uncollected. Obviously the people of Scotland, and in particular the people of Glasgow and Strathclyde, do not want the sort of chicken-feed handout that the Government are offering them. They want a fair system based on the ability to pay. Today's fraudulent statement, dangling a carrot possibly for the next election, is nonsense. The Government have said that they will review it and it is time that they came up with new plans.
§ Mr. Lang
If anybody is misleading the House on the collection rates, it could be the hon. Gentleman. I am not suggesting that he is; he may have misunderstood the figure that he quoted. The collection rate this year is running at broadly the same level as it was at the same time last year. On the basis of last year's figures, it now seems that the total collected will exceed 90 per cent. of the amounts budgeted. In some parts of Scotland it will be around 95 per cent. or more. Therefore, it is possible to collect the charge and to run local authority budgets without imposing additional budgets next year on those who have contributed their share.
§ Mr. Thomas McAvoy (Glasgow, Rutherglen)
I welcome the Secretary of State's announcement on the business rate, the capital programme and the fact that his figures are based on actual poll tax payment. I also welcome the Secretary of State to the world of reality which he entered like his colleagues earlier, when he called the community charge the poll tax. We welcome that revelation from the Secretary of State. I ask the Secretary of State again if he will consider abolishing the 20 per cent. rule because it costs more to collect than it is worth. The Secretary of State said that he would give details of the capital programme, but before he does so will he specifically consider the allocation of funds for a new high school in Rutherglen?
§ Mr. Lang
I am interested that the hon. Gentleman has started the bidding under the capital component of the announcement. I welcome his thanks for the business rate changes and I am grateful that those are widely welcomed throughout the House. The abolition of the 20 per cent. rule is one factor for consideration in the broader and more fundamental review that my right hon. Friend the Secretary of State for the Environment, I and other colleagues in Government are undertaking. It is not something that we felt able to contemplate tonight. The £140 million package of what the Labour party is pleased to call new money that I have been able to announce tonight will, I believe, be a welcome way of using the resources for the benefit of Scotland.
§ Mrs. Ray Michie (Argyll and Bute)
What will be the consequences to the poll tax payer in Argyll and Bute following the recent severe storms which resulted in extensive damage? I know that the Secretary of State has triggered the Bellwin scheme, and I am grateful for that, but it is a restrictive scheme which is barely worth the 1043 paper that it is written on. Will the Government or the poll tax payer finance the cost of, for example, repairing the extensive damage to sea walls in Rothesay and Dunoon? In addition, many recreation areas vital to the tourist industry have literally disappeared—for example, the Shinty pitch at Tighnabruaich, which is very important to it. Can the Secretary of State give some advice, please?
§ Mr. Lang
My advice is that those concerned should find a flat field somewhere else and build a new pitch. I appreciate the difficulties that the storms created for some communities, particularly on Bute and on the Ayrshire coast—but in other parts of Scotland as well, including Dumfries and Galloway.
I was glad to be able to trigger the Bellwin scheme at an early date, so that local authorities know that there is a capacity to provide assistance. Once the cost of the measures has been calculated, it will be easier to assess the amount of assistance for which applicants will be eligible. The trigger point is obviously lower in the case of small district councils than in large regions. The scheme exists to help in the event of catastrophe.
§ Mr. Dennis Canavan (Falkirk, West)
How can the Secretary of State expect local authorities to produce long-term or even short-term financial plans when there is such a hotch-potch of revenue support grant settlements? The whole system of local government revenue, including the continued existence of the poll tax, is supposed to be under reveiw—if we are to believe the Prime Minister, who recently reiterated that in respect of the poll tax review, nothing is ruled in and nothing is ruled out. When will the Secretary of State get it into his skull that the majority of Scots want to see the poll tax kicked out along with all the Tory politicians—the Secretary of State included—who were responsible for foisting it upon the people of Scotland?
§ Mr. Lang
Local authorities' long-term planning need not be affected by my announcement today, because the benefit of the community charge reduction scheme will pass through to community charge payers and will not directly affect local authorities themselves, other than in the administration—and they are already administering the earlier two schemes.
Long-term planning by local authorities would be considerably advanced if Opposition Members such as the hon. Member for Falkirk, West (Mr. Canavan) set a better example to their constituents and to everyone else in Scotland by paying their own share towards local government finance.
§ Mr. Calum Macdonald (Western Isles)
Does the Secretary of State plan to mitigate the effects of the high water charges that some local authorities will have to introduce due to factors outside their control? It is largely Community directives that lead to those higher charges, and the right hon. Gentleman knows that most people on lower incomes do not receive any particular help in meeting them.
§ Mr. Lang
Recently, we made changes to water charges in order to create greater transparency, so that the costs incurred by local authorities would relate more closely to the charges made. I am sure that that is a fairer system, though I acknowledge that it produced a substantial 1044 increase for payers in some local authority areas. That system is not directly affected by my announcement. However, when I made my public expenditure statement last December, I announced a substantial increase in capital expenditure on water and sewerage.
§ Dr. Norman A. Godman (Greenock and Port Glasgow)
As to the economic and other problems that bedevil Inverclyde district council, I hope that when councillor Harry Mulholland and his colleagues meet the Under-Secretary, the hon. Member for Eastwood (Mr. Stewart), they will receive a sympathetic hearing.
The Secretary of State mentioned certain poll tax relief provisions. I remind him of the discrepancy between Scottish and English merchant seamen. It is disgraceful that Scottish merchant seamen can find themselves paying the poll tax, whereas their English comrades are given exemption. Why is the Under-Secretary of State, the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton), so unsympathetic to their case, and why are community charge registration officers so unwilling to advise them on their rights of appeal? Incidentally, the appeals procedure in Scotland is much more cumbersome than that which obtains in England. South of the border, such cases are heard by an appeals tribunal, but in Scotland an appellant must apply to the sheriff court. Will the Secretary of State give an assurance that that disgraceful state of affairs will come to an end in the near future?
§ Mr. Lang
It is significant that when arrangements in Scotland are the same as in England, Scottish Opposition Members complain that the Government are not taking account of the special, traditional differences between the two countries—but where differences apply, the same hon. Members argue that they should not exist. The law and the policy are basically the same. It is essentially a matter for the registration officer, and I anticipate that once the scheme has settled down and more examples are available of how registration officers have reacted to certain situations, the hon. Gentleman's complaint will be seen to be unjustified.
The meeting to which the hon. Gentleman referred is to take place tomorrow. The hon. Gentleman knows as well as I do that my hon. Friend the Member for Eastwood (Mr. Stewart) is a sympathetic individual, and I am sure that the delegation will receive a fair hearing.
§ Mr. George Foulkes (Carrick, Cumnock and Doon Valley)
Why has the Secretary of State not given special consideration to Carrick, Cumnock and Doon Valley district, which has the highest unemployment of any travel-to-work area in mainland Britain and only a small number of firms contributing to the business rate? The right hon. Gentleman should surely give that area special consideration when making his allocations.
Will the Secretary of State confirm that his regional allocation will take account of an early start to the A77? In view of the delay in beginning that project, will the right hon. Gentleman give Strathclyde region a kick up the behind?
§ Mr. Lang
The hon. Gentleman referred to the high unemployment rate in his constituency. He shares that travel-to-work area with me and my constituency, and that is almost all that the hon. Gentleman and I have in common. Businesses there will benefit from the substantial 1045 cash input for business rate reductions that I announced. Community charge payers eligible for benefit under the reduction scheme, and who were eligible under the earlier schemes, will also benefit substantially from my announcement tonight.
As the hon. Gentleman rightly said, the delay in starting work on the A77 is not of the Government's making but is the fault of Strathclyde regional council, and I urge the hon. Gentleman to take the matter up with that authority.