HC Deb 26 November 1991 vol 199 cc779-95 3.32 pm
The Secretary of State for the Environment (Mr. Michael Heseltine)

With permission, Mr. Speaker, I should like to make a statement about the local authority finance settlement for England for 1992–93.

I told the House on 23 July that, in the Government's view, local authorities in England will need to spend £41.8 billion in 1992–93. That is 7.2 per cent. up on the equivalent figure this year. Central Government will distribute £33.1 billion in support of that expenditure. That also is up by 7.2 per cent. Today I am issuing a consultation paper setting out how we propose to distribute those totals.

As I announced on 6 November, the business rate multiplier next year will be 40.2p. This is in line with the annual increase in the retail prices index to September of 4.1 per cent. The total burden on businesses would have been £600 million, or 5 per cent., higher if the business rates had continued to rise in line with local authority spending.

I propose to set the distributable amount of non-domestic rates at £12.3 billion. We will continue to pass on all receipts from business ratepayers to local authorities to support their expenditure.

I will shortly be laying a draft order to increase the rate at which businesses gaining from the introduction of the uniform business rate and the 1990 revaluation receive the benefits of the new system. The effect will be to release £100 million to the benefit of about 150,000 ratepayers, typically in manufacturing industry in the north and midlands.

I propose to pay nearly £309 million in area protection grant. That will continue to provide help to those areas where introduction of the community charge would have otherwise resulted in an undue burden on charge payers. There will also be a grant of £50 million for education authorities in inner London to assist with overspending inherited from the Inner London education authority.

I also propose to pay a special grant of about £86 million to meet 75 per cent. of local authorities' costs, excluding capital spending, on preparing for the council tax. I recognise that these are exceptional costs which authorities would not otherwise need to incur. Accordingly, that special grant, which I propose to distribute on the basis of the number of domestic properties in each charging authority's area, with an adjustment to reflect the higher costs in London and the south-east, will be outside the settlement totals. I am today sending authorities an exemplification of that proposal.

I propose that the total of revenue support grant for 1992–93 will be just over £16.6 billion. In addition, about £3.8 billion of specific grants will be available. After allowing for specific grants, the total of standard assessments will increase by around 6.8 per cent.

The consultation paper issued today gives details of the proposed standard spending assessments for all authorities. In considering how SSAs should be calculated, I have been conscious of the need to maintain stability from one year to the next. I am, nevertheless, proposing some minor changes to improve the basis of distribution. There are three, in particular, which I should mention. First, we will use more recent data which have become available on overnight visitors and the information will be extended to include foreign visitors. Secondly, we will discontinue the adjustment in respect of revenue support for bus services in London. We have now devised a new methodology which removes the need for the separate adjustment. Thirdly, the counties have rightly pointed out that they have relatively less scope to generate interest receipts than other authorities. For next year we will, therefore, change our methodology so as to make separate assumptions about the ability of different classes of authority to generate interest receipts. Those changes are designed to deal with long-standing grievances from particular groups of authorities without introducing too much disruption to SSAs.

Under my proposals, the community charge for standard spending will be about £257. Efficient authorities should be able to set charges which are even lower. Actual charges, however, will depend on authorities's budgets and on their efficiency and determination in collecting the charge.

Many people will, of course, pay much less than £257 because of help through the community charge reduction scheme and the community charge benefits. Entitlement under the community charge reduction scheme will be based on the difference between the rates and this year's community charge; and people who moved home this year and lost their entitlement to a reduction may be able to qualify at their new address. The total value of the reduction scheme will be similar to this year—that is, about £1.1 billion.

I told the House on 23 July that if authorities did not budget sensibly next year, I would not hesitate to use my powers to curb excessive budgets or excessive increases in budget and to protect charge payers from the consequences.

I am today announcing my provisional criteria. As last year, I consider it reasonable to allow smaller increases for those authorities whose budgets are well above their SSAs. Where budgets are very substantially above SSA, as is the case for some authorities brought within capping for the first time following the abolition of the £15 million threshold, I intend to seek budget reductions. In such cases, I consider it right to expect the greatest reductions from those authorities whose budgets exceed SSA to the greatest extent. But in all cases I intend the reductions to be achievable, albeit demanding.

My intended criteria are therefore: any increase of more than 6.5 per cent. over the previous year's budget will be considered an excessive increase if it gives rise to a budget over the authority's SSA.

Mr. Eric Martlew (Carlisle)

On a point of order, Mr. Speaker.

Mr. Speaker

I have not heard anything out of order.

Mr. Martlew

My point of order is this. Is it correct —[HON. MEMBERS: "Order."]

Mr. Speaker

Order. If a point of order is raised with me, I must hear what it is. Otherwise, I cannot rule.

Mr. Martlew

Is it correct that members of the press have been issued with a copy of the statement from the Secretary of State? I have just been to the Table Office, where it is not available to hon. Members. Is that not wrong? Does it not show a disregard for the House?

Mr. Speaker

I have no idea whether that is correct. [HON. MEMBERS: "It is."] Order. The whole House knows my view about this.

Mr. Heseltine

Any increase of more than 4.5 per cent. over the previous year's budget will be considered an excessive increase if it gives rise to a budget over 5 per cent. above the authority's SSA; and any increase of more than 2.5 per cent. over the previous year's budget will be considered an excessive increase if it gives rise to a budget over 10 per cent. above the authority's SSA.

In addition, I intend that any budget more than 12.5 per cent. above the SSA will be considered excessive, save that an authority will not be designated if its budget is 30 per cent. or less over SSA and is no more than that set for 1991–92; if its budget is 60 per cent. or less over SSA and is 5 per cent. or more below that set for 1991–92; or if its budget is 10 per cent. or more below that set for 1991–92.

In 1990–91 there was a de minimis provision allowing authorities budgeting only a small amount above the criteria for excessiveness not to be designated. In 1991–92 the criteria included a principle that no authority was to be designated if its budget was excessive by £10,000 or less. Local authorities should not assume that there will be any such proviso or principle for 1992–93.

I intend to make special provision for the particular circumstances of the inner London boroughs which still bear the cost of inherited overspending by the Inner London education authority, and for the City of London.

These criteria are necessarily provisional, as was the case with the criteria which the Government set out last November. When I come to make my decisions on capping, I will, of course, take into account all appropriate considerations. I have placed a paper in the Library and Vote Office setting out my intentions in detail and have sent a copy to local authorities.

The provisional criteria which I have announced are tough, but manageable. We are determined that all authorities should exercise expenditure restraint arid use the very considerable extra resources we have made available to keep charges at reasonable levels. Well managed authorities will be able to achieve effective service provision with budgets at or below the level of the provisional criteria.

My proposals for local authority spending and for external support are fair and realistic. The rate of inflation now stands at 3.7 per cent. per annum. Local government cannot expect to stand apart from our determination to exert continuing downward pressure. Against that background, this settlement should enable authorities to deliver local services of the quality people expect and deserve, at a level of charge which they can afford.

Mr. Bryan Gould (Dagenham:)

Does the Secretary of State recall in May last year castigating universal capping in an excellent article in The Times, when he said it would negate accountability and be an act of centralised political power outside our experiences… Local authorities should be free to set and account for their own budgets."? Does the Secretary of State feel any sense of embarrasssment at so quickly abandoning that stance and introducing today precisely the universal capping that he rightly attacked just 18 months ago? Does he feel any embarrassment at further undermining what little remains of local government democracy by imposing through central Government a straitjacket which means that every local council budget henceforth is his budget, that every cut in services henceforth is his cut and that every poll tax bill be his bill? When those bills arrive in March and April of next year, every one will bear the Secretary of State's fingerprints.

Can the right hon. Gentleman explain why the statement has been so long delayed and is three or four weeks later than in previous years? How is local government, already hard pressed by the horrendous problems of collecting the poll tax and the preparations for the council tax, to grapple with this further delay? Will it mean that the consultation period will be shorter, or will the final RSG settlement also be delayed, or both? Was the delay because of a defect in the computers or a defect in Ministers?

Does the Secretary of State recall his predecessor's admission that SSAs were fundamentally flawed and should be reformed? How does he respond to the Audit Commission's warning that The Government should not underestimate the lack of confidence in SSAs among local government politicians and professionals"? Why are we stuck with an unfair system which, without any supporting evidence, concludes, for example, that it costs £857 per adult in Wigan for a standard level of service but 69 per cent. more, at £1,448, in Manchester? What confidence can there be in a system which does not include economic deprivation—surely a fundamental factor—but does include visitor nights and is now to be extended to include foreign visitors, something that can be considered only as a renewal of the Westminster benefit? How can local government trust an arbitrary and capricious system which measures the number of days when snow lies on the ground and concludes that Harrow, at 15.4 days, has more snow than Cumbria, at only 12.6?

Why, given the increase in the business rate, is £100 million less being distributed from the national business rate to local government than is the case this year? Is that yet another effect of the recession, or is there another explanation?

Does the Secretary of State expect the damaging cuts demanded by his capping criteria to be effected without any real impact on services or those who depend on them? Is Derwentside, for example, to be expected to make cuts worth 10 per cent. in cash terms and 17 per cent. in real terms, and is Tory-dominated Elmbridge to be expected to make cuts of 8 per cent. in cash terms and 15 per cent. in real terms, without deep and damaging consequences for services?

Has the right hon. Gentleman checked with the Home Office whether single-service police authorities can finance their Home Office-approved levels of police stablishment? If he does, he will be told that the answer is no.

Is the right hon. Gentleman's £257 prediction of the average poll tax not predicated on the same fanciful assumptions about 100 per cent. collection as earlier vitiated and equally over-optimistic predictions in the last few years? Is it not the same fairy-tale exercise as we saw in 1990 and 1991?

With this reminder that the poll tax is still alive—I was going to say, and well, but that would be a misrepresentation—and that the bills will arrive yet again next year, and with this abandonment by the Secretary of State of all principle in introducing universal capping, is this not yet another black day for local government? Our only consolation is that, for the Secretary of State, nemesis is close at hand.

Mr. Heseltine

The hon. Member for Dagenham (Mr. Gould) asks me whether I feel any sense of embarrassment about the capping levels. I have given him the answer before. I believe that the Chancellor of the Exchequer was extremely generous in giving £140 per community charge person to lower the level of community charges. It seems to me absolutely essential to protect that benefit to the community charge payer, and I know of no other way to do it but to cap the local authorities which would otherwise spend it.

The question flowing from that lies in the fact that, if we do not cap, it is automatic that there would be approval from the hon. Gentleman for increases in expenditure. So I therefore want him to say how much authority he has from the shadow Chancellor for the increases in public expenditure that lie behind every question that he has asked me today. How much would it cost in extra community charge and in extra tax rates to add to the 59p in the pound with which we are already threatened by the Labour party?

We were then asked to listen to the case of the hard-pressed local authorities. It might be helpful if I tell the hon. Gentleman how hard pressed they really are. In 1980–81, the cash available for the financing of relevant grants and expenditure was £19,307 million. In 1991–92, it was £39,892 million. At 1991–92 constant prices, that is a 5 per cent. real-terms increase in the expenditure of local authorities, so there have not been cuts as the hon. Gentleman claims.

The hon. Gentleman asked specifically about bringing foreign visitors into the calculations of SSAs. If a local authority is confident and keen to attract tourists to its area, foreign visitors are just as attractive as domestic visitors. We have simply updated the calculations on the basis of later information available to us. All that is explored with my Department by the local authority working groups.

I confirm that my right hon. Friend the Home Secretary fully supports the increase in expenditure on the police provided by the settlement, whereby it will be increased by 12.9 per cent. That will pay for the excess of 16,000 extra police officers who have come on to the establishment since the Government were elected, and the extra 1,000 police officers announced by my right hon. Friend recently.

When the hon. Gentleman asks so many questions about the changes in SSAs in one area as opposed to another, he should ask why it costs on average £255 more per person to deliver services under a Labour authority than it does under a Conservative authority. If one considers the whole of London, why does it cost a Labour authority £131 per person more to deliver services than it would cost a Conservative authority?

It is not just a London phenomenon. In every class of authority, voting Labour costs a large sum of money. In the shire districts, it costs £70 and in the metropolitan districts it costs £61 per community charge payer to vote Labour. Taking the whole of local government in aggregate, the cost of voting Labour in an area controlled by that party as opposed to the Conservative party is, on average, £83. The only lesson is that the Labour party is extravagant, profligate and totally uninterested in the benefits to its community charge payers. It is interested only in the Labour-dominated, trade union-restricted services, which it seems to want to increase regardless of cost.

Several Hon. Members


Mr. Speaker

Order. We have an important debate on further and higher education in Scotland later this afternoon, so I shall allow questions on the statement until 4.30. I hope to be able to call all hon. Members who wish to participate if they ask brief questions.

Mr. Robin Maxwell-Hyslop (Tiverton)

Will my right hon. Friend explain why provision is made for local authorities with a history of overspending but not for local authorities with a history of underspending, which may have very expensive problems in rural areas, and extensive school networks and social services, to a level which cost far more than in the authorities which have a history of high spending?

Mr. Heseltine

I know that my hon. Friend feels strongly about the interests of his constituency. However, SSA methodology, like all previous methodologies for distributing grant from central Government, is discussed with great care by my Department with the working groups of the local authorities. A statistical analysis is carried out and formulae are arranged to bring about that distribution. The characteristic reaction of local authorities is that each of them and every class of them has been disadvantaged, but none of them can ever reach a formula which the others will accept.

Mr. David Bellotti (Eastbourne)

Does the Secretary of State agree that, now and in the next financial year, local authorities will be spending much money needlessly trying to collect the poll tax from people who can ill afford to pay it? Does he not accept the Government's responsibility for that? He has asked the local authorities to collect the council tax the following year, so is not now the time to say that the Government will pay the whole cost of the introduction of the new council tax? Does the Secretary of State agree that the percentage increases that he announced today do not cover such legislation as the Children Act 1989, the introduction of care in the community and the extra police officers announced by the Home Secretary? It is not much good the Government saying that police authorities may appoint police officers if the Government then stop them from doing so by capping the authorities.

Mr. Heseltine

I do not agree with the hon. Gentleman that we should give 100 per cent. grants in such circumstances, because that would remove the authorities' incentive to deliver effective and cost-conscious services. As to the substance of the hon. Gentleman's question on the collection of the community charge, I have looked into the matter. It is interesting to note that it is not necessarily Labour authorities that cannot collect the charge.

Of the top 10 community charge collection authorities last year, three were Labour: Cannock Chase collected 110 per cent. of its budget, Copeland collected 105 per cent. and Gateshead collected 104 per cent. The only conclusion to draw from that is that the authorities that do not collect their community charge are ineffective and inefficient.

That is why, if we consider the authorities with the worst record of collecting the charge, we find that in 1990–9I Labour had a clean sweep—the worst 10 authorities were all Labour-controlled. Of the 10 worst authorities in 1991–92, only nine are Labour, but the one clear characteristic of all the statistics is that the Labour party is ineffective and inefficient in collecting its bills. If the worst Labour authorities had behaved like the best three, they would not have encountered a problem.

Sir Timothy Raison (Aylesbury)

Has my right hon. Friend any plans to help those charge payers who, perhaps because they were too young, were not rate payers, and who now derive no protection under the reduction scheme?

Mr. Heseltine

It is quite difficult to help people who were not paying a specific bill when the new system came into existence. We can only introduce schemes—we have done so on a generous basis—for those people whose bills suddenly increased from a lowish level to a much higher one. We have introduced transitional schemes for them. I do not think that we can introduce schemes to help people who never had a bill.

Mr. Harry Cohen (Leyton)

Is not the Secretary of State's own bill far less than most people's, particularly in London, where, under the new council tax, he will pay less than people who occupy garages in eight London boroughs? Should he not have come to the House and said that he would make arrangements to help those who cannot pay the poll tax and are forced to pay the 20 per cent. minimum contribution? Should he not have said that he would get rid of the minimum 20 per cent. rule?

Mr. Heseltine

The hon. Member will want to give us every help in getting the new council tax on to the statute book as quickly as possible, as it does exactly what he suggests.

Sir Anthony Durant (Reading, West)

Will my right hon. Friend bear in mind the experience of my borough council, Reading, which is near his constituency, which blew all the reserves immediately the Labour party came into control by placing bollards all over the bloody town—

Mr. Speaker

Order. That is inelegant, I think, for Reading.

Sir Anthony Durant

The bollards, which I shall not describe, were placed throughout the town. The council blew all its reserves and failed to collect the community charge, so that everyone has had to pay an extra £48 on their community charge this year because of the level of non-collection.

Mr. Heseltine

I very much sympathise with my hon. Friend and his constituents. I hope that, under the present regime, the local authority will collect the community charge and save a great deal of money for those who would otherwise have to pay excess bills.

Ms. Dawn Primarolo (Bristol, South)

When the Secretary of State announced the figures today, he made it clear that he expected the extra expenditure to be used on reducing the charge—the poll tax—not increasing services. What proportion of SSAs to local authorities has been allocated for increased expenditure for the implementation of the Children Act 1989?

Mr. Heseltine

The hon. Lady will know that we never give specific breakdowns of individual figures, but she will also know that service increases are given. For example, the increase for personal social services is 7.7 per cent., education 7.1 per cent., police 10.9 per cent., fire and civil defence 8 per cent. and other services 9.2 per cent., with a total of 7.2 per cent.

Miss Emma Nicholson (Torridge and Devon, West)

Will my right hon. Friend confirm that, under the new regulations, there is no need for any local authority to be capped, even the most irrational Labour council, because new targets have been set and the councils are required to meet those new targets only from the current starting point?

Mr. Heseltine

My hon. Friend makes a valid point. We have clearly told local authorities where the capping regime could bite after consultation, and they now have plenty of time to adjust. It is important to make the point that, across the country, businesses, which pay vast sums of money towards local authorities, are having to make such adjustments all the time.

Mr. Gerry Steinberg (City of Durham)

Will the Secretary of State explain why my local authority of Durham has an SSA which is half that of Hove, an authority similar in functions and population? Is it perhaps because Durham is Labour-controlled and Hove is Tory-controlled?

Mr. Heseltine

The hon. Gentleman will know full well that, in a statement such as this, we cannot look into the details of every one of the hundreds of authorities. However, all the information is available to him and to his local authority, and the answer will be because the methodology of the SSA system delivers the results that he has suggested, if those are in accord with the real world. The hon. Gentleman is perfectly able to write to my Department and seek any further clarification that he wants.

Mr. Phillip Oppenheim (Amber Valley)

Does my right hon. Friend agree that a council such as Derbyshire, which spends nearly £14 million a year pegging school meals to 1981 prices but which at the same time sacks hundreds of teachers and which has increased its work force by 8,000 in the past decade but cut the number of police, can have no credibility in its ritual whining about underfunding?

Mr. Heseltine

My hon. Friend puts his point with extreme eloquence, and I very much support the thrust of what he says.

Mr. Allen McKay (Barnsley, West and Penistone)

Is the Secretary of State now prepared to meet the seven authorities which have wanted to meet him for months to discuss their problems with their SSAs? Will he now come off his high horse and meet those people rather than shove them on to his Minister of State?

Mr. Heseltine

The hon. Gentleman will realise the pitfalls of responding favourably to a suggestion that the Secretary of State should receive a delegation, when there are still 28 minutes to go in which every other right hon. and hon. Member could make the same request. I can at least say that we meet delegations, we carefully consider all applications that are put to us, and there is no reason why his should automatically be turned down.

Mr. Nigel Forman (Carshalton and Wallington)

Is my right hon. Friend aware that one of the best bits of news in his statement today was his announcement that the business rate increase would be kept to no more than the rate of inflation in the coming period? What prospect is there that the Government will be able to go further than that in due course and reduce the rate of increase in the business rate, which bears hard on many new small businesses in my constituency and elsewhere?

Mr. Heseltine

I am aware that a strong body of opinion wants us to look at the matter again. My hon. Friend will realise that a revaluation is scheduled for, I think, 1995, which might address some of the problems. Another important part of the background is that, as the economy recovers, so the pressure on many of those businesses will be eased.

Mr. Eric Illsley (Barnsley, Central)

Is it not the case that the errors which have been apparent in previous SSAs have been repeated in this year's statement, in that the SSAs are still being calculated on the 1981 census data and many of the factors are simply irrelevant to local authorities such as my own?

Mr. Heseltine

I addressed that question earlier as fully as I could. The distribution of central finance is always a controversial issue, with arguments between individual authorities and classes of authority to the effect that it is unfair or does not provide what they want. That will be the case whatever system operates. The working parties presided over by my Department, but deeply involving of course local authorities and other Government Departments, consider all the evidence and try to reach agreement on a practical way forward. Ultimately, it falls to the Government to take decisions; otherwise, no decisions would be made.

Mr. Quentin Davies (Stamford and Spalding)

I congratulate my right hon. Friend on his excellent statement. Does he agree that nothing can excuse the wanton and vicious extravagance of so many Labour authorities, and that it is about time that the costs of non-collection were met by forcing local authorities to reduce their expenditure rather than imposing them on virtuous citizens who pay their community charge?

Mr. Heseltine

I understand my hon. Friend's indignation, which is widely shared throughout the country. Far and away the best solution would be for all local authorities to be determined to collect the proper entitlements of the bills they issue. That would enable many of them to deliver a far better service.

Mr. John Battle (Leeds, West)

Is it not a fact that, under last year's standard spending assessment, Merton received only an 18 per cent. grant, the lowest in London, whereas Wandsworth received the highest, at 24 per cent.? Is that not repeated in this year's assessment, which reveals a similar divergence? Does that not prove that the Government are providing more funds to Tory-controlled authorities than to Labour authorities?

Mr. Heseltine

The hon. Gentleman selects his authorities carefully, and fails to point out that Lambeth and Hackney are at the top of the list of distributions. It has nothing to do with the unfortunate party political point that the hon. Gentleman seeks to make: it is a matter of trying to allocate resources according to the needs of individual authorities.

Sir David Mitchell (Hampshire, North-West)

Is my right hon. Friend aware of the problem of workers and others in tied accommodation, who do not pay any rates and who are thus ineligible for transitional relief?

Mr. Heseltine

I understand that difficulty, but my hon. Friend will appreciate that we are in the last year of the community charge. Also, a large number of people who let their properties on a service tenure to the individuals occupying them pay the consequential community charge, in the same way that they previously paid rates.

Mr. Peter Kilfoyle (Liverpool, Walton)

Given the Conservatives' claim to be the party of law and order, does the Secretary of State agree with Merseyside police authority that capping will cause the loss of 400 to 500 policemen on the beat in Merseyside?

Mr. Heseltine

The hon. Gentleman will want to consult his authority in the light of today's announcement. One cannot escape the fact that more than 16,000 extra policemen have joined the establishment since this Government were elected, and a further 1,000 are to come as a result of the announcement by my right hon. Friend the Home Secretary. That cannot be construed as anything but a dramatic commitment by the Government to law and order.

Mr. Martin M. Brandon-Bravo (Nottingham, South)

Many of us felt that the old regional development grants were arbitrary and unfair to certain cities. Can my right hon. Friend illustrate by the figures that he has given today how the distribution of the unified business rate will operate more fairly and helpfully to the benefit of towns and cities in the north, such as that which I represent?

Mr. Heseltine

I am very interested by my hon. Friend's comment. I do not have to hand a breakdown of the distribution of the non-domestic rate, but I am sure that my hon. Friend will welcome my statement that, because more was collected from the national business rate than was expected, we have been able to release the benefits—particularly to manufacturing industry in the north and the midlands. That has made available about £100 million more than expected, which will be shared by 190,000 ratepayers.

Mr. Ian McCartney (Makerfield)

Although the right hon. Gentleman's own Department acknowledges that Wigan metropolitan borough provides services comparable, in terms of their value, to those offered by local authorities such as Wandsworth, again this year Wigan has a standard spending assessment of less than half that applying to comparable authorities. Is it not a disgrace how the SSA operates against the interests of local authorities that provide, in the words of the Secretary of State, value-for-money services? Should they not receive the same level of grant that authorities such as Wandsworth receive?

Mr. Heseltine

The hon. Gentleman has returned to an issue that we have explored exhaustively. The fact is that local authorities do not agree among themselves on any alternative method of distributing central Government funds. Each class argues for more for itself, and, inevitably, each authority within each class argues for more for itself. In the end, someone must make a decision, and, as central Government distribute the money, it is not surprising that the Secretary of State will present their proposals to the House.

Mr. Michael Shersby (Uxbridge)

What consideration has my right hon. Friend given to the expense that is now being incurred by certain authorities with major ports of entry in their areas in connection with the care of refugees and asylum seekers?

Mr. Heseltine

My hon. Friend has raised what I know to be an important and difficult issue. It is indeed a growing issue, which concerns us all. Within the standard spending assessments are indicators measuring social hardship and the incidence of social problems. They would, in part, impact on the difficulties that my hon. Friend has described.

Mr. Dennis Skinner (Bolsover)

Has the Secretary of State the nerve to admit that, in the past two years, grants have been allocated to ensure that Tory flagships such as Wandsworth and Westminster are safe for Tory control, and that this year he has decided to fiddle the figures to save all the Tory marginals for the general election—or, at least, in an attempt to do so? Is it not ironic that a Cabinet Minister should be taking over the budgets of all the local authorities in Britain, while at the same time his Cabinet colleagues are handing power over the national Budget to the Common Market?

Mr. Heseltine

Some of us would rather see the Budget handed over to the Common Market than see it handed over to the hon. Gentleman's party. As long as my party remains in power, however, there is not the slightest chance of either the Common Market or the Labour party getting it.

Let me help the hon. Gentleman. He is trying to suggest that grant has been distributed in a "party" way. He must explain the fact that, over the past two years, total standard spending has increased by 27 per cent., and aggregate Exchequer finance produced by central Government by 43 per cent. There is no conceivable way in which that could be described as a party political allocation.

Mr. James Hill (Southampton, Test)

My right hon. Friend must be aware that £50 of the £140 concession was swallowed up by the failure of many people to pay their community charge. In my Labour-controlled area, only £90 was returned.

A curious advertisement has been placed in the local papers, asking people to pay their community charge. Part of it states: "The Southampton Labour group does not agree with the poll tax"—and that is in the middle of an advertisement whose aim is to make people pay up. Does my right hon. Friend know about that, and does he know about the four pages that I have sent to his Department, which deal with wasteful products and wasteful propositions in Southampton? Will he ensure that Labour-controlled Southampton city council is scrutinised and capped?

Mr. Heseltine

My hon. Friend rightly feels strongly about the inability of some authorities to collect their community charge, while nevertheless spending large sums. It is, however, the democratic responsibility of local people to carry out checks. I have no power to intervene in the internal affairs of the local authorities; that is a matter for the local democratic process or, as a last resort, for the Audit Commission.

Mr. Martlew

How can the Minister justify asking Carlisle city council to reduce its budget by £400,000 when Government spending is out of control? Carlisle is probably one of the best district councils in the country. That was acknowledged by the Minister, who recently appointed its very able leader to the Audit Commission. How can we expect the Secretary of State, sitting in Whitehall, to know what is best for the people of Carlisle? Time and time again, they have democratically elected a Labour council. When will the Secretary of State give democracy back to the people?

Mr. Heseltine

The hon. Gentleman will realise that, having given £140 per community charge payer to the people, it is my responsibility to protect that generosity by the Chancellor of the Exchequer and to ensure that it is not mopped up by the extravagance of local authorities.

Mr. Paul Marland (Gloucestershire, West)

I know that the subject has already been raised once before, but it is so important that I want to ask my right hon. Friend whether there is any possibility of the Government reviewing the step-by-step increases in the business rate for small businesses. These large increases are putting many small businesses, not only in my constituency but throughout the country, in a very difficult situation.

Mr. Heseltine

I understand the strong feelings of my hon. Friend and many other hon. Members. The situation has undoubtedly proved much more difficult because of the strain of the economy on small businesses. I very much hope that, as the economy recovers, as it is now beginning to do, that pressure will ease. My hon. Friend knows that small businesses are protected from excessive increases by the limits that we have introduced. That is the limit of what we are able to do.

Mr. Giles Radice (Durham, North)

Is the Secretary of State aware that, because of the rules changes that he has instituted, some local authorities could have to make cuts of up to 10 per cent.? Derwentside is one example. The Secretary of State says that there is a need for stability. Is there not a case, therefore, for looking at those local authorities where the impact has been exceptional?

Mr. Heseltine

The hon. Gentleman will know that, in the capping regime that I announced, we recognised that there was a limit to the speed at which we could expect change to come about. We have said that, when local authorities begin the process of adjustment, there is a point beyond which, in a given year, no further pressure will be exerted. However, to become an overspender on the scale of some authorities means that money is being spent on a dramatically larger scale than by equivalent authorities providing similar services.

Mr. Christopher Hawkins (High Peak)

Did I mishear my right hon. Friend? Did he say that the rules for people who qualify for rebate may be changed if they move house? If so, will he elaborate? Nothing causes more ill feeling and resentment in my patch than the fact that people lose their right to rebate solely because they move house.

Mr. Heseltine

My hon. Friend will find that, where people have moved, there are some opportunities for them to claim rebate. I should be happy to look into the cases of any specific constituents if my hon. Friend would care to write to me.

Mr. Malcolm Bruce (Gordon)

First, why was it absolutely necessary for this statement on English business to be made today, before the debate on Second Reading of the only Scottish Bill this Session? Secondly, will the right hon. Gentleman explain, given the fact that he is the string that pulls the Secretary of State for Scotland on these matters, how the business alleviation that he proposes will compensate businesses for the inflationary and recessionary consequences of the 2.5 per cent. increase in VAT that he was responsible for imposing on businesses in the first place?

Mr. Heseltine

The hon. Gentleman is confusing many different issues. We arranged to make this statement now in order to give local authorities plenty of time. There is always, as the hon. Gentleman knows and as my right hon. Friend the Leader of the House constantly explains, pressure for time on the Floor of the House. I must therefore leave it to my right hon. Friend to determine the appropriate moment at which I should make a statement.

Mr. Robert Banks (Harrogate)

I must tell my right hon. Friend that, in my experience, Liberal Democrat-run councils are every bit as incompetent as Labour-run councils. I warmly welcome my right hon. Friend's statement. The level of grant to local authorities is considerably higher than the rate of inflation. More particularly, I welcome his statement about the inclusion of visitor nights in the standard spending assessment methodology. That will help many authorities. I am grateful to my right hon. Friend for having listened to the representations that were put to him.

Mr. Heseltine

I am very grateful to my hon. Friend. This has been a source of controversy with local authorities, but we now have more up-to-date information. The previous information stretched back to the early 1970s. We have been able to help significantly, but I am only too well aware that, when we have done so, the authorities that have lost have complained that we have switched to an unacceptable new system, although I have no doubt that it is a better one.

Ms. Joan Walley (Stoke-on-Trent, North)

What account has the Secretary of State taken of the representations that Staffordshire made to the Department of Health, which we understood would be relayed to the Department of the Environment? What is his advice to parents whose children live in Staffordshire's residential homes or homes for the mentally and physically handicapped, which need £19 million to bring them up to the standards laid down following pindown and the Utting report? Does not Staffordshire's standard spending assessment mean that the county will be nowhere near able to meet its statutory responsibilities?

Mr. Heseltine

The hon. Lady will know that we consulted on the matters that I have announced today. The capping regimes are essentially a consultative process. The working parties that my Department organises include representatives of local authorities and of the Department of Health. The information to which she drew our attention will have been considered by all the people concerned. That is not the end of the story—there is still a chance for it to happen—but it is fair to point out that a range of other authorities will have their own views on why they should be given more money, which is always to be found at somebody else's expense.

Mr. Richard Tracey (Surbiton)

I am sure that my right hon. Friend will agree that one of the worst examples of overspending must have been the unlamented Inner London education authority. He said again today that he has had to compensate the new inner-London education authorities. In considering the figures, has he found that Conservative-controlled authorities—Westminster, Wandsworth and Kensington and Chelsea—have moved much faster and more efficiently in cutting overspending than Labour-controlled authorities?

Mr. Tony Worthington (Clydebank and Milngavie)

That is a difficult question.

Mr. Heseltine

No, it is not difficult at all. I cannot entirely accept my hon. Friend's suggestion that the Inner London education authority was the worst of the authorities that we got rid of: I always thought that the GLC was a close competitor for that claim. However, we got rid of both, which is a help.

All I can do is point to the stark contrast between the community charge bills of Labour and Conservative authorities in inner London. The figures are quite startling. The average community charge of an inner-London Conservative authority is £98. Under a Labour authority, it is £353—a cost of £255 per community charge payer for voting Labour.

Mr. John Fraser (Norwood)

Does the Secretary of State agree that education is critical to breaking the cycle of deprivation? Will he therefore ensure that the additional £50 million for inner-London education is spent on inner-London education?

Mr. Heseltine

The hon. Gentleman has missed the point. We are compensating London boroughs for ILEA's excess costs to enable them to adjust over a phased programme. That is the purpose of the £50 million.

Mr. Robert G. Hughes (Harrow, West)

Does my right hon. Friend agree that it is a matter for congratulation that he has announced today a real-terms increase in local authority spending? Nevertheless, does he accept that real choices will have to be made by local authorities and that it would have been dishonest to announce a catalogue of spending promises when perhaps he had failed to obtain the extra money from Treasury colleagues and had privately briefed councillors that that spending could not be made? Have not we discovered from today's newspapers that that is what the hon. Member for Dagenham (Mr. Gould) has been doing? Is not that dishonest, and totally typical of him?

Mr. Speaker

Order. That word will have to be withdrawn. The term "dishonest" is not to be applied to hon. Members.

Mr. Hughes

I replace it with "an unlikely proposition".

Mr. Heseltine

My hon. Friend is right to say that the total standard spend will rise by 7.2 per cent. next year, whereas inflation is currently running at 3.7 per cent. Therefore, as far as one can forecast, that is likely to be a real-terms increase in local authority expenditure consistent with the pattern throughout the 1980s of a 5 per cent. real-terms increase in expenditure. However, every time the settlement is announced to the House, one hears endlessly from the Opposition about cuts. In the real world, there has been a 5 per cent. increase.

Mr. Harry Barnes (Derbyshire, North-East)

Why can we not have a fundamental review of the standard spending assessment, which is the second great evil of the poll tax? Of 296 non-metropolitan districts, North-East Derbyshire finishes 295th in terms of standard spending assessment per poll tax payer, but the people of north-east Derbyshire are not filthy rich, so there is clearly something very peculiar about the formula. Even at this stage, they are being asked to pay 30 per cent. of the total standing spending assessment out of the poll tax moneys, although, at the beginning of the poll tax, we were told that only 25 per cent. would have to be raised in that way. Since then, there have been massive increases in value added tax. As we know—

Mr. Speaker

Briefly, please.

Mr. Barnes

As we know something about these matters in North-East Derbyshire, could we—like my hon. Friend the Member for Barnsley, West and Penistone (Mr. McKay) and his constituents—meet the Minister?

Mr. Heseltine

The hon. Member fulfils my expectations. I realise that, if I were as generous to the hon. Gentleman as it is in my nature to be, it would be only a matter of time before other colleagues sought to expose that weakness in my character and to obtain extra meetings. We do meet delegations—although not from every hon. Member—but if the hon. Gentleman cares to make a submission, we shall consider it carefully.

Mr. Ken Hargreaves (Hyndburn)

Would my right hon. Friend reconsider the position of people who become 18 after 1 April? Surely it does not make sense for such a person to pay more community charge than the parents with whom he lives?

Mr. Heseltine

I understand the circumstances that my hon. Friend outlines, but I do not wish to leave any doubt. We shall not be able to reconsider the matter in the context of the last settlement for the community charge. We have considered so many exemptions and have helped so many people that we must now proceed with the settlement and recognise that it will be the last one.

Mr. Peter L. Pike (Burnley)

Why does the Secretary of State not admit that, after 13 years of fiddling with grant-related expenditure assessments, with standard spending assessments and with the whole system of local government finance, he still does not have a system that he can prove is fair? Does he not agree that most people would say, neutrally, that the Government are anti-local government and wholly incompetent and that it is time for a change and for fairness to be part of local government once again?

Mr. Heseltine

The hon. Gentleman is largely right, which is why the council tax is coming.

Mr. Geoffrey Dickens (Littleborough and Saddleworth)

On Saturday morning, I am to meet a group of 14 local head teachers, who have been led to believe by the local authority that there will be massive education cuts next year, which will increase the teacher-pupil ratio.

What am I to tell those head teachers, and how can we be sure that the money sent to Rochdale and Oldham metropolitan borough councils will be spent on education, as some of it was intended to be?

Mr. Heseltine

My hon. Friend will want to tell them that the increase in SSAs for education over 1991–92 will be 7.1 per cent.

Mr. D. N. Campbell-Savours (Workington)

In deciding on the assessment for Cumbria police, did the Secretary of State take into account the 52 per cent. increase in crime in West Cumbria? Does he understand that many of my constituents now live in fear? A couple of extra police officers on the streets of Workington will not begin to deal with that problem. Can he assure me that the problem will be sorted out in these assessments when calculations are made in the future?

Mr. Heseltine

The hon. Gentleman is fully aware that my right hon. Friend the Home Secretary decides on establishment issues—

Mr. Campbell-Savours

It is not enough.

Mr. Heseltine

Then I ask him the question that I asked one of his colleagues: by how much extra is he authorised to commit the Labour party to increase expenditure on law and order? That is the sharp issue.

My right hon. Friend the Home Secretary has announced a further increase in police establishment of 1,000 people, which is included in the figures that we have announced. That increase is in addition to the 16,500 who have joined the ranks since 1979.

Mr. John Wilkinson (Ruislip-Northwood)

My right hon. Friend has made his statement with force and logic, which I welcome. However, how is it right that local authorities that have many tourists and overnight visitors will benefit from an augmented SSA, whereas local authorities such as Hillingdon, which have ports of entry to which many refugees come, especially unaccompanied refugee children who are a large burden on the social services and housing departments, do not get special provision?

Mr. Heseltine

My hon. Friend may have heard my reply a few moments ago. Those are different factors within the SSA mechanism. One is dealt with by social indicators, whereas the other is dealt with by having regard to the number of visitors, bearing in mind the fact that one is dealing with tourist authorities. I ask my hon. Friend to understand that distinctions are drawn in that way. I am not unsympathetic to his point, but I point out that there is a far wider issue about the number of people coming to this country illegally who are seeking asylum and who are a potential cost to the local authority. My right hon. Friend the Home Secretary has addressed the matter recently in the House, and doubtless he will continue to do so.

Mr. David Madel (Bedfordshire, South-West)

My right hon. Friend has said that this is a consultative document. He has also said that the £15 million rule comes in, whereby councils such as South Bedfordshire district council could be capped. Will he consider its position sympathetically? It is an authority that lost money in the Bank of Credit and Commerce International, and it is in a state of anxiety. May I have an assurance that it will be some weeks before my right hon. Friend takes a final decision about whether South Bedfordshire should be capped?

Mr. Heseltine

My hon. Friend will know that, by statute, I am bound to listen to all arguments that are put to me. I assure him that I will do that, although I cannot say what my conclusion will be after those representations. I have no doubt that my hon. Friend's authority will wish to put its point.

Mr. Kenneth Hind (Lancashire, West)

Will my right hon. Friend look carefully at authorities such as Lancashire, with a spending budget of £1 billion? If such authorities are obliged to make reductions in expenditure, will he ensure that they do not make them in the areas that are the most painful and that will attract the most publicity? I have in mind especially statements of educational needs and the number of policemen. Would my right hon. Friend consider ring-fencing the police budget to ensure that that does not happen?

Mr. Heseltine

It would be an extraordinarily cynical and reprehensible way for a local authority to behave, and I very much hope that we shall not see examples of it. It would not be appropriate for me to try to take legislative powers to ring-fence individual programmes of local authorities in the circumstances that my hon. Friend has outlined, although I very much share his anxiety.

Mr. David Blunkett (Sheffield, Brightside)

Have we not heard this afternoon a new definition of a Tory Euro-enthusiast—one who would rather have our money directed by the Germans and French than by a democratically elected Labour Government?

Will the Secretary of State confirm that, having encouraged local authorities to bid for city challenge, expenditure generated locally to meet that next year will be subject to the capping rules, and that expenditure that has to be raised and spent locally over and above any central Government grant for the introduction of the council tax will be subject to capping? Will not the real victims of capping be children in schools and the elderly in need of social services?

Mr. Heseltine

No, I reject both the hon. Gentleman's suggestions. I must confess that I looked in the eye of the hon. Member for Bolsover (Mr. Skinner) and thought of him running this country. Perhaps even my imagination was carried away by the idea that he should govern us in any circumstances. I can think of nothing worse than such a horror scenario.

The hon. Member for Sheffield, Brightside (Mr. Blunkett) will be as aware as I am that the city challenge arrangements have been carefully considered by my Department and that the urban grant arrangements will be dealt with in the way that I was able to announce very recently. Only 10 per cent. of them will count within the revenue of the local authority, so there is considerable assistance, in that we have increased the disallowance to 90 per cent. There are similar and helpful arrangements for the capital programmes also. The issue of city challenge has been dealt with sympathetically, and I am delighted that it has.