HC Deb 26 November 1992 vol 214 cc1008-23 4.41 pm
The Secretary of State for the Environment (Mr. Michael Howard)

With permission, Madam Speaker, I should like to make a statement about the local authority finance settlement for England for 1993–94.

Next year is the first year of the council tax. As hon. Members will know, the tax will reflect both the value of the property and the number of people who live in it. The lowest value properties are in band A, the highest in band H. The occupants of a band H property will pay no more than three times as much in local tax as the occupants of a band A property in the same area, thus preventing a return to the excessive variations in household bills which occurred under the rates. All 6 million single adult households will receive a 25 per cent. discount. Almost all full-time students will be exempt. Three million households on income support will pay nothing. There will be transitional protection for those households facing higher bills. The new tax will be cheaper and easier to collect than the community charge, because there will be only one bill per household and no need to keep a register.

The council tax will place local government on a strong financial footing. I believe that it has considerable support, not only among members of the public but among local authorities. They have worked hard with us to ensure a smooth and successful introduction of the new tax. I am grateful to them and to the local authority associations for the constructive role that they have played.

In considering the details of the settlement I have taken into account the representations made to me by local authorities and their associations, the responsibilities which local authorities face and the scope for further improvements in value for money. I have had in mind our intention that public sector pay settlements should fall within the range 0 to 1.5 per cent.

I have also considered very carefully what the country as a whole can afford. Local government expenditure accounts for 26 per cent. of general Government expenditure. It has increased by 3.6 per cent. a year in real terms over the past two years. In present economic circumstances it is unreasonable to expect such growth to continue. The Government must keep a tight grip on public spending, and within the total we must give as much priority as we can to capital spending. Local government must play its part, too.

Authorities will be able to spend considerably more on capital projects next year, since they will have full use of nearly all the capital receipts they receive from 13 November to the end of December 1993. I expect this change to make an extra £1.75 billion available to local authorities for capital expenditure. As an additional incentive, I have already announced a range of capital partnership programmes, which offer authorities extra support from my Department to make these receipts go even further and to encourage projects of lasting benefit to local communities and industries.

It was against this background that, on 12 November, I announced the aggregate figures for the local government settlement for the coming year. Those figures have now been increased by £26 million, as announced by my right hon. Friend the Secretary of State for Health today in the light of changes to the independent living fund. Taking account of that additional sum, the Government's view is that the appropriate level of spending for local authorities in England in 1993–94 will be £41.168 billion. Central Government funding in support of that expenditure will be £33.545 billion.

Those figures reflect a number of changes in local authorities' functions next year. They include £565 million which we intend to set aside as a special grant to help authorities as they take on their important new responsibilities for community care. On the other hand, they make no provision for functions, principally further education, for which local authorities will no longer be responsible next year and for which about £2.5 billion was provided in the current year.

Making full allowance for these changes, the year-on-year increases underlying my proposals are 3.1 per cent., which is about £1.2 billion, in the appropriate level of spending and 3.7 per cent., which is also about £1.2 billion, in Government funding. Those increases should enable local authorities to maintain service provision. Overall, local authorities should need to raise no more next year through the council tax than they have budgeted to raise this year from the community charge.

I am today issuing a consultation paper setting out how we propose to distribute that funding. Copies have been placed in the Vote Office and the Library and are being sent to every local authority.

In the statement I made on 12 November, I proposed that the non-domestic rate poundage for 1993–94 should increase by 3.5 per cent. to 41.6p, in line with the rate of inflation. That will ensure that businesses continue to benefit from the Government's success in reducing inflation. In addition, under the changes announced by my right hon. Friend the Chancellor in his Budget statement earlier this year, business ratepayers who stood to benefit from the introduction of the unified business rate or from the 1990 revaluation will receive the whole of their benefit next year. Transitional protection will continue to be available for those who stood to lose, and the shortfall will be made good by the Exchequer.

I now propose to set the distributable amount of non-domestic rates at £11.559 billion. This represents a reduction of £747 million from 1992–93, largely as a result of repayments following appeals. I am today publishing details of the full calculation. All receipts from non-domestic rates continue to be distributed in full to local authorities.

I propose that the total of revenue support grant for 1993–94 will be £17.052 billion. In addition, some £4 billion of specific grants will be available. My detailed proposals for the way in which standard spending assessments will be calculated for 1993–94 are set out in the consultation paper. I have also provided the provisional figure for each authority's standard spending assessment. I am proposing some modifications to the way in which SSAs are calculated.

The main changes are inevitable, as they result either from changes in local authorities' responsibilities or from the new basis of local taxation. The main change of functions is in relation to further education, which will become the responsibility of the Further Education Funding Council from April 1993. This means that a simple comparison of proposed SSAs for 1993–94 with those for 1992–93 will, for all education authorities, show a decrease.

Expenditure on authorities' new community care responsibilities will be funded by the special transitional grant, so there is no allowance for this expenditure in the SSA element for personal social services.

Other changes to the calculation of SSAs result from the use of more up-to-date information. In particular, we now have estimates of resident population for mid-1991 based on the 1991 census. I propose to include these in SSAs for 1993–94 as they clearly represent a better basis than the previous figures based on the 1981 census. I realise, however, that for some authorities there will be changes, either up or down, between these better estimates, only very recently available, and those previously used. I therefore propose to pay a special grant to those authorities whose SSA in 1993–94 will be reduced by 5 per cent. or more as a direct result of incorporating the population estimates based on 1991 census results rather than those based on 1981 census results.

Council taxes will be set locally by individual councils. They will depend on how much councils decide to spend and on how much they provide for non-collection, community charge arrears and successful appeals. There are 366 billing authorities and eight separate valuation bands; so tax levels will inevitably vary widely.

At the level of the individual household, the variation in bills will be even wider, because of single person discounts, income support exemption, council tax benefits, and transitional relief. Against that background, any figure for average taxes needs to be treated with great caution. What matters is the individual tax bill for the individual taxpayer.

In order to distribute grant fairly to each council, we have to allow for different levels of taxable resources in each authority. That means that, for each of the eight valuation bands, we have identified a notional council tax for standard spending which can be derived from the figures. For instance, for band C—two thirds of all properties fall in bands A to C—the council tax for standard spending is £439. I emphasise that those figures are part of the grant calculation. They are not predictions or averages.

Many households, particularly those living in properties in the lower bands, will gain from the council tax. On the other hand, those living in properties in the higher bands should expect to make a relatively larger contribution to the cost of local services. But I am determined that any year-on-year increases in bills between the community charge and the council tax should be held down to affordable levels.

I am therefore proposing a scheme of transitional relief which will ensure that no household faces an excessive increase in liability next year as a result of the introduction of the council tax. Relief will be provided against increases above a specified amount, which will be different for each of the eight valuation bands. For properties in band A, relief will be provided against increases above £1.75 a week. For each higher band, the starting-point for relief will rise by an additional 25p; so for properties in band B it will be £2 a week and for properties in band H it will be £3.50 a week.

I expect that in most cases the calculation of relief under this scheme will be based on authorities' actual budgets and not assumed budgets. The scheme will last for at least two years, and we shall review the arrangements for later years in the light of experience of the operation of the scheme in 1993–94. I shall set aside resources from the total of Government support to meet the cost of the scheme, which I expect to be about £340 million in the first year.

My Department has written to local authorities today with details of the scheme. Copies of the letter have been placed in the Vote Office and the Library.

I have consistently made it clear to the House that I am determined to protect local taxpayers from unreasonable demands by their local authority. I have no doubt that most authorities will wish to play their part in setting reasonable budgets and reasonable levels of council tax, but where councils propose excessive budgets or excessive increases in budgets, I shall not hesitate to use my powers to protect council tax payers from the consequences and to ensure that local government spending does not rise above affordable levels.

I am today announcing my provisional capping criteria which authorities will need to take into account when they set their budgets over the next few months. I am also issuing my proposals for exercising my statutory powers to specify for each authority a base position—known as a notional amount—by reference to which I intend to measure budget increases for the purposes of applying capping criteria. I have placed papers in the Library and Vote Office setting out in detail my provisional criteria and my proposals for notional amounts. Copies have been sent to local authorities.

No authority that sets a budget at or below its SSA can or will be capped. Only those that budget above their SSA are potentially liable to capping. I intend to allow larger increases for authorities with budgets close to their SSAs than for those whose budgets are higher. Where budgets are very substantially above SSA, I intend to seek budget reductions, but in all cases I intend the reductions to be manageable.

I am proposing that each authority's notional amount is to be its 1992–93 budget adjusted to reflect changes in boundaries and functions and that under the new council tax system interest on collection fund cash flow will for the first time fall within the authority's budget.

My intended criteria are therefore as follows. Any increase of more than 2.5 per cent. over the 1992–93 notional amount will be considered an excessive increase if it gives rise to a budget requirement over the authority's SSA. Any increase of more than 1.75 per cent. over the 1992–93 notional amount will be considered an excessive increase if it gives rise to a budget requirement over I per cent. above the authority's SSA. Any increase of more than 1 per cent. over the 1992–93 notional amount will be considered an excessive increase if it gives rise to a budget requirement over 5 per cent. above the authority's SSA. Any increase of more than 0.5 per cent. over the 1992–93 notional amount will be considered an excessive increase if it gives rise to a budget requirement over 10 per cent. above the authority's SSA.

In addition, I intend that any budget requirement more than 12.5 per cent. above the SSA will be considered excessive, save that an authority will not be designated if it fulfuls certain conditions equivalent to the conditions which I applied this year.

This year, I adopted a de minimis proviso allowing authorities budgeting by no more than £1.50 per adult above the criteria for excessiveness not to be designated. I told the House at that time that it should not be assumed that in any future year we would judge such a de minimis provision to be appropriate. Local authorities should not assume that there will be any such proviso or principle for 1993–94.

My proposals allow for the particular circumstances of the inner London boroughs which still bear the cost of overspending inherited from the Inner London education authority and of the City of London.

Those criteria are necessarily provisional. When I come to make my decisions on capping, I shall, of course, take into account all appropriate considerations.

My proposals for local authority spending and for external support are realistic and manageable in the current economic circumstances and, in particular, in the light of the Government's policy on public sector pay. We expect pay settlements for local government employees within a range of 0 per cent. to 1.5 per cent. over the coming year. Given my proposed increases of 3.1 per cent. in total spending and 3.7 per cent. in external support, provided that local authorities manage their resources efficiently, they should be able to maintain the full range of services they provide.

This settlement also means that authorities will not need overall to raise from their taxpayers next year any more than they did under the community charge this year. For individual taxpayers, my proposals will provide additional protection in two ways: through capping, which will restrain unreasonable levels of spending, and through the transitional relief scheme.

I am confident that this settlement will provide local authorities with the resources that they need to deliver the wide range of local services of the quality which people expect and deserve and at a level of tax which they can afford.

Mr. Jack Straw (Blackburn)

Is it not true that the Secretary of State's statement will mean cuts in vital public services throughout the country, with nursery classes closed, library provision ended in many areas and higher charges for meals on wheels and home helps—all because the right hon. and learned Gentleman has been ready to sacrifice the needs of children, the elderly, the sick and families to sweeten the pill for the rich of the introduction of the council tax?

Is the Secretary of State not aware that, having failed the nation once by forcing through the poll tax against overwhelming hostility, he is now failing the nation a second time? Will he confirm that the announced 3.1 per cent. increase in so-called total standard spending is a bogus figure; that councils will be short of £200 million in cash, comparing this year's budgets with next year's settlement; and that this can only mean job losses, even with a total pay freeze? Was not that the implication of the right hon. and learned Gentleman's weasel words, when he said in his statement that these increases "should" enable local authorities to maintain service provision? Is he saying that these levels of settlement will enable authorities to maintain service provision? Will he guarantee that there will be no service cuts and no job losses? Has he made any calculations about the statement's effects on jobs and services? Is the right hon. and learned Gentleman proud, or sorry, that his policies have already led to the loss of 6,700 teaching posts in the past year?

On council tax, will the Secretary of State confirm that his announced band C of £439 is £57, or 15 per cent., above the level promised by his predecessor, the right hon. Member for Henley (Mr. Heseltine), even allowing for inflation since he claimed those figures? The right hon. Member for Henley claimed that band C would he £356. Allowing for inflation since then, that would be £382, not £439.

Given that, will the Secretary of State now apologise for the way in which the right hon. Member for Henley misled the House and the country in the run-up to the election, and will he apologise for the fact that only two weeks ago he sought to mislead the House by pretending that no such predictions had ever been made?

Madam Speaker


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

My hon. Friend did not say "deliberately".

Madam Speaker

Order. Perhaps the hon. Member will allow me to deal with the matter. The hon. Member for Blackburn (Mr. Straw) knows that we do not use such terminology.

Mr. Straw

Will the Secretary of State apologise for the way in which he sought to confuse the House and to dissemble over the fact that he knew very well that the right hon. Member for Henley had made predictions about the level of the council tax before the eletion, well knowing that the Government would never implement such levels after the election?

Why has the Secretary of State pretended in public that the council tax will be fair, when in private, in a letter to Conservative Back Benchers, he has trumpeted its unfairness? Why has the Secretary of State rigged the system, to quote his words, so that someone in a £350,000 house will pay only three times the council tax of someone in a £35,000 flat, not 10 times the tax?

Will the Secretary of State confirm that the single person's discount will mean that a single company director earning £100,000 a year and living in a £350,000 house will pay no more council tax than a pensioner couple living in a £120,000 house with below-average income?

Will the Secretary of State confirm that the majority of people who will gain from transitional relief are those who also gained from the poll tax? Is it correct that in Wandsworth the maximum council tax can only be £3.50 a week, given the operation of the transitional relief scheme?

Will the Secretary of State confirm that the £1.75 billion that he is claiming that local authorities can raise is based on wholly tendentious assumptions that the authorities will be able to sell that number of assets and that, what is more, he has not mentioned that £330 million of that amount, even if it is raised, is to be clawed back by reductions in central Government's credit approvals on top of which the Government have cancelled the urban programme?

Is it not the truth that the Secretary of State's capping regime has been specifically designed to force through cuts in services and jobs? Does he not understand that his threat to cap every authority is contrary to the view of his predecessor, the right hon. Member for Henley? Writing in The Times two years ago, the right hon. Gentleman said that councils should be free to set and account for their own budgets". Not only is it contrary to the right hon. Gentleman's view; it is contrary to the Secretary of State's own view, expressed to Parliament, that charge-capping powers should be used only "rarely", where a council acts "irrationally" and "contrary to all reason", and contrary to his words to the House: The people of an area certainly will be able to vote for a relatively high-spending authority if they so choose."—[Official Report, 25 April 1988; Vol. 132, c. 51.] Since many Conservative as well as Labour authorities are now spending at the cap, is the Secretary of State claiming that those authorities have been acting irrationally in seeking to protect services in their areas? What does the Secretary of State have to say to Conservative councillors in, say, Harrow, who are now having to consider £13 million of cuts and hundreds of job losses to keep within the cap?

Is the Secretary of State not aware that the standard spending assessments can only be a rough and ready system for the distribution of grant? Is it not an affront to good government and to democracy for such complex algebraic formulae to be used by him to ride roughshod over the judgment of 24,000 democratically elected councillors of all parties and their voters on what should be the appropriate level of services in their areas?

Where is the reason in an SSA system that provides £200 more for each pupil in Berkshire than in Wigan? Where is the justice in a system which gives Gloucestershire £7.5 million for nursery education when it has no nursery schools, while punishing North Tyneside for providing a nursery place for almost every child?

Is not the Secretary of State's SSA system, the base for this central control, nothing more than a grotesque farce, given that it has taken Ministers three years to end the lunatic regulation that assumed that Brent had more snow than Cumbria, and Camden more snow than Lancashire? It has taken the Secretary of State three years to end what was blatantly obvious to everyone else.

When will the Secretary of State understand that while across Europe, east and west, other countries have been moving to devolve power to local communities and their councils, the Conservative Government in Britain today now have such tight central control of local authorities that it is unparallelled in the industrialised world outside the former Soviet Union? If subsidiarity is to mean anything, is it not time that it began to mean something at home?

Is this not a bad statement about a poor system from an utterly incompetent and uncaring Secretary of State?

Mr. Howard

The lament of the hon. Member for Blackburn (Mr. Straw) is the latest in a long line that we have heard from Labour spokesmen after revenue support grant statements. Year after year we are told by the Labour party that increases in Government support will lead to slashing cuts in services and job losses. If the Opposition's predictions had been correct, we would not have any more teachers, policemen or home helps employed by local government.

Nowhere in the hon. Gentleman's remarks was there any sense that local councils might run their services more efficiently, that there is a need to protect capital investment or to keep firm control of current spending. Nowhere was there any recognition of the interests of the taxpayer; rather, there was one giant hole in the hon. Gentleman's remarks: how much extra does he think should be provided to local authorities next year? Has he cleared any figure that he might have in mind with the hon. Member for Peckham (Ms. Harman)? How would he raise that extra money—through income tax or through higher borrowing?

The hon. Gentleman suggested that the figures that I gave of a 3.7 per cent. increase in funding and a 3.1 per cent. increase in spending were bogus.[Interruption.] He says that now. But it was not a bogus figure. The bogus figure was the figure that the hon. Gentleman gave. He was not comparing like with like, and I was. That is why my figure was accurate and his figure was nonsense.

The hon. Gentleman referred to the figure for the CTSS. He compared it with what he said was a figure promised by my right hon. Friend the Member for Henley (Mr. Heseltine), but he knows perfectly well that my right hon. Friend never promised any level of council tax at all, that he never made any predictions about council tax and that the figures that were published by my right hon. Friend were in response to the Opposition's demand that the Government should provide figures on the same assumptions that the Opposition have made—unrealistic assumptions. The figures were published not as promises or predictions, but in response to demands made by the Opposition.

We have heard some interesting points from the hon. Gentleman. We have heard that he is against the single person discount of 25 per cent. He is against a discount that will benefit 6 million people next year, and they will remember that Labour was against providing them with that help. The hon. Gentleman is against transitional relief —and the 3.75 million people who will benefit from it also will remember that Labour was against providing them with any help next year.

The hon. Gentleman is against capping because he does not recognise that it is essential to restrain central or local government expenditure. He clings to the same absurd approach that Labour took at the last general election, when it wanted to cap the assembly that it proposed for Scotland but not cap any local authority in England, Scotland or Wales.

The hon. Gentleman had a clear test to face today. Labour local authority leaders want a successful introduction to the council tax and in September told the Leader of the Opposition to soft-pedal his opposition. Local councils do not want the upheaval that would be caused by the need to introduce yet another form of local taxation and neither does anyone else—except members of the Opposition Front Bench. Far from co-operating responsibly as their local authority leaders would wish, they are determined to do all that they can to undermine the new tax.

The partisan claptrap that we heard from the hon. Gentleman this afternoon shows how dismally Labour is failing the test of opposition—and far more so that of government.

Several Hon. Members


Madam Speaker

Order. Before we proceed, I make the point that the exchanges between the two Front-Bench speakers lasted half an hour. I am looking not for comments or statements but for brief questions to the Secretary of State. I am sure that the right hon. and learned Member will be equally brief and helpful in his answers.

Sir Paul Beresford (Croydon, Central)

Does my right hon. and learned Friend agree that the brief mention by the hon. Member for Blackburn (Mr. Straw) of Wandsworth failed to acknowledge that the opportunities for adjacent authorities that have similar standard spending assessments, but are Labour and Liberal-controlled, would be exactly the same if they were efficient and provided decent, value-for-money, quality services?

Mr. Howard

I agree, and I have every confidence that Wandsworth's future performance will continue to provide a benchmark against which people can judge the performance of responsible Conservative local government against that of irresponsible local authorities controlled by Labour or the Liberal Democrats.

Mr. Nigel Jones (Cheltenham)

Can the Secretary of State estimate the number of job losses that will result from his statement, and the average council tax in the various bands that he announced? What does he have to say to the Association of District Councils, which yesterday passed a motion condemning capping because it takes away the ability of local councillors to undertake the programme on which they were elected and denies the people the high-quality, properly managed services for which they voted?

Mr. Howard

I would say to the association exactly what I said to the hon. Member for Blackburn a few moments ago—and in deference to your remarks, Madam Speaker, I shall not repeat my observations. We will not forecast the average council tax because, as the hon. Gentleman will appreciate, council tax will be fixed by local authorities next year and I am not in a position to say the precise level at which they will each fix it. If local authorities manage their resources sensibly and adhere to the public sector pay policy guidelines of between 0 per cent. and 1.5 per cent., there will be no need for job losses.

Mr. Alan Howarth (Stratford-on-Avon)

I draw to the attention of my right hon. and learned Friend the two volumes of closely reasoned argument presented by Warwickshire county council to his Department and the numerous representations made by Members of Parliament representing Warwickshire constituencies, detailing the deficiencies and anomalies of the county's standard spending assessment. Will my right hon. and learned Friend tell the House what action he has taken in this settlement to remedy the injustices suffered by my county and my constituents?

Mr. Howard

My hon. Friend has fought hard for the interests of Warwickshire and has drawn its grievances to my attention on more than one occasion. I considered his material very carefully and, although we have not been able to make extensive changes to SSAs this year, I shall keep that matter under close review.

Mr. Clive Betts (Sheffield, Attercliffe)

Is not the Secretary of State really concerned about the relatively affluent people living in larger houses who would have to pay more council tax? Given his failure to secure £2 billion of transitional relief, is he not seeking to protect the wealthy from any increase by imposing a draconian capping regime that will cause thousands of redundancies and destroy basic services in authorities such as my own, in Sheffield, and those in authorities of all political persuasions throughout the country? Will not the constituents of Conservative Members as well as those of my right hon. and hon. Friends recognise the severity of the cuts imposed by the Secretary of State's package when they see housing, education and social services in their areas undermined and destroyed?

Mr. Howard

I doubt whether any right hon. or hon. Member can speak with greater authority about irresponsible local authority overspending than the hon. Gentleman, so I do not propose to take any lectures from him. There was never any question of £2 billion of transitional relief—I do not know from where the hon. Gentleman plucked that figure. I have just announced the details of our effective system of transitional relief. We also have a capping system that will ensure that local government plays its full part in restraining general Government expenditure, which is essential for this country's economic performance.

Mr. David Sumberg (Bury, South)

My right hon. and learned Friend will know from my meetings with members of his Department of the widespread concern and anger in Bury that the council is proposing to close nursery classes, reception classes and a whole raft of local services. Will he acknowledge the great demand in the community that I represent for a reappraisal of the grant mechanism? There is a belief in Bury that, being a small borough, it is not treated fairly.

Mr. Howard

I know the lengths to which my hon. Friend goes in making sure that Bury's case is powerfully made, and I have no doubt that he will continue to miss no opportunity to ensure that that continues. We think that Bury is fairly treated under the proposals that I announced today, but that is, of course, a consultation exercise and we are open to any further points that Bury wishes to make.

Dr. Roger Berry (Kingswood)

Will the Secretary of State contrast the Government's immediate decision to provide £50 million to repair Windsor castle with the effect of his statement, which will be to impose £50 million of cuts on Avon county council services? Does he acknowledge that the use this year of funds and balances to protect services had the full support of Avon's Conservative councillors? Will he extend his concern for one family living in Windsor to the thousands of families in my constituency of Kingswood and throughout Avon, so that their children's education will not be further damaged and that care for the elderly and disabled will not be further disrupted?

Mr. Howard

That is a thoroughly unworthy intervention, of which the hon. Gentleman should be ashamed. I am confident that it will evoke no greater sympathy in Avon than it has in all sensible parts of the House.

Sir Anthony Durant (Reading, West)

Will my right hon. and learned Friend confirm that transitional relief will be based not on a notional figure but on the actual level of the local tax?

Mr. Howard

I can confirm that. Subject to few conditions, that will be the case—it represents a great advance on previous years, when transitional relief was based on notional budgets. We intend as far as possible to base relief on the actual budgets fixed by local authorities, and we expect to be able to do so in the overwhelming majority of cases.

Mr. David Clelland (Tyne Bridge)

How can the Secretary of State justify the cuts in jobs and essential services that his announcement implies for places such as the city of Newcastle and the metropolitan borough of Gateshead, when his own Government recognise that they are in need of special help? What implications does the statement have for crime levels in Northumbria, and what suggestions does the right hon. and learned Gentleman have, given the imminent ending of the urban crime fund? Will not the Secretary of State go down in history as the Marsham street strangler—slowly choking the life out of democratic local government?

Mr. Howard

I have no need to justify the job losses alleged by the hon. Gentleman, because there is no need for them to occur. If local authorities manage their resources sensibly and adhere to the public sector pay policy guidelines, they will have the resources that the hon. Gentleman's own authority needs to provide the services that he identified. I have held discussions with his neighbour about the ways in which the initiative that led to the urban crime fund can be continued.

Mr. James Paice (Cambridgeshire, South-East)

I very much welcome the use of more up-to-date figures, which must benefit growing counties such as Cambridgeshire. Does my right hon. and learned Friend agree that the apparent concern expressed about job losses would be much more valid if the hon. Member for Blackburn (Mr. Straw) and others had set an example last night in regard to pay restraint, instead of copping out of a difficult decision?

Mr. Howard

My hon. Friend is quite right. Not for the first time, he has identified an example of the yawning gap between the words that we hear from the Opposition and the actions that they perform.

Mr. Peter Hardy (Wentworth)

The Secretary of State appeared to acknowledge the defects that have featured in previous years' standard spending grants and to recognise the difficulties inherent in using the 1981 census. Does he accept, however, that a quick glance at the figures suggests that unemployment and economic deprivation have not figured adequately in the determination of grant? Ai a result, areas suffering from those conditions will find it extremely difficult to maintain services, however prudent their spending may have been. Such areas will experience an increase in public squalor and a marked reduction in their authorities' capacity to meet serious need.

Mr. Howard

I do not accept the hon. Gentleman's criticisms. Although the standard spending assessment makes no specific allowance for the factors that he mentioned, allowance is made for many other factors that lead to similar consequences. The hon. Gentleman said that he had had a quick look at the assessment; if he reads the report in detail, he will find that the way in which other factors are taken into account goes a long way towards dealing with the problem that he has identified.

Mr. Eric Pickles (Brentwood and Ongar)

My right hon. and learned Friend's announcement about transitional relief has gone some way towards relieving my constituents' anxieties, but does he recognise that the tightness of the settlement will cause some local authorities difficulties? I refer to authorities which do not collect the community charge, rates or rents, which leave properties empty and which will kick and scream to get any services out of competitive tendering. If any jobs are to be lost, they will be lost in Labour and Liberal authorities that simply do not get their act together.

Mr. Howard

For the benefit of local government, my hon. Friend has helpfully identified a checklist of policies that they should put into effect if they are to ensure that they can respond to this settlement constructively, without any of the dire consequences of doom and gloom that have been predicted by Labour.

Mr. Paddy Tipping (Sherwood)

Does the Secretary of State accept that he sets the revenue support grant and the business rate and that, because of his stringent capping powers, he effectively sets the level of council tax throughout the country and throughout Nottinghamshire? His talk of law and order services has a hollow ring, given that the Nottinghamshire chief constable wants 60 extra police officers, the county council could fund 20 and the Government will provide none.

Mr. Howard

No; I do not accept for a moment that it is the Government who set the council tax for authorities in Nottinghamshire or elsewhere. We set the limits—the constraints—which are necessary, for reasons that I advanced earlier, but local authorities are allowed a good deal of discretion within which to set the council tax. I hope that the hon. Gentleman will exert on his local authority whatever influence he may possess and will encourage it to behave in the way suggested a few moments ago by my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles).

Dame Elaine Kellett-Bowman (Lancaster)

Does my right hon. and learned Friend accept that a large majority of the houses in my constituency are in the lower council tax bands and that they suffered cruelly under the community charge? They will definitely benefit from the new arrangements. Moreover, many of my constituents are single householders who suffered under the rating system: they, too, will benefit. As my right hon. and learned Friend will know, our bete noire is the extravagant spending of Lancashire county council. I am delighted that he is to cap the council firmly and make it behave for once.

Mr. Howard

I am grateful to my hon. Friend. We shall have to wait and see what budget Lancashire county council sets for next year before deciding whether to cap it; I hope that it, in common with other local authorities, will note the capping criteria that I have set and will set its budget within those criteria. In that event, I shall not need to impose a cap. I am sure that my hon. Friend will lose no opportunity of drawing to the council's attention the significance of the criteria that I announced.

Mr. Harry Barnes (Derbyshire, North-East)

One massive evil of the poll tax that still remains is the methodology by which the standard spending assessments, and therefore the grants, are determined. The only alterations of which we have heard are those introduced by further education and community care legislation and by the carrying out of a census. In other respects, the same methodology is used—a methodology that has placed North East Derbyshire district council, for instance, in 365th position among 366 authorities in England and Wales, while some other authorities receive two or three times as much per resident.

The formulae should be changed and the allocation should be redistributed. Will the Secretary of State publish the figures, placing the amounts in order, to show each district and each county area the amount that they receive? The Government are supposed to believe in league tables; let us have some league tables now so that we can see what is going on.

Mr. Howard

If the hon. Gentleman visits the Vote Office, he will find that all the information he needs is there in voluminous quantities. We consult local authority associations scrupulously on the way in which we assess the amount of grant that each authority should receive. As even the hon. Gentleman will realise on reflection, it is not possible to arrive at a system that pleases everyone. I accept that our system does not altogether please the hon. Gentleman, but it is a fair system, which is the result of extensive consultation.

Mr. Michael Ancram (Devizes)

Will my right hon. and learned Friend confirm that local taxpayers in areas with responsible councils, such as Wiltshire, will do better than those who are governed by irresponsible, high-spending Labour or Liberal Democrat councils? Will he also confirm that the cost of electing irresponsible councils will still be borne largely by those who elect them, rather than by the taxpayer in general? In the light of that, once the council tax has settled down, would my right hon. and learned Friend be prepared to re-examine the unified business rate to see whether it too can be made to work more fairly?

Mr. Howard

I entirely agree with the first part of my hon. Friend's question. On average, each Labour councillor costs £238,137 more, and each Liberal Democrat councillor £107,423 more, than each Conservative councillor. That bears out in some detail, and with some force, what my hon. Friend said.

I fear that I cannot hold out any hope of further action on the business rate. As my hon. Friend will know, the fact that the rate now increases by no more than inflation is a great safeguard for business, after years in which profligate Labour authorities used to heap huge increases on business, year after year. My hon. Friend will also be aware of the measures taken by my right hon. Friend the Chancellor in this year's Budget, which afforded substantial relief to business rate payers.

Mr. Andrew F. Bennett (Denton and Reddish)

Does the Secretary of State recall that, when the Government began to alter local government finance, they made two claims: that the new arrangement would be simpler and easier to understand and that it would be fairer? Does he really think that the system described in his statement is simpler and easier to understand? Does he really think that it is fairer for my constituents in Tameside still to have to pay substantially more next year than people in, for instance, Wandsworth? Should not the Secretary of State have apologised to the House for the mess that the Government have made of the system and, in particular, for all the money that was wasted in the introduction of the poll tax?

Mr. Howard

I very much doubt that it is given to man to find a system of financing local government that would please the hon. Gentleman. I think that the system that we have put in place, which will take effect from 1 April next year, is sensible and will attract support from those who want to put arguments about the method of local government finance behind them once and for all.

Sir Dudley Smith (Warwick and Leamington)

Am I right in believing that, overall, the majority of householders will pay less under this fairer system, and has my right hon. and learned Friend any facts and figures that are comparable with the old rating system?

Mr. Howard

It will crucially depend on the level of council tax that local authorities fix next year, but I expect that more people will benefit from the introduction of the council tax than will lose.

Mr. Nigel Spearing (Newham, South)

But does not the Secretary of State realise that we can all agree on at least one of his sentences—that sufficient resources should be made available to councils to provide proper services? Is he aware that the available money for the London borough of Newham is £10 million less than the total SSA estimated by the Government as necessary expenditure on services? That is equivalent to the difference between the amount that the council must pay in capital repayments and interest and the amount of the relevant SSA. However, the Financial Secretary to the Treasury, writing to me last year, said that the capital borrowed by councils was not under the control of the Government. Does the Secretary of State agree, therefore, that the Government should fix the SSA pro rata to the amount for which they give permission and that, unless they do so, they can be accused of financial fraud?

Mr. Howard

I do not entirely follow the hon. Gentleman's point. It is for local authorities to decide how much they wish to spend on capital projects. They make their capital spending decisions, and those charges have financial consequences. I am sure that the London borough of Newham was aware of those consequences when it took the decisions to which I referred. The documents that I have placed in the Vote Office are part of a consultation exercise and I shall listen to any points that the hon. Gentleman or his local authority wish to make in the course of that exercise.

Mr. James Hill (Southampton, Test)

I agree with my right hon. and learned Friend about the democratic right of local authorities to fix their own budgets, but the mistake that was made with the community charge was that those budgets were not monitored close enough, were not capped early enough and, like my authority, were allowed to spend many millions of pounds on wasteful schemes. Auditors are taking Southampton city council to court for wasteful and illegal expenditure of well over £1 million. Such action shows that my right hon. and learned Friend must act quickly to cap wasteful authorities.

Mr. Howard

My hon. Friend is entirely right to draw attention to such important matters. I shall not hesitate to use the capping powers which I have announced where councils spend excessively and breach the criteria.

Mr. Bryan Davies (Oldham, Central and Royton)

Has the right hon. and learned Gentleman been following a script from "Dad's Army"? Has he not displayed all the ruthless centralising ambition of a Napoleon with the bumbling incompetence of a Captain Mainwaring? In so far as his figures add up, do they not do so solely on the basis of a pay increase of 0 to 1.5 per cent. for some of the lowest paid workers—dinner ladies, home helps and others —and is it not scandalous of the Government to demand that of them?

Mr. Howard

I defer to the hon. Gentleman on "Dad's Army"; but the Government have said that people in public sector work should be prepared to make a sacrifice to increase the prospects of jobs for those who are out of work. I should have thought that that message might just command the support of the hon. Gentleman and his hon. Friends. If it does not yet do so, I ask them to reflect and reconsider, because it has widespread support among the people of this country.

Mr. Douglas French (Gloucester)

Will my right hon. and learned Friend confirm that, in calculating the SSA for the city of Gloucester, he has taken fully into account the population changes resulting from the boundary changes —which, he will acknowledge, were not taken fully into account last year?

Mr. Howard

Without going into what was or was not fully taken into account last year, for next year I can answer my hon. Friend's question in the affirmative.

Mr. George Stevenson (Stoke-on-Trent, South)

The Secretary of State claims that the council tax is fair. Is he aware that its relief provisions for disabled people are grossly unfair, because someone in the top band can claim relief for disablement, taking him down to the next lowest band, but there is no band into which someone who is in the bottom band can fall? The right hon. and learned Gentleman's proposals and the council tax discriminate unfairly against disabled people in the lower band of the council tax. What does he intend to do about that discrimination?

Mr. Howard

The purpose of the relief to which the hon. Gentleman refers is to ensure that disabled people are not penalised unfairly because a house has an extra room or extra facilities for them. For that reason, we say that such a property should be deemed to be in a band lower than it would otherwise be. If a property is already in the bottom band, it cannot, by definition, be put into a lower band. I should have thought that that would be apparent even to the hon. Gentleman.

Mr. Nigel Waterson (Eastbourne)

Will my right hon. and learned Friend agree to reconsider the way in which SSAs are calculated for coastal resorts such as Eastbourne, particularly tourism statistics, ward-weighted density arid coastal protection?

Mr. Howard

I very much understand the concerns to which my hon. Friend referred. Tourism statistics are now taken into account in the calculation of the standard spending assessment, as my hon. Friend will see when he examines the documents in the Vote Office. As I have said, this is a consultation document, and I shall listen carefully to representations from my hon. Friend or his local authority.

Mr. Doug Henderson (Newcastle upon Tyne, North)

Will the Secretary of State be honest with the House arid acknowledge that, in attempting to appease the rich in the leafy suburbs, his statement will lead to a severe cut in essential public services in many parts of the country? Will he acknowledge that, at a time when almost 3 million people are out of work, his statement will lead to the loss of many jobs of those employed directly in the public sector and those in the private sector who are dependent on public sector purchases of goods and services?

Will the right hon. and learned Gentleman further acknowledge that the reduction in the real level of local authority resources will turn the screw on the recession and further weaken our economy? Given the consultations that he will have with the many authorities such as Harrow that will inevitably troop into his office to make representations, will he give a commitment now to modify spending limits and capping procedures and allow authorities of different persuasions to provide the essential services that their communities demand?

Mr. Howard

I do not accept any of the points that the hon. Gentleman made, for the reasons that I gave when answering other Labour Members' points. I understood that the Labour party intended to start singing a new tune, but we have heard this evening the same old discordant tune and the same old failed message—spend more, tax more, waste more. That is the message that the Labour party still gives to the people of this country, and that is why it will continue to be rejected by them.