Local Government Finance (Scotland)

HC Deb 19 February 1998 vol 306 cc1195-232 4.11 pm

The Secretary of State for Scotland (Mr. Donald Dewar)

I beg to move, That the Local Government Finance (Scotland) Order 1998, dated 4th February 1998, a copy of which was laid before this House on 5th February, be approved. We are also discussing the following motions: That the Revenue Support Grant (Scotland) Order 1998, dated 4th February 1998, a copy of which was laid before this House on 5th February, be approved. That the Special Grant Report (98/1) (Scotland): Local Taxation Collection Grant Scheme 1997–99 (HC 530), which was laid before this House on 5th February, be approved. That the Special Grant Report (98/2) (Scotland): Grant in Aid of Local Authority Revenue Costs and Reinstatement Works at Dunblane Cemetery Resulting from the Dunblane Tragedy (HC 531), which was laid before this House on 5th February, be approved. That the draft Housing Support Grant (Scotland) Variation Order 1998, which was laid before this House on 29th January, be approved. That the draft Housing Support Grant (Scotland) Order 1998, which was laid before this House on 29th January, be approved. I am putting before the House a comprehensive package of legislation that sets the framework for local authority funding for the year ahead. It is an important package. I do not pretend that it makes exciting material for debate—the possibility of flashing wit is somewhat limited—but it is the stuff of politics. It is the basis of the framework within which local government must operate, and it deserves thoughtful consideration. I do not know whether there can or should be a wide-ranging debate, but I hope that the debate is relevant and specific to the issues of real substance. Before I briefly introduce each of the orders and reports, I shall say a few words about the general background to the measures.

The prospects for local government next year were bound to be extremely tight given the public expenditure plans that we inherited from the previous Administration. As every hon. Member knows—unless they have cut themselves off completely from political debate over the past nine or 10 months—we committed ourselves, if returned as an Administration, to stick by the inherited totals. I make no apologies for that, as there were obviously good and sound reasons for it. I occasionally meet someone who says, "I know the present Chancellor said it, but I didn't believe he meant it." Well, as they say, they know now. I can assure the House that this is not some conversion to masochism. It is not hair-shirt politics for the sake of it. Because we believe that there are sound, long-term economic reasons for holding hard to the public expenditure figures in the first two years of Administration, we have done so.

It is obviously important that we hold inflation in check and borrowing is a matter for concern. We want to ensure that we have growth in the economy but at a level that can be sustained over a period and be a proper basis for our social and other plans in the future. We do not want, as has too often happened under many Governments in the past, a retreat to boom-and-bust conditions.

Mr. James Wallace (Orkney and Shetland)

The Secretary of State has made something of sticking by the previous Government's spending plans. He recall that the previous Government said that they v prepared to commute the housing debt of Shetland Islands council—and that of the Western Isles council Highland council—yet the Government will no longer that. Can the Secretary of State give an explanation that and, in particular, give the housing policy considerations underlying that decision, which v referred to in a letter from his Department to Shell Islands council on 9 December 1997?

Mr. Dewar

This is a subject on which the hon. learned Gentleman is probably well informed. I do remember in detail what the Conservative Government said on the matter, but I am aware of the issue. It is on which, in principle, we have some sympathy with council. The immediate problem was divergence interest rates, which shifted the balance and costs considerably, but that is no doubt something that car discussed again when the circumstances are right I thought that the hon. and learned Gentleman was at to write that down, in which case I might begin to that I had gone too far. But there we are; we all live \ our mistakes.

During Scottish questions, an hon. Gentleman whose name I know—but not his constituency—rose to as question. His opening shot was to ask how I explained fact that there was not more fuss from local government about what the Labour Government are doing. I ha\ lot of sympathy with the hon. Gentleman, because he obviously looking at a local government structure an financial system about which he knows little. I understand that, because his constituency is far fi Scotland and I suspect that he was protected simply b rather flimsy brief from the Whips Office. It was a g feed line, because it reminded us just how severe draconian the settlement would have been if Conservative Members had held on to power. It is worth reminding House of that because it is the background against which what is happening now will be judged.

Mr. John Swinney (North Tayside)

The Secretary State talks of the lack of fuss about the local government settlement. I might agree with him to some extent on sc aspects of the debate, but the Labour group on Perth Kinross council supported a motion put forward by Scottish National party administration express its dismay and disappointment at the new Lab Government's decision to continue with the for Conservative Government's spending targets for local authorities. Would that constitute a fuss in the right I Gentleman's eyes?

Mr. Dewar

I was quoting a Conservative Member, endorsing what he said. I was making the simple put that we have held the settlement in broad terms, but with the context in which we are operating we have tried to introduce elements of genuine flexibility to help local government. We have tried to understand its priorities preserve them and weight the settlement in favour of them. We have, with the co-operation of local government, been able to produce a well-ordered settlement. I have always recognised that councils face tough decisions, but they are decisions that most councils are addressing sensibly and responsibly against background of a recognition of some of the financial economic reasons why this policy is being followed.

I do not object to the SNP majority on Angus council taking a line hostile to the Government. I would be surprised if it did not, and I suspect that the local Member of Parliament would be even more surprised. I cannot remember what part the wife of the hon. Member for Angus (Mr. Welsh) presently plays in local government in Angus, but I am sure that he is well able to put in his tuppenceworth of advice and guidance on the matter. We give those expressions the weight that they deserve.

Mr. Swinney

The right hon. Gentleman may not have heard fully what I said. The motion, which was before Perth and Kinross council, of which the wife of my hon. Friend the Member for Angus (Mr. Welsh) is not a member, was supported by the Labour group on the council, expressing its concern at the Labour Government's commitment to the previous Administration's spending targets, a point which has concerned many hon. Members on both sides of the House.

Mr. Dewar

I apologise. I misheard the hon. Gentleman. I should have realised that he is not responsible for affairs in Angus. The hon. Member for Angus (Mr. Welsh) is ubiquitous on those matters. I shall not be distracted further; let me return to the thrust of this debate.

In the plans set by the previous Administration, central Government grant to local authorities—aggregate external finance—was set to fall in cash terms by more than 1 per cent. and expenditure was to rise by only 0.7 per cent. in cash terms, even taking account of the various and significant new spending pressures facing councils. I am thinking, for example, of care in the community, for which this Government have included £24.5 million in the settlement, and of the impact of the Children Act (Scotland) 1995, for which £11 million has been put into the settlement. Given the threats that were in store, many people will look with realism at what the Government have managed.

Mr. Michael Ancram (Devizes)

The Secretary of State keeps referring to the figures that were put forward by the previous Government. Does he agree that those were the figures in the public expenditure survey for year two, that they were therefore provisional and, given the nature of the public expenditure survey, that they would have been revised when they dropped into the slot where they become year 1 figures?

Mr. Dewar

The diffident way in which that possibility was inserted into the debate was touching. I know that the right hon. Gentleman has ambitions to be classed as a wet, but the suggestion that the figures would have been changed radically is over-optimistic.

Mr. Ancram

Is the Secretary of State saying that year two in Labour's public expenditure survey will be cast in tablets of stone and not open to revision?

Mr. Dewar

I do not know what the right hon. Gentleman's speech will contain, but I have always taken seriously the Conservatives' claims to wish to cut public spending. I do not imagine for a moment that he would have wanted me to take them less than seriously. Let me take the argument on a little and follow up what I said to the hon. Member Perth and Kinross—

Mr. Swinney

North Tayside.

Mr. Dewar

I am sorry, I meant the hon. Member for North Tayside (Mr. Swinney).

Mr. Swinney

The Secretary of State's geography is terrible.

Mr. Dewar

I know; it is like my counting.

It is important to look at how the settlement has been deployed, which is within comparatively tight parameters. We have tried to ensure that certain areas are given priority—areas that we think are of social importance, which we featured in our general election campaign and which we believe reflect the priorities that people in Scotland voted for. We were able to provide an additional Government grant of more than £90 million for education and to allow local authorities additional spending power of £150 million over and above the inherited plans.

Mr. Andrew Welsh (Angus)

Will the extra money for education be an on-going or a one-off allocation? When the Local Government Commission meets, will it be allowed also to consider finance, which is important?

Mr. Dewar

I can only point to our priorities, which we intend to reinforce in the coming years. Spending plans are clearly open to adjustment—I concede that much to the right hon. Member for Devizes (Mr. Ancram). We are trying to ensure that education is given priority, which is as it should be.

Mr. Welsh

So the allocation is a one-off.

Mr. Dewar

I did not say that it is a one-off allocation; I said that it is a priority that we intend to continue to favour, but how we do that and to what extent, and how we can improve and build on it, we shall have to see as the economy develops.

Not just the £90 million was in the settlement; we have also inherited plans for £3 million for early learning initiatives and for numeracy and literacy. That rose to £7 million. We have a school-building programme of £27 million for next year and additional money—some £9 million—was found to allow local authorities to implement the pledge on nursery places for all four-year-olds whose parents wish to take advantage of them. As I am sure the hon. Gentleman will recognise, there is a degree of weighting in that sense, which I hope he will feel able to support as a principle.

We have given particular weighting to certain matters that have involved a good deal of controversy. To be fair, that is true of the last Administration as well. I am thinking of, for example, law and order and the police in particular. There has been some controversy over the police allocation, which I have tackled head on. In 1998–99, police grant-aided expenditure will be 3.8 per cent. above the budget for this year. In 1996–97, it was 7.7 per cent. up on the previous year and in 1997–98 it was 9.7 per cent. up on the previous year. There has been a cumulative effort to ensure that funding is adequate. That is in sharp contrast with what was managed in the overall local government settlement, in which increases in GAE averaged around 2 per cent., or just over 2 per cent. That does not mean that there are not problems. I am merely pointing out that law and order is another issue on which we have delivered on our pledges. We have tried to reflect what I think ordinary citizens in Scotland going about their business consider important.

Several hon. Members

rose—

Mr. Dewar

I am not going to deal with every point of information that comes up, although I see that there are some enthusiastic runners. I shall, however, give way to the hon. Member for Woodspring (Dr. Fox) as he is a Front Bencher.

Dr. Liam Fox (Woodspring)

The Secretary of State throws percentages around, but the simple fact is that the Scottish chief constables said that the police needed an extra £28 million this year for a standstill budget and they are getting £11 million. How on earth does that square with the Government's manifesto promise to be tough on crime?

Mr. Dewar

I accept that figures must sometimes be looked at carefully, but if the hon. Gentleman looks at the figures he will see that I have represented the position correctly. I think that the base line on which the claims were made was a rather optimistic starting point. If the hon. Gentleman examines what has happened to the budget year on year, I think he will see that I am being very reasonable and that what I am saying has been well borne out.

Sir Robert Smith (West Aberdeenshire and Kincardine)

Will the Secretary of State give way?

Mr. Dewar

I shall give way to the hon. Gentleman; then I must push on for a few minutes.

Sir Robert Smith

The Secretary of State might like to look at the history of the funding of the police. The last Government altered the ground rules when they introduced capping on the cash available for the police-specific grant. In the past, it had been possible for local authorities to draw down additional funds for the police by going over the capping level of the GAE. The right hon. Gentleman should compare like with like. What looked like an increase in 1996–97 was artificial: in the case of several authorities, there was no real increase in Government cash for the police, because in the past they had been able to spend over GAE.

Mr. Dewar

All I can say is that provision in the settlement has gone up steadily in comparative terms, as against the settlement as a whole. I would not for a moment deny that there have been problems with police spending. Some authorities, under pressure, have spent significantly below GAE for certain joint police boards. I am merely saying that, if we are looking for priorities, the fire service and the police are among the services that have been protected to some extent against the hard times with which most departments, and most other areas of council activity, have had to struggle in recent settlements. I will not retreat from that position for a moment.

Aggregate external finance is now set to increase in the coming financial year by over £33 million, or 0.6 per cent., and Government-supported expenditure by £133 million, or 2.2 per cent. The provisional capping principles that I also announced on 3 December allow Scottish local authorities to increase their capped expenditure by more than 3.4 per cent., a total of £191 million. Let me point out for the last time that those who look back at what was planned will see that that is a significant improvement.

I have carefully considered the available capping options and concluded that the fairest approach to all was the tiered regime that allows councils spending closer to GAE a greater general increase than those spending well above GAE. Those capping principles are in every respect more generous than those allowed in the previous year, as I think hon. Members will recognise.

I recognise the tough choices that all local authorities will face in setting their budgets for 1998–99. They will have to focus resources on our agreed priorities and cope with some inescapable pressures, such as the increase in the costs of their pension contributions arising from the abolition of advance corporation tax credits. I recognise that that is a matter of concern to local authorities and that it will put pressure on their budgets.

Mr. Donald Gorrie (Edinburgh, West)

The £36 million that is required by councils to pay the advance corporation tax on pensions was not inherited from the Conservatives, so the Government cannot blame them for that. That change in the law has brought in a huge amount of money to the Treasury. Is it not reasonable that the Secretary of State should ask his colleague in the Treasury to give back that sort of amount? It affects only Scottish councils this year—it will affect English councils later—but it is a major issue. There is a simple way of finding what must be a large pot of gold to help pay for this.

Mr. Dewar

The hon. Gentleman makes a point that local government has, understandably, made forcibly. This is a pressure that it will have to cope with. I do not for a moment pretend that there are not substantial pressures. In the coming year, public sector pay will be a pressure, for example, on local government budgets, but it is right that we hold to the policy that we announced.

Of course, in some ways, there have been other unusual factors this year, as the hon. Gentleman, a long-standing and long-serving councillor, will know. For example, the pattern of debt repayment has changed, which means that, this year, getting on for £70 million is available to local government which would not otherwise have been there. That is not new money in the sense that it is additional spending power, but it allows councils to take up any room for expenditure without putting an enormous burden on their council tax payers. That, for example, is an important factor in this year's settlement.

However, I have never hidden the fact—I keep making this point; I will did so for the last time—that difficult and tough decisions must be taken. I have considerable respect for the way in which most councils, at least, are trying to face up to some of the problems.

We have had a helpful dialogue with local authorities, both bilaterally and through the Convention of Scottish Local Authorities. At the most recent meeting with the convention, it was made clear to me that local authorities would welcome in particular the flexibility to convert a small amount of their capital spending power into revenue expenditure, to relieve some of the pressures on their revenue budgets next year. That would help, in particular, those councils that were able to set very low council tax increases next year.

Following consideration of those representations, I announced on 13 February that I was prepared to allow all councils the opportunity to increase their budgeted revenue expenditure for next year by up to 0.25 per cent. of base budget, on top of their existing capping limit, provided they keep the increase in their band D council tax below the likely Scottish average.

It is right to try to introduce that element of flexibility. I willingly concede that it is not a major addition to the room for manoeuvre of local government. It is probably worth about £10 million, but it will allow that transfer and a little welcome, I hope, additional flexibility.

Sir Robert Smith

rose—

Mr. Dewar

I do not regard it as a major matter and, with respect to the hon. Gentleman, I would like to make a little more progress.

It is worth stressing that the scheme is an example of the close working relationship that we have developed with COSLA. I pay tribute to its efforts. After 18 years, Scottish local government representatives welcomed the opportunity to discuss, in what I hope was a constructive and progressive way, the harsh choices that local government faces over the next few years. There have been substantial benefits to both sides from that dialogue and from that ability to co-operate.

The Local Government Finance (Scotland) Order 1998 is the first order before us today. It sets out the amounts of revenue support grant and non-domestic rate income that will be payable to each authority in 1998–99. It also redetermines the amounts of revenue support grant that are payable for 1997–98.

Hon. Members who have studied the papers will be aware of the fact that the order is accompanied by a report that sets out in detail the background to the figures in it. The detailed calculations have been the subject of consultation with the Convention of Scottish Local Authorities, with which we have had a good working relationship, and they deal with matters of distribution. The distribution formula was reached by agreement between the parties.

I am particularly pleased that this year we have been able to agree with COSLA to introduce a measure of stability into the grant distribution arrangements. They looked as if they might produce some rough weather for some councils as a result of no action by those councils. The stability arrangement limits the extent to which changes in grant distribution can cause hugely uneven pressures on council tax in different parts of the country. To some extent, they arise from the redistribution of the social work GAE figures and the phasing out of the mismatch finance which dealt on a transitional basis with the problems and costs of reorganisation.

If there had not been a co-operative effort by COSLA to spread the load and phase the change, there would have been a dramatic difference. For example, in the City of Glasgow those two items alone would have resulted in an additional £166 on band D council tax. The figure for Dundee would have been more than £86. I am grateful to local government generally and to COSLA for its mediation for enabling us to formulate a sensible scheme that limits the impact arising from the changes to a maximum of £40. That was a genuine contribution to good order in our local government finance system.

The Revenue Support Grant (Scotland) Order 1998 is also accompanied by an explanatory report. The order makes what we expect to be the last set of adjustments under the AEF guarantee. No one is allowed to ask me any questions about that. It relates to payments in respect of 1992–93 and is worth, in total and at the limit, £200,000. It is of almost theological interest to experts in my Department, but I am not a true believer. It is obviously an important part of the mechanism, but I do not think that any hon. Member will be interested in pursuing it. If anyone does, I warn him now that I shall write to him later.

I shall now deal with the local taxation collection scheme special grant report. It relates to a special grant of £3 million to councils in the hope that it will go some way towards enabling them to put in place measures to tackle the significant burden of unpaid local taxes on their balance sheets. I appreciate the difficulty of doing that and it may be impossible to recover debts from the poll tax days. However, there is a chance of recovering debts from more recent times if proper steps are taken and this modest sum, if distributed on the basis of the amount of debt outstanding, might assist in bringing returns.

I say to any of my hon. Friends who are concerned about the matter that it is important for people to meet their obligations. If they do not, the burden falls increasingly on those who have and that is inequitable and unsatisfactory. Perhaps the limited funds will be used to improve IT records, issue reminders and engage in general chasing. It is a reasonable investment and I understand that it has been well received by local government.

The Dunblane special grant report enables a payment of only £1 million. It is a small but necessary contribution to Stirling council to help it to deal with the unusual and rather sensitive expenses that followed the tragedy in Dunblane primary school. It relates largely to the costs of counselling and to certain expenditure on education that was required in the aftermath of the tragedy. I do not think that anyone would begrudge or question the wisdom of that.

I shall deal now with the housing support grant orders that are also before the House. The first is the draft variation order. It is normal practice to bring forward a variation order if, during the year, there has been a change in the pool interest rate used in the calculation of the loan charges element of the housing support grant settlement. In the current year there has been a slight increase in the pool interest rate and the variation order provides for a consequent increase in housing support grant payable in 1997–98 from £15.2 million to £15.6 million. It is entirely a reflection of interest rate fluctuations and it is comparatively on the margin.

There is also the Housing Support Grant (Scotland) Order 1998, which provides for a total amount payable in 1998–99 of £12.7 million. That comprises £9.3 million payable to Highland, Shetland Islands and Western Isles in respect of their mainstream housing costs and £3.4 million payable to 20 authorities as a contribution towards the running costs of their hostels for the homeless.

The grant calculations are based on an assumed rental income of £40.56 per house per week and assumed management and maintenance expenditure of £859 per house per annum, an increase of 3 per cent. over the equivalent figures used last year. I should emphasise that the figures are neither guidelines nor recommendations but are used for the purpose of housing support grant formula only. They are uprated annually. It is a formula calculation that has been accepted and well established for some time.

Housing support grant—there is no need for me to discuss this in detail—has declined greatly over the years. At its height it was running at about £240 million but, as rents have increased, some of that has transferred to the housing benefit totals and, as housing support grant has fallen, they have risen. It goes back to an argument that is as old as me—if that is possible—about whether to subsidise the house or the person. No doubt the Government will wrestle with that as certainly as did the previous Government.

We are dealing now with a comparatively small part of the sweep of housing finance. I remind colleagues that we have managed to find about an additional £50 million for housing in the public sector, £35 million of which is for housing partnerships, which we hope will be a way of levering in private finance to provide accommodation, and £7 million for the empty homes initiative as well as other sums such as £5 million for energy efficiency and so on. I would be the last to suggest that that represented a revolution, but it is at least a first attempt to do something about the acute problems facing the housing sector, particularly the public sector. It may be that people will want to comment on those matters.

Mr. Welsh

rose—

Mr. Dewar

I see one person who wants to comment now. Let us hear him.

Mr. Welsh

Will the Secretary of State admit that those figures come against a backcloth of a drop of £484 million in the housing budget over the past two years? Therefore, any increases, although welcome, have to be taken in the context of a rapidly falling commitment to housing by the Government.

Mr. Dewar

I should thank the hon. Gentleman for welcoming what has been done in the initiatives I have mentioned. It will be very difficult for any Government, based on any unit within the United Kingdom, to solve the housing problem simply by straight subvention from the public purse. I freely concede that levering in private finance and housing partnerships and so on will be an increasingly important part of the process.

I take the view—I think it is sensible—that I want my constituents and the constituents of the hon. Member for Angus (Mr. Welsh) to live in housing that is sound, dry and adequate and which is the type of housing that they want to live in. My job as Secretary of State and the job of my Department is to use every possible endeavour to achieve that end. I believe that the way in which that burden is shared will alter in the time ahead, but that is a challenge to which we should rise and which we should welcome. I want to leave it at that now. We will have many other opportunities to discuss these matters in the future.

I recognise that there are problems. I recognise some of the frustrations and difficulties, many of which are put to me forcibly by friends and colleagues of many years. I also recognise and give a heartfelt welcome to the realism with which local government is going about its task. I recognise the determination to find a way forward which is represented in the co-operation over best value and the determination to increase efficiency and to make the delivery of services more effective. If we can achieve great things in that way and move forward, and if we can put the public finances on a sound footing, we will be well placed to achieve targets and to meet our priorities in the years ahead.

4.45 pm

Mr. Michael Ancram (Devizes)

It is somewhat nostalgic for me to participate in this debate today. It is 11 years since I was last involved in what was then a debate on rate support grant in the House and I was sitting behind the Government Dispatch Box. I have some sympathy with the Secretary of State. I have wonderful recollections of grant variation orders and pool interest rates. Whenever they arose, I hoped that I could leave it to another Minister to answer the questions later or that I could write to hon. Members.

It is rather sad to think that this is probably one of the last two such debates in the House. After the inception of the Scottish Parliament, presumably these debates will be transferred, at least in their detail, to that Parliament. We will no longer be able to enjoy these wonderful celebrations of clear formulaic thinking on the part of Scottish Office Ministers and officials.

Mr. John McAllion (Dundee, East)

May I assure the right hon. Gentleman that he is probably alone in the House in thinking that it is sad that these matters will no longer be debated here? I am delighted that, in two years' time, they will be debated in Scotland.

Mr. Ancram

The hon. Gentleman's sense of humour is not in line with mine. If he thinks that these debates will be enjoyed any more in a Scottish Parliament—or be any better attended there—he may be indulging in a little wishful thinking.

These debates are minefields. It is much easier to be speaking for the Opposition than for the Government, because I can ask the questions and the Under-Secretary of State for Scotland, the hon. Member for Western Isles (Mr. Macdonald), who is responsible for local government, will have to answer them.

I remember being told that the formulas are very exclusive. They are understood by three people—one is dead, one is mad and one advises the Secretary of State. [Interruption.] I am glad that the Secretary of State seems to be confirming that that is still the situation in the Scottish Office.

On housing, we accept both the formula and the principle behind what is proposed. I have always taken the view that it is better to subsidise people than bricks and mortar, and I welcome the fact that that is what the Secretary of State is pursuing. His hon. Friend the Member for Dundee, East (Mr. McAllion) is shaking his head—so whether that will last into a Scottish Parliament is perhaps another matter.

I always enjoy the Secretary of State's performance. Today's was a feat of gentle ingenuity in which he tried to portray the settlement as some sort of triumph. He called it a well-ordered settlement and justified that by saying, that if there is anything wrong with it, it is the fault of those who have gone before, and that if there is anything good about it, that is entirely for him. I thought that that was his argument. It avoids one fundamental political fact, which, after nine months, I am surprised has not impressed itself on the Secretary of State.

The settlement is not down to the last Government but is totally in the hands of his Government. We are talking about a new financial year on the back of a Budget that was struck by the Chancellor last July—I will come back to that—and it will take place after a further Budget from the Chancellor in March. He cannot do other than take full responsibility for what is in the orders. He cannot shelter behind the phrase "inherited plans". One Government do not bind another and he knows that. If he wanted to abandon what he calls the inherited plans, he was entitled to do so. He is adopting a cop-out position that does not fool anyone.

I asked the Secretary of State whether the public expenditure surveys for years two and three were provisional. Although he chided me for asking, he effectively admitted that they were. He said that provisional spending plans are revisited—I think that I am quoting him correctly—as the economic situation develops. That is why the Government have provisional spending plans. They cannot see two or three years ahead, but they have to give some idea of the likely levels of spending. They set provisional spending plans and consider the economic situation when the time arrives.

I am sure that Labour Members appreciate that the economic situation has developed considerably over the past year, not least with the extraordinary windfall—if I may use the word—of tax revenue that allowed the Chancellor to make a £10.4 billion repayment of borrowing two days ago. He could make that record repayment because there was more tax coming in than anyone expected, partly from growth and partly from self-assessment.

The figures that the Secretary of State is dealing with today were put forward on the basis of a different economic situation. They cannot be justified in today's circumstances. It is for the Secretary of State and the Chancellor to decide whether to use that unexpected £10.4 billion windfall to fill a war chest to try to buy the next general election or to look after people who need looking after now.

Given the problems facing local government, I suspect that many people in local authorities throughout Scotland would like some of the extra cash that is available. The Government had the opportunity to give them some of it. The Secretary of State has no credibility sheltering behind historic figures and wringing his hands because the settlement is not as good as he would like. He cannot keep hiding behind the previous Government's figures. He must face up to his own.

Important questions need to be asked about the settlement. On Tuesday, at Scottish Office questions, the Secretary of State said: The increase in cash terms is 3.4 per cent."—[Official Report, 17 February 1998; Vol. 306, c. 880.] That is above the current rate of inflation. He told us today that the settlement is better than it would have been had the previous Government still been in office. The Convention of Scottish Local Authorities has provided a useful briefing that says: Next year's settlement shows a cash standstill on inherited plans. Taking away some of the specific and exceptional increases, it says that there is not a great increase, but a cash standstill. That does not tally with what the Secretary of State said on Tuesday.

On 30 November last year, the Secretary of State wrote to Councillor Geddes, describing the settlement as a real terms reduction in support of local authorities. That means that the council will be able to buy less this year than last.

We have an enormous number of different sets of weasel words, all of which seem contradictory.

Mr. Dewar

The 3.4 per cent. is the increase in spending limits. The amount that the authorities are able to spend has risen by 3.4 per cent. That is the figure in which people are interested.

Mr. Ancram

I was careful to quote the Secretary of State's comment on Tuesday correctly. He said that it was a 3.4 per cent. increase in cash terms. Perhaps he would like to write to me about that. My understanding of cash terms corresponds with COSLA's statement that there will be a cash standstill on inherited plans. One of those statements is wrong. I should like to know the answer.

Mr. Wallace

I am interested to know where the right hon. Gentleman's argument is going. He rightly says that the Secretary of State has a free hand. During our debates on funding for the Scottish Parliament, most, if not all, Conservative Members have said that Scotland gets too much per head. Is he saying that we are getting too much and the Secretary of State should give us more, or is he saying that we are getting too much and the Secretary of State should give us less?

Mr. Ancram

I am trying to find out what the Secretary of State is saying. He seems to be contradicting what he said in his letter to Councillor Geddes in November and what COSLA has said. Is the settlement, which rests heavily on inherited plans, to be described as "rotten", as Labour Members described last year's settlement, or is it a tight but fair settlement, as the hon. Member for Western Isles has said? It is either rotten or tight but fair. It cannot be both. If it is the latter, it cannot be said to rely on last year's spending plans. The Government must decide why they rest their defence for this year's settlement on the basis that they are dealing with last year's figures, which they so vehemently opposed at the time.

Mr. Dewar

The right hon. Gentleman must be aware that I said that we started with those plans and have improved on them. That is the important point. I repeat that the cap limit is up by an average of 3.4 per cent. That is the amount that local authorities will be allowed to spend. That is a considerable increase. I accept that the right hon. Gentleman may claim that the Conservatives would not have held to their plans. If he wants to say that definitively, that might be of interest to us. Our settlement is a considerable improvement on the plans that we inherited.

I am not sheltering behind the right hon. Gentleman or anyone else. That would be a flimsy shelter. We have said from the beginning that there are good economic arguments for putting the public finances on a sound and stable footing to achieve a sustainable growth rate in the economy. Local authority expenditure must play its part.

Mr. Ancram

That does not answer the question that I asked earlier. Perhaps we shall have an answer in the winding-up speech. I understand that the £10.4 billion windfall was £4 billion more than the Chancellor had predicted in the autumn. The Secretary of State should have considered using some of that money to provide for the problems that he has outlined. He decided not to. In my book, a real-terms reduction is not an improvement and a cash standstill is not an increase. If that is his defence, everyone in local government in Scotland will know it.

In the debate on the Welsh revenue support grant last week, the Secretary of State for Wales made it clear that he would examine capping. It is Government policy to try to remove capping in England. Is that the policy in Scotland? If the cap goes, who will make up the shortfall between what can be provided by central Government and what will have to be raised by council tax? Will there be an increase in the revenue support grant to make up for the removal of capping, or will it be left to council tax payers?

I join the Secretary of State in welcoming the grant in aid orders for Dunblane. We all shared the grief of that community and we share a desire to provide help, even if it is, of necessity, limited. However, there is not much else in the settlement that is welcome. It is a sorry picture for local government and a cruel picture for council tax payers.

Mr. Gorrie

If there is so much wrong with the settlement, will the right hon. Gentleman and his hon. Friends join me and my hon. Friends in the Lobby to vote against it?

Mr. Ancram

I should like to hear what the hon. Gentleman has to say before committing myself to supporting him. It would be unwise to give an undertaking on the basis of an argument that I have not yet heard.

Some councils have done better than others in the settlement. I shall not go into the details of that. However, I should like a brief explanation of the formula for the individual distribution of the revenue support grant to councils. In particular, what criteria, if any, have changed in the formula since last year? I remember changes being made in the formula from year to year. I should also like to know whether any of those changes were made on the basis of representations and what those representations were.

I should like to raise some more general points. The Secretary of State was almost apologetic about some of the problems facing local government at the moment. He referred to several extra costs that local authorities face. The reason why I was surprised by his apology, if it was an apology, was that all these costs have arisen because of a deliberate decision taken by the Labour Government.

The hon. Member for Edinburgh, West (Mr. Gorrie) asked about advance corporation tax, or what I prefer to call the pension tax. When it was introduced in July, we were told that we were wrong to suggest that it would have a deleterious effect on councils or individuals. We are now being told, understandably, that it will have a significant effect on councils in Scotland.

The hon. Member for Edinburgh, West mentioned £36 million, which is the figure that COSLA says in its brief will be the cost to it. That cost arises only because of a decision taken by the Chancellor last year. There is no way that the Secretary of State, as a member of the same Cabinet and bound by collective responsibility, can somehow dissociate himself from that decision. It is a cost that will be borne by Scottish councils because of a deliberate act of the Chancellor—new Labour, higher costs.

Interest rates have risen five times, or 1.25 per cent., since 1 May—new Labour, higher interest rates. People may ask, "What do interest rates matter to local government?" I can tell those not in local government that they matter very much, especially with regard to debts. In 1996–97, the debt stood at £5.6 billion. That is up £377 million on the previous year. I understand that it costs £793 million to service that debt. That is a substantial sum, and we need more information about it because the cost of servicing the debt is four and a half times greater per head than in England—£151 per head in Scotland as opposed to £33 in England.

I have cited the figure for the previous year, but what is the current debt figure? What is the increased cost of servicing that debt, and how much of that this year will be due to the increases in interest rates that have occurred under this Government? The costs caused by the increases in interest rates will be borne by the council tax payer, either through increased council taxes or reductions in services.

We also need to know about the impact of the minimum wage. The trade unions and local authorities in Scotland have agreed a minimum wage of £4 an hour. I understand that that represents an increase of 2.8 per cent., or some £20 million on wage bills. Clearly, it is part of the Government's policy, even if the Government have not yet struck their minimum wage limit. What provision, if any, has been made in the settlement for this increase? Will the money be found through cuts in services, or through increases in the council tax? If the Government are to set a minimum wage in the coming months, what provision has been made for it in the settlement to ensure that it will not adversely affect jobs or council tax payers?

We note that there are some strange reductions. The Secretary of State spoke about police funding. He was asked a question by my hon. Friend the Member for Woodspring (Dr. Fox), and his answer was surprising. Was my hon. Friend right to say that the £11 million that is being given this year is less than half what the chief constables asked for? If so, were the chief constables wrong to say that they needed £28 million in order to achieve a standstill? If that is not the case, how can the Secretary of State explain the chief constables' dissatisfaction with the provision that has been made?

I deal now with uncollected taxes. There is nearly £900 million worth of uncollected tax relating to local authorities in Scotland. That is up £150 million on last year. It is surprising that there has been such an enormous jump over the past 12 months. As we know, where there are uncollected taxes, the council tax payers who do pay end up subsidising those who do not.

A grant was made last year, and a grant is being made this year, to enable local authorities to collect the uncollected tax. Given the increase in the sum of uncollected tax this year, what happened to the grant that was given last year? Has there been an audit to see whether the grant is an effective way to proceed? In the light of the deteriorating situation, what proposals do the Government have to improve the rate of collection?

All this means higher council taxes for Scottish council tax payers. Once again, we see that, under a Labour Government, local taxes go up. This year there will be an average increase of 7 per cent. in Scotland, which is double the rate of inflation. Each council tax payer will pay £55 extra, all because of the reasons that I have outlined. The solution lies with the Government. Whatever else it may be, the settlement hardly matches the description given by the hon. Member for Western Isles, who said that it was fair.

The Government cannot duck responsibility. It all comes back to the grant and how it is distributed, and that is a matter for the Government alone. Council tax payers will have to bear the cost, and Labour councils will continue to have to struggle with debts and the difficulties involved in collecting taxes. Against that background, the Labour Government are increasing the costs imposed on local government. In the end, it is a cynical exercise by the Labour Government to make sure that, when the general election comes, they have money with which to buy the support of voters.

The settlement is a blow to Scottish council tax payers: once more, Council Tax payers will be paying more for fewer services and possibly facing higher charges. Those are not my words, but those of the president of COSLA, Councillor Geddes, on 3 December last year. He was right then, and is right now. The settlement is one of which the Secretary of State and his colleagues should be roundly ashamed.

5.5 pm

Mr. Donald Gorrie (Edinburgh, West)

In our view, the settlement is deceitful, mean, destructive and unnecessary.

Mr. Welsh

He does not like it.

Mr. Gorrie

No, I do not like it.

Scottish local government is in the position of a school pupil being unjustly belted by a series of head teachers. The Tory teacher used to belt local government and say, "I'm not really belting you. This does not hurt at all, and there is no cut." There has now been a change to a Labour teacher who belts local government while weeping bitterly and saying, "This hurts me more than it hurts you"—but it still hurts. The cuts continue.

Why is the settlement deceitful? The Government are keeping in the settlement the idea that £40 million will be saved by local authorities because of the reorganisation of a couple of years ago. However, they know that that is not happening. I received an answer from the hon. Member for Edinburgh, North and Leith (Mr. Chisholm) who has now honourably returned to the Back Benches. When I asked about the Government's estimates, he said: The Government do not endorse those assumptions"— about the £40 million saving— but we are committed to live within the existing public expenditure control totals for this year and next."—[Official Report, 23 July 1997; Vol. 298, c. 610.] Therefore, the Government concede that the £40 million is a chimera, a mirage, or one of those things that does not exist, yet they keep it in the figures. What sort of honesty is that?

The Parliamentary Under-Secretary of State for Scotland (Mr. Calum Macdonald)

We do not keep it in the figures, in the sense that we do not base future grant allocations on those figures. We recognise that they were wrong, but it is not possible to unpick them, go back and re-do them all over again. If we did, some councils would gain, but others would lose.

Mr. Gorrie

I am still not clear whether the £40 million exists or not. I am advised by the director of finance in Edinburgh that his capping limit is based on the idea that Edinburgh's share of the £40 million exists, but it does not exist, so Edinburgh is penalised by having a lower capping limit than it should have.

Mr. Swinney

Would not the £40 million gap in the assumptions be tackled if the Government allocated £40 million to local authorities? They have the power and, as we have heard in the past few days, the money, to do it.

Mr. Gorrie

I agree.

The next issue is the landfill tax, which the Government accept will cost local authorities £18.5 million in the corning year. They allow no money for that; it will have to be found magically. There is nothing in the settlement for the Children (Scotland) Act 1995, which it is accepted will cost £11 million in the coming year. The budget is based on a series of false assumptions whose cost local authorities must bear.

Mr. Macdonald

On the Children (Scotland) Act, the money is perhaps not as much as the authorities were requesting. Their analysis of the cost of implementation differs from ours. We included it in the settlement. We have not included anything for the landfill tax because it is a tax that has to be borne by all sectors of government, as it is by all sectors of the economy.

Mr. Gorrie

I am obliged to the Minister for his explanation. I should rephrase my remark about the Children (Scotland) Act. There is a gap of £11 million between what the Government are allowing and what the Convention of Scottish Local Authorities and local authorities think is needed.

The settlement is mean because—as with my previous point—there is money in the budget for care in the community but another £12 million at least is needed to cope properly. The Government seem to be refusing to make any allowance for the £36 million needed to top up pensions. There must be £36 million in the Treasury for that because councils have paid that money in. It must exist and could easily be used. It is a £36 million penalty on councils.

The Secretary of State declined to say whether the £59 million extra on education will continue. The £30 million for spend to save, buildings and other such things is a one-off, but if councils knew that they would continue to get the £59 million, they could use it sensibly by hiring more teachers. Councils will not take on more teachers if the £59 million will disappear next year, forcing them to sack them all again.

The settlement is mean because, for the fifth year running, the Government are allowing nothing for pay awards. Cumulatively over five years, that has cost councils £450 million. There is a myth that that money can be saved by productivity. There are obviously some areas in which councils could improve performance, and they are trying to do that, but in many cases they cannot. The £450 million cut can only mean more job losses. There have been 11,000 in recent years and there will be thousands more this year.

The settlement is destructive because, if allowance is made for the pension money and the specific educational grants are taken out, the increase is only 0.7 per cent., when inflation is much higher than that. The increase in Government money, despite the extra, is only 0.6 per cent. That means considerable cuts. The Government are forcing up the council tax by an average of 7 per cent. and linking it with severe cuts. I accept that the right hon. Member for Devizes (Mr. Ancram) made play of that while the previous Government did exactly the same, deliberately forcing up council tax to gain credit for reducing income tax. That fact that they did a bad thing is no reason for the Labour party to do a bad thing.

It is destroys people's respect for democracy if councils raise council tax well above inflation and have to inflict devastating cuts. The man or woman in the street does not accept that there is not enough money from Government; they just blame the council and think that the whole system is rubbish. The Government are destroying belief in local democracy.

The Government are destroying our housing by not investing enough. There is a £50 million reduction this year, and again next year, in housing capital. Many of our fellow citizens live in intolerable circumstances. The Government are failing to do things that they could do about that.

To take one council in the middle range of the increases, Edinburgh is trying not to make cuts in school education, police and fire services and, as a result, is having to cut 9 per cent. from all other budgets. That means a 9 per cent. cut in grants to voluntary organisations. The Labour Government are presiding over a massacre of voluntary organisations. The changes in urban aid, the ending of it for some organisations and the reduction in grants to others, mean that many important voluntary organisations—many of which help in deprived areas to do exactly the sort of things that the Government are keen on—are disappearing. The Government are destroying large swathes of the voluntary sector.

Mr. Macdonald

The voluntary sector is an important issue. I acknowledge that the money available for the urban programme has declined in the past few years. The hon. Gentleman will acknowledge that the funding available for voluntary sector projects was never designed to be long-term; it was to be phased out after three years. That must be so, or the same voluntary sector projects would always get the money. There has to be a transition between phasing out some projects and new ones coming in. We expect that more new ones will come in over the next year than are being phased out.

Mr. Gorrie

Metaphors about pump priming and seed money should be banned. I know that the Minister did not use them, but that was the thought process involved. The idea is that, if a little money is put into something for a few years, it will pay for itself ever after. That is rubbish, and a major cause of problems in our society. He should address that. [Interruption.] If the hon. Member for Glasgow, Pollok (Mr. Davidson) has a solution, he is welcome to intervene.

Mr. Ian Davidson (Glasgow, Pollok)

Is the hon. Gentleman aware that, ever since the beginning of the urban aid programme, some projects have lost funding? It has never been the case that every urban aid project is mainlined by local authorities after losing its urban aid funding. It was a recurrent problem throughout the years of the Conservative Government. Urban aid was intended to provide the opportunity for experimentation which would then allow local authorities to determine whether to make projects mainline or to take the lessons and spread them across the service.

Mr. Gorrie

The difference is that in the past councils had enough money to continue many projects that deserved to be continued with. Now they do not, because of the savage cuts imposed by the Labour Government and the previous Tory Government.

The system is destructive of good management in local government. All hon. Members want local government to be as efficient as possible, as do people in local government. Finance and other important officials spend sixth months of the year preparing budgets, seeking cuts and then implementing them. For half the year, they are not making positive management decisions at all. That is harmful to local government and prevents it from improving.

Mrs. Eleanor Laing (Epping Forest)

Does the hon. Gentleman agree that, if some local government officials stopped doing the work that he described and set their minds to gathering some of the debts owed in the great cities of Scotland, there would be less need for cuts?

Mr. Gorrie

I could not disagree more strongly. The hon. Lady's party imposed an uncollectable tax and then moaned that councils found it difficult to collect. Having been involved in local government, I assure her that councils tried hard, and are continuing to try, to collect it.

Mr. Desmond Swayne (New Forest, West)

Which one is that?

Mr. Gorrie

The poll tax and the council tax—two taxes.

Why did people vote Labour at the last general election and why did Labour Members who are genuinely honourable and care about society seek election? I do not think that they sought election—or that people voted for them—to end hot school meals, to cut library books, home helps and road maintenance, to cause major destruction in our community education, to have fewer local government workers delivering worse services, to widen the gap between the richer and poorer areas, to reduce the opportunities available in deprived areas and to deliver the worst local government services known for 23 years.

If we measure back to the start of the regional and district system that is roughly similar to the present system, we find that the level of services proposed in this budget will be the worst ever. The housing budget will be the worst funded. That is not what people voted for and it is not what the honourable people on the Labour Benches stood for. The Government are persisting in a foolish and unnecessary policy—the self-imposed policy of adopting Tory spending plans. They have chosen to wrap themselves in Tory Treasury rules.

Mr. Macdonald

I must set some of the facts straight. It is not the lowest housing budget. We have provided an additional £50 million for housing for the coming year, which we are spending on priority areas such as the rough sleepers and empty homes initiatives and on the new housing partnerships. We acknowledge that the settlement is tight, but the hon. Gentleman greatly exaggerates the position.

Mr. Gorrie

I cannot remember exactly what I said and the Minister is correct in saying that there is a small increase, but it is after two years of severe decreases. What I intended to say but did not, for which I apologise, is that the Government will preside over housing in Scotland being in a worse state than ever because they are providing inadequate money and housing is getting steadily worse.

Mr. Welsh

The hon. Gentleman should stick to his point, as he is correct. An additional £27 million may have been allocated by the Government, but it is against a backcloth of a £484 million deficit in the past two years. It is a vastly reduced housing budget, quite apart from the disaster caused by the 75 per cent. claw back rule, which has taken hundreds of millions of pounds out of Scotland's housing.

Mr. Gorrie

I am obliged to the hon. Gentleman for his excellent support.

The policies of the Conservative Government have been adopted unnecessarily by the Labour Government, who have stuck to the Treasury rules devised by the Conservatives. For example, local authority self-financed expenditure—LASFE—is counted within the control total. If Edinburgh, Aberdeenshire or any other council should decide to raise its tax by £1 million and spend that money locally, some other organisation somewhere else in the public sector in Scotland would have to spend £1 million less. There is no logic behind that: it is idiotic.

If local people vote to pay a little more in tax to have more teachers, better roads or whatever, they should get those. The Labour party is espousing an anti-democratic system that was foisted on us by the Conservatives.

There is widespread support for changing that rule and for not counting LASFE within the control total. There is also widespread support for taking expenditure on housing, water and drainage and other capital items of that sort out of the public sector borrowing requirement and using another calculation, such as the general Government financial deficit, which would allow them not to be counted. Therefore, much more investment would be possible without rocking the boat financially. Those systems are used by our continental neighbours and if we used them we would approximate more to their systems should we wish to enter the single currency.

Finally, there has been much talk about what we will achieve in a Scottish Parliament. We want to co-operate, be consensual and do good things together. If Labour policy in a Scottish Parliament is to make such cuts in local government, there is no way in which the Liberal Democrats will co-operate with them in those cuts. We will not support cuts of this sort in local government expenditure.

5.24 pm

Mr. Andrew Welsh (Angus)

Even the Secretary of State's undoubted mastery of the understatement and his always impressive powers of euphemism cannot hide the attack that this settlement represents on Scotland's local authorities and the daily services that they provide. Clearly, the new Labour Government are continuing the old Tory policy of cutback and closure and for the same reasons. They are giving the people of Scotland a continuing diet of cuts, closures and job losses in local government. The settlements are a double disaster. They will affect services and, in particular, the housing sector.

Next year, there will be a cash standstill on inherited plans. The capping increase is 0.7 per cent., but inflation is 3.3 per cent. and the capping flexibility is very limited indeed. Council tax will rise dramatically. There have been about 11,000 job losses in the past two years, but those will be multiplied by the new Labour settlement.

In addition to increased charges for local government services and hefty council tax increases, housing will be hit even harder. The present year is the lowest point in decades, and the hon. Member for Edinburgh, West (Mr. Gorrie) was right: the first two Labour years have brought about a 35 per cent. cut in resources compared with the previous two Tory years.

Mr. Swayne

Does the hon. Gentleman acknowledge that the public sector borrowing requirement has improved significantly—an improvement that the previous Administration did not enjoy but laid the foundations for? It is all very well for him to complain about the continuation of Conservative policy, but the circumstances have changed, as would Tory policies have done, I am sure.

Mr. Welsh

If the hon. Gentleman's wants to justify the misery caused by Tory policies with that explanation, he is welcome to it.

In real terms under the settlement, housing support grant will now be worth 36 times less than it was in 1979. Individuals and families will pay the price for all this in ill health and poor housing—the very things that Labour Members used to argue against when they were in opposition. In the Scottish Grand Committee, when the Secretary of State announced the importance of the Government's policy of maintaining a tight control over public expenditure",—[Official Report, Scottish Grand Committee, 3 December 1997; c. 4.] no one could have predicted the true cost of that pragmatic policy for Scotland's local authorities. They face their most serious financial crisis in memory. Even the most prudent financial authorities are down to the bone and having to consider seriously massive cuts in services. Those will be a direct consequence of central Government policy and will inevitably lead to more cuts in services and jobs and a rise in council taxes.

New Labour is simply continuing to implement Tory spending plans to slash £150 million from Scottish local government services this year—an average cut of 3 per cent. The knock-on effect will be damaging cuts to vital core services. Once again, there will be bad news for council tax payers with an average rise of 7 per cent. to achieve fewer services, because this Government continue to tie the hands of Scotland's local authorities.

The new Labour Government have made no allowance for pay awards, forcing councils to self-finance any pay rise for their employees. For example, a rise of only 2 per cent. will burden local authorities with an additional £75 million without any financial support from central Government. Self-financing public sector pay awards have been a time bomb under local authority services, and that is directly a Tory policy that is being continued by new Labour.

The Government have allowed for a capping increase of only 0.7 per cent. compared with inflation of about 3.3 per cent., which will place a tight limit on local authority budgets. My local council, Angus—a very financially prudent authority by any measurement—has had to face its worst capping restriction. It can spend only 1.12 per cent. above grant-aided expenditure for 1998–99, in comparison with Dundee with 11.48 per cent., Glasgow, 10.88 per cent. and West Dumbartonshire, 10.73 per cent. Does the Minister agree that such wide variations are inequitable and that strenuous efforts should be made to achieve greater flexibility in capping?

The effects of the £300 million cuts can be seen in the devastation of services and the loss of the equivalent of more than 11,000 full-time jobs over the past two years. Already, 760 jobs in Edinburgh and 50 in Stirling have been lost. Aberdeen council is closing residential homes and even considering transferring its housing stock.

Local authorities are dependent on Scottish Office finance, as they have the power to raise only 15 per cent. of their revenue and there is arbitrary capping. Central Government now run local government. Local government does not even control its expanding work load, which is a result of central Government statute. More than 75 per cent. of local authority expenditure is on statutory services that are determined by central Government, who have imposed additional burdens without providing the funds to meet them.

The Convention of Scottish Local Authorities has identified some £180 million of new burdens that central Government have imposed through, for example, care in the community, the Children (Scotland) Act 1995 and the Disability Discrimination Act 1995. The Children (Scotland) Act is a particularly interesting case study: extra spending of £11 million has been earmarked for next year, but no additional funds have been made available to finance it.

Mrs. Maria Fyfe (Glasgow, Maryhill)

The hon. Gentleman will notice that the Children (Scotland) Act was enacted in 1995; it has been in operation for some time. I recollect that the Conservative Government would not make available any extra money for local authorities.

The hon. Gentleman is wrong to say that no money has been allocated this year for the implementation of measures under the Children (Scotland) Act, although I accept that the full £11 million has not been made available—I am not sure what the exact figure is. As the Minister said, this year, unlike in previous years, some money has been made available.

Mr. Welsh

The point is that there are extra burdens on local authorities, which depend on central Government for finance. If that money is not forthcoming, local authorities will have to cut services or sack people. The same problem arises with self-financing pay awards. Local councillors now face horrendous decisions—I am sure that the hon. Lady, with her vast knowledge of local government, knows exactly what I mean—because central Government have imposed burdens but not the money to pay for them.

Mrs. Fyfe

I thank the hon. Gentleman for his generosity in giving way again. He is doing what the Scottish National party always does—it pretends that there is no difference between the Conservative and Labour parties. He heard my right hon. Friend the Secretary of State make it clear that things will be very different in the near future for local authority services and for housing in particular. He cannot pretend that the Labour Government have the same attitude as the previous Government—that is quite dishonest.

Mr. Welsh

I am not pretending anything; the reality is there for everyone to see. I have given many examples of ways in which the new Labour Government are no different from the old Tory Government. There may be a slight difference in emphasis, but the problems that local authorities face because of under-resourcing are the same.

When people voted massively for new Labour at the general election, they expected something better than what the Government are delivering. The hon. Lady and other Labour Members will be answerable to the electorate for the Government's failure to make a difference. The Government have created a deficit in housing, as their cuts are greater than those in the last two years of the Conservative Government. I regret having to say that, but it is the reality.

Mr. Macdonald

Let me settle this question. The money that we inherited for local authority capital investment in housing this year was £222 million—that includes the grant and the money that local authorities have been able to raise—to which we added an additional £15 million. Next year, we are planning to spend £230 million—again, adding together the grant and local authority money—to which we shall add £50.7 million. It is simply not correct to say that the Government are spending less money on local authority housing this year than was spent last year.

Mr. Welsh

I had the same problem with the former Conservative Secretary of State, who juggled money between budget headings. The truth is that total expenditure on housing during Labour's first two years in government will be one third less than the Tories spent in their last two years in government. The £27 million that the Government are allocating is negligible against the background of the £484 million that was cut over the past two years. That £484 million could have provided 11,000 new houses or insulated homes for 200,000 families, pensioners and other groups at risk. My view is straightforward: I want more money to be allocated to meet Scotland's needs, as Labour Members argued when they were in opposition.

Dr. Fox

In fairness, there are differences between the Labour Government and the former Conservative Government, as I am sure the hon. Gentleman will accept. For example, the tax on pensions—and the £36 million extra that will have to be raised as a result—is the Labour Government's innovation; it did not exist under the Conservatives.

Mr. Welsh

I am grateful to the hon. Gentleman, as I was about to make that point myself. The major difference between old Tory and new Labour is that the old Tory party is out of office and new Labour is in office.

Mr. Ernie Ross (Dundee, West)

Old Tory, old SNP.

Mr. Welsh

As the hon. Gentleman comes from Dundee, which has an atrocious local government record, he should have very little to say on this subject.

In the July Budget statement, the Chancellor announced that pension funds would no longer be able to reclaim advance corporation tax credits attaching to dividend income.

Mr. McAllion

Will the hon. Gentleman clarify what he meant by his disgraceful smear against the local authority in Dundee? Dundee has a tremendous record of fighting Tory cuts, which is more than can be said for Angus. Dundee has direct labour organisations, with workers working directly for the council, whereas Angus local authority privatised the whole lot.

Mr. Welsh

If the hon. Gentleman has not got the message, the electorate certainly have. I invite him to discuss these matters with the people of Monifieth, who were never so glad in their lives to escape Dundee local authority with its high council charges and low-quality services, and be put under the control of Angus, where there are low council charges and high-quality services. I well remember the black propaganda that Labour councillors produced about the boundary changes, all of which has been proven totally false. I hope that the hon. Gentleman will encourage the Dundee Labour council to do its job better and provide better services to its people—that would be a better use of his time.

The Government do not want to discuss advance corporation tax, as their proposals will result in an extra bill for local authorities in 1998–99 of some £36 million. Will the Minister meet the additional costs by increasing the grant, or does he agree that a capping disregard is essential? I hope that he will give some comfort to local councils by announcing, when he winds up the debate, that the Government will offer some assistance.

I welcome the additional £89 million for education this year. I asked the Secretary of State whether additional money would continue to be granted, but because I did not receive much of an answer, I ask again. As the hon. Member for Edinburgh, West said, local authorities will be very wary of taking on long-term commitments unless they secure from central Government long-term agreements on funding.

Local government has become merely an enabling administration rather than a service provider. I know that that subject is dear to the Minister's heart. He made a disgraceful speech in which he said, more or less, that he wanted to destroy local government—perhaps he could amplify those remarks. The Conservative Government wanted local government to become an enabling administration, but I want local authorities to be service providers, which can assess and address the needs of their local populations.

We now have local administration rather than local government—the old cliché is now, sadly, true. They have no scope to raise their own finance, either revenue or capital; and 75 per cent. of their services are statutory and imposed by central Government. That is not local government in a flourishing democracy—it is heavy centralisation. Local authorities should be key players in the provision of top-quality, low-cost and democratically accountable local services. We should be playing to the strengths of local expertise, professional skills and the traditions of local government, not destroying them in this fashion.

Nowhere is the problem more acute than in the provision of desperately needed housing. A new Labour Government means no change from the old Tory Government in terms of housing finance or policy—there may be a little tweaking at the edges, but there is no change in fundamental policy. The recent Scottish housing conditions survey confirmed that Scotland has some of the poorest housing conditions, with high levels of dampness and condensation and poor energy efficiency. In addition, homelessness is spiralling: there were almost half a million homeless applicants between 1979 and 1995, but such applications rose 72 per cent. between 1985 and 1995. I see nothing in the Government's plans that will address or provide redress for that problem.

All that is storing up major problems and misery both for homeless individuals and families in the present and for the whole system in the future. The Minister might argue that there is an additional £29 million allocated for housing this year, but that is a drop in the ocean compared with the £484 million that has been cut from the housing budget in the past two years alone. That could have provided all the new houses or additional insulation that I described. It could have been spent on services to meet real need. New Labour has continued the Tory policy of cutting the housing support grant and it is now a mere £12.7 million. If the grant had kept pace with inflation, it would now be worth £457 million—36 times more than Labour's allocation.

New Labour should be ashamed of itself, and I know plenty of Labour councillors and grass-roots Labour supporters who already are. In the last two years of the Tory Government, the then Secretary of State for Scotland, Michael Forsyth, implemented an increasing clawback of 75 per cent. of the money raised by councils through council house sales. That measure removed an estimated £170 million from housing capital budgets in 1997–98, which represents around 35 per cent. of last year's housing budget.

The irony is that Labour's manifesto committed a Labour Government to a review of the newly imposed requirement in relation to the retention of 75 per cent. of housing receipts. However, the 75 per cent. rule still exists and will continue to deny councils one of the scarce resources available to them to provide capital for investment in housing stock. That is especially worrying given that one in three council houses is still in need of urgent major repair.

That is not scaremongering by the Opposition, but a realistic picture of the current plight facing our local authorities. They will make do with the resources allocated to them, but Scotland's local authorities should not be asked to shoulder the blame for central Government's pursuit of on-going Tory policy. People voted en masse for new Labour last May and they expected a change in policy—a new hope for the future. What they have is new Labour, same old Tories.

Asking more for less is one thing, but asking for the impossible for less is a different matter. The impossible is precisely what local authorities are being asked to do because of the settlement. When will the Labour Government accept that the previous Administration failed to recognise the damage to local government and that that damages the whole Scottish economy? The sooner they realise the potential of local authorities, the better it will be for those who are reliant on services provided by local authorities, which are best placed to assess need and to provide low-cost, high-quality public services in the public good. That is in the finest tradition of local government, but local authorities have to be properly resourced to be able to do it.

We simply cannot wait for the advent of a Scottish Parliament to right all the wrongs of 18 years' mismanagement by the previous Government. The Scottish Parliament offers hope for an improved relationship between central and local government, but we need action now, before the damage becomes permanent and irreversible. Whether the new Parliament will be able to provide extra resources is questionable: the devolved Parliament will suffer as a result of a cut of £1.6 billion from the existing Scottish Office block grant and may well be strapped for cash. The trouble is that the Scottish Parliament will be the paymaster for Scottish local authorities and many of the current problems will persist because of the system of financing whereby both the Scottish Parliament and local authorities will be financed by this Parliament.

New Labour is sowing the seeds of its downfall by sticking to its predecessors' spending plans. Ministers may have faced tough choices, but by saving money for tax cuts and pre-election sweeteners, they are showing their true blue colours and forgetting their roots. What their present boss thinks will suit middle England will not go down well in Scotland and, like their predecessors, this Government's time will come at the ballot box.

New Labour in office means no improvement in the housing-related problems of homelessness, dampness, overcrowding and ill health. Those problems—which, when in opposition, Labour Members talked about and blamed the Tory Government for—still remain and, in some cases, they will worsen under the Labour Government.

Blair's new Government offers nothing new. Their lack of commitment to housing is as great as the Tory failure and their policies are almost indistinguishable from those of the Tories. This year's paltry increase hardly merits the description of window dressing, especially when allied to the continuation of the cuts in the housing support grant. Housing needs exist and are worsening. New Labour should be ashamed of itself, and I know that many of its councillors and grass-roots supports are.

5.46 pm

Mr. Ian Davidson (Glasgow, Pollok)

I rise as one who, in the past, has not been a great enthusiast for links with the Liberals having believed that they have led us down many false roads. However, I was greatly heartened by the speech of the hon. Member for Edinburgh, West (Mr. Gorrie) and his defence of public expenditure and public services. It may well be that, in the Scottish Parliament, the Liberals will find themselves much closer than they expect to the Co-operative party block there.

It would be inappropriate to allow the debate to pass without making it clear that many of us believe that the state of rented housing in Scotland is a disgrace. Far too many of our people live in accommodation that is unsatisfactory, unsanitary and not waterproof or windproof. Concern about this matter is not restricted to Opposition Members; at our surgeries, many Labour Members are inundated by the results of years of underspending. What makes that particularly unpalatable is the way in which, at present, because of the possibility of military action against Iraq, we see all the hi-tech wizardry displayed, while our hi-tech and scientifically advanced society is apparently unable to provide windproof and watertight homes for substantial numbers of our people. Surely there is a mis-spend somewhere?

Why are the problems of so many of our people, who have to live in rented housing, ignored? I believe that it is because few opinion-formers live in rented housing and few of those who live as tenants ever appear in focus groups. The needs of that minority are under-represented in the political dialogue of this country. That is inappropriate and it is up to those of us who represent such people to make sure that their voices are heard on occasions like this.

Today's debate is the first of this sort under the Labour Government and the lack of adverse comment from COSLA and local authorities has been remarked upon. We should not mistake silence for acquiescence—it arises from the gut loyalty felt by Labour local authorities to a Labour Government, after years of Tory Government. I hope that my right hon. and hon. Friends on the Treasury Bench will not abuse that loyalty and will recognise that something has to be delivered relatively soon to local authorities. Loyalty has to be rewarded by jam tomorrow and the sooner we can make commitments about jam tomorrow, the happier I, the vast majority of Labour Members and our supporters, will be.

5.49 pm

Sir Robert Smith (West Aberdeenshire and Kincardine)

Following on from the point that the hon. Member for Glasgow, Pollok (Mr. Davidson) made about jam tomorrow and the reaction of the Convention of Scottish Local Authorities, I believe that it is important for the Government to recognise that they should be considering more than the reaction of COSLA. The Government should be considering the reaction of all the parents on school boards; all the parents of children whose schools will be affected by the cuts; all the people in housing suffering from poor repairs; all the people affected by the problems of getting care in the community to work; and all the people facing additional charges for their care in the community. Although COSLA might be co-operating in terms of language, the settlement that the Government are persuading us to accept today will be damaging to individuals.

I repeat what I said in the Scottish Grand Committee. It is welcome to have a Government who at least allow the debate to take place to a certain extent, by recognising that local authorities are in trouble, are facing a financial squeeze and have very tough decisions to take. The real waste of the past two years, after reorganisation, was the farcical situation where central Government tried to pretend that there was no financial problem for local communities to address. If local communities do not know that there is a problem, how can they confront setting priorities and taking decisions within what is a poor or tight settlement? On those points, Liberal Democrat Members have welcomed the Government's more open language.

I tried to intervene on the Secretary of State regarding the capping flexibility announcement. When he replies, will the Minister say how many councils are likely to be able to take advantage of that announcement? There was a sense of deja vu. One felt that, yet again, a Government, on a Friday afternoon, were making an announcement that got one or two headlines about some interesting figures—an announcement which even the Secretary of State did not appear to be interested in debating at any length, and which, when one unteased it, was not of great substance. In any case, it was nearing the time to set budgets again.

I hope that—unless the Minister is planning any great largesse or great change of heart in the Scottish Grand Committee—councils will not be placed in the farcical situation that they were placed in two years ago, when, on the day that they were setting their budget, faxes arrived to say that the Government were changing the capping limit again. Some stability is essential if we are to plan how to spend whatever money is available.

I want to reinforce what my hon. Friend the Member for Edinburgh, West (Mr. Gorrie) and other hon. Members have said about the fact that, although the Government have recognised that reorganisation will not make savings of £40 million, they have not adjusted the figure to take account of that. Although they have recognised that they have introduced a pension tax that imposes a burden of £36 million, they have done nothing to take account of that. Those are the Government's decisions—their recognitions—taken post the previous Government's Budget plans, and the Government must start taking responsibility for them.

I hoped that the Government would have recognised that, although the £40 million is a figure to do with reorganisation, far, far more serious damage than that was done in the dislocation of services and the confusion and chaos of that reorganisation, affecting sensible budget reduction planning. If local authorities had to cut services and facilities, it would have been far better to have a level playing field in the early years and then warn of the cuts to come. To try to impose cuts on an organisation that is not up and running is not the best way to achieve efficiency savings.

Yesterday, when the Accounts Commission for Scotland held a reception in the House, it conveyed an important message that puts in perspective some of the debates about local authority funding. It emphasised the probity of Scottish local government and the lack of fraud. It is important to remember that, although local government may be a whipping boy in many ways, it is still a major part of the structure of our society, and an important provider of services for our society.

Therefore, it is disappointing that the Government have stuck to the fine print of their manifesto, instead of the principles that were probably more at stake in the electorate's mind at the general election. When the Prime Minister's economic adviser says that there is scope for additional public spending, there is a worry that we are facing damage now that will have to be repaired, instead of surviving this period of the economy in order to expand services later.

The Prime Minister says that we do not want boom-bust economics. Everyone acknowledges the need to inject some stability into our economic finances, but the concept of bust-boom is equally disastrous. As my hon. Friend the Member for Edinburgh, West said, it is pointless for councils to reduce the number of teachers only to have to increase it again. It would be far more efficient and effective if councils could see their way through this period before they build their war chest and take it into the run-up to the next general election.

The right hon. Member for Devizes (Mr. Ancram) said that eventually this debate would take place in the Scottish Parliament. However, I hope that we do not have a decision like this or a debate under the same ground rules as this one.

The Government are conducting a review, which is to report to the Scottish Parliament, on the relationship between local government and the Scottish Parliament. It seems depressing that the Minister wants to exclude financial arrangements from that review, because, as we have seen today, at the heart of the problems of local government and the setting of priorities is the fact that decisions are being taken, not by the people in the communities, but in this fairly empty Chamber, without a great amount of debate. Local priorities should not be decided in this place; the local communities should decide.

I hope that the Government will recognise that the Scottish Parliament will not want to sit around and decide the spending plans of every community in the country. The point of local democracy is that local people have a say. We argue that they should have a say through proportional representation, so that they elect a council that reflects their community. If they do so, the community should decide its spending priorities and resourcing priorities. The Government must recognise the need to change the system.

We want to vote against the settlement today because we feel that it is inadequate, and to send a warning shot across the Government's bows to say that this is not the way to run local government. We hope that they do not continue this method of setting priorities into the future Parliament.

5.55 pm

Mr. Alasdair Morgan (Galloway and Upper Nithsdale)

I shall be brief, because I understand that hon. Members are experiencing a magnetic attraction to the polar hubs at Heathrow and Euston. I do not want to address the detail of the figures in the settlement. I should like to spend a little time discussing the philosophy underlying the issue of what a local council's task should be.

The Government say that they are committed to the Tory Budget and the Tory spending plans. I do not agree with them on that, but I accept that that is their position. However, do they accept the Conservative philosophy that underlay the budget that these figures comprise? I refer to the speech made by the Minister at the John Wheatley centre. Referring to the duties of a local council, he said: it is not the direct provision of services which is fundamental". He said that councils should become strategic planners and enablers, rather than being necessarily direct providers of services. He said that the days are past when it was necessary for councils to deliver services directly". How far down that road does the Minister wish to travel? Does he wish to apply that approach to the direct labour organisation in Dundee, of which the hon. Member for Dundee, East (Mr. McAllion) is so proud? Does he envisage it happening to education in Scotland?

The Government appear to have accepted that the privatisation of local social services is here to stay in terms of "externalisation", as it is called, of old folk's homes. The Minister seems to have accepted that philosophy with regard to the provision of local authority housing; hardly a local council in the land can build a new house. Is the Minister prepared to draw a line there? Is he prepared to give a commitment tonight that public education in Scotland will not go the way of public housing or public social services? The logic of the budget path that the Government are taking is that public education will go the same way and will be privatised, and that local authorities will be merely enablers.

Lastly, I want to speak briefly about rural schools. The local authority—Dumfries and Galloway—whose area covers my constituency has outstanding proposals to close six rural schools. Earlier this week, the hon. Member for Argyll and Bute (Mrs. Michie) said that Argyll and Bute council proposed to close 11 rural schools. Those proposals are a direct consequence of the local authority funding settlements for the past few years.

It is not good enough for the Government to wash their hands of that and say that local authorities must assess their priorities and take their own decisions accordingly. I emphasise to the Minister that rural schools are in a unique position; they are educationally essential, but they are also socially essential for their communities. There is not another school a bus ride down the road. Those local communities will wither on the vine if their schools are taken away. Is the Minister prepared to make some special commitment or give some special instruction or guidance to local authorities so that they do not have to close even more rural schools than have already been closed over the past 10 to 15 years?

5.59 pm

Dr. Liam Fox (Woodspring)

Following the fine example set by the hon. Members for West Aberdeenshire and Kincardine (Sir R. Smith) and for Galloway and Upper Nithsdale (Mr. Morgan), I shall be relatively brief.

Much of the debate has been underpinned by the idea of the Government's tight financial control and the maintenance of the previous Government's spending limits. Several points should be made at the outset. There is value in repaying public debt and maintaining tight monetary and fiscal control. Over recent decades, remarkably great strides have been made which have resulted in falling unemployment, increased investment and rising living standards in Scotland. There are great benefits to be had from the sort of policies that the Government have been willing to accept as conventional economic wisdom.

The debate has a certain "Alice in Wonderland" context. The Secretary of State could not accept the point made by my right hon. Friend the Member for Devizes (Mr. Ancram) that this is the second year of a three-year cycle. It becomes year one, and all things are reassessed in the light of economic circumstances. I wonder whether the Chancellor is overdoing the hair shirt a little. He may want to sleep on bare floorboards to set the Lord Chancellor an example, but there is a £4 billion windfall excess.

Although the Conservatives have always believed—as we have shown—in tight economic control, there is a point to economic growth in public expenditure terms. Public expenditure is bad when it runs out of control and damages the rest of the economy, but it is not bad in itself. [Interruption.] Growth in health expenditure under the Conservatives was far greater than that ever managed under a Labour Government. Economic growth in the 1980s was largely channelled into such things as the NHS, which saw a huge increase in the amount of money available to it.

I do not have a problem with the Government's economic policies, but I do have a problem with what Labour said before 1 May. There is a credibility gap. I find it strange that the Government say that they want to repay public sector debt, which is laudable, but, at the same time, they say that they want to reduce hospital waiting lists, when they are rising, or want to reduce class sizes, when they are making no difference. The Minister for Education and Industry, Scottish Office, has said that there is not enough money from the abolition of the assisted places scheme—which is Labour party policy—to reduce class sizes. Presumably, the money must come from somewhere else, yet, the Government are saying that the money cannot come from somewhere else because there must be real-terms reductions in the Scottish block.

I wonder what the actual settlement is. The Secretary of State told the Convention of Scottish Local Authorities that there will be a real-terms reduction, and that he understands the value of a tight settlement. He told us that the settlement would be neutral in terms of cash growth. Then he told the House: The increase in cash terms is 3.4 per cent."—[Official Report, 17 February 1998; Vol. 306, c. 880.] I know that the Government try to be all things to all men, but there cannot be three different figures for the settlement. Will the Minister tell us exactly what is going on? Is there to be an increase this year, or is the Secretary of State being economical in his terminology? Are we simply seeing an increase in what can be spent, but not an increase in what is available to councils from the Government?

I should like the Minister specifically to turn his attention to two matters. The first is the impact of the pension tax, which has been raised several times in the debate. The Chancellor unveiled in his Budget a £5 billion smash-and-grab raid on pension funds, which has nothing to do with the previous Government. COSLA says that the decision will cost Scottish councils £36 million to maintain the value of pension funds—not to mention the impact on individual taxpayers. In practice, that will cost Edinburgh £3 million extra, putting another £20 on a band D council tax bill.

The hon. Member for Edinburgh, West (Mr. Gorrie) referred to Edinburgh's financial management. The Government have made no provision for the impact. It is simply a back-door tax. It cannot be blamed on the previous Government; it is a Labour tax imposed by a Labour Government. I am sad that some Labour Back Benchers, out of a sense of loyalty, sit back and take that.

The second Government-imposed problem will be over wage settlements. Last year, the trade unions and Scottish local authorities agreed to a minimum wage of £4 an hour. The Government said that they would not fund that. Why should they? They were not party to the deal. However, they are about to introduce a minimum wage. We do not yet know its level, but it will impose extra burdens on local government. Will the Government make funds available to local government to compensate for the direct result of their policy? Or will the minimum wage become another tax imposed on both the private sector and local government? The Minister must give us an answer. Simply to say that they have not yet decided the level of the minimum wage will not be good enough in this debate.

I should like to ask the Minister a couple of structural questions. The first refers to Glasgow. Why does Glasgow continue to get such a proportion of the total settlement? We accepted—and accept—that Glasgow faced problems as a result of the disaggregation of the old regions, and transitional relief was provided under the mismatch scheme. That was to give Glasgow time to develop efficient structures, but it has not reformed itself sufficiently. It still has 21 departments when other councils are operating with four or five.

Perhaps the internal warfare in which the Glasgow Labour group is involved has left it too little time to consider the matter. Perhaps the kangaroo courts distract it from what is going on elsewhere. Perhaps the KGB-type actions of the party do not give it time to consider structures. How long will the rest of Scotland have to go on funding Glasgow to the present extent? It is time that its house was put in order.

In reply to my question earlier, the Secretary of State said that the police settlement was not as bad as it looked. No matter how one looks at it, the Government are failing to provide the police with adequate income. I am sorry that the Secretary of State is not here—[HON. MEMBERS: "Yes he is."] Right on cue, as ever. Despite what he said, on the same funding basis, Scottish chief constables are saying that they are not getting enough money—£11 million when they should be getting £28 million for a cash-standstill budget.

Mr. Wallace

Like the right hon. Member for Devizes (Mr. Ancram), the hon. Gentleman has voiced a number of criticisms of the motions. Is he prepared to follow his voice with his vote?

Dr. Fox

I shall come later to how we intend to vote. I urge the hon. and learned Gentleman to be patient just for once.

I want the Minister to answer specifically the following question: which Scottish councils have met their side of the 50:50 police funding deal? That is a question of accountability. The public should know, as they should about the scandal of uncollected taxes. There is £897 million outstanding. The problem is that those who will not pay are being subsidised by law-abiding citizens who are paying. It is all very well for hon. Members to say that such taxes are difficult to collect, but that does not explain the massive discrepancy between the worst and the best collectors. A quarter of the uncollected total is due to Glasgow, and a fifth is due to West Dumbartonshire.

I am interested in the relationship between the local taxation collection scheme grant, which the Secretary of State mentioned, and the percentage of outstanding debt. I think that I am correct in saying that the Secretary of State said that there was a direct relationship between the two, yet I see that Fife has the 18th highest outstanding tax revenue, but receives the fifth biggest grant; West Dumbartonshire has the second highest outstanding tax revenue, but receives the eighth biggest grant; and Argyll and Bute has the fifth highest outstanding tax revenue, but receives only the 14th biggest grant. Will the Minister give us a clear idea of how the relationship is worked out?

This is a disappointing settlement from a disappointing Government. Even in their own terms, they have seemingly gone from one set of principles before 1 May to another after 1 May. I do not find their new principles particularly disappointing, but there is a credibility gap, if not a charge of absolute hypocrisy, which can be laid at Labour's door. When many of Labour's supporters consider what they are being delivered in this settlement compared with what they were promised on 1 May, there will be a good deal of disillusionment. It is only time before that leads to contempt, which is very bad for the political process and all of us who seek political stability in Scotland.

6.8 pm

The Parliamentary Under-Secretary of State for Scotland (Mr. Calum Macdonald)

The debate has been useful and it has covered a fair amount of ground. I appreciate that time is pressing, but I shall try to cover as many of the points raised in the debate as I can.

I shall begin with one of the final points of the hon. Member for Woodspring (Dr. Fox) about local tax collection. I am pleased to say that it has improved considerably since the abolition of the poll tax. The hon. Gentleman is incorrect to say that a grant was made available last year to encourage collection of local taxes. We are in the first year of such a grant, and it has been made in a way that is broadly in line with those local authorities and those areas in which the problems have arisen. We shall be monitoring the performance of local authorities in increasing tax collection. It is one of the issues that I raise regularly with the representatives of local authorities who come to see me. I stress the importance of having a good tax collection rate.

Mr. Ancram

The Minister has told us that tax collection is improving. Will he confirm that the amount of uncollected tax has increased by £150 million in the past year?

Mr. Macdonald

I said that collection has improved vastly since the abolition of the poll tax. There are still problems with collection of council tax, and that is why we are introducing the scheme to which I have referred. No such grant was available in previous years. A new scheme has been introduced, and we hope that it will have the effect that we are seeking.

The hon. Member for Woodspring asked what criteria had changed in the distribution formula for revenue support grant from last year. He asked also whether there were changes on the basis of representations. The formula that we used for distribution continues to be, as it has always been, subject to extensive consultation with local authorities through COSLA. It would not be right for the Government to introduce changes by fiat. The distribution formula cannot be based on picking and choosing between councils. There must be a collective approach that is the result of co-operation, and that must involve COSLA. Indeed, that is the way in which we have approached the matter.

The most significant changes for the coming year include the phased implementation of the review of social work GAEs, which began in 1996. That implementation has resulted in some considerable changes. The process has been based on co-operation and consensus.

Another important change is the phasing out of the previous Government's allocation of grant-aided expenditure assessment based on the supposed savings as a result of local government reorganisation. As I have said, to go into back years to try to unpick entirely would result in losers as well as winners. I am sure that, on reflection, the hon. Member for Woodspring will agree that that would not be wise.

We are bringing to an end the mismatch support that was introduced at the time of reorganisation. We have introduced new stability arrangements to ensure that any changes that take place are progressive to enable local authorities to cope with them. Such changes will not be introduced suddenly. As I have said, all the changes to which I have referred are being introduced in co-operation with local authorities on the basis of consultation.

The hon. Member for Woodspring asked specifically about Glasgow's share of GAE. That is determined by the formula that is agreed with COSLA. Again, this is always done on the basis of consultation and co-operation. The formula has been in place for many years. The previous Government, of which the hon. Member was a member, submitted to that formula. I find it odd that he should now raise queries and questions about it.

The hon. Member for West Aberdeenshire and Kincardine (Sir R. Smith) wanted to know how many councils would be able to take up capping flexibility—the additional flexibility that will be introduced from 13 February. That will depend entirely on the decisions of individual councils. A majority of councils could potentially take up the option, but we believe that not all will do so. To take up the option would have an impact on council tax, and not all councils want to go down that road.

The hon. Member for Woodspring asked about the cost of servicing local authority debt and wanted to know whether the cost has increased. The servicing of debt for the coming year will be a bit lower than in the current year—£728 million as opposed to £793 million. That is the result of a change in the system of debt financing. Again, that has been introduced with the co-operation of local authorities and in response to them. Support for loan charges to pay off this debt servicing is 100 per cent. from central Government.

Comments have been made about increased costs for local authorities. I accept what has been said about landfill tax, which is something that everyone is having to bear. The revenue will go into public projects and towards the public good.

As for the Children (Scotland) Act 1995, social work GAE was increased by £24 million for community care. In addition, an extra £15 million was provided in the social work increase. That can be taken account of in terms of additional costs in implementing the Children Act.

Mrs. Ray Michie (Argyll and Bute)

Why has the Minister failed to recognise the cost of delivery of services to the islands in Argyll and Bute? Was it not possible for him to make an interim award pending the review of the special line of needs allowance in what is one of the most fragile economic areas throughout Scotland? Indeed, it has one of the lowest gross domestic products.

Mr. Macdonald

I understand the hon. Lady's concerns. As I have said, I cannot by fiat begin to pick and choose between local authorities in deciding which will get more money and which will have money taken from them. The special line of needs allowance must involve consultation with all affected local authorities as well as with other local authorities that are not directly affected. The money is top-sliced from the total sum that is available to local authorities. The issue is being considered with all local authorities through COSLA.

It is true that there has been a decline in housing support grant since 1979. Only three local authorities now receive the grant. However, the grant has largely been replaced by housing benefit, which has mushroomed enormously in the years since. The two factors are to be seen directly linked.

There have been several questions about the reduction in housing expenditure. I shall quickly put the figures on record. The total amount of capital investment available for housing for the current year was £222 million. For next year, £230 million will be available—there will be an increase. On top of that, we have provided an extra £50 million in the current year for new housing partnerships and the empty homes initiative. Another extra £15 million will be available for the same purposes next year.

I understand that rural schools represent an important concern for many Members. The Government make special adjustments in the GAE for rural primary schools. For example, Argyll and Bute gained about £1 million as a result of the rural adjustment.

It has been an extremely useful debate, and one which has covered many important topics. If I have failed to respond to any particular questions, I shall be happy to return to them as soon as I can. I hope that at the very least—

Mr. Ancram

rose—

Mr. Macdonald

It would seem that the right hon. Gentleman wishes to intervene at a late stage in my reply.

Mr. Ancram

I am grateful to the Minister for giving way. I intervene because my hon. Friend the Member for Woodspring and I asked about policing and whether the chief constables had asked for £28 million. Are they right in saying that, without that, they will not be able to achieve a standstill? I would be grateful for the Minister's reply.

Mr. Macdonald

Bids are always submitted. An extra £15.8 million was made available for policing this year. That represents a 2.3 per cent. increase. We believe that it is possible to meet the aims of police boards and chief constables with that increase in funding.

I hope that hon. Members will agree that although the settlement is difficult it is fair. We shall try to proceed in an honest and open way in partnership with local authorities. I am grateful that local authorities have responded positively to the settlement.

Question put:—

The House divided: Ayes 241, Noes 29.

Division No. 174]	[6.19 pm
AYES
Abbott, Ms Diane	Campbell, Alan (Tynemouth)
Adams, Mrs Irene (Paisley N)	Campbell, Mrs Anne (C'bridge)
Ainger, Nick	Casale, Roger
Ainsworth, Robert (Cov'try NE)	Cawsey, Ian
Anderson, Janet (Rossendale)	Chapman, Ben (Wirral S)
Ashton, Joe	Chisholm, Malcolm
Atkins, Charlotte	Church, Ms Judith
Austin, John	Clapham, Michael
Banks, Tony	Clarke, Rt Hon Tom (Coatbridge)
Barron, Kevin	Clarke, Tony (Northampton S)
Battle, John	Coaker, Vernon
Bayley, Hugh	Coffey, Ms Ann
Beard, Nigel	Cohen, Harry
Beckett, Rt Hon Mrs Margaret	Coleman, Iain
Benn, Rt Hon Tony	Colman, Tony
Bermingham, Gerald	Connarty, Michael
Blears, Ms Hazel	Cook, Frank (Stockton N)
Blunkett, Rt Hon David	Corbett, Robin
Boateng, Paul	Corbyn, Jeremy
Bradley, Keith (Withington)	Corston, Ms Jean
Bradley, Peter (The Wrekin)	Cranston, Ross
Brinton, Mrs Helen	Cryer, John (Hornchurch)
Brown, Rt Hon Nick (Newcastle E)	Cunningham, Jim (Cov'try S)
Browne, Desmond	Darling, Rt Hon Alistair
Buck, Ms Karen	Darvill, Keith
Burden, Richard	Davidson, Ian
Butler, Mrs Christine	Dean, Mrs Janet
Byers, Stephen	Denham, John
Caborn, Richard	Dewar, Rt Hon Donald

Dismore, Andrew	McCartney, Ian (Makerfield)
Dowd, Jim	McDonagh, Siobhain
Drew, David	Macdonald, Calum
Drown, Ms Julia	McDonnell, John
Eagle, Angela (Wallasey)	McFall, John
Eagle, Maria (L'pool Garston)	McGuire, Mrs Anne
Edwards, Huw	McIsaac, Shona
Ennis, Jeff	Mackinlay, Andrew
Fatchett, Derek	McNulty, Tony
Field, Rt Hon Frank	MacShane, Denis
Fisher, Mark	Mactaggart, Fiona
Fitzpatrick, Jim	McWalter, Tony
Follett, Barbara	McWilliam, John
Foster, Michael Jabez (Hastings)	Marek, Dr John
Foulkes, George	Marsden, Gordon (Blackpool S)
Fyfe, Maria	Marshall, David (Shettleston)
Gardiner, Barry	Marshall, Jim (Leicester S)
Gerrard, Neil	Martlew, Eric
Gibson, Dr Ian	Maxton, John
Gilroy, Mrs Linda	Merron, Gillian
Godman, Norman A	Michael, Alun
Goggins, Paul	Milburn, Alan
Gordon, Mrs Eileen	Miller, Andrew
Griffiths, Jane (Reading E)	Mitchell, Austin
Griffiths, Win (Bridgend)	Moffatt, Laura
Grocott, Bruce	Moran, Ms Margaret
Grogan, John	Morgan, Rhodri (Cardiff W)
Hain, Peter	Morley, Elliot
Hall, Mike (Weaver Vale)	Morris, Ms Estelle (B'ham Yardley)
Hall, Patrick (Bedford)	Morris, Rt Hon John (Aberavon)
Hanson, David	Mudie, George
Heal, Mrs Sylvia	Mullin, Chris
Healey, John	Norris, Dan
Henderson, Doug (Newcastle N)	O'Brien, Mike (N Warks)
Heppell, John	Olner, Bill
Hesford, Stephen	O'Neill, Martin
Hill, Keith	Palmer, Dr Nick
Hinchliffe, David	Pearson, Ian
Hoon, Geoffrey	Pendry, Tom
Hopkins, Kelvin	Perham, Ms Linda
Howarth, Alan (Newport E)	Pike, Peter L
Howells, Dr Kim	Pollard, Kerry
Hughes, Ms Beverley (Stretford)	Pope, Greg
Hughes, Kevin (Doncaster N)	Pound, Stephen
Hurst, Alan	Prentice, Ms Bridget (Lewisham E)
Hutton, John	Prentice, Gordon (Pendle)
Illsley, Eric	Prescott, Rt Hon John
Jackson, Helen (Hillsborough)	Purchase, Ken
Jenkins, Brian	Radice, Giles
Johnson, Miss Melanie	Rammell, Bill
(Welwyn Hatfield)	Raynsford, Nick
Jones, Mrs Fiona (Newark)	Reed, Andrew (Loughborough)
Jones, Ms Jenny	Robinson, Geoffrey (Cov'try NW)
(Wolverh'ton SW)	Roche, Mrs Barbara
Jones, Dr Lynne (Selly Oak)	Rooker, Jeff
Jowell, Ms Tessa	Rooney, Terry
Keen, Ann (Brentford & Isleworth)	Ross, Ernie (Dundee W)
Kemp, Fraser	Roy, Frank
Kennedy, Jane (Wavertree)	Ruddock, Ms Joan
Kilfoyle, Peter	Russell, Ms Christine (Chester)
King, Ms Oona (Bethnal Green)	Ryan, Ms Joan
Kumar, Dr Ashok	Salter, Martin
Ladyman, Dr Stephen	Sawford, Phil
Lawrence, Ms Jackie	Sedgemore, Brian
Lepper, David	Sheerman, Barry
Leslie, Christopher	Sheldon, Rt Hon Robert
Levitt, Tom	Shipley, Ms Debra
Lewis, Ivan (Bury S)	Short, Rt Hon Clare
Linton, Martin	Simpson, Alan (Nottingham S)
Livingstone, Ken	Skinner, Dennis
Lloyd, Tony (Manchester C)	Smith, Angela (Basildon)
Lock, David	Smith, Jacqui (Redditch)
Love, Andrew	Smith, John (Glamorgan)
McAllion, John	Snape, Peter
McAvoy, Thomas	Soley, Clive
McCafferty, Ms Chris	Spellar, John

Squire, Ms Rachel	Twigg, Stephen (Enfield)
Starkey, Dr Phyllis	Vaz, Keith
Stevenson, George	Vis, Dr Rudi
Stewart, Ian (Eccles)	Walley, Ms Joan
Stoate, Dr Howard	Ward, Ms Claire
Stringer, Graham	Wareing, Robert N
Stuart, Ms Gisela	White, Brian
Sutcliffe, Gerry	Whitehead, Dr Alan
Taylor, Rt Hon Mrs Ann	Wicks, Malcolm
(Dewsbury)	Williams, Rt Hon Alan
	(Swansea W)
Taylor, David (NW Leics)	Williams, Mrs Betty (Conwy)
Thomas, Gareth (Clwyd W)	Woolas, Phil
Thomas, Gareth R (Harrow W)	Wright, Anthony D (Gt Yarmouth)
Timms, Stephen	Wright, Dr Tony (Cannock)
Tipping, Paddy	Wyatt, Derek
Todd, Mark
Touhig, Don	Tellers for the Ayes:
Trickett, Jon	Mr. Clive Betts and Mr. David Jamieson.
Turner, Dennis (Wolverh'ton SE)
NOES
Allan, Richard	Michie, Mrs Ray (Argyll & Bute)
Ashdown, Rt Hon Paddy	Moore, Michael
Baker, Norman	Morgan, Alasdair (Galloway)
Ballard, Mrs Jackie	Oaten, Mark
Brake, Tom	Öpik, Lembit
Brand, Dr Peter	Rendel, David
Bruce, Malcolm (Gordon)	Russell, Bob (Colchester)
Burnett, John	Salmond, Alex
	Smith, Sir Robert (WAb'd'ns)
Burstow, Paul	Stunell, Andrew
Campbell, Menzies (NE Fife)	Swinney, John
Chidgey, David	Wallace, James
Cotter, Brian	Willis, Phil
Hughes, Simon (Southwark N)
Keetch, Paul	Tellers for the Noes:
Kennedy, Charles (Ross Skye)	Mr. Donald Gorrie and Mr. Andrew Welsh.
Maclennan, Rt Hon Robert

Question accordingly agreed to.

Resolved, That the Local Government Finance (Scotland) Order 1998, dated 4th February 1998, a copy of which was laid before this House on 5th February, be approved.

Resolved, That the Revenue Support Grant (Scotland) Order 1998, dated 4th February 1998, a copy of which was laid before this House on 5th February, be approved.

Resolved, That the Special Grant Report (98/1) (Scotland): Local Taxation Collection Grant Scheme 1997–99 (HC 530), which was laid before this House on 5th February, be approved.

Resolved, That the Special Grant Report (98/2) (Scotland): Grant in Aid of Local Authority Revenue Costs and Reinstatement Works at Dunblane Cemetery Resulting from the Dunblane Tragedy (HC 531), which was laid before this House on 5th February, be approved.—[Mr. Pope.]

c1232
1. HOUSING (SCOTLAND) 174 words
c1232
2. TRADE AND INDUSTRY COMMITTEE 99 words
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3. NORTHERN IRELAND AFFAIRS COMMITTEE 31 words