HL Deb 16 December 1980 vol 415 cc996-1004

3.44 p.m.

Lord Bellwin

My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for the Environment. The Statement is as follows:

"Local government is responsible for about a quarter of public expenditure and employs more than 2½ million people. Its financial decisions are an integral part of the national economy. The Rate Support Grant settlement must reflect this.

"This settlement is the first for England under the provisions of the Local Government, Planning and Land Act 1980 and I therefore thought it right, exceptionally, to make a Statement to the House. Documents relevant to my Statement to the Local Government Consultative Council are being placed in the Vote Office. I am also laying before the House this afternoon copies of the RSG reports and orders, which will be debated in the House in the normal way.

"My right honourable friends will make separate statements today about Wales and tomorrow about Scotland.

"As part of our policy on public expenditure, the volume of local government current expenditure for RSG purposes will be 3.1 per cent. below the figure for 1980/81. The cash limit on grant will provide for increases of 6 per cent. in earnings from annual pay settlements in this round after 1st November 1980 and provisionally for the next pay round beginning on 1st August 1981. It contains an allowance for price increases of an average of 11 per cent. between 1980/81 and 1981/82. The grant percentage for England and Wales will be reduced from 61 per cent. to 60 per cent. At 61 per cent. the effective grant for England is 60.1 per cent. The effective grant for England in 1981/82 will be 59.1 per cent.

"The aggregate Exchequer grant for England will be £10,895 million at estimated out-turn prices. Specific grants are estimated at £1,447 million. Transport Supplementary Grant will be £416.5 million. A copy of my right honourable friend's statement to the Consultative Council is being placed in the Library. National Parks Supplementary Grant will be £4.5 million. The remaining amount available for the Rate Support Grant is therefore £9,027 million.

"There are two new features of the grant distribution this year. First, the new system is based on a new method of assessing the needs of authorities, which relies on service-by-service appraisal of those factors which affect local authority expenditure. The system is fair, rational and open to scrutiny. The change leads to some significant alterations to the entitlement of some local authorities in the first year.

"The second feature is the introduction of block grant which will replace the old system, with its in-built bias towards authorities who increase their spending at the expense of more prudent authorities. These changes are both moderated by safety nets.

"Authorities retain exactly the same freedom to reach their own expenditure decisions as at present, but block grant ensures that a greater weight of the consequences of high spending is borne locally and not at the expense of other authorities. For the first time there is a fair and consistent incentive not to overspend. In particular, the recent drift of grant to London at the expense of the Provinces is reversed.

"The House will remember that pending the introduction of the new system next year, I took transitional powers, for this year only, to limit central Government support to high spending authorities. Of the original 23 authorities liable to penalty, 14 have qualified under the waivers which I set out in my statement of 18th September. There remain only nine authorities liable to abatement of their grant. The House will shortly be invited to approve the appropriate order. They have only limited time, therefore, to make the necessary reductions in their expenditure if they are to qualify for exemption and thus avoid imposing this unnecessary extra burden on their ratepayers.

"I have repeatedly stressed the essential part local authority manpower levels have to play in meeting our public expenditure targets. The Joint Manpower Watch figures for the year ending September are published today, and announced to the House in a Written Answer to my honourable friend the Member for Reading North. These figures show a seasonally-adjusted reduction over the last quarter of 15,446, making a total for the year of 36,500 on a full-time basis. Local government manpower is now back to its lowest level since the Manpower Watch began in 1975. But although the annual and quarterly reductions are the highest ever achieved, the fall is still only 2 per cent. from the all-time record level when we came to power. I reaffirm today that the volume of current expenditure, particularly manpower levels, must continue to drop.

"I turn now to the question of rates. The local authority current expenditure volume target is 5.6 per cent. below the spending in 1978/79. If local authorities plan for that target, and budget in line with the cash limit assumptions, increases for ratepayers should be contained within reasonable levels and be much lower than for this year. I shall be talking to the associations shortly about action to secure that the expenditure targets are met.

"Mr. Speaker, the announcement I have made this afternoon represents a significant contribution to the Government's public expenditure policies. It is a major challenge to distribute £9 billion to 413 authorities administering over 20 major national services. The new system I have announced today achieves this through a system that is fairer, more visible and more comprehensible. This is particularly important when the lower volume of expenditure and the reduction in grant percentage will in any case present local government next year with a major challenge."

My Lords, that is the end of the Statement.

3.50 p.m.

Lord Mishcon

My Lords, it is only proper that I should thank the Minister for his courtesy in repeating a Statement made by his right honourable friend in another place; but I am sure that he will not expect me to congratulate him on that Statement. Only yesterday the Minister talked very proudly of certain local government announcements that were made to which he said some of the local authority associations agreed and all the local authority associations had been consulted and had expressed a view.

The Statement that we have heard this afternoon is a Statement of which not one single local authority association in this country will approve, either in regard to the formula of the rate support grant or of its application. I am sure that that is a somewhat solitary situation in which any Minister in charge of local government would want to find himself.

I wonder whether the Minister will forgive me if ask him some questions arising directly out of the Statement that we have just heard. Is it not right that the Minister has taken unto himself the complete prerogative and arbitrary power of deciding what are the needs of local authorities? In other words, is there not writ large upon this Statement the words: "Mr. Heseltine knows and Mr. Councillor Smith, Jnr. does not"? If I may go in particular into some of the figures arising out of that general question, there are assumptions in the Statement of 6 per cent. in the increase in local authority wage settlements—that, incidentally, to be over a period of two years, two annual pay settlements—and an increase of 11 per cent. in the rise in prices.

Without in any way wanting to comment on the optimism or pessimism of those figures, may 1 ask the noble Lord the Minister whether, if those figures in either case are exceeded, it is intended to make a corresponding allowance back in the grant? I have calculated—and it may be that my calculation is wrong—that this represents a cut or, putting it another way, a saving in grant of some 18 per cent. Does the Minister agree that this is roughly right? And would he also agree that in this so-called saving the Secretary of State has slashed more in one year of local government required expenditure than any other Secretary of State, certainly since the end of the war?

May I ask the Minister whether he would kindly tell us what are the safety nets to which he referred in his Statement, and which are supposed to moderate the changes to which he referred? Turning if I may to the question of the problem areas, the proud statement is made: In particular, the recent drift of grant to London at the expense of the provinces is reversed". Is the Secretary of State aware of the particular predicament of London and many of the urban areas? Does he know, for example, of a somewhat startling figure that whereas in the London area one-parent families represent some 24 per cent. of the families in London, the percentage figure in the rest of the country, if you except London, is just over 11 per cent.?

What is going to be done for the special problem areas? What allowances are being made for them? Is the Secretary of State aware that he is taking a very uncomfortable responsibility, but more uncomfortable for the citizens of London and the urban areas, in regard to the whole concept of rates that will now have to be looked at in the light of the reductions that have been made and the complete ignoring of the special problems? Possibly those questions are enough at this stage to ask the Minister. I hope that with his usual courtesy and clarity of mind he will be able to let us have answers to them in full.

3.56 p.m.

Lord Beaumont of Whitley

My Lords, this is a very important Statement. I do not feel that we have a great deal of time to go into its intricacies this afternoon, although I am sure that noble Lords will want to raise the matter very, very fully in the immediate future. I have therefore only one comment to make and one question to ask. The comment is that it is a very strange world and a very strange form of economics that we appear to work under when with unemployment at over 2 million the Secretary of State can boast to Parliament about the number of jobs that he has killed and the number of jobs that he proposes to kill in the immediate future.

The question that I should like to ask the noble Lord—whom we thank for repeating the Statement—is this: How can the Government justify a settlement which penalises local authorities who have conscientously tried to abide by Government guidelines and who have been treated to the same reduction in their rate support grant as the big spenders? Apart from the nine local authorities being singled out for punitive action, it has made no difference whether a council has tried to save money and make economies or whether it has not. How do the Government justify that?

3.58 p.m.

Lord Bellwin

My Lords, first may I deal with the points raised by the noble Lord, Lord Mishcon. He said that not one local authority association in the country will approve of the Statement. Well, of course there are only three. I do not know whether they will approve or not; but it is important that they should know what line the Government have been taking. There has been tremendous consultation all the way down the line. Indeed, it has been the local authority associations themselves who have been helping, through their grants working group and in many other ways, in coming to these conclusions. So, of course, no one will approve of anything that reduces the amount of money that they have been given, and to that extent I suppose that the noble Lord is correct. Whether or not they will approve the final equity of the distribution is something upon which I cannot comment. I suspect that they will not all disapprove of that.

To come to the individual points, the noble Lord said that the Minister has taken unto himself to decide the needs of local authorities. That just is not so. The fact is that under the previous rate support grant settlement basis there was an assessment of need. There always has to be an assessment of need. How else can you try to equalise grant—and that is the purpose of the rate support grant settlement—if you do not try to assess need? The debate has been on the different ways that there are of assessing it.

I say now, as I said during the time when we were debating this at such great length, when the Bill was going through the House, that it is surprising to me how many friends the old rate support grant system, the multiple regression analysis basis of assessment of need, has now found when, in the past, I never found anybody anywhere who had a good word to say for it. I could, if this was the occasion—but I have to bear in mind that I am answering questions on a Statement and do not want to go into it in depth—go into details of the inequities of the previous system. As to the present one, I will say only this: never before has there been a clear exposition of the exact basis of this assessment of need.

There is here a document—not a thick document, and written relatively in lay terms—which I would commend to the noble Lord and indeed to anyone who is interested. It shows how the assessment of need of every single service has been arrived at. Here for the first time there can be debate on the rights or wrongs of this and on ways of improving it, if you like. I think it is what I said it would be at the time of the Bill, a tremendous step forward. I hope that noble Lords will take the opportunity of looking at this in due course.

The noble Lord asked whether, if the 6 per cent. or 11 per cent. (that being the wage settlement, the wage announcement allowance and the 11 per cent. for inflation) are exceeded, there would be an increase to take care of that. There will be the same increase as there was in the past, when previous Governments made their forecasts and were so woefully out. I so clearly and bitterly remember the 5 per cent. for wages and the 8 per cent. inflation which I, in another incarnation, was given to deal with and to handle when in fact the figures turned out to be multiples of those figures. What we will say is that, as regards these figures, the 11 per cent.—and that is the inflation rate allowed for from April 1981 to 1982—is a realistic figure. We believe that the trends now going on will make that a realistic figure.

As for the 6 per cent., in respect of pay settlements, everybody knows—and if they do not know it by now this would be a good time to reiterate it—the importance of the fact that settlements must be at that level and if they are not at that level the alternative will be that there will be fewer jobs. This is what it is all about, because at the end of the day it is all about what we can afford—something that nobody ever seeks to mention: what can we afford? We have for so long been paying ourselves more than we could afford, and if we will not come face to face with that reality and accept it, then we will be in difficulties. As to the other points—

Lord Mishcon

My Lords, before the noble Minister leaves this point, I wonder whether I may ask him if this afternoon he would kindly not deal with the sins of other Governments but only with the virtues of his own? Would he therefore kindly say whether or not there will be an allowance made, whatever other Governments may have done?

Lord Bellwin

Of course, my Lords; but the sins are so many that who could deny me the chance to comment on them? As to the virtues, only time will tell, but the answer is: No, of course not, any more than it applied in the past. As to the safety nets, these are 13p and 7p, depending on the categories; but this is the kind of detail I should prefer to write to the noble Lord about, if he will permit me, because there are masses of statistical information to which, with great respect, he would not have had access at the present time. I think he should have that. I gladly undertake to write to him on that.

Lord Balogh

My Lords, the noble Lord says that we cannot afford it, but if we reduce our national income, with high interest rates and extra taxes, we shall not be able to afford even the new low level. This can go on ad infinitum.

Several noble Lords


Lord Bellwin

My Lords, this is a Statement. I am trying to respond. I am probably being over-long but I am trying to reply as briefly as I can. I am sure there will be many other occasions for further debate on that. The noble Lord, Lord Mishcon, made a very important point which I should like to comment on. He asked what is being done for the special problem areas. I would answer that by saying that the whole basis of assessment of need is in fact assessing the need of the problem areas. If they have greater needs—and in many cases they have—then this should be taken care of in what we used to call the needs assessment. It then became standard expenditure and now has the title of grant-related expenditure. In that way there is an attempt here to make allowance for that. The noble Lord will also know that in the worst areas, the partnership and programme authorities, there is urban money which goes to them.

The noble Lord, Lord Beaumont, referred to the number of jobs killed. I really cannot get into that sort of a debate. It used to be said to me: is it jobs saved or jobs lost? My Lords, it all depends on who is paying at the end of the day as to how you look at this question. The fact is that the numbers which have increased in local government, not least since the reorganisation, have not been commensurate with the extra levels of services or of the efficiency of those services. It does not help us to go into a debate as to who it was, because I would then reply by explaining who it was who initiated the original suggestion that there should be a reorganisation; and that would not get us too far.

Lord Peart

My Lords, let me say to the noble Lord that I believe the proposal to reorganise local government has been disastrous, has created terrible burdens and destroyed local areas; and so the noble Lord should not rejoice in what he has said.

Lord Bellwin

My Lords, I do not rejoice at all in any way. Perhaps I am able to comment upon local government since the reorganisation as much as the noble Lord himself, having worked in it for some years, as I did. We probably should not quarrel too much between us about many aspects of that—

Lord Peart

Made a mess of it!

Lord Bellwin

The noble Lord says we made a mess of it: that is a matter of opinion. Then the noble Lord, Lord Beaumont, said what he did about equal punishment. If by the word "punish" he means more or less grant, let me say this. The figures announced are figures based on the assessment of need and relate against base figures which have had to be calculated because this is a new system and now every authority receives its grant direct, whereas before it was done in another way. That is why we have had to make calculations. But at the end of the day block grant will come into effect—not at this stage, but at the point when rates are fixed when spending is decided. That will be the time when it comes into effect. This has to do with grant-related expenditure as a basis of apportionment of this finite sum of grant.

Lord Irving of Dartford

My Lords, the noble Lord has indicated that there is to be a redistribution between London and the Provinces, but the forecasts and leaks from the local government council indicate that there will be a massive redistribution between the counties and the districts. This is going to be very serious indeed for the districts. It is forecast—I am talking in terms of 100 to 150—that some will lose anything between a 2p and a 9p rate. Can the noble Lord say whether there will be any amelioration for the districts, whether this will be spread and what is the minimum rate loss in any one year that the districts will suffer?

Lord Bellwin

My Lords, the fact is that what matters at the end of the day is the amount that affects the ratepayer. If there is this adjustment between the counties and districts, it was so within the last three years, I think, that there was a massive switch of some £350 million in adjusting the apportionments. That figure is subject to verification. Two years ago there was a great shift from the counties to the districts—the shire districts we are talking about and not the metropolitan districts—and it was done on a totally arbitrary basis, as the then Secretary of State said. He said: "There is no basis on which I can justify this: it is something which I think I should do." Now at last, as part of the attempt to get some semblance of reasonableness into the way in which grant is distributed, there is a shift to the counties from the shire districts. But, at the end of the day, when the ratepayer has to be affected by what is levied, the two are added together. So if county A receives a net gain and districts within its county have a net loss, then when it comes to fixing the rate the two are added together. Therefore, the effect on the ratepayer as such should not be adverse.

Viscount Ridley

My Lords, my noble friend said that the increase in rates should be kept within reasonable levels. I wonder whether he can indicate what he regards as reasonable levels, bearing in mind the somewhat unrealistic assumptions in the early part of his Statement.

Lord Bellwin

My Lords, I hope noble Lords will not think that the assumptions I made earlier were unrealistic, because, if that is so, what hope does the country have if people are not prepared to work within the totality of what Government feel can be afforded? What is reasonable? If I remind noble Lords that last year rates increased from a low of 9 per cent. to a high of 60 per cent., you will see why it is so difficult to try to say what is a reasonable figure. Another danger of stating a figure is that you create a norm. Those who would have rated less say, "We will rate that little bit higher." That is the danger of so doing. Therefore, I do not want to embark on that exercise. I say what I said before. If people will stick to the lines laid down by the Government, then the rates levied should be much less than they were last year.

Baroness Jeger

My Lords, in assessing the needs of problem areas, is the Minister bearing in mind that many of these problems are imported? May I ask him whether he has considered a borough such as Camden, in which I have served in local government for many years? Because it happens to have three main line termini, it is natural that there is an enormous number, a disproportionate number, of homeless families who, because they arrive at these termini, report to the nearest town hall. The centre of our city is the focus for unmarried mothers from all over the United Kingdom. We have an enormous number of homeless families, many of whom have followed the Prime Minister's advice to come to London looking for jobs, which they have failed to find. So why should the ratepayers of Camden be shouldering a disproportionate amount of what is really a national problem, imposed on it by the Government's policies?

Lord Bellwin

My Lords, in no way do I accept the point that the Government's policies have imposed special problems on Camden. The fact is that in assessing need, and in looking at the grant-related expenditure assessments, the factors that the noble Baroness has mentioned, along with many others, are of course considered.

Lord Denham

My Lords, I know that the noble Lord, Lord Taylor, is wanting to get up and ask a question, and so is my noble friend Lord Sandford. But your Lordships may feel that, after those two noble Lords have asked their questions and have been answered, we should perhaps go on to the other business.

Lord Taylor of Gryfe

My Lords, I thank the noble Lord. I wonder whether I may return to the question raised by the noble Lord, Lord Beaumont of Whitley, and ask whether, in regard to the cutbacks that have been announced, there has been any assessment of the consequences in terms of employment. I am concerned not simply about local authority employment, but about the fact that this involves cutting back on capital items such as the replacement of vehicles from British Leyland, or cutting back the construction industry, which may put more people out of employment as claimants on the PSBR, when I understand that the whole purpose of the exercise is to prevent an increase in the public sector borrowing requirement.

Lord Bellwin

My Lords, capital allocations will be announced in the next two or three days. The indi- vidual allocations for capital spending have not, as yet, been announced and therefore, as I say, they will come forth. I believe that some are coming today, tomorrow and the next day—during the rest of this week.

Lord Sandford

My Lords, this is such an important Statement that I must crave the indulgence of the House in asking my noble friend one or two more questions. Of course, the associations in local government recognise that, responsible as they are for a quarter of the national economy, they must make a contribution to cutting the local government cloth to match the national economic cloth—

Several noble Lords


Lord Sandford

My Lords, the question is this. We did not succeed in persuading—

Several noble Lords


Lord Sandford

If I may just phrase it in my own way, we did not succeed in persuading the Government to delay the introduction of the block grant and so we are faced with a rate support grant which is incomprehensible and unpredictable, as we feared it would be. May I ask my noble friend this question? Is he going to introduce the dampening measures, to make sure that these significant alterations, as between this year and the next, are really held within bounds, having said originally during the consultations that the Government were not prepared to introduce the dampeners? If the dampeners are introduced, will the levels of rate increase which local authorities will be obliged to charge be held within the single figures which his right honourable friend indicated at an early stage would be the case? It is very important to know that.

Lord Bellwin

My Lords, first, I by no means agree that the RSG is now incomprehensible or unpredictable. If I only look at what happened in the past, I am astonished at its clarity. Would that it were more so. As to whether there will be dampeners, multipliers—call them what you like—yes, there will be safety nets—

Lord Sandford

Not safety nets—dampeners.

Lord Bellwin

Dampeners, multipliers—yes, my Lords. There will be multipliers as well. For noble Lords who may feel that this is a technical new word, dampeners is a word which means that you spread out over a period of time the impact of something that you may do. In terms of this subject, that is what it means. As to whether the rates will be in single figures, I shall be very surprised and very disappointed if there are not very many authorities who vote for single figures. Certainly if they stick to the numbers that we have mentioned, and which we have been talking about today, there will be every opportunity for them to do so.