HL Deb 17 December 1980 vol 415 cc1116-22

3.37 p.m.

The Minister of State, Scottish Office The (Earl of Mansfield)

My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my honourable friend the Minister for Home Affairs and the Environment at the Scottish Office. The Statement is as follows:

"My right honourable friend the Secretary of State for Scotland is this afternoon informing the Convention of Scottish Local Authorities that the 1981–82 rate support grant for Scottish local authorities will be derived from total relevant expenditure of £2,458.5 million (at November 1980 prices). The relevant expenditure figure is 2.7 per cent. less than the figure on which grant for 1980–81 was based. That reflects my right honourable friend's allocation of priorities within the Scottish block of expenditure in the light of the Government's public expenditure decisions announced to the House by my right honourable and learned friend the Chancellor of the Exchequer on 24th November.

"The new grant percentage represents an actual reduction (compared with 1980–81) of 1 per cent.: a further 0.8 per cent. adjustment replaces an ad hoc abatement made since 1978 in respect of rates on local authority properties and will have no net effect on the cash received by local authorities. That results in a grant percentage of 66.7. Aggregate grants for 1981–82, on expenditure at November 1980 prices, will be £1,639.8 million, of which rate support grant will be £1,503.1 million.

"There will be a cash limit of £94 million on additional grant for 1981–82 towards pay and price increases beyond November, 1980. It includes provision for increases of no more than 6 per cent. on average in pay settlements in this round and provisionally for the next. It contains provision for price increases of no more than an average of 11 per cent. between 1980–81 and 1981–82. Total grant payable in increase orders may be above or below the cash limit to take account of variations in expenditure due to changes in interest rates, which are not subject to cash limits. My right honourable friend intends to make additional grants in respect of increased costs of £24.5 million for 1979–80 and £203.1 million for 1980–81. Grants for 1980–81 may be increased again in a second increase order next year.

"The main object of the grant distribution formula will be stability, as recommended by the Convention. Within this general objective, my right honourable friend will reduce the ratio of resources element to needs element from 1:7 (as in 1980–81) to 1:9 in order to restrict the additional resources element payable to authorities striking comparatively high rate poundages. My right honourable friend will lay the necessary order for the approval of the House as soon as possible, together with a report of the considerations underlying his proposals." My Lords, that is the end of the Statement.

3.40 p.m.

Lord Ross of Marnock

My Lords, my first duty is to thank the noble Lord, the Minister of State, for this Statement. I think that it is the first time that the rate support grant order has merited a Statement, so it is unique. I do not know why—I think that they are suffering from a guilty conscience in the Scottish Office, and the Department of the Environment, in respect of places where they should have made Statements and neglected to do so. I shall not mention anything about colleges, housing or anything like that.

We are grateful for the Statement. It was a much clearer Statement than the one we had yesterday. I am sure that my noble friend Lord Irving of Dartford will be glad to know that in Scotland we make no bones about it. If we go above the expected limits in respect of inflation then it is visualised that increase orders will be introduced next year, as indeed they are this year. People talk about rate support grant and do not really know what we are talking about. We are talking about education; we are talking about fire services; the police; water; road maintenance; social work; treatment of the elderly and children; and all these other services which enrich life and make life endurable for people, such as home helps, civil defence, street lighting local transport in rural areas and in towns. So, when we talk about "bashing" local authorities, we are talking about this.

The first thing that we have is a cut of 2.7 per cent. in reckonable expenditure. This is an arbitrary cut so far as I can notice because it says in the Statement that it reflects the Secretary of State's priorities—not the priorities of those who have the responsibility but the Secretary of State's priorities. That is a strange doctrine in respect of local government. The Statement goes on to say that he is cutting the percentage grant by 1 per cent.

What happens first of all is that they decide in conference what is the reckonable expenditure. Was there agreement with the Scottish local authorities about that? Regarding the cutting of the percentage by 1 per cent., there is no need for agreement, that it is just laid down by the Secretary of State. It would appear to me that there has been an arbitrary decision in respect of reckonable expenditure as well. It is cut and the Government may well argue that because it is cut then their expenditure can be cut as well.

But, within the cut of the relevant expenditure, there are expected increases. We know that. We are proud of the fact that we have more policemen than we had before; and they are far better paid and so they are more expensive. To the extent that there is an increase there, it means that that 2 per cent. cut is a much greater cut in all the other services. Examined them, my Lords. The one big function that is in this rate support grant is educaton. It is the biggest lump of the rate support grant. I have known Ministers of Education not realise it and vote in Cabinet for cutting the rate support grant, not realising that they were voting to cut themselves.

The noble Lord, Lord Bellwin, announced it. But Lord Bellwin has nothing to do with education. The Secretary of State for Education has to bear this. The biggest cut will be there and if there are increases in any other field, then it comes to that. What I fear is this: in the Scottish position today we are going to have fewer ratepayers. We have over a quarter of a million people unemployed. Many of these people will be applying for a rate rebate. That will increase the local expenditure rather than decrease it, because it is not one hundred per cent. met by the Government.

There are redundancies all over the place, and that means closed factories. Yesterday, in Glenrothes, Vestey's cold store shut down, leaving 200 people unemployed. That is a loss of rates from the individual ratepayers; it is also a loss from the company. They will not be paying rates on an empty factory. When one thinks about Strathclyde, spoken about by my noble friend, and the loss in valuation, the loss in income, I should like to ask this question: what assessment was taken, what valuation was taken? Was it last year's or that of the year before? It is about two or three years ago since we had a revaluation. It will be quite unrealistic, but it means that with fewer ratepayers—individuals and companies—with a cut of the Government's grant, quite apart from the reckonable expenditure (which I am sure is bound to be exceeded), it means that there are going to be massive increases of rates within Scotland. This is as a result of the Government's policy. It is a dim outlook for Scotland.

There are one or two questions that I should like to ask. Can the noble Lord, tell me what estimate is made of the increase in rate rebates? That should affect reckonable expenditure. That part has to be paid by the local authorities and is not helped. What is the increase in police costs? This will give us an idea as to whether the reckonable expenditure and a reduction of reckonable expenditure is a proper reduction of 2.7 per cent. or in respect of all the other services is very much more.

What about water, my Lords? Also, the police are not going to be kept to 6 per cent. but water in Scotland is a local authority service. What is the argument about at the moment? It is somewhere between 10.8 per cent. and 18 per cent. that they were promised. We know that that 6 per cent. is not going to be kept to. Yet, according to the cash limits, the local authority have to meet the difference. This is unrealistic. At the same time, with 256,000 unemployed—and there were another 1,000 announced yesterday at British Leyland at Bathgate—the call on the services, particularly the social services, is going to be greater than ever. I can remember cash limits and saying that the desirable would need to wait upon the essential. We are now at the point where we are cutting into the essential and the quality of living in Scotland is going to be worse as a result of the Government's policies and this bravado Statement about squeezing local authorities. It is not local authorities that we are squeezing, it is people.

3.48 p.m.

Lord Mackie of Benshie

My Lords, I, too, should like to thank the Minister for making the Statement, and express the hope that the calculations have been more accurate than some of the calculations that this Government have made over the money supply and one or two other things. We accept that if we are going to get real wealth back into the economy Government spending has to be cut, and the Government are trying to do this.

I agree with what the noble Lord, Lord Ross of Marnock, said about the many hardships inflicted on the people of Scotland as a result of this; but I also know that throughout the local authority area there are very large areas of waste where some cutting can and should be done, many of them relevant to the debate that we have interrupted in order to hear this Statement.

I should like to ask two questions. I should like to repeat the question put by my noble friend Lord Beaumont of Whitley to the noble Lord, Lord Bellwin, yesterday. He did not get an answer. How are we going to vary this between the good and the bad authorities? It must take into account the past record of authorities who have pleased the Government and others—whom one can name not very far from the county of Angus—who have not done so. It is grossly unfair if we are going to have absolutely flat-rate all-out cutting of both competent and incompetent authorities.

The other question I should like to ask, which is very relevant to the one posed by the noble Baroness a moment ago, is this. Are we going to relax any of the tight Government instructions to local authorities such as having to spend money in any one year if they want to get it? It appears to me that if you are going to ask the authorities to cut—and I agree they have got to cut—then you must relax some of the firmer laws which have for a long time appeared to many people to be stupid.

The Earl of Mansfield

My Lords, I must thank both noble Lords for their qualified welcome of this Statement—at least I think the noble Lord, Lord Ross, welcomed it to start with until he went into rather wider issues. Nobody denies that these cuts are going to entail difficult decisions which local authorities will have to make. Painful decisions will have to be made by the local authorities in many instances to cut, or at any rate not to maintain or not to expand, services upon which no doubt they would like to increase expenditure. But I repeat, as has been repeated so often from this Dispatch Box, and as was echoed, I think, by the noble Lord, Lord Mackie, that the national interest unfortunately necessitates for the time being curtailment of the resources which are made available for local services. Curtailment of public expenditure is an essential part of the Government's economic strategy, and our ability to finance future tolerable levels of service depends upon winning the present battle.

We need to keep in mind the fact that, even with the reduction of 2.7 per cent. from the 1980–81 figure, the amount of relevant expenditure proposed for 1981–82 remains above the level of actual spending in real terms in 1977–78. In that year local authority services were not widely regarded as being inadequate, and so I hope your Lordships will agree with me that there is no reason why the local authorities will not be able to serve the public as well in 1981–82.

The noble Lord, Lord Ross, asked a number of questions. First, on the likely increases in rate rebates, I am informed that 90 per cent. of these will be paid by central Government, and that is additional to the rate support grant. I think that disposes of that matter—

Lord Ross of Marnock

That still remains—

The Earl of Mansfield

My Lords, perhaps the noble Lord will just let me finish and then I am sure the House will look at him indulgently if he wants to come back—or at least it may do. He also asked what loss of valuation there may be. The valuation is estimated to increase in 1981–82 by about 2 per cent. over 1980–81: the annual increase is of that order.

Lord Galpern

My Lords, regarding the valuation increase, can the noble Minister state whether the devaluation in Scotland will take place according to statutory requirement, or is there any possibility of its being postponed?

The Earl of Mansfield

My Lords, I do not think the noble Lord has quite appreciated what I was saying. The noble Lord, Lord Ross, asked by way of a preliminary, I think, what agreements or consultations there had been so far as the Scottish local authorities are concerned, relating to cuts in relevant expenditure. I am sure the noble Lord will know very well, if he stops to think, that in a matter such as this no agreement is sought by Governments. Governments are expected to give a lead, and they give a lead and have given a lead. In such instances, in the national interest local authorities are asked to follow that lead. That does not mean to say that there is not consultation before the Government take their decision. But it is for them to decide these matters and to give a lead, as I have said.

The noble Lord, Lord Mackie of Benshie, in effect asked: How do the Government distinguish between the good local authority, of which we have at least one in Tayside, and the less good authority, of which we also probably have one in Tayside, not so very far away from where he and I live on the edge of the raspberry belt? In so far as this can be taken into account, it is so taken in relation to the needs and resources elements. The noble Lord will have heard me when I said in effect that there will be a reduction in the ratio of the resources element to the needs element from 1:7 to 1:9. This, of course, hits at (if that is the right word) the naughty authority, if I may so call it, which in order to spend money has to impose a high rate poundage. It will then be the profligate authority which will come off worst in that reallocation of resources.

The noble Lord also asked me about instructions to local authorities. I have to tell him frankly that this is too big a question for me to answer in the context of this Statement. I have not got the information. I will find it out and write to him.

Lord Galpern

Before the noble Earl sits down, my Lords, is he prepared to answer the question I asked, which was regarded as irrelevant at that point? Will he answer it now, please?

The Earl of Mansfield

My Lords, either the noble Lord did not follow what I said or I did not understand what he asked. Whichever may be the truth, I cannot answer his question now.

3.58 p.m.

Lord Ross of Marnock

My Lords, does the noble Earl appreciate that I have quite a lot of experience in rate support grant in respect of negotiations with local authorities? I used to have a final meeting which usually lasted all day. I used to ask a simple question: Did they accept as fair the total of relevant expenditure? Secondly, did they agree to the Government's reduction of 1 per cent. in their percentage of that relevant expenditure, which comes to just over 60 per cent.? I should tell the House that 60 per cent. is an average; if you go to Orkney it is probably somewhere nearer 90 per cent. and the Highland area is fairly high too. The reduction of the 1 per cent. amounts to very much less when you come to Edinburgh and Glasgow. Lastly, the important thing—and we seldom have disagreements about this within the Scottish local authorities—is the distribution formula. It usually is agreed. Was it agreed on this occasion?

The Earl of Mansfield

My Lords, I know there were consultations. Whatever happened in the days when the noble Lord was a thoroughly distinguished Secretary of State, my understanding of the situation is that no agreement in those terms was sought on these matters, nor was given. Indeed, my right honourable friend is meeting the Convention only this afternoon to tell them what is going to happen, so I fear that the answer to all his questions is, No. So far as the question of the noble Lord, Lord Galpern, is concerned, which the Officials Box understood if I did not—and I apologise to him for my stupidity and obtuseness—the Secretary of State will decide at the appropriate time whether and when the next revaluation will take place.

Lord Taylor of Gryfe

My Lords, in his Statement the noble Earl made certain specific assumptions with regard to, first, the level of wage settlements at 6 per cent., and, secondly, the rate of inflation in the period covered by the rate support grant of 11 per cent. I wonder whether, in his economic projections, he made any assumptions with regard to the consequences of these in relation to unemployment.

The Earl of Mansfield

I am sorry, my Lords. I do not quite follow the noble Lord. Assumptions were made on inflation, but I do not know about the rest of his question.

Lord Taylor of Gryfe

My Lords, the question is simply that the noble Earl made some assumptions in connection with the inflation rate and the wage settlement rate in local government. I wondered whether his economists had made any projections or assumptions about the impact on employment as a result of the allocations that are now being made. Presumably the local authorities will have to cut back to some degree on their expenditure programme.

The Earl of Mansfield

Yes, my Lords. All these matters would have been taken into account.

Lord Kaldor

My Lords, if I understood the noble Lord, Lord Taylor, aright, his question was that if real wages fall by 5 per cent., because prices go up by 11 per cent. and wages by only 6 per cent., would that not have unfavourable repercussions on consumption—hence demand and hence employment, especially local employment? That was his question.

The Earl of Mansfield

Yes, my Lords, I understood exactly that. But the question to which my right honourable friend had to address himself was the level of rate support grant. With all respect, that is rather a different matter.