§ 5.12 p.m.
§ Lord Sandys rose to move, That the order laid before the House on 5th November be approved.
§ The noble Lord said: My Lords, this is an order which simplifies and rationalises complex grant arrangements for transport expenditure in Wales. Under the existing arrangements transport supplementary grant (TSG) is paid to county councils in respect of both current and capital expenditure. Transport current expenditure is also supported through the block grant. The purpose of this order is to restrict from 1982–83 onwards the payment of TSG in Wales to capital expenditure only.
§ With the introduction of a new rate support grant, the block grant, in 1981–82, the Government announced that they would review the future of TSG. In Wales this review has now been completed as regards current expenditure and we have been able to reach agreement with the Welsh local authority associations on appropriate arrangements for subsuming the current expenditure element of TSG into the Welsh block grant system. These arrangements avoid the complications which can arise when transport current expenditure is included in two different grant systems. However, so far as transport capital expenditure is concerned, different considerations apply as compared with current expenditure.
§ Major highway schemes are by far the most expensive projects which local authorities undertake in any service for which they are responsible. Financing these schemes can create difficulties as a result of the highly irregular distribution of expenditure on these large projects. By retaining TSG for capital expenditure we shall be able to concentrate assistance on those authorities which need to undertake large and expensive projects.
§ For these reasons my right honourable friend the Secretary of State for Wales has decided that, for the time being at least, TSG should be retained for capital expenditure, and Article 3 of the order provides for this. The types of capital expenditure which will be considered for grant are described in the schedule to the order. They comprise five categories which are compatible with and based upon the descriptions of prescribed expenditure for local authority capital allocations which are contained in Schedule 12 to the Local Government, Planning and Land Act 1980. As now, the main areas of expenditure which will be treated as eligible for TSG will comprise public transport, highways, the regulation of traffic, parking and the provision of freight handling facilities.
§ The assessment of a local authority's needs for TSG will be based on its bid and accompanying transport programme information. My right honourable friend the Secretary of State for Wales will decide on the amount of capital expenditure which he considers appropriate to meet those needs in the light of his policies and his assessment of the authority's transport programme. This amount of expenditure is known as accepted expenditure. It is intended that TSG will be paid in respect of all such accepted expenditure at a rate derived by dividing the aggregate 1155 amount of TSG available by the total level of accepted expenditure for all counties in Wales.
§ As a consequence of making TSG a grant in respect of capital expenditure, it is necessary to change the existing method of apportioning grant between individual counties in Wales. This is the purpose of the second amendment contained in Article 4 of the order. Because the amount of grant payable to each county will directly reflect their individual needs, this change has proved necessary in particular because the application of a threshold calculated in accordance with Section 6(4) of the Local Government Act 1974 is no longer appropriate or necessary.
§ Under the existing TSG system the first step in establishing the amount of TSG payable to counties is to determine the total level of both current and capital expenditure which should be taken into account for TSG. It is assumed that, as with other predictable local authority expenditure, an authority should be able to finance that part of its transport programme which remains relatively stable and even from year to year from other sources; for example, from rates and general central Government grant. This stable and even expenditure consists mainly of current and minor capital works. Allowance is made for this type of expenditure by the application of a population based threshold to each county's expenditure which has been accepted for grant purposes. The expenditure lying above the threshold, which consists of the remainder of current expenditure and expenditure on major capital works, is regarded as being of an uneven and unpredictable nature and therefore is eligible for support through the existing TSG system.
§ Under the new arrangements, all current expenditure will be absorbed into the block grant system, leaving only accepted capital expenditure to be financed from TSG. Since the bulk of such capital expenditure, being made up typically of a relatively small number of major projects, falls clearly within the uneven expenditure category, the need for any distinguishing threshold no longer exists. Given the uneven nature of expenditure, it would not in any case be possible to devise a thresh-hold formula which could be applied equitably to all Welsh counties. For the application of a threshold, we consider it necessary and proper to make the amendments to Section 6(4) of the 1974 Act, which are detailed in Article 4 of the order. It is our intention, once the county councils have had an opportunity to consider the working of these new arrangements for the payment of TSG on capital expenditure, to review the situation in the spring of 1982.
§ Finally, I should like to point out that none of the provisions contained in this order will affect the assessment of the totality of grant paid in support of total local government expenditure in Wales. All that will happen is that the part of TSG which was formerly paid in support of transport current expenditure will be added to the total of block grant. However, by making a clear distinction between current and capital expenditure, the order will ensure that the distribution of block grant will no longer be complicated by the current element of TSG, while TSG itself will remain as a capital grant which can cope with the lumpiness of capital expenditure.
§ I fear this has been a somewhat complex explanation 1156 but I hope that your Lordships will find it satisfactory. If the order is approved by your Lordships' House it will come into operation later this month. I beg to move.
§ Moved, That the order laid before the House on 5th November be approved.—(Lord Sandys.)
§ 5.20 p.m.
§ Lord Underhill
My Lords, I am grateful to the noble Lord, Lord Sandys, for explaining the purpose of this order so clearly. Nevertheless, although he has explained it clearly, there are a number of points on the proposals I should like to put to him. First, may I make it quite clear on behalf of the Labour Party that we have been in full support of placing the responsibility for transport policies and programmes on the county councils, and of the procedure for the transport supplementary grant to be paid through counties for all transport purposes
If this order is approved it means that we shall have three different procedures in Great Britain. Scotland has the procedure where its transport grants are paid within its rate support grant system. In England, as in Wales at present, subject to this order, we have the major part of transport grants paid through the TSG. With the passing of this order, we shall have a third procedure where the capital expenditure in Wales will be paid through the TSG and current expenditure through the rate support grant.
When in 1980 your Lordships had before you the Local Government, Planning and Land Bill, at Committee stage I proposed an amendment to the clause on which this order before us is based. I pointed out to your Lordships that it must be appreciated that the incorporation of TSG in a block grant system could have an adverse effect on our transportation policies and it could have an adverse effect on the co-ordination or integration of county transport policies with finance and other measures.
The Under-Secretary of State for Wales has stated in another place that the bulk of the capital expenditure to be covered for TSG under this order will be for a relatively small number of major projects. I am given to understand that the county engineers in Wales have already been complaining bitterly that even at the present there is insufficient money to carry out repairs which are essential to keep the roads in a safe condition. When the order was before the Standing Committee in another place, the Under-Secretary of State for Wales give an assurance—and I quote—that:these proposals will not result in less money being available for roads in Wales".I would ask the noble Lord the Minister whether that is certain, in view of the fact that TSG is to be for capital expenditure, as the Under-Secretary of State for Wales has said, for a few major projects? Also, the emphasis has been given to expenditure on roads; and there are two questions on capital expenditure set out in the schedule to the order which I should like to raise. I would ask the noble Lord, Lord Sandys: do the descriptions listed in the schedule include capital expenditure on lighting of highways? Secondly, does the capital expenditure listed in the 1157 schedule include the capital expenditure on the provision of parking places, which at present is covered by the 1974 Act?
I should also like to ask: what is the purpose and reasoning behind the proposal to absorb all current expenditure on transport within the rate support grant system as it applies to Wales? At present, as the noble Lord has pointed out, TSG includes the most part of current expenditure for transport purposes and in particular grants made to operators for the provision, improvement and development of facilities for public transport. Will the funds to be made available within the rate support grant system be earmarked for transport purposes? Can the Minister give an assurance that with the new procedure there will be no decrease in the money to be made available to a county for transport services as a whole?
I must stress the effect that the recesson is having on the revenues of most public transport undertakings, and any lessening of the ability of county councils to make grants to operators could increase the problems, especially in the rural parts of Wales—and we are dealing with an order applicable to Wales. If the local government expenditure for 1982–83 is to be cut, as proposed by the Secretary of State, by a further 3 or 4 per cent., will the county councils in Wales be in a position to meet this situation?
I should also like to ask: do the proposals set out in the order reflect any shift away from the procedure whereby the county councils submit their TPP to the Secretary of State for approval? We have regarded that as a really important development. Finally, the statement made by the noble Lord, Lord Sandys, says that the matter is to be reconsidered in the spring of 1982. I should like to ask what actual matters will be reviewed in 1982, because I gather these will be grants for 1982–83? Will it be possible to assess fully the effects of this order so early in spring 1982?
§ 5.28 p.m.
§ Lord Sandys
My Lords, I was very grateful that the noble Lord, Lord Underhill, supported in general terms on behalf of his party the Government's proposals in this order. The noble Lord asked a number of quite specific questions on the order, beginning with several points on the schedule. His first question related to the question of capital expenditure on lighting, and whether it was included. I can assure him that it is included, because in the schedule under 2(c) he will see the phrase:substantially improving the standard of the highway".That is to be construed as including lighting in that category.
His second question referred to parking facilities. I can give him the assurance that parking facilities are also included, as he will see under paragraph 2, where it says—and I quote:Expenditure on the reclamation, improvement or laying out of land and on the construction, preparation, conversion, improvement, renewal or replacement of buildings and structures",are included.
That will of course include both multi-storey car parks and the laying out of car parks on a conventional basis.
1158 The third question referred to the purpose and reasoning behind the alteration to RSG. As I explained earlier, transport current expenditure qualifies for TSG and for the block grant, but the two grant systems operate quite differently. TSG relates to a particular level of expenditure in a particular county, whereas block grant is intended to support a common standard of service. It is, of course, one of the options available and it was carefully considered during the review of the TSG. I hope that what I have said already will satisfy the noble Lord on that point.
The noble Lord, Lord Underhill, also asked for an assurance on the question of the financial implications and the block grant entitlements. I think that I can give him a satisfactory assurance here, because for Welsh counties as a whole the block grant total will increase by exactly the same amount as the reduction in the TSG total. For individual counties it is impossible to be precise at this stage. Although the loss of TSG will be broadly mirrored by the gain in the block grant, there will be a small net gain for some counties and a small net loss for others. The important point is that, whatever the net result, it will flow from a revised distribution system which is generally accepted by the Welsh County Councils Association as being fair and sensible.
The extent to which current expenditure will no longer be eligible for TSG in individual county shares of TSG will be affected. But, that said, it is not really relevant to compare year on year changes in individual allocations in respect of capital expenditure. TSG is, as its name implies, a supplementary grant and is designed to accommodate peaks and troughs in individual counties' spendings. I hope the noble Lord will feel that we have sufficiently explained that aspect of the finances.
The noble Lord made further comment upon the specific earmarking of funds from the block grant for transport purposes. I can assure him that there is no earmarking within the block grant. That is a standard practice. Nor is there any earmarking within the TSG, because that is a grant for a programme. There will be no decrease in the money to be made available in grants to operators. I hope that on that point the noble Lord will feel that that is about as far as we can go at this stage.
The noble Lord referred to the new procedures weakening the transport policy programme, the TPP, but I can assure him that there will be no weakening at all. The county councils have agreed the programme and this order does not weaken the TPP system as a whole. The noble Lord asked a number of questions relating to the financial implications, which I have tried to deal with in detail. If there are any matters which have omitted, I will certainly write to him.
§ Lord Underhill
My Lords, before the noble Lord sits down, could he deal with the question of the review in spring 1982?
§ Lord Sandys
My Lords, that is a point on which I shall have to write to the noble Lord in detail. There are no precise details which I can give him in answer to that today.
§ On Question, Motion agreed to.