§ 3.48 p.m.
§ The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin)
My Lords, with the leave of the House, I should like to repeat a Statement which is being made in another place by my right honourable friend the Secretary of State for the Environment.
"With permission, Mr. Speaker, I will make a Statement on current expenditure by local authorities.
"My right honourable friend the Secretary of State for Wales will be making a Statement later today, and my right honourable friend the Secretary of State for Scotland will be making a Statement shortly.
"My department has now analysed the revised estimates of local authorities in England and Wales for the volume of their current expenditure in 1980–81 and the budget plans of English local authorities for 1981–82. In the light of this analysis I have today put proposals to the Consultative Council on Local Government Finance.
"Honourable Members will recall that when local authorities in England and Wales originally submitted their budgets for 1980–81 these suggested a planned excess in the volume of current expenditure by local government as a whole of some £740 million at November 1979 prices. This was 5.6 per cent. above the Government's public expenditure plans. As a consequence, in June last year I called for revised budgets which led local authorities to reduce this planned excess to some £350 million at 1979 prices, or 2.6 per cent. above the Government targets.
"In order further to reduce this remaining excess, the Government asked the House to approve the withholding of £200 million from the increase order 1125 for England and Wales made in January 1981 on the understanding that we would be prepared to restore all or part of that sum if the outturn figures for 1980–81 showed an acceptable reduction.
"The analysis of the revised estimates for 1980–81 indicates that there will still be a volume excess, which the local authority associations estimate could range from £50 million to £250 million in England. Final figures for the outturn expenditure in 1980–81 are however not yet available. I shall have to wait therefore until more accurate outturn figures are available in the autumn before considering restoration of grant.
"Budgets of local authorities in England for this year—1981–82—indicate a volume of current expenditure about £800 million or 5.3 per cent. above the Government's target level at November 1980 prices. Local authorities have also made provision for higher pay and price increases than allowed for in the cash limits, and have thus budgeted for a cash excess of £1,250 million above the amount assumed for current expenditure in the rate support grant settlement. This is an inadequate response to the Government's request for lower public expenditure and protects the current consumption and staffing levels of local government at the expense of ratepayers whose ability to pay is already seriously diminished by the present recession.
"The traditional relationship between central and local government rests on the clear understanding that local government keeps within the overall financial policies of the central Government. The Government believe that this understanding must be upheld. I am therefore asking all local authorities to review their budgets for 1981–82 by the end of July in order to achieve levels of expenditure consistent with the Government's public expenditure plans.
"If the call for revised budgets does not produce a satisfactory response, I propose to ask the House in the autumn to approve a reduction in the total amount of grant available this year. I cannot be certain until I know the results of the revised budgets what would be an appropriate figure. But if the present spending plans remain unchanged the Government consider that £450 million would be the appropriate amount to withhold in grant. Authorities which achieve the Government's volume targets will not suffer from this reduction in grant. I also intend that those close to their volume targets will be partially exempted.
"I am placing in the Library detailed figures showing how this proposal would affect individual authorities. I shall be inviting detailed consultations about these proposals with local government. I must emphasise that it lies entirely in the hands of local government to revise its plans so as to achieve the necessary reduction of public expenditure and thus to avoid loss of grant.
"The House will want to know that over one-third of all local authorities, responsible for about 11 per cent. of local authority expenditure, have already budgeted within the Government's volume targets and thus will lose no grant from this reduction 1126 if they stick to their present plans. Over half of all local authorities, responsible for over one-third of local authority expenditure, would already be protected wholly or in part from holdback.
"The Government have not only to consider the consequences of excessive expenditure, but also the extent of the inequities in the way in which local revenue is raised through the rates. The Government therefore intend to issue a consultation document on the alternatives to domestic rates in the autumn. In the meantime we are considering further measures, including legislation next Session, which are needed to bring home to individual local authorities and their electorates the consequences of high-spending policies."
That is the end of the Statement, my Lords.
Following is the Statement made by the Secretary of State for Wales in the House of Commons, referred to by the Lord Denham at the end of Question Time this afternoon:
With permission, Mr. Speaker, I will make a Statement on current expenditure by local authorities in Wales in 1981–82.
My department has analysed the local authorities budget plans for 1981–82 and these show that in aggregate planned current expenditure will exceed the Government's target by about 2.2 per cent. or £21 million at November 1980 prices.
Any current expenditure excess is a matter of serious concern and I have given very careful consideration to the need for corrective action. In doing so I have taken account first of the fact that in recent years budgets have in aggregate over-stated the actual volume of current expenditure by proportions not dissimilar from the present indicated excess and, secondly, the considered view of the Welsh local authority associations that the Government's current expenditure target will be met.
In view of these considerations, and noting that in aggregate Welsh local authorities have clearly made efforts to meet the Government's current expenditure targets, I have decided not to call for revised budgets or to withhold grant at supplementary report stage this autumn.
In adopting this course my determination to see that current expenditure is kept at the level allowed for in the RSG Settlement is in no way lessened; rather I am deferring judgment on the need to withhold grant. If despite the local authority associations' views there is an overspend this year, I will take action to reduce the total amount of grant available by the amount of that excess. In so doing I would protect authorities who have made an appropriate contribution to the necessary expenditure reductions.
This decision reflects my trust that Welsh local authorities will meet our expenditure target. It is entirely up to them both individually and collectively whether I will need to withhold grant at a later stage.
I have communicated this decision to the Welsh Consultative Council on Local Government Finance. I have also told them that I shall be consulting them in due course about the matters concerning the rating system to which my right honourable friend the Secretary of State for the Environment referred at the end of his statement this afternoon".
§ 3.55 p.m.
§ Baroness Birk
My Lords, I thank the Minister for repeating the Statement which was made by his right honourable friend in another place. May I say that it does fill one with total alarm and despondency at what has been happening between local government and central Government in this country. First, I think it is fair to say that the concept of overspending in this generalised way is really an invention. What local government is not able to do is to comply with arbitrary 1127 targets. Local government's record in spending has been very good over the last six years, and 1980–81 was the first occasion of excessive expenditure. I was also struck by the Secretary of State's remark on page 2, in that, two months into the financial year, it seems ridiculous to punish authorities on the basis of what they are going to do when he does not yet know the final outturn figures for 1980–81.
Thirdly, the targets are quite unrealistic, and this has been shown since 65 per cent. of local authorities, both Labour and Conservative, have been unable to comply with them. Fourthly, to take away a grant which has already been promised and to do it retrospectively with decisions yet to be taken, seems to me to be really quite scandalous. It is like penalising somebody and not letting them know what the penalty is likely to be until they have done something for which they incur the penalty.
I would point out that it was shown clearly that the people who voted in the elections of 7th May overturned in many authorities Conservative rule for Labour rule. This meant that four out of the six shire authorities who are now Labour-controlled were in fact voting against Government policies and for increased expenditure. These are people who, all over the country, are suffering from the tears in our social fabric in social services, education and everything that local government does. It seems to me that this is really an extra nail, if you like, in the coffin of local government. It is becoming more and more the puppet of central Government.
Finally, may I ask the Minister whether the last paragraph, where the Secretary of State talks about introducing legislation even before the consultation takes place, means that the Government intend interfering with the traditional rights of local authorities to make any shortfall in the block grant right by levying a supplementary rate? That is to say, do they intend to claw back even further sums from the block grant or to limit local authorities in the way in which they can raise certain rates?
§ 3.58 p.m.
§ Lord Evans of Claughton
My Lords, from these Benches we would like to thank the Minister for repeating the Statement made by his right honourable friend. We also welcome the intention expressed by the Government to introduce a consultation document in the autumn on alternatives to domestic rates. That is something for which my party has been looking for many years, and I hope that in the consultation document serious consideration will be given to capital and site value rating and indeed to the possible introduction of a local income tax.
From these Benches we have always taken the view that local government expenditure has, on the whole, kept better to the public expenditure limits than have other public agencies. It seems, time and again, that a special and unfair case is being made in respect of local government. Would the Minister not agree that on the inadequate figures he has produced—as he himself admits—on the whole, local government is keeping fairly well within the limits in view of continuing inflation and of wage settlements that are very often beyond the control of individual local authorities?
1128 May I ask the Minister to try to ensure that if he does insist on further cutbacks they must not affect the education, social and welfare services and measures to reduce unemployment entered into by hard-pressed local authorities, particularly of inner urban areas, and particularly in view of the fact that the rate support grant has been biased against inner urban authorities in the last dispensation?
Finally, would the Minister not agree that the 1981 county council elections indicated fairly clearly that the ratepayers were dissatisfied with the way Conservative local government was going? Would he therefore not agree that local councillors have been elected to carry out local policies and should be left to get on with them?
§ 4 p.m.
§ Lord Bellwin
My Lords, to deal with the points made by the noble Baroness, Lady Birk, she was expressing—to quote her—alarm and despondency at what is happening to the central and local government relationship. I, too, have long been concerned about that, but it is certainly incumbent on local government now to be as responsible as it always was in the past, and to work within the framework set down by central Government. But we are seeing, possibly for the first time—certainly on the scale that is envisaged in the figures that I have given—central Government's policies being thwarted by local government, if local government is not willing to work within those overall parameters.
The noble Baroness said that local government's record is good. I entirely agree that, in the past, it has been good—certainly good in the sense that it has always come out very close to the original estimates—and would that central Government had always had as good a record in that respect. But what we are talking about is the position as it now is, and as the figures that we are talking about seem to indicate. If we are talking about alarm, then I should have thought one would have been very alarmed to see a potential overspend of the magnitude that I referred to a few moments ago, when I talked of £1,250 million. I should have thought that that was cause for much concern and for more than alarm.
No Government could idly sit by and simply accept that position and, at the same time, try to pursue the objective which this Government are doing, of reducing public spending. Policies of higher local spending are against the national interest, and against the long-term interests of those who work in the councils, because all they will lead to, in the end, is the closure of firms, losses of jobs and the out-migration of skilled and professional workers. There is evidence that that is so.
The noble Baroness went on to say that it is ridiculous to punish when the figures for 1980–81 are not known. What we are doing is not punishing at all. We are simply drawing attention to some information which is now available to us and which indicates that if nothing is done about it then we shall be in the situation that we foresee. I do not consider that it is one day too soon to be looking at that right away and asking: What is that we are doing today? We are asking local government to take this back and look again and see what they might do. In the time between 1129 now and the end of July, we shall certainly want to be talking and consulting with them to see what they feel able to do, what they feel unable to do and how far we can, if you like, help one another to get to where we must be at the end of the day. So that that certainly is consultation.
As regards the elections in May—and the noble Lord, Lord Evans, made the same point—one would really have to look very carefully at some of the statistics surrounding those elections, in order to get a true flavour of the extent to which they gave a mandate. I would point out that of the total local authority current expenditure, 60 per cent. comes from Exchequer grant, 24 per cent. comes from non-domestic rates, which are paid for by industry and commerce which have no vote at all, with the balance of 16 per cent.—and, in some cases, the figure is much lower than that—coming from people who are domestic ratepayers and who vote. It may well be said that that is all right, but the fact is that if no one is going to look to protect all these other bodies of people, we shall be in grave difficulties.
Yes, my Lords, it is a mandate and local government has always had one, but always within the boundaries set down by central Government. That was a fundamental tenet. Indeed, it was the proud boast of those of us in local government that that was our tenet, and we often did things that we did not like at all, because central Government were laying them down. But the rule is that Governments have to govern in the longer term interests of the total domestic scene. We believed it then, and I believe now that local government will respond as it has done in the past.
To comment very quickly on the observations of the noble Lord, Lord Evans, I think that I covered his point about local government doing it better, if you like, than central Government; and, on the whole, they have kept within their limits. He asked whether we would ensure that any cuts did not affect education, social services and so on. We have never set out to say how individual authorities should run their affairs or what their priorities should be. Only they can decide that, as the circumstances vary, as both he and I know so well. That is a matter for local government. But I hope that, in looking, they will be looking not just at the services, but at the cost of their provision and at other opportunities that may exist.
§ Lord Boyd-Carpenter
My Lords, is my noble friend aware that many ratepayers, who have been shocked by the massive rate increases which have resulted from the increases in local government expenditure, will be very glad to see that the Government are now taking action in this matter? Is not the argument of the noble Baroness, Lady Birk, and the noble Lord, Lord Evans, that recent local government elections results show that the ratepayers do not mind this, vitiated by the fact that a very large number of local government electors are not ratepayers, and that the biggest ratepayers of all—the business ratepayers—have no vote?
§ Baroness Stedman
My Lords, from this Bench we should also like to thank the noble Lord for repeating the Statement. I wish that he had paid some tribute to the way in which councils have made really strenuous 1130 efforts to try to meet their spending targets and, at the same time, to maintain essential services for their electors. I am quite sure that this antagonistic approach towards local authorities is not the most effective way of getting them to reduce their expenditure.
The only part of the Statement that I can welcome is that part which refers to the fact that there is to be a consultative document issued to look at alternative systems in rating. Some of us have argued for a long time that we need to do something about it, or, if we are stuck with the present system, we need to have more regular revaluations. According to the Statement, this consultative document is to be issued in the autumn, but I ask the noble Lord: with whom will the Government consult, how long will be allowed for consultation and when can we expect the legislation to implement the decisions after that consultation has taken place?
We have had long arguments across the Table about grant related expenditure, grant related poundages, multipliers and so on, during the passage of the Local Government, Planning and Land Act 1980. Section 59 of that Act provides that the multipliers can be used only to increase an authority's grant or to limit the increase over the previous year, and Section 58 provides that where an authority's total expenditure is at, or below, its grant related assessment, then changes in block grant must be proportional to the changes in the expenditure. Will those two sections of the Act be very fairly complied with and will they also apply to any supplementary reports, in the same way as they do to the rate support grant report?
There is something like 5 or 6 per cent. overspending in the shire counties and, with one exception, before the elections all those were Conservative controlled. How is this to affect those authorities when Essex is overspent by £24.7 million, Kent by £19.1 million and my own county of Cambridgeshire by £13.9 million? Will the formula deal with those counties as well, or is it arranged so that it will catch only the Labour controlled authorities, which is what we were afraid of during the passage of the earlier Act?
Also, will the grant reduction, if it conies about, take account of the fact that 60 per cent. of the money comes from the Government and, therefore, it is only 60 per cent. of that overspending that is really the concern of the Government in the reduction of the grant? It is not the local authorities who are being penalised; it is their ratepayers who will be penalised by having to pay supplementary rates to provide the services which local people think are essential. Once again—I must say it—it is the people on the ground who know best what is wanted in their area, rather than the man sitting in Whitehall.
§ Lord Bellwin
My Lords, may I first thank my noble friend Lord Boyd-Carpenter for his very helpful remarks, and may I also take the opportunity to wish him many happy returns of the day. May I say to the noble Baroness, Lady Stedman, who referred to an antagonistic approach, that this is anything but an antagonistic approach. If we are seriously concerned with a source which accounts for some 20 to 25 per cent. of all public spending—as we are and have to be—we must surely recognise that, in order to get to where we need to be, though not to where we necessarily 1131 want to be, we must go along together with local government. I, as much as anyone, would want that to be the approach. When I spoke of consultation that is what I had in mind. Yes, we shall consult. We do not consider that we are at all antagonistic. Conversely, I feel confident that those who are responsible for the leadership of local government will bear in mind what I said earlier, which I shall not repeat, about the responsibility which falls upon local government not to thwart the objectives of the national Government.
The noble Baroness asked: with whom would we consult? I readily tell her we shall consult with anybody who wishes to give an opinion and a view. We are saying that this has been "on the go" for so long that it cannot go on any longer, that we have to come to conclusions. There will be an opportunity for everybody to make a contribution, but we are not going to put it off beyond the time I have mentioned.
Turning to the noble Baroness's question as to whether these measures will affect only Labour-controlled authorities which are overspending, my answer to her is, certainly not. We are talking about everybody who is involved. If local government will give us what we need, there will be no need for any holdbacks. That would be the most desirable objective. It is what many of us want to see happen, and I hope we shall be pleasantly surprised by the response we receive.
As to ratepayers being penalised by supplementary rates, yes, that is one option. But if we reached that point, surely local government would be turning its back upon what the Government need to do. I am not so sure that local government will rush to do so, although there will be some authorities which will. On that point, I would refer the noble Baroness to the last part of the Statement.
§ Lord Sandford
My Lords, is my noble friend aware that I agree entirely with the noble Baroness, Lady Birk, and the noble Lord, Lord Evans of Claughton, when they say that hitherto it has been possible to claim—I have often claimed—that local government has been more successful in keeping within the limits imposed upon it by the policy of central Government than have most central Government departments and agents of central Government? However, I disagree entirely with my noble friend if central Government go on to say, as I think they do, that matters can be left as they are by the Secretary of State for a moment longer. A budgeted overspend of 5 per cent. is far too great to be tolerated. If one-third of local government have already succeeded in keeping their budgets within the limits needed, I am confident that a very substantial number of other authorities will be able to do likewise once the challenge has been put to them, as it has been by this Statement. I would urge my noble friend, however, to rely for as long as possible upon the good sense and responsibility of local government to do what is required of it before taking any further steps which can be interpreted and misunderstood as an interference by central Government in the affairs of local government.
§ Lord Bellwin
My Lords, I am grateful to my noble friend, to whom I gladly give the assurance that he called for in his last sentence.
§ Lord Pitt of Hampstead
My Lords, there can be two interpretations of a 5 per cent. overspend. One is that local authorities are spending to the extent of 5 per cent. more than they should. The other is that the basic grant-related element—that is, the basic expenditure which the central Government are laying down—is too low. Therefore, in their consultations with the local authorities will the Government bear that point in mind and see whether there can be a negotiated agreement? It seems to me (I am expressing an opinion) that what has happened is that central Government have laid down a level of expenditure which in fact is too low and which local authorities are finding it extremely difficult to meet. There is a meeting point which for the last two years or 18 months we have been talking about and which seems to me to be the problem: that central Government have laid down a level of expenditure, that that level of expenditure is very difficult for local authorities to meet and that central Government are insisting upon their level of expenditure being met and are using a particular weapon which in fact does not help. All it does is to cause the ratepayers to pay more.
§ Lord Bellwin
My Lords, the noble Lord, Lord Pitt of Hampstead, has made a fair point. It is a question of what the level should be. I would only say to him that Governments have to decide what levels can be afforded in total. It is quite true that there are, and will always be, local situations where a good case can be made, but this does not in any way detract from the base of the argument which is: what can we afford? For very many years we have said, "We need this; therefore we must have it", but there comes a point where, as a Government, one has to say, "We cannot afford it". However, I take the noble Lord's point about the need to consult and I assure him that we intend to do so.