HL Deb 04 June 1981 vol 420 cc1363-71

4.6 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 right honourable friend the Secretary of State for Scotland. The Statement is as follows:

"I will make a Statement on current expenditure by local authorities in Scotland. I have today notified the Convention of Scottish Local Authorities of my proposals which I shall discuss with them at our next meeting on 15th June.

"It is a matter of extreme concern to me that, in their budgets for 1981–82, local authorities in Scotland plan to spend about £180 million at November 1980 prices (8.8 per cent. in volume terms) more than allowed for in the 1980 rate support grant settlement. 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 £235 million above the amount in the RSG settlement. This is a totally unacceptable response to the Government's request for lower public expenditure in the interests not only of the national economy but also of ratepayers.

"I propose a twofold response. First, I am asking all local authorities to undertake an immediate review of their budgets in order to reduce their spendings to levels consistent with the Government's expenditure plans. Authorities are being asked to report to me by the end of July.

"Secondly, should the Local Government (Miscellaneous Provisions) (Scotland) Bill be enacted, I intend to take immediate action to reduce the rate support grant payable to certain local authorities who are planning to incur expenditure in 1981–82 which I am satisfied is excessive and unreasonable. The procedure (set out in the Local Government (Scotland) Act 1966) requires me to report to the House on the circumstances of each case and to obtain the approval of the House to such grant reductions, after giving the opportunity to the local authorities concerned to make representations. In order that the local authorities which may be affected initially may have the maximum opportunity to consider their responses and to examine the scope for reductions in planned spending, preliminary notice has today been given to them of the assessments upon which I have based my provisional conclusions. I shall, of course, be prepared to consider reducing the assessments in the light of any representations I receive. This preliminary advance notice is my response to requests for early notice of my intentions. It does not rule out the possibility of later action against other authorities.

"The extent to which I reduce rate support grant will depend upon the results of the revised budgets. If present spending plans were to remain unchanged, I consider that it would be appropriate to withhold £100 million. It will be my objective to secure as much as possible of this reduction by selective means but, as I have already warned the Convention of Scottish Local Authorities, it may also be necessary to reduce grant generally if present budgets are not substantially reduced. This would be achieved by reducing the amount of grant which might otherwise have been paid at increase order stage. I must therefore ask all authorities to review their budgets for further savings to keep any general abatement of grant to the minimum necessary. Such general abatement should be significantly lower than would otherwise have been necessary provided that the selective powers sought in the Bill are granted to me, since this would enable me to concentrate the necessary abatement upon those most responsible for the excess. This will be of benefit to the majority of local authorities in Scotland.

"I now turn back to 1980–81. As honourable Members will recall, local authorities' original budgets for 1980–81 suggested a planned excess of £83 million (or 4.9 per cent.) at November 1979 prices above the figure provided for in the 1979 rate support grant settlement. I called for revised budgets from all authorities and their response was that the outturn would be significantly less than the budgets. The provisional outturn figures for 1980–81 suggest that this did not happen and I have already expressed to the Convention my deep concern about this situation. I shall consider further action when final figures are available in the autumn, but I am bound to make clear now that it remains my intention to effect reductions in the rate support grant under my existing powers where I am satisfied that excessive and unreasonable expenditure has been incurred. If the final figures for outturn continue to disclose an unacceptable excess, I intend to effect grant reductions in the range of £40 million to £60 million. The higher figure will be appropriate if the excess of £83 million disclosed by the provisional returns is confirmed. I will give further consideration to the means of securing such a reduction and the possibility of part or all of it falling upon rate support grant for 1982–83.

"In the more general context, my right honourable friend the Secretary of State for the Environment announced on 2nd June that the Government are considering further means to bring home to individual local authorities and their electorates the consequences of high-spending policies. I shall be considering with my colleagues the action, including legislation next Session, which may be required in Scotland. The Government must also consider the unfairness of the rating system. I shall undertake discussions with the Convention of Scottish Local Authorities on the consultation document (which as my right honourable friend said we intend to issue in the autumn) which will deal with the alternatives to domestic rates".

My Lords, that concludes the Statement.

4.12 p.m.

Lord Ross of Marnock

My Lords, with this Statement local government in Scotland as we know it, responsible and independent and accepted as such, is at an end. Hitherto it has been the advice given to electors in Scotland that the hope of the Conservative party was to make Scotland's local government more financially independent and responsible. You could paper the walls of this Chamber—big as it is—with White Papers and papers of speeches made to that effect by members of the party opposite.

But now local government is denied independent judgment, responsibility for its decisions, to its own people, and they are the people properly to judge whether or not the electors were wrong in placing their faith there. The fact that 59 out of 65 local authorities could not reach the guidelines is an indication that there was something wrong with them. If reckonable expenditure is reduced to an unreasonable amount, and if one further reduces the part that Government pay—as they have in Scotland—over two years, then inevitably rates will rise and expenditure will seem excessive. But you have to relate that to services. We are told in this Statement—I wonder why it was made at all because there is a lot more information on the tape than in the Statement—that there are seven local authorities which are being specially reprimanded and warned. This is the selective element which can be implemented when the Government get the Act of Parliament. Am I right in thinking that those seven have been told? We have not been told which they are. Why were they selected? What were the priorities in respect of that?

Dumbarton, for instance, is one of them. Dumbarton is one of the local authorities which is not seventh or even eighth on the list of high spenders. What is their percentage increase?—remembering that 8.8 per cent. was the average for them all. Could he compare that with Edinburgh districts? Since this letter has been sent to all the local authorities, I should be able to be told what the increase is for Edinburgh. What was it for the Western Isles? Bearing in mind the actual facts are that in the islands neither of the authorities could reach the guidelines, you can put the two together and the increase above the guidelines is 34.9 per cent. All this information has been available since the month of March. This is why we kept on asking during the proceedings on the Bill for some information from the Minister. How can he justify that decision? What was the means of selection, and was Dumbarton merely dragged in because it was a Labour authority? There are Tory authorities way above the guidelines and much higher than some of those that have been mentioned.

The Statement said that the local authorities have already made provision for higher pay and that price increases have been allowed. What are the payments that have been made that are higher than the guidelines? For the teachers? Have the Government nothing to do with that? Local authorities cannot settle without the authority of the Government because the Government are to participate within that settlement of the teachers. What about the police? Remember that the guidelines were 6 per cent. You cannot possibly breach the guidelines realistically in respect of this kind of thing. Can we be told what are the pay settlements which are higher and to which the Government object, and can we be told the extent to which the Government themselves are participants in those settlements?

Taking the outturn for last year, the suggestion is that they are going to be penalised probably between 40 per cent. to 50 per cent. This year in relation to the estimates they are going to withhold £100 million. That is £160 million worth of unemployment. What will be the unemployment factor if these default powers are carried out? It involves teachers; it involves social workers. The Minister says that the ratepayers will benefit. The ratepayers want services. They want a reasonable standard of services. This unreasonable attitude of the Government means that we may have a certain amount of reduction in rates if we get the new power in respect of that, but services will be considerably reduced.

What does the Minister think will be the reaction of local authorities to this? The local authorities are where the Government want to sack people. It is the local authorities who have to reduce their services. They are to be just puppets of Whitehall. Is there any possibility that any of the local authorities will say: "Well, if we have got to do this, you come in and do the dirty work yourself"? They have gone down a road of confrontation, and now we are coming up against the reality of the meaning of the policies.

Am I right in thinking that what is being done in Scotland is far worse than what is being done in England? The reduction in Scotland is £160 million. I think we in Scotland have an eleventh of the population of England and Wales, and the reduction there is about £450 million. That is the extent. This is not democracy; this is tyranny. It is from a Government with no mandate at all to do anything in Scotland. They may have a mandate in this House by numbers, but they have not got it in another place when it comes to Scottish Members. I think that the present Secretary of State has a lot to answer for, and eventually he will be asked to answer to the electors of Scotland.

4.20 p.m.

Lord Tanlaw

My Lords, we from these Benches wish to thank the Minister for the Statement. While agreeing with the principle of cost effectiveness for both the local and the central executive we have some doubts about the method outlined in this Statement. Would the noble Earl the Minister perhaps be aware that certain quarters in Scotland interpret this Statement in its present form, as no more and no less than a threat from South of the Border to the authority of locally elected councillors, as well as creating doubts as to their competence in budgetary matters? The noble Earl is well aware that the Scots have a tradition of competence in this area, to the extent that we are often a butt of jokes, but I am afraid this is not a subject for much humour for those councillors in Scotland who will receive the Statement.

Would the Minister not accept that, in its present form, no distinction has been made between capital expenditure and running revenue expenditure? There are certain capital programmes already in train in a number of the local authority areas in question, if not in all of them, which will actually reduce the annual expenditure year by year but, if they are not allowed to be implemented, they will, like any other capital programmes become inefficient and un-cost-effective and will add to the burden on the ratepayers. Therefore, can the noble Minister make a distinction between capital budget programmes in this expenditure, which is only described as current expenditure for local authorities, and that which is annual expenditure of costs, which is not capital? If this distinction can be made—and I doubt whether it can because the Government themselves do not make this distinction in their own budgetary matters—I believe there will be some more co-operation North of the Border in Scottish authorities in accepting a cost-effective programme. But if the Minister is unable to make the distinction between what is capital expenditure and what is running revenue expenditure, then I cannot see how any councillor can take this Statement helpfully or constructively.

The Earl of Mansfield

My Lords, perhaps I may respond to those two speeches from the Front Benches first. The noble Lord, Lord Ross, alleged, or certainly implied, that my right honourable friend's Statement and the action which the Government have been reluctantly impelled to take in this matter are bringing the responsibility of local authorities to an end and that in effect local authorities are being denied judgment to make decisions about local affairs. I think one has to keep a sense of proportion in this. Ever since this Government came to power, my right honourable friend, on what might be described as a quarterly basis, has made no secret of his dismay at the spending plans of local authorities and has told them they are too high and that the country simply could not afford them. When one considers that no less than two-thirds on average of every pound which local-authorities spend comes from the pockets of the tax payers through central Government, it is a negation of function for Government simply to turn a blind eye or not to take the requisite action to see to it that local authorities, or some of them, who refuse to comply with the guidelines which are laid down in the interests of the whole country, and not least of our inflationary policy, are complied with.

The noble Lord asked me about the seven local authorities whose names have already appeared on the tape. The information which has already appeared is minuscule in scope compared with the content of my right honourable friend's Statement, and I am sure that the noble Lord, who has seen both, would agree with that. The answer is that they have already been communicated with by letter.

The noble Lord went on to say that the ratepayers want services. Of course the ratepayers want services, but what they want above all is a level of rates which is not going to cripple them; and when one bears in mind that a very large proportion of business firms who have the privilege of paying rates have no vote and no local say at all in how their money in fact is going to be spent, then I suggest that democracy is not quite so apparent as the noble Lord seems to imply.

The noble Lord also asked me why apparently there are to be reductions of £100 million in Scotland and £450 million in England. He says it is unfair when one has regard to the levels of population in each country. The determination of grant reductions is not an exact science, but if noble Lords were in a position to compare the figures in my right honourable friend's Statement with those which were given by my right honourable friend the Secretary of State for the Environment on 2nd June, they would know that the overspend we expect for 1980–81 and for 1981–82 is proportionately very much higher in Scotland than in England.

The noble Lord, Lord Tanlaw, asked whether it was possible to distinguish between capital and revenue. The figures which I quoted of course exclude loan charges and relate to current expenditure which qualifies for rate support grant. Therefore, if I may say so, I do not think that was a particularly good point. The noble Lord talks about the tradition of competence so far as Scottish local councillors are concerned and of course I concur that in the vast majority of local authorities in Scotland the vast majority of councillors perform their tasks in a competent and faithful manner. Unfortunately, there are exceptions, and the totality of what they have done by way of performance is such that, reluctantly, the Government have been driven to taking the action they have.

Lord Wilson of Langside

My Lords, may I ask the noble Earl two questions? The first arises out of the conclusion of the Statement which referred to the unfairness of the rating system in Scotland. Can he tell your Lordships for how long this matter of fairness of the rating system has been under consideration in the Scottish Office under successive Governments? If my recollection that the period of time may be calculated in decades rather than years is correct, can we expect an answer to this problem to be forthcoming soon from the Government?

My second question arises out of the general. Are the Government conscious, in this context and at this particular time, of the importance of having in mind the political tensions which have always existed and which have varied only in degree from time to time—political tensions between the Scots and the English? This is of particular importance at the present time when of course, as the noble Lord, Lord Ross of Marnock, has already said, the Government are not significantly supported in Scotland. In that situation, my question is: are the Government aware, in handling this matter, of the need for very great political skill and wisdom?

The Earl of Mansfield

My Lords, I am not, happily, privy to what went on in the Scottish Office before the latter part of May 1979. But we all know that there has been discontent with the rating system, probably throughout the 20th century. It has been getting more and more unfair, and more and more unsatisfactory, as the increasing complexity of our business, economic and social life has, as it were, disturbed the balances between domestic and industrial or commercial properties which have to pay rates. Nevertheless, I think that things have moved with a good deal greater speed in the last two years than they have before. We have been actively considering how we can remedy the present totally unsatisfactory and unfair system. There will be a discussion paper in the autumn, and I hope that when it comes out the noble and learned Lord will read it and, no doubt, will have a part to play in future discussions.

So far as his second question is concerned, which was whether the Government are conscious of the political tensions in Scotland, my answer is: Yes, of course. There are bound to be political tensions in any part of the country and, indeed, throughout the United Kingdom, if we continue to live so high above our means that we enter into an era of high inflation, with all the dangers for political stability which we know that can bring about. It is to reduce these potential dangers that, reluctantly, the Government are acting in the way they are.

If I may say so, it is a very dangerous road for the noble and learned Lord to go down when he talks about the Government having support, or lacking it, in one portion of the United Kingdom or the other. We are the Government of the United Kingdom. If one had wanted to go down that road, one could have said that the last Government had no mandate in England. But I do not think it would have been profitable or even proper—and it was never said when noble Lords who are now on this side of the House were sitting on the noble and learned Lord's side of the House—to make that kind of suggestion now.

Lord Galpern

My Lords, the noble Earl has agreed this afternoon that the local people desire public services, but they have a greater regard for the incidence of the amount of rates that they have to pay for the provision of them. We have heard this afternoon the statement that some local authorities have paid wages which are beyond the guidelines and far too high. Is it then suggested—bearing in mind that the highest percentage of local government expenditure goes on wages and salaries—that the wages and salaries ought to be cut? Furthermore, in cases where local authorities carry out a sincere and genuine review—for that is what they are being asked to do now, irrespective of what has gone before—and are unable to effect any cuts, will the Government or the Secretary of State for Scotland then step in and indicate to those authorities where, in their opinion, these cuts could be effected?

The Earl of Mansfield

My Lords, there will obviously be a continuing dialogue between my right honourable friend the Secretary of State, and local authorities. But I would remind the noble Lord, Lord Galpern, that, in order to produce rate support grant, my right honourable friend has to be satisfied and, indeed, has to satisfy the House of Commons that the expenditure plans are not excessive and unreasonable. That, I think, is the criterion which we should have very much in the forefront of our minds.

I am not going to point at any individual local authority or at how it comports itself, but I suggest that, bearing these matters and considerations in mind, the Secretary of State will make up his mind in any report that he sees fit, if the Bill which is presently awaiting its Third Reading in your Lordships' House reaches the statute book, and the Secretary of State is given power to approach the House of Commons in the way that is contemplated in the Bill.

Lord Ross of Marnock

My Lords, I am sure that the Minister does not want to mislead the House and those who are unfamiliar with the Bill that is now passing through the House, but it is not simply a question of being unreasonable and excessive. There are also certain comparisons to be made, and regard to be had to financial situations and economic situations of comparable local authorities, as well as all kinds of other things. We have been given no information at all about the seven which have been selected.

I asked the noble Earl a question about Dumbarton vis-à-vis Edinburgh. He has not replied to it. I asked him a question about pay settlements and about the extent to which the Government are visiting the inequities of failures of their own, in respect of pay settlements, upon local authorities. If the noble Earl wants to stop for advice, I can sit down and let the noble Lord, Lord Bellwin, say what he thinks the answer should be.

But I sincerely hope that the noble Earl will not fail to appreciate that this really is the end of an era. I was reading the report of the Royal Commission on Scottish Affairs last night, and followed that up with what was said by working parties about the position of Scottish local authorities vis-à-vis central Government. We have moved a long way from the hopes that were expressed and, indeed, the votes of confidence that were given to Scottish local government. Let us bear in mind that after two years of Tory Government, we have reached an impasse such as we have never known before.

But may I have an answer to those two questions, and may I make one other point, if we are to make preliminary judgments? Will the Government publish the budget estimates and the percentage of their excess over the guidelines of all the local authorities? The noble Earl must have the information, because he has sent out that warning letter to all local authorities, apart from the selected seven. Let us see how he did his selection.

The Earl of Mansfield

My Lords, we, as opposed to us, are not going to see that in the content of a Statement which is repeated in this House. As the noble Lord, Lord Ross, well knows, there are much more complex features about the Bill and its effects than were apparent from either the question of the noble Lord, Lord Galpern, or my reply. Both were expressed in, possibly, simplistic terms. Neither am I going to comment on the effect on individual local authorities. It is much too early to give any precise indication of the possible effects on individual local authorities, how they are to be treated and how they will respond. This must depend upon detailed consideration, which my right honourable friend will have to give to the individual situation of each local authority. That is the basis upon which—if he does—he will seek reductions on a selective basis.

Lord Tanlaw

My Lords—

Earl Ferrers

My Lords, with respect, we have been on this Statement for half-an-hour and, considering the amount of business that there is to take place, I think that we should move on.