§ 3.45 p.m.
§ The Minister of State, Department of the Environment (Lord Bellwin)
My Lords, with the leave of the House, I beg to repeat a statement which is being made in another place by my right honourable friend the Secretary of State for the Environment. The statement reads as follows:
"With permission, Mr. Speaker, I should like to make a Statement on the rate support grant settlement in England for 1984–85. The necessary order is being laid today, and there will be a debate early in the new year.
"Local authority current spending forms part of the total of public expenditure. For next year, the House endorsed that total in the debate following the publication of the Autumn Statement by my right honourable friend the Chancellor of the Exchequer. The rate support grant report which is published today (and copies of which will be in the Library) deals with three elements which bear on the level of local authority current spending. These are, first, the targets for individual authorities which, in aggregate, relate to the total figure in the Autumn Statement: second, the amount of, and method of distributing, rate support grant to local authorities; and third, the arrangements for grant holdback for authorities who spend above target. There is of course a fourth element—namely, the level of rates and precepts; these are fixed by each local authority in the light of its own spending decisions and of the impact of the other three elements.
"In each of the last four years. local authority current spending has far exceeded the provision made in the public expenditure white papers. In each RSG settlement, therefore, my predecessors have had to take account of this by increasing the provision for the following year. For instance, for the current year, 1983–84, the provision was increased this time last year by about £1.1 billion, or around 6 per cent. Despite that, local authorities have still budgeted to overspend by a further £770 million or 3.8 per cent. In the context of our policy of holding public spending in check—a policy repeatedly endorsed by this House—such substantial overspending cannot be ignored. In order to keep total public spending under control, other spending programmes have to be cut, including local authorities' own capital spending. Those who complain loudest about restrictions on capital spending are often those who have forced them on us by excessive current spending.
"Of course, not all local authorities are equally to blame. On the contrary, around 80 per cent. of all authorities are budgeting this year to spend at or 252 within 2 per cent. above target. The great bulk of the overspend arises from the decisions of the remaining 20 per cent. of authorities to spend above those levels—some of them by tens of millions of pounds. Indeed, no more than sixteen authorities are responsible for around three-quarters of the total overspend. As the House knows, it is the Government's intention to deal directly with that problem of the highest overspenders in the Bill which I hope to introduce before Christmas. But that must be for another day. This Statement relates to 1984–85 which of course cannot be affected by the proposed legislation.
"For next year, therefore, we must sustain pressure for real reductions in local authority current spending across the board. At the same time, we must make a greater distinction between the majority of local authorities who have made efforts to find economies and the minority of high spenders who have not.
"Since August I have been consulting local authorities on the main proposals for next year's settlement. There have been two meetings of the Consultative Council on Local Government Finance; my honourable friends and I have met a great many deputations from individual councils; and we have received written representations from many more. As the House will see, we have taken account of some of the points raised with us in the settlement which I am announcing today. The main features are as follows.
"Provision for local authority current spending for 1984–85 is £20.4 billion—an increase of over half a billion pounds on the provision made in last February's public expenditure White Paper. The aggregate of targets comes to just over this figure, £20.5 billion. This is about 3 per cent. higher than the total of targets for the current year. The basis of fixing targets remains broadly as I proposed in August. The distinction between low spending and high spending authorities will be much more marked next year than hitherto. The targets for most low spending authorities represent a cash increase of 3 per cent. over their budget this year. The targets for most high spenders represent a cash cut of up to 6 per cent. In the light of the representations since August, I am proposing three minor changes which will have the effect of increasing targets for some 107 authorities. The three changes, which all operate to reduce the budget baseline and so increase the headroom for next year, cover budgeted transfers from housing revenue account; budgeted interest receipts representing more than 10 per cent. of expenditure; and expenditure more than 2 per cent. below target for 1983–84. The third change will give those authorities like Birmingham who budget well below target an incentive to continue to do so.
"Even with these changes, the targets are tough for everyone, but they are much tougher on the minority of high spending authorities where the biggest scope for economy lies.
"I now come to grant. Aggregate Exchequer grant for next year will be £11.9 billion, £90 million more than in the current year. It is 51.9 per cent. of total relevant expenditure compared with 52.8 per cent. 253 for this year. Although there are a number of technical changes in the method of distributing the grant to local authorities, these should have only a limited effect on the individual ratepayer.
"The third element in the settlement is the grant holdback. As the House knows, the system is intended to reinforce the pressure of block grant by making sure that the impact of overspending falls on ratepayers to whom local authorities are accountable and not on the general body of taxpayers. For authorities which exceed their target, I confirm the pattern of hold back proposed in October. At ratepayer level, holdback will be at the rate of two pence in rate poundage terms for the first one percentage point of overspend; four pence for the second; eight pence for the third; and nine pence for each percentage point above that.
"Next, disregards: certain spending is disregarded, that is, it does not count against an authority's spending for the purposes of the target and holdback regime. As this year, we shall disregard increased urban programme expenditure by partnership and programme authorities, and increased expenditure on civil defence. For next year, there will be an additional disregard. I propose to disregard increased expenditure on those community care schemes which are jointly financed with health authorities. I hope that this relaxation will be widely welcomed by local authorities.
"The House will wish to know the impact of all this on the level of rates. If local authorities budget to spend in line with the targets I have set, the average increases facing ratepayers next year should be very low. For some ratepayers, there could be rate reductions. High rates are unfair to ratepayers, damaging to industry's competitiveness and destructive of jobs. It is now up to each local authority to take its spending decisions in the light of the announcements I have made and with a clear view of the impact of those decisions upon their ratepayers."
My Lords, that completes the Statement.
§ 3.54 p.m.
§ Baroness Birk
My Lords, I thank the Minister for repeating the Statement made in another place. It makes extremely gloomy news, gloomy listening, and it will make very gloomy reading. The Minister started by talking about local authority current spending exceeding the provisions made in the public expenditure White Paper. I should like to know what are the comparable figures for Government overspending. Is it not true that local government spending has been kept in far greater control and check than Government spending? Is it not also true that the increased amount of overspend is a half per cent. of public expenditure and a quarter per cent. of the GDP—that is £770 million? Talking in the global terms of the budget we are considering for this country, that is just a drop in the ocean.
The Minister then said that other spending programmes have to be cut. I wonder whether he would tell me which of the other spending programmes of central Government are being cut and 254 which are being increased? He went on to say that those who complain loudest about restrictionson capital spending are often those who have forced them on us by excessive current spending. If the Minister had been with a number of industrialists as I was last night—I regret to say that I do not think they are very firm supporters of my party—he would have heard what they had to say about the Government's lack of investment in infrastructure in this country and the need to increase the capital spending.
When the Minister said that 80 per cent. of all authorities are budgeting this year to spend at or within 2 per cent. above target because of the changes that the Government have made on penalties—to which I shall come in a moment—it still means that they will be forced to make very real cuts. He went on to say that for nextyear we must sustain pressure for real reductions in local authority counter-spending across the board. There is no indication in this Statement, apart from the figures and the jargon which I agree cannot be avoided, about what the effect will be on the community and on people to whom this will make a great difference.
The cash increase over the 1983–84 level which the Statement sets out is, in real terms, a cash decrease; it is not an increase at all. It is a decrease for 1984–85 because once provision for inflation at 5 per cent. is taken into account, plus the 1 per cent. cash decrease in real terms, there is a cutback of 6 per cent.
At about this time last year I remember speaking from the Dispatch Box and referring to the 53 per cent. grant which I reminded noble Lords had dropped from 61 per cent. when the Government first came to power. Now we are talking about a decrease to 52 per cent. This means that for 1984–85, rates will go up 7 per cent. without penalties. With penalties many authorities will have to increase rates by over 20 per cent. just to stand still.
I wonder what the Minister would say to the Conservative leader of the Association of County Councils who described these ceilings as unachievable and entailing severe cuts in budgets and services. This is not just a one-sided or one-party question of how people will be affected. It will affect everybody everywhere. What it means in human and real terms, based on an assessment made by civil servants and officials on expenditure, is that there will be about 12,000 fewer teachers; over 8,000 day care places in day nurseries and elderly day care centres and other day care places will be closed; over 46,000 fewer homes will be able to receive home help services. There will be over 3,000 fewer firemen, and reductions in concessionary fares for the elderly. These are just a few of the examples.
Recently the Minister for the Arts put out a consultation paper in which he said that the Government might look favourably on local authorities being able to increase the two pence rate that they could spend on the Arts. I ask your Lordships how on earth can they spend that when they will not even be able to get the money to deal with the basic, most needed human services? These targets mean that the poorest inner city boroughs will be treated badly. For example, Hackney is at the top of the Department of the Environment's own deprivation list and it will have a cut of 1.9 per 255 cent. Haringey, which is one of the most highly deprived areas in the country and one with the highest number of ethnic groups, will also be cut in that way.
If local democracy is to be treated in this way, it means that people will not be able to deal with local government as they have in the past. It seems to me that what the Government are aiming at is really to do away with local government altogether, to run everything from the centre and to have local authorities merely as agencies.
§ 4 p.m.
§ Baroness Stedman
My Lords. I am grateful to the noble Lord for repeating the Statement. Like the noble Baroness, I think it makes extremely dismal reading and is another very severe hit below the belt for the long-suffering ratepayer. I think that once the effects of this have been borne home to the ratepayers and the local authorities, the Conservative Government will not be able to pose as the champions of value for money in local government since they seem to be so determined to drive up the rates and to slash the quality of local government services.
Is it not a fact that the Government are putting forward the most severe grant penalties for local council spending over targets—targets which have been fixed arbitrarily for them by central Government? Is the Minister aware that informed sources in local authority circles believe that if all the 410 local authorities in England spend the same in real terms in 1984–85 as they have spent in previous years, only 29 of them will be able to have rate increases of 10 per cent. or less, while many councils will need much more substantial rate rises? This is merely to maintain the present level of services, and not for any improvement. I believe that most members of local authorities will not accept the Minister's assurance that rate increases will be low.
The increase offered is 3 per cent. higher than in the current year. This means that once again the Government are understating the rates of inflation. Is the Minister aware that the Association of County Councils criticised this understatement of the rate of inflation last year? They maintain that if the £600 million which was lost by that underestimation last year had been made good, then the overspend of expenditure over target of 3.8 per cent. would have been cut to £171 million, or just 0.8 per cent. overspend. I suspect that the Government have got their sums wrong again. If so, will the Minister be bold enough to say that they will make good this year's underestimate in due course?
Does the Minister recall assuring some of us on this side of the House during the passage of the 1980 Bill that the grant-related expenditure assessment would he used only as a benchmark for grant distribution, and not as a prescriptive target? Yet it has become a major element of settlement over the last four years. Can the Minister not see that the effects of the targeting policy have been to undermine the basic principle of the block grant system, the idea of rate poundage equalisation for similar levels of services provided?
The Government have set unrealistic targets for local authorities, and on the basis of those targets the 256 local authorities are facing devastating penalties. Do the Government realise that these decisions affect not only the high spenders—mainly the bigger Labour-controlled authorities—buttheir own supporters in the shire counties. where Buckinghamshire expects to face an overspend of £ 10 million, which will attract a hold-hack of £32 million, while Northumberland must reduce its expenditure by £6 million to attract a £12 million hold-back? These are only two examples of many counties which will be caught by Government action.
The Ministers sit in glasshouses throwing stones at the local authorities, and they are seemingly still quite oblivious to the overspending of Government departments. Will the Minister acknowledge that he is not in the front line, that it is the local councillors who are, and that the Government are expecting them and their officers to produce miracles? Does the Minister agree that local councils must be directly accountable to their electors for their spending decisions, and that this might well be better achieved if we introduce proportional representation into local elections and the reform of local government finances?
§ Lord Gisborough
My Lords, may I ask the House whether this is a time to make speeches, or whether it is customary purely to ask questions?
§ The Earl of Swinton
My Lords, I will read from the Companion to the Standing Orders:Ministerial statements are made for the information of the House, and, although brief comments and questions for clarification are allowed, such statements should not be made the occasion for an immediate debate, unless the House so order".At the same time, I think I ought to tell my noble friend that it is customary to allow the spokesmen of the two Front Benches a certain amount of latitude in this respect. I do not think that the noble Baroness has exceeded that.
§ Viscount Ridley
My Lords will the Minister, when replying, be able to tell the House what percentage of the £770 million overspend that he is talking about is due to the actions of the GLC and the other metropolitan counties which are due to be removed?
§ Lord Bellwin
My Lords, if I may respond to the comments which were made by the noble Baronesses, it seems to be my fate always to be having to respond to the ladies in the House—far more difficult a task than had it been the other way round. First of all, the noble Baroness, Lady Birk, referred to the comparable figures for Government overspending, as she put it. We always get this when it runs round year after year. The fact is that you cannot compare apples with pears. Local authorities do not have social security and other such demand-led expenditure with which to deal: and they do not have to deal with defence, although many of them seem to be running their own nuclear programmes, and so on. But that really is not the same thing.
The noble Baroness referred to the £770 million as a drop in the ocean. Last year it was £1.1 billion. I do not know the figures for the previous years. For each figure the ratchet goes up and comes into effect: and I am one of those old-fashioned guys who still think that £770 million is £770 million, any way you look at it. 257 I do not consider it a drop in the ocean—quite the contrary. I would even think that it was less of a drop in the ocean if I was one of those—and I am—providing only a small percentage (in my case, a very tiny percentage) of the money.
The noble Baroness asked which other spending programmes will be cut—a perfectly proper question to put, as, indeed, were the rest of her questions. The Statement, when referring to that, says in effect that, with a finite sum of money to distribute, if you spend it on one thing you cannot spend it on another. That is the reality—which programme you then decide to cut because you have to validate (as we have validated year by year) the totality of spending. That is for the Government to decide. The fact is that if they do not have the £770 million, or whatever, they have taken away from them the opportunity to choose which programmes will receive more and which less. That is what the Statement means.
The noble Baroness asked whether I knew that the industrialists were concerned and were anxious that there should be an increase in capital spending. On that, I entirely agree with her. I have spoken many times in your Lordships' House deploring the fact that the totality of capital spending in local government has fallen as dramatically as it has. It is really astonishing; but I would simply say that a major factor in that respect is that the spending on current account has been at the expense of capital spending.
The noble Baronesswill well recall that when Circular 45 came out in 1976 and local government was told to reduce its expenditure by 3 per cent. in one year, it did so: and it did so mainly by reducing capital spending. That seems to have been a pattern which has gone on ever since. So, yes, I agree with the noble Baroness in saying that we need more capital spending; but one has to look at what is happening with local government current spending to put that into perspective.
The noble Baroness, Lady Birk, asked whether I appreciated the effect on people. It is all about spending on people, but the fact is that over 80 per cent. of local authorities have managed, and are managing, to work within the parameters set down. The whole issue is about spending what we can afford, when for so many years we went on doing the opposite.
The noble Baroness referred to the annual Exchequer grant of 52 per cent. this year and said that the rates would go up by 20 per cent. Might I just say to her that last year we had the same horror stories from her and her right honourable and honourable friends in another place; and the fact is that when the annual Exchequer grant was reduced last year—not by 1 per cent., as this time, but by 3 per cent. in the year—the average rate increases in the country were 64 per cent., the lowest for many years. The reality is that in the majority of cases local government was starting to face up to what has to be done.
Then we got also from the noble Baroness other horror stories: the 12,000 fewer this or that, the aged persons' homes, and the usual panoply that is trotted out. Of course, it is nothing of the kind. I am second to none in my respect for the noble Baroness and her knowledge of local government matters, but it really will not do for her to trot out the annual retinue. She 258 knows as well as I do that if there do have to be cuts—and she also knows that I am a staunch advocate of cutting what it costs before you start cutting what you provide—each authority has the choice and can decide its own priorities; and of course the horror stories that she mentions are rarely anyone's priorities.
The noble Baroness, Lady Stedman, referred to "hitting below the belt" of the ratepayers, driving up rates. I have said many times here that what drives up rates is not the level of grant but the level of spending. That is even more the case when grant is related, as it is now, to spending in a way, with holdbacks and so on, that was not the case in the past. So I definitely do not accept that. The record does not show it, and it will not be shown in the future, in my view.
The noble Baroness, I am sure, will excuse me if I do not cover every point that she made because she did make quite a speech, in which I was very interested. She said that the 3 per cent. increase understates inflation. The experience of those who had to cope with the forecasts of Governments, of which I was one on the other side, year after year was that the estimates of inflation were never anywhere near the actual figure. They were a joke in relation to what inflation became. In the event, last year was the first time that we had inflation which was in fact below what had been allowed for. I am hoping that, if local government can get its pay settlements right—andthat is the key, as the noble Baroness will know, because of the fact that 70 per cent. of expenditure goes on pay—and if they can be kept at levels below the inflation level, that figure can be more than easily contained. No, I should not say "easily", but it can be contained if the will is there. She asked whether the Government would make good at the end of the day. That is, of course, what validation is, as she knows. Each year it goes up, and I referred to the "ratchet effect", because that is what it is.
Finally, can I just say, to make the point as strongly as I know how, that we have to look at the settlement this time in the context of the fact that here we are talking about a 1984–85 figure when the spending so far in the totality of local government has been 12 per cent.—I repeat, 12 per cent.—more than the figure the Government had in its 1980 White Paper forecast. In fact, it is 4 per cent. more in real terms, when the Government tried so hard to get the spending reduced by several percentage points.
§ Lord Raglan
My Lords, the noble Lord gave figures for estimated local authority current expenditure. Can he give us the estimate for local authority capital expenditure and say how the balance between capital and current expenditure has changed in, let us say, the last decade?
§ Lord Bellwin
My Lords, if I can try the second half first off the top of my head, it goes something like this. In 1974–75 at the time of the reorganisation—and if I get any of these figures wrong the noble Lord will make allowances, but I think I have them in my mind—capital spending, taking a level figure of 260 (never mind 260 what, for the moment), had become 100 by 1978–79, and by last year that figure had become 46. In the current year it is expected to be some 66 and I think, if nothing else, that gives an 259 indication of the enormity of what has happened to capital spending within local government. Actually it very much makes the case put by the noble Baroness, Lady Birk; but that is what has happened. I will write to the noble Lord giving actual numbers, but those are the figures. I am sure that my officials who are listening are listening either slightly mesmerised or in some horror, but I can assure them, as I do the noble Lord, that those figures are not pulled out of the air but are based on facts carried somewhere in my mind. As for the other figure, I have probably covered the noble Lord's point, but, if not, I am sure he will ask me again. But I will write to him with details.
§ Baroness Birk
My Lords, may I ask the Minister to answer just one brief question? He pushed aside any talk of the cuts in social services, of which I gave just a few examples. Can he tell me how those authorities which are not spending on what we might call "municipal frivolities", and who are being as careful as they can be, are going to be able not only to reinstate the social services but keep up their really basic and most important services under the sort of cuts we have heard about today?
§ Lord Bellwin
My Lords, the noble Baroness knows that the priorities for spending are always for the authority itself to decide. But I would say that if I were in the position of an authority which was having its grant cut, for whichever reason, the first thing I would do is look at what it costs to provide the services. The fact is that those authorities which concern the noble Baroness so much, as I well know, happen to be authorities which in many instances are not willing to look at the cost of provision.
For example, as regards opportunities for cost saving by contracting out services, why should Birmingham be able to save £3 million a year not by contracting out but by going to tender, whereas other authorities (who need that money every bit as much) are unwilling even to consider providing services in that way? I would have thought that that was so relevant to the ability to have money to be able to provide services. I will not take advantage of some examples of what I call "loony" spending and reel them off, which I could do, and make points; that is not my intention, nor, I am sure, is it the noble Baroness's intention either. But the fact is that one really does wonder sometimes, because there is one authority—I will not mention names—which in the year ended June 1983 had taken on 676 staff, and is still adding to its staff, yet claims that it cannot afford even to maintain its current level of services. I just do not understand that at all.
§ Lord Maude of Stratford-upon-Avon
My Lords, is my noble friend aware that some of the smaller shire counties, like Warwickshire, which have continuously budgeted prudently, have low rateable values and have cut expenditure to the bone, find year after year that they seem to come off proportionately worse than the larger spenders, and in fact the more economical they are the worse they do? Can the Minister give us any hope that there will be some sort of reward and incentive for these low spenders in the future?
§ Lord Bellwin
My Lords, my noble friend raises a very interesting point on exactly the opposite side of the fence. He highlights the problem of having to take a finite sum of money and distribute it on the principle of equalisation, and yet having to take care of the very important point that he makes, although, as he will have heard in another place and again here today, concern has been expressed in the opposite direction. I know the position, because I went to Warwickshire and spent two hours talking to the members of the council about their particular situation. It is very true that they have tried very hard to work within the parameters, and in many ways they have been successful. Their concern is: where do they go from here?
All that my noble friend's question brings out is the great difficulty which exists in trying to do this whole complex settlement in a way which fits all the situations that arise. If my answer to him today is less than clear, it is because the situation is less than clear. But I assure him on this very important point that it is something which we are considering carefully, in the same way as we are considering the points which the noble Baroness has raised. There is no absolute black and white—I had better be careful what I say in thatsense—and there is no clear-cut basis which is so simple that the solution is easy. It is a very difficult matter, and my noble friend's point is, by itself, very valid. I assure him that we have it very clearly in mind.
§ Lord Prys-Davies
My Lords, I have a very brief question. Can the Minister inform the House whether the Government intend to make a similar statement in respect of Wales?
§ Lord Bellwin
My Lords, I do not recall having made a separate statement for Wales before in the past when this matter has arisen. But may I ask whether the noble Lord will allow me to come back to him on this, which I gladly undertake to do.
§ Lord Bellwin
Yes, my Lords. The reason why I did not take up my noble friend's question before was that I was trying to cover the points raised by the Front Benches. In fact of the £770 million overspend, the figure for the GLC is round about £500 million—
§ Lord Bellwin
My Lords, if the noble Lord will allow me to continue, I am able to say to the noble Lord, Lord Prys-Davies, that I am informed that a statement on Wales will he made in another place very shortly.
§ Lord Diamond
My Lords, is the Minister aware that, if my recollection is correct, the original Statement that he read out included on two occasions differences in cash terms which led to a certain conclusion, without at the same time giving the figures in real terms which would have led to an opposite conclusion? Will he please take the greatest care in any Statement that he reads out in future to make quite sure that he is giving the House information and not misleading the House, as inevitably happens if the cash figures alone are given? The second question that I would ask him is: what is the justification—
§ Lord Denham
My Lords, will the noble Lord forgive me for intervening? We have been a very long time on this Statement. It is a very important Statement and I do not want to deprive noble Lords of the ability to ask brief questions for elucidation. But I ask whether from now on they would be brief and ask for elucidation.
§ Lord Diamond
My Lords, before I put the second question which I wanted to ask the noble Lord, may I say, in relation to the interruption which the noble Lord has just made, that every time the Government make a misleading statement based on cash terms without giving the real terms in addition, I shall get up and seek the leave of the House to draw attention to that practice of misleading the House until it is corrected, as it has been broadly corrected in the other House—
§ Lord Denham
My Lords, the noble Lord, Lord Diamond, is really going a little far with the length of his question. His noble friend has spoken for the Alliance and had the customary leeway in making quite long comments on the Statement, and I ask the noble Lord whether he would keep his question brief.
§ Lord Diamond
My Lords, the second question which I wanted to ask—and on which I have been stopped twice—is a very short and simple question. What is the justification of the Government for reducing the proportion of the grant—not merely the amount, but the proportion of the grant—yet again?
§ Lord Bellwin
My Lords, as to the reference to statements being made in cash terms and the necessity for them to be made in real terms, I will certainly discuss with my right honourable friend the point which the noble Lord has made. But I remind the noble Lord of two things. First, I am repeating a Statement that is being made in another place by my right honourable friend. I am sure that the noble Lord did not mean to imply that I was trying to mislead the House as such. What he meant, I think—and if he does not agree I am sure he will say so—was that by presenting it only in cash terms it is itself not clear. But I personally dislike the word "mislead" very much indeed. It implies something which is not the case and I hope that the noble Lord will accept that from me.
Secondly, on his other point about the 1 per cent. reduction in the aggregate Exchequer figure, I see nothing particularly sinister in that—quite the contrary. I remember only too well that I referred to 3 per cent. last year. We have seen this come down from 66 per cent. in the time when I was in local government. I have seen it come down from 66 per cent. to 56 per cent., go back up again to 61 per cent. and come down again now. I am sure the noble Lord knows that there are many people in local government who believe that it will be healthier for local government, as such, when the percentage is a lower figure rather than a higher figure, provided that there are other alternative options and sources for funds to be raised.