§ 4.29 p.m.
§ The Minister of State, Scottish Office (Lord Gray of Contin)
My Lords, with the leave of the House I shall now repeat a Statement on local authority expenditure and rate support grant in Scotland which is being made in another place by my right honourable friend the Secretary of State for Scotland. The Statement is as follows.
"With permission, Mr. Speaker, I shall make an announcement about local authority expenditure and rate support grant in Scotland.
"Scottish local authorities are planning expenditure in 1984–85 which is some £114 million or 4.2 per cent. above the current expenditure guidelines that I issued to them. When I met the Convention of Scottish Local Authorities on 22nd June I said that I was disappointed that authorities were not much closer to the expenditure provision made in the rate support grant settlement. Having considered the budget returns of authorities I said that I had decided not to take selective action to reduce the rates of any individual local authority this year, although I will not hesitate to use the power again if an individual authority plans excessive and unreasonable expenditure.
"However, since there was only marginal improvement on last year in the general level of expenditure I made it clear that there would have to 1362 be a substantial general abatement of rate support grant. It is apparent that the abatement which I imposed last year was not sufficient to impress upon authorities the very real need to bring their spending into line with Government guidelines.
"In my consideration of the level of abatement required I was very aware of two arguments which the convention and individual authorities had raised with me.
"First, the distribution of the abatement. Previously grant reductions for excess over guidelines bore no relation to the level of excess over guideline. Authorities were penalised in proportion to their share of grant rather than on the basis of their degree of overspend. This, I acknowledge, was not fair. During the parliamentary proceedings on the Rating and Valuation (Amendment) (Scotland) Act 1984 it was made clear that I intended to use my powers under the Act to ensure that the amount of reduction for each authority was directly related to the extent of its overspend.
"Secondly, COSLA has for a number of years represented to me the unfairness of a system which did not recognise reductions in overspend at outturn and thus gave no incentive to respond to an abatement by economies in the current year. This year, I have decided that the amount of the grant reduction will be adjusted when information is available about actual expenditure in 1984–85. Any authority whose expenditure at outturn is below guidelines will have its grant penalty cancelled. An authority which, while still above guideline, reduces its expenditure at outturn will have its penalty reduced. Conversely, of course, an authority which increases its excess will find its penalty on outturn increased.
"In the light of these two significant improvements to the system which have removed the basic unfairnesses which have previously existed, I have had to consider whether to seek a grant reduction equal to the full amount of the overspending of £114 million.
"I have decided, however, that a penalty of this scale would be too steep an increase on last year's total penalty of £64 million. I have decided that for 1984£85 the appropriate reduction would be £90 million. I will lay the necessary rate support grant order shortly and grant reductions will start on 1st August. I have today placed in the Library a paper showing how the abatement will affect each local authority, and letters of notification to them are being posted today.
"I accept that this penalty will be regarded as severe. At the same time the new system will allow authorities to reduce their penalty in part or in entirety by taking positive action now to bring their spending down. The solution lies in their hands. In the interests of their ratepayers and of the economy as a whole, I hope that this opportunity will not be missed."
My Lords, that concludes the Statement.
§ Lord Ross of Marnock
My Lords, we are grateful to the Minister of State for the Statement which he has repeated here. It is all very predictable. In fact, the only 1363 question was: which of the battery of powers that the Secretary of State has taken would he use? Would he use his general clawback powers? Would he apply it to individual authorities that had sinned against the whole spirit of the Scottish Office today? Would he use his general or individual rate-capping power? That was the only mystery that certainly for me was concerned. He used his latest power; the power that was given in, I think it was, Clause 1 of the last Act that we had in this respect during this Session of Parliament.
He has decided that he will cut local authority expenditure. It was £114 million above the guidelines, but he will not cut it by that amount; he will cut it by £90 million. That was predictable too, because anyone who had looked at rate support grant would have seen that, although rate support grant went up in this coming year as compared to last year by 2.6 per cent., that was without taking account of inflation so that in real terms the local authorities were getting less. There was a reduction in the Government support because the actual rate support grant—the relevant expenditure—had been cut by the Government.
The Government decide everything here. It is the Government who decide the guidelines; the Government decide aggregate expenditure rate support grant; and the Government decide what amount of support they will give to the local authorities. Of course, that was cut too. The central Government share of relevant expenditure was cut by 1.6 per cent. It is now just over 60 per cent. When I was Secretary of State—believe it or not—it was 75 per cent. or 76 per cent. So you can well understand that, although local authorities have held their expenditures pretty well, the Government, by cutting their share of that expenditure, have forced rates up. That is why, although expenditure has been held fairly well as the result of the cutting of the Government support of that expenditure, they have forced up rates in Scotland by about 133 per cent.
Of course, they have been found out in this. We are dealing here with budgets that were drawn up, not by the councils who are in power now, but the councils who were in power prior to the district elections which were held in May of this year. Indeed, in view of their choice of this particular form of penalising local authorities, it is interesting to note that, if the Government had chosen from the selection of individual authorities, the authority they would have had to choose for having the highest increase or excess in expenditure over the guidelines would have been Edinburgh; Edinburgh on a budget drawn up by the Tories, a budget of which the excess was over 14 per cent.
As to the reality of these guidelines, we had no sanctity in relation to guidelines until we got this last Act. Time and again the Secretary of State said, "The guidelines are there only as a guide; you do not have to keep strictly to them"—a bit above and a bit below did not matter. Then suddenly they became part of statute.
Thanks to the delays that have been caused by other necessary Bills and the way we do things here, I have been able to get a list of the local authorities who have sinned against the Scottish Office and the Boy George. It is interesting to note—it might have been embarrass- 1364 ing for the Minister of State himself, who I think belongs to Inverness—that Inverness's excess of expenditure is 10.03 per cent. Every single Scottish local authority is in excess. Honourable mention should be made of Sutherland—0.78 per cent. I think the Western Isles is even lower than that, it is 0.72 per cent.
But, generally speaking, with the districts there is a considerable increase of expenditure above what the Government expected. That was inevitable because the guidelines were unrealistic. They did not even take account of the increase in inflation costs and to that extent I think the reduction from £114 million to £90 million is just not good enough. Even if he wanted to apply his own system, I think he should have taken the proper inflation rate and applied that to that particular figure. It would probably have further reduced it from £90 million below.
There is the other point. Reducing the support that the Government themselves gave to 60.2 per cent., or 60.1 per cent., cost the Scottish local authorities £48 million in total compared with the previous year. That, too, should have been taken off if the Government were working their own system fairly—with which I do not at all agree. It should be a matter for local authorities to determine what they want to spend, and it should be a matter for their electors to deal with them.
We have just held the elections. Who lost out all over the place? The Government did. They lost Edinburgh—the jewel in the Tory crown of local government. In Glasgow, the Government have only four or five seats left. It is hard to find a Tory councillor in Glasgow. The same applied throughout the whole of Scotland. The Government are out of step with the Scottish ratepayers and certainly with the Scottish people.
What will happen now? I calculate that Glasgow's increase was less than that of Edinburgh—about 12 per cent.—and yet Glasgow will lose about £8 million. I understand that Edinburgh itself will lose about £4 million. Strathclyde, with the biggest problem of all and containing about half the population of Scotland, will lose £38 million. I believe that some 70 per cent. of local government expenditure in the regions is spent on education. This development will mean fewer teachers in Strathclyde. It will mean, no doubt, more unemployed school cleaners. It will mean a cut in the services in respect of transport, concessionary fares, and ferries. I believe that only about £56 million of rate support grant was given for the whole of Scotland, and Strathclyde reckoned that its need, if it was to be realistic in the provision of services, was alone more than £50 million. This is the kind of thing that is happening to local authorities, by the unrealistic application of now legislatively-sanctioned and empowered guidelines.
I am sorry about this because it means that the gap between Scottish local authorities and the Government widens and widens. Negotiations no longer exist; there is just a ritual meeting and there is nothing constructive about it. The Government tell us in the Statement how they will pay attention to how they will apply the general claw-back. We know all about that. It was in the Act of Parliament whose passage started even before the noble Lord opposite came properly into this House.
1365 One further question arises. Has there been complete agreement by local authorities in respect of the distribution formula? Under the new formula which was introduced using, as the Government told us, a client-based system (which nobody understands), the distribution has changed considerably. Therefore, there may be a change in the incidence of penalties imposed on local authorities. Has that aspect been agreed?
Secondly, the Minister stated that he is seeing COSLA. Has he seen the individual local authorities which will be hardest hit, or is he hoping to see them? I do not see why he should not do so, because he has plenty of time. I am placing greater importance now on budget proposals, which are struck before the start of the financial year, and less on the outcome: what people say they are going to spend and what they actually spend are very different matters. I agree that the Government have sorted that out slightly. If the local authorities make savings within the year, then they will not be penalised so heavily. But there is an unreality surrounding this whole subject, which stems from the Government's original unfairness in drawing aggregate guidelines and then individual guidelines for local authorities which hear no resemblance to reality.
I remember Hector Munroe in another place complaining that Dumfries and Galloway had kept very well to their guidelines in the previous year despite increases in costs and all the rest of it, yet they were being cut by £3 million in the coming year. We have only to look at Dumfries and Galloway now to see that they, too, have exceeded the guidelines. It is inevitable, but the system is unfair and this shows how out of touch the Government are with local authorities.
There was only one copy in the Library of the document I now have before me, and I am sorry that I had to take it. In future, when the Government are drawing up a list, will they provide me with a personal copy, and include in that list the proportion of expenditure of each local authority that is paid by way of rate support grant? I wish to know the percentage. The general expenditure for Scotland is just over 60 per cent., but I know that Glasgow is only about 33 per cent.; there was a time when the figure was 41 per cent. That itself is a 14p rate poundage reduction caused by Government action. It will be helpful if we can see exactly how each of these local authorities are helped. Not the 60 per cent.—I know that the highlands authorities and Orkney and Shetland receive a very much higher figure, but such information would provide an indication of the reality in that respect.
§ Lord Grimond
My Lords, we, too, are most grateful to the noble Lord the Minister for repeating the Statement. Is he aware that we are indeed impressed with the importance of economy by local authorities, and is he aware also that we do not believe he will ever achieve such economy under the present method of allowing local authorities to fix their budgets and then attempting rate capping? The solution is to reform the system of local government finance, so that instead of a wholly capricious rating system which many people do not pay, or pay in full, the local electors are much more responsible.
1366 Secondly, may I ask the Minister if he will stop loading on local authorities miscellaneous duties which involve them in greater expenditure on staff? May I ask him also if he will remove his mind from the warmth of London and take it back to the misty uplands of Ross and Cromarty? He will be well aware that the climate in the north is very different from the climate here. Local authorities there have to deal with widely-scattered constituents, with high transport costs, and so forth. Has any notice been taken of that in the present proposals?
I also draw the Minister's attention to the fact that the highland authorities are being heavily penalised. As I understand it, the figure in respect of Ross and Cromarty itself is 81.44. The same applies in respect of Inverness, Caithness and Shetland. I should like to know whether special attention has been paid to the special difficulties and expenses which the Minister well knows those local authorities inevitably face.
§ 4.58 p.m.
§ Lord Gray of Contin
My Lords. I am grateful to both noble Lords, Lord Ross of Marnock and Lord Grimond, for their comments on the Statement. I will begin by saying how glad we all are to see the noble Lord, Lord Ross of Marnock, with us. Today, he sees through a glass darkly—but we feel sure that before long he will be restored to full vision. I believe that I speak for everyone on this side when I say how delighted we are that his illness does not appear to have affected his persistence in criticising any measures we put forward.
In his criticism of the general attitude we are developing in this Statement, the noble Lord, Lord Ross of Marnock, suggested that the fact of the matter is that local authorities will receive less. I remind him that local authorities are still planning to spend more in 1984–85 than they did in 1978–79. At constant prices, their budgets are 2.6 per cent. above their spending in 1978–79. In cost terms, which shows much more clearly the cost of local authority services to the economy, the increase is 12 per cent.
Therefore, I fully defend what my right honourable friend is seeking to do in persuading local authorities that they really must reduce their spending. There is no alternative to that, and it is in their interests and everybody else's that they achieve what we are asking them to achieve.
The noble Lord suggested that the guidelines were unrealistic. That is not so. Fifteen local authorities have managed to stay completely within the guidelines. Indeed, one-third of all the local authorities in Scotland have managed either to remain within the guidelines or not to exceed them by 3 per cent. It is not right to suggest that what we are asking local authorities to do is by any means beyond them.
The noble Lord, Lord Ross of Marnock, mentioned Glasgow. I remind him that last year Glasgow wasted £5 million of housing capital expenditure because it would not raise rents. That is what we are up against at the present moment.
§ Lord Ross of Marnock
My Lords, are we including housing now? Has housing anything to do with the Statement? I thought we were dealing with rate 1367 support grant. Housing does not come within rate support grant—or does the noble Lord not know that?
§ Lord Gray of Contin
My Lords, I remind the noble Lord that, when he is arguing with me, he never ceases to bring in any factor which he thinks will improve his argument. I reserve the right to do the same when I am replying to what he suggests.
In addition, last year that authority suggested that the penalty with which it was faced would cause massive cut-backs in services. Instead, by disciplining itself to a certain extent, that authority managed to have a surplus by the end of the year. It used that surplus this year to keep its rates down. The fact that that happened to be in an election year was probably coincidental. But that does not matter. It did it, and we all applaud what it managed to do.
The noble Lord asked whether there has been agreement with local authorities. There has been discussion with local authorities on what is proposed. I am not in a position to say whether there has been complete agreement. I should be surprised if there was complete agreement with COSLA on that matter, but there has certainly been discussion. I have not seen COSLA. As the noble Lord will be aware, this is not one of my day-to-day responsibilities in the Scottish Office, but a Scottish Office Minister has seen COSLA. Indeed, my honourable friend the Under-Secretary of State had a meeting with its representatives in Edinburgh only this morning.
The noble Lord asked me whether I could let him have a list of the expenditure and the percentages. I shall certainly do that. I shall ensure that what he seeks is given to him as quickly as possible.
I now turn to the noble Lord, Lord Grimond, who made a number of comments about authorities in the Highlands region. Like him, I know most of those authorities very well indeed. I remind him that one of the Islands authorities within his former constituency was one of those which managed completely to keep within the guidelines. Indeed, two other authorities have not exceeded the guidelines by very much.
I take the points that the noble Lord made about the difficulties that Highlands authorities are involved in because of their geographical position. Of course, in discussions with those authorities those difficulties are considered and taken into account.
From their point of view noble Lords made a fair criticism of our proposals. I am grateful to them for participating in our short discussion.
My Lords, may I ask the noble Lord whether copies of the figures that he is sending to the noble Lord, Lord Ross, will be placed in the Library?
§ Lord Gray of Contin
My Lords, I am grateful to the noble Lady for that comment. I should have said that of course I shall make them available in the Library for the benefit of any noble Lords who wish to see them.