HL Deb 18 February 1985 vol 460 cc385-6
Lord Dean of Beswick

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what effect the increase in interest rates will have on rate poundages charged by local authorities.

The Parliamentary Under-Secretary of State, Department of the Environment (The Earl of Avon)

My Lords, there is no direct relationship between the level of interest rates at a particular point in time and rate poundages, since in setting their rates local authorities must have regard to estimated average interest rates over the whole of the relevant year. The effect of an increase in interest rates on local authority finances will in any event depend on the balance between authorities' debts and investments.

Lord Dean of Beswick

My Lords, I am grateful to the noble Earl for that reply. Is he aware that there are calculations which suggest that, in global terms, the increase in percentage rates which local authorities will have to pay means that, between them, the authorities will have to find between £250 million and £300 million for no additional services? Does the Minister think that fair and just bearing in mind the fact that they have already had their resources severely cut by the Government, with resultant cuts in services?

The Earl of Avon

My Lords, I think the noble Lord presses ahead too fast. To start with, we have not at the moment reached the financial year 1985–1986, when the new system will come in and a level of rates will be anticipated—and I gather the figure is 10.95. In this current year, about which we are now talking, they will of course be adjusted.

Lord Dean of Beswick

My Lords, the Minister must be aware that the AMA, which is a responsible body, has produced figures which show that in real terms it will cost the local authorities the sums of money I have suggested. I find it hard to reconcile the AMA's views of the matter with those of the Minister.

The Earl of Avon

My Lords, the system changes at the end of this financial year. At the moment we do not even know what the interest rate will be at the beginning of the next financial year.

Baroness Birk

My Lords, have the Government raised the expenditure levels for rate-capped authorities? If not, will not the cuts be of even greater magnitude for those authorities since they will be having to pay more interest on their loan charges and will not be able to make that up except by making cuts in other areas of essential expenditure?

The Earl of Avon

Indeed, my Lords, of course, the very fact that local authorities are rate-capped means that they may have more problems with their loans, but those problems are of their own making.

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