HL Deb 27 June 1985 vol 465 cc845-50

4.6 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 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 1985–86 which is some £91 million or 3.2 per cent. above the guidelines I issued to them. When I met the Convention of Scottish Local Authorities on 24th June I said that I was disappointed that, despite my warnings that grant penalties would be more severe than last year, local authorities continue to plan for significant overspending. The total of local authority budgets is still above 1984–85 outturn in real terms and is 1.8 per cent. above expenditure in 1978–79. Given the continued overspending, I have decided that for 1985–86 the total penalty would be £126 million. I will lay the necessary Rate Support Grant Order shortly and grant reductions will start on 10th July. 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. The penalties are on a tariff which starts at a grant loss of 70 per cent. of overspending rising to a grant loss of 90 per cent. of overspend for a 1 per cent. overspend; 110 per cent. for a 2 per cent. overspend. At 2.5 per cent. the rate of penalty is 120 per cent. and then steepens to 140 per cent. at 3 per cent. and 170 per cent. at 3.5 per cent. excess and above.

"While these severe penalties have been necessitated by the continued overspending of some local authorities, no authority which is planning to spend at guideline will suffer a penalty, and I am glad to see that this year 30 local authorities will avoid penalties by budgeting within guidelines. I very much hope that the remaining authorities will reduce their expenditure to guideline and thus eliminate their penalties to the benefit of their ratepayers when penalties are recalculated at outturn.

"When I announced the penalties for 1984–85 I said that, in response to representations from the convention, penalties would be adjusted in the light of outturn to give incentives to authorities to respond to the grant abatement. Authorities bringing their expenditure within guidelines would have their penalties cancelled. Those reducing their overspending would have their penalties reduced. When I met the convention on 29th April it asked that this adjustment should first be made on the basis of provisional outturn. When I saw the convention on 24th June, I told it that I was able to agree to this suggestion. An initial adjustment of penalties on the basis of provisional outturn will be made for the first time in Scotland this year. The 1984–85 penalties will be further adjusted in the light of audited final outturn about January.

"I am glad to see that 13 authorities subject to penalty on their 1984–85 budgets have brought their expenditure within guideline at provisional outturn and will have their penalty cancelled unless final outturn figures show them to be above guideline. The repayment of penalties will obviously be of benefit to ratepayers. Most other authorities subject to penalty have reduced their expenditure and will have some repayment of penalty under the new arrangements introduced last year. I am sorry to say that nine authorities have increased their spending and will have increased penalties. The total amount of penalties to be repaid in respect of 1984–85 is £29 million. Overspend for 1984–85 is still—at £77 million—too high.

"There is no need for authorities to lose grant and it is in the interests of their ratepayers to spend at guideline. I hope those that have not budgeted at guideline for 1985–86 will bring their expenditure to guideline at outturn."

My Lords, that concludes the Statement made by my right honourable friend.

Lord Carmichael of Kelvingrove

My Lords, I thank the Minister for repeating the Statement that was made in another place and for giving me an earlier sight of it. Is the Minister aware that this is a new and very serious departure in the Government's control over local authorities in Scotland? We are now dealing not with guidelines but really with punitive penalties on local authorities.

I am grateful to the noble Lord for having passed to me the paper which in the Statement was said to have been put in the Library. I am sure he will understand that the time since I have been given it has been insufficient for me properly to study it. I shall take it and look at it very carefully later. However, from the figures I was able to obtain before I received this paper from the noble Lord, Lord Gray of Contin, it seemed quite staggering that, for instance, the overspend last year was about £114 million and the penalty, the clawback, was £90 million; and that this year the overspend may be £91 million and the clawback as high as £126 million, which is a very drastic figure.

When one looks at an area such as Lothian, which is Tory controlled, with the Council presumably well run, in the eyes of the Government, one sees, as far as one is able to understand it, that it may be as much as £7½million over the guidelines this year, but the Government are proposing to claw back £8½ million. This means that there is considerable leeway to be made up.

With regard to Strathclyde, because of its size, the figures are even greater. In Strathclyde, because of the nature of the area and its severe difficulties, such as extremely high unemployment and infrastructure problems, perhaps the effects of this punitive Statement will be even worse.

I should like to ask the Minister where he thinks these enormous cuts can be made. There is very little fat left in Scottish local authorities after six years of this Government. The officials and the responsible councils have been doing their best to try to cut as much as is reasonably possible, making allowance for the fact that they have a service to provide for their people.

Do the Government suggest that it will be an education budget? Will teachers have to go? As far as I understand it, the main items under the heading of expenditure of, in particular, the regions, are education, social work and interest charges. Will it be teachers who will have to go? Is it the social work department that will have to be severely cut down, or home helps—because little can be done about interest charges?

The Minister suggested that what is proposed will be of benefit to ratepayers. If the figure I have heard is of any value, about 6,000 has been suggested as the number of teachers who would have to be dismissed in order to meet the guidelines. That is more than 10 per cent. of the Scottish teaching population.

The cutbacks in education or in social work would be very severe. Generally, I wonder what the Government are looking for. The Government are dictating to local authorities the shape of their budgets. I think they should accept the responsibility of giving some guidelines to the local authorities on where they think that excessive expenditure, as they believe it is, can be cut back. If they are taking the responsibility for dictating the budget, I believe that they should tell the local authorities how their services should be cut and where they can be cut. The people of Scotland would then know who was to blame and would realise that the responsibility for the rapidly declining service, despite all the hard work of officials and elected members on all sides, and for the cut backs and reductions lies with the Government, not with the local authorities.

4.15 p.m.

Lord Grimond

My Lords, I, too, should like to thank the noble Lord the Minister for repeating the Statement. Perhaps I may first ask him whether in fact it is the Statement which was more or less published in full in the Scottish press this morning. Is it not the case that the Scottish press have an advantage over this House in that the paper referred to in the Statement appears to have been available to them yesterday, but was not in our Library three-quarters of an hour ago? Does the noble Lord not agree that although this is not surprising, it is reprehensible? I doubt whether I can expect him to agree with that because no doubt he leaked it. However, is he aware that the Prime Minister wrote to me some time ago saying that she disapproved of statements to Parliament being issued to the press far in advance of their being made to Parliament?

Turning to the Statement itself, perhaps the noble Lord the Minister will accept that I certainly am aware of extravagance in local government and that I deplore it. However, will he not agree with me that this is a most unsatisfactory way of conducting business? The local authorities have done nothing illegal. They are asked to draw up their budgets, which they do, and they are then told that they are excessive and that they will suffer a penalty. As has been said, it is not indicated to them what they should do. As I understand it, the Government take no responsibility for the cuts or for suggesting what should be cut; they merely say that a penalty must be enforced.

Will the noble Lord the Minister not agree with me that this makes it essential that the Government press on with a review of local authority finance? Will he not also agree—and perhaps he can throw some light on this—that where the penalties are abated or withdrawn altogether, it is clear that the advantage will fall to the ratepayers and not simply to the Exchequer?

Lord Gray of Contin

My Lords, I am most grateful to the noble Lord, Lord Carmichael of Kelvingrove, and to the noble Lord, Lord Grimond, for the comments which they have made on the Statement which I have repeated. Perhaps I may first of all take the initial point which the noble Lord, Lord Grimond, made, and say to him that I was as appalled as he was when I saw the Scottish press this morning. I am afraid that however Governments try to avoid information reaching the press, that is not always possible. However, certainly so far as the Government are concerned, there was no question of the Government's giving information to the press before the House.

I shall come back in a few minutes to what the noble Lord said about guidelines and his view of this being an unsatisfactory way of conducting business so far as local authorities are concerned. However, perhaps first I may turn to what the noble Lord, Lord Carmichael, said and try to clear up one or two of the points which he made.

First of all, he suggested that these were punitive penalties. The fact of the matter is that the penalties are severe and the local authorities were well and truly warned by my right honourable friend that if they did not make a greater effort to keep their expenditure within guidelines, the penalties would be severe.

The noble Lord asked, why is grant being reduced when authorities have reduced their budgets since last year? The plain truth of the matter here again is that the overspending at £91 million over guidelines—that is, over 3 per cent.—is still substantial and local authorities are still planning to spend more in 1985–86 in real terms than they did in 1978–79. In real terms their budgets are 1.8 per cent. above their spending at that time. In cost terms, which show much more clearly the costs to the economy of local authority services, the increase is 10.6 per cent. It is essential therefore to increase pressure on local authorities to reduce their spending.

The noble Lord suggested to me that the Government might give guidelines to local authorities on how they might reduce their spending. Where should the cuts be made, or where should the savings be made? All that I can say to the noble Lord, Lord Carmichael, in reply to that point is that this must be a matter for individual authorities. Economies can be made without service cuts through greater efficiency, through a degree of privatisation and through perhaps contracting out certain services. Indeed, there are a great many authorities which will avoid penalty. Thirty authorities have been able to avoid penalty by keeping within guidelines and 13 which had budgeted to overspend have been able to come back within the guidelines.

It is a fact that there are some authorities which have made no effort, or very little effort at all, to reduce their spending. In the case of Edinburgh, for example, my right honourable friend has been obliged to calculate the penalties based on the only budget that we have from them. That is the budget that they put forward before my right honourable friend announced selective action against them. This has resulted in their losing all their rate support grant. This is a very serious matter for them and their ratepayers.

It is suggested in the press that they are going to continue to defy the Government on this matter. I just hope that they have read the report of what the leader of the Labour Party has said about this. He has pointed out to local authorities which defy the Government in these matters that they are on their own. I hope that due note has been taken of that.

I can perhaps say a word about the comment of the noble Lord, Lord Grimond, also concerning guidelines. I would remind him that there are many authorities which have not found it impossible, and which, indeed, have not found it over-difficult, to budget within the guidelines. Indeed, I can commend certain of the authorities within the noble Lord's former constituency which have been able to achieve this target. I do not think that I would wish to elaborate further other than to say that there is no reason for these penalties to be put into effect if the local authorities concerned are able to reduce their spending and try to come nearer to the guidelines set for them.

Lord Carmichael of Kelvingrove

My Lords, I thank the Minister for the reply that he has made. He must realise on looking at the figures that he has given me—I have only now had time to examine them—that there are many authorities in excess of guidelines: for instance, Eastwood at 7.6 per cent., Strathkelvin at 5.1 per cent. and Perth and Kinross at 3.6 per cent. over guidelines, all of them good solid Tory local authorities run by businessmen. On the other hand, Glasgow, considered profligate by many Members on the other side, is 3.8 per cent. in excess of guidelines, considerably less than others. This matter goes much deeper than has been argued.

The noble Lord, Lord Grimond, was correct in saying that when figures like this are thrown at us it shows that there is something seriously wrong with local authority finance. The Minister is quite wrong in suggesting that by hiving off certain things by privatising certain things, and by reducing in other ways the responsibility of local authorities, we can get the figures down. I hope that the Minister will give the matter a great deal more thought and that he will urge his right honourable friend to take some action in relation to the whole Scottish rating system.

Lord Gray of Contin

My Lords, the only further answer that I would give to the noble Lord. Lord Carmichael, is that I think it will be obvious to him, despite some criticisms levelled in certain quarters at my right honourable friend, that the policy of restraint of local government expenditure is being applied across the board and fairly whether the councils are Labour, Conservative, Alliance or independent-controlled.

Lord Grimond

My Lords, I do not wish to delay the proceedings. But may I be allowed to thank the noble Lord, the Minister, for assuring us that the leak had nothing to do with him? I shall withdraw any possible imputation that it might have had anything to do with him. However, would the noble Lord not agree that it is most undesirable? A leak of this detail must have been authorised in some way at a fairly high level, I should have thought, in the Scottish Office. Will he give an undertaking that some inquiry will be made into how this happened and that steps will be taken to prevent its recurrence?

Lord Gray of Contin

Yes, my Lords, I can assure the noble Lord that I shall pass on his comments to the Secretary of State for Scotland. I can also assure him, as I did initially, that there was no question of these figures being revealed from Government sources. When a leak of this sort occurs, I can assure the noble Lord that the department involved is even more upset than those who raise the matter on the Floor of the House.