§ Mr. Kinnock
asked the Secretary of State for the Environment what estimate he has made of the additional financial resources which would be available to local authorities in Wales in the financial year 1978–79 if the rate support grant were maintained at current levels, the domestic rate were not reduced in any local authority and interest rates remained at approximately their current levels.
§ Mr. Radice
asked the Secretary of State for the Environment whether he will now make a statement about the rate support grant settlement for 1978–79.
§ Mr. Shore
Yes. The statutory meeting on the rate support grant settlement took place today with the Consultative Council on Local Government Finance. A copy of the statement I made at that meeting has been placed in the Library. Briefly my proposals are that the rate support grant should be at a rate of 61 per cent. on relevant expenditure of £12,531 million at November 1977 prices. The planned level of local authority current expenditure in 1978–79 is effec-390W tively the same as in the settlement for 1977–78.
The total amount of additional grant that may be payable under any increase orders relating to 1978–79 will be as in previous years subject to cash limits. These limits accord with the Government's pay and anti-inflation policies; they have been fixed at a total of £525 million.
The 1978–79 assessment of local authority spending needs will be based on a regression analysis of local authorities' 1976–77 provisional outturn expenditure. To avoid excessive changes it will be combined with those for 1975–76, 1976–77 and 1977–78. In addition there will be a new "safety net" provision to ensure that no authority's loss of needs element as a result of the 1978–79 distribution arrangements is greater than the equivalent of a 2p rate. To avoid changes to authorities' grant entitlements during the grant year on account of data changes, the data for the distribution will be "frozen" as from this month. The adjustment for London's excess resources will be set to secure that if authorities conform to Government guidelines, the increase in the average rate bill of London domestic ratepayers will be the same as the average increase elsewhere. The framework of the 1977–78 scheme for needs element distribution and rates equalisation within London will be repeated.
The resources element will remain at 32½ per cent. of the total of needs and resources element combined. The rateable values used to calculate it will be adjusted to allow compensation to authorities for the mandatory rate relief they give to charities. Domestic rate relief will be maintained at 1977–78 levels, namely 18½p for England and 36p for Wales. There will be limited extra relief for domestic ratepayers in four London boroughs as part of the internal London rate equalisation arrangements.
I propose to make a second increase order for 1976–77 giving local authorities additional grant only in respect of changes in the variable items which are excluded from the operation of the cash limit. This is in accordance with the intention I expressed last year. The amount of grant will be £9 million. I also propose to 391W make in increase order for 1977–78. The amount which I intend to pay under the increase order is £337 million. This is within the cash limit which was of course adjusted so that authorities might be fully reimbursed for the extension of the free school meals scheme. The Government will review the position on the cash limit when considering whether to make a second increase order for 1977–78 in the light of all the circumstances of the time.
There will be a full opportunity for the House to debate the settlement. I shall be laying the approximate orders for approval within the next few days.