HC Deb 16 November 1979 vol 973 cc853-8W
Mr. William Shelton

asked the Secretary of State for the Environment whether he will make a statement on the rate support grant settlement for 1980–81 and on changes in grant arrangements, especially with reference to dealing with overspending authorities.

Mr. Heseltine

Yes. A copy of the statement I made today at the Consultative Council on local government finance has been placed in the Library.


Briefly my proposals are that the aggregate Exchequer grant should be at a rate of 61 per cent. on relevant expenditure of 15,737 million—at November 1979 prices. The total of relevant expenditure is based on the White Paper: "The Government's Expenditure Plans 1980–81": Cmnd. 7746. The planned level of local authority current expenditure in 1980–81 shows a reduction of about 2½ per cent. below what authorities actually spent in 1978–79.

The additional grant that may be payable under any increase orders relating to 1980–81 will be subject to cash limits. The cash limit on rate support grant will be £1,380 million; on transport supplementary grant £46 million; and on national parks supplementary grant £0.7 million.


The cash limits for 1978–79 have been revised to take account of the 1978 manual workers' settlement and of changes in the variable items. The cash limit on RSG now stands at £31 million; and on TSG at £0.8 million. Grant will be paid within the cash limits.


The cash limits for 1979–80 were initially set at the time of last year's settlement. The Chancellor of the Exchequer said in his Budget Statement that the Government would take account of pay settlements in calculating the 1979–80 increase orders but would make an across the board reduction of not less than £300 million from the total thus calculated. The Government have decided that a further abatement of £20 million shall be made. Of this £10 million will be added to the £300 million already announced.

The total abatement for RSG purposes will therefore be £310 million. The remaining £10 million will be found through a reduction in other local authority programmes for which I am responsible. In coming to this decision, a major factor has been how much in present circumstances it is reasonable for the taxpayer to contribute, and the need to secure the improvements in efficiency and productivity identified in the Clegg report.

The cash limits have also been adjusted for the variable items and now stand as follows:

Rate support grant £493 million
Transport supplementary grant £ 30 million
National parks supplemenary grant £ 0.4 million
Grant will be paid accordingly.


For 1979–80, further adjustments to cash limits will be required to take account of payments falling to be met in 1979–80 in respect of pay settlements and comparability awards yet to be made. However, the Government consider that a limit must be set to the amount of grant payable in respect of 1979–80. I propose, therefore, that the cash limit will be £150 million. (Rate support Grant £148 million, Transport supplementary grant £2 million.) This order will be made in November 1980.

The amount of National parks supplementary grant will not be further increased.


The arrangements used to distribute the grant in recent years have proved neither equitable nor sensible. But in the time available it has not been possible to develop any alternative. I have therefore had to make use of the existing arrangements for 1980–81. However, no new formula is to be used to distribute the grant next year; instead the 1979–80 formula is to be re-applied, using up-dated data for the various factors in the formula. There will be a "safety net" to limit losses in non-London authorities' needs element entitlements—except those resulting from corrections of data errors—to the equivalent of a 1p rate poundage; only four authorities qualify for this. London's overall grant loss will also be constrained to the equivalent of a 1p rate by the London clawback mechanism; further losses to individual London authorities arising from the within-London redistribution will be limited to 2p.

The within-London arrangements are also on a standstill basis, with the 1979–80 formula re-applied to updated data. The national standard rateable value for the distribution of resources element will be £178. Domestic rate relief will be maintained at 1979–80 levels of 18½p in £ in England and 36p in £ in Wales.

Taken together, these measures achieve a welcome degree of stability in the grant distribution while at the same time halting at long last the drift of grant from the non-metropolitan counties that has taken place since 1974–75.


So far as overspending is concerned, while a majority of local authorities have shown a willingness to keep in step with the Government's guidelines on public expenditure, a minority of authorities persist in maintaining levels of expenditure which the present economic circumstances simply do not justify. It is, however, clearly wrong that the Government's contribution through the rate support grant to local authority expenditure can take no account of whether that expenditure is reasonable or not. That is now the case.

Such is the perversity of the present resources element arrangements that high spending authorities get the same level of support on all additions to expenditure, at the expense of other authorities. This is unacceptable.

I therefore intend to include provisions in the forthcoming Local Government, Planning and Land Bill to replace the needs and resources elements of the existing grant arrangements with a single block grant, payable to all authorities and calculated as the difference between an authority's expenditure and the product of a standard rate poundage, applicable to all authorities of the same type, levied on the authority's total rateable value. Different standard rate poundages will be prescribed for different levels of spending in relation to "standard expenditure".

The schedule of standard rate pound-ages will be set in such a way that each increment of expenditure beyond a threshold level—to allow for the inevitable variations in local circumstances—above an authority's standard expenditure will attract progressively less grant. Authorities will still be free to determine how much they wish to spend, and how much they wish to raise by rates, but the Government will be able to limit the level of grant support for expenditure above the threshold.

It will continue to be necessary to deal with certain problems—such as the exceptionally high rateable resources and high rate bills of London—by special arrangements, as is done under the present rate support grant system. In addition it will be necessary to ensure that the transition to the new grant is as smooth as possible. To deal with these problems my proposals will provide for multipliers to adjust the standard rate poundages and hence to adjust entitlements to grant. The multipliers will be determined in accordance with general principles applicable to a class or classes of authority and set out in a report to Parliament.

My right hon. Friend the Secretary of State for Wales will be making a separate announcement about the position of Wales under the new scheme.

The Government intend that the new grant system should come into operation in 1981–82. As an interim measure the Bill will provide that authorities' 1980–81 grant entitlements under the existing rate support grant legislation can be adjusted at increase order stage next year. Grant entitlements will be abated where budgeted expenditure significantly exceeds assessed need.

We shall consult the local authority associations fully on the mechanics and implementation of the new grant system and on the development of the method of assessment of standard expenditure.

There will be a full opportunity for the House to debate the settlement. I shall be laying the appropriate orders for approval within the next few days. The proposals for legislation will be introduced in due course.

Mr. Scott

asked the Secretary of State for the Environment what assumptions have been made about rent increases for 1980–81 in the context of the rate support grant settlement.

Mr. Heseltine

The total of accepted relevant expenditure contains a forecast of rate fund contributions to local authority housing revenue accounts and other housing expenditure falling directly on the rate fund. The forecast assumes, among other things, that a guideline average rent increase of £1.50 a week will be applied by those authorities statutorily able to do so. It also takes account of the fact that the existing housing subsidy arrangements will continue without major changes throughout 1980–81.

Mr. Ginsburg

asked the Secretary of State for the Environment if he will ensure that those authorities like Kirklees, which could be adversely affected by changes in the rate support grant distribution formula, will have the benefit as in the past of damping and safety net arrangements.

Mr. Woolmer

asked the Secretary of State for the Environment whether those authorities like Kirklees, which could be adversely affected by changes in the rate support grant distribution formula, will have the benefit as in the past of damping and safety net arrangements.

Mr. Gwilym Roberts

asked the Secretary of State for the Environment (1) if he will now make a statement on the rate support grant for 1980–81;

(2) what plans he has for changing the methods of calculating the rate support grant to make allowance for population transfer between counties and the consequent pressure on local authority services;

(3) what plans he has to change the method of calculating the rate support grant to encourage the provision of adequate minimum standards of services in line with the recommendations of the Green Paper Cmnd. 6813; and if he will make a statement.

Mr. King

I refer the hon. Members to the statement made today by my right hon. Friend, in answer to my hon. Friend, the Member for Streatham (Mr. Shelton).