Public Expenditure (Hansard, 12 November 1984)

§ Mr. Patrick Jenkin

My right hon. Friend the Chancellor of the Exchequer has announced the main changes to the Government's public expenditure plans for 1985–86 and later years. The following table gives details of the changes in my Department's programmes.

Resources for spending in the public sector next year will be very limited, and have been further stretched by the continuing over-spending by local authorities. As I announced on 24 July, we have had to increase local authority relevant current expenditure provision (adjusted for changes in the responsibilities of local authorities) by some £800 million. I have consulted local government on the various elements of the 1985–86 rate support grant settlement and will lay proposals before Parliament in December.

There was a substantial overspend on local authority net capital provision in 1983–84, and there is again likely to be an overspend in 1984–85. The figures in the table take account of both.

For housing we have made a small reduction of £65 million on the gross provision. Expenditure will be supported by a level of capital receipts £430 million higher than we assumed last year for 1985–86; this higher estimate has been made possible by the success and extension of our right-to-buy policies.

I shall be announcing later, in the usual way, the apportionment of this total between the local authorities and the Housing Corporation; and individual local authorities will be receiving their detailed housing investment programme allocations. I am considering whether any change should be made in the prescribed proportion of capital receipts which authorities may use to augment their allocations, bearing in mind that local authorities were told in Cmnd. 9143 that they could plan their programmes on the assumption that their allocations for 1985–86 would be not less than 80 per cent. of those in 1984–85.

Expenditure at these levels means that it is more important than ever to determine clear priorities for spending on housing and to seek the most cost effective solutions. It will be necessary for local authorities to concentrate more resources on the repair and renovation of their houses and flats and to make a start on dealing with the emerging problem of structural defects. Where authorities have blocks of flats or housing estates which need substantial renovation for which they do not have the resources in the near future, I will expect them to make strenuous efforts to find private sector partners who can take this on.

For private sector property, it was never the Government's intention that expenditure on Home Improvement Grants should continue indefinitely at the levels of the last 2 or 3 years. It is primarily the responsibility of owners to keep their own dwellings in repair and where necessary to finance improvements by borrowing on the security of their properties. Accordingly, I would like to see home improvement grants focussed increasingly on those who can least afford to pay for repairs and improvements. I will shortly be issuing a consultation paper on proposals for legislation to secure this objective and I hope that so far as practicable local authorities will be guided by the general sense of these proposals in budgeting for improvement and repairs grants in the next financial year.

The urban programme will be continued with total provision (including other Department's contributions) of 68W over £300 million a year for 1985–86 and the following two years. Within this total, provision for partnership and programme authorities will, be continued at about the present cash level next year. The traditional urban programme will be concentrated in fewer areas, but existing revenue grants will be continued for their present term of up to five years. Provision for urban development grant will continue at a level that will enable schemes already approved to proceed and new schemes to be brought forward. In the two later years resources will increasingly be concentrated on the areas of greatest need.

Provision for local authority local environmental services capital is unchanged from the White Paper. The reduction of £45 million is the net PES provision for New Town expenditure and reflects a corresponding increase in the forecast receipts from disposal of commercial and industrial assets. Gross New Town expenditure will be maintained at the previously planned level.

I have made some additional resources available to the Nature Conservancy Council and the Countryside Commission to reflect costs involved in their obligations under the Wildlife and Countryside Act, and a small addition to maintain the Heritage provision.

The external finance limit for water authorities in England and Wales for 1985–86 will be £203 million, including £14 million for land drainage grants administered by MAFF and £20 million allocated to the Welsh Water Authority. For the English water authorities, the Government intend that there should be a significant increase in the provision for water investment from this year's provision of £686 million, to £769 million in 1985–86. This will allow us to make faster progress on replacement, repair and maintenance of sewers arid water mains, and on improving the quality of rivers, estuaries and coastal waters. To finance this investment consistently with the reduced external finance limit, the Government have decided to set the financial targets for the water authorities to achieve an average rate of return of 1.4 per cent. in 1985–86 compared with this year's average rate of return of about 1.0 per cent. This is the first step in a policy to raise the average rate of return over three years to 1.7 per cent. and then to 1.9 per cent.

As a result water charges will increase by rather more than the general rate of inflation. Discussions will now take place with individual authorities to give effect to these policies.

An extra £15 million has been allocated to the Property Services Agency in 1985–86 for major new works and maintenance of the civil estate.

£ million Cash
	1984–85	1985–86
	Cmnd 9143 Provision	Notional allocation of provision in Cmnd. 9143	Revised provision
Total Local Authority Relevant Current Expenditure (covering all Departments' Services)	20,389	^*20,829	21,315
Housing (Local Authorities, Housing Corporation, New Towns):
Capital:
Gross Expenditure	3,244	3,121	3,056
Receipts	-1,600	-1,300	-1,730
Net Capital Expenditure	1,644	1,821	1,326

69W

	1984–85	1985–86
	Cmnd 9143 Provision	Notional allocation of provision in Cmnd. 9143	Revised provision
Current Expenditure†	847	779	979
Programme total:
Net capital plus current	2,491	2,600	2,305
DOE Other Environmental Services
Local Environmental Services Current Expenditure‡	2,260	2,338	2,372
Local Environmental Services Capital Expenditure:
Gross Expenditure	549	547	547
Receipts	-360	-360	-360
Net Expenditure	189	187	187
New Towns (Industrial and Commercial Sewerage)	3	3	-42
Urban and Derelict Land Block (including Urban Current)	404	427	405
Royal Parks, Ancient Monuments, Heritage etc.	92	92	94
Central and Miscellaneous Services, Environmental Research	117	121	126
Environmental Bodies, Development Commission	89	92	100
English Water Authorities External Finance Limit	264	243	183
Water Research, Other Water Services	10	10	9
British Waterways Board External Finance Limit	43	44	44
PSA:
Office and General Accommodation॥	-86	-100	-85
^* £20,493 million after adjustment for abolition of NIS and classification changes in respect of London Regional Transport and non advanced further education.
Subsidies, rate fund contributions, and local and central government housing administration.
‡ Including costs of rate collection and of the births, marriages and deaths registration services.
॥ Negative provision reflects the fact that Departments' repayments to PSA for office accommodation at market rental values exceeds PSA's actual costs of provision because of its holdings of property on Crown leasehold and at low historic rents.