Local Government Reform (Hansard, 30 November 1984)

§ Mr. Kenneth Baker

Savings will result from abolition in two ways——elimination of a whole layer of local government in the metropolitan areas, thus ending unnecessary duplication —the more efficient and economical provision of those services transferred to successor authorities.

Abolition will provide arrangements which are easier for the public to understand, and remove sources of 612W administrative conflict and tension. The resultant savings, after allowing for some transitional costs, will flow naturally from abolition. But savings are not the Government's primary objective in introducing this reform. The case for abolition rests on the provision of a more local, more accountable system of local government in the metropolitan areas.

The ultimate extent of the savings to be achieved will result from decisions yet to be taken by the successor authorities in the light of their eventual analysis of the current policies and management practices of the GLC and the MCCs.

The following estimates, like any assessment made at this stage of the likely savings to result from abolition, necessarily rest upon the information currently available to the Department and upon assumptions about the eventual decisions of the successor authorities affecting both administrative arrangements and spending policies.

Rationalisation savings

Savings will result from the removal of an unnecessary layer of government. The GLC (excluding ILEA) and the MCCs (excluding the police) at present employ directly some 60,000 people on a full-time equivalent basis. Almost half of this number will be transferred enbloc to the new authorities. Many of the remainder who are employed directly on providing other services will receive job offers from the boroughs and districts by 1 April 1986. However, there are areas where the existence of shared responsibilities leads to duplication, and provides scope for substantial savings. Such areas include planning, a major function which is currently provided at both upper and lower tier levels. As the lower tier authorities already have planning departments, it is reasonable to assume that they would not require the services of all the staff now employed by the GLC or the MCCs. Further substantial saving of staff is expected to result from the transfer of responsibility for highways where, in general successor authorities are already partly equipped to take on this function.

Furthermore, the Government consider that there will be savings in central administrative services, such as secretariat support, finance, and personal management. Although successor authorities either jointly or separately, will doubtless recruit some of these staff, particularly those providing specialist support on central purchasing or computing, economies have been assumed in central services.

In total, the savings estimated to arise from such rationalisation processes are based on an assumed reduction of about 9,000 posts. Using a cost multiplier which allows for factors such as accommodation as well as pay, this gross saving amounts to £128 million per annum. This, however, must be offset by the staff needed for continuing functions which may initially be transferred to the residuary bodies, leaving a net reduction of 8,000 posts in local government as a whole.

A further 900 staff will be required by nondepartmental bodies. A small number of staff will be required by Government Departments: these will be accommodated within planned manpower totals.

Therefore the estimated net annual saving arising from rationalisation alone will be of the order of £100 million from 1986–87 onwards. This figure divides broadly equally between the GLC and the combined MCCs.

As stated earlier, the estimates of savings relating to staff reductions incorporate an element which reflects 613W accommodation requirements. There will, however, be further proceeds from sales of surplus property owned by the abolition authorities. It is not yet possible to estimate what this could amount to, though the amount is likely to be considerable.

Transitional costs

In the initial years after abolition there will be certain transitional costs falling on the ratepayers in the metropolitan areas. These costs will fall most heavily in 1986–87. The principal component will be compensation to staff made redundant, estimated at £40 million in the first year after abolition. Some allowance must also be made for temporary costs arising from the process of organisational change. Even after taking all these elements into account, however, the Government expect net administrative savings to be made in 1986–87, in addition to which certain early policy savings are bound to be secured.

Policy Savings

The Government are confident that further savings will be achieved through economies and greater efficiency in the way in which successor authorities manage the services they will inherit, even though no comprehensive estimate of these savings can be made at this juncture. Much will depend on decisions yet to be taken by those authorities.

All of the Government's expectations of savings take account of discussions with members and officers of those lower tier authorities who are co-operating with the Government in preparing for abolition. It is the lower tier authorities who will be running the services after abolition and who are best placed to judge the economies that can be made.

The existing arrangements governing local government finance, which apply to successor authorities, will continue to apply pressures for economy. Moreover, the precepts of the new joint authorities and ILEA will be controlled by the Government for the first three years after abolition. There is also provision for manpower control.

The abolition authorities in aggregate are budgeting to overspend in relation to their targets by £432 million or 26 per cent, this year; and to overspend in relation to their grant related expenditure assessments by £601 million or 40 per cent. GREs are Government's assessments of the cost to local authorities of providing a common standard of service. The comparable figures for all authorities are 4 per cent, over target and 8 per cent, over GREs. These comparisons indicate the very considerable scope for economy which exists in the GLC and MCCs.

The GLC in particular has a reputation for needless extravagance. It has expanded the number of its committees and panels since 1981 from 30 to 59. One of these new committees — the women's committee — currently has a budget of over £9 million, three times the budget for the Equal Opportunities Commission—and the record of unnecessary grants given by this and other committees to their political allies is well documented. A further example of extravagance is the GLC's propaganda budget of £10 million, which alone is greater than the entire budgets of the cities of Oxford or Durham.

Against this background the Government have looked at the potential savings which might result from the reduction of discretionary spending under section 137 of the Local Government Act 1972 following the abolition of the GLC and MCCs.

The successor authorities will need substantially to increase their spending in order to provide continuing 614W support to worthwhile voluntary and industrial development projects; they will do this both individually and under the proposed new arrangements for collective grant-giving to the voluntary sector in clause 46 of the Bill. But even allowing for this the Government estimate that annual savings of the order of £20 million could be made in Section 137 spending by eliminating extravagant and wasteful expenditure.

The GLC and MCCs have also been increasing their staff at a time when their responsibilities are diminishing. Allowing for housing transfers, the GLC's staff had increased by 1,000 or 5 per cent, between June 1981 and June 1984. A further increase of 900 has been approved since June. Greater Manchester county council has increased staff by 8 per cent, since 1981, and West Midlands county council by 6 per cent, since 1982.

The scope for major policy savings is clearly substantial. Economies are there to be made to the lasting benefit of ratepayers in the metropolitan areas. Although abolition is not being proposed solely in order to secure those benefits, the Government believe that successor authorities will prove significantly more economical as they reflect more positively and closely the concerns of their electors and ratepayers.