Local Government Finance

HC Deb 29 November 1994 vol 250 cc649-51W

Mr. Gamier

To ask the Secretary of State for the Environment (1) what is his estimate of the non-domestic rate poundage for next year;

(2) if he has decided the details of the transitional arrangements to phase in the effects of the 1995 revaluation; and if he will make a statement.

Mr. Gummer

The 1995 revaluation will not lead to any significant change in overall rateable value in England. We therefore propose to set the poundage for England next year at 43.2p, in line with the increase in the retail prices index in the year to September 1994.

However, the revaluation will result in significant local and sectoral shifts in rateable values. My Department's consultation paper, published last month, outlined proposals for transitional arrangements to phase in the effects of these shifts on rate bills. In the light of responses to that paper, and the generous package of support announced by my right hon. and learned Friend the Chancellor today, I now propose that no business will face year on year increases of more than 10 per cent., after allowing for inflation. For property with a new rateable value of less than £10,000—£15,000 in London—the maximum real increase will be 7.5 per cent., while for many small shops combined with living accommodation, the corresponding limit will be 5 per cent.

We estimate that nearly 1 million smaller properties and 250,000 million larger properties in England will benefit from relief. One third of beneficiaries will be shops. A further 170,000 properties will see reductions in their bills as a result of the revaluation. I am sure this will be widely welcomed by the business community.

The Exchequer contribution will cover part of the cost of the scheme. The remaining element will be met by limiting real reductions in rates bills, as proposed in the consultation paper. For 1995–96, the limits will be 10 per cent. for small properties and 5 per cent. for large ones.

Other details of the scheme will be as proposed in the consultation paper. Regulations giving effect to these changes will be laid before Parliament shortly.

Mr. Merchant

To ask the Secretary of State for the Environment what are his proposals for the appropriate level of aggregate local authority spending in 1995–96, and the level of central support for that spending.

Mr. Gummer

I propose that total standard spending for 1995–96 should be £43.51 billion for England. This represents an increase of £930 million—2.2 per cent.—compared with this year's figure, including the amount for transitional community care special grant and provision for local government reorganisation transitional costs. Excluding community care and reorganisation, this still represents a cash increase of 0.8 per cent.

I propose that the level of aggregate external finance distributed to local authorities in 1995–96 should be £34.67 billion. This represents an increase of £430 million—1.2 per cent.—compared with this year's figure, including community care. Net of community care, this represents a cash decrease of 0.4 per cent.

I also propose that the national non-domestic rate poundage for 1995–96 in England should rise to 43.2p, reflecting this year's revaluation and the annual increase in the retail prices index to September. This will ensure that the benefit of the government's success in tackling inflation will once again be passed on in full to businesses.

I propose to set the distributable amount of non-domestic rates at £11.35 billion. I propose that the total of revenue support grant should be £18.32 billion. Special and specific grants within AEF will amount to £5 billion.

I shall announce shortly my proposals for the distribution of Government grants, including my proposals for changes in the standard spending assessment methodology. At the same time, I shall announce my capping intentions. I shall also set out my proposals for the third year of the scheme of transitional assistance to those households which faced particularly significant increases in their local tax bills following the introduction of the council tax.

It is essential that local and central Government continue to play their part in restraining expenditure. Our overriding priority is to reduce the public sector deficit. My proposals for total standard spending, aggregate external finance and the non-domestic rate poundage represent a balanced approach to the funding of local authority services in 1995–96. I look to local authorities to take the same responsible attitude in determining their spending priorities and setting their budgets in 1995–96. However, in the context of a tough settlement, I am confident that with efficient housekeeping and efficient collection of the council tax, these proposals will allow local authorities to maintain their current levels of spending and carry out their functions.