§ Sir Hector MonroTo ask the Secretary of State for Scotland if he will announce details of the 1996–97 Scottish local government finance settlement. [3237]
§ Mr. Michael ForsythI have decided to improve on last year's plans and to allocate to Scottish local authorities the full amount of the extra sum added to the Scottish block as a consequence of the English settlement. Scottish local authorities are therefore being treated very favourably, despite the difficult public expenditure round. Next year, the level of local authority spending in Scotland will be 31 per cent. higher per head in Scotland than in England and the level of Government support will be no less than 44 per cent. higher.
Within the settlement, priority is being given to the police and education services and a further transfer of resources is being made to local authorities in respect of their care in the community responsibilities.
On the basis of this settlement, there should be no need for cuts in front-line services or excessive council tax increases, especially if the new councils grasp the opportunity present by reorganisation to streamline their management structures and take a fresh approach to the way services are delivered to ensure that both the national and the local taxpayer receives best value for money.
The details of the settlement are:
- Government-supported Expenditure
- I propose that government supported expenditure—which is the Government's view of the total amount local authorities need to spend on providing services and meeting debt charges—for 1996–97 should be set at £6,200.7 million. After adjusting for transfers of responsibility to and from local government from 1 April 1996, this is an increase of 2.08 per cent. on the current year's figures.
584 - Grant-aided Expenditure
- Local authorities will incur an estimated £777.7 million on loan and leasing charges in 1996–97. This is an increase of £32.3 million over this year's figure—after adjusting for transfers of responsibility. These charges are increasing at an alarming rate and I am announcing separately my plans to bring them under greater control. After deducting this sum from the GSE total, £5,423 million is available for allocation as grant-aided expenditure. This is the amount which we think local authorities need to spend on services. This GAE amount is 1.75 per cent. higher than that for the current year, after adjusting for transfers of responsibility. I shall announce GAE figures for individual local authorities as soon as possible.
- Aggregate External Finance
- I further propose that Government support for local authority current expenditure—that is, aggregate external finance which consists of revenue support grant, specific grants and non-domestic rate income—for 1996–97 should be set at £5,400.9 million. This is an increase of 2.62 per cent. on the current year's figure, after adjusting for transfers of responsibility. Proposals for the distribution of AEF to individual local authorities are again likely to be issued before Christmas.
§ Sir Hector MonroTo ask the Secretary of State for Scotland what is the level of local authority debt in Scotland and if he will make a statement. [3238]
§ Mr. ForsythAt the end of March 1995 local authorities' outstanding debt on general fund services was £5,338 million. This represents an increase of £2,114 million or 65 per cent. since 31 March 1987. The level of loan charges and repayments associated with that debt is an estimated £799 million in the current year, £42 million higher than in 1994–95. At over 13 per cent. of all Government-supported expenditure, these loan charges are pre-empting an increasing proportion of the resources available for local authority services in Scotland. They are also pre-empting resources for other public services since rising loan debt is a factor I have had to take into account in deciding the share of the Scottish block which is allocated to revenue support for local authorities.
Outstanding capital debt on local authorities' housing revenue accounts has also increased since 1987, despite a 25 per cent. fall in the number of council houses over that period. Outstanding debt at 31 March 1995 was £3,938 million and debt per local authority house was £6,166, compared with £3,930 per house eight years earlier, a 57 per cent. increase. As the size of the local authority stock has declined, the burden of loan charges is being shouldered by a decreasing number of tenants.
The high debt levels in Scotland are the product of two factors: the high levels of capital spending by Scottish local authorities, 75 per cent. higher per head than in England; and the absence of a policy which encourages the use of receipts to repay outstanding debt.
Provided they spend them in the same year, local authorities in Scotland are currently allowed to use the full proceeds of asset sales to incur new investment, without having to pay off debt. This contrasts with the position in England and Wales where councils are in general required to use 50 per cent. of general receipts and 75 per cent. of most housing receipts to repay outstanding debt.
I have decided that it is necessary, in the interests of future generations of council tax payers, council tenants and customers for local services, to encourage greater 585W prudence in the use of capital receipts. From 1 April 1996, therefore, the new Scottish authorities will be obliged to use 25 per cent. of their capital receipts for the repayment of debt. My present intention is that from 1 April 1997, the proportion of receipts to be used to repay debt will be 50 per cent. The details of the new regime, including the question of any exceptions to these general rules and the implications for large-scale disposals of housing stock, will be the subject of detailed consultation with the Convention of Scottish Local Authorities in the near future. As announced separately, I have also decided to control the level on capital expenditure financed from general revenues, in order to protect council tax payers.
By allowing councils to spend 75 per cent. of their receipts next year, I am giving them an incentive to dispose of assets quickly after local government reorganisation. If councils take full advantage of this opportunity and make sufficient progress in reducing their outstanding debt, I hope to be able to allow them in future to spend 50 per cent. of both housing and non-housing receipts, a more favourable position than in England. I shall, however, keep the position under review.
Councils' ability to incur capital expenditure at their own hand will obviously be curtailed. There is, however, plenty of opportunity for them to meet the needs of their communities by doing more to involve the private sector in meeting local needs. The outgoing councils have in general been able to pursue the outdated philosophy that where needs exist they must be met by direct public investment. The Government's approach, reflected in the private finance initiative, is that the public sector should increasingly focus on specifying the services its customers need and look to others to incur the necessary investment. By actively promoting the private finance initiative and pursuing joint ventures with the private sector, the new councils should be able to attract private investment on a scale which more than offsets the effect of these changes.
§ Sir Hector MonroTo ask the Secretary of State for Scotland if he will announce the non-domestic rate poundage for 1996–97. [3239]
§ Mr. ForsythYes. I propose that the Scottish non-domestic rate poundage for 1996–97 should be 44.9p. An order prescribing the poundage will be laid before Parliament in due course. This poundage maintains the link between the Scottish and English poundages and ensures that Scottish business will continue to benefit from the Government's unified business rate policy.