Rate Support Grant

Part of the debate – in the House of Commons at 12:00 am on 12th December 1974.

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Photo of Mr Arthur Jones Mr Arthur Jones , Daventry 12:00 am, 12th December 1974

I do not wish to argue about why hon. Members are not in the House. I am sure that they will all be here for the right hon. and learned Gentleman's speech. We shall, perhaps, not be hanging on every word, but we shall be picking out the aspects of this complicated and far-reaching matter which we think are important. It will be a different story for the ratepayers when the rate demands are issued for next year. That will be the test. The Government are playing it soft in the meantime, but, inescapably, reality will have to be faced in due course.

I want to address myself to the contradictions which I see in the attitudes of the Chancellor of the Exchequer on the one hand and the Secretary of State for the Environment on the other. In the Budget Statement the Chancellor referred to a reassessment of public expenditure, and in that context he said one of the aims was to establish firm control over the demand on resources of the public sector as a whole so as to make sure that the programmes do not increase in demand terms by more than 2¾ per cent. a year on average over the next four years."—[OFFICIAL REPORT, 12th November 1974 ; Vol. 881, c. 270.] The Secretary of State for the Environment said today that local government expenditure is to increase by 4 per cent. in the next financial year. That cannot do other than undermine the objectives which the Chancellor set in his Budget. There is no reference to savings to be made to offset the balance of increased expenditure on local government services.

The Budget Statement went on to refer to a review embracing housing and other social and environmental services. To my knowledge nothing has been said in that respect, but in making that reference the Chancellor said: If this is to be achieved, it will require action from both central and local government … No matter how much he would like to see a further development of standards and services, a rate of increase which so far outstrips the growth in national resources cannot go on indefinitely."—[OFFICIAL REPORT, 12th November 1974 ; Vol. 881, c. 271.] I agree with that part of the speech of the hon. Member for Meriden. Referring to local authorities, the Chancellor went on to say: They must limit the rise in their expenditure to what is absolutely inescapable …— [OFFICIAL REPORT, 12th November 1974; Vol. 881. c. 271.] I see no reflection of that requirement in the rate support grant proposals for next year.

On 24th July, in Press Notice No. 560, the Secretary of State for the Environment referred to a levelling oft of the rate of growth in local government expenditure". I am not quite sure what "a levelling off" means. His proposals imply an increased expenditure of about 4 per cent. in real terms for 1975–76. That is where I see some evidence of disagreement. What lies behind the advice given to local authorities which in no way requires policies which recognise the serious financial situation with which the country is faced? We have had no statement by the Government that circumstances are so serious that there will have to be a reduction in local government services.

The country is not being faced with the seriousness of the situation in terms of the tremendous proportion of the gross national expenditure with which we are dealing. There is no evidence of a determination to ensure that local government expenditure keeps within the rate of growth of the gross national product which in the past few years it has exceeded by no less than a multiple of three. It is a reflection on the Government and on earlier administrations that we have allowed the escalation of local government expenditure. Surely, what we as a nation must do is to reduce the level of public expenditure in the local government sector. To follow policies that are directed merely towards the containment of rate increases in real terms and the maintenance of services beyond our financial resources is entirely misconceived.

There is a real crisis throughout local government whose policy of borrow, borrow, borrow at a time of rising interest rates is a denial of the nation's economic reality. I know this is only a near quote, but in one of his plays Shakespeare could have said: "Borrowing dulls the edge of good husbandry". As the Secretary of State says, we must look to a curtailment of borrowing.

Central Government will not give local authorities permission to go on borrowing as they have done in the past to meet the cost of their services. The total loan debt on local authority loans amounts to £23,381 million. Of this the long-term debt is £18,370 million and the temporary borrowing £3,656 million. It would be enlightening to know the average rate of interest on that short-term borrowing. It is undermining budgets throughout local government.

Incidentally, overseas borrowing in the last five years total £203 million, and it may be that to an increasing extent local government is maintaining services through borrowing abroad. In the circumstances of the oil crisis and the fluid situation of world currencies we may well be floating many of our local government services with the aid of Arab oil money.

Through his rate support grant proposals the right hon. Gentleman the Secretary of State for the Environment seeks to fund from central resources £3,100 million. In an award of this magnitude the real seriousness of the United Kingdom's financial situation is being substantially ignored. This immense sum will be added to the large figures to which I have referred. I was interested in the debate which took place on 4th November on local loans when the Minister of State at the Treasury said: The control of local government spending is decided in conjunction with the Chancellor of the Exchequer, and the capital expenditure is a separate agreement made between the Chancellor and the local authorities."— [OFFICIL REPORT, 4th November 1974; Vol. 880, c. 846.] Central Government have a clear responsibility in terms of capital expenditure by local authorities. If that statement by the Minister of State is correct, all control of local government expenditure lies in Whitehall and Westminster. As far as small peripheral matters are concerned, I think that the statement is correct. I hold the view that local government expenditure should be cut. It is the Government's responsibility to direct where cuts should be made. I welcome the clear indication given in paragraph 11 of the Rate Support Grant (No. 2) Order 1974: … many desirable projects will have to be deferred; and … many charges and fees will have to be increased above the amounts neces- sary merely to keep in step with price increases. That is a good firm statement which I welcome, but it goes only part of the way.

Paragraph 13 of the order reads: The Government intend to issue a circular, which the local authorities have indicated that they would welcome, giving specific guidance on the way in which economies in services might be made. I do not have any hope in that direction but I shall look to economies in services.

I believe that there should be a curtailment in local government services and that this is substantially a Government responsibility. It is something away from which successive Governments have shied in the past. Such a course would answer many of the pleas from those who play a prominent part in local government. I quote from an article in the Local Government Chronicle by Mr. Othick on 15th November 1974: If worthwhile economies are to be secured, then local authorities are entitled to ask in what direction The Government have now met that request, and, indeed, events have forced the Government's hand.

Local government is widely criticised on all sides, but with one or two exceptions it loyally carries out Government policies and has done so in recent years in the context of significant changes imposed by this House. I refer to local government reorganisation—which has been a sea change for officers and members throughout local government—and to the establishment of regional water authorities and the reorganisation of the health services. Local government takes on added commitments on demand and sheds others at indecently short notice. The standards which it achieves are equal to the best anywhere in the world.

Local authorities need protection against central Government and the departmental ambitions which have required increased expenditure regardless of the total consequences for their own budgets and for public expenditure as a whole. I welcome the indication by the Secretary of State this afternoon that he intends to ensure that the budget will not be bedevilled by the competition for expansion and increase of services by various central Government Departments. That is a significant step forward and I readily accept it. I congratulate the right hon. Gentleman on having made that statement. I hope he succeeds.

The parlous state of our economy demands that expenditure on local government services must be reduced. This means smaller staff establishments and cuts in services. Indeed, the Government recognise this need. If we are to protect many of the essential local government services we need to look for savings in less necessary services. We need to choose our objectives and to obtain a correct order of priorities. It is not good enough to say that we can go ahead and expand local government services as we have done in the past. There is little in these proposals that reflects an adequate recogntion of the problems which we face. In education it was a mistake to extend the school leaving age from 15 to 16.

I believe that in financial terms there could be substantial savings. We should make better use of buildings and available staff. Let us look at library services on which a total of £100 million a year is spent. I have always maintained that we need a good library service, but when people take out books of fiction why should not they pay for them? What is wrong with paying for the facility comprised in a good fiction library? Such payments would bring private resources into local government services. Surely, economies can be made in services which are inessential, and nobody can say that the fiction service of a library is essential, although it may be highly desirable. I do not include the education side of the library service, but why should not the ordinary borrower, in the main the fiction borrower, pay for the service that he is enjoying? After all, the ratepayers are footing the bill. The service, which is enjoyed by a substantial number of people in the community, is not essential. This is a question of priorities.

Surely our national dilemma lies, to some extent at least, in the fact that the British people have not as yet been brought face to face with the realities of our potentially disastrous financial plight. The Government's willingness to allow local government expenditure to continue at its present level and to be expanded by 4 per cent. is, in my judgment, contributing to our problems and is unwise and profligate.