Rate Support Grant

Part of the debate – in the House of Commons at 12:00 am on 22nd December 1976.

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Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Environment 12:00 am, 22nd December 1976

The amount that has to be found in terms of post-tax incomes is extremely serious for large numbers in the community.

To an extent the Government have done what I believe to be necessary in approaching the question of local government expenditure. They have moved in the direction of reducing the proportion of funding that comes from the central taxpayer. I believe that is a step in the right direction.

The Government have failed to grasp the overall need to reduce public expenditure on a more significant scale than they have achieved. They have ended up by reducing net expenditure by 1·6 per cent. and the proportion of support from the national exchequer by 4·5 per cent. The effect has been to leave the responsibility for carrying the consequences of the decisions that the Government should have taken in the hands of local authorities and the private sector. The dirty work that flows from this rate support grant will be done by people other than the Government. The Government should have done their own dirty work which inevitably they will be forced to do.

It was interesting to hear the Secretary of State again rehearse the argument that anything more severe would have caused a great deal of unpleasantness and harshness and that the consequences would have been hard to bear. We have heard that argument, not only by the Secretary of State, but by the Chancellor of the Exchequer for the past two years. Every three to four months after that argument is put forward, one of them comes back to the Dispatch Box to explain that all the things which were impossible three to four months ago have now to be done because of the worsening financial crisis.

That is the dilemma. I believe that I put the position clearly and in much franker language than that used by the Secretary of State today in my speech on the Loyal Address to which the right hon. Gentleman referred. I then made it clear that there was a need for a harsher approach to local government expenditure. I understand clearly the consequences that I spelled out on that occasion, some of which the Secretary of State quoted, as flowing from such a decision. I believe that, faced with the choice between reducing staff levels and services in local authorities and increasing rates, the vast majority of people would prefer rates to be held at lower levels than the Secretary of State suggested. That is a harsh judgment, but, if I read the situation correctly, that is precisely the judgment that this country knows must be taken sooner or later.

As I see it, there are four reasons why the Secretary of State's proposals are wrong. First, I do not believe that the reductions in local authority expenditure are sufficiently large to meet the economic crisis facing this country.

Secondly, I believe that the responsibility for doing what has to be done is being transferred from central Government to the local authorities. The main cause of the agonising reappraisal in local government is inflation. The burst of inflationary pressures which gave rise to the crisis with which the Government are now grappling began some time in the early months of 1974 in consequence of policies pursued by the Government after they were first elected. That led to dramatic increases in the staffing costs of local authorities. That has been a major inflationary factor the consequences of which the Government are only now being forced to cope with.

Thirdly, the cuts have been engineered to cause the minimum impact upon people's daily lives. They have been designed to cut capital projects, as opposed to ongoing consumption, in the hope that the painful consequences that everyone knows follow from public expenditure reductions can somehow be delayed a little longer on the offchance that something will turn up—preferably North Sea oil. The fact is that, where it has been possible to abandon a road scheme, to cut house building and to reduce educational construction, that option has been chosen as opposed to reducing the numbers employed by local authorities. That is another misjudgment by the Government.

Fourthly, the changes are unfairly spread. They are unfairly spread for two reasons, both of which were inadequately dealt with by the Secretary of State. First, the right hon. Gentleman made no attempt to try to grapple with the difficult problem of those authorities which have tried to co-operate with the Government's economies and those authorities which have taken not a blind bit of notice.

Secondly, within the unfairness of the spread, there is no justification for suggesting that the genuine problems within inner cities, which I recognise, should be financed to an increasing extent by ratepayers who do not live in those areas and whose problems they cannot conceivably be.

The Secretary of State was at pains to suggest that he was not doing anything that my right hon. and learned Friend the Member for Hexham (Mr. Rippon) or myself a few days ago had advocated. But that is to misrepresent the situation. I do not have the figures before me, but I believe that my right hon. and learned Friend certainly moved in the direction of increasing support for the inner city areas. But my right hon. and learned Friend was administering a rising budget and, within the context of a rising budget and a rising proportion of central Government support, he was moving in the direction of helping the inner city areas. The Secretary of State is dealing with a different situation. The right hon. Gentleman is dealing with a smaller proportion of central Government support and a reducing budget. In those circumstances, it is particularly harsh to try to continue to move in the direction in which my right hon. and learned Friend was able to move, because the action taken by my right hon. and learned Friend was in the context of an expanding situation.

When I spoke about much the same kind of problem, I made it clear that, to find the resources for the inner city crisis, the Secretary of State would do better to seek to enter into partnership with the private sector and to attract the savings of the institutions and pension funds into investment in land and other developments in those areas, if only the economic climate were conducive to profitable investment in those areas. I specifically precluded any suggestion that the Secretary of State should seek to inveigle ratepayers outside those areas to take on tasks which could not be considered to be their responsibility.

The Secretary of State made it clear that he had what I would describe as inadequate information to try to distinguish between those authorities which have conformed to the general pattern of economic behaviour that he wanted to see them adopt and those authorities which have not. In that event, his decisions must be arbitrary. On the basis of inadequate information, the Secretary of State must take decisions the implications of which he cannot fully understand in their local impact. It would have been better to face the real difficulties with which the right hon. Gentleman undoubtedly has to deal and to ensure that he had the information upon which better judgments were capable of being made.

Many authorities have had great pressures put upon them because they have tried to do what the Government asked them to do. They have cut their expenditure to the bone and run down their balances to help their ratepayers. They have done what the Secretary of State wanted them to do. However, those authorities have seen other authorities that not only have done none of those things, but have publicly flaunted their refusal to do so. Those authorities are now able to turn to the authorities which co-operated and say "What fools you were. We told you that under this Government there was nothing to gain from co-operating. All you had to do was to go on with your profligate expenditure and business would be precisely as before in terms of Government support"

What conceivable incentive is there this time round for those authorities which co-operated so well and to which the Secretary of State paid tribute to go on co-operating knowing that their only benefit will be more aggro in the local election results and the local Press?