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 12:00 am, 22nd December 1976

My right hon. and learned Friend is undoubtedly right. He chooses a particularly apposite year, because 1929 was the last time that unemployment began to soar under a Labour Government. It rose to 3 million by 1931. I know that Labour Members do not like being reminded of these facts. They have some way to go before they break their previous record. Unemployment records are always broken under Labour Governments, but these things never have anything to do with the Government so long as the Government are a Labour Government.

The Secretary of State said that he had done everything possible in the current economic situation to cut rigorously, and that anything more would have caused hardship. I understand from the Cabinet leaks and from the right hon. Member for Newham, North-East yesterday that the latest round of public expenditure constraints have had to be introduced without legislation. The last thing that the Government want is for their back benchers to get near these issues. The trade unions, it seems, must not be allowed to feel any hardship under these circumstances. The rate support grant is part of the overall package. That is the most that the Government can do.

The Secretary of State estimates that 25,000 people in local government will lose their jobs, but that this will cause the minimum of hardship. I challenge the right hon. Gentleman's fundamental assumption about the whole issue of job losses in local government. What has actually happened is a consequence of the rate support grant calculations. The effects of the changes introduced by the Government will be higher unemployment, lower levels of production, and a perpetuation of the malaise which afflicts our manufacturing industry. I am prepared to accept that the right hon. Gentleman may have saved some jobs in local government for a short time. But the price for doing that is to destroy more jobs outside local government.

To preserve the public expenditure levels associated with the rate support grant we have to tolerate crisis rates of interest. These rates of interest are adding to the burden of local authorities and are destroying jobs in the private sector. They are driving small companies and shop keepers out of the city centres. There are record levels of bankruptcy, and the link between public expenditure levels and the mounting destruction of the private sector is absolute. That is why the Secretary of State's analogy is wholly wrong.

We have to break out from the position that prevents the private sector from raising or investing money. As long as the right hon. Gentleman has his way, and as long as the arguments he put forward in Cabinet hold sway there will not be an alternative growth of employment in the private sector.

We have reached the situation where the private sector can no longer carry the burden which the Secretary of State believes it should. Nowhere is this clearer than in the Government's housing programme. When they came to power the Government wanted a surge forward in local authority housing. This was to be secured in partnership with the provisions of the Community Land Act and all the centralised power associated with it.

With the burden that was placed on the private sector in the form of rising rates of interest small property developers and builders were unable to maintain the momentum. The Government believed that the public sector would pick it up and carry it on, but the price for that has been even higher rates of interest and an economic squeeze that has strained the public sector's ability to maintain the momentum. The result is that next year will see the worst housing record for decades. The Government will go down in history for having destroyed the country's housing programme.

The hon. Member for Bolsover (Mr. Skinner)—I do not often quote him—said only a week ago that the housing crisis was the failure of the Government and of no one else. I believe that the Government have failed to secure a viable long-term economic policy because of the attitudes which underlie the concept of maintaining high levels of public expenditure associated with crisis rates of interest. It would have been better for the Secretary of State to make clear that he was intending to bite into the vicious cycle of inflation, but for him to accept an average increase in rates of 15 per cent. next year is to contribute to the vicious inflationary cycle which other Ministers are trying to halt.

To avoid that would mean telling local authority employees that they would not have a job, and they expected that. They must be told that; because, unless we condition people to that attitude, which is what I presume the Government mean when they say they want to switch resources from the public sector to the private sector, we will not succeed. How can the Secretary of State argue that these policies will have no real consequence when public sector employment is to be maintained at its present level? That is the last thing that the country expects to hear. The country expects to be told how much local government expenditure is to be reduced, and the Secretary of State has missed the opportunity of doing that.

The Government claim that they want to give a new sense of purpose to the private sector, and that is all right as long as their words are never translated into practice. But we know that they will be seeking powers to extend the scale of direct labour organisations. That is what we now come to expect. All of the Government's arguments are in favour of giving greater strength to the private sector, but when it comes to taking a decision they act in precisely the opposite direction. We shall resist the powers to be given to direct labour organisations with all our constitutional strength. That legislation will represent a further diversion of effort and the misuse of resources. It represents yet another appalling prospect for our economic revival.

We know the Government's attitude on public expenditure. We now face the prospect of inflation of 15 per cent. on a year-on-year basis starting next April. In spite of what we have been promised consistently by the Chancellor in his repeated Budget statements, we know that we face reductions in the levels of services, and the Secretary of State knows that that is the prospect.

It is no use saying that rates will not continue rising and that they will be reduced. In fact, we shall have rising unemployment in both the public sector and the private sector as a consequence of the policies that are being pursued. We shall have soaring rate increases. The increases will be up to 30 per cent. in many parts of the country. There is no prospect yet of any of these trends being reversed or of any change in direction.

The Secretary of State has missed an opportunity. He could have matched the mood of the country if he had put forward a very different approach—namely, the one that the country wants to adopt and the policy it wants to follow. However, he has missed the opportunity. That is his responsibility, and as things worsen next year—we all know on both sides of the House that they will—the responsibility will come home to roost.