During the election campaign prior to the Conservative Government taking office in 1979, Conservative party candidates promised to give more freedom to local government. They promised also to abolish the rating system. Local government has not been given more freedom. Indeed, it has been subject to increasing restrictions year after year.
I was involved in local government until last year. At the time when I was elected to this place, I thought that local government had seen the worst of the Government's impositions. Unfortunately, local government finds itself in an even worse position. The controls that the Government have placed on capital and revenue expenditure have tied down local government and made it impossible for councillors to do the job for which they are elected. I often wonder now why members of the public stand for election as councillors. If elected, they will be unable to do the job that they wish to carry out on behalf of those whom they represent.
We have seen no change in the rating system since 1979. I recognise that the present system is an easy and cheap form of taxation and that it is difficult to agree on an alternative system that would not produce more anomalies and problems. However, the Government have failed to meet their promise to abolish the rating system.
A considerable burden has been transferred from the Government to local ratepayers since the Government were elected in 1979. The RSG settlements since 1980–81 show that a massive burden has been transferred from central Government to local ratepayers. That would be so even if we assumed that there had been no inflation and that the costs of running local government during that period had remained static. The 1980–81 RSG settlement was 61 percent. In 1981–82 it was reduced to 59 per cent., in 1982–83 to 56–1 per cent., and in 1983–84 to 52·8 per cent. For the current year it is 51·9 per cent., and we are talking of 48·7 per cent, for the following year. That means that an additional burden of 13 per cent., which would have been borne by the Government if the settlement were still 61 per cent., has been transferred to local ratepayers. At the same time, additional burdens and tasks have been thrown on local government by central Government.
The Government admit that they cannot assess the costs borne by local government. It is extraordinary that the Government can introduce policies without fully knowing the cost implications to local government in terms of staff and revenue. It is clear that, even without taking account of holdback and penalties, the Government are responsible for most of the rate increases in recent years.
The Secretary of State referred to rate increases next year in single figures, yet the Association of District Councils forecasts that 67 shire district councils will need rate increases of more than 20 per cent, and 164 district councils will need increases of between 10 per cent, and 20 per cent., with the average increase likely to be 11·7 per cent. The ADC is certainly not a Socialist-controlled body, yet it says that this year's RSG settlement is harsh, and I certainly agree.
My hon. Friend the Member for Copeland (Dr. Cunningham) said that 38 out of 39 shire counties had cash targets below their grant-related expenditure assessment level. Lancashire is in that position. If Lancashire county council were to spend up to its GRE figure, it would incur penalties of £46 million. The GRE is, however, the level considered to be necessary to provide a typical standard of service, according to the Government's criteria. That level is not determined by the local authorities; it is the Government's basis for determining what a council should spend.
Lancashire's GRE is just over £532 million and £22 million over its cash target figure. Expenditure above that level results in the council incurring a penalty. That is nonsense. To maintain its present level of services next year, Lancashire would need to increase its precept by 46 per cent. I do not envy the councillors' unpleasant task of dealing with their budget in the months and years ahead. The council really needs to spend more on education and social services, and surely it cannot be expected to cut fire, ambulance or police services.
I am annoyed about the way in which we allow subsidies to be provided for private residential homes for the elderly. There has been a massive growth in the number of those homes. Would it not be far better to allow those Government subsidies to be transferred to local government to provide care for the elderly than to permit profit to be made from them? If the Lancashire county council does not make economies, the ratepayers will be heavily penalised by the Government. That is wrong. The Government must think again about their proposals.
The position of the borough of Burnley differs from that of the county of Lancashire. The borough's cash target is higher than its GRE. The GRE assessment for the year ahead is £5,422,000, which is £50,000 less than this year. We are not certain why the figure is lower. The cash target has increased by 3·75 per cent, on this year's target to £8,481,000—much higher than GRE. During the current year, the council is budgeted to spend slightly over its cash target. If the council budgets in 1985–86 to spend at target, what will happen as a result of the Government's proposals for next year's RSG? The reduction in grant alone will cost Burnley ratepayers £510,000, or the equivalent of a 6p rate on top of this year's 40p rate. Just to spend at target, the council will have to increase the rate by 8p to 52p. That is what will happen without inflation and extra services.
At the top end of spending on this basis, the rate of grant will be down by 12·5 percent. That is the penalty incurred for having a cash target higher than GRE. Once a council spends above its GREA, the rate of grant decreases. When a council spends at the threshold level, RSG decreases again. That causes a considerable difference at the top level of 12·5 per cent. That is what the measures will mean to Burnley next year.
Burnley council feels that its GRE is far too low. That point has been made on many occasions to Ministers, but there has been no reaction from them. It is nonsense for Burnley to experience such a large difference and to receive such a large part of its grant at the lower rate once it has gone above GRE. The ratepayers of Burnley must, therefore, meet a much higher percentage of the cost, and that is wrong.
The Government recognise Burnley as a deprived area according to its designation in the Inner Urban Areas Act 1978. In 1983, Burnley was designated as a deprived area. Because expenditure arising from Burnley's designation is not disregarded and because there has been no adjustment in GRE, there have been revenue implications. Burnley can, therefore, incur further penalties, and that is wrong.
Burnley has not yet finalised its budget for 1985–86. At this stage, its estimates are well above target. Burnley council is not a high spender or overspender. Burnley is an old industrial town. It is like other towns in Lancashire, such as Preston and Blackburn, on which this country's wealth was built during this century and the last. Those towns, which have experienced industrial dereliction, must deal with many problems. Inflation has caused some increase in expenditure, because the inflation rate is higher than the increase in target.
I am worried about the fact that, year after year, the Government fail to recognise that capital allocations have revenue implications. Many people, on noting housing investment programme allocations, tend to think that that money is handed on a plate to local government. They do not think of HIP as permission to local authorities to borrow money or of the revenue implications. Capital allocations affect staff and thereby revenue.
Each year, Burnley council has great difficulty in ensuring that revenue demands are containable within the budget. Our HIP allocation is totally inadequate. Indeed, next year's allocation has been decreased by £1 million. We cannot deal with the housing problems facing us in Burnley. Burnley and many other towns are heading in the near future for a housing crisis in the public and private sectors, but that is a subject for another debate. It is appropriate to consider the revenue implications of the HIP allocation in today's debate.
When I was chairman and leader of Burnley borough council I believed that the grant portion of the HIP allocation had only a small revenue implication and that the council should spend more of the grant in the private sector because the revenue implication was less than new build of sheltered housing or improvement of council houses. However, the 10 per cent, revenue implication for Burnley on meeting the debt charge for improvement in the private sector is now running at about £250,000 which is equal to a 3p rate.