I was not surprised to hear the hon. and learned Member for Perth and Kinross (Mr. Fairbairn) attack the rating system, especially in the light of the experience of Perth and Kinross district council. That council already receives no housing support grant from the Government, and next year its rate support grant will be halved. That is what is happening to an authority which, as the hon. and learned Gentleman said, has been loyal to the Government.
The hon. and learned Member for Perth and Kinross might have added, as a reminder to the Secretary of State, that the Government promised in the 1974 election to abolish the domestic rating system. The Government have produced very little. They have forgotten that promise.
I do not go along with a good deal of the criticism of the rating system, but the effects of successive rate support grant orders from the present Secretary of State help us to understand why there is a widespread feeling in Scotland about the system's inequities and widespread anxiety about the ever-increasing burdens placed on ratepayers.
My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) dealt comprehensively with the speech by the Secretary of State. As we have come to expect, the speech by the Secretary of State was full of claptrap about how anxious he was to protect ratepayers from additional rating burdens. Because my hon. Friend the Member for Garscadden dealt comprehensively with that speech, I shall deal with some of the major issues that arise from the settlement.
We have the same pattern this year as we have had every year since this Secretary of State took responsibility for rating in Scotland. The expenditure level at which grants will be paid in 1985–86 is unrealistic. There is no chance in 1985–86 of local authorities generally budgeting for the figures provided for in the order. Their budgets will be well above that level. There is some dispute about how far above that level individual local authorities will be, but, taken as a whole, they will not fit the guidelines laid down by the Secretary of State. Their total budgets will certainly be higher than the relevant expenditure provided for in the order.
Every year we have said, "The expenditure provided for by the Secretary of State is completely unrealistic." Every year the Secretary of State has said, "It is a perfectly realistic figure. If only local authorities were sensible and reasonable, they would reach the figure I have laid down."
Paragraph 8 of the statement accompanying the Rate Support Grant (Scotland) Order 1984 stated that £64 million would be added to the provision for the relevant current expenditure for 1984–85. That amount was an increase on the level proposed in the White Paper published a few months previously. The £64 million was added to bring the amount up to a "realistic expenditure" level.
If one says that extra money must be added to bring the amount up to a realistic figure, one says that the previous figure was unrealistic, and that is precisely what the Opposition said at that time. We said that, even with the addition of £64 million, the amount was still unrealistic. Of course, the Secretary of State said that that was not so and that, if everyone behaved himself, there would be no problem. The local authorities budgeted for £114 million above the rate support grant figure. In July 1984, the Secretary of State told the House that he had imposed a penalty on them of £90 million.
We are going through the same process again this year. The Secretary of State talks about a so-called enhancement of £98 million for 1985–86, to make the figures realistic. Why do we need an enhancement if the original figures were realistic, as was claimed at the time of the publication of the White Paper? We said at the time that they were not realistic. We said that there was no hope that in 1985–86, if the Government stuck to the figures, the local authorities would even approach them.
The Secretary of State makes a virtue of the so-called enhancements, but the figures that were used for a number of years were so ludicrously out of scale with actual expenditure by local authorities that they made a complete nonsense of the public expenditure White Papers. The right hon. Gentleman had to enhance the figures, not even to make them realistic but just to prevent that discrepancy between his figures and reality from growing worse each year.
However, at the same time as the right hon. Gentleman enhances the figures with an extra £98 million, he reduces the rate of grant by a larger amount, so that the local authorities are not better off but worse off. The reduction in the rate of grant is greater than the so-called enhancement of the figures. For 1985–86, the amount of rate support grant provided for in the order is less than the amount provided for 1984–85 in the equivalent order last year. The amount of money going to the local authorities by way of grant has been reduced by £6 million, despite inflation and increased costs.
Even if local authorities budgeted for 1985–86 on the same basis as for the current year, and took account of the Secretary of State's ideas about what the inflation rate will be in 1985–86—which will be proved to be an underestimate — they would still have to reduce their expenditure by about 3·6 per cent. in real terms. The reduction would be somewhat more for the districts and less for the regions. However, they are not going to make that reduction.
The Secretary of State's figures are becoming closer to reality not because of his generosity but for the reasons that I have explained. But the local authority budgets for 1986 will not be reduced to the figures in the order or in the guidelines based on it. There will therefore be the same rigmarole in July. The Secretary of State will tell the House that, because the local authorities have budgeted above the guidelines, he will, unfortunately, have to impose penalties. We understand from a threatening passage in his speech that those penalties will be even more severe in 1985–86 than they were in 1984–85.
The Government's attitude might suggest that there has been some extravagant explosion of expenditure by local authorities in recent years. That is not true. The Secretary of State quoted some Government figures this afternoon. They were given in an answer on 10 January. It was said that, between 1978–79 and 1984–85—in six years—there had been an increase of 2·5 per cent. in real terms in local government expenditure relevant to the rate support grant.
What the Secretary of State did not say was that since 1980–81 there had been no increase at all. In 1984–85 the figures were, in fact, slightly lower than in 1980–81. Over those years, local authority expenditure, in real terms, has been frozen.
The Secretary of State boasts about it. He says that there have been no great cuts. One would think that he had planned for a freeze, but every year he plans for a reduction in the following year—not a freeze. When he cannot get it, he points out that, for instance, the pupil-teacher ratio is not as bad as we had said it would be. However, that will only be because, very sensibly, the local authorities have paid no attention to some of the strictures laid on them by the Secretary of State.
If services have not been slashed, it is no thanks to the right hon. Gentleman. In the first year of his responsibility for the rate support grant, the right hon. Gentleman wanted the authorities in the following year to reduce their services by 7·5 per cent. in real terms. He has more modest ambitions now. He said that that reduction could be achieved without difficulty because there was plenty of fat. That was proved to be nonsense, and in recent years, local authority expenditure has been frozen in real terms.
That, of course, means a real cut. The situation is similar to that in the National Health Service. Unless there is a modest improvement in real terms each year in finance for the NHS, to take account of demographic and technological changes and so on, the NHS deteriorates. The same argument applies to the local authorities. Especially in the urban areas such as Glasgow, but also in rural areas, we all know that because of the increasing demands being placed on local authorities and their inability, because of Government cuts, to meet those demands, there have been real reductions in services.
In the past few years, the reduction in the quality of services has sometimes been savage. Every hon. Member knows in his heart that that is so. Opposition Members have acknowledged the fact and have protested against it whenever we have been presented with one of these orders. The level of the services has not been maintained. There have been real reductions in the quality of the services provided by local authorities—in some cases, savage reductions.
All that might have been justified—although not by me—if, somehow or other, the burden on the ratepayer had been kept to a reasonable level. One could have said to the ratepayers, "You may be getting a worse service, but at least you are not paying for a better one." What is the reality? My hon. Friend the Member for Garscadden mentioned what has happened to domestic rates between 1978–79 and 1984–85. The average bill has risen from £132 to £326—an increase of 147 per cent. In other words, in the current year, domestic ratepayers are paying two and a half times as much as they paid in 1978–79, but receiving poorer services.
What is the reason for that huge increase? First of all, there is inflation. The Government try to blame the local authorities for everything, but they cannot blame them for the level of inflation.
Secondly, there are the constant and consistent reductions in the rate of grants. This is the first time that, in speaking on a rate support grant order, the Secretary of State has not mentioned the reduction of 4 per cent. in one year during the last Labour Government. I will answer that point in any case, as the Minister who replies to the debate may well make it.
When the Labour Government left office in 1979, the rate of grant was higher than it had been when we took over in 1974. It had risen from 68 per cent. to 68·5 per cent. The present Government cannot claim to be following some long-term trend. Between 1974 and 1979 we slightly enhanced the rate of grant. We certainly maintained the real rate of grant to local authorities.
Since 1978–79, the figure has fallen. Last year it was 60·2 per cent. and this year it is 56·6 per cent.—but even 56·6 per cent. is not the correct figure. There will inevitably be penalties during the year, so the real rate of grant will be below 56·6 per cent. It has already been reduced from 60·2 per cent. to 57·7 per cent. because of penalties in 1984–85. Ratepayers are bearing an even greater burden and getting poorer services because of wholesale reductions in grant, not just because of inflation.
We might be comforted if the outlook for 1985–86 was a little better. The sacrifices might have been worth while if the rate burden was unlikely to increase further, but that will not happen. As has been said, Dumfries and Galloway has been a good boy and gone along with the Secretary of State, yet it faces substantial increases in its 1985–86 rate burden. We know that the real increase in 1985–86 will be well above the rate of inflation. Circumstances will be even worse for domestic ratepayers.
The Secretary of State said today that if everyone sticks to the guidelines—they will not—there is no need to worry about domestic ratepayers, as they will face an increase of only 13 per cent. That figure was produced as if it was a triumph. Who is getting a 13 per cent. wage or salary increase in 1985–86? The teachers and local authority workers certainly will not if the Government have anything to do with it. However, the real average increase for domestic ratepayers in Scotland will be considerably more than 13 per cent. We do not know what the increase will be, but it will be far more than 13 per cent.
Even that average disguises large variations in authorities, depending on how the revaluation has worked out. Scottish domestic ratepayers face an average increase of 8 per cent., purely as a result of revaluation. The increase in Glasgow is 18 per cent. That could have been avoided, as there is no need to have a domestic element that is exactly the same—5p in the pound—for every rating authority in Scotland. Labour's legislation of 1975 and the Rating and Valuation (Amendment) (Scotland) Act 1984 provide that the domestic element can be varied according to the circumstances of different areas. The 18 per cent. increase faced by Glasgow domestic ratepayers is not an inevitable consequence of revaluation, because the domestic element could have been adjusted.
The Government, who pretend to be the ratepayers' friend, have not bothered to use the flexibility available to them. The Government have taken ever more dictatorial powers over local authorities in Scotland so that they cannot function effectively as bastions of local democracy, which is what they ought to be and what they were before 1979. They are now subject to more restrictions, controls and dictation from St. Andrew's house. The result is poorer services and higher rates. It is not an attack on elected councillors as such, although that is serious enough, as we understand the anxiety and anger of councillors, not all of whom are members of the Labour party or the Liberal party. The attack on local councillors is an attack on ratepayers and the people of Scotland. They are paying more and getting less, despite all the bland words of the Secretary of State. The responsibility is the Secretary of State's, and the Government's.