With permission, Mr. Speaker, I shall make an announcement about local authority expenditure and rate support grant in Scotland.
Scottish local authorities are planning expenditure in 1985–86 which is some £91 million or 3·2 per cent. above the guidelines that I issued to them. When I met the Convention of Scottish Local Authorities on 24 June, I said that I was disappointed that despite my warnings that grant penalties would be more severe than last year, local authorities continue to plan for significant overspending. The total of local authority budgets is still above the 1984–85 outturn in real terms and is 1·8 per cent. above expenditure in 1978–79. Given the continued overspending, I have decided that for 1985–86 the total penalty would be £126 million. I will lay the necessary rate support grant Order shortly and grant reductions will start on 10 July. I have today placed in the Library a paper showing how the abatement will affect each local authority, and letters of notification to them are being posted today. The penalties are on a tariff which starts at a grant loss of 70 per cent. of overspend, rising to a grant loss of 90 per cent. of overspend for a 1 per cent. excess over guideline and 110 per cent. for a 2 per cent. excess. At 2·5 per cent. the rate of penalty is 120 per cent. and then steepens to 140 per cent. at 3 per cent. and 170 per cent. at 3·5 per cent. excess and above.
While these severe penalties have been necessitated by the continued overspending of some local authorities, no authority which is planning to spend at guideline will suffer a penalty, and I am glad to see that this year 30 local authorities will avoid penalties by budgeting within guidelines. I very much hope that the remaining authorities will reduce their expenditure to guideline and thus eliminate their penalties, to the benefit of their ratepayers when penalties are recalculated at outturn.
When I announced the penalties for 1984–85 I said that, in response to representations from the convention, penalties would be adjusted in the light of outturn to give incentives to authorities to respond to the grant abatement. Authorities bringing their expenditure within guidelines would have their penalties cancelled. Those reducing their overspending would have their penalties reduced. When I met the convention on 29 April it asked that this adjustment should first be made on the basis of provisional outturn. When I saw the convention on 24 June, I told it that I was able to agree to this suggestion. An initial adjustment of penalties on the basis of provisional outturn will be made for the first time in Scotland this year. The 1984–85 penalties will be further adjusted in the light of audited final outturn about January.
I am glad to see that 13 authorities subject to penalty on their 1984–85 budgets have brought their expenditure within guideline at provisional outturn and will have their penalty cancelled unless final outturn figures show them to be above guideline. The repayment of penalties will obviously be of benefit to ratepayers. Most other authorities subject to penalty have reduced their expenditure and will have some repayment of penalty under the new arrangements introduced last year. I am sorry to say that nine authorities have increased their spending and will have increased penalties. The total amount of penalties to be repaid in respect of 1984–85 is £29 million. Overspend for 1984–85 is still — at £77 million—too high.
There is no need for authorities to lose grant and it is in the interests of their ratepayers to spend at guideline. I hope those who have not budgeted at guideline for 1985–86 will bring their expenditure to guideline at outturn.
It is sometimes easy to lose sight of the enormity of what the right hon. Gentleman is doing in the welter of detail that he provides. Last year the excess over guidelines was £114 million and penalty £90 million. This year the excess is £91 million — a very considerable improvement according to the terms of reference of the right hon. Gentleman—but the penalty is to be £126 million. Even if we exclude Edinburgh, where there are complicating factors, the excess is £74 million and the penalty will be £117 million.
Can the right hon. Gentleman say why, for the first time, he has thought it necessary to impose what can only be described as punitive fines, which are based neither on justice nor on logic? There is no pretence that the Secretary of State is trying to ensure that the guidelines are met. It is a vendetta, with stinging penalties for any local authority that does not bow the knee to his personal diktat. How does he justify this when local authority budgets between 1984–85 and 1985–86 increased by only 4 per cent., which is well below the rate of inflation? Will he tell the House whether the comparable abatement in England and Wales for 1985–86 will be weighted in a similar way, with a clawback of more than £1 in the pound, or whether this is a particular form of torture that he has devised for Scottish local democracy?
Has the right hon. Gentleman considered the impact upon individual local authorities? For example, in Strathclyde the excess over guidelines in 1984–85 was £50 million and the penalty £38·5 million. This year the Strathclyde excess will be £41 million—£9 million less than last year—but the penalty will be increased from £38·5 million to £67·5 million, the equivalent of 5p on the rates. According to my calculations, the penalty is 165 per cent. of the excess over guidelines. Even if there were merit in the guidelines, which is a matter of considerable controversy, there is no case for imposing an additional penalty of this kind. Can the right hon. Gentleman say why the hard-pressed councillors of Strathclyde should be expected to make a saving of this kind in this financial year? How many teachers does he think will have to go to the wall, how many home helps, how many occupational therapists—
Yes, and social workers. Unlike the hon. Member for Banff and Buchan (Mr. McQuarrie), I do not think that the term "social workers" is an insult. They do a useful job. An authority such as Strathclyde cannot find £67 million at the fag end of the year. This announcement will result in an unreasonable and unreasoning butchery of local government services.
Last year the excess in Central region was £4 million and the penalty £3 millon. This year the excess is slightly down—about £4 million—but instead of £3 million the penalty will be £7 million. Does the right hon. Gentleman expect to be thanked by his political allies in Lothian region, which in 1985–86 has an excess over guidelines of £7·5 million and which will be asked to pay a penalty of £8·8 million? In other words, Lothian region will be brought below the already completely inadequate guidelines that have been set by the Secretary of State. Lothian is not unique. Tayside is in exactly the same position.
What about some of the hideous complexities that will now face Edinburgh district council? The right hon. Gentleman seems determined to throw everything at the situation, including the kitchen sink—[HON. MEMBERS: "Too long."] Will he confirm that Edinburgh will be deprived of the entire needs element of its rate support grant settlement? Even if it meets his demands—because of the right hon. Gentleman's allegation that its spending is excessive and unreasonable — and makes cuts of £16·3 million, it will still be faced with more than £1 million in penalties as a result of this announcement.
Does the right hon. Gentleman accept, as any fair-minded person would, that his announcement is a recipe for chaos and that he is deliberately creating confrontation while at the same time parading around Scotland lamenting and complaining about the very crisis for which he is largely responsible? Even now, at this late date, will not he make some contribution to settling a difficult and dangerous situation by abandoning what amounts to no more than a pointless and punitive campaign against local democracy in Scotland?
To hear the hon. Gentleman, one would think that all this was complete news to him. But he knows perfectly well that last year the huge gap between what local authorities were planning to spend and our provision was met half way by an extra £98 million that was found by the Government. At that time I clearly said that, as part of that, the penalties would be much more severe this year. What is more, I have said that every time I have met the local authorities and I have also said it in public. Therefore, no one should be surprised that the penalties are much more severe.
The hon. Gentleman described the penalties as fines. That is not correct, because authorities can get this money back by bringing their spending down at outturn. Indeed, quite a number of authorities that suffered penalties last year have now got some money back. That will either reduce the net effect of these penalties or in some cases will wipe them out altogether. In England and Wales, the reverse of what the hon. Gentleman said is the case. The highest levels of penalties in England and Wales are far higher than in Scotland. The highest is 300 per cent. of overspend, which is much more severe.
The penalty for Strathclyde is large because it is a large authority with large expenditure. Although the penalty is up this year, that masks the fact that Strathclyde will get some money back from the penalty that it was scheduled to pay last year because it has brought its expenditure down at outturn. It is not all that difficult for Strathclyde, but I accept that it is not easy.
As to the time of the year, the hon. Gentleman might have mentioned the fact that we have managed to make the announcement considerably earlier. Last year's announcement was made well into July. I hope that this earlier announcement will be helpful.
Edinburgh is in a unique situation. I confirm what the hon. Gentleman said, that as things are going at the moment, Edinburgh will come out of grant altogether. But it will get that back if it brings its spending down to anywhere near guidelines. I have merely asked Edinburgh to go 3 per cent. above guidelines in the order that I propose to bring forward. But it is interesting to note, such are Edinburgh's extraordinary spending plans, that, had the penalty been 60 per cent. rather than the higher figures I have mentioned, it would still have lost rate support grant this year, given its planned level of overspending. Edinburgh is in a totally different situation, and I urge everyone in Edinburgh to think again before they do real damage to the city.
Order. I must bear in mind that this is an Opposition Day. A large number of hon. and right hon. Members wish to take part in the subsequent debates, and there is also an application under Standing Order No. 10. I am anxious that questions on this statement do not continue much beyond 4.30 pm. Questions should therefore be brief.
Will my right hon. Friend accept that he is absolutely right to implement the grave warnings that he has given over many years? Does he also agree that some local authorities, such as Dumfries and Galloway, have, through prudent budgeting, kept within the guidelines and deserve credit for doing so? In next year's formula will he consider some incentive for those authorities that have kept within guidelines this year so that they benefit from their prudence?
I am very grateful to my hon. Friend. It is worth pointing out that even those authorities that have kept within guidelines have had to work extraordinarily hard and have had to make very difficult decisions to do so. I hope that they will be duly regarded for the contribution that they have made. We shall be looking at ways of ensuring that they are not penalised for their care and responsibility.
Are not these outrageous penalties just another part of this dishonest charade that we have had from the Government every year? They have laid down completely unrealistic guidelines and have pretended that they can be reached, when the Secretary of State well knows that they cannot. They have now come forward with these penalties that are a burden on the ratepayer. Will the right hon. Gentleman stop talking about penalties on local authorities, because these are penalties on rates and services? They expose the hypocrisy of the Secretary of State posing as a friend of the ratepayer. He provided an ostensible £50 million of relief for domestic and commercial ratepayers, reduced that to £30 million, and, as a result of this announcement, has taken away £100 million more than he is giving in the current year.
The right hon. Gentleman is quite wrong. It is extraordinary that he should say that guidelines cannot be reached when 30 Scottish local authorities are now planning to do just that. He might also note that the guidelines are in some cases above the needs assessment. As for a charade, he will recall that when he imposed penalty, it was completely unfair and bore no relation whatever to the amount of overspend by particular authorities. That we have put right, and now the penalty at least bears a fair relationship to overspend.
Was not the Edinburgh district council Labour group fully warned about the consequences of its actions? Much more important, will my right hon. Friend strongly emphasise to those Labour councillors that if they reduce spending to within guidelines they will again be entitled to grant?
I certainly confirm what my hon. Friend has said. Edinburgh's course is beyond understanding, particularly when it has been asked to achieve a figure that is quite a long way above guidelines. Edinburgh is being treated very well.
Is the right hon. Gentleman aware that the so-called guidelines are simply his arbitrary figures so that he can act in accordance with Treasury diktat? Is he aware that any kudos he received for the £50 million repayment, later massaged to £30 million, will disappear when the ratepayers feel the effect of this massive piece of political chicanery?
Exactly how many local government jobs does the right hon. Gentleman expect to be lost as a result of his announcement? Does he not agree that the local authorities he is penalising have a much better mandate than he has to govern the people of Scotland?
Will my right hon. Friend accept my congratulations on fulfilling the punishment of extravagant sinners, but will he remember that forgiveness is also part of the treatment of sinners? One of my sparse virtues is an ability to understand the English language. I understand what an assessed need is, but not what a guideline is. It is absurd that a frugal council such as Perth and Kinross should have a guideline that is £1·2 million below what the Scottish Office has assessed as its need, whereas in extravagant Edinburgh the guideline is 10 per cent. above assessed need. Cannot we change such a mad system?
I appreciate what my hon. and learned Friend has said. As I have told him, we are looking hard to see whether we can get a more accurate calculation of guideline in the future. I sympathise with him on that point. I agree with what he said about the repentance of sinners, but they must repent before one can forgive them.
Surely nothing extravagant has been done by any of these authorities. Much of what they have done has been caused by the duties imposed on them by central Government and the central Government cuts from which they have suffered. How much longer will we see our urban services in particular run down under this Government? What will happen to the marvellous and massive private housing improvement in Glasgow, for example, which has now stopped in midstream as a result of these punitive measures? This is part of the problem facing local authorities, and the Government will go down in shame for having halted these things.
The hon. Gentleman is quite mistaken in thinking that there is any effect whatsoever on housing improvement in Glasgow. That comes under the Housing Corporation, which has been very generously funded by the Government. As to the statement that none of these authorities has indulged in any extravagance, the credulity of the people of Edinburgh will be stretched beyond belief if they read that the hon. Gentleman has said that.
I congratulate my right hon. Friend on the method that he has adopted to ensure that the high-spending authorities are penalised when levying these undue charges against the ratepayers. Will my right hon. Friend accept, however, that rural areas and places such as Banff and Buchan district council and Grampian regional council have found it difficult to keep to his guidelines, but nevertheless have endeavoured to do so? I sincerely hope that the work that they have put in will be found to be of benefit when they realise what local authorities will enjoy in abatement.
My hon. Friend is absolutely correct in that. Indeed, he is being unduly modest because he will find, when he sees the figures, that not only is Grampian within guidelines and has no penalty, but Banff and Buchan has some money back from the penalty that it would have had to pay last year because it has got its spending within guidelines.
Surely the Secretary of State is aware that not one single local authority in Scotland believes his guidelines are fair and provide the kind of finance needed for a local authority to supply services to ratepayers. Not even Grampian regional council, or Banff and Buchan district council, has a good word to say about the guidelines. Will he not take that into account? Secondly, he seems to express some surprise that there should be outrage on the Opposition Benches because we knew that this statement was coming. I tell the right hon. Gentleman that somebody who is sentenced to be hanged knows that capital punishment is coming, but that does not make it any the more palatable when it finally arrives.
I should have thought then, with that last point in mind, that such a person would not commit the crime in the first place if he could avoid it.
Aberdeen still has some penalty to pay, but the hon. Gentleman may be reassured to know that it will be getting back some of the penalties that it incurred last year because it got its spending down nearer to guidelines.
Does my right hon. Friend not agree that, if there is any hypocrisy in this matter, it lies with those Socialist councils in Scotland that are bleating about having to cut services because of cuts in rate support grant which they have brought on themselves by having chosen to spend millions of pounds on supporting striking miners, giving money to CND, sending councillors on trips to eastern Europe and elsewhere and many other extravagances, in the sure and certain knowledge that not only would the ratepayers have to pay but they would lose grant and incur penalties as a result?
Yes, I certainly agree that some of the things on which such councils as Stirling are spending money are almost beyond belief. My hon. Friend will agree with me, I am sure, that, while these authorities seem to enjoy putting on the crown of the great overspenders, they do not like it when there is some penalty as a result. They should realise that one goes with the other.
I understood the Secretary of State to say in reply to my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) that relevant expenditure was to be increased by £98 million. Surely this does not meet inflation, and, since local authority expenditure has risen by only 4 per cent., it represents a cut in real terms.
That is not quite the point that I was making. I was saying that there was initially a gap of about £200 million last year. I moved just about halfway to make it easier for local authorities. In return, I expected them to do better, and I warned them that there would be severe penalties. The hon. Gentleman may be pleased to know, however, that his local authority will get some benefit from the changes in the order.
I am grateful to my right hon. Friend for announcing earlier that Aberdeen district council would get a refund of penalty on 1984–85. Is that not the best possible incentive for it to remain within guidelines this year and to make every effort to ensure that its expenditure is reasonable?
My hon. Friend is absolutely right to say that it is a tremendous incentive. It compares very much with the previous system, which meant that authorities got completely indiscriminate penalties related only to their proportion of rate support grant, which often bore no relation to the amount of overspending that they had incurred.
Is it not the case, whether or not local authorities in Scotland have met their guidelines, that they are virtually united in regarding the system of guidelines and penalties as being operated with gross unfairness? Is it not also the case that, after six years as Secretary of State, the right hon. Gentleman has wholly failed to protect ratepayers from overspending local authorities, has failed to promote local accountability and has failed to develop a system that is comprehensible to anyone?
Does my right hon. Friend agree that the whole problem of local authority expenditure began way back, before the general election of 1979, when the compact that existed between local authorities and Government worked? It broke down during the winter of discontent in the late 1970s, and, sadly, the expenditure base from which the prudent authorities began under guidelines meant that, as the years went by, the prudent authorities found it much more difficult to maintain the guidelines. Those that have deserve rewards. I should have liked to see more rewards for those authorities that had been good and even steeper penalties for those that had been bad. Being good has not been an adequate reward, and it is time that we got rid of the whole system.
I appreciate my hon. Friend's last point. It is desirable that those who have made the very difficult efforts necessary to keep within guidelines are rewarded. I think that the system now is very much fairer than it was. My hon. Friend is right in referring to this as a longstanding problem. I am afraid that the honour still falls to the Opposition, when in power, of having—in 1976—made the biggest-ever cut in one year.
As a Strathclyde Member of Parliament, I wish to add my protest to those of my right hon. and hon. Friends as this vicious attack on the ratepayers of Strathclyde. Is the right hon. Gentleman aware that Cunninghame district is the unemployment black spot in the United Kingdom, with every third man unemployed? Is the Secretary of State further aware that Cunninghame district council is known as a responsible authority, one which not only carries out good housekeeping now but has done so in the past? Why should we suffer further when we have done well in Cunninghame and have tried to keep to the Government's guidelines? Why should we be penalised?
I do not always agree with the hon. Gentleman or with Cunninghame district council, but in this case it has had a much fairer deal because on this occasion it is getting back some money and is a net gainer from these changes.
Does not my right hon. Friend think that it is time to consider a new system to prevent this annual wrangling of an auction every year, which makes it very difficult for councils to organise their budgets, particularly when the budgets are affected halfway through the year?
My hon. Friend is absolutely right to say that making these changes in the middle of the year is extremely difficult. That is why I have been pressing local authorities to do this much earlier—in fact, long before the year starts. Some of them did so and some of them did not. My hon Friend will be glad to know, however, that Inverclyde council is one that will be getting back some penalty as a result of the savings that it has made.
Is the Secretary of State aware that the brutal cut he is trying to impose on Edinburgh amounts to an attempt to make a complete mockery of the decision of the Edinburgh people to elect a Labour council, and will do real damage to the level of services and to housing provision in Edinburgh? Will he admit that the 15·7p rate that he is trying to impose on Edinburgh is precisely the rate that was moved unsuccessfully by the minority Tory group last March, and that he has made no attempt to acknowledge the successful 22·7p rate moved by the majority Labour council?
The hon. Gentleman must know, as does everyone on Edinburgh council, that the council has deliberately and openly—it has been quite honest about it—set out to bust every one of the rules and regulations governing dealings between central and local government. If it does that, it must expect the normal methods to be used. I hope that, in the interests of the ratepayers of Edinburgh, it will now get its spending down. After all, all that I am asking it to do is to cover the huge growth in spending which it has instigated. There is no question of ordinary services being affected.
Does the right hon. Gentleman recognise that my district council is operating within the guidelines? However, that does not deter the council from stating that this is the worst Government in history when it comes to looking after the interests of local government. Will the right hon. Gentleman take cognisance of the fact that, if Strathclyde works within the guidelines, there will be serious cuts in social services? Because of the clawback that will be imposed on the council, the right hon. Gentleman will not be able to fulfil his promise on Tuesday that the teachers would be taken care of with an increase in rate support grant.
I appreciate what the hon. Gentleman says about his local district authority. I applaud the council for coping with its difficult task in operating within the guidelines. Of course it is not easy for a large authority like Strathclyde district council to get its spending quickly down to the guidelines. However, I have urged the council to do so for six years. If the council had started to act earlier, it would have found it much easier to get within the guidelines.
Will the right hon. Gentleman accept that my colleagues and I do not approve of or support Socialist councillors accused of breaking the law, even though we may disagree with the Government's choice of guidelines? We believe that the position in Edinburgh warrants some flexibility from the right hon. Gentleman, and not law-breaking by the council. Will the right hon. Gentleman acknowledge that, following the rates debacle last month, the Scottish people know how much the Government are responsible for forcing up rates? They will see this decision as a further move by the Government to force up rates and consequently to cut services next year. In those circumstances, will the right hon. Gentleman undertake to ensure that the £126 million penalty which he is now clawing back will be handed back directly to Scottish ratepayers?
I am grateful to the hon. Gentleman for his clear statement about giving no support to lawbreaking. I hope that that statement will be noted in all quarters. However, the hon. Gentleman's remarks about overspending were quite off beam. I thought that he would have been thoroughly pleased that his district local authority and regional local authority have avoided any penalty. Surely he must feel, therefore, that this penalty system is much fairer than the one that operated before the Conservative party came to power.
I am pleased to hear the right hon. Gentleman's positive reference to Inverclyde district council. Has he calculated the number of teachers' jobs that may disappear because of these penalties and other proposed cuts?
It is for the local authorities to decide the details of the cuts. The provision that the Government have made allows, in general, local authorities to provide teachers up to full Red Book standard, plus an extra 6 per cent. to allow for curriculum development. If local authorities are already employing many more than that, they may have to reduce the numbers to make some savings. The provision is certainly perfectly adequate.
Further to the point of order, Mr. Speaker. Is this procedure not an abuse of the House? The Front Bench at least should have these details instead of having to rely upon details in the Library. The Secretary of State has information that is denied to the rest of the House. This information is not included in the statement.
Further to that point of order, Mr. Speaker. The Secretary of State has refused to answer any supplementary questions. He has simply looked up the figures and said that the hon. Gentleman or the hon. Lady "may be pleased to know" that his or her authority has received some sort of benefit. If the right hon. Gentleman is going to abuse the provisions of a statement in this way, he should at least ensure that a copy is available, not only in the Library but in the Vote Office, so that hon. Members may study the figures and have a sensible question and answer exchange.
The problems faced by Back Benchers in these circumstances are worsened by this lack of information, especially when figures and percentages are bandied about between the two Front Benches. Back Benchers are in a difficult enough position. They should be provided with the information that is necessary for them to ask good questions.
As this Front Bench speaker does not have the detailed abatement figures either, I ask the Secretary of State to spell out some of the details concerning certain authorities, because hon. Members are faced with great difficulties when their authorities are affected and they do not have full details.
Why, when the total budget is to increase by less than the rate of inflation, does the right hon. Gentleman propose to unleash this chaos on Scottish local government? The right hon. Gentleman has not yet given details of the staffing cuts that will be necessary for the remainder of the current year to fulfil the proposed guidelines. Has Edinburgh already received £2·5 million of the needs element in RSG? Does the right hon. Gentleman propose taking that money away from the council? If so, how will he do it? Why is the right hon. Gentleman conducting this frenzied attack on Scottish local authorities, the ratepayers and the services that are provided in these areas? Why does he continue to give us these bland assurances that he has the interests of Scotland's ratepayers at heart when, in fact, COSLA representatives must have given him a roasting the other day when he met them? Perhaps the Secretary of State would like to tell us what the COSLA representatives said this morning when he consulted them about these outrageous proposals.
Talking about strange roles, the hon. Gentleman's role as the supporter of ratepayers is pretty odd in view of the fact that he is a greater supporter of overspending councils than anyone.
I gave instructions that the information should be made available in the Library, which was asked to release the information. I shall of course look into the matter. I very much regret any shortcoming in the provision of information for hon. Members.
The proposed spending for the coming year is not increasing as much as the probable rate of inflation, but the spending must be related to what the country can afford. If that is not done, worse things might befall us. No business or family anywhere in Britain has a guarantee that what it spends next year will be fully uprated for inflation. The public sector cannot be guaranteed in that way.
An over-provision had already been made to Edinburgh, and we are considering the best way to rectify that position.