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With permission, I should like to make a statement about local government finance for 1987–88.
The Government believe that for 1987–88, there should be a rate support grant settlement which allows no increases or very low increases in rate bills if authorities budget responsibly, which provides greater certainty for all authorities about their grant entitlements, and which provides tough pressures on authorities that persist in overspending. I want to make it clear that this settlement means that high rate bills, or poor standards of service, or both, will be entirely the fault of the authorities concerned.
Under the present rating system, the link between the governed and the governors is being increasingly weakened. Our proposals for the future will certainly restore that link. Meanwhile, this settlement is designed to secure the greatest possible democratic accountability that the present system can yield.
My proposals are as follows. For local authority current expenditure, I propose to set provision at £25·2 billion. This is a cash increase of £2·9 billion over provision for 1987–88 published in January's public expenditure White Paper and is equivalent to an increase of 3·75 per cent. over local authorities' budgets for 1986–87. This level of provision represents a reasonable assessment of what local authorities will spend, given the level of inflation and their past pattern of spending. It does not follow that I believe that local authorities need to spend at this level. There is widespread scope for carrying out services more efficiently and for cutting out extravagant provision. Therefore, I am reviewing — I want to consult local authorities as usual about—the aggregate of GREs with the aim of keeping them broadly steady in real terms.
I propose to provide authorities with about £12·85 billion in aggregate Exchequer grant. This will maintain the grant percentage at 46·4 per cent. of relevant expenditure, the same as in 1986–87. This is a cash increase from 1986–87 of over £1 billion. This will mean that, if authorities spend in line with the generous provision that we have made, there should on average be no need for rate bills to increase at all. Ratepayers will have the certainty that the blame for high rate increases lies fairly and squarely at the door of their local authority.
These are very substantial increases, which I am sure will be welcome. They make it fair for me to propose a change that will both provide authorities with greater certainty as to their grant entitlement and increase the penalties for the reckless, putting greater pressure on authorities to spend less.
Hitherto, overspending authorities have contributed grant to a pool of money which was then recycled to all authorities on the basis of a common rate poundage. Individual authorities had no certainty as to their grant entitlements, which depended not only on their own expenditure decisions but on those of all other authorities. Of necessity, authorities could be informed of the estimated level of recylced grant only at a late stage, when it was difficult for them to take it into account in setting their rate or precept. More paradoxically, even those authorities that chose to overspend regained some recycled grant.
Therefore, I intend to introduce legislation in the autumn, after consultation, to abolish grant recyclying. As a result, authorities will be able to plan their budgets and rates with much greater assurance. Their grant entitlement will depend solely on their own expenditure decisions. It also means a tougher regime for high spenders. They will continue to lose grant if they overspend, but will not then gain on the roundabouts, by getting recycled grant, part of what they lost on the swings.
I move on to the incorrigible, for whom we have rate limitation. I am today laying before the House a report setting out how authorities will be selected next year. I am selecting authorities not selected in 1986–87 whose budgets are more than 12·5 per cent. above GRE and show growth of more than 4 per cent. since 1985–86. I am reselecting those authorities that were selected in the current year whose budgets are more than 12·5 per cent. above GRE and show growth either of more than 4 per cent. since 1985–86, or more than 20 per cent. since 1982–83.
On these criteria, nine authorities not selected in 1986–87 — Brent, Brighton, Gateshead, Hounslow, Middlesbrough, Newham, North Tyneside, Sheffield and Tower Hamlets — are selected. Eleven authorities are reselected — Basildon, Camden, Greenwich, Hackney, Haringey, Islington, Lambeth, Lewisham, Newcastle, Southwark and Thamesdown. Together with the authorities subject to automatic precept control under the Local Government Act 1985, this will mean that, in all, the Government will next year be limiting the rates or precepts of 40 authorities with expenditure totalling some £4.5 billion.
I am today also setting the expenditure levels for the 20 rate-capped authorities. For reselected authorities, there will be a cash standstill on expenditure levels for 1986–87. All but one of the nine newly selected authorities have budgeted in 1986–87 for a significant increase in spending. Therefore, I am setting their expenditure levels at the lower of their cash budget this year and a 6 per cent. increase over their 1985–86 budget. I am, of course, open to representations for redetermination of expenditure levels. As last year, where an authority applies for redetermination because it considers that special accounting arrangements imply unachievable economies in 1987–88, I will not use my powers to reduce expenditure levels or impose conditions.
My right hon. Friends the Secretaries of State for the Home Department, Education and Science, and Transport will be making separate announcements about expenditure levels for ILEA and the joint authorities subject to precept limitation under the Local Government Act 1985.
In the field of capital expenditure, I have to tell the House that, from authorities' own forecasts, we expect the main national cash limit in England to be overspent in 1986–87 by about £700 million.
The Green Paper "Paying for Local Government" set out proposals for a better capital control system, both for the benefit of the national economy and to give local government greater stability. I am urgently considering what steps to take in the light of the responses. I shall make a further announcement later.
I am acting now, however, to end an abuse relating to advance and deferred purchase schemes. These are borrowing schemes masquerading as expenditure. They make use of a bank or other intermediary to transfer expenditure from the year when work is done to an earlier or later year. On the scale that some authorities have indulged in recently, those devices store up massive problems for their ratepayers in the future.
I shall therefore introduce legislation to ensure that prescribed expenditure is incurred in the proper year regardless of when the authority pays. That will apply to all advance and deferred purchase arrangements, and other arrangements with a similar effect, entered into after midnight tonight. It will apply to England and Wales. Officials are writing to local authorities today with the details.
I am considering an exemption, so that authorities which genuinely need to use the device for its proper purpose for an occasional project are not disadvantaged. Any such exemption would also take effect from a date to be announced.
My proposals for this settlement — decisions on abolition of recycling, rate limitation, advance and deferred purchase — increase the pressure on high spending authorities. On the other hand, authorities which spend sensibly and prudently will have a clear opportunity to keep rate increases low. They will have greater certainty and will not have to gamble their budgets and rates on the unpredictable proceeds of recycling. Where authorities spend up, they will forfeit grant. Where spending exceeds all reasonable limits in flagrant disregard of the interest of ratepayers and local businesses, authorities will be subject to rate limitation.
With a realistic spending provision and a generous grant level that keeps the percentage of grant aid unchanged, I believe that this is a settlement which the whole House should welcome.
I begin by congratulating the Secretary of State on a very cleverly worded and presented statement: a statement, however, which is grotesquely misleading. Is the right hon. Gentleman aware that he has improved the presentation while diminishing the substance of what he had to say? Whatever has happened to the criticisms and to the cacophony of calls of overspending and of abuse by local authorities round the country? Do not at least his words demonstrate the needless damage that has been inflicted on local authorities for the past six years?
Is the Secretary of State aware that in his statement it is easy to recognise the all too-obvious deception? He is planning to reduce grant-related expenditure aggregates. Is he not also effectively increasing penalties on all local authorities by making the slope of penalty for spending over GRE steeper and more punitive than ever before?
Is not the Secretary of State also, in his plan to end the recycling of grant, effectively saying to local authorities, "Here is additional money in the settlement, which will be taken away later, almost certainly in at least an equal amount, by the termination of the recycling of grant."? Does not that simply mean a massive windfall for the Treasury, which will be used for other purposes than local authority expenditure?
Does the Secretary of State agree with the Prime Minister's words in the Ryedale by-election when she claimed — as a result of the spending of Labour authorities in the main — that education spending per pupil was at a record level? Is the right hon. Gentleman planning to end that level of expenditure in the settlement? Will his right hon. Friend the Secretary of State for Education and Science agree?
Is it not clear from the studies by the expenditure groups of the Department of the Environment's own officials that any improvement in efficiency that local authorities may be able to achieve will amount to less than 1 per cent. of the total planned expenditure, so there is no way that local authorities can counteract the cuts that have been imposed on them in the past in that way? How can the Secretary of State claim that there will be little or no rates increases, when the Government are planning tomorrow to overturn the defeat in the House of Lords on the Social Security Bill, which will ensure, through legislation, that everyone, regardless of income, will have to pay a minimum of 20 per cent. of their rates bill in future? Does not that mean that thousands of families that do not pay anything at the moment will face major increases in their rates bill as a result of the legislation?
With regard to the end of the recycling of grant, is not the implication of what the Secretary of State has had to say that the Treasury may be taking back up to and perhaps beyond the £1 billion extra that he is saying will be available to local authorities as a result of the settlement? Does not the massive increase in rate capping mean that this Government are spreading even further the central domination and control of local authorities? How is it that, yet again, the right hon. Gentleman has been able to rig the criteria for rate capping to catch more Labour authorities, while avoiding the fact that the City of London is the biggest overspender of GREA of all authorities in the country? Is it not scandalous that he continues to rig the criteria to exclude the City of London, while including impoverished inner-city Labour authorities?
In his promise to legislate to end what is called creative accounting, is not the Secretary of State really enforcing further cuts on many authorities, reducing their freedom and flexibility, and their room for manoeuvre? Is not this statement, like all the others, a naked attack on local authorities, on the quality of the services that they provide, and on their freedom to provide the services that their electorates want? Like all the others, is it not doomed to bring political disaster to this Government, who are already on the road to defeat?
I must check with my office to see whether the hon. Member for Copeland (Dr. Cunningham) was sent a copy of the wrong statement. I cannot make any correlation between his remarks and the welcome and important announcement which I have just made.
The local authority associations asked for the provision to be increased by £3 billion and it has been increased by nearly that amount. I simply cannot see how the hon. Member for Copeland can say that, in some way, this is not what local government asked for.
The hon. Gentleman alleged that the GREs had been reduced. As a result of the statement I have just made, the GREs will be increased by 3·75 per cent. or possibly more, subject to consulting the authorities. The hon. Member said that the slopes had been steepened for grant penalties. That is simply not true. I never mentioned anything of the sort, nor is it our intention to do so. So far, the hon. Gentleman has been wrong on three out of three and regret to tell him that he is wrong on the fourth point, regarding grant recycling.
I have never heard a poorer response to a statement — generally welcomed by the House — and a more incompetent piece of analysis than that which came from the hon. Member for Copeland this afternoon. With regard to grant recycling, we have made realistic provision both for spending and for aggregate Exchequer grant. No authority need incur any penalty or forfeit grant provided that it does not spend more than this year's budget plus the GDP deflator. We have allowed for inflation and we have allowed for the present high level of spending, but if, on top of that, an authority makes a further increase in spending, it surely deserves to forfeit grant. If every authority behaves in the reasonable way that I have suggested, no grant will be forfeited. The hon. Gentleman's suggestion that £1 billion of grant would be forfeited is ridiculous. The hon. Gentleman is aware that at this year's level of provision, which was well under the level of spend, only £628 million was forfeited, under totally different conditions.
The hon. Member, in seeking to consider next year's rate support grant, made reference to the Social Security Bill, but I think that that is something which should be discussed tomorrow.
With regard to rate capping, the hon. Member asked why a number of Labour authorities appear in the list. The hon. Gentleman is aware—I read out the criteria—that the criteria are clearly designed on levels of spending and levels of increases in spending. The fact that a number of Labour authorities appear in those lists is surely an indictment, if ever an indictment was needed, of the Labour authorities which go in for profligate waste.
Does my right hon. Friend accept that the best compliment that the House can pay him is summed up by the lacklustre response of the hon. Member for Copeland (Dr. Cunningham)? Does my right hon. Friend accept that all prudent councils and all ratepayers of cash-happy councils will welcome his statement this afternoon? Will my right hon. Friend confirm that it is no coincidence that, of the 20 rate-capped authorities, 19 are Labour-controlled and one, Tower Hamlets, is Liberal-controlled? Does my right hon. Friend further accept that industry and commerce in the inner cities will be grateful for his protection so that they can go about creating jobs and wealth?
I am grateful to my hon. Friend. He is right about the political denomination of the 20 councils I mentioned. However, I must say that that is only a temporary state of affairs and it may not last much longer. The business rate is vital to those of us on this side of the House who are trying to increase employment.
The greatest damage which has been done to employment in large parts of the north of England has been the excessively high business rates which have been levied by local authorities. If this settlement makes a contribution to holding or even reducing the rates in those parts of the country and results in a better climate for business, I shall be proud of its contribution to job creation.
Is the Secretary of State aware that, although the increase of nearly £3 billion is welcome and the fact that the Government have not reduced the grant again below 46·4 per cent. is a consolation to local authorities, they believe that the increase takes account only of inflation during the past few years and will probably not compensate for the increased wages that they will have to pay the police, teachers and other public officers? Although the change in the recycling rules is welcome because it is better for local authorities to have certainty, it is tinged with danger because there is no prospect of gain for any authority which tries to conform with the Secretary of State's guidance. That is a defect of the abolition of recycling. Does the Secretary of State agree that the change from 20 per cent. to 12·5 per cent. above GREA for rate-capped authorities is tightening the screw and that capital controls are the thing which local authorities resent most? They want to be able to spend their capital as they choose and not have the Secretary of State increasingly dictate that they can spend less and less of it.
The hon. Gentleman has to accept that local authorities must be responsible for the wages that they negotiate and the pay of their employees. I cannot be expected to accommodate the public spending rule to whatever they choose to pay. I am glad of his welcome for the abolition of grant recycling. There is a chance of gain this year because, with the increased aggregate Exchequer grant, authorities will get more grant, provided that they do not go and forfeit it by engaging in overspending.
The hon. Gentleman is not alone in welcoming the abolition of grant recycling. The hon. Member for Blackburn (Mr. Straw), who I see in his place, referred to it on 5 March when he said that it was causing great financial uncertainty in Labour and Conservative authorities alike. I should like to introduce him to the hon. Member for Copeland to see whether they can agree about grant recycling.
I am delighted to be able to help the constituents of the hon. Member for Southwark and Bermondsey (Mr. Hughes) by rate-capping the borough of Southwark. That will protect his constituents from excessive rate demands which would otherwise have been made. I have not yet announced the result of our consideration of the capital controls system for local authorities.
I congratulate my right hon. Friend on what appear to be some encouraging and welcome features in his statement. Is he aware that much of the trouble this year, and all of it in my county, was caused not by the local authority but by the Government setting the taper points for the reduction of grant in totally the wrong place? Will he assure the House that nothing so unjust and ridiculous can possibly happen under the system that he has announced this afternoon?
I was delighted to receive my right hon. Friend only last week, when he brought a delegation from Buckinghamshire to discuss these matters with me. I think that he will agree that much of what he said has been incorporated in the statement. I cannot go further into the effects on individual counties until we have completed the consideration and consultations about GREAs, but in the next statement, at the end of the year, I hope to be able to give much closer exemplifications of the effect on every authority.
Is the Secretary of State aware that the British people will not be fooled by a Conservative Secretary of State in a Government who, when county and district councils were Conservative-controlled, cut rate support grant so that rates were forced up, but who now that nearly every local authority is Labour-controlled or hung, are giving enough RSG to keep rates down? Does he agree that this is a vicious attack on local government? The Secretary of State is giving a so-called extra £1 billion, having taken £17 billion off local authorities during the past seven years, and he will claw most of that £1 billion back and keep it, rather than redistribute it, as happened in previous years. The Government did a calculation last year of how much clawback there would be because of penalties. Has the right hon. Gentleman made that calculation of the money that he will keep this year?
With so many authorities now in the hands of Labour or hung, it is right that the Government should do something to protect the unfortunate ratepayers and victims of those vicious councils. I give notice to the hon. Gentleman and to all councils that after this rate support settlement there will be no excuse for any authority to increase its rates bills by more than a small amount. If such increases occur, they will be the fault of the authorities concerned. The Conservative Government have come to the aid of ratepayers throughout the country, despite the Opposition.
I congratulate my right hon. Friend, first on maintaining the percentage of Government support, particularly unless and until we can spread the load much more fairly, and, secondly, on tackling the abuse of the deferred payment scheme. Is it his assessment that more authorities should have greater funding than at present to enable them to improve the fabric of school buildings, housing, and so on?
I am grateful to my hon. Friend. The figure of 46·4 per cent. remains and I believe that many authorities will welcome that. I also thank my hon. Friend for his reference to the stopping of abuse of the deferred payment scheme which will save ratepayers immense burdens in the future. It is in the interests of ratepayers that that abuse should be stopped quickly before it gets them into real trouble.
Capital allocations are not the subject of this statement, but I shall be putting forward proposals or making a statement about that aspect at a later stage. The figure, of course, will be covered by the public expenditure White Paper.
Does the Secretary of State recall that the borough of Gateshead has been more than responsible in its budgeting to meet the terms and conditions laid down by the Government? Is it not perverse that an area more deprived than most in terms of education, housing, health care, social services and employment should be treated so badly? Does he agree that it is disgraceful and scandalous that such a responsible authority should be rate-capped?
The Secretary of State has made much of increased spending in rate support grant available to local authorities, but will he confirm three points? First, will he confirm that the extra amount is a mere fraction of the amount taken away in the past six years? Secondly, how much of that amount does the Treasury intend to claw back? Thirdly, will he guarantee that, once the entitlements for individual authorities are announced, they will not be altered retrospectively, as is being considered in the case of Southwark?
I acknowledge that the grant percentage has continued to fall under this Government, a process started by the Labour Government, and that it has fallen from 61 per cent. to 46·4 per cent. That has been a deliberate act of policy by the Government to put more of the burden of local spending on local people.
I cannot confirm that there will be any clawback from the grant. It is a realistic settlement and if authorities spend in line with inflation and not above there will he no forfeit of grant at all. That is quite different from the situation last year when it was clear that the provision was less than the likely spending, so there was a heavy forfeit of grant for recycling.
I did not quite follow the hon. Lady's third question, but I assure her that there will be no change in grant entitlement as the year goes on because of the abandonment of recycling.
In view of the extent of Labour protest about the penalties suffered by authorities which have spent far above their GRE, may we conclude that authorities which spent considerably less will he very favourably treated under the new proposals? Will my right hon. Friend confirm that such authorities will be allowed to spend more to reach their GREs? If they cannot do that, what is the point of having GREs at all?
My hon. Friend will need to study the full details when they are worked out to see the effect on any particular authority, but I confirm that, when an authority makes a budget, it will be able to read off immediately the amount of grant that it will receive for that budget and will be able to maximise its share of the grant by its spending plans. In addition, it should be able to benefit from the increased grant. I believe, therefore, that there is every opportunity for prudent authorities to do better out of this settlement.
What about Labour councils such as Birmingham which have always spent less than GRE figures but have lost grant this year because the right hon. Gentleman's predecessor referred to notional rather than to actual figures for last year? Will they lose next year as well?
I do not know whether the hon. Gentleman is referring to events which were brought to a successful and correct conclusion late last night, but Birmingham., like all authorities, must abide by the rules for rate support grant and share equally.
Whatever my right hon. Friend considers to be the right and proper rules, by which Birmingham should abide like everyone else, does he appreciate that cities such as Birmingham have very special problems? What hope is there for them in this settlement? Are we to get more money or are the slums to continue? Which is it to be?
It depends entirely on how much money Birmingham budgets to spend. If it budgets for this year's spending plus 3·75 per cent. it will maximise its grant take.
Is the Secretary of State aware that official statistics published by the Department show that the London borough of Newham is the second most deprived borough in the country? Is he aware that the local council is wrestling with massive problems, including a terrible housing problem, exacerbated by the need to remove tower blocks like the notorious Ronan Point? Does he agree that on any objective criteria the Government should be granting partnership status to Newham and helping the area, not rate-capping it? Does he agree that decisions about expenditure should be taken locally and decided by local democracy in elections? Is he aware that in the elections immediately following the setting of a rate in Newham Labour won 60 seats of of 60? Is that why he is being so vindictive to Newham?
The hon. Gentleman cannot be pleased or proud of the figures for Newham, with spending 18 per cent. above GRE, an increase of 15 per cent. since 1985–86 and a local rate which has gone up 66 per cent. above the class average and is 50 per cent. higher than in 1982–83. Any authority with a record like that would be wiser to keep quiet.
Is my right hon. Friend aware that his statement will be received with relief and considerable satisfaction by most local authorities, although their ability to achieve low rate increases will clearly depend on the level of wage increases? Will my right hon. Friend continue to bear very much in mind the problems of traditional low-spending authorities which have little or no waste remaining to be cut out but which wish and are required to provide an adequate level of public service?
I believe that authorities of the type that my hon. Friend has described will find that they can accommodate the spending that they need with aid from the Government as a result of this settlement. I commend the settlement to my hon. Friend, because it recognises the very point about past rate support grant settlements that he has been making with such persistence.
Does not the Secretary of State accept that, in the past seven years, we have seen a process of centralisation of local government power in the hands of the Secretary of State and that rate increases in most of the inner urban areas, particularly in inner London, have largely been due to cuts in the rate support grant? How are inner London local authorities supposed to maintain very important services such as social services and meet the legitimate aspirations that have been democratically decided upon by their people if they are placed within the confines of a central Government straitjacket, the like of which has never been seen before?
I shall give the hon. Gentleman a straight answer. Islington rent arrears are running at 16 per cent. As that authority is short of money, why cannot it collect that rent and spend the money on these more important purposes?
Does the Secretary of State accept that there will be considerable satisfaction in counties such as Lincolnshire at this settlement, in that, because there is a realistic assessment of next year's likely budget and there has been no decrease in the Treasury grant, it should be possible to keep rates at their present level? Will he consider one point? In counties such as Lincolnshire, which are spending below their GREs, there is as yet no provision to uplift spending towards their GREs without grant penalties. Will my right hon. Friend consider whether such a facility can be extended to such counties?
I am grateful to my hon. Friend for what he has said. It will be possible for counties such as his, and many others like it, to be able to maintain their present level of services in real terms by zero or very small increases in rates if they do not go in for an overspending rush. We shall have to look at the details for each county as they come in, but this settlement is designed to enable counties such as Lincolnshire to achieve just that result.
When the figures show that rate-capped authorities such as Basildon, Lewisham and Greenwich are budgeting this year, despite the limits, to increase their spending over last year by anything up to 25 per cent., how can the Secretary of State claim that rate capping is protecting the ratepayers of those authorities?
Far be it from me to tell the hon. Gentleman about events in his constituency, but he knows full well that, had it not been for rate capping, Greenwich would have had very much higher rates than it has now. There are various ways in which some authorities have sought to evade the effects of rate capping, which will cumulatively catch up with them in the end.
Will my right hon. Friend confirm that the £1·25 billion available for teachers' pay is still in place? Will he further confirm that it will be subject to the conditions announced at the time by our right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) when he was Secretary of State for Education and Science?
I can confirm that this settlement does not include any allowance for the increase in teachers' pay which may or may not be approved by the Government depending upon the ACAS process. The £1,250 million was offered to the local authorities in return for improvements in the way in which the teaching forces managed in order to improve educational standards. When the ACAS process is complete, the Government will consider the outcome in full and decide whether the release of all the £1,250 million is justified.
When will the Secretary of State accept that the really irresponsible action has been that of the Government? How can the Government blame local authorities when those authorities have been robbed of millions of pounds? For example, Sheffield has lost more than £240 million in grants and has received a measly £20 million, despite the fact that all the problems remain. The Government may take the money away, but while the problems remain, the caring will continue. I am convinced that, had this Government been in power many years ago, the good Samaritan would have been shot for irresponsibility.
Will my right hon. Friend therefore explain why Sheffield was not rate-capped last year? Is he satisfied that the budget it submitted to escape rate-capping was false, because last January we were threatened with 70 per cent. increases? Will he now confirm that the £33 million a year which Sheffield is borrowing from French banks will be stopped forthwith, because ratepayers — whether householders, commerce or industry — will welcome such action in relation to a council that has not run its affairs properly?
Sheffield was not selected last year, because it did not meet the criteria. This year it does meet the criteria. We operate strictly in accordance with the criteria, and I cannot pick or choose within or without those criteria.
How will the right hon. Gentleman's statement help those who are unemployed in Middlesbrough, and how will it help the impoverishment of the town by general Tory economic policies since 1979 by depriving that town of the wherewithal to raise the money to meet its needs? No doubt the Secretary of State will quote a series of figures, but let me quote to him a litany of sad and tragic facts — 28 per cent. unemployment, with 98 per cent. unemployment in certain areas. How will the right hon. Gentleman's statement help the town? Is he merely another of these high-ranking Tories who are full of hypocrisy towards the town and have no generosity of spirit?
I must tell the hon. Gentleman in all sincerity that Middlesbrough has had a local rate that is 89 per cent. above the average for its class, and spending per head has been 119 per cent. above the class average. Figures such as those— I say this seriously— result in crushing burdens on business, which in turn cause unemployment. The hon. Gentleman quoted unemployment. Has he yet realised that there is a very strong link between these profligate rate policies and unemployment, and does he now see how rate capping can even be a contribution towards helping the prosperity of his own town?
While I warmly welcome the statement, I return to the point made by my hon. Friends the Members for Grantham (Mr. Hogg) and for Horsham (Sir P. Hordern). Does my right hon. Friend agree that the present formula simply does not take into account those local authorities that have very rapid growth? We are so far behind that we need some means of catching up.
I was pleased to discuss these matters with my hon. Friend when he came to see me. He will take some comfort from the fact that we were able to help him over the problem of the new town of Milton Keynes in his constituency. I do not believe that it would be possible to base GREs on expected increases in population, as he suggested, as it would also be necessary to base them on expected decreases in population, which would be too difficult to achieve. But we are constantly listening to what he and his hon. Friends say, and I hope he will think that we have gone a long way to helping them in this rate grant settlement.
Today's grants announcement is designed to be equivalent to a projected inflation figure next year that will, in the right hon. Gentleman's words, produce a standstill in the rates. Will not the announcement produce a standstill in the conditions of misery that are experienced in Coventry and other cities throughout the country? Coventry will still have 1,000 council houses unfit for human habitation and 6,000 private and council houses without toilets or hot and cold running water. It will still have 14,000 houses each of which will need repair and modernisation amounting to £4,500. We do not need a statement such as this or even a change of Minister—we need a change of Government who will restore the money to local authorities so that they can bring the housing and other conditions of working people up to the level that they ought to be.
The hon. Gentleman displays his usual ignorance. The refurbishment of housing is a capital responsibility, not part of the rate support grant. Coventry could well help itself by making sure that its rent fund allowed for the proper repair and maintenance of its houses rather than resulting in large amounts of dereliction because of its own neglect. If the hon. Gentleman really cares about the people of Coventry, he will be looking forward to the election of a Conservative council there.
While I welcome the abolition of grant recycling, which returned to Leicester more than £200,000 after it was rate-capped and, therefore, did not qualify for it, why has Leicester city not been included in those which should be rate-capped? Two years ago it was rate-capped and since then it has continued to waste ratepayers' money. The council has just made an 80 per cent. rate rise and is showing no regard for ratepayers and the decent people of Leicester.
I must say to my hon. Friend, although I 'know that he is a staunch advocate of ratepayers in Leicester, that Leicester does not come within the criteria which I set out, so it would be wrong to include it.
Does the Secretary of State recognise that Leicester city council is struggling to meet great problems of deprivation and that his statement paid practically no regard to the duties of local authorities to care for people in need and to the services which they provide? Does he recognise that the words "democratic accountability", which he used, in the local authority context mean the accountability of councils to those who elect them, and that he and the Government continue to remove that accountability?
The hon. and learned Gentleman must also bear in mind the accountability of councils to those who find the money which they spend. That is something which one never hears from the Opposition Benches. If local authorities spend £25·2 billion in 1987–88, they will be spending more than a quarter of total public expenditure, which is an extremely large sum.
While I welcome my right hon. Friend's statement and the general gist of what he said, does he accept that some Conservative Members are deeply worried about responsible, prudent but expanding authorities which have been penalised under successive rate support grant announcements over recent years? Will he give a categorical assurance that authorities which have obeyed the Government to the letter will in no way be penalised by this settlement? Although it is not a major part of the statement, will he reassure us that the limitations on the spending of capital receipts will be relaxed for responsible authorities which want to use the money to build specialist accommodation, particularly for the elderly?
I have not dealt with capital receipts today. They will have to be the subject of further study before we can make an announcement. On my hon. Friend's first point, I have tried to design the settlement with the sort of views and objectives he has in mind, but it is never possible for a rate support grant settlement to be wholly acceptable to every authority. However, within that constraint this will prove to be a settlement with which authorities can live and provide a decent level of service.
Is not one of the most blatant cases of political bias revealed in rate-capping Brent? When it was Labour-controlled it was rate-capped. Last year there was a Tory authority which left behind a series of repairs to be done on school buildings and a whole log jam of work to be done. The council is now Labour-controlled and has again been rate-capped. Is the Secretary of State aware that each week my ratepayers spend £30,000 on bed-and-breakfast accommodation for 650 homeless families, that 18,000 people are on the waiting list for housing, that our social services have made the news throughout the country, that 52 per cent. of the population fall into ethnic minority groups, and that 80 per cent. of our school leavers are black and in July will go straight on to the dole? We are urban-aided, but is it not nonsense to give urban aid with one hand and to rate-cap with the other?
Is it not nonsense to have 36 per cent. rent arrears in the borough of Brent? Would it not be a useful source of income if the council at least collected its rent and spent the money on the purposes to which the hon. Gentleman rightly draws attention?
My right hon. Friend will be aware that by far the largest proportion of any local authority's budget is that spent on wages and salaries. In that context, does he agree that there is a great responsibility on those who negotiate increases in wages and salaries to ensure that more local authority resources can be spent at the sharp end rather than on wages and salaries? Does my right hon. Friend agree that no local authority should accept a generous settlement merely to employ additional staff when all local authorities should be economising on the number of staff?
I entirely agree with my hon. Friend. It is no excuse to hide behind the fact that local authorities have chosen to negotiate a number of wages and salaries centrally, because, if they do that, they must take account of the cost of those settlements.
Having rate-capped a large number of inner city partnerhips and programme authorities, which is bad enough, what is the point of penalising those authorities if they spend within the resources available to them, and of preventing them from spending on capital projects when at the same time the Department, in a statement on urban programmes, is encouraging local authorities to take inner-city partnership schemes into their main stream and to spend on capital? What is the logic of the Government's programme on inner cities?
I must confine the statement to the rate support grant. The hon. Gentleman includes matters which deal with capital control and public expenditure provision of capital. I cannot yet discuss that.
While I welcome my right hon. Friend's statement, will he take into account the fact that both his immediate predecessors told my authority that, in return for a bad settlement, there would be a better one next time, and that that has now happened two years in a row? Can Solihull expect to be lucky the third time?
Will the Secretary of State concede that the principal reason for the savage rate increases over the past two years is that the Tory Government have removed £17 billion in rate support grant from local authorities, and that it has little to do with so-called profligate local authorities? Does he agree that, if his statement that there should be no rate increases is not to be dismissed as pernicious propaganda, he must acknowledge that that will depend on the circumstances of individual authorities and such factors as the rate of inflation and the level of wage and salary increases, especially for teachers? Is he aware—
The hon. Gentleman must look at the spending figures. During the past five years total local authority current spending has grown by 38 per cent. in cash terms, which is 7 per cent. in real terms. It is not merely a question of who is finding the money. There has been massive growth in the total spent, as those figures prove. Before an agreement is reached on teachers' salaries between the Government and other parties, we must see the nature of the agreement with ACAS. The Government have not yet been shown that. I must reiterate the conditions of that, which my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) has made clear to the House in the past.
As my hon. Friend knows, I cannot give the details for every county council, but the settlement is designed to provide a good level of grant. Providing that authorities do not increase their spending above the rate of inflation, they should be able to manage with zero or small rate increases.
Will the Secretary of State confirm that the help that Bradford will receive from central Government in real terms as a result of the settlement will remain the same? Will he come to Bradford, or receive a delegation from Bradford, so that he can consider urgently the need for additional money to deal with our housing and education crises and inner-city decay?
I cannot comment on the precise effects on individual authorities, as I have said to all hon. Members who have asked me that sort of question. I can say that the settlement will enable authorities to achieve a proper level of services without large rate increases.
My right hon. Friend's statement will be welcomed especially by careful authorities such as my own. Will he accept that authorities such as Gillingham are worried about the contortions and distortions of the system which allowed two years ago for Gillingham to be in penalty, when it was spending 49 per cent. of its GRE, while this year it has not had to raise a rate at all, due to the munificence of my right hon. Friend's immediate predecessor?
I am grateful to my hon. Friend. I think that the changes that I have announced today will have a considerable effect in simplifying the system and making it easier for authorities, ratepayers and electors to understand what is happening.
Will the Secretary of State break the habit of a lifetime by giving the Chamber a straight answer to a straight question and so allow hon. Members fully to appreciate the level of cunning and slyness in his ploy and its presentation this afternoon? Will he give an undertaking that the total GRE will equal the total running expenditure and that there will be no unallocated margin?
Is my right hon. Friend aware that my constituents who are ratepayers and who live in the Basildon district council area will be pleased by the announcement that Basildon is to be rate-capped for the third successive year? Is he aware also that ratepayers in my constituency and ratepayers everywhere will be indebted to him for the action that he will be taking from midnight tonight on the advance and deferred purchase schemes?
I am grateful to my hon. Friend. The spending of his authority is 97 per cent. above GREA and spending per head is 99·9 per cent. above the class average. I am sure that he and his constituents will be grateful for the action that is being taken. The second part of my hon. Friend's question was addressed to deferred purchase. The leader of Islington council, Ms. Hodge, is engaged in one of these schemes to the extent of £38 million. In a newspaper report, she is alleged to have said:
This is a high risk strategy, because not only does it depend on a change in government but it also depends on a commitment by the Labour Front Bench to bail us out when they return to power.
The Leader of the Opposition is in his place and he can give such a commitment. I wonder whether the right hon. Gentleman is prepared to give such a commitment this afternon to bail out his friend in Islington. But I doubt whether he will ever be in a position to deliver.
The Secretary of State has said that the London borough of Newham is spending 18 per cent. over its GREA arid will be rate-capped. The City of London spends 190 per cent. over its GREA but it is not being rate-capped. Does the right hon. Gentleman realise how deeply offensive it is to describe the spending programme of Newham as profligate when it is surrounded by massive social and economic problems? Will he emerge from behind the Dispatch Box and his prepared statement and come to Newham to see things for himself?
The hon. Gentleman knows full well that only authorities that fall within the criteria can be selected for rate limitation. The authorities which I have read out are the ones that fall within that criteria.
Surely what is grossly misleading is the present system which penalises low-spending authorities by rewarding high-spending Labour authorities? Will my right hon. Friend confirm that, with the welcome demise of recycling from low-spending shires to cities, the ratepayers of Lincolnshire, who have a low-spending authority, will never again be faced with high rate increases as long as we have the present Government, committed as they are to this reform, and as long as they re-elect Conservative county councillors?
I think that I can confirm what my hon. Friend seeks, but I cannot commit my successors on the Government Benches as future Secretaries of State for the Environment.
Is the Secretary of State aware that those outside the House will have understood what the statement is all about? They will understand that it is balanced on a piece of election elastic. That is why he has not been able to answer some of the questions which have been put to him. It seems that the statement has been made because there might be an early 1987 election. Is it not a double standard for the Government—
It is brief.
Is it not a double standard to tell local authorities that they cannot be involved in rescheduling their debts when at the same time, or two or three years ago, the Government told the banks in Britain that they could reschedule debts to Argentina? They told them as well that if they managed to get a default upon the payment of these debts, they would be relieved of the requirement to pay taxation upon the debts. There is one law for the banks in Britain, which have been relieved of the requirement to pay taxation, and another for local authorities that provide public services to help the people in their areas, who are being hammered by the Government. There is one law for the bankers and another for local authorities.
As my right hon. Friend will be aware, due to the financial good sense of the previous Tory administration of Gloucestershire county council it has received a £5 million refund this year. However, it is now a hung council and the £5 million has not been redistributed among the ratepayers. Does my right hon. Friend think it in order for Gloucestershire ratepayers to look forward to a rate reduction next year?
I am glad that my hon. Friend brings in the county which he, I and others represent. I can tell him that this year Gloucestershire county council, under Liberal-Labour control, forfeited £4·3 million of grant and received £4·8 million in grant from the recycling mechanism, which seems to be an odd reward for overspending. The only way to remedy this is for a change of control of the council.
Will the Secretary of State tell the House what his credentials are for understating the extent of the real poverty that now exists in inner-city areas? Will this statement make any real difference to the mean life which the Government have inflicted on my constituents and those of many of my right hon. and hon. Friends?
The hon. Gentleman says that there is poverty in his constituency. That poverty can be made worse only by having high rates and taking money away from those who are suffering poverty. He has still not grasped the point that there is great benefit in reducing the burdens which authorities such as that in his constituency are placing upon the poorest in society.
The prospect of low or zero rate rises will be welcomed by employers in Norwich and by ratepayers generally. Can my right hon. Friend confirm that we are moving towards a system that will reward low spenders and to a far simpler system that will be free of the sort of gobbledegook which we have had to tolerate for so long?
I hope that authorities will find that they can manage with zero or low rate increases if they keep their spending roughly in line with inflation. I hope also that my statement will make the system a little easier to understand, though I confess that it is still extremely complex.
Does my right hon. Friend agree that the treatment of Norfolk county council in recent years has been harsh and unfair and that it is not its fault that this year has seen large rate increases? Will he accept that his statement will be most welcome, and will he give a categorical assurance to Norfolk ratepayers that he means business when he says that he is determined to improve the lot of prudent shire counties?
Does my right hon. Friend agree that it needs to be said time and time again that if there is a rate increase next year in counties such as Oxfordshire it will be due entirely to the profligate spending policies of the Labour and SDP parties, whose only hobby seems to be a wish to write cheques on other people's bank accounts?
My hon. Friend has the point exactly right. I can add only that what he has said does not apply solely to counties such as Oxfordshire. It applies to every county and district throughout the land. If there are to be rate increases, the public must know full well that the blame must lie fairly and squarely upon the authority concerned.
The Secretary of State told my hon. Friend the Member for Copeland (Dr. Cunningham) that he was not planning to increase the slope. How, then, does he intend to implement the statement that he has made today, that he will increase the penalty for the reckless? In answer to my hon. Friend the Member for Stockton, North (Mr. Cook), the right hon. Gentleman has now admitted that GREAs may well be set well below the level of aggregate expenditure. I hope that the right hon. Gentleman will confirm that, if that is so, he will be putting into the settlement a mechanism by which he could claw back up to the £1 billion that he says that he is giving to the local authorities. How much is the Treasury budgeting to claw back from the local authorities? Is it not the message of the settlement that, after suffering seven years of assault, local authorities should beware of Conservative Ministers bearing gifts? While the rhetoric of the settlement has about it all the stench of the pre-election pork barrel, it will in reality do precious little to meet the social and economic consequences of the Government's actions and the poverty and hardship that they have produced, or to commence rebuilding of Britain that is the task that we shall inherit.
I hope that, if the hon. Gentleman inherits anything, he will do his homework and get it right. He has not got it right. The penalty for reckless authorities is the abolition of grant recycling.
I understand the system very much better than the hon. Gentleman. If a local authority loses grant on the present slopes, that grant is forfeited and goes back to the Treasury. However, since the grant and the provision are set at a realistic level, no authority need lose grant, not do we expect any authority to lose grant unless it goes in for a wild bonanza. For that reason, we do not expect any grant recycle to be forfeited. The hon. Gentleman must make up his mind whether what I have announced is a cheat or a pe-election bribe. It cannot be both.
On a point of order, Mr. Speaker. During the statement made by the Secretary of State for the Environment on the rate support grant for England, he constantly referred to the levels of rent arrears in various boroughs. Is it in order for the right hon. Gentleman deliberately to mislead the House about rent arrears when they are the responsibility of the Department of Health and Social Security?
No hon. Member, whether from the Front Bench or the Back Benches, deliberately misleads the House. The hon. Gentleman seems to be seeking to raise a point for debate. As I understand it, there will have to be an order on this matter, and so there will be a debate. I shall bear the hon. Gentleman's claims in mind when we come to that point.