I beg to move, That the Bill be now read a Second time.
The House has had to consider more than the usual share of local government finance in recent months—[Interruption.] I am glad that I have the unanimous approval of the House, at least at the beginning of my speech. I am not sure whether the amount of that legislation is a matter on which I should express my sympathy to the House, or vice versa. As hon. Members are aware, this legislation has arisen, for the most part, because of legal problems or deficiencies in the existing legislation and in the way in which it was thought to operate.
I am pleased to tell the House that the Bill is not of that category. It is a positive measure—[Interruption.]—designed to improve the operation of the current rate support grant system, at least until such time as we are able to bring in a new and more satisfactory system of local government finance. My right hon. Friend has already announced his firm intention to introduce legislation no later than the first Session of the next Parliament.
This is a Bill to abolish the procedure known as grant recycling. I shall summarise for hon. Members how the procedure works at present, and the disadvantages of this system, before explaining how the Bill seeks to replace it.
The block grant system may, if Plato will forgive me, he likened to his definition of democracy:
A charming form of government, full of variety and disorder, dispensing a sort of equality to equals and unequals alike.
That may also be a definition of grant recycling under the present arrangements my right hon. Friend announces, in the context of the rate support grant settlement, the aggregate amount of Exchequer grant available to local authorities for the year in question. From that he deducts the amounts estimated to be required for specific and supplementary grants, and after a further deduction for domestic rate relief grant the balance is the amount of money which he calculates will be available for distribution to local authorities as block grant. He also announces the principles on which that grant is to be distributed and estimates the amount of grant which each authority can expect to receive on the assumption of a certain level of expenditure. Some assumption about expenditure needs to be made at this stage, in order to be able to set the grant-related poundage schedules which govern the distribution of the grant total, and to provide examples of authorities' likely entitlements.
Authorities, however, in this fallen world, do not always spend at the levels we have assumed. Some authorities will turn out to have spent less, and will in most cases then be entitled to more block grant than anticipated. Other authorities will choose to spend more than has been estimated, in the full knowledge that their grant entitlement will decrease accordingly.
Under the present system, if the sum total of actual grant entitlements is calculated to be more or less than the sum originally made available, the poundage schedule governing grant distribution is reset for all authorities in a supplementary report so that the aggregate of authorities' grants is equal to the original amount. So, when authorities spend more and lose grant entitlement the resulting underclaim is eventually redistributed among all authorities on a common poundage basis. Similarly, if some local authorities underspend and thus receive extra grants, all authorities lose some grant so that the total grant from the Government remains exactly the same. Hence the term recycling. This process continues periodically for some time after the grant year in question as new and better information about authorities' actual expenditure becomes available.
The procedure has several disadvantages, which have become increasingly apparent to the Government and clear to many local authorities. The first and most important of these is that authorities have no certainty about their likely grant entitlements at the crucial stage when they are setting their budgets and their rates for the forthcoming year.
Will the Minister give an assurance to local government that the Secretary of State's guarantee at the beginning of the 1986–87 financial year that £2·41 million would be given to Sefton through the recycling process be honoured? There may be a little more money. Surely those assurances enable local authorities to plan, knowing that they were guaranteed a certain sum. If that practice were continued, the Minister would not need to pinch money from local authorities.
It was £400 million at the beginning and shortly thereafter a further commitment was made. I am grateful for the help of my hon. Friend. The sum was increased up to £500 million and a press release was circulated.
Grant recycled in 1986–87 is likely to be £611 million, so, to answer the hon. Gentleman's question immediately, I cannot see that there would be any threat to the sum guaranteed to Sefton, depending on its expenditure. However, I shall certainly write to the hon. Gentleman about this. The amount from Government depends on the level of expenditure of a local authority. If a local authority has increased its expenditure greatly, obviously that will have an effect on the grant as the original grant will be reconsidered. Sefton, like every other local authority, will have its share of grant recycling.
I should like to follow the point niade by the hon. Member for Bootle (Mr. Roberts). Will my hon. Friend confirm that if the House gives the Bill a Second Reading and it passes through all stages in Committee and the other place, it will have no effect on the rate support grant settlement for 1987–88 and that the rate support grant settlement for the coming financial year is well in advance of that for previous years—some 5·5 per cent.—for those local authorities that are not rate-capped, that is, well above the rate of inflation?
I can give my hon. Friend the assurance that he seeks. The Bill deals simply with the question of recycling, not with the original distribution, which has already gone out. The end of recycling means that each local authority will have the grant that has been given to it, provided that it spends at the level of the settlement spending assumption. I can give that straightforward assurance.
Does my hon. Friend agree that in general terms the position is similar to that in which, if the Ministry of Defence spent in line with its estimates for any year, it should expect some extra money at the end of the year? At present that is what is happening in local government and that is what the Minister is rightly trying to stop.
I agree with my hon. Friend's definition. Without bringing in other Departments, I realise that that was a splendid illustration of what is happening and what the Bill is about.
To continue with what I was saying, the process continues periodically for some time after the grant year in question as new and better information about authorities' actual expenditure becomes available. As I have already said, that procedure has several disadvantages. The first and most important is that when local authorities set their budget they have no certainty as to whether they will have more money coming to them as the year goes on. Obviously, the right time to make firm decisions is at the beginning of the year when the distribution of their money between the various local departments should be made. Relatively large amounts of additional grant can subsequently appear or be lost purely as a result of an authority's spending elsewhere.
I am listening carefully to what the Minister is saying. He should tell the House what has happened to the promises made by the right hon. Member for Mole Valley (Mr. Baker), who is now the Secretary of State for Education and Science. He told the House, particularly Conservative Members, that grant recycling would be used to help bring additional resources to low-spending shire authorities. What has happened to that promise? What has happened to the promise of the present Secretary of State for the Environment, who said that he was bringing an extra £800 million or £900 million in rate support grant for the coming financial year, because the Bill will reduce that amount by at least half? That is the intention of the Bill.
The settlement that my right hon. Friend brought out in the summer is 9 per cent. higher than the previous year in Government grant; over £1 billion. No authority needs to lose one penny of that if it spends at settlement level. Settlement spending assumption is 1·5 per cent. higher than inflation. If the £400 million of this year was lost, it would mean that authorities throughout the country were spending at 8·5 per cent. above the previous year. If they lost £600 million this year they would be spending 11 per cent. higher, that is three times the rate of inflation. The hon. Member for Copeland (Dr. Cunningham) is a reasonable individual and he must be as shocked as I am to realise the level of expenditure that would be required to lose grant to that extent.
The hon. Member for Copeland's intervention gives me the opportunity to put on record the fact that if local authorities spent only 0·5 per cent. higher than inflation, at the rate of 4·25 per cent., which is 1 per cent. less than the settlement presumed, they would gain an extra £132 million from the Treasury. The opportunity is present. It is not a game of football in which the intention is to score goals, or a procedure in which the way to get more money from the Treasury is to spend less. However, more money can be obtained by spending 0·5 per cent. over inflation.
I read what the hon. Member for Copeland said last year when this matter was debated. It is surprising, sometimes, how people change sides as time passes. We have all experienced that. On 20 January 1986 the hon. Member for Copeland said:
the local government finance system is now much more difficult to understand and predict than before".
I will not disagree with that. Indeed, we are trying to simplify matters and assist understanding throughout the House by introducing this measure. The hon. Member for Copeland went on:
The figures issued by the Government on the entitlements of indvidual authorities are misleading, because they ignore the 'close-ending' factor—".
Which is grant re-cycle—
The Secretary of State cleverly made seductive promises … about what their authorities might get. Does he suppose that responsible councils and treasurers can fix budgets and levy rates and precepts on what they might get out of close-ending? Of course not. He knows that that is a preposterous suggestion. He knows that no responsible local authority would dream of budgeting on that basis."—[Official Report, 20 January 1986; Vol. 90, c. 57.]
I rest the whole of the Bill on the comments that the hon. Member for Copeland made then. Indeed, his comments were very responsible.
I would like to continue—
I believe that it is a good thing to continue and I am glad that I have the support at least of the Liberal Benches. Indeed, perhaps the whole alliance may be joined in the desire for me to continue. There may be continuity there, if nowhere else.
As I have already said, these amounts cannot he anticipated and are quite outside an authority's control. Berkshire county council, for example, will this year receive about £39·3 million of block grant on our latest estimates. Of that, some £11·3 million will come from recycled grants—£10·3 million of which the council did not anticipate when it set its budget and rate for the current year.
Many local authorities have complained about the effects of that recycling, even though they stood to gain extra grant this year. Extra grants have been available to Nottinghamshire, Cheshire and many other authorities and these were not expected when the councils set their budgets. I can quote the example of one county council, Dorset, which sent us a long and detailed paper in June last year on the advantages of a new approach which would enable local authorities to calculate their grant with greater certainty and would produce a more direct relationship between an authority's spending decisions and its grant. The approach advocated was exactly along the lines which the Bill seeks to introduce. We have received similar letters from other authorities from which I could quote if there was time.
On the other hand, in 1985–86 for example, initial grant claims exceeded the amount available by £123 million. Therefore, £123 million had to be clawed back from all authorities' entitlements. Clearly that creates quite unacceptable uncertainty for local authorities. A further disadvantage of the present system, of particular concern to the Government, is the fact that any grant recycled when there is an underclaim, is distributed both to high and low spending authorities. Authorities which choose to penalise themselves by spending up, and which lose grant as a consequence, can paradoxically receive back large amounts of windfall grant, regaining on the swings what they quite justifiably lost on the roundabouts.
All that sounds like something from "Alice in Wonderland". Indeed, it brings to mind a piece of nonsense verse by Lewis Carroll which might have been written to describe grant recycling:
I gave her one, they gave him two
You gave us three or more;
They all returned from him to you,
Though they were mine before. Basically, that is what recycling is about.
That, then, is how the system works and why it needs to be changed. My right hon. Friend the Secretary of State announced his proposals to abolish grant re-cycling in July last year. Measures to implement them were foreshadowed in Her Majesty's Gracious Speech at the beginning of this Session and the intention to legislate was confirmed in the House on 13 January when my right hon. Friend announced his firm intentions for next year's rate support. grant settlement.
The Bill is, I am sure hon. Members will agree, admirably short, comprising just three clauses.
If the Minister is concerned that the present re-cycling system takes money from his so-called overspenders, does not give it to underspenders but distributes the money to all local authorities whether they over or under spend, why does he not introduce a new system which does what he wants—takes from the so-called overspenders and gives it to the underspenders instead of taking it from everyone and giving it to the Treasury?
It is not taken from everyone; it is just taken from those authorities which overspend when compared with the assumption. Consideration was given by the Government to the suggestion made by the hon. Member for Bootle (Mr. Roberts). The disadvantage of his suggestion is that an authority may be spending a lot of money yet an assessment is made on its support grant allocation and that authority may receive money back. Another authority, which is not spending much at all, may not be rewarded because it is assessed against its record in recent years. The difference between authorities' expenditure is considered in recent years. Thus there will be rewards for authorities which do not deserve them under that method.
Unfortunately, there is another side to that coin. There are authorities that have been particularly frugal in their expenditure over many years, and which, when there was rate-capping and recycling, were able to recoup some of the grants that they would have received and the support for their low levels of expenditure. That redistribution has been removed and my authority in east Sussex, which has been praised by my hon. Friend's Department year by year, and which has been promised action year after year to correct its balance of expenditure, has this year—not uniquely but as one of very few authorities—had its available cash reduced. There will be no extra funds available later in the year. That problem exists, but the Bill does not tackle it.
There are two points in my hon. Friend's intervention. My hon. Friend's points relate to the method of distribution. The basic problem is not recycling or no recycling for some authorities. Rather, the basic problem lies in the way in which the rate support grant is distributed. Because of our suspicion of the way in which the system works at the moment and the disadvantage of the domestic rating and business rating systems, we have suggested that, in the first Session of the next Parliament, we will introduce legislation to change the system.
I accept that within the system there have been advantages to such authorities as Sussex, part of which my hon. Friend the Member for Lewes (Mr. Rathbone) has the honour to represent. Last summer my right hon. Friend the Secretary of State gained an excellent settlement of an extra £1 billion of real money—an increase of 9 per cent—for distribution. More money was put in. However, my hon. Friend's objection relates to the method of distribution. The extra money was only a stop-gap help. There must be a change in the system to help the shires. That will be far more satisfactory in the long run.
The Bill, as hon. Members will agree and as I have already said, is honourably short as it comprises just three clauses. Clause 1 contains the meat of the Bill. It enables the Secretary of State to end the practice of grant recycling by requiring him not to be concerned to distribute the amount of block grant estimated to be available in any previous report. Instead, he may vary the amount of grant payable in any subsequent report. It also enables the Secretary of State to leave out of account new information about authorities' actual or likely total expenditure if he needs, for whatever reason, to determine new principles for grant-related poundages in the supplementary report.
In addition, clause 1 ensures that the Secretary of State can make such assumptions as he considers appropriate about authorities' total expenditure when he sets the poundage schedule in a rate support grant report.
Will the Minister give an interpretation of some of the words in the Bill? Last week, when we were discussing the previous Local Government Bill, he said that the interpretation of words was important. What is his interpretation of clause 1(b)(ii)? That can be misinterpreted easily, and I should like, this afternoon, for its meaning to be read in to the record, so that everybody is clear that the Minister knows exactly what it means, and we can then go into Committee bearing in mind what he has said.
I look forward to dealing with this important clause in Committee in great detail. Clause 1(b)(ii) is the centre of the Bill. Previously, every time there was a supplementary report, the Secretary of State had to bring all local authorities into line so that the sum going in grant had to be the same as what was previously determined. In this case, there is no such determination. The same £12 billion is going in grant this year. If the authorities overspend, that amount in full will not go out. On the other hand, if authorities underspend, a greater amount will go from the Treasury. Without this, the Secretary of State would have to bring all local authorities into balance in total expenditure, so that every time one local authority over or underspent, it would affect every other local authority.
I hope that I am informing the hon. Gentleman correctly. The rate support grant statement, made by my right hon. Friend the Secretary of State, set out the sum of grant to each authority and presumed a 5·25 per cent. expenditure increase. The difference of grant to each authority will depend on whether it has spent over, below or at the presumed level. I am grateful to the hon. Gentleman for drawing my attention to this, because this is the kernel of the Bill.
Clause 2 contains a rather technical provision which, though incidental to the abolition of grant recycling, is necessary to ensure the smooth operation of the modified scheme by removing a possible doubt in the existing legislation. This is in the use of the words "the appropriate class" which appear several times in the 1980 Act in describing different types of authority, but which our legal advice suggests may be susceptible to different interpretations in different parts of the Act. Our intention in this clause is to ensure consistency of interpretation, and to clarify that the Secretary of State's ability to consider different types of authority separately when setting the mechanisms for rate support grant reports applies in the same way throughout.
The third and final clause of the Bill, which is the most simple, provides that the Bill shall apply to England and Wales only.
Having seen reports in one newspaper today, I should like to put at rest suspicions about what clauses 1 and 2 are about. We can all agree on clause 3. We are not seeking to validate any actions that were taken on the distribution of grant in London following the abolition of the GLC. Nothing in the Bill does that. The Bill has no bearing on the Greenwich case, which concerns the so-called Bromley error. The definition of classes of authority has no bearing on this. The Bill removes doubt about the precise meaning of part 6 of the Local Government, Planning and Land Act 1980, as amended by the Rate Support Grant Act 1986. We use this to set grant-related expenditure and grant-related schedules on spending and GRE. We need this to be correct to ensure that we can distribute extra block grant to educational authorities, and not all local authorities, following the Government agreed teachers' pay settlement. The Bill does not seek validatory action by my right hon. Friend the Secretary of State.
In practice, the Bill ensures that the grant-related poundage schedule determined in the rate support grant report to distribute the amount of block grant then available will not be redetermined to take account of the spending decisions of individual authorities. In consequence, any grant not claimed because authorities overall spend more than the settlement will not be paid out. If, overall, authorities claim more grant by spending less, additional grant will be provided subsequently by the Exchequer.
That the abolition of grant recycling will bring greater certainty and stability to authorities' block grants is, I believe generally acknowledged. Many local authority members and officials who have written or come to see my colleagues and I in the course of our consultations on next year's rate support grant have recognised this. The Association of County Councils, the Welsh Counties Committee and the Association of District Councils have welcomes the principle of our proposals, although naturally they and many of the individual authorities who have commented qualify this by wishing that more grant could be made available or that the settlement spending assumption were higher. However, I remind the House that the rate suport grant settlement which my right hon. Friend has announced for 1987–88 is an extremely generous one. It represents an increase of more than £1 billion—or over 9 per cent.—in the total amount of Exchequer grant available to local authorities in England next year—a substantial real terms increase.
Labour Members will probably seek to suggest, as they have done in the past, that the abolition of grant recycling will automatically wipe out part of this increase. That has already been said. This is not true. There is nothing automatic about it. If authorities can restrain their spending increase next year to the settlement assumption—which in England is 5·25 per cent.—in current terms, rate-limited authorities excepted, which is well above the expected level of inflation of 3·75 per cent., they will be able to claim in full the extra block grant made available. I hope they do so.
However, if some authorities choose to increase spending beyond this assumed level, they will lose grant, as is the case now. The difference under the provisions in this Bill is that they can no longer hope to regain some of this grant through recycling. This is a positive benefit of this Bill.
The Bill will put an end to grant recycling and the uncertainties and illogicalities that go with it. In future, local authorities will have much greater certainty as to their grant entitlements. They will know their entitlement for a given level of spending at the time of the settlement, and will be able to calculate what their grant would be for any other level of spending in the knowledge that other authorities' decisions will no longer he able subsequently to change the whole picture. Unlooked-for sums of grant will no longer wash into authorities' accounts long after their rates for the year have been set. Neither will the Government take away grant in order to pay for some sudden increase in another authority's entitlement. An authority's grant will, from now on, if the Bill becomes law, depend on its own spending decision alone, which can only help to improve its accountability to the ratepayer.
The Bill will encourage sensible, responsible and properly planned budgeting by local authorities. I commend it to the House.
On 16 January 1985, a former Secretary of State for the Environment, who was not then, and is not now, a Secretary of State for the Environment, described the debates on local government finance as
occasions when the disgruntled speak to the disenchanted in front of the disbelieving.
He went on to describe the rate support system as:
understood only by the initiated … byzantine in its complexity … fully comprehended only by those who have a taste for scholastic theology".—[Official Report, 16 January 1985; Vol. 71, c. 413.]
Two weeks ago, during the debate on the Local Government Finance Bill the hon. Member for Ealing, Acton (Sir G. Young), who is also no longer a local government Minister, said that the more the local government finance system was explained to him the less he understood it. This week the Local Government Finance Bill is in another place. It is intended to give retrospective cover to a series of illegal acts committed by a series of four former Secretaries of State for the Environment. That Bill will also remove the legal challenge in the courts to the past exercise of powers by the Secretary of State.
The Bill before us today adds another chapter to the byzantine saga. Like last week's Bill, this Bill has retrospective effect under clause 2. The Minister said that it was not retrospective, but of course it is because it seeks retrospectively to validate past acts. I shall go into that in more detail later. Clause 2 is certainly retrospective. This Bill, together with last week's, removes the challenge in the courts to past rate support grant decisions and introduces new and wide discretions. It is a further part of the tangled mess of the Government's creation.
This Bill like last week's and like the ones we had last year and two years before that, are all developments of the rate support grant system introduced in 1980 by the right hon. Member for Henley (Mr. Heseltine) who, like the others I have mentioned, is no longer a Minister. The right hon. Gentleman gave a broad description of the system in 1980. After listening to the Government's assurances, it is as well to go back and look at how the present system, which is being slightly amended, was described then.
The then Secretary of State, the right hon Member for Henley, announcing the new block grant system, said:
The new system in no way sets limits to what an authority spends".
That is no longer true, is it? He said:
nor does it fix the level of an authority's rates.
That is no longer true, is it? He went on:
Those decisions remain with the authority.
That is no longer true. He went on to say:
No cash is actually removed from an authority,"—[Official Report, 5 February 1980; Vol. 978 c. 251–2.]
That is no longer true either, is it? We must look back to the assurances that were given when the sytem was introduced and listen also to the assurances given about last week's Bill and about this week's Bill. We must remind ourselves that this is the 42nd legislative skirmish between the Government and local councils since 1979.
This Bill is only three clauses long and is therefore admirably short, but it is another milestone along the road of muddle and misanthropy, incompetence and illegality, and sometimes plain malevolence, in the administration of the rate support grant system. 'We have had change after change, penalty after penalty and retrospection after retrospection. It is like the films produced by Sylvester Stallone, the "Rocky" series. Every film has a sequel, although even Sylvester Stallone never got anywhere near the number of sequels being produced by the Government.
To paraphrase and depart only slightly from the wording of the Bill, it will enable the Secretary of State to do as he thinks fit. That is the context in which the Bill is presented, and so far that is a charitable view of the legislation. The financial memorandum could hardly be more obscure. I cannot remember looking at the memorandum on a previous Bill and finding out from something which is supposed to be informative that the Bill may cause more or less money to be spent. That is the least informative piece of information that I have ever seen in a financial memorandum. It is so obscure that it is quite clear that more money could be spent. However, given the Government's record, that is unlikely.
We are talking not about a theoretical world in which local authorities spend only 0·5 per cent. above the rate of inflation, but about the real world in which on the best estimates there will be a loss to local councils, and that means a loss to ratepayers. On one low estimate the loss will be £2 billion to £3 billion. On a higher estimate it will mean a loss to ratepayers and councils of £1,000 million. Those are not exaggerated figures because, as the Minister said, the amount of grant recycled in the current year was £611 million. The Bill has huge financial consequences for local authorities and diminishes the increase in support for local authorities that was promised only last year.
I listened carefully to the Minister because I thought he might invalidate many of the things that I was proposing to say. He said that the recycling system is complicated and creates uncertainty. We knew he would say that because it is in the explanatory memorandum. But he might have said that there is another way of distributing this money with a greater degree of certainty under a different but fair and equitable system for local authorities. Almost everything he said pointed the way to large amounts of this money going back to the Treasury.
The Minister gave his own description of how the present recycling system works. I shall try to give my version of that because local government finance is not as byzantine as some people make out. At present, the rate support grant goes from the taxpayers via the Treasury to local councils. As the Minister said, it is calculated as a fixed global sum which is shared among local councils according to Government assessments, not councils' assessments, of their needs. To some extent it takes into account previous spending records. To say the least, it is a somewhat odd system, because if a local elected council assesses the needs of its electorate as being much greater than the Government's assessment, it is rate-capped, or its grant is withdrawn or, at worst, it suffers both.
If a council disagrees with the Government over the assessment it will be hammered and receive less money. That is a somewhat odd system, but it gets odder. If a council agrees with the Government's assessment of its needs as set out in the grant-related expenditure assessment and tries substantially to move up to the Government's assessment of its needs, it still gets punished—certainly it will not be rewarded.
There is a third aspect of this odd and curious system. If a council disagrees with the Government's assessment of its needs and thinks that the Government have assessed that need as too great, and if the council spends below the Government's assessment of need, it gets some reward. That is the rate support grant system introduced in 1980. Since that system was introduced, the global sum has been allocated to local authorities collectively. Money has been withheld from councils that overspend according to the Government's estimates and, as the Minister explained, that pool of money is redistributed. As well as doing other things, clause 1 enables that money to be seized back by the Treasury instead of being shared by the beneficiaries for whom it was intended.
At present, the system is akin to a tote or a pool in which, even if the odds or the shares are changed, the total distribution will still go to those who are entitled to share in the pool. At least the system has that certainty. The new system that clause 1 introduces allows the Department of the Environment to fiddle the odds. I quote the word "fiddle" from a speech on the rate support grant by the hon. Member for Tiverton (Mr. Maxwell-Hyslop) about a year ago. Under the new system, the Department of the Environment can fiddle the odds and can change the shares rather like the promoter of a lottery or a bookie who puts his hand into the pool and takes some of the punters' money. As I said, the amounts involved are enormous.
If London authorities generally overspend in the forthcoming year by 3 per cent., leakage from the pool will be £112 million in 1987–88. That leakage will be three times greater than the total amount of urban aid given to London local authorities in the forthcoming year as partnership aid, programme aid and other urban assistance. If shire counties overspend—that is the DOE definition of overspend—by an average of 3 per cent. the loss from the pool to the shire counties will be £193 million, and that will wipe out in aggregate all the cash gains that the Minister claims for the current rate support grant settlement. All the cosy consultations between the Secretary of State and Back-Bench Tory MPs will come to nothing.
The same objection is made by the Association of County Councils. They say that, of course, they should like to see clarity and certainty. It says:
It was made clear, however, that such support—
that is, for this new system—
was only on the basis that an adequate spending assumption which properly reflects local authorities' spending was used in any RSG Settlement.
This is the crucial part of clause 1. It goes on to say:
This would ensure that the full grant pool would be distributed and avoid the unexpected results for 1987–88 whereby it is estimated that some £400m of grant will be returned to the Treasury.
It goes on to state:
Since the Association does not regard the assumed spending underlying the 1987–88 Settlement as adequate, nor have any assurances been received for the future, then the total abolition of block grant recycling must be opposed at this time.
The potential losses, even on a 3 per cent. overspend basis, could wipe out all the gains that the authorities are likely to receive.
The figure of 3 per cent., which is a modest one, is not a far-fetched forecast. In the 30 January edition of the Local Government Chronicle, I saw the recommended or approved precepts for a number of English counties. They are not loony Left councils—I do not think that there are any loony Left councils—but Left councils that care. Whatever the argument, the councils that I shall mention are not loony Left—some of them are not even Left or centre.
North Yorkshire plans to increase its spending next year by 10·9 per cent. That is well above my 3 per cent. figure. Oxfordshire—the Minister for Housing, Urban Affairs and Construction, who represents a constituency in Oxfordshire, has departed from the Chamber after his bashing at Question Time—is budgeting for an increase of 15·8 per cent. Somerset is budgeting for an increase of 7·8 per cent. Surrey—no militants are in command in Surrey—is budgeting for a 7·44 per cent. increase in its precept, and Wiltshire is budgeting for an increase of 9·9 per cent. A series of Conservative or middle-of-the-road authorities plan to bring about the grant loss that I put forward.
On Government assumptions, if all local authorities overspend by more than 3 per cent., the loss will be over £400 million. To put that sum in context, that is £70 million greater than the Government expend on arts, libraries and museums. It is close to the total amount that the Department of Environment provides for housing subsidies for local authorities with great housing needs. It is a large loss indeed. I shall translate the recycling loss for individual authorities and give the House some figures. Taking this year's figures as representative, Essex would lose £19 million. Hampshire—I am sure that this is of interest to the Under-Secretary of State for the Environment, the hon. Member for Southampton, Itchen (Mr. Chope)—would lose £17 million, and Birmingham would lose £15 million.
I also have figures for some London boroughs. Bearing in mind the Government's interest in law and order, the Metropolitan police will lose £11 million with this system. Hard-pressed boroughs such as Hackney would lose £0·8 million, Islington would lose £1·1 million, and Lambeth— my borough—Southwark and Wandsworth would lose £1·3 million. It is interesting to look at the hard-pressed borough that the Minister represents. On these assumptions, as a result of what he is doing, the borough, of which his constituency forms one third, would lose £3 million. Newham would lose £2 million. I am talking not about inconsequential sums but in some cases about substantial losses, to shires that have been promised a little more as a result of the recycling and, in other cases, money that will go to hard-pressed boroughs that, whatever the circumstances, can do with a little extra assistance.
My hon. Friend mentioned my borough, Brent, whose representation I share with the Minister. In spite of the Conservative's efforts to keep down rates at all costs, we were left with large bills. The loss of the £3 million will be disastrous because of the legacy that we received from the previous Conservative administration.
I am grateful for my hon. Friend's intervention.
I used the word "overspend" because we are talking about Government assumptions. The word assumptions is important. Clause 1 allows the Secretary of State to make virtually whatever assumptions he may with very little chance of court challenge. We are talking about assumptions such as that the homeless do not need to be housed. This afternoon we heard the assumption by the Secretary of State that it is sufficient for the homeless to be put into hostels and bed and breakfast accommodation. I know of children who have begun to eat insects as a result of their stay in bed and breakfast accommodation. Those are the assumptions about which we talk—assumptions that the cold do not need to be warm, that the jobless do not need to be provided with jobs, or that adult illiterates do not need evening classes where they may be assisted and taught to read. The Government are taking power to make even more assumptions with less likelihood of challenge.
The Minister said that the Bill has the advantage that it removes uncertainty. First, borough and county treasurers are a lot more cunning, canny and clever than they are given credit for. It may be a byzantine system but they do not find it too difficult to operate and to forecast within it. It does not worry the finance officers or the local officer's authorities that, as a result of the recycling system, they, like the London borough of Brent, may receive an extra £3 million that was not covenanted for. Brent and any other hard-pressed borough do not mind that type of uncertainty.
If the Minister were running the premium bonds system, he could remove the uncertainty by abolishing the prizes. That is the sort of system that he brings forward. A few boroughs worry about the bonuses that they get from the recycling system. The argument about certainty will not wash with any authorities. According to experience, the Department and the Treasury will be tempted to deflate local authority expenditure again. That is why all sides of the House ought to have misgivings about the Bill.
Clause 1(3) is highly objectionable. It enables the Secretary of State to discriminate against a single authority. The subsection provides for different assumptions to be made about different authorities. According to the Association of County Councils, that gives the Department the power to victimise an individual local authority. That power does not exist now. I, too, believe that clause 1(3) is obnoxious and I hope that it will be deleted.
Clause 1(3) also gives the power for the first time to create new descriptions of authorities within existing classes without parliamentary approval. Under clause 1(3) it is perfectly possible to distinguish between inner London and outer London boroughs. That power is expressly preserved by a later provision. Theoretically, it would enable the Secretary of State to discriminate between the north and the south, inner and outer districts of urban areas, hung and unhung local authorities and Conservative and Labour authorities. There is no limit to the discrimination that could be exercised under clause 1(3) and it is highly objectionable.
Clause 2 is retrospective and validates discrimination between inner and outer London boroughs. Retrospectively, it may validate favouring Bromley at the expense of a borough like Hackney. Because of clause 4(6) of the Local Government Finance Bill, which is in another place, that cannot be legally challenged. I disagree with the Minister's interpretation of the interaction between these two pieces of legislation. I hope that the other place will ensure that the judge-proofing provisions in the Local Government Finance Bill will spill over into this Bill and that it will look again at the removal of the challenge in the courts to past decisions in relation to London local authority expenditure.
This is a tiny Bill, but small errors can be costly. The amount of money involved is as much as £1 billion The Bill lets the bookie welsh on the punters' funds and then renders him immune from prosecution in the courts. It is a breach of promise to low-spending authorities and a grave disappointment to those that spend more highly, according to their assessment of need. The Bill deeply disturbs local authorities and their associations, of every colour. It results in the massive loss of rate support grant to the Treasury and is a kind of financial three card trick, similar to the trickery of the figures in the housing investment programme. We hope that the House will agree that the Bill ought not to be given a Second Reading.
I begin by declaring an interest that I have not declared before in the House. I failed O-level maths not once, not twice, but three times. I am quite sure that I join many of my hon. Friends, many Opposition Members and most of my constituents when I say that I do not understand the algebraic formula or the mathematical ramifications of local government finance. Although I may be light on technical ability, I hope that I am not so light on common sense.
In principle, I welcome the Bill. It seeks to streamline an almost incomprehensible system, for the time being, until the party that sits on this side of the Chamber is returned to office at the next general election to enable it thoroughly to overhaul and restructure, on a fairer and a more common-sense basis, the whole system of local government finance.
This Second Reading debate also affords the House an opportunity to dwell on the reservations that some of the local authority associations have expressed. The hon. Member for Norwood (Mr. Fraser) referred to the reservations of the Association of County Councils. I agree with him about some of those reservations, and I shall dwell on them in a little more detail in a moment.
The debate also provides us with an opportunity to put under the parliamentary microscope the attitudes, behaviour and antics of certain local authorities—the so-called high spenders and profligate authorities—that this Bill, if it becomes an Act, in the not-too-distant future will stop. It is those authorities—
It managed to escape the microscope of the Audit Commission, but it has not escaped the attention of the media, or of industry or commerce. The reason why there is so much unemployment in the hon. Gentleman's constituency and the city of Liverpool is largely the antics of Liverpool city council, high rates and the profligate and wasteful spending of taxpayers' and ratepayers' money.
I am pleased about that, because the hon. Gentleman is under the illusion that I represent a Liverpool constituency. I do not. I represent a Sefton constituency, one of the lowest rated metropolitan districts in the country. It has been Tory-controlled since 1974 when it was established, and it has a 30 per cent. unemployment rate, which is as high as the unemployment rate in the constituency of my hon. Friend the Member for Walton. Is the unemployment rate in my constituency the result of the antics of the Sefton Tory council and of its leader Ron Watson?
The hon. Gentleman is talking rubbish. In the last three years we have built 3,000 houses in Liverpool and we have taken workers off the dole. The members of my union, the Union of Construction, Allied Trades and Technicians and the Transport and General Workers Union have built those houses. We are building sports centres. We have also built a park in the centre of Liverpool, where there was never a park before. We have not indulged in what may be criticised in other parts of the country as profligate spending. We have been doing a good job for the people of Liverpool. However, the Government withheld the support that Liverpool required to carry out its programme. The responsibility for what has happened in Liverpool has to be laid at the Government's door. The local authority has carried out the programme upon which it was elected. That is not profligacy.
For the 3,000 new houses that the hon. Gentleman reminded us his union has helped to build, probably 4,000 or 5,000 houses owned by Liverpool city council are lying empty and derelict and attracting vandals and they have been empty for four, five, six, or 12 months or more.
If he were allowed by you, Mr. Deputy Speaker, to continue, the hon. Member for Walton, who makes that intervention from a sedentary position, would remind the House that many multi-storey flats in Liverpool and around that once great city have now, in a partnership between the private and the public sectors, been made habitable and suitable for his constituents and others to occupy.
I shall not dwell further on the problems of Liverpool, but subsequently I shall refer to the problems of the eight inner London authorities that are highlighted in the Audit Commission's recent report. I welcome the Bill because, as my hon. Friend the Minister for Local Government said, it will end uncertainty and instability. It will stop grants from being recycled indiscriminately to the high-spending authorities.
The hon. Member for Norwood suggested to my hon. Friend the Minister that if he were in charge of the premium bond system he would cancel the prizes. The difference between the premium bond system and the rate support grant system is that the premium bond holder—whoever he or she is—stands an equal chance of winning. Under the rate support grant system, high spenders and irresponsible councils enjoy the prizes. Under the Bill the prudent local authorities—controlled by both major parties in the past, but now controlled more by the Conservative party—are more likely to get the prizes.
I understand that there is a genuine difference of opinion between hon. Members as to where the money available for recycling should be recycled. But surely we can have an agreement between Conservative Back Benchers and the Opposition that whatever is available for recycling should go to the local authorities not to the Treasury. If an appropriate amendment to that effect is tabled, will the hon. Gentleman support it?
I am sorry to disappoint the hon. Gentleman. I agree with the theory that he has just put forward, but I do not agree with the practice. More and more of Liverpool taxpayers' and ratepayers' money has been spent on trying to revitalise Liverpool through derelict land grants and urban development grants, as well as a raft of initiatives introduced by the Government since they were elected in 1979, but, unfortunately, it has not cured the problem. The reason is that the local authorities in Liverpool and on Merseyside have not invested the taxpayers' and ratepayers' money in the most cost-effective and job-creative manner.
My concern about the system of local government finance is not the amount of money that is in the pool, although I agree with the hon. Member for Norwood that the more money there is in the pool the more likely it is to be invested wisely. Enabling the Treasury to recycle the money through the rate support grant system will not necessarily produce a more cost-effective system. The reason for that has already been given by my hon. Friend the Minister in answer to interventions. The rate support grant settlement for 1987–88 is £1 billion more than last year, a 9 per cent, increase on previous years. For all the local authorities that are not rate-capped that will mean a 5·5 per cent., increase in grants which is some 2·5 per cent, above the prevailing rate of inflation. To answer the hon. Member for Norwood, more money is coming from the Treasury, which is due to the Government's overall management of the economy.
I shall turn to the points made by the Association of County Councils. The hon. Member for Norwood referred to the ACC's general objection to the Bill. The hon. Gentleman quoted page 2 of a letter that he received from the ACC today:
Since the Association does not regard the issue of spending underlying the 1987–88 settlement as adequate, nor have any assurances been received for the future, then the total abolition of block grant recycling must be opposed this time.
Clearly, there is a difference of opinion between the Government and the ACC as to the adequacy of the money available within the system. As my hon. Friend the Minister said, there is £1 billion more available in the system this year than in previous years.
The letter from the ACC highlights the association's three other reservations, which no doubt are shared by the other local authority associations. These matters, however, can be dealt with in Committee. The letter says:
The Bill as framed would not give a future Secretary of State for the Environment any discretion to re-introduce the operation of flowback without other further primary legislation.
In the association's view that is unnecessarily restrictive. The letter continues:
The Bill makes no provision for the Secretary of State to be required to consult the local authority associations who represent them on various aspects of the proposals.
In the opinion of the ACC, that omission should be rectified, but that is not a particularly significant point. The association's final point is about the powers granted to the Secretary of State to make different assumptions for the different authorities in clause 1(3).
The ACC says:
This is a change from previous practice whereby any assumption would only be applicable to classes of authority,
thereby preventing the victimisation of individual authorities. The Association of County Councils is concerned at the potential for the proposed change to be used for a wider purpose than is presently intended, which is to deal with the issue of rate-cap authorities. It is suggested that a more precise definition could be found rather than the rather wide wording presently proposed".
I suspect that my hon. Friend the Minister will agree— between the House giving the Bill a Second reading and a Standing Committee being convened—that that matter can be accommodated in Committee within the framework of the Bill.
The purpose of the Bill is to deny those high-spending and irresponsible authorities which seek, for their own narrow party political advantage—dare I say mongrel dogma—to fly in the face of central Government and try every trick in the creative accountants' book to cause distress to the ratepayers by pursuing narrow party political ends. At this point I believe that my right hon. Friend's proposals are correct. Let us look at the eight inner London authorities that captured the attention of the Audit Commission. Brent is £2·6 million overspent—
No doubt the hon. Gentleman has his own sources—the national press, radio and television. I recall sharing a microphone with the hon. Member for Blackburn (Mr. Straw)— one of the hon. Gentleman's Front-Bench colleagues—on the BBC World Service last Thursday, and he was certainly adequately briefed. The arguments that he put forward to the world at large were not convincing, but he convinced me that he had considerable knowledge of what the Audit Commission's recommendations were.
I tried on a green form to obtain a copy of the recommendations before the debate so that I would know exactly what was being said, but I did not obtain a copy. That is disgraceful. A document is being quoted, but when we as Members of Parliament tried to obtain a copy we were unsuccessful. In the old days—I do not know whether the Government have had anything to do with this—these documents were made available. Now one has to put a green form in to obtain one, but I still could not get one in time for today's debate. That is a disgrace.
I shall leave the hon. Member for Liverpool, Walton to discuss the matter with the hon. Member for Blackburn, who clearly has had the opportunity of putting in either a green card, a yellow card or possibly a gold card and has certainly obtained a copy of the Audit Commission's recommendations.
If recycling were to occur and the Bill were not to be passed by the House, Brent would receive £2·6 million more; Hackney £750,000 more; Haringey £1·6 million more; Islington ?1 million more; Lambeth £1·2 million more; Lewisham ?750,000 more and Southwark £1·12 million more. Let us look at those authorities through the eyes of the Audit Commission. I shall quote what the Audit Commission says about those high-spending authorities that would benefit from recycling. It refers to housing as a "catalogue of despair" and states:
voids, staffing and other costs are 70 per cent, higher than might reasonably be expected, and arrears nearly three times good practice levels".
The Commission states:
none of the authorities appears to be spending per dwelling as much on maintenance as Tower Hamlets, Wandsworth and Westminster"—
authorities with similar inner-city housing problems. The Audit Commission says that in the eight boroughs
the cost of refuse collection was at least 20 per cent, more than it need have been, given local policies and conditions outside the authorities' control".
The Audit Commission's view on these high-spending authorities was that inefficiency and mismanagement were rife and that these local authorities were trying to fly in the face of the prudence practised by the Government. If the Bill does nothing else but deny those local authorities the opportunity to have the money which should go back to the better benefit of the wider public—the ratepayer and the taxpayer—it should receive the wide support of the House.
We can all rehearse the arguments about high-spending authorities, but will the hon. Gentleman explain the particular problems with Hampshire, East Sussex, West Sussex, Dorset, Kent and Surrey, which will all suffer? What have they done wrong? They are interested to know what they have done wrong and why they should be punished by the Bill. Will the hon. Gentleman explain how his local authority will benefit from the Bill?
No doubt the hon. Gentleman will have the opportunity to catch your eye later, Mr. Deputy Speaker, to speak specifically about Hampshire. I served my local government apprenticeship on Kent council and am proud to have done so. The council certainly has not lobbied me. I suspect that none of my hon. Friends who represent Kent constituencies and who are not in the Chamber have a particular gripe about the Bill. There seem to be no problems with Staffordshire, which is controlled by the Labour party. Apart from a rather wild faction in Stoke-on-Trent, which is becoming wilder by the minute, Staffordshire county council manages its affairs not unreasonably because basically it has a good dialogue with my hon. Friends and me, who represent the eight constituencies in the southern and middle part of the area.
The hon. Gentleman has intervened once already. With respect, I should like to conclude to enable other hon. Members to catch your eye, Mr. Deputy Speaker.
I am particularly attracted to the comments of my right hon. Friend the Secretary of State, who, in July, said:
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."—[Official Report, 22 July 1986; Vol. 102, c. 182.]
I was glad to see the Secretary of State for the Environment on the Treasury Bench, even as a casual visitor to our debate. He cuts a more than slightly ludicrous figure in trying to masquerade as a friend of good local government. The plain truth is that many of the very best people in local government insist that they are now being forced to choose, not only which of their discretionary powers to use, but even which of their legal duties to fulfil.
That is now spectacularly true, in an increasing number of localities, of the legal duties imposed by section 2 of the Chronically Sick and Disabled Persons Act 1970, which is about making life better, or at least bearable, for Britain's 5·5 million disabled people. It is an Act, as the House knows, which I piloted to the statute book and, not unnaturally, I take a very close interest in its implementation. By common consent, the Act is not now being applied as the House intended and some of the worst offenders are those in local government on whom the Secretary of State lavishes most praise.
The right hon. Gentleman is clearly highly pleased at the £500 million that he will be taking from local authorities by ending grant recycling. No doubt he believes that he will be hurting those fantasy monsters which people his nightmares and stalk the pages of much of the press. These so-called ogres of the Left appear very different to the people whom they serve. My purpose in intervening in the debate is to make the Secretary of State listen to those who will really be hurt by his policies. They are not the council leaders, about whom the right hon. Gentleman is so obsessed. They are people with severe disabilities seeking to establish themselves in homes of their own, not least people with mental illness discharged after many years in hospital who find they have nowhere to live.
I am not sure whether the Secretary of State reads The Guardian, but I hope that at least he read the letters published on 2 February in reply to the complacent article by the Minister for Housing, Urban Affairs and Construction. If not, he should now urgently read the letter from three doctors at King's College hospital, in which they describe how a homeless, mentally ill man of 32 recently developed severe frostbite and had to have both his legs amputated. It is people like that man, among others, for whom I want to speak briefly in this debate.
The Department of Health and Social Security has been weak enough over the past seven years in fighting for people with disabilities, but it at least knows what is needed. It knows that local authorities are the only bodies that can nationally provide the care that such people need, but at times DHSS Ministers might just as well be sitting on the Back Benches for all the influence they seem to have, either with the Secretary of State or with the Treasury.
In recent weeks DHSS Ministers have been congratulating themselves on an extra £27 million which they claim to be providing for community care in 1987–88. But what use is £27 million if the Secretary of State then takes back £500 million? How can local authorities possibly provide community care for physically disabled people, for people with mental handicaps or for those suffering from mental illness in these circumstances? How can they, especially in those parts of London that will particularly suffer at the right hon. Gentleman's hands, care for the additional hundreds of people dying of AIDS who want to spend the remainder of their lives in their own homes?
The hon. Member for Mid-Staffordshire (Mr. Heddle) referred to the Audit Commission. Let me remind the House that on page 34 of its report "Making a Reality of Community Care" the Audit Commission states:
Virtually till authorities that provide social services lose grant if they increase spending in real terms.
Hence, the system used to control expenditure can penalise local ratepayers in authorities implementing Government policy and saving money for the NHS into the bargain. Thus in one authority visited that had pioneered community care for mentally handicapped people in accordance with the Government's guidelines, heavy grant losses were being incurred because the authority was exceeding its GRE in part as a result of this policy.
How does the right hon. Gentleman respond to that penetrating challenge to a policy which is as crackpot as it is self-defeating and inhumane?
I remind the right hon. Gentleman that last summer, with overwhelming support from both sides of this Chamber, the House passed the Disabled Persons (Services, Consultation and Representation) Act 1986. The new Act placed special emphasis on the problems and needs of severely disabled people leaving institutions. It reached the statute book with the warm blessing of the Government, and the hon. Member for Braintree (Mr. Newton), then the Minister with responsibility for the Disabled, made a clear statement of his intentions on its implementation.
What has happened? Sections 5 and 6 of the Act were due to be brought into force in October. These are absolutely key sections and the delay may have already affected the futures of disabled young people leaving school or further education well into the 1990s. Yet the discussions between Government Departments and local authorities are still utterly bogged down. That is a deeply serious matter and, in the view of the organisations of and for disabled people, a wholly scandalous failure to give effect to the will of this House.
I know that the DHSS is not to blame. The blame lies with the right hon. Gentleman and the Treasury. Local authorities, quite rightly, are not prepared to start implementing the 1986 Act if they know that, if they spend the modest amounts required, they will be clobbered by the right hon. Gentleman. The amounts needed to implement sections 5 and 6 of the Act are a tiny proportion of the £500 million which the right hon. Gentleman is seeking to take from local authorities by ending grant recycling. Indeed, estimates for the implementation of the 1986 Act as a whole amount to only one fifth of that figure.
Ministers must be made to reflect on the fact that their policy of clobbering the long-term sick and disabled is a minority policy even within their own party. I urge all those many right hon. and hon. Members on the Government Benches who gave their full support to the Disabled Persons (Services, Consultation and Representation) Act 1986 last year to join me in indicating to the Secretary of State for the Environment their determination that the Government must keep to the schedule for its implementation outlined by the present Minister for Health.
If the 1970 Act, supplemented and strengthened as it is by the 1986 Act, is to be applied in the way intended by the House, we need an urgent change in the Government's whole approach to local government finance. They have very badly let down not only social services authorities but disabled people and their families. In place of the gobbledegook with which Environment Ministers now weary the House week by week, I call for a clear and explicit statement that the Government will provide the resources needed for the full and humane implementation of the two Acts.
The right hon. Member for Manchester, Wythenshawe (Mr. Morris) has spoken on a subject which is very close to his heart with all the authority that he commands in the House on this subject. I hope he will forgive me if I do not follow him specifically on the important points that he has raised this evening.
I was interested to hear the speech of the hon. Member for Norwood (Mr. Fraser) and his reference to his bewilderment over the terminology of the Bill. I share that bewilderment. Unlike my hon. Friend the Member for Mid-Staffordshire (Mr. Heddle), I did manage to get an O-level in maths, but when it comes to working out the intricacies of the rate support grant I do not think that I am any better off than he is.
I was interested when I picked up the Bill to try to determine what it was about, and I must say that I found it extremely difficult. Nevertheless, I turned to the explanatory and financial memorandum—
I have heard the argument used that it is byzantine theology, but it is much worse than that, because byzantine theology is very clear: first, they did not accept the Pope and, secondly, they believed that Mary the Mother of God ought to be worshipped as well as Christ himself. This is much worse than that.
I take the point to heart. I was only going to say that looking at the intricacies of the Bill and the rate support grant is rather like taking the back off a computer and looking at its internal workings— which is rather different from the analogy drawn by the hon. Member for Liverpool, Walton (Mr. Heffer).
Turning to the explanatory and financial memorandum, my eye fell on these words:
the Secretary of State determines fresh principles".
I thought it was rather interesting that the word "fresh" was used, and I could not help but wonder what had happened to the stale principles.
According to the memorandum, clause 2 clarifies the words "the appropriate class', but on turning to clause 2 I found myself in a greater fog than ever before. However, the good part about the Bill is that it has a long title, which gives it wide scope, and I want to raise certain points in the debate, as well as refer to amendments which I hope to table at a later date.
There is nothing more difficult than the formulae used for calculating the rate support grant. The stage must have been reached where we shall have to look seriously at the whole system and consider wiping the slate clean and starting again. It has become so incredibly complicated that I cannot but believe that it must require an enormous army of staff to make the interpretations that are necessary to arrive at the grant.
Having been through all this machinery to arrive at an amount for my own constituency borough council, Harrogate, the result is a round figure of £2·5 million. If it had come up with a figure of £2,491,000·50 I might have believed that there was something in the calculations and precision in taking account of all the various elements in that calculation. It amazes me that one ends up with a round figure.
I welcome the benefit that we in Harrogate have derived from the recycling mechanism and the additional grant due to the late change to the grant limitation arrangements. This has been a great help to us. I am sure that removing the safety netting or the capping multipliers would seriously affect the grant arrangement as it affects Harrogate borough council. Without the multiplier, the council's block grant in 1987–88 would be just over £0·75 million, and that would be £1·9 million short of the grant that has been allocated. It is therefore essential, from the point of view of the ratepayers in my constituency, to maintain the present level of protection. I seek the Minister's assurance tonight that there are no plans to make alterations to the safety netting and the capping multiplier system.
Turning now to one or two elements in the calculations used for the rate support grant, I take by way of example density. The density factor is one of the many factors which have to be taken into account. In Harrogate the ward-weighted density is 13·7 persons per hectare, compared with a simple across-the-board density of 1·1 persons per hectare over the whole area. This compares with York—which of course is a relatively dense area—with a ward-weighted density of 37·5 compared with 34·8 persons per hectare on the simple across-the-board density calculation. Any change from the ward to the simple calculation would be of enormous harm to Harrogate borough council and I seek the assurance of my hon. Friend the Minister that there are no plans to make any changes of that sort.
Apart from Harrogate, Knaresborough and Ripon, the areas in the surrounding district are essentially rural, and this is a factor in the sparsity element that must also be taken into account. The North Yorkshire county council is most grateful to my hon. Friend the Minister for the help that he has given to determine a sparsity factor that will take account of the education needs of the county. He deserves full recognition for that.
There are areas which specialise in bringing in visitors such as holidaymakers, conference visitors and tourists. This practice is growing enormously, and rightly so. There are many jobs to be created from the development of tourist projects and this development is more important in Yorkshire and the north of England generally than in other parts of the United Kingdom.
The figures that are used in the rate support grant take account of day visitors. The correct terminology, which I find curious, is "daytime net inflow", which is the number of people who come to an area during the day. There is reference also to "visitor nights", which means the number of visitors who stay overnight. These designations involve separate calculations and there is scope to rationalise the measurement that is based on the long-distance travel survey that was carried out as long ago as the 1970s.
The crux of the problem for Harrogate and other towns, such as Brighton, Bournemouth, Bristol and Scarborough, which are noted conference towns, lies in taking into account the importance and drawing effect that they have in bringing in visitors from other parts of the country.
Work on the construction of the Harrogate conference centre commenced in the 1970s during the period of hyper inflation. Delays, construction problems and other factors that are still the subject of a study and report contributed to a colossal escalation in cost from an initial £7 million to £8 million base to an outfall of £31 million. As the House will understand, the cost of the centre bears heavily on the backs of the ratepayers in the district. It should be recognised, however, that the centre has established a northern venue of exceptional quality and attraction that caters for conferences of national and international importance. A large and important international medical conference is to be held there and my town will be hosting the Liberal party conference in September. I hope that the tills will be ringing throughout Harrogate while that conference sits.
The problem for Harrogate has been how to alleviate the burden of debt charges on a considerable construction cost. We are grateful to the Government for enabling the borough to extend the borrowing period. That was achieved some years ago. The methodology of calculating grant-related expenditure does not reflect the revenue expenditure for servicing the loan or operating the centre. It is certain, however, that the conference centre is a magnet for Yorkshire and the north, and the benefits to those in the transport business and in other businesses far and wide are without question. The centre has already seen bookings increase by 4 per cent, for 1987, which will increase the occupancy rate to 69 per cent. The rate for the exhibition halls is running at 90 per cent. The council will be issuing tender documents shortly, following the move to put out the catering section to private operation.
It has been set out in the rate support grant consultation paper that airports' debt charges are to be used in the coming financial year in the grant-related expenditure calculation, to the benefit of about 30 local authorities. My right hon. Friend the Secretary of State has accepted the recommendation that I have just outlined, and others include the substitution of air frost for grass frost in the assessment of grant-related expenditure for highway winter maintenance. That is a good illustration of how detailed and complex the formula has become for arranging for a block grant to be given to a local authority.
I ask my right hon. Friend the Secretary of State to include the debt charges on conference centres in the category into which airport debt charges come. That would benefit Harrogate, Brighton, Bristol and other towns that are faced with the problem of bringing in people from far and wide and contributing to a large extent to the prosperity of an area that is larger than that of the town itself. I ask my right hon. and hon. Friends to give consideration to my request. I shall be seeking in Committee to table an amendment on this issue so that the Committee will have an opportunity to debate the matter fully.
Nothing is more important than using the RSG to give support to authorities, especially those in Yorkshire and the north of England generally, which through environmental schemes and other projects, are making their areas attractive to visitors and giving support to tourism projects which are sponsored by private enterprise or developed in partnership with it. I would far rather see the mechanism used to give support to towns in the north of England, especially those that have high unemployment, than give grants to try to cajole businesses to come to certain areas. If individual areas are made more attractive, they will attract visitors and become more attractive to those who decide about the placing of industries. Greater attractiveness will encourage those from outside to live and settle in the areas that I am talking about and that will be accompanied by the creation of new business enterprise.
I ask my right hon. and hon. Friends again specifically to consider introducing into the formula the debt charges that are carried by authorities which have provided the service of a conference centre. I hope that my right hon. Friend will look favourably upon my request.
First, I must declare an interest. I am a member of Hampshire county council and Portsmouth city council and I shall be involved in the implementation of the Bill once it is enacted.
If I were a cynical person, I would suggest that the Secretary of State's absence from the Chamber is because he has started already to formulate the amendments and new clauses that he will be introducing in Committee. If previous experience is to be taken into account, we might end up with a Bill that is considerably longer than the measure that is before us. It may not resemble the one that we are discussing now. Perhaps the right hon. Gentleman's absence is explained by his attempts already to refine the amendments that will be put before us when we consider the Bill in Committee.
It is clear that we are witnessing yet another attack on local authorities and their ability to cope with their problems. The Government have introduced legislation that will supposedly improve local democracy, but I suggest that it will do the opposite. Once again, the legislation will seriously undermine the ability of local authorities to respond properly to the needs of their communities.
I accept that the recycling system produces uncertainties for local authorities. Indeed, when the statement about this legislation was made last year, my hon. Friend the Member for Southwark and Bermondsey (Mr. Hughes) said that we were prepared to support it but that we had strong reservations about the way in which it would be implemented. Now that we have the Bill before us our worst fears have been realised. We have grave reservations about the way in which the Bill will operate. I suggest that the only sensible course of action for hon. Members who care about local authorities is to resist the easy temptation to vote for the Second Reading. I know that we shall vote against it.
My hon. Friends will rush back from where their endeavours have taken them and we shall all vote in the same Lobby.
The proposed change is something akin to what the hon. Member for Norwood (Mr. Fraser) suggested, when he compared it to taking the prize away from a premium bond holder. I would go further: it is like taking the right of appeal from a condemned man. It certainly removes any uncertainty, but it will not encourage local authorities to believe that they will benefit. Conservative Members have not been able to justify what will happen to many local authorities that will lose out. Many Conservative Members know from experience that their local authorities will suffer. They will not have the expenditure necessary to serve their areas.
The Government are now deliberately endeavouring to embark on a process of underestimating the expenditure assumptions of local authorities. In that way the Treasury can get the money back from the local authorities. The Government are making the task of the local authorities harder. The Government are deliberately underestimating what it takes to run an authority and the only body that will benefit will be the Treasury.
Even if one gives the Government the benefit of every possible doubt, it is suggested that the Exchequer will be some £400 million better off as a result of the legislation. Local authorities will find it more difficult to decide their priorities. The irony is that most local authorities will lose grant and, as a result, the Government will have more money available for tax cuts. It is suggested that the £400 million will be used to bail out the Government's promise of tax reductions. Once again, cynical hon. Members would suggest that there is a degree of logic behind that argument.
The Government have made it clear that not only the high spenders will be affected—most local authorities have benefited from the flowback in the current financial year. Figures produced by the Department suggest that over 500 local authorities have benefited. Therefore, those 500 local authorities, as well as the high spenders, will also suffer. Hampshire is a big spender and will suffer considerably. However, over the past seven years, it followed to the letter Government instructions concerning changes to local government finance. Other local authorities such as West Sussex, Dorset, Kent and Surrey will also be losers under the proposed changes. I do not care that the hon. Members who represent those authorities are not here today, but I am damn sure that the people who live in their constituencies will be concerned that they are not here to defend their ability to use the services of their local authorities.
I believe that the hon. Gentleman is rather overdoing it. Let me give him a simple analogy. If we follow through the hon. Gentleman's principle, will his party give all Government Departments—whether they have spent above budget, below budget or on budget—extra sums of money each February simply because it is February and it is a nice thing to do?
The hon. Gentleman is making a rather silly point. We would make sure that local government expenditure took care of the specific needs of the areas. That expenditure would not be conceived in Marsham street or some other Government Department. It would take into account the proper needs of the community.
The right hon. Member for Manchester, Wythenshawe (Mr. Morris) has already discussed the problems facing the disabled. The Government must be embarrassed that many local authorities cannot fulfil their commitments to the disabled in their areas. That cannot be something of which Ministers are proud. I am sure that Conservative Members must be squirming in their seats at the embarrassment to which they and their colleagues in local government have been exposed.
The Association of Metropolitan Authorities has doubts about the necessity for the Bill. It believes that the Bill is necessary to abolish the present system but it focuses attention on the new powers that the Secretary of State is trying to slip in on the Bill's coat tails. The AMA recognises the need for change, but it also recognises the true problem contained in the Bill—the extra powers given to the Secretary of State and their potential effect on local authorities.
The Trojan horse in the Bill is clause 1(3). It allows the Secretary of State not only to victimise one or more local authority if he does not happen to like its political colour but, alternatively, it allows him to favour individual local authorities if he chooses. We should be concerned about that. The Secretary of State can not only screw down the high spenders but, if it suited him for political purposes, encourage some local authority by giving it more assistance. That takes away any fairness—if that is the right word—in the operation of the system. It affects the way in which the Secretary of State responds to the needs of local government as a whole.
Undoubtedly, that is something that will worry hon. Members and will occupy many hours in Committee. If it is the Government's intention to create a new class of authority—specifically identified as education authorities or rate-capped authorities—that intention should be clearly stated. That should be spelt out and, at the very least, the House should have the opportunity to scrutinise any new expenditure assumption made in subsection (3).
The Minister represents a constituency in the same county as myself, and the county treasurer of Hampshire has described the Bill as being
a very severe and unfair mechanism for restraining individual local authority spending.
I do not suggest that Mr. Scotford is anything but a first-class officer who respects the rule of law and the rights of government. However, the fact that he described the effects in such a manner must surely strike a chord in the democratic heart that beats somewhere on the Government Benches. It is not right that a county treasurer should have such an opinion of a Bill of this nature.
I hope that when the Minister replies he will recognise that the proposals in the Bill will mean that the county will lose not £17 million as originally quoted but close on £20 million. Absorbing that sort of loss will mean enormous difficulties. As I said recently—and I had an absurd reply from the Secretary of State—the whole of the planning and transportation department of Hampshire county council would cease to operate. If we tried to share the burden, libraries would be closed, firemen would be ill equipped and there would be fewer poliemen and police cars to patrol the streets to try to curtail the enormous growth in crime that Hampshire has suffered during the past few years. It would mean fewer home helps and a reduction of the ability of the social services to provide adequate and proper care. Hampshire has the second ' highest number of children in care of any local authority, and the legislation will diminish Hampshire's ability to cope with the problems.
We must carefully study the Bill because it is not good enough. We hope that the Minister will recognise that, sooner or later, the crumbling edifice that has been created during the past seven years—the farcical way in which local government finance is administered—will come tumbling down around us. I am sure that local authorities will welcome the day when they have total control over their income and over their ability to spend it. However, the only way in which that can be achieved is by introducing a system of local income tax, although I do not mean a system similar to that proposed for Scotland, where the poll tax will further diminish the money-raising powers of local authorities.
The rating system is obviously incapable of providing genuine local democracy. We must free local government from centralisation. We must try to give it the impetus it needs to move properly with the times. This Bill will do none of that. In fact, it will make matters worse.
If we are not to paint a very sad picture of the future of our cities, we must heed the report in The Guardian on 30 January entitled
Ridley rules out rescuing eight Labour councils from £300 million spending gulf.
The final paragraph of the article reports one chief executive of the authorities affected as saying:
To argue that without improvements to local government inner London is only a few years behind Harlem and the Bronx is, to be kind, imaginative.
If the Government proceed along their present route—and last week's and today's legislation will undoubtedly lead them along that route—inner London will be on a par not only with Harlem and the Bronx but with many other areas in Britain, and not only those confined to the inner cities. Rural areas will suffer real deprivation because all counties and all councils will suffer. No one in his right mind should welcome this Bill.
With the exception of one or two comments on inner cities, I could not find very much in the speech of the hon. Member for Portsmouth, South (Mr. Hancock) with which I could readily agree.
I welcome the legislation, which I regard as a natural consequence of the present system. I apologise to the hon. Member for Norwood (Mr. Fraser) for not having been in the Chamber to hear his speech, but I can assure him that I shall read it.
My right hon. and hon. Friends on the Treasury Bench will be aware that I have had the odd disagreement with the Government about the present system. Since I came to the House seven years ago, I have consistently said that we should move towards a system that dramatically reduces the amounts that are dictated from the centre and gives local authorities a more dynamic and widespread source of funding. However, I am aware that the House would not wish me to go into great detail about that today.
In the context of the present system, the central proposal in this legislation makes a great deal of sense. After all, primarily we are talking about certainty and good housekeeping. I remember that only a few years ago, when the Local Government Act 1982 was passing through the House, the Government attempted to include a provision that would allow them to change the rules during the year. The provision was known as the mid-term holdback, and it would have allowed the Government to go to local authorities half, two thirds or three quarters of the way through the year and take back some of the money that they had said they would give.
That provision was opposed by a number of Conservative Members and by the Opposition, and, for a variety of reasons, it did not happen. Certainly, the principle that guided my opposition to that provision was the same principle as we face today, except that it is the other way around. We are now considering a system—I have endeavoured to get this point across without much success, especially with the hon. Member for Portsmouth, South—under which local authorities, whether they are good or bad, high spenders, medium spenders or low spenders, have fixed their budgets at the beginning of the financial year. They assess their likely income and likely expenditure, taking into account the level of Government support. Then, guess what happens. As if by magic the seventh cavalry comes to the rescue of many authorities and provides more funding. It does not matter whether they "deserve" it—I put the word in inverted commas because there are sensitive souls in the House—it is simply a consequence of the system.
I do not think that, stripped of party-political labels, hon. Members honestly think that that is an intelligent way to budget. It certainly does not impose proper disciplines on local authorities. I am a great defender of local government, and I do not think that even my worst enemies would deny that. I have great faith in the ability of local councils to run their affairs effectively. Given a fixed budget at the beginning of the year, I believe that they can deliver an outturn roughly on the level of budget fixed. It does not in any way encourage a sensible budget-making process to have the present adjustments.
The Association of County Councils—a body to which I listen carefully—spoke, understandably in this context, of the money being lost to the local authorities' pool. I understand what the association means, but to agree with that interpretation would imply that local authorities were acting in concert and that the direct consequence of each of their separate decisions should therefore be retained within local authorities. It is my experience and, I suggest, that of every hon. Member, that local authorities manifestly do not act in concert. Even if we ignored different authorities under different party control and simply considered those under similar party control, we could produce an intersting list of councils that did everything except act in concert. It is, at best, a theory to view the issue as one of some local authority pool being lost.
Linked with good housekeeping is testing the efficiency of local authorities. I believe that many, if not most, local authorities are more efficient than several branches of Government. I have said that before and I shall say it again. As the recent Audit Commission report makes clear—the hon. Member for Liverpool, Walton (Mr. Heffer) referred to this earlier—the level of inefficiency in some authorities is quite appalling. My hon. Friend the Member for Mid-Staffordshire (Mr. Heddle) went into this matter in some detail, and I do not propose to follow him line by line. I simply wish to highlight two or three brief points arising from the report because it goes to the heart of the whole question of efficiency.
The report demonstrated that the eight London Labour authorities that it named have twice as many staff in post per thousand population as the most deprived metropolitan districts outside London. The implication is that inner London in particular knows deprivation and the cost that that undoubtedly brings. However, there are many areas of high deprivation, but administratively speaking, those areas are spending at twice the level. That is frightening. Secondly, it was discovered that there was a gap of 100 per cent, between expenditure per head in inner London and the most deprived authorities outside the capital.
It is not a question of Socialism. I am the first to go to battle for or against specific policies. I am sure that many Opposition Members would be the first to recognise in their heart of hearts that we are talking about inefficiency and that inefficiency is doing a disservice to the Labour party rather than to the Conservative party.
There are further implications which worry me still more. Many authorities find it difficult to recruit senior staff-those who earn over £25,000 a year. That is a substantial sum. The figures in the Audit Commission report show that, despite the problems of unemployment and all the other difficulties about which we regularly read, those authorities find it enormously difficult to attract qualified senior staff. One consequence may be that some senior and responsible staff appointed may have less ability than we would wish, and, of course, they are prey to the suspicion that they are appointed as much on party political considerations as on ability.
That is always a fear, but it is more of a fear when candidates have to be chosen from among one or two dozen rather than from 100 or 200. I am talking about incompetence rather than about any high-flown Socialist, or even Conservative, theory.
This is a short, but I believe important, Bill. I should be grateful if my hon. Friend the Minister would answer the query raised by the Association of Metropolitan Authorities about the possible interpretation of clause 1(1)(b). The AMA charmingly stresses that the theory could be either malign or benign and, for reasons that will come as no surprise to any hon. Member in the Chamber, the AMA is more naturally concerned about a malign interpretation.
The AMA says that the clause
allows for differential close-ending of grant entitlements. In other words the Secretary of State may make assumptions on different bases about the spending of individual authorities and therefore potentially drastically alter the block grant entitlements of local authorities, for instance penalising those who do not spend in line with his expenditure assumptions.
It is possible that the AMA is chasing a false hare. Indeed, the words I have quoted were sufficiently surrounded by "ifs" and "ands". However, I hope that my hon. Friend will deal with that matter in his reply.
I do not foresee any major problems with the Bill. Some people say that the Bill will lead to a loss of grant, but I assume that the real argument is that more grant should be given to local authorities under the initial settlement. That is a perfectly valid view. I might find myself manning a similar barricade in many other instances. But the time to make that view known is when the initial allocations are made. The present system, which is a somewhat accidental top up, has little to commend it and it owes nothing to any sort of discipline. When the system is changed by the Bill I am sure that it will be more efficient and effective.
I am most disappointed with the speech of the hon. Member for Hornchurch (Mr. Squire), especially as, claiming to be a supporter of local government, he has been my co-conspirator in a number of private Bills to open up local government in terms of access and freedom of information. We want to make everything open and free, except for private meetings to discuss the Bills which we are introducing.
For one who claims to oppose dictation by central Government to local government, the hon. Gentleman made a very strange speech. Indeed, it was a very strange speech for a supporter of local government, damning with faint praise, assenting with civil leer, and—seemingly—without sneering, teaching the rest to sneer. The hon. Gentleman is obviously a supporter of Tory local government rather than local government as a matter of principle.
The Bill continues a long line of pieces of legislation that the Government have introduced to take more power to the centre and to take away freedom and rights from local democracy. This is the 42nd or 43rd piece of local government legislation, or legislation directly affecting local government, in England, Wales and Scotland since 1979. It is the 16th Bill dealing with local government finance. The Bill is
designed to remove this uncertainty by making further provision for calculating the block grant payable.
The Rate Support Grant Bill 1986, now in the other place, is
An Act to validate certain block grant determinations already approved by the House of Commons; and to clarify and amend the law relating to rate support grants.
The Local Government Act 1986 is
An Act to require rating authorities to set a rate on or before 1st April; to prohibit political publicity and otherwise restrain local authority publicity.
The Local Government Act 1985 is
An Act to abolish the Greater London Council and the metropolitan county councils; to transfer their functions to the local authorities in their areas and, in some cases, to other bodies.
The Local Government (Interim Provisions) Act 1984 is
An Act to make provision for the composition of the Greater London Council and the metropolitan county councils pending a decision by Parliament on their continued existence.
The Rates Act 1984 is
An Act to enable the Secretary of State to limit the rates made and precepts issued by local authorities.
The Local Government (Miscellaneous Provisions) Act 1982 is
An Act to make amendments for England and Wales of provisions of that part of the law relating to local authorities or highways which is commonly amended by local Acts.
The Local Government Finance Act 1982 is
An Act to abolish supplementary rates and supplementary precepts; to require rates and precepts to be made or issued for complete financial years".
I have quoted from the long titles of only a few of the Acts introduced by this Government. It all started with the Local Government, Planning and Land Act 1980, which had the audacity to call itself—and this is how it still reads—
An Act to relax controls over local and certain other authorities".
Since that Act we have had a plethora of legislation designed to interfere with the freedom of local government, destroy local democracy and concentrate power not here in Westminster, but in Whitehall, in the Department of the Environment. Under that legislation—and this Bill is no exception—Ministers may take powers unto themselves to penalise one authority and help another at their discretion and by means of their own determinations. If precedent is anything to go by, the decisions have been political, taken by Ministers, to penalise Labour authorities and, supposedly, to help Conservative authorities. Recently, however, even the promises made to Conservative authorities have begun to be broken.
Conservative Members may be surprised to learn that the Bill is not an attack on the so-called loony Left or the Liverpools of this world. It penalises the so-called "underspenders"; it penalises the whole of local government. It will take at least £500 million away from local government.
Conservative Members are concerned that when grant is withdrawn from local authorities that the Government say have overspent, the money is generally redistributed so that every local authority benefits, including those so-called overspenders. So why do we not have before us a Bill to fulfil the promises of previous Tory Secretaries of State to redistribute the grant that is clawed back to the underspenders-to the so-called prudent authorities?
Ron Watson, the then leader of Sefton council, which was Conservative-controlled until last May—it is now hung or, as the Liberals would say, "balanced"—justified his council's support for the rate-capping legislation and for the plethora of legislation increasing central Government's control over local authorities on the ground that under such legislation authorities such as Manchester, which spent a lot of money, would lose grant, while authorities such as his, which wielded the axe with enthusiasm and did everything that the Government asked it to do to cut services and keep the rates down, would benefit in terms of rate support grant.
After many years of Tory control, Sefton is now to lose a significant sum under last year's budget, determined by the Tories, and this year's budget, which will be determined by a hung council. If we assume a 3 per cent, expenditure over the Government's target, Sefton will lose £1·121 million in the next financial year. If it spends 5 per cent, over the Government's target, it will lose £1·869 million. Like the whole of Merseyside, Sefton will suffer, too, from the clawback of grant from the Merseyside police, fire and transport services, which are to lose £4·103 million, £725,000 and £4·391 million respectively. That money will not be redistributed to anyone and it is in addition to the £6 million that has already been taken away from the Merseyside police force in the rate support grant settlement to be given to the shire counties. We are talking about an area with a massive crime wave, which needs all the money that it can get for policing facilities.
That shows the nature and scale of the impositions that the Bill, by ending recycling, will make on hard-hit areas with high unemployment. It will affect not only Labour Liverpool but what was until recently Tory Sefton-one of the lowest rated metropolitan districts in the country, and an authority of what I would describe as the loony Right. Such authorities close schools for the handicapped and learner swimming pools, while at the same time they spend money on fairy lights for Lord street in Southport and provide grants for statues of Red Rum. Those were the loony Right-wing priorities of Sefton, which cut social services, education and other services.
Sefton's reward for making the people in the area suffer and for keeping the rates down is not to be extra grant but an end to grant recycling and the loss of even more grant. In 1980–81 Sefton received £50·237 million in rate support grant; in 1981–82, £47 million; in 1982–83, £45 million; in 1983–84, £45 million; in 1984–85, £43 million; and in 1985–86, £44 million. It is with those massive cuts that this Government have rewarded Conservative-controlled local authorities for cutting services and keeping down the rates. It seems that Sefton's final rate support grant figure for 1986–87 will be only £45·78 million. The budget, introduced by the outgoing Tory administration, meant a massive rate increase of 19 per cent., as well as cuts in service.
I am pleased to say that the change in grant recycling arrangements will not hit the proposals of the Labour group on Sefton council, which are to be put forward for consideration at the next budget meeting. For the first time ever, we have a growth budget—the kind of budget of which any sane, sensible, responsible local authority could be proud. Now that we have got rid of overall Tory control in Sefton, things are looking up. The Labour group proposes an extra £3 million revenue which will allow for the creation of 125 genuine jobs for teachers, home helps, nursery nurses and others in various departments.
The proposed Labour budget earmarks £1·7 million for improvements in education, such as an increased pupil-teacher ratio, repairs and maintenance to the borough's schools, which are neglected and dilapidated, £100,000 for the new GCSE examination and £50,000 for additional discretionary awards. It is scandalous that young students with places in colleges of higher education—students from Liverpool and Manchester or one of the other areas with criticised so-called Left-wing councils—got the grant, but students from Tory-controlled Sefton did not get one and therefore could not go to an institution of higher education.
We are proposing to put that right by providing an extra £50,000 for discretionary awards, a further £20,000 for postgraduate awards, £30,000 for school swimming programmes and £100,000 for the borough's youth service, which is essential in an area of high youth unemployment. The social services will get £750,000, including £40,000 for aids and adaptations for the disabled.
Sefton was the kind of local authority that my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) mentioned. It did not break the rate-capping legislation but it broke the statutory legislation—the Chronically Sick and Disabled Persons Act—by having illegal waiting lists and not providing the necessary services and facilities for the disabled.
We shall also allocate £115,000 to works for the elderly and the mentally infirm. If that is what is meant by the Loony Left, I plead guilty. If the budget proposals and improvements in services in my area and in Southport and Crosby are the kind of thing that Conservative Members want to condemn, I am happy for them to do so and to put their views to the electorate, because all these so-called Left-wing Labour councils have been returned to power over the past few years.
I congratulate Councillor Benton, leader of Sefton's Labour group, on his marvellous statement that Labour's budget, if adopted, would bring good news to the borough's council tenants.
We don't propose any rent increase for tenants for this year",
he said, but an increase in repairs and maintenance as a result of the profits which the Tories have made on the housing revenue account, which will not be given back to the tenants in the form of no rent increase and improved repairs and maintenance. He continued:
It is the first time for a number of years that we have been in a position to show any growth within Sefton services and we welcome this. We can't in one year restore all the damage done by cuts since 1979, but this will indicate our gradual progression in the present political climate".
That is a major achievement, given that the Government are still cutting grant and are taking away up to £3 million that Sefton would have received next year if recycling had remained and this Bill had not been introduced.
This is a tawdry little Bill. It will pinch at least £400 million from local government. The money is not being taken from Left-wing councils or from overspending councils—I use the Government's term, although I do not believe that they are overspending. Those councils are trying desperately to meet the needs of their areas and to provide the services that are demanded by a higher percentage of one-parent families, greater poverty, more children on free school meals, deprivation and unemployment.
The Government are taking money not only from those who are fighting to provide services but from the whole of local government, including those so-called underspenders that successive Conservative Secretaries of State for the Environment have promised to help. The Government are stealing the money by the back door and giving it to the Treasury so that the Treasury can use it, with other money that it is stealing, for tax cuts in the Budget in preparation for a probable early general election. That is what the Bill is about. It is a scandalous little Bill and it should be rejected.
I follow my right hon. and hon. Friends in condemning the Bill. It is another blow against local authority democracy. Clause 1 gives the Secretary of State broad discretion on several issues. For example, he may determine the principles for calculating grant-related poundages for the rate support grant report, and any supplementary report, on any basis. He may also make assumptions on any basis about the total expenditure of local authorities. He does not need to match claims for grants from local authorities with the originally determined total of block grant available. He may make wholly different assumptions about the position of individual local authorities.
I recall the Minister's opening remarks when he said that if local authorities spend less they will get more Government money. That might sound reasonable, although it does not make sense for local authorities that are not unreasonable in their spending, but fulfil their obligations, not only to the electorate, but in the provision of services. It is totally unrealistic to say that if an authority spends less money now it will be rewarded later.
I accept that there must be more clarity and certainty, but I do not believe that the Bill will fulfil that obligation either. We should consider the needs of different areas in the country, and the obligations that they place on the appropriate authorities.
It has been said that the Bill is a microscope to consider whether local authorities are efficient, or overspend and are irresponsible. I do not mind a microscope being placed on local authorities, but I should prefer it to cover not just the financial situation but the services and needs of those areas. That is not being done.
The provision of accommodation for the elderly and for social care services is being ignored. The ever-growing pressure of educational needs, especially in inner city areas, and the problems of inner-city deprivation and massive unemployment in areas such as Sheffield are also being ignored. There is also the problem of trying to keep up the morale of people who feel that they are under constant and increasing attack from a Government who do not understand their needs or the pressures on them.
On Monday, I was privileged to be present when Sheffield city council opened a new job project to create as many job opportunities and training facilities as possible within the limitations that have been imposed. It is a good scheme that looks to the future, and looks after the young by giving them something to hope for. However, because of the massive financial restrictions that have been placed upon the council by the Government, the project will not be as successful as it could be.
My hon. Friend has referred to our city of Sheffield and to the cuts that we have sustained. There have been attacks on the south Yorkshire transport system, and there is massive unemployment. At 4 o'clock this afternoon, I learned that 600 redundancies had just been declared in the large Stockbridge steel works in my constituency. We have to contend with that sort of thing from the Government, in addition to their policy of cuts, cuts and more cuts in every direction.
I understand what my hon. Friend has said. He has given another example of the tragedy that we are facing. However, there is no way in which the city council can respond because of the continuing restrictions. The problems do not go away, but are with us all the time. The fact that the council cannot react to them because of the lack of finance does not mean that the problem suddenly disappears. It means that, through no fault of their own, ordinary people cannot get the help that would normally be provided by the city council, if all things were fair and equal.
Sheffield is a rate-capped authority, but the fact that it has no recycling money will also affect the Sheffield area in the long term. Last week, a headline in my local paper read, "Residents weep as home closes." The article tells the story of a home that would have been all right had some work been done on it, but it was discovered that the electrics were all wrong. The city council's finances are now so restrained that there is absolutely no way that it can improve such homes to the necessary standards. The old people can be removed from the home that they obviously love and fitted in elsewhere, but the net effect is that other people who need that sort of accommodation will have to stay at home and perhaps be looked after by loved ones. Others may be totally neglected, unless much better financial provision is made.
The services that Sheffield has provided over many years are still needed, but the buildings and services have to change. The longer those buildings are used, the more they cost and the more they will have to be changed to be brought up to modern standards. That work cannot now be done because of the restraints placed on the council. We cannot update the services that have been carried out for between 20 and 50 years.
The Government appear to have taken a microscope to local government but have ignored, or have chosen to ignore-perhaps they do not really understand-those problems.
The Government cannot tell the world to stand still while local authority expenditure is restrained. Although we have had meetings with the Ministers and, I believe, proved our case, the reaction has always been the same.
Some activities that have been carried out by Sheffield city council have been done at the request of central Government, but I do not believe that the council will be able to fulfil them in the future. The Government discuss the efficiency of city councils and local authorities, but we have spelt out to them many times the fact that even the district auditor has commended the city council on its effectiveness and on the value for money that it has been able to achieve in the services that it provides. The attacks have not been made just to save the ratepayers or taxpayers money. There has been a political attack on local authorities. It is an attack on the services that have been provided by caring authorities, and an attack on the services that our citizens require and demand. The Government seem to have taken a tremendous dislike to the caring image that is presented by many local authorities.
I wish to refer to the problem of providing services and especially accommodation for the elderly. This is a catch 22 situation. We all agree with the regulations that place certain standards of care on local authorities. How can a local authority respond to the regulations that have been placed upon it by central Government if the financial restraints are becoming more severe with each year that passes? How can a local authority look after the people that it has to remove from institutions because of a lack of maintenance money or general revenue? What will happen to those who are still waiting to receive those services? Are they to die alone? If there is a tragedy, the blaze of publicity will throw the blame not on central Government, but on the local council, social worker, housing visitor or the health visitor. Neither the problem nor the responsibility lies fully with those people.
We need to try to educate the Government to look at local authorities in a more positive and rational manner. The answers to the problems will not be found by Government officers, but lie within the local communities.
I have already outlined the consequences of this legislation and repeat that life and limb will be put at risk. I know that the Minister met delegations yesterday from the Fire Brigades Union, which tried to spell out exactly what the consequences would be if further restrictions were placed on local government finances. I met that delegation also. Last time I spoke on this subject, I talked about the worry that south Yorkshire would not be able to carry out its statutory responsibilities. I was rather surprised to discover that schools and hospitals are not covered by the so-called statutory responsibility of cover for fire prevention. There is a high risk of the fire service being unable to cover schools and hospitals, again because of a lack of resources. The chief fire officer of south Yorkshire has made it clear that the fire service already operates below the minimum standards required. That makes the probable further restrictions even more worrying. Last year, on 1,500 occasions the fire appliances that were called out to major fires were undermanned. This year the restrictions will make the situation even worse.
I cannot think why we have a financial formula which only takes into account finances in order to put money back into the Treasury pots. Many people are at risk from a lack of care and because the fire services are undermanned, firemen are likely to put themselves in greater danger. Normally local government can respond, and people throughout the country have enjoyed the benefits of that, but now no services of any consequence can be provided.
The Bill must be opposed and the Labour party will oppose it. It reminds me of the Tory philosophy that I first discovered when I was a councillor in Liverpool many years ago. I was a member of the children's committee and we discussed the possibility of providing three or four bicycles for children in a home. We agreed to do so and then a Tory lady councillor said, "I hope they will be secondhand bicycles." I shall never forget that. I also remember discussing whether we should install central heating in the dormitories of children's homes. One lady, who no doubt lived in a nice house with central heating in every room, including the bedrooms, said, "You don't really need central heating in dormitories. It is better for children not to have it. They grow up strong." That summed up Tory philosophy. The Bill and everything that the Government have done with rate support grants over the years sums up that same Tory philosophy.
Since 1979 the Government have cut £17 billion in rate support grant to local government. Imagine everything that could have been done with that for children, the old, those who need homes to live in and those who are dispossessed. The Bill adds to that problem.
My hon. Friend the Member for Bootle (Mr. Roberts) has described what has happened on Merseyside and I shall describe what could happen in Liverpool. The settlement amounts to £128·316 million, and before anybody gets enthusiastic about it, they should understand the problems facing Liverpool. We have high levels of unemployment. Despite what Labour authorities have achieved over the past three years, people live in slum properties which should have been pulled down many years ago. We have a drugs problem and terrible pressures, yet what do we find? If the budget exceeds the Department of the Environment's assumption by 3 per cent., local government will lose £7·252 million; if it exceeds the assumption by 5 per cent., it will lose more than £12 million. In other words, the local authority dare not go beyond the Government's limit. Talk about centralised control. The Government talk about freedom, yet they tell local authorities, "Do this or you will suffer worse than you have suffered in the past." That is unacceptable.
I should like to suggest what the Labour party should do when we return to office. First, we should not hesitate to abolish rate capping and the penalty system. Secondly, we should abolish surcharges on local councils for carrying out policies which they have said they will follow. We should certainly abolish the disqualification of councillors. Councillors have already been disqualified in Lambeth and some may be disqualified in Liverpool, if the case goes against them. I hope that it does not and that the House of Lords will have enough sense not to agree to their disqualification. However, if they do not, we shall abolish surcharges and the disqualification of decent, ordinary, working people who carry out their policies.
Thirdly, we should restore central Government grant to its level prior to 1979. Some will say that I am asking for too much, but I do not think so. Even if we restore it to the 1979 level, because of the higher costs involved we are not restoring it to the level at which it should be, but only to the level at which it would have been if we had not had the Government's policies. The distribution of rate support grant must certainly be reformed, based on a genuine assessment of local authority needs.
Fourthly, we must introduce special measures through the grant system to assist financially local authorities which have been forced to use creative accountancy measures. Did any of them want to use those measures? Of course not. They were forced into it because they had no choice. That has led to further problems for local authorities.
Fifthly, we should abolish the controls on capital spending to allow local councils the freedom to determine and plan their local capital programmes. Sixthly, we should provide cheap loans to local councils which seek to expand their local capital programmes in order to tackle homelessness and urban deprivation, and to generate employment. Hon. Members who have not read the Church of England's document "Faith in the City'" should study it. I refer particularly to Tory Members who often talk about being Christians and members of the Church of England. That document goes beyond what we in the Labour party are advocating.
Seventhly, local authority powers should be extended so that authorities can interven in the local community and economy, particularly in relation to raising the 2p limit on section 137 moneys. Eighthly, we should repeal the Government's privatisation legislation and replace it with both a statutory requirement on minimum pay and conditions for local authority employees and equal opportunities policies.
Finally, we should restore the Greater London council. It is an absolute scandal that it has been abolished. It is wrong for our capital city not to have a local authority covering the whole area. It is an absolute nonsense and it should be restored.
We must bring the police service under democratic control. We must do that on the basis of what we have seen recently. That does not mean political control, as Conservative Members are always saying. It means control by people who are elected and who, if the electorate do not like them, can be turned out. Democratic control is vital.
We must consider the concept of more regional Government in certain areas to deal with the problems.
I hope that I have summed up what I think should be done. Unfortunately, we will not win the vote tonight. The trouble in the House now is that we always win the argument hands down but we lose the vote. In the next election we will not only win the argument but win the vote as well.
I should like to explain why the Newham Members have been unable to be present during the debate. They have been talking to a large number of people who are lobbying because of the effects of local government finance measures on their borough. It should be on the record that Newham is being rate-capped for the first time without any appeal.
The Bill is a squalid one. It is one of a series of squalid Bills introduced in recent weeks which have included retrospective legislation and which have been designed to rob local authorities of power.
I shall put the Bill into context. On 20 January 1986 the Secretary of State for the Environment, now the Secretary of State for Education and Science, said:
Under the old system of targets and penalties, the grant lost by the high spenders was surrendered to the Treasury … Under the new system, the grant that will be lost by the high spenders will form a pool which will be recycled to local authorities.—[Official Report, 20 January 1986; Vol. 90, c. 48.]
The then Secretary of State made much political capital of his decision to introduce grant recycling. Just over one year later we are debating a Bill to bring an end to grant
recycling. That is not surprising in the context of the way in which the Government have treated local authorities, particularly in respect of finance.
The Government have created a system of local government finance that is so complex, with so many irregularities and illegalities, that the only people benefiting and laughing all the way to the bank are the lawyers. The system is so unsound that it makes one wonder about the lawyers in the Department of the Environment. However, I suspect that their advice has probably been ignored for political expediency. We know with certainty that neither the people who administer the system in the atmosphere of uncertainty nor the people whom they serve benefit. The system, shrouded in illegalities, can be tinkered with no longer. A system which is understood by all, and which gives certainty, must be introduced urgently. The Government have forfeited their opportunity to carry out that task. In fact, if the present Government were measured on their treatment of local government alone they would be relieved of office forthwith, and so they should be.
My hon. Friend the Member for Norwood (Mr. Fraser) and my other hon. Friends who have spoken have explained in a simple and understandable way how the amount of cash in recycling is arrived at. I shall not waste the time of the House by reiterating what has already been said. On 5 March 1986 the then Secretary of State for the Environment stated in a written answer:
On the evidence now available to me about local authority budgets in 1986–87, I am satisfied that there will be a grant underclaim of at least £500 million."[Official Report, 5 March 1986; Vol. 93, c. 190.]
He continued by declaring his willingness to guarantee that amount.
The Association of County Councils gave a guarded welcome to the scheme. In a press release issued on 5 March it said:
The Government's guarantee … will bring a welcome degree of certainty to shire counties and counties … will nevertheless be glad that this money will benefit ratepayers.
However, the chairman of the association, Mr. John Lovill, pointed out that the £500 million was still a recycling of a total grant that is less in cash terms than in the current financial year.
By 7 May 1986 the Secretary of State had informed the public, through a Department of the Environment press release, that his guarantee to recycle £500 million would not be called upon. His officials had discovered a grant underclaim of £628 million that was available for distribution to local authorities. I am sure that the fact that that announcement was made to the newspapers less than 24 hours before polling began for the by-elections in Derbyshire, West and Ryedale was purely coincidental. The Department said that it was a routine announcement. Those who believe that must live in a dream world.
The Association of County Councils pointed out in its own press release on 13 May 1986 that the announcement did not represent new money for local authorities. The association's cool attitude led it to say that there was uncertainty about the future of the recycling because the amount would change, as authorities' spending inevitably varied from their budgets. Local authorities do not like uncertainty. However, they must prefer uncertainty about the amount they will get to the certainty of getting nothing. That was to come.
In his first rate support grant settlement consultation paper, 1987–88, the Secretary of State confirmed that grant recycling was to be abolished. He demonstrated his ability to write excellent Orwellian double-speak. In paragraph 5 he proposed to introduce
a further change which will provide individual authorities with greater certainty as to their grant entitlement.
In paragraph 6 of the same document he argued that local authorities which overspent were entitled to less grant, which was then redistributed. He continued by saying that one local authority did not know by how much another was going to overspend, so no one knew how much was going to be recycled. The announcement of the amount to be recycled was made late and it was difficult to take into account when setting the rates precept. The Secretary of State, therefore, introduced certainty. Recycling was finally to be ended altogether.
The Secretary of State demonstrated that he was able, not only to write double-speak, but to talk it. On 22 July 1986, during his rate support grant statement for 1987–88, he said that he intended to abolish grant recycling. He said:
As a result, authorities will be able to plan their budgets and rates with much greater assurance.
That is an excellent example of Orwellian's new language. My hon. Friend the Member for Copeland (Dr. Cunningham) questioned the Secretary of State on his statement. He said:
Is not the Secretary of State also, in his plan to end 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 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?"—[Official Report, 22 July 1986; Vol. 102, c.182–83.]
The Secretary of State said that my hon. Friend was wrong about recycling. My hon. Friend was not wrong; he was absolutely correct. Everything said by the Minister today has justified every word said by my hon. Friend. Clearly, it was the Secretary of State who did not understand his own brief.
The treasurer of Somerset county council has estimated that the size of the grant that will be lost in 1987–88 will be over £400 million. This compares with £592 million that would have been lost to English authorities if there had been no grant recycling in 1986–87. It is like management offering its work force a rise of between £8 and £12 during wage negotiations and the next day offering nothing because that removes uncertainty and allows the work force to redistribute its wages with, to use the Secretary of State's phrase, "much greater certainty."
The treasurer of Durham county council, Mr. Kingsley Smith, wrote to me on 13 January 1987. He is a highly respected and experienced chief officer. He wrote:
The only advantage will be that the present uncertainty about grant entitlement will be removed. However the cost of removing this uncertainty is prohibitive and I cannot imagine that there is a local authority treasurer in the country who would regard it as a reasonable price to pay.
Because of Mr. Smith's knowledge of the trade, I am certain that he reflects the anxieties of treasurers the length and breadth of England and Wales.
The Government are taxing local authority spending. They are robbing the authorities of cash which the authorities expect and to which they are entitled. That important aspect has been underlined by the county treasurer of Durham. He writes:
The point that needs to be emphasised is that the effect of this Bill will be that local authorities collectively will not receive the amount of grant that Parliament believes it is approving for local authorities in the annual rate support grant statement.
Local authorities are being denied cash which Parliament approves for them which they desperately need to deliver the services to the increasing number of people in their areas who need those services.
I want to consider what that means for a specific local authority. David Wishart, the treasurer of the borough of Sunderland, wrote to me about the Bill. He explained that Sunderland spends above its GREA and as a consequence of spending 11 per cent. above GREA it suffered a grant loss of £2·598 million in 1986£87. Based on the returns of estimated expenditure for 1986–87 from local authorities, Sunderland's share of the £628 million available for grant recycling would be £2·735 million, that is to say, £137,000 more than the grant lost. If a similar calculation is made for 1987–88 based on an estimated expenditure of 4·1 per cent. higher than the 1986–87 figure, and the borough spent 11·8 per cent. above GREA, it would lose £1·89 million. If grant recycling was ended, that £1·89 million and the total grant lost by the other local authorities would be retained by the Treasury. Of course, the Government's assumption that spending will increase by only 4·1 per cent is open to a big question. A treasurer told me that the assumption that expenditure would increase by only a little over 4 per cent. was "clearly ridiculous."
Mr. David Wishart ends his letter by stating:
In summarising I would wish to express concern at the Secretary of State's decision to abolish grant recycling, because of the possible effects on Sunderland and similar authorities.
I do not have time this evening to debate all the problems of Sunderland. Suffice it to emphasise that Sunderland has a large unemployment problem and the town has the highest unemployment rate in Great Britain. The Government aim to take away almost £2 million from that authority.
Does my hon. Friend agree that the city of Newscastle, in the metropolitan borough of Gateshead, stands to lose about £10 million as a result of these measures? These authorities share an inner area partnership. As a result of the Government's financial regime the authorities now have to reduce expenditure by more than twice as much as they will receive in inner area partnership grant. Does that not make nonsense of the Government's crocodile tears over the problems of the inner cities?
My hon. Friend has made a telling and important point. Indeed, Newcastle could lose between £5 million and £9 million worth of grants, and his local authority—of which he was such a distinguished leader—may lose between £500,000 and £1·6 million. That money is badly needed in the areas that we represent.
The borough of Sunderland is greatly concerned about clause 1 (1)(b)(i), because it appears to be too wide in its literal sense. It suggests that the Secretary of State can ignore any information or data that become available. That appears to conflict with the requirement of section 65 of the Local Government, Planning and Land Act 1980, as amended by the Rate Support Grants Act 1986, which states that the information required from authorities in order to enable the Secretary of State to produce the rate support grant report must be received
in such form and by such date as he may specify".
I also want clarification about clause 1 (1)(b)(ii), which could have far-reaching implications. It would appear to give the Secretary of State the power to fix the aggregate amount of block grant available without having any regard to the amount so specified in the RSG settlement.
Clause 2 retrospectively corrects an illegality. The clause has been introduced to prevent adversely affected councils from seeking redress in the courts. The clause will turn out to be a legal minefield. It adds to a local government system created by the Government which is a shambles. The House has spent a considerable amount of time recently debating Bills concerned with retrospective legislaton which have had to be introduced because local authorities took the Government to court for acting illegally and won their cases. Each time we discussed the Bill, a Minister suggested that everything would now be all right.
At the end of the debate on the rates Support Grants Bill the Minister said:
We are about to pass a Bill which will clarify the law and make it what it was thought to be in a number of important technical respects in relation to rate support grant settlements."—[Official Report, 21 July 1986; Vol. 102, c. 150–;51.]
That was the Bill to end all Bills, but very soon we were considering other Bills, and this is the third Bill in quick succession on these matters.
The Secretary of State said in reply to a question from my hon. Friend the Member for Bootle (Mr. Roberts):
I am the only person who is quite certain what the law is."—[Official Report, 16 December 1986; Vol. 107, c. 1055.]
If the right hon. Gentleman is certain about the law, I do not understand why he wants to bring in three Bills— and no one can guess how many more might be introduced—to bring some sanity into the system.
If the Secretary of State understood the law so well, why did the Government have to introduce the Rate Support Grants Act 1986, the Local Government Finance Bill and this Rate Support Grants Bill? Every time that the Government have tried to introduce certainty, they have discovered greater uncertainty. How many more Bills will they introduce before they realise that there are so many problems with the present system that the only honourable thing to do is for the Government to pack their bags, be gone, and let the Opposition create a simple, easily understood and manageable local government system.
We have had a full and, by and large, constructive debate this afternoon on what is a simple but important new measure designed to improve the operation of the present rate support grant system. Hon. Members have made interesting and largely relevant contributions. I have listened carefully to the views expressed and will do my best to respond to some of the key points that have been raised.
My hon. Friend the Minister for Local Government has eloquently explained already the need for the Bill and how it achieves its stated objectives, and I do not intend to repeat what he has already made clear. He has also explained the benefits which the Bill will confer on local authorities in terms of great stability and certainty, which explains why many authorities have welcomed the principles and purpose which lie behind it.
Some Opposition Members have raised the spectre of all sorts of misdeeds which they believe my right hon. Friend the Secretary of State may be trying to perpetrate under cover of this apparently straightforward measure. I must tell Opposition Members that they are wrong. I am unable to say whether they are wrong through lack of understanding or lack of trust—or perhaps both.
The Bill is intended to abolish the practice of grant recycling, a procedure which has proved a hindrance to good management and sensible budgeting in local government. Local authorities which adopt sensible spending policies have nothing to fear from the provisions of the Bill. It is significant that most of the contributions from Opposition Members came from hon. Members representing high-spending authorities which wish to spend even more. The Bill has implications for such authorities. It will provide a tougher regime for those who choose to push up spending, and that I regard as a further positive advantage offered by the Bill. Hitherto, recycled grant has found its way back indiscriminately to high and low spenders alike. The very high-spending authorities whose spending decisions have reduced their grant entitlement, and have therefore contributed to an aggregate underclaim of grant, find themselves beneficiaries of recycling. Such a situation is unacceptable, and the Bill will bring it to an end.
I stress that the Bill will still allow local authorities to spend at levels of their own choice. However, it ensures that the consequences of their spending decisions, in terms of their entitlement to grant, are clear-cut and flow directly from, and only from, those decisions. The spending levels of other authorities have no bearing on an authority's grant entitlement. Overspending elsewhere will not affect that entitlement. This is important in promoting certainty as to grant entitlement at a very early stage, when budgets are being set and rate levels discussed, and in achieving a greater level of local accountability. Ratepayers will be able to see with the utmost clarity just what the effects of profligate spending are.
If the hon. Gentleman had been present this morning when I was addressing a seminar organised by the Local Government Chronicle, he would have been able to have the benefit of a detailed analysis of exactly how much money is being wasted unnecessarily in local government, and how much can be saved. We intend to make six particular services the subject of compulsory competitive tender. Even if only 10 per cent. savings are made on those services—that is a modest estimate having regard to the savings made by those authorities which have already gone in for competitive tendering— that will save £250 million. I do not expect to convince the hon. Gentleman about this, because I read in the newspapers that he regards the present Liverpool city council as the best that there has ever been in Liverpool. If that is his view, that shows how wide is the chasm between us and how difficult it will be to reach an understanding on these matters.
We have been asked when the Bill's provisions will apply. There will be no grant recycling in 1987–88, but for the remainder of the financial year 1986–87 grant will continue to be recycled. The guarantees given by my right hon. Friend the previous Secretary of State that £500 million would be available in the first supplementary report for 1986–87 will be implemented when that report is made. That will be as soon as the Local Government Finance Bill has received Royal Assent. Some £618 million will be recycled by that report. However, that is only the first supplementary report in 1986–87, and subsequent supplementary reports will be produced in due course. I cannot comment about those.
The hon. Member for Norwood (Mr. Fraser) suggested that, on what he called a low estimate of the Bill's proposals, it would cause two thirds of a billion pounds to be lost. A higher estimate was that £1 billion would be lost. There is an amazing contrast between that and what the hon. Member for Copeland (Dr. Cunningham) has said. He suggested that the cost would be about £400 million. There is a lack of consistency here.
I am able to tell the House that both hon. Members are wrong. Their assumption is that local authorities will carry on massively overspending, and if that assumption is proved correct those authorities will forfeit grant. However, if local authorities do not go on massively overspending, the grant is theirs. They will not lose any grant if they increase spending overall in line with the settlement assumption, which, at 1·5 per cent. above inflation for non-rate-limited authorities, is realistic. Authorities will then be able to claim the full amount of grant available for them next year.
My hon. Friend the Member for Mid-Staffordshire (Mr. Heddle) raised a number of interesting points, in particular his concern about consultation. No special consultation provision is necessary, because of the wide provisions available in part VI of the 1980 Act, which requires consultation on the contents of the rate support grant reports.
A number of comments have been made about clause 2 and the delineation of classes of authority. This delineation is used to enable different determination of GRE, grant-related poundage, multipliers and so on to be made for different types of authorities. This is necessary because of the different functions undertaken by different types of authorities. For example, county councils, metropolitan districts, outer London boroughs, ILEA and the Isles of Scilly are education authorities, while the shire districts, the inner London boroughs and the Common Council of the City of London are not. Our lawyers advise us that there is doubt about whether the definition of classes of authority is consistent throughout part VI, and that is why clause 2 seeks to put all those references on the same footing—that is, using the definitions in sections 53(5) of the 1980 Act, as modified by section 59(11) and schedule 1 to the Rates Support Grants Act 1986. I hope that that will allay some of the fears that have been expressed by Labour Members.
I had hoped that we would hear a bit more about the Labour party's proposals. As far as one can detect from what it has published so far, its proposals envisage the reintroduction of grant recycling and putting no local authority on a negative marginal rate of grant. This would mean that no authority would lose grant if it increased spending, and most would gain grant. That is not the end of what the Labour party says. It says that total grant would be cash-limited, and that means that additional grant would have to come from other authorities. We would thus return to a situation where authorities which exercised good housekeeping would have to pay for the excesses of the high spenders. Labour would not be introducing grant recycling— it would be giving authorities more grant than they expected, but it would be introducing grant clawback, giving authorities less grant than they expected. This has severe implications for all local authorities living within their means and trying to budget sensibly.
The right hon. Member for Manchester, Wythenshawe (Mr. Morris) raised a number of detailed points about the disabled. I am as concerned as he is about the disabled. He did not refer to the principal issue that is one of the priorities for local government. His local authority of Manchester increased its number of employees on a full-time equivalent basis by 2,291 between June 1985 and June 1986. How many of those extra employees have been taken on to help the disabled?
With their very important responsibilities for local government finance, what consultations have Environment Ministers had with DHSS Ministers and the Treasury about the implications of the Disabled Persons (Services, Consultation and Representation) Act 1986? That is a very important question.
I shall write to the right hon. Gentleman in answer to that detailed point. Much of his speech was addressed to the implications of the Bill. He suggested that it would take money away from local authorities which would otherwise wish to spend it on the disabled. It is worth pointing out that in Wandsworth, between 1978 and 1985, despite prudent spending by that authority, there was a 27 per cent. increase in home helps and a 38 per cent. increase in the council's stock of sheltered accommodation. That shows that prudent spending is compatible with care for those in greatest need. I do not have time to deal with all the other detailed points raised in the course of the debate. This is an important Bill and deserves the support of the House.
|Division No. 80]||[7 pm|
|Adley, Robert||Body, Sir Richard|
|Aitken, Jonathan||Bonsor, Sir Nicholas|
|Alexander, Richard||Bottomley, Peter|
|Alison, Rt Hon Michael||Bottomley, Mrs Virginia|
|Ancram, Michael||Bowden, A. (Brighton K'to'n)|
|Arnold, Tom||Bowden, Gerald (Dulwich)|
|Aspinwall, Jack||Boyson, Dr Rhodes|
|Atkins, Rt Hon Sir H.||Braine, Rt Hon Sir Bernard|
|Atkins, Robert (South Ribble)||Brandon-Bravo, Martin|
|Atkinson, David (B'm'th E)||Bright, Graham|
|Baker, Rt Hon K. (Mole Vall'y)||Brinton, Tim|
|Baker, Nicholas (Dorset N)||Brooke, Hon Peter|
|Baldry, Tony||Brown, M. (Brigg & Cl'thpes)|
|Banks, Robert (Harrogate)||Browne, John|
|Batiste, Spencer||Bruinvels, Peter|
|Beaumont-Dark, Anthony||Bryan, Sir Paul|
|Bellingham, Henry||Budgen, Nick|
|Bendall, Vivian||Bulmer, Esmond|
|Benyon, William||Burt, Alistair|
|Best, Keith||Butler, Rt Hon Sir Adam|
|Bevan, David Gilroy||Butterfill, John|
|Biffen, Rt Hon John||Carlisle, Kenneth (Lincoln)|
|Biggs-Davison, Sir John||Carlisle, Rt Hon M. (W'ton S)|
|Blackburn, John||Carttiss, Michael|
|Blaker, Rt Hon Sir Peter||Cash, William|
|Chalker, Mrs Lynda||Heathcoat-Amory, David|
|Channon, Rt Hon Paul||Heddle, John|
|Chapman, Sydney||Henderson, Barry|
|Chope, Christopher||Heseltine, Rt Hon Michael|
|Clark, Hon A. (Plym'th S'n)||Hickmet, Richard|
|Clark, Dr Michael (Rochford)||Hicks, Robert|
|Clark, Sir W. (Croydon S)||Higgins, Rt Hon Terence L.|
|Clegg, Sir Walter||Hill, James|
|Cockeram, Eric||Hind, Kenneth|
|Colvin, Michael||Hirst, Michael|
|Coombs, Simon||Hogg, Hon Douglas (Gr'th'm)|
|Cope, John||Holland, Sir Philip (Gedling)|
|Corrie, John||Holt, Richard|
|Couchman, James||Hordem, Sir Peter|
|Cranborne, Viscount||Howard, Michael|
|Critchley, Julian||Howarth, Alan (Strati'd-on-A)|
|Crouch, David||Howarth, Gerald (Cannock)|
|Currie, Mrs Edwina||Howe, Rt Hon Sir Geoffrey|
|Dickens, Geoffrey||Howell, Rt Hon D. (G'ldford)|
|Dorrell, Stephen||Hubbard-Miles, Peter|
|Douglas-Hamilton, Lord J.||Hunt, John (Ravensbourne)|
|du Cann, Rt Hon Sir Edward||Hunter, Andrew|
|Dunn, Robert||Hurd, Rt Hon Douglas|
|Dykes, Hugh||Irving, Charles|
|Edwards, Rt Hon N. (P'broke)||Jackson, Robert|
|Eggar, Tim||Jenkin, Rt Hon Patrick|
|Emery, Sir Peter||Jessel, Toby|
|Evennett, David||Johnson Smith, Sir Geoffrey|
|Eyre, Sir Reginald||Jones, Gwilym (Cardiff N)|
|Fairbairn, Nicholas||Jones, Robert (Herts W)|
|Farr, Sir John||Key, Robert|
|Favell, Anthony||King, Roger (B'ham N'tield)|
|Fenner, Dame Peggy||King, Rt Hon Tom|
|Finsberg, Sir Geoffrey||Knight, Greg (Derby N)|
|Fletcher, Sir Alexander||Knight, Dame Jill (Edgbaston)|
|Fookes, Miss Janet||Knowles, Michael|
|Forman, Nigel||Knox, David|
|Forsyth, Michael (Stirling)||Lamont, Rt Hon Norman|
|Forth, Eric||Lang, Ian|
|Fowler, Rt Hon Norman||Latham, Michael|
|Fox, Sir Marcus||Lawler, Geoffrey|
|Franks, Cecil||Lawrence, Ivan|
|Fraser, Peter (Angus East)||Lawson, Rt Hon Nigel|
|Freeman, Roger||Lee, John (Pendle)|
|Fry, Peter||Leigh, Edward (Gainsbor'gh)|
|Gale, Roger||Lennox-Boyd, Hon Mark|
|Galley, Roy||Lightbown, David|
|Gardiner, George (Reigate)||Lilley, Peter|
|Gardner, Sir Edward (Fylde)||Lloyd, Sir Ian (Havant)|
|Garel-Jones, Tristan||Lloyd, Peter (Fareham)|
|Glyn, Dr Alan||Lord, Michael|
|Goodhart, Sir Philip||Luce, Rt Hon Richard|
|Goodlad, Alastalr||Lyell, Nicholas|
|Gorst, John||Macfarlane, Neil|
|Gow, Ian||MacGregor, Rt Hon John|
|Gower, Sir Raymond||MacKay, Andrew (Berkshire)|
|Grant, Sir Anthony||MacKay, John (Argyll & Bute)|
|Greenway, Harry||Maclean, David John|
|Gregory, Conal||McLoughlin, Patrick|
|Griffiths, Sir Eldon||McNair-Wilson, M. (N'bury)|
|Griffiths, Peter (Portsm'th N)||McNair-Wilson, P. (New F'st)|
|Grist, Ian||McQuarrie, Albert|
|Ground, Patrick||Madel, David|
|Grylls, Michael||Major, John|
|Gummer, Rt Hon John S||Malone, Gerald|
|Hamilton, Hon A. (Epsom)||Maples, John|
|Hamilton, Neil (Tatton)||Marland, Paul|
|Hampson, Dr Keith||Marshall, Michael (Arundel)|
|Hannam, John||Mather, Sir Carol|
|Hargreaves, Kenneth||Maude, Hon Francis|
|Harris, David||Mawhinney, Dr Brian|
|Harvey, Robert||Maxwell-Hyslop, Robin|
|Haselhurst, Alan||Mayhew, Sir Patrick|
|Havers, Rt Hon Sir Michael||Mellor, David|
|Hawkins, C. (High Peak)||Merchant, Piers|
|Hawkins, Sir Paul (N'folk SW)||Meyer, Sir Anthony|
|Hawksley, Warren||Miller, Hal (B'grove)|
|Hayes, J.||Mills, Iain (Meriden)|
|Hayhoe, Rt Hon Sir Barney||Mills, Sir Peter (West Devon)|
|Hayward, Robert||Miscampbell, Norman|
|Mitchell, David (Hants NW)||Smith, Tim (Beaconsfield)|
|Moate, Roger||Soames, Hon Nicholas|
|Monro, Sir Hector||Speller, Tony|
|Montgomery, Sir Fergus||Spencer, Derek|
|Moore, Rt Hon John||Spicer, Jim (Dorset W)|
|Morris, M. (N'hampton S)||Spicer, Michael (S Worcs)|
|Morrison, Hon C. (Devizes)||Squire, Robin|
|Morrison, Hon P. (Chester)||Stanbrook, Ivor|
|Moynihan, Hon C.||Stanley, Rt Hon John|
|Mudd, David||Stern, Michael|
|Murphy, Christopher||Stevens, Lewis (Nuneaton)|
|Neale, Gerrard||Stewart, Allan (Eastwood)|
|Nelson, Anthony||Stewart, Andrew (Sherwood)|
|Neubert, Michael||Stewart, Ian (Hertf'dshire N)|
|Newton, Tony||Stokes, John|
|Nicholls, Patrick||Stradling Thomas, Sir John|
|Normanton, Tom||Sumberg, David|
|Norris, Steven||Tapsell, Sir Peter|
|Onslow, Cranley||Taylor, John (Solihull)|
|Oppenheim, Phillip||Taylor, Teddy (S'end E)|
|Oppenheim, Rt Hon Mrs S.||Tebbit, Rt Hon Norman|
|Osborn, Sir John||Temple-Morris, Peter|
|Ottaway, Richard||Terlezki, Stefan|
|Page, Sir John (Harrow W)||Thatcher, Rt Hon Mrs M.|
|Page, Richard (Herts SW)||Thomas, Rt Hon Peter|
|Parkinson, Rt Hon Cecil||Thompson, Donald (Calder V)|
|Patten, J. (Oxf W & Abgdn)||Thompson, Patrick (N'ich N)|
|Pawsey, James||Thorne, Neil (Word S)|
|Peacock, Mrs Elizabeth||Thornton, Malcolm|
|Percival, Rt Hon Sir Ian||Thurnham, Peter|
|Pollock, Alexander||Townend, John (Bridlington)|
|Porter, Barry||Townsend, Cyril D. (B'heath)|
|Portillo, Michael||Tracey, Richard|
|Powell, William (Corby)||Trippier, David|
|Powley, John||Trotter, Neville|
|Price, Sir David||Twinn, Dr Ian|
|Prior, Rt Hon James||van Straubenzee, Sir W.|
|Proctor, K. Harvey||Vaughan, Sir Gerard|
|Rafian, Keith||Waddington, Rt Hon David|
|Rathbone, Tim||Wakeham, Rt Hon John|
|Rees, Rt Hon Peter (Dover)||Walden, George|
|Renton, Tim||Walker, Bill (T'side N)|
|Rhodes James, Robert||Wall, Sir Patrick|
|Rhys Williams, Sir Brandon||Waller, Gary|
|Ridley, Rt Hon Nicholas||Walters, Dennis|
|Ridsdale, Sir Julian||Ward, John|
|Rifkind, Rt Hon Malcolm||Wardle, C. (Bexhill)|
|Rippon, Rt Hon Geoffrey||Warren, Kenneth|
|Roberts, Wyn (Conwy)||Watson, John|
|Robinson, Mark (N'port W)||Watts, John|
|Roe, Mrs Marion||Wells, Sir John (Maidstone)|
|Rossi, Sir Hugh||Wheeler, John|
|Rost, Peter||Whitfield, John|
|Rowe, Andrew||Whitney, Raymond|
|Rumbold, Mrs Angela||Wiggin, Jerry|
|Ryder, Richard||Wilkinson, John|
|Sackville, Hon Thomas||Winterton, Mrs Ann|
|Sainsbury, Hon Timothy||Winterton, Nicholas|
|Sayeed, Jonathan||Wolfson, Mark|
|Scott, Nicholas||Wood, Timothy|
|Shaw, Giles (Pudsey)||Woodcock, Michael|
|Shaw, Sir Michael (Scarb')||Yeo, Tim|
|Shelton, William (Streatham)||Young, Sir George (Acton)|
|Shepherd, Colin (Hereford)||Younger, Rt Hon George|
|Shepherd, Richard (Aldridge)|
|Shersby, Michael||Tellers for the Ayes:|
|Silvester, Fred||Mr. Robert Boscawen and|
|Sims, Roger||Mr. Tony Durant.|
|Skeet, Sir Trevor|
|Abse, Leo||Banks, Tony (Newham NW)|
|Adams, Allen (Paisley N)||Barron, Kevin|
|Alton, David||Beckett, Mrs Margaret|
|Anderson, Donald||Beith, A. J.|
|Archer, Rt Hon Peter||Bell, Stuart|
|Ashley, Rt Hon Jack||Benn, Rt Hon Tony|
|Ashton, Joe||Bidwell, Sydney|
|Atkinson, N. (Tottenham)||Blair, Anthony|
|Bagier, Gordon A. T.||Boothroyd, Miss Betty|
|Boyes, Roland||Hughes, Roy (Newport East)|
|Bray, Dr Jeremy||Hughes, Sean (Knowsley S)|
|Brown, Gordon (D'f'mline E)||Janner, Hon Greville|
|Brown, Hugh D. (Provan)||Jenkins, Rt Hon Roy (Hillh'd)|
|Brown, N. (N'c'tle-u-Tyne E)||John, Brynmor|
|Brown, R. (N'c'tle-u-Tyne N)||Jones, Barry (Alyn & Deeside)|
|Brown, Ron (E'burgh, Leith)||Kaufman, Rt Hon Gerald|
|Bruce, Malcolm||Kirkwood, Archy|
|Buchan, Norman||Lambie, David|
|Caborn, Richard||Lamond, James|
|Callaghan, Jim (Heyw'd & M)||Leadbitter, Ted|
|Campbell, Ian||Leighton, Ronald|
|Campbell-Savours, Dale||Litherland, Robert|
|Canavan, Dennis||Livsey, Richard|
|Carlile, Alexander (Montg'y)||Lloyd, Tony (Stretford)|
|Carter-Jones, Lewis||Lofthouse, Geoffrey|
|Clark, Dr David (S Shields)||Loyden, Edward|
|Clarke, Thomas||McCartney, Hugh|
|Clay, Robert||McDonald, Dr Oonagh|
|Clelland, David Gordon||McGuire, Michael|
|Clwyd, Mrs Ann||MacKenzie, Rt Hon Gregor|
|Cocks, Rt Hon M. (Bristol S)||Maclennan, Robert|
|Cohen, Harry||McTaggart, Robert|
|Coleman, Donald||McWilliam, John|
|Conlan, Bernard||Madden, Max|
|Cook, Frank (Stockton North)||Marek, Dr John|
|Cook, Robin F. (Livingston)||Marshall, David (Shettleston)|
|Corbett, Robin||Martin, Michael|
|Cox, Thomas (Tooting)||Mason, Rt Hon Roy|
|Craigen, J. M.||Maxton, John|
|Crowther, Stan||Maynard, Miss Joan|
|Cunliffe, Lawrence||Meacher, Michael|
|Cunningham, Dr John||Meadowcroft, Michael|
|Dalyell, Tam||Michie, William|
|Davies, Rt Hon Denzil (L'lli)||Mikardo, Ian|
|Davis, Terry (B'ham, H'ge H'l)||Millan, Rt Hon Bruce|
|Deakins, Eric||Mitchell, Austin (G't Grimsby)|
|Dixon, Donald||Morris, Rt Hon A. (W'shawe)|
|Dobson, Frank||Morris, Rt Hon J. (Aberavon)|
|Dormand, Jack||Nellist, David|
|Douglas, Dick||Oakes, Rt Hon Gordon|
|Dubs, Alfred||O'Neill, Martin|
|Duffy, A. E. P.||Orme, Rt Hon Stanley|
|Dunwoody, Hon Mrs G.||Owen, Rt Hon Dr David|
|Eadie, Alex||Park, George|
|Eastham, Ken||Parry, Robert|
|Evans, John (St. Helens N)||Patchett, Terry|
|Fatchett, Derek||Pavitt, Laurie|
|Faulds, Andrew||Pendry, Tom|
|Field, Frank (Birkenhead)||Pike, Peter|
|Fields, T. (L'pool Broad Gn)||Powell, Raymond (Ogmore)|
|Fisher, Mark||Prescott, John|
|Flannery, Martin||Radice, Giles|
|Foot, Rt Hon Michael||Randall, Stuart|
|Forrester, John||Raynsford, Nick|
|Foster, Derek||Redmond, Martin|
|Fraser, J. (Norwood)||Rees, Rt Hon M. (Leeds S)|
|Freeson, Rt Hon Reginald||Richardson, Ms Jo|
|Garrett, W. E.||Roberts, Allan (Bootle)|
|Gilbert, Rt Hon Dr John||Roberts, Ernest (Hackney N)|
|Godman, Dr Norman||Robertson, George|
|Golding, Mrs Llin||Robinson, G. (Coventry NW)|
|Gourlay, Harry||Rogers, Allan|
|Hamilton, James (M'well N)||Rooker, J. W.|
|Hamilton, W. W. (Fife Central)||Ross, Ernest (Dundee W)|
|Hancock, Michael||Ross, Stephen (Isle of Wight)|
|Hardy, Peter||Rowlands, Ted|
|Harrison, Rt Hon Walter||Sedgemore, Brian|
|Hart, Rt Hon Dame Judith||Sheerman, Barry|
|Haynes, Frank||Sheldon, Rt Hon R.|
|Healey, Rt Hon Denis||Shore, Rt Hon Peter|
|Heffer, Eric S.||Short, Ms Clare (Ladywood)|
|Hogg, N. (C'nauld & Kilsyth)||Short, Mrs ft.(W'hampt'n NE)|
|Holland, Stuart (Vauxhall)||Silkin, Rt Hon J.|
|Home Robertson, John||Skinner, Dennis|
|Howarth, George (Knowsley, N)||Smith, C.(lsl'ton S & F'bury)|
|Howell, Rt Hon D. (S'heath)||Smith, Rt Hon J. (M'ds E)|
|Howells, Geraint||Soley, Clive|
|Hoyle, Douglas||Spearing, Nigel|
|Hughes, Robert (Aberdeen N)||Steel, Rt Hon David|
|Stott, Roger||Weetch, Ken|
|Strang, Gavin||Welsh, Michael|
|Thomas, Dr R. (Carmarthen)||White, James|
|Thompson, J. (Wansbeck)||Wigley, Dafydd|
|Thorne, Stan (Preston)||Williams, Rt Hon A.|
|Tinn, James||Winnick, David|
|Torney, Tom||Wrigglesworth, Ian|
|Wallace, James||Tellers for the Noes:|
|Wardell, Gareth (Gower)||Mr. Ron Davies and|
|Wareing, Robert||and Mr. Allen McKay.|