For nearly eight years we have had antagonism and a virtual state of war between central and local government. We have had one Bill after another until we have almost lost count. I think that my hon. Friend the Member for Blackburn (Mr. Straw) counted 43. We are suffering from legislative indigestion. Even the parliamentary draftsmen cannot keep up; hence this truncated Bill.
The Department of the Environment regularly falls foul of the law. Unprecedented and sweeping powers have been arrogated by the Secretary of State and more are taken in this Bill. There has been an unheard of centralisation of state power, but not of the wisdom to exercise it. Elected councils have been turned into mere ciphers. The Government have moved the burden of local government finance from the taxpayer to the ratepayer.
When this Government came to office, rate support grant was 61 per cent. It has been slashed every year since then and is now only 46 per cent. So, while in 1979 for every £100 of local government finance, £39 had to be raised in rates, now, for that same £100 of expenditure, £54 has to be raised in rates. That is an increase of 35 per cent. in rates for the same expenditure. That is the reason why rates have gone up, but, while central Government make the cuts, it is local government that gets the blame.
I want to address myself briefly to the position of the London borough of Newham and to use it as an analogue and an example. Mine is an inner-city area in east London wrestling with a legacy of deep-seated problems. I will not take the time of the House by cataloguing details of the borough's social economic and environmental deprivation. I do not have to tell the Government about this, because they have told us. The figures from the Department of the Environment reveal that, with one exception, we are the most deprived local authority in the whole of England and Wales. Our difficulties are greater than those of eight of the nine authorities which have been given partnership status and therefore extra resources. This is a serious source of grievance locally. Expenditure per head in Newham is considerably below that in comparable areas. I am concerned that Government action should not exacerbate and compound our difficulties.
In the 20 February issue of The House Magazine the Home Secretary wrote an article in which he said:
we cannot complacently wait for the next spark. Dereliction, disinvestment and despair in inner city areas need to be and will be tackled. For whatever reason, there have sprung up pools of disaffected youths in some of these areas and we must do our utmost to see that the springs of discontent are dried out, that the pools are not replenished.
This is the whole point. The Government's local government policy is threatening to make the dereliction in the borough worse and to take funds away from the voluntary groups working with the disaffected youth. That cannot be right. Government policy threatens to cause a crisis in Newham. Where is the sense in that ? Any alleged savings could easily be swallowed up by the Home Office in the extra costs of maintaining law and order.
I was very pleased that the Minister of State accepted my invitation to visit Newham last Friday, when he had the opportunity to meet those principally concerned—the elected members and officers charged with administering the borough. He will have observed that they are reasonable, decent people, wrestling as best they may with intractable problems. He will have noticed that Newham is not a profligate or wasteful authority. The Audit Commission recently made a report. I am critical of the methodology of that report. However, it covered two groups of authorities, one of which it criticised and the other of which it did not. The Minister will know that Newham was in the group that was not criticised. It is an authority which is seeking to be responsive to local opinion and to achieve an efficient delivery of services. I hope that he felt that his visit was instructive and worth while, and I very much hope that something constructive will emerge from it.
The Government have decided to rate-cap Newham. This is not the time to debate the principle of that. I am opposed to rate capping, but Newham is not asking for the ability to raise its rates. The borough is aggrieved about the way it is rate-capped, the formula on which the rate capping is based and the base year that is used, which results in such a freakishly harsh effect. The infamous algebraic formula in the Bill now in another place was cobbled together in haste to meet the Government's legal problems. They were not of our making, yet we are expected to suffer because of them.
I hope that the Minister will agree that a standard, common formula saddled on disparate authorities must lead to anomalies and to uneven and grossly unfair results. In Newham's case it leads to a 26 per cent. rate reduction —twice that of all but one of the other rate-capped authorities and more than three times that of 15 of the other 20 authorities. Furthermore, 16 of the others can spend 10 per cent. above grant-related expenditure, seven can spend 20 per cent. above GRE, but Newham can spend only 3·7 per cent. above. I do not think that the Minister will pretend that that is fair or evenhanded.
The legislation of 1984 recognised that. It allowed—great play was made of this at the time—redetermination, that is, appeal to have cases looked at on their individual merits. Last year six authorities appealed and they got increases of between 2·2 per cent. and 7·7 per cent. In other words, some attention was paid to individual and local circumstances. We came to see the Minister to do the same and we still feel sore that, although he listened to us, he knew that a Bill was coming to take away the right to redetermination because of the Government's stampede to get out of their legal fiasco.
Something has to be done, and I hope that the Minister learned in Newham that the main cause of our difficulty is the base year of 1985–86. The Government under-estimated what the council spent in that year by about £15 million. That is where things have gone wrong. The budget of that year was distorted by completely lawful and legitimate special accounting, about which the council has been absolutely and completely open. Basing the Government's standard formula on that year's distorted budget means a cut of 15 per cent. of the amount above GRE in one year. That is an unreasonable and absurdly unrealistic cut.
What is to be done? The Government could not easily accept amendments that would wreck the Bill now going through the other place—I accept that—but they could accept the modest amendment moved by Lord Elwyn Jones, and I should like to give the Minister six reasons for looking upon it favourably. First, it would be a "class" amendment and so would not cause hybridity. Secondly, it would affect only three authorities. Thirdly, Newham would not gain at the expense of others. Fourthly, it would not cost the Government anything. Fifthly, it would mean that Newham would still have a cut in rates by 6·2 per cent. Sixthly, Newham would still have a cut in expenditure.
Those are six very good reasons for looking favourably upon that amendment. I do not claim that this would be a perfect solution, but it is something with which the borough could cope, with which it could live. It is my duty as a constituency Member to say that, unless something of this sort is done quickly, the Government will cause a crisis in the borough. Why do that? Who would gain from it? It would undermine the locally elected civic leadership. It would badly damage morale among council staff. It would cause cuts in education, environmental services, housing, social services and much else which would excaberate inner city decay and bring distress to my constituents. I call upon the Minister, after seeing the situation at first hand, to take action now to avert that iniquity.