Rate Support Grant (Scotland)

Part of New Clause 3 – in the House of Commons at 10:02 pm on 20 July 1987.

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Photo of Malcolm Rifkind Malcolm Rifkind Secretary of State for Scottish Office 10:02, 20 July 1987

Even so, some uncomfortable facts remain and have to be faced. When my hon. Friend the Minister of State responsible for local government finance met COSLA recently they considered, among other things, trends in local authority spending in the past seven or eight years. There were several striking features.

First, while expenditure in 1986–87 was at the same level in volume terms as in 1978–79, for the current year it had leapt by an astonishing 2·3 per cent. in volume. Secondly, since 1978–79 expenditure in cost terms has increased by 18 per cent., indicating that inflation in local authority costs has been quite significantly higher than in the economy as a whole. There are alarming signs that the gap is again increasing.

Thirdly, reverting to volume, education expenditure, which forms such a high proportion of the total has declined, that is only to be expected as a result of demographic changes, but if we take out education spending, expenditure and other services have increased over the past nine years by over 10 per cent. in volume. Hon. Members on both sides will find these figures interesting and will understand why the Government consider that there is room for economy in local government and room for accommodating expenditure and new priorities, if only existing expenditure programmes are rigorously examined. I fear that many councils are still to become fully aware that many ratepayers can ill afford the burdens that are being put upon them and that many business ratepayers find their local taxes a significant burden and penalty on their efficiency and capacity to create jobs.

The system of grant penalties remains a powerful, if regrettable, instrument to encourage local authorities to budget and to spend prudently. This is no time to reduce our efforts to keep local authority spending under control. Circumstances will, of course, change in April 1989 with the introduction of the new arrangements provided for in the Abolition of Domestic Rates (Scotland) Act 1987. Statutory control of the annual increase in non-domestic rates and replacement of domestic rates by the community charge give us an assurance of increased pressure for accountability that will allow us to abandon the grant penalty system.

I refer now to the Circumstances leading to local authorities' 1987–88 budgets. This time last year it seemed that the message was at least sinking in. Budgets for 1986–87 showed, as I have already mentioned, that volume spending was down to 1978–79 levels. I responded at that time by fixing provision for the current year at a realistic level of 1986–87 budgets, plus an addition for inflation, which was 3·75 per cent. There were subsequent additions to provision and to grant in respect of the teachers' pay settlement and one or two minor transfers of responsibility between central and local government. The level of provision and grant for the current year was such that, in general, Scottish local authorities should have been able to maintain their expenditure within guideline levels, avoiding grant penalties this year and with only modest requirements for rate increases. When budgets were reached for this year, the picture was sadly and disappointingly different.