Rate Support Grant (England)

– in the House of Commons at 3:31 pm on 30th November 1987.

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Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury 3:31 pm, 30th November 1987

With permission, Mr. Speaker, I should like to make a statement about the rate support grant report for 1988–89, which I have today laid before the House

I announced to the House in July my proposals for the aggregates of local authority expenditure and grant for 1988–9. Subsequently, in October, I issued a consultation paper to local government containing details of all my proposals for next year's rate support grant settlement. The main elements of those proposals were that local authority current expenditure provision should be set at £27·38 billion, a 7 per cent. increase on the amount provided for 1987–88, allowing non-rate capped authorities to hold their spending broadly steady in real terms; that there should once again be a margin between the total of grant-related expenditure and expenditure provision to reflect my view that authorities continue to spend more than they need; that aggregate exchequer grant should be £13·775 billion, a cash increase of £750 million or 5·75 per cent. on 1987–88, holding grant at 46·2 per cent. of relevant expenditure; that there should be no major changes in the mechanisms of grant distribution and only limited changes to the methology for assessing needs; and, finally, that there should be a safety net equivalent to 5p at ratepayer level to prevent certain year-on-year grant losses and a cap of 10p at authority level to limit grant gains.

I have received comments on my proposals from the local authority associations and about 175 local authorities. There has been a widespread welcome for the stability proposed in the mechanisms for distributing grant and the methodology for calculating grant-related expenditure. Inevitably, I did not please everybody. There has been criticism of some aspects, especially the provision for expenditure, and of the effect of the proposals on certain authorities.

I have considered all the comments very carefully, and believe that my proposals strike the right balance, subject to some minor changes of data. Accordingly, I have laid the report today

Within the existing rate support grant system, I believe that the settlement provides realistically for expenditure while making it clear that the Government are not prepared to underwrite high spending and high wage increases. It includes a generous cash increase in the taxpayer's contribution to the running of local services. As I have already indicated, it maintains as much stability as possible in this, the penultimate year of the present system.

In reaching my decisions, I have had especially in mind the effect of my proposals for ratepayers. The settlement means that rate bills need, on average, to increase by no more than the rate of inflation, but I must stress that there can be significant variations around the average. Clearly, the actual level of rates will depend on the budgets of each individual local authority. I hope, however, that authorities will take advantage of the many opportunities open to them to increase efficiency and make savings so as to keep rates down.

I will be making a separate announcement on rate limits and on the expenditure levels of those authorities that have sought redetermination next month.

Photo of Mr Jeff Rooker Mr Jeff Rooker , Birmingham, Perry Barr

May I first apologise, on behalf of my hon. Friend the Member for Copeland (Dr. Cunningham), for his absence today, due to an accident.

We welcome the Secretary of State's statement. Its brevity belies the damage that this statement and its predecessors have done to local government finances. I want first to ask the Secretary of State if it is a correct assumption that for local authorities to maintain the current level of services in the next financial year they would have to find another £1·4 billion but that, if they did so, the Government grant would be reduced by no less than £600 million. Is this not the Government again forcing up rates as they have managed to do for the average ratepayer in England to the tune of £4·91 a week, compared with 1978–79, as a result of Government changes in various grants? Of course, the Secretary of State has to accept that the rate bills do not solely depend upon the spending decisions of local authorities.

The Secretary of State said that he had struck the right balance and that his statement gave stability, but that is after years of damage to the financial structure of local government. It is all very well for him to say that we are going to be stable now; he should instead be starting to undo some of the damage.

Regarding the distribution of rate support grant in respect of the so-called safety nets and the caps, will the local authorities which are losing and gaining do so on the same basis? The money figures are not the same, and it is not clear from the Secretary of State's statement whether the same formula is used for the safety net as for the grant losses. Are they treated on the same basis for both losing and gaining

? What has the Secretary of State allowed in the 1988–89 figures for the poll tax start-up costs? This is a matter on which he has received representations from both my hon. Friends in local government and his hon. Friends in the Conversative party.

Given that from April 1988 there will no longer be 100 per cent. rate rebates and that even the very poorest people, those on the means test, will pay 20 per cent. of the rates, where is the promised income support?

Is any money allowed in this 1988–89 settlement for the consequences of the storm damage on 15–16 October? It is quite clear that in 1987–88 the Treasury will make a profit on that storm damage and its financial consequences to local government. Is there anything set aside for next year?

As the Secretary of State will be making another statement, I will not go into his last point, rate capping, as that is probably inappropriate today. But given that he has promised another statement, could he see whether in it he will, after today's settlement, say why he cannot state the ground rules for rate capping before budgets are set in early 1988 for the year 1989–90? It is quite clear that, if this is the penultimate year, before they set their budgets the local authorities ought to know the ground rules for rate capping rather than being presented with changes in the rules towards the end of the year.

The Secretary of State said in July that the new system would be easier to understand, but will he confirm that, even if the poll tax comes into force on the date and in the form planned, there will still be all the trappings of the rates system—safety nets, grant-related expenditure, poll tax capping, and so on — and that ail the evidence suggests that the new system will be just as complex as the present one?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I am sure that the whole House wishes the hon. Member for Copeland (Dr. Cunningham) a full and speedy recovery. Meanwhile, we are delighted to see the hon. Member for Birmingham, Perry Barr (Mr. Rooker) taking his place.

The hon. Member for Perry Barr asked whether the settlement would allow local authorities to finance the same level of services. The provision at settlement is 7·1 per cent. higher than last year and the grant is 5·8 per cent. higher than last year's gross grant. We do not yet know what the loss of grant will be, but the current estimate is £265 million. Taking that aspect out of the equation, both increases are very generous and should enable local authorities to maintain current levels. Indeed, I fear that it will allow them to increase the levels slightly, as the increases are well above the rate of inflation. [HON. MEMBERS: "Fear?"]

The hon. Member returned to a false point about the effect on local authority finances of the changes that the Government have made in the eight years since we came to office. Under the last labour settlement, for 1979–80, the AEG cash grant was £8,101 million. Updated to 1988–89 prices, that would be £14,691 million, compared with the grant that I am providing of £13,775 million. That represents a cut of £916 million, which is not the figure usually bandied about by the Opposition. I am happy to have the opportunity to put the true figure on record.

In relation to nets and caps, I said in my statement that the safety net would be equivalent to 5p at ratepayer level and the cap to 10p at authority level. I hope that that answers the hon. Gentleman's point. The increase in provision and grant includes sufficient to cover any costs that may be incurred in starting to compile the community charge register next year. Income support is a matter for my right hon. Friend the Secretary of State for Social Services, who I believe has already suggested levels by which income support will be increased to cover the 20 per cent. share of rate bills that people will be asked to find.

With regard to storm damage, we still have not had information from local authorities as to the costs that they might wish to capitalise and for which they would seek additional capital allocations. Until I have that information, it is impossible to estimate what the effects will be. It is, of course, always possible to adjust for these matters in the rate support grant if that is what we decide to do, but without the figures it is clearly hopeless.

As for rate capping, I simply abide by the statute, which sets me the task of setting out criteria for each year. In passing, I think that the hon. Member for Perry Barr would acknowledge that, if I set out the criteria in advance, there would be a marvellous opportunity for people to find ways of getting round them. That is not the purpose of the operation.

Several Hon. Members:

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Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. I remind the House that there will be a debate on this later. We have a heavy day before us. I will allow questions to continue until 4.15 pm, but then we must move on.

Photo of Mr Ian Lloyd Mr Ian Lloyd , Havant

It would appear that, after making due allowance for the arcane complexities of rate support grant and accounting, which my right hon. Friend understands far better than most, he has announced an increase of money in real terms and, possibly, as a percentage of GNP. Therefore, how does he propose to deal with what will undoubtedly be a furtherance of the sedulously cultivated myth that that represents a cut in public expenditure?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I am grateful to my hon. Friend. I am bedinning to learn what a "cut" means in Labour language. It means that if one asks for expenditure on a programme to be doubled and it is increased by only 50 per cent., that is regarded as a cut of 50 per cent.

Photo of Simon Hughes Simon Hughes Shadow Spokesperson (Environment, Food and Rural Affairs)

Is it correct that there is a difference of 3 per cent. between the grant-related expenditure assessment figure for shire counties and their expenditure assumption, which was the point that they made to the Secretary of State by letter following a meeting with the Minister for Local Government and that there will therefore be a shortfall of about £2 billion to keep services at a standstill? Most importantly, is it correct that there has still not been a change in the GREA for calculating the needs of the homeless and that the Secretary of State's slip of the tongue in referring to "mythology" rather than "methodology", is the appropriate description because councils will not have the money to cater for the rising tide of homeless people who present themselves, under the law, at their doors?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I think that the hon. Gentleman is referring to the unallocated margin as between GREs and the total at settlement. That does not mean that the money is not forthcoming, but simply that it is not allocated to any particular service. It slightly affects the distribution between different classes of authority. At the request of the associations, we have made the minimum changes to GREAs that are acceptable, and that has been welcomed by the associations.

Photo of George Young George Young , Ealing Acton

Is my right hon. Friend aware that his statement that he is not prepared to underwrite high spending will be warmly welcomed by Conservative Members? Is he also aware that several authorities that have been rate-capped have not appealed against his limits, but have made it clear that they will not reduce their expenditure to the level that he suggested? Does not that imply that there are still some loopholes by which such authorities can evade the controls, by borrowing and building up further debts? Does my right hon. Friend have any plans to try to block such loopholes?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I am grateful to my hon. Friend, who is right to say that the settlement should discourage high spending. In fact, only two of the authorities that I originally suggested for rate limitation have applied for redetermination. As I have said, we shall announce our decision on that before Christmas. However, I have no evidence that the authorities that are subject to rate limitation are planning to get round that by spending up through other forms of raising money—whatever they may be. From the newspapers, which are my main source of information on what various authorities are doing, the impression seems to be that such authorities realise that the "party is over", if I may coin a phrase

Photo of Mr John Fraser Mr John Fraser , Norwood

Is the Secretary of State aware of the effect of rate capping on boroughs that will not apply, for good reasons, for redetermination? Is he aware that the growth of homelessness and child abuse, and the velocity of claims for housing benefit mean that some local authorities, such as Lambeth, find it difficult to keep services going? Despite the fact that no application has been made for redetermination, will the Secretary of State consider the real problems of such boroughs, with a view to lessening the controls that at present he intends to place on them?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

Yes, but what is curious about this is that some authorities with problems quite as great as the ones to which the hon. Gentleman has referred seem able to manage to provide a good service and to cope well, but with much lower expenditure. As well as the factors that the hon. Gentleman has mentioned, there is clearly, therefore, the factor of inefficiency. At this stage, it would be wrong for me to pre-empt my statement on rate limitation, about which I shall make an announcement in due course.

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch

Is my right hon. Friend aware that there is great concern in the London borough of Havering because the draft figures show that the cash settlement for 1988–89 would be no higher than that for the current year? Given that Havering has been a low-spending borough for many years, will my right hon. Friend explain, unless the figures have now changed, how we are expected to meet the inevitable increase in staff costs?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

In previous incarnations, my hon. Friend has been too close to the Department of the Environment not to know that the rate support grant formula operates on the basis of rateable values and needs as expressed through GREAs. The result of applying those formulae, which I must do by law, is that, under the settlement assumptions, the London borough of Havering has precious little change in the amount of grant which it receives. Some authorities are much less fortunate in that they lose grant because of the operation of the high rateable value element of the formula. I look forward to joining my hon. Friend in the Aye Lobby when the time comes to sweep away this silly system and to return to a much more sensible system based on the community charge. I am sure that we shall rejoice.

Photo of Dr Mo Mowlam Dr Mo Mowlam , Redcar

Could the Minister please clarify and reconsider his position on grant-capped authorities? Now only five authorities are grant-capped, one of which is Cleveland county council. That places it in a difficult position, because it means that next year there will be an additional £3·4 million on the rates although the authority is already in receipt of inner-area funding and urban-programme funding and has a large percentage of unemployed people. That strikes us as irrational, and we should like the Minister to clarify it.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

If Cleveland spends at the settlement assumptions, its grant will be increased from £91 million to £111 million, which is an increase of nearly £20 million. It will be enabled to keep its rates to an increase of about 1 ·4 per cent., which is well below the rate of inflation. I can think of many boroughs, counties and districts, such as that of my hon. Friend the Member for Hornchurch (Mr. Squire), which would be only too delighted to have such a result. It shows how the formula works in favour of authorities with high needs, and this is hardly the moment to complain about it.

Photo of Mr Timothy Raison Mr Timothy Raison , Aylesbury

Will my right hon. Friend say whether, under the new rate support grant, he will do anything about the unfairness suffered by counties such as Buckinghamshire, which have a rapid rate of population growth and whose rate support grant figures have lagged behind their population figures?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I have great sympathy with my right hon. Friend. He will know that the reason for that is the increasing rateable value in counties such as Buckinghamshire. I notice, for example, that this year it will receive an increase in grant because of the operation of safety nets and caps. That has probably made it possible for my right hon. Friend to have a much lower rate increase in his county than would otherwise be the case. However, the unfairness is recognised; that is one reason why I look forward to my right hon. Friend joining me in the Lobby later this month to sweep the whole system away.

Photo of Mr Max Madden Mr Max Madden , Bradford West

Will the Secretary of State understand that there is great anger in Bradford over the fact that, since 1979, the city has been robbed of more than £70 million in rate support grant? Will he understand that Bradford is penalised for trying to meet the needs of an increasing population and that we face the prospect of being poleaxed by the poll tax? Will he understand that there will be great disappointment that he and the Minister of State declined to meet a parliamentary delegation and representatives of Bradford council to discuss these matters, on the excuse that the deadline for consultation was over, although that was not communicated to us until at least eight days after the deadline for consultation?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

All consultation periods must come to an end and an end means that they have come to an end. I notice that, if Bradford spends at the settlement assumption, it is likely to have a grant increase from £137 million to £154 million, which is more than £16 million. I find it extraordinary that the hon. Gentleman dares to come and complain about that when many authorities will lose grant. The authorities of many of my hon. Friends are losing grant left, right and centre for the hon. Gentleman's benefit. Far from a word of thanks or gratitude, we have many words of gripe.

Photo of Mr Hilary Miller Mr Hilary Miller , Bromsgrove

Will my right hon. Friend acknowledge that the Conservative council of Hereford and Worcester has always kept its spending below GRE, below target and below the increase in inflation? However, owing to tinkering again this year with the support grant mechanism in respect of highways—as with last year, in respect of the civilianisation of the police — the result of that Conservative council following Government policies is that it has now been docked another £6 million of grant although its highway expenditure is only up to 75 per cent. of the 1973 level.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I must slightly disagree with my hon. Friend about the figures. Hereford and Worcester stands to gain £2 million more grant if it spends to settlement assumption. Therefore, I do not believe that the figure of £6 million is quite right, unless that council is planning a spending spree about which neither he nor I have heard.

I believe that that is extremely unlikely. That extra £2 miilion will enable Hereford and Worcester to increase its rates by just under the rate of inflation and no more. That is not a bad result from the point of view of that council. I must say that the figures are not figures that I carefully work out for each authority. The figures come out of the formula that is enshrined in the Local Government, Planning and Land Act 1980. There is no way in which we can get rid of such results unless we have a new system altogether.

Photo of Mr Peter Shore Mr Peter Shore , Bethnal Green and Stepney

The Minister will know that Tower Hamlets has over 1,000 homeless families in bed-and-breakfast accommodation at a cost of more than £20 million a year. What provision has he been able to make in this year's rate support grant to ease the enormous problem of that particular borough?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I am happy to say that, if that borough does not increase its spending above the settlement assumption, it will be able to drop its rate. Of course, Tower Hamlets may prefer to go about it the other way. However, that is my answer to the right hon. Gentleman.

Photo of Mr Ian Gow Mr Ian Gow , Eastbourne

Will my right hon. Friend add to his reputation as a scholar of English and of the economy by confirming that neither his Department nor the Treasury will make a profit from East Sussex county council because of the storm damage on the night of 15 October?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I would be horrified and astonished if either my Department or the Treasury were to make a profit from any authority as a result of that night. However, I must see the figures so that we can understand why it is that people are not aware that the expenditure that was incurred as a result of that storm either falls within the Bellwin rules or is subject to charging to capital account, in which case an authority will receive capital allocations, provided that it had not insured. I can think of very little expenditure that will not fall into either of those categories. I should be happy to show my hon. Friend figures that would convince him that, if that is the case —as I believe it should be—the Treasury, rather than East Sussex county council, will be the poorer.

Photo of Hilary Armstrong Hilary Armstrong , North West Durham

Is the Minister prepared to make any provisions for those authorities, such as many of the authorities that I represent, which are not high spenders, which have measured needs — as the right hon. Gentleman has acknowledged—which are as great as in inner-city areas, but which themselves are not inner cities? As a result, those authorities have lost any special funding such as urban aid funding. Their needs are the same, but the amount of money that they are allowed by the Government is much less. How, then, are those authorities to meet the needs that he has acknowledged, but keep within the spending limits that he has determined?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The hon. Lady has had the good luck not to go through this exercise quite so often as some of us. I must convince her that the figures that come out for each authority result from the global decisions that I announced in July and that I do not, as it were, target a certain amount of money according to what I think about an authority's claims. The hon. Lady will be aware that the north of England is the main beneficiary of the present system. For instance, Durham county stands to gain £6·6 million of extra grant simply because its needs are taken into account in the GRE formula. I do not believe that the hon. Lady can sustain the view that her part of the world is damaged by this settlement.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

Will my right hon. Friend confirm that, when GRE was first introduced, my right hon. Friend the Member for Henley (Mr. Heseltine) said triumphantly that no longer would the sins of the high spenders be visited on the low spenders? Yet by adhering to regression analysis—that horrible phrase — as a basis for deciding the weighting of the GRE elements, it continues to be the case that those who are historically low spenders are punished for so being compared with the high spenders. Is it not time, even while this system remains with us, to do the opposite?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I must tell my hon. Friend that it is not the GRE which results in what he calls the punishment for low spenders; it is the fact that their rateable value increases. That is included in the 1980 Act, where there is no power to vary it. That element of the formula causes the problem which my hon. Friend identified, and I have every sympathy with him. We must go to an entirely new system to get that element of resource equalisation out of the system or my hon. Friend's complaint will be valid for as long as we stick with the present system.

Photo of Jeremy Corbyn Jeremy Corbyn , Islington North

Will the Secretary of State address his mind to the effect of Government spending cuts on the housing crisis in London? Is he aware that local authorities are forced to spend millions of pounds every year on bed-and-breakfast accommodation for the homeless and that they are denied the possibility of building or buying large numbers of new houses? In the process, are we not creating a generation of unhealthy children growing up in appalling conditions in bed-and-breakfast accommodation and creating a generation of millionaires living off bed-and-breakfast money from those hotels because central Government place such tight restrictions on local government that it cannot build to alleviate the crisis? Will he reconsider the position and ensure that London authorities have enough money to provide housing to meet the needs of the people as per the Housing (Homeless Persons) Act 1977?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

First, we are talking about rate support grant, not capital allocations for local authorities. Secondly, local authorities are not the only organisations which can build houses or convert them for the homeless. Thirdly, I invite the hon. Gentleman to linger a while— perhaps as late as midnight—so that he can be in the Lobby with us to make sure that the Housing Bill has unanimous support. That Bill is designed to bring into use much more empty accommodation, public and private, and to stimulate the private sector and housing associations to build much more housing for all classes of people in need of homes.

The hon. Gentleman might like to know that, this morning, I announced that an extra £25 million should be made available for local authorities and others to provide immediate relief to the problems of those without homes. I look forward to the hon. Gentleman putting his vote where his voice is and supporting the Housing Bill.

Photo of Mr Peter Hordern Mr Peter Hordern , Horsham

Will my right hon. Friend confirm that the local authorities such as West Sussex which have had to spend much money repairing the ravages of the storm will not have that expenditure counted against them in respect of cash expenditure or borrowing when it comes to the rate support grant settlement?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

My hon. Friend was kind enough to discuss this with me, and I believe that he understands the position. Expenditure as a result of the storm may fall within the Bellwin rules, under which expenditure above the threshold will not result in an authority losing rate support grant and will attract a 75 per cent. grant from the Government. If the expenditure falls into the capital account, we shall try to make available some capital allocation. Until we get the figures from local authorities, it will be impossible to forecast the effect that it will have on next year's spending through the interest on that capital. When I receive the information, I shall reach a conclusion on that.

Photo of Mr Kenneth Eastham Mr Kenneth Eastham , Manchester, Blackley

Is it not true that, for years, the Department has consistently deprived local authorities of adequate funding? The Minister fooled no one with his statement today. Is it not true that many authorities are not meeting their statutory obligations to provide social services, housing and local authority grants? If some organisations took local authorities to court for breaking the law, who would go in the dock — local councillors or the Secretary of State?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The hon. Gentleman is wrong. Local authorities have increased expenditure by about 1·5 per cent. a year in real terms throughout the period of this Government. It is not true to say that they do not have enough money to discharge their responsibilities. Indeed, we are seeking ways to help them to save money so that they need not make such large demands on their ratepayers, and the current Local Government Bill will contribute to that effort.

Photo of Mr David Madel Mr David Madel , South West Bedfordshire

Will my right hon. Friend confirm that what he has proposed by way of safety nets will be of the same potential help as the measures that he announced 12 months ago to counties such as Bedfordshire, which would have benefited had not the ruling Labour and Liberal group gone on a big spending spree and pushed up rates by 23 per cent.?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The safety nets, like the caps on grant gains, are designed to stop too violent a change in authorities' grant entitlements and to give them time to adjust to the volatile form of grant which arises from the current system. I am happy to tell my hon. Friend that, if Bedfordshire meets its settlement spending assumption, it will receive nearly £3 million more in grant, which should enable the county to keep the rate down to about 1·5 to 2 per cent., depending on its budget. The results depend entirely upon what the county council decides to spend.

Photo of Jim Cousins Jim Cousins , Newcastle upon Tyne Central

Will the Minister close the black hole in the existing grants system which means that, in the case of rate-capped authorities, expenditure which is recognised for the purposes of the rate limit and the expenditure limit is still subject to grant penalty withdrawals at a rate greater than 2p in the pound? Does he recognise that, in Newcastle, closing the black hole would not relax the authority's expenditure disciplines, which are targeted — as they must be—upon the very old and the young, but would enable ratepayers to have a rate cut of more than 25 per cent?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I cannot confirm the hon. Gentleman's figures, but one effect of rate capping is, one hopes, to limit the expenditure of the authority, with the result that it obtains more grant because it does not forfeit grant. If Newcastle spent at its settlement assumption, it would be likely to receive nearly £14 million more in grant, which is a major contribution. We shall be richly rewarded if it succeeds in stopping Newcastle being one of the highest rating authorities north of Watford.

Photo of Mr Barry Field Mr Barry Field , Isle of Wight

My right hon. Friend's Department will be aware that, because of an omission by the Treasury valuer, the Treasury did not apply to have the unused prison block and prison officer dwellings on the island reduced for rating purposes. The Department's solution was that we should re-rate empty Government properties. But I have discovered that estimates have been outstanding since 1984–85. My right hon. Friend will appreciate that Government property which is re-rated by the Treasury is normally adjusted in the following year's rate support grant, but, because this goes back for several years and because it is a Treasury omission, that will be impossible. It represents £2 per head of the population in the Isle of Wight. Will the Department give us some assistance in this matter?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I am afraid that I must tell my hon. Friend that I am not aware of that complicated position in the Isle of Wight. I will write him a full response when I have made sure of my facts.

Photo of Tony Lloyd Tony Lloyd , Stretford

Would the Secretary of State at least concede that the description of the whole process as a battle between the low and high spenders— as some of his hon. Friends have put it — is wholly misleading? The real battle is between those traditionally low-spending authorities that want to improve services, and cannot under this Government, and those such as Manchester, which have provided good services and which are now having to pauperise some of the poorest people in Britain.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I would not agree with the hon. Gentleman. Two factors are at work: first, the automatic operation of the rate support grant formula, based on the rateable value and the GREs expressing needs. Secondly, there are the authorities' decisions about what they are going to spend. In theory—I know it is not precise—if every authority spent according to its needs as measured by GREs there would be no difference in rates throughout the whole land, because all authorities would charge the same rates. That is what the present system is designed to achieve.

If rates are high in Manchester—I confirm that they are—the hon. Gentleman has only his own council to blame for spending well over its needs.

Photo of Eric Forth Eric Forth , Mid Worcestershire

My right hon. Friend will be well aware that my two excellent, responsible local authorities — Hereford and Worcester county council and Wychavon district council — have suffered yet again as a result of their responsible attitude over many years.

Further to what he said in reply to my hon. Friend the Member for Bromsgrove (Mr. Miller), will my right hon. Friend give an absolute assurance to my hon. Friend, my local authorities and me that the absurdities and anomalies in the present system will be eliminated and not carried over when I vote with enthusiasm for his new proposals on local government finance? Will he assure me that these nonsenses will not be continued, because that is the assurance that my local authorities need?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I give my hon. Friend that assurance wholeheartedly. There will be no resource equalisation or grant forfeit under the new system. The needs of each authority will be defined under the new system; each will receive the appropriate grant, and that will be the end of the story.

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

Will the right hon. Gentleman not agree that certain parts of the country have greater needs than others? Will he accept that, in a city such as Liverpool, which has lost between £500 million and £600 million in rate support grant since the Government came to power, the needs of the people are great? Is it not ridiculous that the right hon. Gentleman should continue rate capping for that city, and meet it and arrange to have discussions without talking about the whole issue of redetermination?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The needs of Liverpool and every other city and district in the country are assessed in the GREAs. [AN HON. MEMBER: "They are not."] They are, and that is why grant flows. Almost a further £10 million is likely to flow to Liverpool because its needs are recognised. One cannot have a recognition of needs in GREAs, and then say that those needs have not been recognised. That is where the hon. Gentleman is wrong. Rate capping has been of great help to some cities, and will be to Liverpool, because, if they were allowed unrestrainedly to put up their rates, the damage that would be done in terms of lost jobs, industry and income would be simply appalling. So there is everything to be said for it. Liverpool city council has not applied for redetermination, so how could I possibly have considered it?

Photo of Mr Patrick Thompson Mr Patrick Thompson , Norwich North

Bearing in mind that I, like many of my hon. Friends, cannot wait to join my right hon. Friend in the Lobby finally to sweep away this complicated system, and that the aim, which I fully support, is to curb the high spenders, will my right hon. Friend help me get across to the low-spending Broadland district council a solution to the problem that it feels that it has been unfairly treated and penalised for low spending time and time again? Somehow, there is a problem; will he examine the comparison between Broadland district council and Norwich city council, both of which are in my constituency? That comparison has caused great puzzlement, and I should like further enlightenment about it.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I agree that these things are hard to understand, because they are the product of a formula rather than any rational or logical judgment. That is why they had better be swept away.

Although there has been a loss of grant to Broadland district council, the effect at ratepayer level, when the grant to the county is taken into account, is not great and not much above the likely rate of inflation — if the council spends at the settlement assumption. I hope that my hon. Friend will convey to his district council the fact that it is probably something to do with its rateable value or low needs that causes the council to believe that, in some way, it is being singled out for adverse treatment. In fact, it is due to the formula on which we are operating, and which is outwith of the control of Ministers. The only solution is to start with a new system.

Photo of Mr Jeff Rooker Mr Jeff Rooker , Birmingham, Perry Barr

We shall want more information about the apparent £25 million of new money for the homeless about which the right hon. Gentleman spoke. There will be a chance for that later.

In response to his hon. Friend the Member for Mid-Worcestershire (Mr. Forth), the Secretary of State spoke about local authorities getting the grant that is appropriate, without any of these other problems. Will he answer the only question that I originally asked him to which he has so far not alluded? Under the new system, after he has swept away the existing Conservative-invented system of rate support grant, there will still be safety nets funded by three quarters of all authorities for the quarter of the remaining authorities; there will still be grant-related expenditure and poll tax capping. That stands every chance of being as complicated and unfair to many authorities as the existing system.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

On the first question, I shall show the hon. Gentleman a copy of the news release in which a further £25 million is made available to authorities in the current financial year because there has been an underspend on capital. Of the £44·7 million that has been made available, £25 million is specifically directed to helping the homeless, which is the most that we judge that authorities would be able to spend in the short time remaining of this financial year.

On the hon. Gentleman's second point, there are two separate safety nets. The first is the one that we have been discussing this afternoon. The safety net proposed for the community charge is one that phases out the high level of rates in certain areas over four years, then ceases to exist and cannot be brought back into the equation. That is a different type of safety net from the one that we have been discussing; but the grant to each authority, particularly after the four-year transitional period, will be based on that authority's needs as assessed by a new system that I hope will be simpler than the present one, but equally accurate. When that grant is paid, it will not be subject to abatement, targets, holdback or grant underclaim of any sort. Nor will it be subject to the spending of the authority in any way, so the grant will then be the authority's, and we shall not have the problems which my hon. Friends have so rightly identified—those of losing grant for no apparent reason.

Several Hon. Members:

rose

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. I regret that it was not possible to call all hon. Members who have risen. If they remind me when we come to debate the matter, I shall give them precedence in the debate.