With permission, Mr. Speaker, I should like to make a statement about the Welsh rate support grant report 1988–89 and the supplementary reports for 1984–85 and 1985–86, which I have today laid before the House.
I am today announcing the details of the 1988–89 settlement to the Welsh Consultative Council on Local Government Finance. Copies of the text of my statement to the consultative council, together with a number of key statistical tables, have been placed in the Library.
Before I give details of the settlement I shall refer briefly to the second supplementary reports for 1984–85 and 1985–86, which are based on authorities' audited outturn expenditure and are intended to be the final reports for those years. The 1984–85 report increases aggregate Exchequer grant by £9·5 million and makes provision for an increase in relevant expenditure and additional grant holdback. The 1985–86 report increases the aggregate Exchequer grant by £9·7 million. It restores grant previously withheld and increases provision for relevant expenditure.
I announced my proposals for 1988–89 to the House in July, and these have been the subject of consultations with the local authority associations. The report takes account of their views. The settlement for 1988–89 has six main elements. First, provision for relevant expenditure will be set at £1,894 million. This is £112·9 million or 6·3 per cent. over 1987–88 budgets, 1·8 per cent. over the expected rate of inflation and £8 million higher than the amount that I announced in July. Secondly, the current expenditure provision is set at £1,640 million, an increase of £81·9 million or 5·3 per cent. over 1987–88 budgets and 0·8 per cent. above the expected rate of inflation. Thirdly, aggregate Exchequer grant is £1,256 million, an increase of £80·9 million or 6·9 per cent. over last year. Fourthly, specific and supplementary grants total £241.2 million, an increase of 5·8 per cent. on 1987–88. Fifthly, domestic rate relief grant remains unchanged at 18·5p in the pound, and in aggregate totals £27 million. Sixthly, block grant is £987·8 million, an increase of £66·9 million or 7·3 per cent. over last year.
I have decided to retain the same block grant mechanisms as those used in the present year and have restricted changes to the methodology used in assessing needs to those requested by the local authority associations. I have thus provided the stability sought by the local authority associations. This is particularly important as the present rate support grant system reaches its penultimate year. The threshold and the slope of the poundage schedule remain unchanged, and multipliers will limit the effects of certain year-on-year changes in grant entitlement.
The settlement provides significant rating benefits for councils which increase spending by less than the anticipated rate of inflation. Their decisions will be rewarded with additional grant, with the obvious and welcome consequence of lower rate rises. Authorities' grant entitlements are entirely the outcome of their own spending decisions. They will get the grant to which they are entitled.
The 1988–89 settlement is fair and realistic. The increases in all the main components — relevant expenditure, current expenditure, aggregate Exchequer grant and block grant—are well above the forecast rate of inflation. I hope that all councils in Wales will respond to this settlement, in the interests of their ratepayers, by keeping spending close to my plans, by making further progress towards greater efficiency and by securing moderate wage increases. They have a responsibility to their ratepayers to do so and to budget for low rate rises.
I thank the Secretary of State for the fact of the statement, if not for its contents. It makes a pleasant change from Government by press release.
Will the right hon. Gentleman accept that the key figures for the level and quality of our services are the current expenditure figure and the level of grant? Will he further confirm that, because the current expenditure figure covers salaries, wages and transport, it inevitably rises faster than the retail prices index, which, after all, reflects only the average spending pattern of the average family, so comparisons with a 4·5 per cent. change in the cost of living are irrelevant, inadequate and misleading?
In that context, will the right hon. Gentleman recognise that his officials, in conjunction with the county officials, take part in an expenditure sub-group at which they try to agree the expenditure figure that will be necessary to sustain the existing level of services based upon the existing policies? Does he confirm that they have identified that the standstill increase would mean plus 11 per cent. rather than the 5·3 per cent. that he has announced today? That would require £1,700 million, not the £1,640 million that he has announced today. Therefore, we are faced with a shortfall in Wales of £60 million just to sustain services.
Will the right hon. Gentleman further confirm that the 5·3 per cent. increase is below the 7 per cent. increase in spending that has been allowed for England, and that that change alone has robbed Wales of £27 million?
If it is not true, the right hon. Gentleman can show why later. I shall be only too happy if he does so.
Will the right hon. Gentleman also bear in mind that the £60 million shortfall will be seen either as the scale of cuts that are necessary in services, or as the extra burden that will have to be borne by the Welsh ratepayers? In that context, does he recognise that, because of the penalty system, his statement means that cuts in services will be accompanied by increases in rates in Wales?
Will the right hon. Gentleman confirm that yet again the percentage of Government grant has decreased from 66·7 to 66·3 per cent., itself a cut of £6 million? Does he recognise that, as a result of that percentage change, compared with the percentage of rate support grant that was paid in 1978–79, since the Government took office Wales has suffered a cumulative loss of rate support grant of £750 million? That is a massive deflation for Wales. Councils have had to find £750 million since then to replace that Government grant. It means that a sum of £750 million has been transferred at a cost to the Welsh taxpayer and that £750 million is not available for other desperate needs in Wales.
Will the right hon. Gentleman bear in mind that today's inadequate and pathetic announcement follows last week's announcement, by written answer, of capital expenditure for the councils next year which, on his own terms, represents a real cut of £10 million?
On a point of detail concerning the first sub-paragraph on page 2 of the statement, dealing with relevant expenditure, will the right hon. Gentleman state whether the £8 million extra that is referred to is mainly an adjustment that is needed to recognise the fact that in the past public debt charges have been based on public expenditure White Paper figures which have been wildly out of date and which have led to the Welsh authorities being robbed in the past?
Does the right hon. Gentleman realise that the failure to recognise the impact of salary increases —[Interruption.] They are important to the people of Wales. Conservative Members may not want the people of Wales to know about this, but I would bet that the press handout is several pages longer than the statement that was given to the House. We shall ask our questions whether or not the Government like it. Does the right hon. Gentleman realise that the failure to recognise the impact of salary increases over the whole range of local government employees covers the teachers' increase of 16 per cent., but refuses to recognise the repercussive effect of that on, for example, further education, for which a 4 per cent. figure is insisted on and used in the calculations?
Will the right hon. Gentleman confirm that a 4 per cent. figure was used in relation to manual workers, for whom there has been a settlement of 10·6 per cent.? Will he also confirm that, among manual workers, home helps have received a 17 per cent. increase — not because of acquisitiveness on their part, but because they have been asked to change their patterns of work? They have been asked not only to do home help work, but to become carers and to take on the work that was previously done in old people's homes, which are now being closed and cut.
Will the right hon. Gentleman confirm that there is no provision in the settlement for the fact that next year districts will incur the cost of starting the planning stages, which will be considerable, for the introduction of the community tax? Will he further confirm that the settlement does not make any provision for the extra costs that councils will incur in preparing for the Government's education initiatives, such as the decentralisation of school spending, which again must be prepared in advance, and therefore, must be financed by ratepayers? [Interruption.]
Order. In fairness to the House, I feel bound to say that there will be a debate on these matters and that many of the issues raised by the right hon. Gentleman can be gone into in detail then. This is the opportunity to ask questions.
Every one has been a question, Mr. Speaker. Indeed, every one has been a different and relevant question to which the people of Wales want an answer.
Is the right hon. Gentleman aware that last year his predecessor stated that predictions of an increase of 10 to 20 per cent. in rates would not be necessary because last year's settlement had been a "very good" one? Indeed, he said:
In no case will the rate bill in districts increase by anything like that amount.
Is the right hon. Gentleman aware that history has proved that wrong and that 10 of the 37 districts increased their rates by 10 per cent., that two did so by over 20 per cent.
and one by 26 per cent.? That happened following what was supposed to be a "very good" settlement. The right hon. Gentleman has made no such grandiose claims for this settlement, so what does he expect the rate increases to be this year? Does he agree that as a result of this settlement rate increases will be greater than the rate of inflation generally and, in some cases, possibly as much as 15 per cent.?
In the past eight days the Secretary of State has announced cuts in councils' capital grant and a standstill in our health provision in Wales. Today he has announced a cut in council-provided services, coupled with a guaranteed increase in rate demands. How does the right hon. Gentleman account for his public protestations of concern and care for Wales, when his actions are calculated to deepen and worsen all the problems of Wales?
I have just checked, and my press handout is about half the size of my statement to the House, but not one tenth of the size of the statement that the right hon. Gentleman has just made. The right hon. Gentleman concluded with references to cuts and reductions, not one of which is true. My statement represents a real increase in the rate support grant. As regards local government expenditure, the increase that was announced for health expenditure was exactly the same. What amazes me is that the right hon. Gentleman served as a Minister in a Labour Government who cut capital expenditure on health by 30 per cent. in one year and reduced nurses' salaries by more than 20 per cent. over the whole period of that Government.
No, I am answering it.
Local authorities have, of course, made estimates and said that they would like more money. However, their highest estimate was for an increase of a further £60 million. What does the right hon. Gentleman think the local authorities were saying during the years when local authority expenditure in Wales decreased, because over the four years of the previous Labour Government it decreased by 4 per cent.? What did the local authority associations say then? I am delighted to say that, under this Government, local authority expenditure in Wales has increased by 11 per cent. in real terms. That should be compared with the 4 per cent. reduction of the previous Labour Government.
Perhaps the right hon. Gentleman wishes to concentrate, as he did, on a comparison with England. As the right hon. Gentleman has forced an argument, I shall give him those comparisons with England and with Scotland. The increase in relevant expenditure in Wales will be 6·3 per cent., and it will be 3·6 per cent. in England. Similarly, the increase for Scotland will he 3·6 per cent., compared with the 6·3 per cent. for Wales. The figures for the aggregate Exchequer grant show the same, that Wales has done very well, and I am delighted about that.
The right hon. Gentleman said that we had forgotten about all the wage increases. There have been increases for manual workers, and it is outrageous to suggest that the main part of the manual workers' increases is for home helps who will care especially for old people. If the right hon. Gentleman knows anything about the totality of the expenditure on manual workers, he should know that that is a small fraction of the total. He is obviously saying to the people of Wales, "We are quite happy to have large increases that are way above the rate of inflation, but we expect the Government, not the people of Wales, to finance them." Wales is to receive a rate support grant of 66 per cent. from the Government, and again that is far higher than the figure for England or Scotland. Indeed, if councils are prudent and sensible and improve efficiency, rate increases in Wales will be low this year because of that totality.
Order. Before I call Back-Bench Members, I repeat that there will be a debate on this matter. Therefore, I ask for brief questions because this is a private Members' day and there is great pressure to be called in the subsequent debates.
Is my right hon. Friend satisfied that public expenditure in Wales remains at a sufficiently high level to cope with the damage that the right hon. Member for Swansea, West (Mr. Williams) has done by once again shooting his foot as well as the Labour party? In view of my right hon. Friend's success in securing a higher increase in rate support grant for Wales than has been secured for Scotland and England, does he accept that a duty lies on local authorities in Wales to reduce their expenditure and increase their efficiency to the maximum extent that they possibly can?
Yes, Sir, and I have every reason to believe that local authorities in Wales are anxious to find every way of improving their efficiency and are fully collaborating on ideas and concepts to do that. I hope that that will enable them to provide better services at a lower and more effective cost for the current year.
Is the Secretary of State aware that this year's actual outturn will include a backdating of the manual settlement, with a restructuring back to September, and that it will mean an 11 per cent. increase for at least half the year? Therefore, when the right hon. Gentleman uses percentage comparisons, does he do so on a base that includes that increase in this financial year and, likewise, the increase for white collar workers of 7 per cent.? Will he confirm that adequate money is available for county councils, in particular, to carry out the responsibilities under the disabled persons legislation, which involves additional expenditure? Will he confirm also that resources will be available for flood control, which will continue into the next financial year?
Yes, I can confirm that. On the second point, relating to the manual workers' claim, there will be implications for the coming year. Earlier today I spoke to local authorities in Wales. They argued that, although there is a substantial increase above the rate of inflation, there is also an improvement in productivity, and that if there is an improvement in productivity during the coming year, it will balance the increased cost of the expenditure. I hope that that will be the case. It is a substantial claim. If there is no improvement in productivity as a result, it will add to the burden on ratepayers in Wales.
I congratulate my right hon. Friend on obtaining a generous settlement for Wales. As he rightly pointed out, it is better than those for England and Scotland. Will he confirm that the settlement should also be favourable for Welsh ratepayers and will lead to no more than low rate rises, provided that local authorities concentrate on their statutory obligations? Will he try to get that message across to Clwyd county council in particular? At the moment, an additional 34 primary school teachers are, in effect, being sacrificed to allow for loan repayments, maintenance and running costs of a highly dubious tourism project.
On the last point, I note what my hon. Friend said. I am sure that Clwyd county council will note it, too. It is a provision that we are making this year for those local authorities which concentrate on their statutory responsibilities and do their best to improve efficiency. It will be good news for ratepayers in Wales.
The report is not as realistic and fair as the right hon. Gentleman maintained. Education looms large in the 1988–89 report that he presented today. Is the provision sufficient to save Connah's Quay high school from closure? Parents and staff are deeply concerned about the likelihood of closure. Will provision be sufficient to prevent the closure of Golftyn infant school? I have had strong representations from parents. I ask him to read Her Majesty's inspector's report on Wales. He will see that it is clearly stated that a great deal of money is needed to cope with the bad state of classrooms and the need for new equipment and textbooks. Does he say that the money that Her Majesty's inspector says is needed for 1988–89 will be provided?
Over the past couple of years, there has been an improvement in capital allocations for educational purposes. On the question of closures, the hon. Gentleman will understand that I am unable to comment specifically on the two cases that he quoted. It is true to say that in the Principality as a whole there will be school closures, not as a result of financial pressures, but because of the changing demography of some areas. Quite a few proposals are coming up on that basis. The provisions that have been made, and the priorities that we have given, mean that there will be better provision for educational buildings.
Is my right hon. Friend aware that, unlike the right hon. Member for Swansea, East (Mr. Anderson), the people of Wales will recognise the settlement, which is 1·8 per cent. above the rate of inflation, as good news for Wales? Will he point out to local authorities that it is important that they keep their wage demands under control? That is one way in which they can moderate demands on ratepayers. Will he point out also to local authorities in Wales that there are 125,000 surplus places in our schools, which cost £20 million a year, and that we need to take action on the matter? Will he point out also to the people of Dyfed, of which I represent part, that if Dyfed county council follows the good advice in the settlement, it should be able to reduce its rates by 2·1 per cent.?
I am sure that the county council will note my hon. Friend's remarks about its prospects in relation to rates. Many education authorities throughout Wales are coming forward with proposals for school closures because of demographic changes. That is always a difficult thing for them to do. As all of us who have been hon. Members for any length of time know, any school closure anywhere is a matter of distress for the parents and pupils whom it affects. There is no doubt that there is a case in many parts of Wales for changes in school structures to take place.
In their negotiations on wage increases, it is important for local authorities to recognise that if they go ahead with wage increases that are way above the rate of inflation and are not linked with improved productivity, there will be an increased burden upon ratepayers.
As the right hon. Gentleman commences his slow ascent up the learning curve of Welsh local government and central Government finance to local government, may I ask whether he agrees that the combination of his two announcements will cause great difficulties to local authorities in Wales? In particular, will he comment on the cancellation of the expected funding for next year of the Butetown link in south Glamorgan? Does not the cancellation of the expected announcement of a road of great importance to inner-city regeneration in south Wales mean that next year we could have disaster in the docklands in Cardiff?
It is not a cancellation; it is looking at the financial year for which provision was originally made. It was expected to start at the end of 1988. As the hon. Gentleman knows, there have been suggestions of an alternative to it, which are being considered at present. I must await that consideration. In view of that, it is more likely that it will start in the following financial year. Provision will be made for it then.
Has the Secretary of State made any provision for increased housing expenditure? In particular, will he free the product of council house sales and allow councils to build more housing for rent? What is his estimate of the effect of public sector pay awards? Because of population sparsity, counties such as Powys are having great difficulty in financing their budgets. In the coming year it is likely that Powys will have a double figure rate increase because of the high cost of providing services there.
I am delighted to say that within the specific grant provisions we have made a substantial increase in the amount provided for the important matter of home improvements. The hon. Gentleman should note that it is significant that the increase that we are providing for next year is almost equivalent to the total expenditure that was made in the last year of the last Labour Government. Therefore, our record on house improvements is substantial. Indeed, it dwarfs anything that was done by our predecessors.
The answer to the question about the specific problems of Powys is that to some extent population problems are taken into consideration in the calculations. I hope that the provisions in the Housing Bill that is about to come before the House will help in respect of rented accommodation.
The Secretary of State recently made a statement on his great interest in and desire to improve the valleys. He said that they were beset with problems and difficulties that were equivalent to those in any inner-city area. Where in the settlement is there any hope for valley authorities? Will they have anything to do the job that the Secretary of State said needs to be done? Does he intend to hand over local government powers to quangos such as the Welsh Development Agency and other organisations so that they may do local government's job for it?
One must look at the figures and the specific grants. From the visit that I made with the hon. Gentleman to his constituency, I know that one of the greatest problems in his constituency, as in all valley constituencies, is that of house improvements. I hope that, when thinking of what is happening in his constituency, he will bear in mind that previous expenditure on house improvements was a meagre £29 million a year. Under this Government it has not been £29 million but £92 million a year. That is an enormous increase. In the provision that I have made for this year there is another £7·4 million in specific grants for house improvements. I am delighted that that improvement has taken place. For the Rhondda, it must be a happy contrast with what happened in previous years.
Before the Secretary of State accuses Labour hon. Members of being misleading with statistics, will he look at his own speeches and not make claims about how much the last Labour Government paid nurses, for example, while excluding the Clegg award, which was something for which his Government had no good words at all between 1979 and 1983?
Is the right hon. Gentleman aware that there was not one word in his statement about the level of service, and that the people in the Principality will view this settlement as a difficult one for local authorities that wish to keep up the standards of service? Will he respond to the question of the hon. Member for Brecon and Radnor (Mr. Livsey) about local authorities being able to spend the proceeds of council house sales without restrictions, so as to be able to build more houses? Will he take off those restrictions, which are causing a great deal of problems and anguish throughout Wales?
It is important to recall, when one mentions standards and service throughout the Principality, that during the lifetime of the last Labour Government wages and salaries fell in real terms by 21 per cent. Under this Government they have risen by 29 per cent.
When examining the problems of the Health Service now, we still have the burden of the 30 per cent. capital cuts that were made in one year by the last Labour Government. The provisions that we have made for local authorities and for service, and the manner in which we have considered the whole range of potentialities, show that this is a fair and sensible award that will help service standards in Wales.
Will the Secretary of State explain why the local authorities in Wales should heed his strictures when he has clearly not listened to what they have said to him since his provisional statement in July; or, if he has, he has completely failed to understand the facts and figures put forward to him? Rather than hiding behind generalisations, will he accept that, even on his guidelines, and with the achievement of efficiencies and the use of equivalent balances this year and last year, Cardiff city council, without allowing for the additional costs of the poll tax and other such impositions of central Government, will need a 12 per cent. rate rise to stand still on the basis of today's figures? Will he confess that he has either failed to understand the facts and figures given to him by local authorities, or he has tried to mislead the House?
In the meetings that I had with the local authorities they said that they wanted more money. I pointed out that I had carefully studied all such arrangements since 1973, that the minutes of all such meetings were available to me—I understood what must have taken place at the meetings for which minutes were not available—and that there had never been a single meeting at which the authorities had said, "The figures that we asked for have been given to us. Thank you very much, Secretary of State." I pointed out that they might be more satisfied with the past year, in which real expenditure on local government had risen by 11 per cent., than with the four years in which it fell in real terms.
Is the Minister aware of recent reports that prove that the spiral of decline in low wage rates in Wales is continuing, to the extent that we are now in the disgraceful position in which a full third of Welsh local authority workers are below the European decency level? It will be absolutely right, proper and inescapable for local authorities to increase their rates way beyond the rate of inflation.
Will the Secretary of State confirm that—as he said —the results of today's announcement will be similar to those of the previous announcement, in that there will be few changes in the block grant assessment? That means that the majority of local authorities in Wales will still be on a system known as the negative marginal rate of grant, which has become known as the ratepayers' rip-off, because it will mean that, when cost-effective, good-value local authorities have to increase their expenditure by a single pound, the amount that they receive in grant will not go up but will be reduced by 85p.
Will the Secretary of State confirm the example of Newport borough council, which, on the provisional assessment, will find that its increase is derisory? Its current rate of GREA is £12,441,000, and under the announced arrangements — if they remain the same —that will increase next year to only £12,506,000—an increase of only 0·5 per cent.
I really think the hon. Gentleman should study the facts of the settlement. Of course it will mean great rate increases if local authorities decide to spend a great deal more money. If they want to go back to the levels of housing activity in improvement grants that they had under the last Labour Government, they will have to make big reductions. I am glad to say that they have got used to higher levels of activity. The Exchequer grant this year to Wales is equal to £1,200 per household in Wales. That is far higher than the Exchequer grant to England and Scotland, so I believe that, with prudence and efficiency, there will be no need for substantial rate increases.
The Secretary of State must be aware that, at this moment, Welsh local authorities have in their coffers about £280 million of capital receipts from the sale of council houses. Is he prepared to allow them to spend more than 15 per cent. of that each year, particularly when, in his own constituency, local authorities are allowed to spend 20 per cent. each year? Will he announce an increase to enable more council houses to be built?
If we were to change the level to that in my constituency, Welsh local authorities would be at a net disadvantage because of other factors that would be taken into account. Welsh local authorities well understand that, unlike the hon. Gentleman. I also point out, however, that there are possibilities of increased receipts from sales in Wales. There is no doubt that the selling of local authority housing in Wales has gone somewhat slower than in other areas. I hope that Wales will have a new sales drive, particularly in view of the additional provisions made by the Government to encourage people to buy their own homes.
Does the Minister agree, that if the economy is growing at 4·5 per cent., and inflation is running at about 4·5 per cent., then all other things being equal, we should have had an increase of 8 or 9 per cent. on last year's figures? Given that the figure is only 6 per cent., does that not really mean that, as the cake is growing bigger, the share that local authorities are obtaining is growing smaller and smaller?
Was the Minister trying to say, in answer to the penultimate question, that, in spite of our comparative poverty levels and the degree of social problems in Wales, Welsh local authorities are receiving more than their fair proportion of Exchequer grant?
Does the Secretary of State realise that, after reading the document and listening to the exchanges this afternoon, I am struck by the fact that the Government have become masterly in the art of duplicity? Does he appreciate that my right hon. Friend the Member for Swansea, West (Mr. Williams) clearly brought out the fact that 11 per cent. is needed —according to the informal discussions that took place beforehand — to maintain existing services? The Secretary of State did not answer that point. Yet a package of £60 million less than what is required is presented as a sort of bonanza to our local authorities. I say to the hon. Member for Delyn (Mr. Raffan) that Clwyd in particular will suffer badly as a result of the settlement.
In addition, there is a restriction on our local authorities because if they attempt to redress the deficit by raising the rates they are penalised. They are put in a straitjacket by a Government who are supposed to believe in local decision making. Does the right hon. Gentleman realise that, when cuts are announced, it is local authorities which have to take the can back and the Government just wash their hands of the whole business?
Education buildings are deteriorating, children are being educated in a shabby environment and there is a shortage of books and other materials. These evil effects are equally calamitous for our old people. Surely that cannot be good for the future of our country. The Secretary of State is a newcomer to Wales, and I say especially to him that we are suffering from mass unemployment, let alone a housing crisis, which he, it seems, is beginning to recognise. In the years of this—
I conclude by asking the Secretary of State to recognise that we have been robbed of £750 million since the Conservative Government came to power, because that is the amount of money that we would have received if the formula adopted by the Labour Government had prevailed. This is a sad story of a Scrooge-like settlement being presented with a Saatchi and Saatchi gloss on it.
The art of duplicity which the hon. Gentleman described applies to anybody who can stand at the Dispatch Box and criticise an increase of 112 million, or 6·3 per cent. The hon. Gentleman sat on this side of the House when his party was in government and in each of its last three years it reduced, in real terms, the rate support grant for Wales. In 1977–78 it went down by 9 per cent. and in 1978–79 it went down by 4 per cent. I am glad that under this Government it is increasing in real terms.