Orders of the Day — Local Government Finance Bill

Part of the debate – in the House of Commons at 8:31 pm on 16th December 1987.

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Photo of Mr Dafydd Elis Thomas Mr Dafydd Elis Thomas , Meirionnydd Nant Conwy 8:31 pm, 16th December 1987

It falls to me to congratulate the hon. Member for Stroud (Mr. Knapman) on his maiden speech. There was a convention when I entered the House many years ago that maiden speeches should be non-controversial. However, that convention has been broken for some years. It is a convention to refer to one's predecessor, and the way in which the hon. Gentleman did that drew support from hon. Members. He spoke of the attractiveness of his constituency, which I can endorse as I drive through it quite often.

The hon. Gentleman showed his strong support for the Government. I am sure that he will learn, when he has spent a little longer in the House, that it is important to be critical of one's party, and I am sure that in future he will do so in the same eloquent manner.

It is a convention not to respond critically to maiden speeches, but many of the points that the hon. Gentleman made were answered by my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins). My hon. Friend spoke, as shall I, about the impact of the Bill on local democracy.

The Bill is the final nail in the coffin of democracy in Britain. It must be considered along with the other drives to a centrally managed state with a concentration of power in Whitehall and a little less power in Edinburgh and Cardiff. It must be considered along with the policies of the Education Reform Bill, which deals with the privatisation and opting out of schools. It must be considered along with the proposals in the Housing Bill, which will transfer council housing estates to the private sector or to self-management. It must be considered along with the proposals to place inner cities under the control of unelected corporations, allegedly to regenerate derelict areas. We can look forward to a scenario in which local government will manage rubbish collection, which itself will be privatised.

There are three lines only in the Bill that I support. Clause 121(4) says: Any power conferred by this Act on the Secretary of State may be exercised differently for England and Wales, whether or not it is exercised separately". Regrettably, there is no separate exercise of power for Wales in the Bill. However, there are some slight differences in the way that revenue support grant and non-domestic rate income are to be paid separately to county and district councils.

It is not clear how those slightly different aspects of the Bill will work in Wales. There are some differences in the non-domestic rate multipliers under schedule 4 and there will be a separate non-domestic rates pool for Wales under schedule 4. Other different arrangements are made for calculating the non-domestic rate income entitlement. Wales is following Scotland in having the tax imposed rapidly in 1990.

In one of my favourite readings, the Welsh Office handout, the Secretary of State for Wales said: The Bill provides for a separate system in Wales; one which is tailored to the needs of Wales. No resources will be lost to Wales as a result of the move to the new system. The new system has not been defined. In the same handout, the Secretary of State said: The new system will distribute grant on the basis of objective assessments of need. I am anxious to ensure that those assessments reflect the differences in areas of Wales as accurately as possible. He further said that there will be discussions with local authority associations.

It is not clear to Hon. Members on this side how the system of assessing needs will operate and how it is different from the present system of rate support grant. At least that was based on an attempt, through the GRE assessments and, traditionally, through the formula of the RSG, to establish an assessment of need for local authorities. Perhaps the Minister for Local Government, who, were it not for the political resilience of the Secretary of State for Wales, might be in his right hon. Friend's position—the hon. and learned Gentleman has a special interest in the subject as well as his own nationality—will explain how consultations are going and how the new revenue support grant system will assess the local needs of authorities. We were told in the Green Paper that there might be two grants—a needs grant to cover differences in needs, and a standard grant. However, that is no longer the case.

It would be helpful if the Minister would explain how the crude system of calculation in schedule 5 of the entitlement of each authority to revenue support grant will work in practice. That part of the Bill should be explored in detail today, tomorrow and in Committee.

The Secretary of State told us that there will be little or no change in Wales as a result of the Bill, but the effect on individual income and local authority expenditure is substantial. The Government intend that 16 per cent. only of local authority expenditure in Wales will come from the poll tax. That underlines the point that was made by my hon. Friend the Member for Newcastle upon Tyne, Central, who said that this tax lacks buoyancy and restricts the operation of local government.

Are the Government hoping that, if there will be a need for a local authority to increase the poll tax, it will result in a steep rise because of the small margin of flexibility that is available? Will the result be such local opposition to poll tax variations between authorities that it will be seen as a move towards a fully grant-aided system of local government? That was one of two stark alternatives offered by the Layfield committee to the Labour Government in 1976. It said that if local government were to be accountable it either had to be 100 per cent. grant-aided, and therefore accountable to the Secretary of State, or accountable on the basis of local income tax as a major source of revenue, and therefore accountable to the electorate.

In discussions on the Education Reform Bill, we shall be considering ways in which education authorities' formula for granting each school's budget will be discussed, and again the Secretary of State will have, in practice, to insist on high education expenditure, which will be at the expense of other local government services.

The possibility of discretionary expenditure by local government has now almost entirely disappeared. Locally elected authorities are in a similar position to that of health authorities in relation to central Government. Revenue is entirely determined by the Welsh Office, by the Department of Health and Social Security in the case of England, and by the Scottish Office in the case of Scotland. That is the position as a result of the changes.

With the current crisis among health authorities, we can clearly see where the mechanism of entire, complete central control leads. It leads to the fundamental discrepancy between Government statements on what funds they are providing and the reality of services. Surely the Health Service crisis is an example of the breakdown of democracy. Nominated bodies are unable to manage and deliver services effectively in accordance with local need, and centrally distributed resources cannot meet the needs. That is the path that we are following in respect of local authorities and health.

The loss of discretionary powers makes the possibility for local authorities to make substantial grants to voluntary bodies virtually nil. It will affect voluntary organisations such as the citizens advice bureau. I can envisage a day when the National Eisteddfod will become a wholly owned subsidiary of the Welsh Office.

As we have been told, the changes in the business rate will have a particular impact on areas such as rural Wales, mid Wales and north Wales. The business rate in such areas will increase. Ironically, one of the reasons why responsibility for assessing rateable value was taken from local authorities in depressed areas was that they tended to favour their own industries and businesses. Local government complained about the regressive nature of the rate and the need for another supplementary tax or taxes long before the Conservative party jumped on the bandwagon.

There are fairer options that relate to two principles. Services are paid for on the basis of ability to pay. We have heard that phrase in Government rhetoric about their interests when it suits them. As an overall principle, the ability to pay must point to a form of local income tax. Also, there is a clear need for a property tax in the form of a capital or wealth tax. But the essential argument is that we need local payment and redistribution mechanisms. Both mechanisms are under threat in the legislation.

The Government tell us that, because of their complexity, the traditional rate support grant allocation formulas are no longer credible or viable. At least there was an attempt to assess need, to transfer resources, and to equalise resources according to needs. This legislation represents a crude assessment of need and gives no clear sign how the Government intend to deal with allocations to authorities.

Another aspect of the Bill relates to the changes that will affect various income groups in a differentially bad manner, particularly in respect of many low-income areas of Wales. Studies show that, as a result of the changes, two thirds of the population will be worse off in terms of their personal incomes and that of their households. In particular, women will be worse off. The average wage for female manual workers in Wales is less than £100 a week. Low-paid people will bear the burden of the Bill.

When we consider that together with the burden of the changes in the social security legislation, which will come into force early next year, we see that the Goverment's policy represents a class attack on those who do not support them. It is a clear attack on local democracy. Governments that attack local democracy only create a demand for a vibrant, diversified real democracy. The history of the relationship between central and local government in all states demonstrates an ebb and flow between the tendency for centralisation and the demand for greater autonomy from localities and regions.