Orders of the Day — Rate Support Grant (Scotland)

– in the House of Commons at 11:08 pm on 11th July 1988.

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Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale 11:08 pm, 11th July 1988

I beg to move, That the Rate Support Grant (Scotland) Order 1988, dated 11 May 1988, a copy of which was laid before this House on 19 May, be approved. The order has three main purposes. As a result of local authorities' planned overspending this year in comparison with their guidelines, the first purpose is to reduce the amount of grant payable in respect of 1988–89 by £140 million and to determine revised grant payments accordingly.

The second purpose is to adjust the rate support grant payable to Scottish local authorities in respect of the previous financial year, 1987–88. That involves the return of substantial grant penalties totalling £89 million in respect of that year in response to lower overspending by authorities at provisional outturn stage.

Thirdly, the order implements minor adjustments in grant in respect of earlier years in the light of more up-to-date information. The effect is to decrease grant for 1986–87 by £0·1 million and to increase grant for 1985–86 by £3·2 million.

I shall deal first with the reduction in grant for 1988–89. Let me begin by setting the issue in context. Last July my right hon. and learned Friend the Secretary of State announced, in respect of 1988–89 and for the second successive year, a rate support grant settlement based on local authorities' own budgets for the year then in operation—1987–88—uprated for inflation and certain other specific costs that were expected to arise. Provision for local authority relevant current expenditure in Scotland in 1988–89 was set at £3,640 million, or broadly 4 per cent. over authorities' total budgets for 1987–88. The grant percentage was maintained at 55·5 per cent., and aggregate Exchequer grant was fixed at £2,372 million. The provision and grant figures were respectively 9 per cent. and 8·2 per cent. above the corresponding figures for 1987–88— at a time when the projected general level of inflation was under 4 per cent. All that, and detailed proposals for grant distribution, were set out in the Rate Support Grant (Scotland) (No. 3) Order 1987, which the House approved on 18 January this year.

In his announcement last July my right hon. and learned Friend described the settlement as "realistic and fair". That is a modest understatement, and it was clear at the time that the Convention of Scottish Local Authorities thought so too. In fact, the level of provision came very close to the figure of £3,677 million that COSLA was seeking for the year—within 1 per cent.

We felt that with that settlement we had done our bit, and hoped that the local authorities would respond by careful budgeting, with low rate increases, for 1988–89. Many authorities did so: the number budgeting within guideline has increased from 28 last year to 34 this year. Further evidence of the reasonable response of many authorities is to be found in the low rate increases that large numbers of Scottish households have experienced this year. I think that it is very satisfactory that 50 per cent. of Scottish households have experienced rate increases no higher than the going rate of inflation.

On the other hand, the extent of rate increases is not in itself a fully accurate indicator of underlying trends in expenditure, as rates are only one way of financing expenditure. Another is, of course grant, but authorities also have at their disposal receipts, reserves and balances. Some authorities, even with low rate increases, have still approved budgets well over guidelines for the coming year, and authorities' planned expenditure as a whole in 1988–89 is 2·9 per cent. higher in volume terms than was their provisional outturn expenditure for 1987–88. In total, there is a planned expenditure over guideline of £136·5 million, or 3·8 per cent. It is particularly worth noting that Strathclyde and Lothian regions alone account for £116 million, or 85 per cent. of the overspend, while £130 million, or 95 per cent. of the overspend, is accounted for by only six authorities.

That is the background against which we must consider the grant penalties. They are the consequence of high budgeted overspending. Local authorities were well warned before they drew up their budgets—not least in my speech in the House on 18 January this year—that the Government would respond to overspending with grant penalties.

In considering the detail of the penalty proposals set out in the order, my right hon. and learned Friend and I have listened to and considered carefully the representations that COSLA has made to us, both in writing and through its officials, and a meeting which we had with the convention on 29 April. I acknowledge, of course, that COSLA opposes grant penalties in principle. But I would like to address myself to two more detailed comments which it made.

First, COSLA disputed the effectiveness of penalties in persuading authorities to revise their expenditure during the year. That is not the conclusion that I draw from the provisional outturn figures for last year, which give rise to the grant now being returned in respect of that year. Many authorities' provisional outturn expenditure, by the end of the financial year, will be somewhat below their budget proposals. But I simply do not believe that, for example, Strathclyde region or Glasgow district would have reduced its spending so substantially last year were it not for the prospect of recovering £33 million and £12 million respectively, as they will do as a result of tonight's order.

We are abandoning grant penalties after 1988–89, in recognition of the greater accountability to which local authorities will be subjected as a result of the community charge, but I believe that the efficacy of grant penalties in reducing expenditure during the year was amply demonstrated last year, and I am confident that the same will happen again.

The second point that COSLA made was to point to the potentially damaging effect of grant penalties on community charge levels next year. The obvious first rejoinder to that is that there are no penalties for authorities that spend at or within guidelines. The fact is that authorities that consciously plan to overspend, knowing the consequences, cannot properly claim that. the consequences for their taxpayers are the Government's fault. The main purpose of grant penalties is to encourage authorities to reduce their expenditure in the course of the year, and to the extent that they do so the grant will be returned.

As I see it, therefore, this last year of grant penalties should be an effective instrument for lowering local authority expenditure and hence the baseline against which the first community charges will be calculated. Ratepayers should see the penalties in that light; I hope that the local authorities will do so too, and that all hon. Members representing overspending authorities will encourage them to maximise their eventual grant entitlement by reducing their expenditure as the year proceeds.

Quite apart from these specific points which COSLA put to us on 29 April, there does appear to be a general view that local authority services are being cut to the bone. My hon. Friends who look around themselves in their constituencies will not recognise this view, and they would be right. Local authority budgets for 1988–89 have increased by 4 per cent. in volume terms over actual local authority spending in 1978–79, without there having been any significant increase in authorities' statutory burdens or responsibilities in the meantime. If, rather than adjusting for local authorities' own inflation rates, which include some excessive pay settlements, we compare local authority spending with the general rate of inflation, we come up with a real increase of 22 per cent. in council spending. That is to say that local authorities are costing the economy 22 per cent. more than 10 years ago. So it is no wonder that we have had to take action.

I should now like to turn to details of the order. First, it reduces rate support grant for 1988–89 for authorities which have planned to overspend. The needs element of rate support grant has been reduced by £140·1 million. That reduction is concentrated entirely on the 31 overspenders.

The grant reduction is related directly to the individual authority's degree of overspending by comparison with guideline, on the basis of a formula which is explained in the accompanying report. In arriving at the detail of our proposals, my right hon. and learned Friend and I have paid particular heed to the pattern of overspend revealed by authorities' budgets. The main features of the penalty tariff to which I would draw attention are, first, the low starting point, so that authorities planning to spend up to 2 per cent. over guideline attract a penalty rising only to 10 per cent. of their guideline excess; but there is a maximum penalty tariff of 110 per cent. for overspends of 5 per cent. over guideline and above.

That compares with a penalty tariff last year standing at 70 per cent. and rising to 175 per cent, for spending of 3·5 per cent. in excess of guideline or above, and the reduction in grant at budget stage is broadly equivalent to the budgeted overspend. By comparison with last year, it is tailored specifically to the pattern of budgeted overspend this year. There will be limited burdens for authorities with low overspends, which may in any case be most disposed to reduce their spending to guideline as the year proceeds; but at the same time the penalty is high, with a correspondingly high incentive to economise, on those few authorities with major overspends.

I offer the House only these two examples. Lothian region now plans to reduce its spending to 4·2 per cent. over guideline, which is the average excess over guideline for all regional councils, and as a result it will recover at the end of the year more than £33 million of the grant it is now forfeiting. If Strathclyde reduces its overspend to, say, 4 per cent. it will recover more than £47 million. These are powerful incentives to reduce spending in the course of the year, and when authorities do so, the benefit will be in reduced community charges next year.

I have mentioned Lothian region's decision to make a voluntary rate and budget reduction. As a result, we have less business to debate here this evening than would otherwise have been the case, and I shall say no more on the subject other than to welcome the sensible and realistic decision that Lothian regional council has now taken.

In terms of previous years, the order contains grant adjustments to take account of provisional outturn and final outturn expenditure figures. In 1987–88, at budget stage, 28 authorities kept within guidelines and the total overspend was £123·2 million. Provisional outturns show that the number of authorities within guideline has increased to 30 and that the total overspend has come down to £74·6 million. The effect of this is to bring penalties for that year down from £202·3 million to £113·1 million, a saving of £89·2 million.

Details of the 1987–88 penalties are given in annexes 3 and 4 to the report. For those authorities affected, the revised penalties are shown in column 7 in annex 4 with the adjustments that will be made to grant payments shown in column 9. I draw particular attention to the amounts of grant being returned to Strathclyde and Lothian regions and to Edinburgh and Glasgow districts.

For 1986–87, final or near-final outturns show a small increase in spending. The effect of this is to increase penalties by £0·1 million. Details of the adjustments to penalties are shown in column 6 of table II of annex 5 to the report. For 1985–86, final outturns show a reduction in spending which has the effect of reducing penalties by £3·2 million. Details of the adjustments to penalties are shown in column 6 of table II of annex 6 to the report.

There will be a continuing need to adjust grant in the light of up-to-date information in respect of 1988–89 and previous years, but this will be the last occasion on which grant penalties will be imposed. I hope that when grant, particularly in respect of 1988–89. is further adjusted, the news for local authorities will be good, reflecting a sensible response by local authorities to the order. I commend the order to the House.

Photo of Donald Dewar Donald Dewar , Glasgow Garscadden 11:21 pm, 11th July 1988

Some of us occasionally think that the economics of the European Community is obscure, obtuse and perverse. We now find ourselves looking at the rate support grant settlement of a Conservative Government and it is no improvement on what has gone before. I should make it clear that we oppose the order.

I do not think that Conservative Governments never work; they sometimes achieve great things. I am indebted to my hon. Friend the Member for Motherwell, North (Dr. Reid) for the information that Mr. Alex Pagett, the important capture from the public sector, has just fled from Scottish Conservative party headquarters in Chester street. I am told that when challenged by the press about his reasons he said that he was taking advantage of the enterprise culture. I suppose that that proves that in this case it is not so much an alibi as an escape route. We ought to make it clear that taking Mr. Pagett was not a quid pro quo for Mr. Rio Stakis's knighthood.

The order is offensive in principle and it is on principles that I want to start. The order and the clawback represent an arbitrary judgment based on questionable guidelines that have been manipulated by Ministers with political advantage in mind. The whole attitude of the Minister to local government was well instanced in his speech. He talked about local authorities being "well warned" as if they were a collection of recalcitrant schoolchildren being reprimanded by a particularly inflexible dominie.

The Minister talked about local authorities "costing the economy". I fear that he has the impression that any expenditure by local government is essentially wicked and can be allowed only in very special and grudging circumstances. I do not like the basis of the system. I remember on one occasion in the days when we had a Scottish Select Committee a senior official in the Scottish Office talking about objective factors subjectively applied. It might have been the other way round, but in any event it became very clear that the basis on which these guidelines have operated are anything but satisfactory and are based on expediency and not on principle.

The global total for 1988–89 is based on the budget of the previous year plus 4 per cent. I think that there were one or two minor adjustments for the teachers' pay settlement and for the ever-burgeoning costs of administering the poll tax. It is interesting to note that the total is based on the budget for the previous year which does not suggest a vote of confidence in the basis on which the £202 million was clawed back in that financial year. It is not so much the total global figure with which we are concerned as the remarkable variations in the guidelines for individual local authorities.

There are, for example, increases among the regions as high as 11 per cent. for Dumfries and Galloway and 10·7 per cent. for Grampian, down to 3 per cent. for Strathclyde and 3 per cent. for Lothian region. There are substantial variations among the districts. The figures vary between 3 per cent. and, in Sutherland, 44 per cent., which I concede is out of line in every sense.

However, it is interesting to note that the authorities that have run into trouble are those whose increase in guidelines has been well below the going inflation rate and who are at the bottom of that list. Grampian, with a substantial increase in guidelines, is out of penalty altogether. Dumfries creeps in at 0·11 per cent.—that is a rather esoteric figure, if ever there was one—but Strathclyde and Lothian face the maximum penalty of 110 per cent.

The whole matter turns on Strathclyde's position. It is being hammered for another £82 million and no one could seriously imagine that the 3 per cent. increase in guidelines this year, as against last year, could accommodate, for example, the problems that it has had and the factors to which I have already referred, such as poll tax administration and increases in teachers' salaries.

It is simply a chaotic, artificial, vindictive and often illogical system. The Minister says that, last year, £202 million was clawed back, but some £89 million of that is now being returned. He says that as though it was a virtue, but it underlines the folly and complete irrelevance of what has been happening. The authorities have had to lie out of that money for up to a year. I am told by COSLA that the interest charges alone amounted to about £9 million. The fact that Strathclyde is getting back £33 million is not necessarily a success for common sense, although it may be a success for the Minister's spleen. That authority has had to struggle bravely to try and protect the ratepayers and has done so probably at the cost of dismantling some services and certainly of undermining financial stability. We should not applaud that or suggest that the Minister should encourage it.

Lothian region is in a particularly bizarre position. There has been an agreed reduction of £23 million, as the Minister said. That will come out of this year's expenditure, but the grant penalty is still being calculated on the basis that that £23 million will be spent. In addition, a penalty of 110 per cent. is being paid. Again, Lothian will have to wait for a whole year for that money to be returned, and interest charges and other expenses will accrue. How can that be in the ratepayers' interests? If the Minister is grateful for the fact that a common-sense solution, as he sees it, has been found and if, in some way, agreement has been reached with the Lothian region, surely the sensible course is to recognise what has happened and to take that £23 million out of its budget for grant calculation. I do not understand why that has not been done.

I have no doubt that the Minister of State will argue that the penalties this year are less than they were last year. The sum of £202 million last year has been replaced with a sum of £ 140 million. The top rate penalty has come down from 175 per cent. to 110 per cent. I must make it clear that we believe that a clawback is wrong. There is no case for that during a financial year, and particularly in a year in which the average rate increase in Scotland is as low as 5 per cent.

This is a very inappropriate order because, as the Minister pointed out, this is the last year of the old system and we face the Minister's brave new world of the poll tax. If we are to close the chapter, draw the line and start again, there is no case for carrying forward deficits into next year, the first year of the poll tax. In any event, it is a basically unsound system that has been foisted upon us without our consent and without any sort of wisdom or appreciation of the needs of Scotland or of the wishes of the Scottish people.

However, be that as:it may, there is a practical argument that I should have thought would appeal to the Minister. It is not just the theory of the clean break. Inevitably, to some extent the penalties will be carried forward into the following year, and will fall specifically on the poll tax.

No doubt the Minister will argue that if authorities cut expenditure, they will cut the deficit and relieve the additional burden on the poll tax. But many authorities have come down to the bare essentials. Some, such as Strathclyde last year, managed to meet their targets in reducing expenditure in the face of the Minister's threats and sanctions by one-off savings that will be difficult to repeat.

I do not know anyone who denies that if the Minister goes ahead with the order and imposes the full penalty that is allowed, at least there will be an irreducible core of deficit that will have to be shifted into the following year, and into the calculations that make up the poll tax.

It will be particularly serious because the burden will have to be borne not by the entire rating base, but by the poll tax payers alone. The commercial and industrial ratepayers are now linked to the RPI and cannot take a share of that increase. As a result, the burden will be carried by about 40 per cent. of the rating base and that will be entirely to the disadvantage of the poll tax payer.

The Minister has said or implied that it is an advantage that the top rate of penalty has come down from 175 per cent. to 110 per cent. But allowing for the fact that the penalty will fall only on that 40 per cent. of the old rating base, to preserve parity, the penalty should be 70 per cent.

The impact of the order on the poll tax will vary from authority to authority. Those that are out of penalty will not be affected. However, COSLA tells me—and I have no reason to believe that it has not calculated carefully—that the impact on Strathclyde if the full penalty had to be met would be equivalent to £50 on the individual poll tax. Perhaps the Minister will say whether he accepts that figure. Even if Strathclyde manages to reduce the penalty that it has to pay, and even if it manages to cuts its expenditure, there will still be a significant push to poll tax levels for half Scotland's population. That is a practical illustration of a well-known and well-advertised consequence of the system that the Government have introduced.

During our debate on the poll tax legislation, the very factors to which I am referring were explained to the Minister. It was pointed out to him by people from the press that there was a gearing effect and, inevitably, the poll tax would rise sharply to levels which the Scottish public would consider intolerable. The Minister's answer was that local authorities would not dare to do it. That says a great deal about his attitude. He is constantly expecting local authorities to respond to his wish to dismantle services and to cut provision, when, from his point of view, no doubt, perversely, but in my view very sensibly, people vote for councils that follow other policies and want the Government to follow other policies.

It is unsatisfactory that in the last year of the present local government financial system, we will lumber local authorities and poll tax payers next year with a burden that is unfair and is a heritage from the past. The Minister knows that it is an unacceptable policy, not simply because it is the view of Opposition politicians, local government and any member of the public in Scotland who is aware and has thought through the system, but because it has been proclaimed as unacceptable by his colleagues south of the border. The Minister will be aware that when the Secretary of State for the Environment made his statement about local government finance in the House on 7 July, he made it clear that he would not follow that example. He said: Under my proposals for closing down the system, grant payments to authorities will not be affected by their level of spending in 1989–90."[Official Report, 7 July; Vol. 136, c. 1200.] The Secretary of State for the Environment was saying very sensibly that the Government have enough problems—and, good Lord, he is right—in trying to get the crazy poll tax system off the ground without burdening it and handicapping it by enforcing a series of punitive penalties in the immeidiately preceding year which will force up the levels of poll tax. Why cannot the Scottish Office take a similarly sensible decision? We want the Minister to answer that question before we vote on the order.

I suggest that the Minister should follow the English example on this occasion, take the same sensible decision and make it clear that he will abandon this series of punitive measures, this foraging expendition into local government finance. He should draw the line behind the present rate support grant system and start afresh next year. That would at least give the hard-pressed poll tax payer in Scotland some chance to come to terms with the unpleasant new system that has been foisted upon him.

This matter relates to a fundamental principle. I believe that the Government are still thirled to the idea of control, restriction and depression of local government expenditure for the sake of depression. They really look forward to inadequate services at an inflated price. We know that in 1981–82 the rate support grant settlement met 68·5 per cent. of agreed expenditure. That has now fallen to about 50 per cent. COSLA estimates that that has cost local government in Scotland about £3,000 million. Against the enormity of that disaster over recent years—a disaster for the ratepayers, despite the Government's rhetoric, and for the provision of services—the present £140 million may seem a paltry sum. This is a matter of principle and of practical importance. If the burden is passed on, it will be concentrated on those who will pay the poll tax for the first time and it may affect people who will be in the local government taxation net for the first time. That is wrong. We want none of that, and we will vote against the order.

Photo of Mr Allan Stewart Mr Allan Stewart , East Renfrewshire 11:36 pm, 11th July 1988

This important debate, regrettably, has been delayed. It should be recorded for the benefit of the people of Scotland that that delay was entirely due to the fact that a bunch of English Labour hooligans delayed the debate by forcing a completely unnecesary Division.

The case that my hon. Friend the Minister put to the House——

Photo of Mr Harry Ewing Mr Harry Ewing , Falkirk East

On a point of Order, Mr. Deputy Speaker. May not the comments of the hon. Member for Eastwood (Mr. Stewart) be regarded as a very serious reflection on the Chair, of which you were the occupant, when my hon. Friend the Member for Bradford, South (Mr. Cryer) was called to speak on the money resolution? Is it in order for the hon. Member for Eastwood to criticise your selection of my hon. Friend the Member for Bradford, South to speak on the money resolution? Is that not a very serious and scurrilous attack on the occupant of the Chair?

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

The comments that I heard may be judged discourteous, but they were not out of order.

Photo of Mr Allan Stewart Mr Allan Stewart , East Renfrewshire

In no way was I criticising the Chair. It is a matter of regret that the hon. Member for Falkirk, East (Mr. Ewing) has delayed further the proceedings of this important debate.

The case made by my hon. Friend the Minister was reasonable. It sounds generous almost to the point of excess. There is absolutely no doubt that the increased provision of 9 per cent. for 1988–89 over 1987–88 represents an increase of 4·7 per cent. on last year's budget. The penalty scale is significantly more generous than it was previously.

The system under which the order operates has worked under successive Governments. Hearing the comments of the hon. Member for Glasgow, Garscadden (Mr. Dewar), one would have thought that Labour Governments had never passed rate support grants that were unpopular with Labour-controlled authorities. Indeed, the reverse is the case. I am delighted to see the hon. Member for Cunninghame, South (Mr. Lambie) in his place, because he has an unprecedented record of voting against rate support grant orders, irrespective of which party forms the Government.

The system has worked increasingly effectively and there is no doubt that it has been effective in Lothian and Strathclyde. It is necessary because of the lack of accountability to the electorate under the rating system. I am delighted that 1988–89 will be the last year of guidelines and that they will, in effect, be stopped by the changeover to the revenue support grant and the community charge.

I followed my hon. Friend's reference to the real terms increase in council spending since 1978–79. I think that he said it was an increase of 22 per cent. Will my hon. Friend break down that figure because I understand that it varies considerably between different expenditure heads and that the figure for police expenditure has increased by only 10 per cent. compared with significantly higher figures for leisure and recreation, and social work?

Photo of Mr Brian Wilson Mr Brian Wilson , Cunninghame North

Does the hon. Gentleman agree that his comments and those of the Minister have ably demonstrated why Mr. Alex Pagett has preferred to move on to the exotic offices of the Stakis organisation rather than defend the system of gomeril nonsense that we are hearing about tonight?

Photo of Mr Allan Stewart Mr Allan Stewart , East Renfrewshire

That is the level of the intellectual attack on the order. That is all that Opposition Members can say. Mr. Alex Pagett can answer for himself—[HON. MEMBERS: "Can you?"] He has moved on and has said that his decision was made because he supports the enterprise culture, and so do I. It is absolutely right that people should move on when they wish to do so. The hon. Member for Cunninghame, North (Mr. Wilson) is trying to divert me from my reasoned appreciation——

Photo of Mr Bill Walker Mr Bill Walker , North Tayside

Does my hon. Friend agree that none of us would be Members of this House if we had not at one point in our lives decided to change our employment? Therefore, it is humbug to criticise an individual for changing employment.

Photo of Mr Allan Stewart Mr Allan Stewart , East Renfrewshire

My hon. Friend is absolutely right, as always. He may agree that it is a pity that some Opposition Members chose to change their previous occupations.

Will my hon. Friend the Minister of State confirm that Strathclyde is still pursuing a unique policy of keeping its police establishment below the authorised level? Such a policy is not pursued by any other police authority in Scotland, including Labour-controlled regional authorities. As I understand the position in Strathclyde—perhaps my hon. Friend can confirm or deny this—the excess in Strathclyde's 1988–89 budget is about 5·1 per cent. If the regional council reduced that to 3 per cent., I understand that that would yield a major saving to the regional council of between £65 million and £70 million, which would be of great benefit. Such a target is not unreasonable for Strathclyde.

Furthermore, if the authority had pursued a policy of school reorganisation instead of bringing in political factors such as absurd opposition to single-sex schools which are popular with Catholics and ethnic minorities, even if unpopular with Opposition Members, it would have fared a great deal better.

Finally, speaking as a Glasgow district ratepayer, I should like to ask my hon. Friend two questions about Glasgow district council. First, it is interesting that the director of finance of Glasgow district forecast a community charge level of £529 before the district elections and subsequently revised it downward after the votes were counted. Secondly, can my hon. Friend comment on the widespread reports that Glasgow district has a substantial cash reserve, which has been put at between £30 million and £40 million? Clearly, it must have a contingency reserve, but, as my hon. Friend may know, that has been controversial and criticised not only by Government supporters but from within the Labour movement.

Finally, next year we shall see the introduction of the community charge and an end to these orders. Will my hon. Friend confirm that over 90 per cent. of community charge canvasses have been returned and that the various assembled and spurious campaigns from the different Opposition parties have failed?

Photo of Menzies Campbell Menzies Campbell Shadow Spokesperson (Defence), Shadow Spokesperson (Defence) 11:45 pm, 11th July 1988

There appears to be a general welcome that this may be the last time we debate the system of clawbacks. The hon. Member for Eastwood (Mr. Stewart) has just stated the basis of his support and the House will undoubtedly draw its conclusions, and I have little difficulty in welcoming an end to these debates. The system of clawbacks has been deeply damaging to local government and offensive to local democracy. I say that to some extent invested with authority from the fact that the district council whose boundaries exactly coincide with those of my constituency did not until 1984, during the time when it was Conservative-controlled, contrive to produce a budget within guidelines. Only when the administration changed in 1984 and since then have budgets within guidelines been produced.

What is deeply offensive about the present system is that it allows the Secretary of State to override the decisions of elected local councillors. The proper course is for those who make budgets and are responsible for expenditure to face the consequences of those decisions when they meet the electorate.

The truth is that the political purpose of clawbacks has not been realised because the public in general have responded adversely to centralisation and appreciated. that a substantial part of the discretion of their local councillors is being taken away. The measure of the public's adverse reaction is found in the fact that not a single council which has been penalised under the clawback provisions has been reclaimed by the Conservative party. If anything, in authorities which have suffered most, the majorities against the Government party have increased substantially.

The community charge is about to become part of local government finance in Scotland.

Photo of Menzies Campbell Menzies Campbell Shadow Spokesperson (Defence), Shadow Spokesperson (Defence)

I accept that it may now be called the poll tax. The hon. Member for Stirling (Mr. Forsyth), the Parliamentary Under-Secretary of State for Scotland, referred to it in those terms during Scottish questions, and on such matters he must for this limited purpose at least be regarded as something of an authority.

I welcome the fact that the Convention of Scottish Local Authorities was consulted on this occasion and that the clawback has been less severe than in previous years. But that may not be unrelated to the fact that the poll tax is coming into operation. As the hon. Member for Glasgow, Garscadden (Mr. Dewar) pointed out, the higher the penalty this year, so much higher may be the effect on the community charge next year. The burden will fall largely on those who pay the community charge or poll tax in the domestic sector, and I wait with interest, as I suspect does the House, to find out why there is to be this distinction in principle between Scotland and England. The distinction is hard to understand and I suspect that the Minister will find it even more difficult to justify when he winds up.

The effect of clawback is to withdraw £140 million from the economy of Scotland. Its immediate effect must be a reduction in services and many of the services that will be adversely affected are those relied upon by the poor, the elderly and the disadvantaged. It is not the rich, the young or the gifted who are the beneficiaries of the services that will inevitably require to be cut. One listens to the Government explain their position, but it is notable that absent from the advice that they seem willing to give local authorities is advice on precisely what services should be cut. In a matter of responsibility, the Government seem willing to leave that problem to the duly elected local councillors.

This is a Government who are supposed to be concerned about local government finance, responsibility and accountability. The truth is that they have presided over more centralisation and less accountability. The clawback has been an unhappy chapter in local government funding in Scotland. It has not achieved what the Government intended and it has weakened and had an adverse effect on local democracy. No tears will be shed when it comes to an end. Likewise, when the order is put to the vote, I doubt very much whether it will command support in the House other than that of the vast ranks of English Tory Members who have contrived to find compelling obligations outside the Chamber and who will troop into the Government Lobby and pass the order, just as one might expect. I wonder whether they would be as keen to pass it if the Secretary of State for the Environment had not made the announcement that he did last week.

Photo of Mr Bill Walker Mr Bill Walker , North Tayside 11:51 pm, 11th July 1988

The hon. and learned Member for Fife, North-East (Mr. Campbell) clearly showed why his party has been so long out of government and looks likely not to be in government in future years. His speech was typical of his party. It was full of aspects about what life should, could and may be, but not about good management and organisation, with accountability and responsibility.

The hon. and learned Gentleman said that the clawback system was unpopular. I agree. It is unpopular with individuals in local government who knew full well that under the rating system there was not the accountability that the hon. and learned Gentleman talked about because under that system too few people paid and the majority did not pay, so those individuals were able to vote for expenditure, knowing full well that they would not have to pay for it. That is why there there was lack of accountability. So I am delighted that this is the last of the orders that we shall deal with.

One of the great advantages of the community charge will be the responsibility and accountability that the hon. and learned Gentleman seems to imagine existed under the rating system. He called it local democracy. There was nothing democratic about people passing massive expenditure that they knew their supporters would not have to pay for. That is what happened so often. It is gradually coming to an end, and not too soon.

Photo of Mr Bill Walker Mr Bill Walker , North Tayside

I am delighted to give away to the hon. Gentleman who represents a party of one in the House.

Photo of Mr Ronald Brown Mr Ronald Brown , Edinburgh Leith

When we speak about the rate support grant, we must understand one thing. That contribution to local government does not come from the Tory party: it comes from the people, the working class, who pay into a kitty that should go into local government. That has been cut repeatedly by the Government. Millions of pounds have been diverted towards other areas, particularly armaments, Trident and so on. So it is dishonest of the hon. Gentleman to suggest that it is simply a matter of the rating system being discredited. Who discredited it? The system has been discredited by the hon. Gentleman's own party. If his Government owned up and made sure that the moneys were available to local government, the rating system would not be so bad.

Photo of Mr Bill Walker Mr Bill Walker , North Tayside

We now know why the hon. Member for Edinburgh, Leith (Mr. Brown) is a party of one at the moment. He has clearly illustrated that he does not know how taxation works, or that the income tax reductions given by the Government have gone to ordinary people, the taxpayers. He may not believe that the people have welcomed that, but I know of no one who has given their tax refunds back to the Exchequer under any pretext.

The Government have pursued a policy of attempting to control local authority expenditure. I stress "attempting" because it has not been possible to control it as one would wish. To suggest that, somehow, there has been a massive reduction in the services provided locally is nonsense. In my part of the world, services have improved in recent years and have not been decimated as the Opposition have sought to suggest. There have been substantial improvements in many of the sectors covered by local government and that has largely occurred because of the additional sums that have been made available to it. The money can only come from the taxpayer; there is no one else. Central Government have no money and local government has no money—it is provided either from central taxation or from local taxation. It is nonsense if the hon. Member for Edinburgh, Leith believes that there is a pot of gold that can be got at.

I believe that my hon. Friend the Minister may have been over-generous in his approach to this matter, but whatever reason the Opposition believe lies behind my stance, I still believe that there are authorities that plan to spend much more than the guidelines. The guidelines were introduced by a Labour Government and it was a Labour Government who first ran into trouble with the local authorities about planned overspending.

How lovely it is to have the selective memory of the Opposition, who forget the years between 1974 and 1979 and all the accompanying traumas. The only time there were massive reductions in local government expenditure was during that period. Since that time there have been substantial increases and it looks as if we are budgeting for a 9 per cent. increase. By any measure that is generous.

Photo of Mr Tony Worthington Mr Tony Worthington , Clydebank and Milngavie 11:57 pm, 11th July 1988

Tonight we experienced the long-awaited moment when the Minister said something memorable.

Photo of Mr Tony Worthington Mr Tony Worthington , Clydebank and Milngavie

It was nothing to do with Alex Pagett, it was when he said that, in the past three years, local government had been costing the economy more. The Government's attitude to local government has never been expressed more clearly.

If one spends any money on local government the implication is that that is parasitical on the economy and dragging it down. Therefore, one must stop building roads. One must stop flushing the lavatory because that it is damaging the economy. One must stop running the tap because it is costing the economy. One must stop asking for a home help because that is costing the economy. One must not have a police or a fire service because that is costing the economy. If my son or daughter says that they want to continue to go to school they must be stopped because that is costing the economy. Nothing has exposed more clearly the Government's attitude to the local authorities, and it is the most insulting one that they could have. It is especially insulting to local government staff, many of whom are especially fine people doing a fine job. The same can be said of councillors. But the Government consider that local government is a cost to the economy. The Minister will suffer for his comment because it reveals clearly the Government's view of local authorities. There will be no end to the restrictions placed on local authorities because any local authority expenditure will be seen by central Government as a cost to the economy.

We are told that this is the last time that we shall have the rate support grant farce. Is that right? Under the poll tax, there will be a similar debate next year when the Government have decided how they will distribute money among local authorities. There will have to be a formula, and the debate will be the same.

I should like to know whether my conclusions on the Government's policies are correct. I estimate that in future about 80 per cent. of local authority expenditure will be controlled by central Government grant and that the business rate will be controlled also by central Government. I assume that about 20 per cent. of local authority expenditure will be controlled by local authorities. It is my experience in local government—I am sure that it was the experience also of my right hon. and hon. Friends—that the Government never provided adequately for inflation. The technique of control has been to say that inflation will he lower than it has turned out to be.

If four fifths of local authority expenditure is controlled by central Government and one fifth by local government, and if the inflation level is 4 per cent. and the Government provide for 3 per cent., the poll tax will have to increase by 8 per cent. for inflation alone. Is that correct? If the level is 5 per cent. and the Government provide for 4 per cent., is it correct that the authorities will have to find 9 per cent. extra in poll tax? If the level is 6 per cent. and the Government provide for 4 per cent., will the poll tax have to increase by 14 per cent? If inflation is 6 per cent. and the Government provide for 3 per cent., will the poll tax have to increase by 18 per cent? The answer to my questions is yes because it is easy to make the necessary calculations. That being so, how can we talk about local accountability? The behaviour of central Government will determine local government expenditure.

In the settlement for this year, Lothian, Strathclyde and 11 district councils had a provision for inflation of 3 per cent. Inflation for local authorities is running at 6 per cent. If the pattern continues, the poll tax will have to increase by 18 per cent. The gearing effect is such that a local authority region such as Dumfries and Galloway, which this year was given provision for an 11 per cent. increase in its expenditure—that was arranged for it by a local and convenient Minister—would have to find some money for the poll tax in the circumstances that I have postulated.

After repeated attempts to obtain an answer from the Government, I now want an answer on the uniform business rate. According to the Tory argument, high local government expenditure has driven jobs away from areas, and one reason why they control the business rate is to protect businesses. However, in Scotland, we have the worst of all possible worlds. They have said that they will take the existing business rate set by Strathclyde, Dumfries and Galloway or Lothian and index-link it. They said that they will not harmonise it within Scotland, but they will maintain it in perpetuity.

What is the logic of that? The logic should be that one would seek to harmonise within Scotland and have a uniform business rate for Scotland, but we will not get that. Why? Dumfries and Galloway would lose—its rates would increase by 40 per cent.

Photo of Mr Tony Worthington Mr Tony Worthington , Clydebank and Milngavie

As my hon. Friend says, it is rigged. However, the much bigger issue is when will the Government come clean about when they will introduce a uniform business rate for England, Wales and Scotland. It is not just the Opposition who are concerned about that, but the CBI, the Scottish Council (Development and Industry) and the chambers of commerce. They see Scotland losing substantially because, when a uniform business rate is introduced in England and Wales, there will be a transfer of resources from the south of England to the north. The substantial advantage that is already enjoyed by the north of England in comparison with rates in Scotland will become even greater.

In Scotland, businesses pay between two and two and a half times as much in business rates as they would in the north of England. To compare the midlands with Scotland, the national exhibition centre, which is five times the size of the Scottish exhibition centre, pays the same rates. That disadvantage will be made even worse.

When the Minister was questioned, he said that he could not anticipate what will happen, because the revaluation has not been carried out. Other sections of the Government have done that. A Treasury Paper called "Running Costs Guidance: Location of Work", issued in March 1988, said: The effects of the uniform rate poundage in England are expected to include a reduction in average rates bills in much of the North and Midlands. That is official.

The Scottish Council (Development and Industry), the Scottish CBI, the chambers of commerce and the Opposition cannot obtain an answer from the Government on why there will be a £300 million disadvantage to Scottish industry, starting in 1990. The chief executive of the Scottish Tories, John MacKay—of beloved memory—admitted that there would be a period of at least 10 years from 1990 to the year 2000 when Scottish business would be disadvantaged to that extent, and the Government appear to be taking no note of that. Why will the Minister not tell us why a different rate of taxation is to be imposed on Scottish businesses as compared with businesses in the north of England?

Photo of Andrew Welsh Andrew Welsh , Angus East 12:09 am, 11th July 1988

I note that the Conservative party has run out of speakers. I shall speak briefly to allow the maximum number of speakers from the Opposition, because it is important that the voice of Scotland in opposition to this disgraceful measure is heard as fully as possible.

The point of the order is to withdraw about £140 million from the local government system in Scotland—money that could be used to provide services, create employment and allow local authorities to maintain and increase their standards of service. The people of Scotland will be the losers from the order, because it will affect the provision of services to individuals, families and the business community.

The Government have a clear and consistent policy of withdrawing financial support from local authorities, which has the inevitable consequence of poorer services or higher rates bills, and, as the Government also operate a clawback penalty system, the inevitable consequences of the order will be poorer local government services for the people. It is yet another example of how central Government are destroying Scottish local government. By this order they are removing £140 million from local authorities' budgets, but at the same time they load new legislation and new financial burdens on the system. The idea of runaway local government spending is a myth, and apart from a few maverick exceptions, the reality is of a highly competent, professional and effective local government system in Scotland coping daily with myriad needs.

The real culprit in rates increases—demonstrably so if one studies the excellent academic work by Dr. Arthur Midwinter and others in our universities—is the withdrawal by central Government of rate support grant funding, and with this order the Government are at it again. They have presided over a massive deliberate withdrawal of funds from Scottish local authorities. Between 1978–79 and 1988–89, the cumulative reduction in local authority grant, calculated at 1988–89 figures, was £1,930 million. Government policy has impoverished local government services at district, regional and island council levels. No national organisation can readily absorb such punishment, and the victim of the Government's policy of loading new responsibilities on to local authorities at the same time as withdrawing their funds is the provision of services to local people.

The Government have acted unfairly towards Scottish local authorities, and their policy must affect every ratepayer. COSLA says: The Secretary of State has already agreed that the penalty system will be withdrawn as from 1 April 1989 and the imposition of the £140 million penalty in the current year will create a situation whereby community charges will require to be considerably higher than would otherwise have been the case. Unless service levels are reduced penalties will be carried over into 1989/90 and rest solely with community charge payers. We should contrast the Scottish Office treatment of poll tax payers with the position in England, where no penalties will be applied in the final year. No wonder that COSLA feels that a similar arrangement should apply to Scotland. We are entitled to ask the Government—and to receive an answer tonight—why Scotland should be treated less fairly than England over the poll tax.

The order is typical of the cavalier and unfair treatment meted out to local authorities by successive Governments. It is unfair and it will create massive and unnecessary problems for the local authorities. It should be rejected.

Photo of Mrs Maria Fyfe Mrs Maria Fyfe , Glasgow Maryhill 12:15 am, 11th July 1988

Once again I intend to respond to the disgraceful attack on the integrity of the director of finance of Glasgow district council. This person has been accused of telling the council, and thereby the Glasgow public, what it suits the Labour administration to hear. I worked closely with Mr. English for several years. I know from direct experience that he would not shirk telling the council what it did not want to hear. He is not a person who seeks to curry favour. That attack says much more about the hon. Member for Eastwood (Mr. Stewart) than about Mr. English.

The hon. Member for Eastwood said that he thought that the clawback of rate support grant was justified, on the peculiar ground that Glasgow district council carries a large contingency fund or surplus. That is pretty strange reasoning. The Government say that it relates purely to overspend. They would be delighted if councils amassed funds and did not spend them on services, but according to the hon. Member for Eastwood they are being punished for doing so. He knows that Glasgow district council held its rate steady for several years and that this year there was a slight decrease. It is not about vastly increased rates or about holding a surplus; it is supposed to be about excessive and unreasonable expenditure.

As the average increase was only 3 per cent., do the Minister and the hon. Member for Eastwood think that 3 per cent. was excessive and unreasonable? [Interruption.] If the hon. Member for Eastwood wants to intervene, I might allow him to do so, but I do not intend to respond to stupid interruptions from a sedentary position. [Interruption.]

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

Order. There are too many sedentary interruptions from both sides of the House. I should very much like to listen to the hon. Lady's speech.

Photo of Mrs Maria Fyfe Mrs Maria Fyfe , Glasgow Maryhill

But the sedentary interruptions on this side of the House are supportive.

I shall put some questions to the Minister, not in the hope that he will answer them but to have them on record. I fully expect the Minister to do what he has done on previous occasions at the Dispatch Box and to avoid answering my questions. Does he accept that inflation, poll tax administration and teachers' salaries account for the majority of the budgeted excess that the order intends to penalise? If so, does he think that that is fair, or will he admit that it is a blatant attempt to force real cuts?

Does the Minister think that a 3 per cent. increase on the previous year's budgets was excessive and unreasonable? If so, does he think that anybody else thinks that it was excessive and unreasonable? If not, why is the majority of the penalty falling on those authorities whose budgets have increased by only 3 per cent.? What justification can there be for the top level of penalty exceeding more than a pound for pound loss of grant? Does he intend to impose £100 on two adults in a household in the first year of the poll tax, or does he hope that those councils will make drastic budget cuts and thereby provide a worse service than the people voted for in recent district elections, in the previous regional elections and in the general election?

Does he believe that the domestic sector—we are talking local government jargon here, but everyone in the House ought to know that "domestic sector" means ordinary families and not business ratepayers—should bear the burden, when they represent only 40 per cent. of the total rating base?

Finally, how can the Minister explain the imposition of this penalty on Scotland, when the Secretary of State for the Environment dare not impose any such penalty on England?

Photo of John McFall John McFall , Dumbarton 12:19 am, 11th July 1988

The order concerns £140 million that is being withdrawn from 1 April 1989, but £136 million of that—over 97 per cent.—is a result of the Government's negligence in refusing to reflect the rate of inflation in rate support resettlement grants over the past six or seven years. Only £4 million is a consequence of local authorities' actions. That means that poll tax levels will have to be higher than they would otherwise have been, as the penalties will have to be carried forward.

During the past six months we have heard that the Scottish legislation and that for England and Wales will come into line in defining such categories as the severely mentally handicapped. Why, then, can the Minister not pledge that these penalties will not be carried forward for 12 months, as the Secretary of State for the Environment did in his statement of 7 July in regard to England and Wales? Otherwise, next April, Scotland will have the poll tax along with rate capping, and it will be unique in that respect. If the Government want to be fair, why cannot they give us the same pledge that the Secretary of State for the Environment gave to England and Wales?

The penalty figures suggest that an average couple in Strathclyde region will have to pay an extra £100. That will destroy at a stroke the so-called link between spending and accountability to which the Government have referred during the past six, 12 or 18 months. It will also destroy the link between spending and the poll tax charge.

In future the Government will provide about 80 per cent. of local authorities' funds, with the authorities having to find the rest. If anything, that is a centralising measure. The Chartered Institute of Public Finance and Accountancy has carried out a survey over the past few months of nearly 50 local authorities in England and Wales. It found that, on the figures available, in about 26 authorities poll tax levels would go up while the authorities' spending fell. In 22, they found the opposite. There is no accountability, and carrying forward the penalties will only penalise Scottish poll taxpayers even more.

It is said that the tariff will be reduced from 175 to 110 per cent. As my hon. Friend the Member for Glasgow, Maryhill (Mrs. Fyfe) has said, the burden will fall entirely on the domestic sector. I well remember in the past few years asking Strathclyde regional council to petition the Government to save social projects in our area—projects such as latchkey schemes and schemes to help alcoholics. Not only did the Government not save the projects but they penalised Strathclyde regional council 110 per cent. over budget because the council had a conscience and decided to save them.

If the Government have any conscience, they should let the poll tax payers in Scotland start with a clean sheet. As my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said, over the past few years rate support grant has fallen from 68·5 per cent. in 1981 to 50 per cent. now. If the order is passed, there will be a total loss of £3 billion. Translated into its value in terms of rates, that means that poll tax payer in Scotland from next year would be entitled to a two-year rate-free period if the money were reinstated.

The problems of local government are nothing to do with local authorities, which have done their best to balance the books and provide services of all kinds over the past seven years. Their problems stem from the actions of the Government. If the Government have any conscience they will cancel the penalties that are being carried over to next year and let the poll tax payers of Scotland start with a clean sheet.

Photo of Tommy Graham Tommy Graham , Renfrew West and Inverclyde 12:27 am, 11th July 1988

We have heard the Minister castigate Strathclyde regional council. It was not so long ago that the previous Secretary of State for Scotland, the right hon. Member for Ayr (Mr. Younger), went around the world praising that council as an excellent, prudent and responsible authority. The council is in an area of huge deprivation, made worse since the Government came to power in 1979. Since then, the Government have cut almost £2 billion from Strathclyde alone.

Since 1979, deprived areas have got worse; in 1979 there were 45—now 78 are so designated. I can see the Secretary of State having a wee laugh. I can assure him that people in Strathclyde are not laughing at the damage inflicted on them by the Government.

The Minister mentioned local government guidelines. When Dick Stewart was leader of Strathclyde regional council he said that no one could tell it what the guidelines were. The figures were mythical, picked out of a hat. The officers and councillors of Strathclyde would learn more from the "Hitchhiker's Guide to the Galaxy" than from what the Scottish Office puts out.

It is appalling that the Minister is attacking Strathclyde, given that it looks after nearly half the population of Scotland—2,500,000 people who are waiting with trepidation for the poll tax to be implemented. If the Minister goes ahead with the clawback there will he a lot of weeping and wailing in Strathclyde because of the damage that that would inflict on the area. For the first time ever, the council would have to consider cutting home helps, concessionary fares, social work and services for the elderly—and the police. That would be a tragedy. The Government should reverse the policy of clawback and give the people of Strathclyde some hope and some future to look forward to.

Instead of castigating Strathclyde, the Government should start to give it a bit of support. They should give some encouragement to local councillors to carry out their mandate. Those councillors were democratically elected and the number of Labour councillors has increased. They have not lost seats but have gained seats at every election. The people of Strathclyde have shown that they wish to have Labour-controlled councils and no Tories.

Photo of Mr Brian Wilson Mr Brian Wilson , Cunninghame North 12:30 am, 11th July 1988

Everything that my hon. Friend the Member for Renfrew, West and Inverclyde (Mr. Graham) has said is true. Perhaps the most eloquent comments were the horse laughs of ignorance from Conversative Members in response to the references to poverty in Strathclyde. At other times Conservative Members, and especially Scottish Office Ministers, seek to exploit the achievements of Glasgow and Strathclyde, but when it comes to the bit, the mass of people in those places need Government financial support to give them a decent standard of living and the decent housing and services that they desperately require.

Ministers are only too happy to participate in the PR. With one hand they seek to take the credit for the achievements of Glasgow and Strathclyde and with the other they take away the resources that Glasgow, Strathclyde and other districts in Strathclyde so badly need.

Scottish Office Ministers are making a deliberate and cynical attempt to raise the starting point of the poll tax in Scotland. That is what the measure is about. If the people of Scotland take note of nothing else that comes out of the debate, they must take note of the contrast between what the Secretary of State for Scotland and his sidekick the Minister of State are doing compared to what is happening in England. What they are doing is in direct contrast to the words of the Secretary of State for the Environment who specifically said that no grant penalty system would operate in England in the final year before the introduction of the community charge. He said: Under my proposals for closing down the system, grant payments to authorities will not be affected by their level of spending in 1989–90."—[Official Report, 7 July 1988; Vol. 136, c. 1200.] Those words and their contrast to what Scottish Office Ministers are about tonight could not be more specific. Ministers are forcing up the level of poll tax in Scotland in some confused hope of gaining political advantage.

We have had news tonight of the departure from office of Mr. Alex Pagett, hired less than a year ago as the propaganda minister for the Vichy regime in New St. Andrew's house. It was discreditable for Mr. Pagett to take the job in the first place, but credit is due to him for, within a few months, saying that he has no stomach for the task of acting as propagandist-in-chief for dishonest Ministers who consistently seek to impose on the people of Scotland policies for which they were not elected. Those policies have no popular mandate in Scotland and can be imposed only by what the Secretary of State for Scotland calls the Gatling gun. If the Government choose to rule by the Gatling gun they cannot expect any respect from the Opposition or from the electors in Scotland. They cannot even retain the loyalty of the hirelings that they have brought in to retrieve the discredited name of the Conservative party in Scotland.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale 12:33 am, 11th July 1988

It is conventional to say at this stage that the debate has been interesting and sometimes productive. The only substantive point of any novelty that has emerged in this debate is the Pagett point. I am happy to be able to assure the House of Mr. Pagett's departure does not incur penalty and will not affect the guidelines of the Scottish Conservative party. Our guideline remains the prudent handling of the economy, and that is evidenced by the order.

The hon. Member for Glasgow, Garscadden (Mr. Dewar) raised a number of matters and claimed that Strathclyde and Lothian were being hammered. He carefully played down the point that Strathclyde was budgeting no less than £75 million over its guideline and that Lothian was about £40 million over budget.

As my hon. Friend the Member for Eastwood (Mr. Stewart) pointed out, if the authority were to reduce its guidelines by just 1 per cent., it would reduce its penalty by £44 million. If it reduced it by 2 per cent., its saving would be over £66 million. There is a strong and clear incentive to the Strathclyde local authority to reduce its spending for the sake of its ratepayers and for the sake of its community charge payers next year. As Opposition Members have said, the penalties will be carried forward to the community charge, but, by the same token, a deduction in spending will also carry forward a benefit to the community charge payers next year.

When the hon. Member for Garscadden suggests that the local authorities would have some difficulty in meeting those targets, I should again point out to him that the guidelines this year are 4·7 per cent. up on last year's budgets and no less than 8·3 per cent. up on guidelines.

The hon. Gentleman made a bizarre point about the gearing of the community charge.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

I am sorry, but I have no time to give way.

The hon. Gentleman also referred to the effect that the penalty would have on community charge payers. Community charge payers will face a burden next year if spending is not reduced to guideline, but it works the other way round, and the benefit to community charge payers can be considerable.

Suddenly my right hon. Friend the Secretary of State for the Environment has become the hero of the Labour Benches, as a result of his announcement that there will be no penalty in England in the year before the introduction of the community charge. The impact of that is, of course, that grant penalty will end in Scotland and in England in the same year. I should have thought that the Opposition Benches would have welcomed that. If we do something in Scotland before they do it in England, we are being guinea pigs. If we do it after them, we are being lemmings. If we do it at the same time, we are accused of being copycats.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

I shall not give way, as I have only two minutes left.

The hon. Gentleman raised the question of cuts in the rate support grant and the hon. Member for Banff and Buchan (Mr. Salmond)——

Photo of Tom Clarke Tom Clarke Shadow Minister (Disability)

On a point of order, Madam Deputy Speaker. On a major issue of this kind—it is almost a constitutional issue—influenced by the policy in Cabinet, which the Secretary of State for Scotland has accepted, would it not be in order, even at this last minute——

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. That is not a point of order for the Chair. I call Mr. Lang.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

The hon. Member for Garscadden raised the question of cuts in the rate support grant, a familiar old story. He forgot to refer the House to the fact that the last Labour Government, in two successive years, cut the rate support grant by a total of no less than 6·5 per cent. No cut by any Conservative Government has ever come close to that. The hon. Gentleman also forgot that the average aggregate Exchequer grant has been increased considerably. Over the past five years, it has risen by 23 per cent. inflation has risen by 25 per cent., yet rates have risen by 52 per cent.

The hon. Gentleman referred to grant penalties as artificial, vindictive and arbitrary, but let him reflect on the history of grant penalties and recall that it was a Labour Government who brought in grant penalties in the first place—admittedly, as a crude and high-handed mechanism for controlling local authorities. We have considerably improved and refined the system, first, by excluding authorities below guideline from penalty, which were penalised under the last Labour Government; secondly, by relating penalties directly to overspend, instead of the crude impost of the last Labour Government; and, thirdly, by providing for the penalties to be revised both at provisional and at outturn stages. We now have a tariff that impacts moderately on low-spending—

It being one and a half hours after the commencement of proceedings on the motion, MADAM DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 14.

The House divided: Ayes 242, Noes 184.

Division No. 406][12.38 am
Aitken, JonathanBowden, Gerald (Dulwich)
Alexander, RichardBowis, John
Alison, Rt Hon MichaelBraine, Rt Hon Sir Bernard
Allason, RupertBrazier, Julian
Amess, DavidBrittan, Rt Hon Leon
Amos, AlanBrown, Michael (Brigg & Cl't's)
Arbuthnot, JamesBruce, Ian (Dorset South)
Arnold, Jacques (Gravesham)Burns, Simon
Ashby, DavidBurt, Alistair
Atkins, RobertButcher, John
Atkinson, DavidButler, Chris
Baker, Rt Hon K. (Mole Valley)Butterfill, John
Baker, Nicholas (Dorset N)Carlisle, John, (Luton N)
Baldry, TonyCarlisle, Kenneth (Lincoln)
Batiste, SpencerCarrington, Matthew
Beaumont-Dark, AnthonyCarttiss, Michael
Bellingham, HenryCash, William
Bendall, VivianChope, Christopher
Bennett, Nicholas (Pembroke)Clark, Sir W. (Croydon S)
Benyon, W.Coombs, Simon (Swindon)
Bevan, David GilroyCurrie, Mrs Edwina
Biffen, Rt Hon JohnDavies, Q. (Stamf'd & Spald'g)
Blackburn, Dr John G.Douglas-Hamilton, Lord James
Blaker, Rt Hon Sir PeterDunn, Bob
Bonsor, Sir NicholasDurant, Tony
Boscawen, Hon RobertEmery, Sir Peter
Boswell, TimFallon, Michael
Bottomley, PeterField, Barry (Isle of Wight)
Bottomley, Mrs VirginiaForman, Nigel
Bowden, A (Brighton K'pto'n)Gale, Roger
Garel-Jones, TristanMiller, Sir Hal
Gorman, Mrs TeresaMills, Iain
Gow, IanMitchell, Andrew (Gedling)
Grant, Sir Anthony (CambsSW)Mitchell, David (Hants NW)
Greenway, Harry (Ealing N)Moate, Roger
Greenway, John (Ryedale)Montgomery, Sir Fergus
Gregory, ConalMorrison, Sir Charles
Griffiths, Peter (Portsmouth N)Morrison, Rt Hon P (Chester)
Grist, IanMoss, Malcolm
Ground, PatrickMoynihan, Hon Colin
Gummer, Rt Hon John SelwynNeale, Gerrard
Hamilton, Hon Archie (Epsom)Needham, Richard
Hamilton, Neil (Tatton)Neubert, Michael
Hanley, JeremyNewton, Rt Hon Tony
Hannam, JohnNicholls, Patrick
Hargreaves, A. (B'ham H'll Gr')Nicholson, David (Taunton)
Hargreaves, Ken (Hyndburn)Nicholson, Emma (Devon West)
Harris, DavidOnslow, Rt Hon Cranley
Haselhurst, AlanOppenheim, Phillip
Hawkins, ChristopherPage, Richard
Hayes, JerryPaice, James
Hayhoe, Rt Hon Sir BarneyPatnick, Irvine
Hayward, RobertPatten, Chris (Bath)
Heathcoat-Amory, DavidPawsey, James
Heseltine, Rt Hon MichaelPeacock, Mrs Elizabeth
Higgins, Rt Hon Terence L.Porter, David (Waveney)
Hind, KennethPowell, William (Corby)
Hogg, Hon Douglas (Gr'th'm)Price, Sir David
Holt, RichardRaffan, Keith
Howard, MichaelRaison, Rt Hon Timothy
Howarth, Alan (Strat'd-on-A)Redwood, John
Howarth, G. (Cannock & B'wd)Renton, Tim
Howell, Rt Hon David (G'dford)Rhodes James, Robert
Hughes, Robert G. (Harrow W)Riddick, Graham
Hunt, David (Wirral W)Rifkind, Rt Hon Malcolm
Hunt, John (Ravensbourne)Roberts, Wyn (Conwy)
Hunter, AndrewRossi, Sir Hugh
Irvine, MichaelRost, Peter
Jack, MichaelRowe, Andrew
Janman, TimRumbold, Mrs Angela
Johnson Smith, Sir GeoffreyRyder, Richard
Jones, Gwilym (Cardiff N)Sackville, Hon Tom
Jones, Robert B (Herts W)Sainsbury, Hon Tim
Kellett-Bowman, Dame ElaineSayeed, Jonathan
Key, RobertShaw, David (Dover)
King, Roger (B'ham N'thfield)Shaw, Sir Giles (Pudsey)
Kirkhope, TimothyShaw, Sir Michael (Scarb)
Knapman, RogerShephard, Mrs G. (Norfolk SW)
Knight, Greg (Derby North)Shepherd, Colin (Hereford)
Knowles, MichaelShepherd, Richard (Aldridge)
Knox, DavidShersby, Michael
Lamont, Rt Hon NormanSims, Roger
Lang, IanSkeet, Sir Trevor
Latham, MichaelSmith, Sir Dudley (Warwick)
Lawrence, IvanSmith, Tim (Beaconsfield)
Leigh, Edward (Gainsbor'gh)Soames, Hon Nicholas
Lennox-Boyd, Hon MarkSpeed, Keith
Lester, Jim (Broxtowe)Spicer, Sir Jim (Dorset W)
Lightbown, DavidSpicer, Michael (S Worcs)
Lord, MichaelSquire, Robin
Luce, Rt Hon RichardStanbrook, Ivor
Lyell, Sir NicholasSteen, Anthony
McCrindle, RobertStern, Michael
Macfarlane, Sir NeilStevens, Lewis
MacGregor, Rt Hon JohnStewart, Allan (Eastwood)
MacKay, Andrew (E Berkshire)Stewart, Andy (Sherwood)
McLoughlin, PatrickStradling Thomas, Sir John
McNair-Wilson, P. (New Forest)Sumberg, David
Madel, DavidSummerson, Hugo
Major, Rt Hon JohnTapsell, Sir Peter
Malins, HumfreyTaylor, Ian (Esher)
Mans, KeithTaylor, John M (Solihull)
Maples, JohnTemple-Morris, Peter
Marland, PaulThompson, Patrick (Norwich N)
Marshall, John (Hendon S)Thorne, Neil
Martin, David (Portsmouth S)Thornton, Malcolm
Mates, MichaelThurnham, Peter
Maude, Hon FrancisTownend, John (Bridlington)
Mellor, DavidTredinnick, David
Meyer, Sir AnthonyTrippier, David
Trotter, NevilleWhitney, Ray
Twinn, Dr IanWiddecombe, Ann
Viggers, PeterWiggin, Jerry
Waddington, Rt Hon DavidWilkinson, John
Waldegrave, Hon WilliamWilshire, David
Walden, GeorgeWood, Timothy
Walker, Bill (T'side North)Woodcock, Mike
Waller, GaryYeo, Tim
Ward, JohnYoung, Sir George (Acton)
Wardle, Charles (Bexhill)
Watts, JohnTellers for the Ayes:
Wells, BowenMr. Peter Lloyd and Mr. David Maclean.
Wheeler, John
Abbott, Ms DianeDalyell, Tam
Adams, Allen (Paisley N)Davies, Ron (Caerphilly)
Allen, GrahamDavis, Terry (B'ham Hodge H'l)
Anderson, DonaldDewar, Donald
Archer, Rt Hon PeterDixon, Don
Armstrong, HilaryDobson, Frank
Ashley, Rt Hon JackDoran, Frank
Barnes, Harry (Derbyshire NE)Duffy, A. E. P.
Barron, KevinDunnachie, Jimmy
Battle, JohnEadie, Alexander
Beckett, MargaretEastham, Ken
Bell, StuartEvans, John (St Helens N)
Benn, Rt Hon TonyEwing, Harry (Falkirk E)
Bennett, A. F. (D'nt'n & R'dish)Ewing, Mrs Margaret (Moray)
Bermingham, GeraldFatchett, Derek
Blunkett, DavidFaulds, Andrew
Boateng, PaulFields, Terry (L'pool B G'n)
Boyes, RolandFlannery, Martin
Bradley, KeithFlynn, Paul
Bray, Dr JeremyFoot, Rt Hon Michael
Brown, Gordon (D'mline E)Foster, Derek
Brown, Nicholas (Newcastle E)Fraser, John
Brown, Ron (Edinburgh Leith)Fyfe, Maria
Buckley, George J.Galbraith, Sam
Campbell, Menzies (Fife NE)Galloway, George
Campbell, Ron (Blyth Valley)Garrett, John (Norwich South)
Campbell-Savours, D. N.Garrett, Ted (Wallsend)
Canavan, DennisGeorge, Bruce
Clark, Dr David (S Shields)Godman, Dr Norman A.
Clarke, Tom (Monklands W)Golding, Mrs Llin
Clay, BobGordon, Mildred
Clelland, DavidGould, Bryan
Clwyd, Mrs AnnGraham, Thomas
Cohen, HarryGrant, Bernie (Tottenham)
Coleman, DonaldGriffiths, Win (Bridgend)
Cook, Frank (Stockton N)Grocott, Bruce
Cook, Robin (Livingston)Hattersley, Rt Hon Roy
Corbett, RobinHaynes, Frank
Corbyn, JeremyHeffer, Eric S.
Cousins, JimHinchliffe, David
Cryer, BobHogg, N. (C'nauld & Kilsyth)
Cummings, JohnHolland, Stuart
Cunliffe, LawrenceHome Robertson, John
Hood, JimmyO'Neill, Martin
Howarth, George (Knowsley N)Orme, Rt Hon Stanley
Howell, Rt Hon D. (S'heath)Parry, Robert
Hughes, John (Coventry NE)Patchett, Terry
Hughes, Robert (Aberdeen N)Pike, Peter L.
Hughes, Roy (Newport E)Powell, Ray (Ogmore)
Hughes, Sean (Knowsley S)Primarolo, Dawn
Illsley, EricQuin, Ms Joyce
John, BrynmorRadice, Giles
Jones, Martyn (Clwyd S W)Redmond, Martin
Kaufman, Rt Hon GeraldRees, Rt Hon Merlyn
Lambie, DavidReid, Dr John
Lamond, JamesRichardson, Jo
Leadbitter, TedRobertson, George
Leighton, RonRobinson, Geoffrey
Lestor, Joan (Eccles)Rogers, Allan
Lewis, TerryRooker, Jeff
Litherland, RobertRoss, Ernie (Dundee W)
Livsey, RichardRowlands, Ted
Lloyd, Tony (Stretford)Salmond, Alex
Lofthouse, GeoffreySedgemore, Brian
Loyden, EddieSheerman, Barry
McAllion, JohnSheldon, Rt Hon Robert
McAvoy, ThomasShore, Rt Hon Peter
McCartney, IanShort, Clare
Macdonald, Calum A.Skinner, Dennis
McFall, JohnSmith, Andrew (Oxford E)
McKay, Allen (Barnsley West)Smith, C. (Isl'ton & F'bury)
McKelvey, WilliamSnape, Peter
McLeish, HenrySpearing, Nigel
McNamara, KevinSteel, Rt Hon David
McTaggart, BobSteinberg, Gerry
McWilliam, JohnThompson, Jack (Wansbeck)
Madden, MaxTurner, Dennis
Mahon, Mrs AliceVaz, Keith
Marek, Dr JohnWall, Pat
Marshall, Jim (Leicester S)Wardell, Gareth (Gower)
Martin, Michael J. (Springburn)Wareing, Robert N.
Martlew, EricWelsh, Andrew (Angus E)
Maxton, JohnWelsh, Michael (Doncaster N)
Meacher, MichaelWilliams, Rt Hon Alan
Meale, AlanWilliams, Alan W. (Carm'then)
Michael, AlunWilson, Brian
Millan, Rt Hon BruceWinnick, David
Moonie, Dr LewisWise, Mrs Audrey
Morgan, RhodriWorthington, Tony
Morley, ElliottWray, Jimmy
Morris, Rt Hon J. (Aberavon)
Mowlam, MarjorieTellers for the Noes:
Mullin, ChrisMr. Adam Ingram and Mr. Nigel Griffiths.
Murphy, Paul

Question accordingly agreed to.

Resolved,That the Rate Support Grant (Scotland) Order 1988, dated 11th May 1988, a copy of which was laid before this House on 19th May, be approved.