Local Government Finance

– in the House of Commons at 3:55 pm on 6th November 1989.

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Photo of Mr Chris Patten Mr Chris Patten , Bath 3:55 pm, 6th November 1989

With permission, Mr. Speaker, I should like to make a statement about the local authority grant settlement for England for 1990–91.

I am today sending a consultation paper to the local authority associations setting out my proposals. Copies are being sent to each local authority, and are available in the Vote Office. The consultation paper summarises the various reports which will be made later this year. Drafts of two of the reports, dealing with the distribution of grant and the calculation of relevant population, have also been circulated. There are also exemplifications showing the amount of grant and the community charges which, on certain spending assumptions, would result for each area. In this first year of the new system a number of basic definitions and principles have to be set out, and that accounts for the large amount of material. It may help the House if I outline the main features of the proposals.

My right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) proposed in July that the total of external support, known as aggregate external finance, for local government services next year should be £23·1 billion, an increase of 8·5 per cent. over the figure for this year on a comparable basis. That support comprises three elements the yield from business rates, specific grants, and revenue support grant.

To calculate the yield from non-domestic rates, I have now made a firmer estimate of the national non-domestic rate multiplier for 1990–91. On the basis of the most up-to-date information available about the effects of the 1990 rating revaluation, I estimate that the multiplier for 1990–91 will be 36p for England. That figure will be provisional until I have final information about the effects of the revaluation, which will be available before the revenue support grant report is laid before the House; but I would expect it to vary only very slightly, if at all. It also includes a small allowance for reductions in rateable values in cases where the initial valuations turn out to be high.

Using that multiplier, I estimate the yield from non-domestic rates in 1990–91, and hence the amount to be distributed to local authorities, will be £10,428·5 million. That estimate represents the total amount which I expect charging authorities to receive in respect of rates paid by private businesses, by the nationalised industries, and by local authorities themselves, together with a contribution in aid in respect of Crown property. I have made allowance for a number of factors, such as rate income forgone as a result of empty properties and of charitable or discretionary relief, and for losses in and costs of collection. The amount estimated to he collected from private businesses and the nationalised industries is in line with the Government's commitment that the yield from these sectors will be broadly the same in real terms as in the current year, 1989–90.

I anticipate that specific grants and transitional grants will amount to £3,182 million. Further details will be available at the time of the Autumn Statement.

I am proposing that revenue support grant should be £9,490 million. Our principal objective in distributing grant is to ensure that, in general, if each authority spends so as to provide a common standard of service, the community charge could then be set at the same level in every area before allowing for the transition arrangements. My right hon. Friend announced in July that the Government consider that it would be appropriate for local authorities to spend £32–8 billion in total in providing services, an increase of 11 per cent. over the amount which, on a comparable basis, we thought it appropriate to spend this year. In order to distribute grant, we shall need to calculate an assessment for each authority of what it would cost to provide services locally to a common standard, consistent with that total.

The proposed method for making these assessments, known as the standard spending assessments or SSAs, is set out in the documents published today. SSAs replace grant-related expenditure assessments in the present system. In summary, the SSA for each authority will be based on an assessment for each of the main services for which it is responsible. It will be calculated using information for each authority about factors which lead to differences in the costs of providing services to a common standard. In this way, we can take account of variations between authorities in the costs they face. These proposals take account of recent research, extensive discussions between officials over the last year and the views of the local authority associations.

SSAs are central to the new grant system. Apart from the transitional arrangements, the relationship between an authority's budget and its SSA determines the community charge for that area. If spending is higher than the SSA, the community charge will be higher than the national community charge for standard spending, and vice versa. It is therefore important that the methods used to calculate these assessments should be fair and right.

If authorities were each to spend at the level of their SSA, the community charge in each area would be about £278. The final figure will not be known until we know the number of people on community charge registers. This figure, the community charge for standard spending, will be the benchmark for accountability. It will appear on the bill which each chargepayer will receive and will help chargepayers to assess the policies and performances of their authorities. In this way, councils will be made accountable to those who must pay for their activities.

The existing system of grant-related expenditure assessments had become over-complex and difficult to explain. We have therefore introduced a simpler, more understandable method.[Interruption.] I appreciate the fact that all these things are relative. As now, the method is applied to each authority, using objective measures of the cost of providing services such as the number of pupils to be educated and the number of miles of road to be maintained. There has been discussion about the factors to be taken into account and the weight to be attached to each, and the associations have put forward a range of alternative suggestions. In my view, the proposals that I have made represent the fairest judgment between the various viewpoints. I believe that they provide the best basis that can be devised for distributing grant.

In place of the 63 separate assessments in the present GRE system there will be 13 components: 11 covering the five major services—education, social services, fire and civil defence, police and highway maintenance—another covering all other services and one reflecting the financial costs of capital expenditure. In general, the method proposed involves fixing a unit cost of providing each service and multiplying this by the number of clients for that service. Our original proposals were placed in the Library last December. For some services we have amended these proposals after discussion. In particular, in response to representations, we are proposing to include an allowance for overnight visitors—to reflect the demands that tourists make on local services—and to recognise separately the costs of flood defence and coast protection work. I know that these matters are of particular concern to hon. Members from the areas affected.

The consultation paper also describes the transitional arrangements. As my noble Friend Lord Hesketh announced on 11 October, it is intended that the area safety net will be for one year only. For the following three years the Exchequer will pay for protection for areas that lose as a result of introducing the community charge and related changes. In 1990–91 chargepayers in these areas will he expected to find the first £25 of any loss to their area, but above that there is full protection. Gaining areas will receive about half their gains in the first year, and the full gain in the second year. It is right that the new system should he phased in, but gainers will still see substantial gain from the start.

My right hon. Friend proposed in July two transitional grants to provide extra help for chargepayers for inner London boroughs, and in areas with very low domestic rateable values. These grants will significantly reduce community charges in some areas.

I have included with the consultation paper exemplifications showing the amounts that each area would receive under these proposals. I stress, however, that figures for authorities are provisional at this stage, and will change, though in most cases only marginally, when local authorities notify me in December of the number of adults that they have included in their community charge registers.

The exemplifications also show what the community charge will be in each area if local authorities spend at the same level as their income from rates and grant in 1989–90, adjusted for changes in function, and increased to be consistent with spending of £32·8 billion in total. It is these charge levels which it is intended should form the basis of the transitional relief scheme announced last month to help principally those former ratepayers, pensioners and the disabled who would otherwise face increases of more than £3 a week. This relief scheme will cost about £300 million in 1990–91. In addition 9·5 million people will receive help through community charge benefits. Many individuals will, therefore, see their bills substantially reduced.

I have asked the local authority associations to respond to these proposals by 4 December. I hope to lay the formal documents before the House in early January for debate later that month. The proposals amount to a substantial package of support for local authorities. The amount of external support has increased by 8·5 per cent. If authorities budget sensibly and spend in line with the Government's assumptions, the average community charge next year should be about £278. If they can do better, charges will be lower. But if their spending increases faster, charges will be higher. Local authorities are now answerable to their chargepayers for their decisions.

Photo of Mr Bryan Gould Mr Bryan Gould , Dagenham

The Secretary of State knows that we and many others have long attacked the poll tax proposals as being inherently complicated and unworkable, and fundamentally unfair. He and his predecessors have tried to deflect that attack by taking refuge in misleading generalisations, and false and unrealistic assumptions. I am sorry to say that we have heard no improvement today. The mixture is much as before and the more additions that the right hon. Gentleman makes to the whole ramshackle structure, the more unconvincing and unstable it becomes.

At the heart of the illusions that the Government have sought to create is the fairy tale that the poll tax average is or could be £278. That figure is a hopeless mirage. It has increased with remarkable rapidity. The Government's estimate in 1986–87 began at £170. By 19 July it had risen to £275. Will the right hon. Gentleman confirm that, even in the interim, it has risen by a further £9 from £269—the true figure on 19 July because of the £200 million transitional specific grant—to £278? Does he agree that there is plenty of room yet for growth? Will he confirm that even if the figure were halfway accurate, local authorities could not be expected—indeed, he does not expect this of them—to meet that figure immediately or even in the foreseeable future? If that were the case, scores of Tory authorities would be pilloried by him as overspenders.

Will the Secretary of State confirm—and this is the most fundamental point—that the figure is an invention because it is based on an invention? He estimates a level of local government spending of £32·8 billion, but that figure is based on an assumed level of spending this year rather than the actual level of spending. Does he acknowledge that all the local authority associations, irrespective of political control or allegiance, agree that that basic error leaves local authorities £1·6 billion adrift?

Will the right hon. Gentleman accept that the basic error is compounded by a further error on inflation? One assumes that the inflation rate has been calculated at the forecast of the Chancellor of the Exchequer of 4·5 per cent., rather than the actual retail prices index figure. When that is taken into account as well, it leaves a shortfall of £2·5 billion. Will the Secretary of State further agree that every last penny of that shortfall will have to be financed out of poll tax, as it is not covered by grant or aggregate external financing, and that means that the figure of £278 is hopelessly out of touch with the reality, which is far in excess of that figure?

Does the Secretary of State also recognise that his basic errors on the side of optimism are added to by the view that he and his officials have taken in making their calculations? They believed that they could safely assume 100 per cent. registration and collection. Will he confirm that everybody who has studied the issue knows and understands that that is hopelessly optimistic? Those errors invalidate the figure of £278 which the Secretary of State described as the "benchmark for accountability".

The consequences of those errors are serious. Does the Secretary of State acknowledge that for local authorities, with their obligation to deliver services, the errors mean that they are faced with Government-sanctioned pay increases to teachers, firemen and policemen far in excess of the actual inflation figure, let alone the Chancellor's fairy tale, and that they will have no option, therefore, but to cut services further? In view of that shortfall, will he tell local authorities this afternoon where he expects those cuts to be made? Should local authorities employ fewer teachers, social workers or home helps? Will he concede that, if his benchmark is so hopelessly wrong, so too are all the other calculations that flow from it?

It can already be seen that the transitional relief scheme, for example, will fail to help most single people, those who will be liable to pay for the first time or those who do not own or rent their homes and who will most need help. However, it will miss its target by an even wider margin because it proceeds on the basis of a ludicrously low notional poll tax figure. Many who believe that they qualify for transitional relief will find that they are paying far more than an additional £3 a week and many of those who will pay more than £3 a week will not qualify for transitional relief.

Is the statement not typically uninformative about the needs formula used, and is not the formula itself, in so far as we know what it is, open to detailed objections? Why, for example, are overseas visitors excluded from the overnight visit figure that is included in the formula? Does not the statement keep up the long and unfortunate tradition of telling us nothing we need to know about the business rate? Is not the 36p figure useless and wholly uninformative for individual business men until they know the effects of revaluation? Is it not equally clear that the Confederation of British Industry has been rebuffed in its request for a £2 billion reduction in total business rate? Will the Secretary of State confirm that in saying that the business rate will be kept at the same level in real terms he is using a figure for the RPI different from that used to calculate local government spending? Is it not an astonishing inconsistency to use two different inflation rates in the same statement?

Is it not sad to see the Secretary of State so bogged down in a morass not of his creation and from which he cannot extricate himself, but is it not even sadder to contemplate the future of local government and the services for which it is responsible and the future of those millions who depend upon and pay for those services when they, too, become the victims of this Government's obsession?

Photo of Mr Chris Patten Mr Chris Patten , Bath

First, I welcome the hon. Member for Dagenham (Mr. Gould) to his new responsibilities. I can say without qualification that I hope that he enjoys his new job for as long as the hon. Member for Copeland (Dr. Cunningham) who we hope has enjoyed doing it for the past six years.

The hon. Gentleman seemed to base his questions on the principle that, whatever the level of local authority overspending this year, we should validate it. That is not remotely the Government's position, and nor, I imagine, would it be the position adopted in the new-look Monklands, East financial policy that the Opposition are pursuing. We are allowing for an increase of 11 per cent. in spending by local authorities next year—over what we believe they should have spent this year. The Audit Commission has suggested savings of £900 million that local authorities could make. The authorities have made about £350 million of those savings, so they still have some way to go.

Our central support for local authorities will increase next year by 8½ per cent., and I think that that is a fair settlement. It is a challenging settlement. If all Government Departments received equivalent settlements, I think that they would be quite pleased.

The hon. Member referred to the standard community charge figure. That figure represents what local authorities would have to charge if they were spending at a reasonable level. The figure has increased from £275 to £278 since July because of the increase in the number of exemptions. The hon. Gentleman is netting off the grant for the Inner London education authority and for low rateable value areas and so is not comparing like with like. I repeat that the community charge of £278 represents the figure that local authorities should have to charge to provide a reasonable service.

The hon. Gentleman referred to registration. So far registrations are going very well. I cannot guarantee that they will go quite as well as in one local authority area in Scotland where the registration figure was 106 per cent., although we can aim for that and we hope that registrations will be as successful as they have been in Scotland.

The hon. Member referred to the needs formula. As he knows, we have set out in considerable detail in the distribution report the basis on which the new needs formula is based. It is a simpler and better formula than the last one, taking into account, as it does, the cost of providing a service to the client and the number of clients. It is based on substantial research and lengthy discussions with local authorities, but perhaps in the next few weeks the hon. Gentleman will have suggestions to make about how we could modify it. He may, for example, think that we have been wrong to provide so well for the education needs of young children in Birmingham, Liverpool, Manchester and inner London, although I rather doubt it. If the hon. Gentleman has any suggestions about how we can improve the needs formula, we shall look forward to hearing from him in due course.

The hon. Gentleman's main argument was that we were wrong to replace domestic rates, or, to put it more correctly, wrong to introduce the community charge. There is at least one thing on which hon. Members on both sides of the House agree the domestic rating system is inequitable and it should go. The difference between us is that the Government have advanced proposals for replacing the domestic rating system, whereas the Labour party, I am afraid, has not. The Opposition periodically make a proposal and then take it away again. I am sure that the hon. Gentleman will have read the motion tabled by the Dagenham constituency Labour party at the Labour party conference, which called the party's proposals "unacceptable electorally and administratively". I assume that those proposals have now been dumped. However, we look forward to a time when the Opposition will be prepared to make the change from domestic rates and also meet the challenge of suggesting an alternative.

Several Hon. Members:

rose——

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

Order. I know that this is a very complicated statement, but we have a busy day before us. The Front-Bench spokesmen have taken about 30 minutes, I will give a comparable time to Back Benchers. May we have brief questions please?

Photo of Mr Hugh Rossi Mr Hugh Rossi , Hornsey and Wood Green

Is my right hon. Friend aware that the London borough of Haringey is still at the top of the league, with a community charge of £554? In the poorer areas of my constituency where rateable values are low, the £3 threshold will be insignificant for my constituents. It is absurd that community chargepayers must still make a contribution to the safety net. Is there nothing more that my right hon. Friend can do to help my constituents?

Photo of Mr Chris Patten Mr Chris Patten , Bath

I suggest that my hon. Friend's constituents should press their local authority to spend more sensibly. I believe that my hon. Friend will agree that the main reason for the impact of local authority spending on his constituents is the level at which that spending is pitched by the council. I believe that our interim relief scheme, the transitional relief scheme, should assist many people who would otherwise be paying more than £3 a week in additional charges. However, there is another way in which we may be obliged to help individual chargepayers. If local authorities insist on budgeting in a ludicrous way, and if they insist on budgeting at far too high a level, we will have no alternative but to cap them.

Photo of Mr Ronnie Fearn Mr Ronnie Fearn , Southport

May I first point out to the Minister that he promised me a copy of the statement at 2 pm and I did not receive it from his Department until 3.10 pm, in spite of a telephone call. The seventh paragraph of the statement refers to common standards to which every local authority must adhere. The statement contains something new, based on the common standard. What is the common standard of service?

Photo of Mr Chris Patten Mr Chris Patten , Bath

I apologise unreservedly to the hon. Gentleman for the fact that he did not receive a copy of the statement at the time that it was promised. I hope that other statements on local government finance—who knows, there may be some—will arrive with the hon. Gentleman on time.

The common standard is set out very clearly service for service. For example, we establish for education what the costs should be for each child and what particular factors should be taken into account. Similar considerations apply to personal social services and to other local authority services. The basis of those different assessments is included in the distribution report which I hope the hon. Gentleman will find helpful. Although we have reduced the number of individual assessments, I hope that we have not lost any of the necessary sophistication in order to produce a comprehensive and fair settlement.

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch

Is my right hon. Friend aware that in the few months since the previous statement was made by my right hon. Friend's predecessor my constituency has moved from being a contributor to the safety net to a recipient? In the short-term, my constituents will undoubtedly be grateful for that, as indeed is their Member of Parliament.

Will my right hon. Friend not hesitate to use the reserve powers that he has in law should we find at the end of the first year that there are such big rises in the uniform business rate, particularly in London, that many businesses would be threatened if they had to face similar increases in the second year?

Photo of Mr Chris Patten Mr Chris Patten , Bath

On my hon. Friend's first point, there are several reasons for the differences between the figures that my hon. Friend saw in July and those that he sees now. The most obvious change is that the figures that he saw in July were based on this year's spending rather than on next year's assumed spending. There are several other reasons for the change, including the movement from the grant-related expenditure assessment formula to standard spending assessments, and the decision to ring-fence the housing revenue account. Those and other factors have a bearing on the figures for hon. Members' constituencies.

On the uniform business rate, we have introduced reasonable transitional arrangements. They include particularly generous treatment for smaller businesses, and we have doubled the threshold definition for smaller businesses. I hope that we will be able to ensure that the UBR is introduced smoothly and without some of the dislocation which my hon. Friend understandably fears.

Photo of Mr Max Madden Mr Max Madden , Bradford West

As some Bradford schoolchildren are being sent home because their temporary classrooms are considered to be too dangerous for them to use, and as the Conservative chairman of the city's education committee says that £100 million is needed to put schools into a good state of repair, does the Secretary of State think that the spending limits for Bradford set out in his statement are realistic?

Photo of Mr Chris Patten Mr Chris Patten , Bath

The hon. Gentleman will find that provision for additional educational needs in Bradford includes extra expenditure on education. I have great confidence that Bradford council, which is led outstandingly well by councillor Pickles and others, will continue to provide the people of Bradford with a better deal than they have enjoyed in the past. One of the consequences of that Conservative council coming to office is a substantial attraction of new private investment to the city.

Photo of Mr John Lee Mr John Lee , Pendle

Despite my right hon. Friend's considerable charm and the transitional relief that has been announced, many people in low-rated areas such as Pendle will suffer substantial increases because of the community charge. May I make it clear to my right hon. Friend in the nicest way that my campaign and those of hon. Members with comparable constituencies will continue?

Photo of Mr Chris Patten Mr Chris Patten , Bath

I understand the particular problems faced by my hon. Friend in representing a constituency in which rateable values are low. As my hon. Friend knows, we have tried to give additional assistance to cope with that problem. I am sorry that my hon. Friend does not feel that it is sufficient. I look forward to discussing the matter with him further. I hope that we can come nearer to satisfying him and his constituents.

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

Will the Secretary of State confirm that, for metropolitan authorities, the figure in the seventh paragraph of the statement includes the extra poll tax for the police and fire authorities which is listed separately? Why are Birmingham citizens expected to pay a poll tax surcharge of £60 a head to pay for high-spending Tory authorities such as Blackpool? That will not wash, and the right hon. Gentleman knows it. Does the right hon. Gentleman accept that a couple living in an average-rated property in Birmingham will still lose more than £2 a week?

Given the added complications of this matter, which is made more complicated as the weeks go by, would it riot be a good idea to delay the introduction of the poll tax until 1991 and avoid the problems of the first year of safety nets, or, better still, put back the poll tax until after the general election?

Photo of Mr Chris Patten Mr Chris Patten , Bath

The answer to the hon. Gentleman's first question is yes. The answer to his second question is that, as he will have recognised from the figures, Birmingham is one of the major beneficiaries of the move from grant-related assessments to standard spending assessments. The hon. Gentleman will surely have the honesty to accept that. The largest beneficiaries from the changes, in one year only, are the largest contributors to the safety net. That is the position that existed in July and it still exists. They were talking about a one-year contribution only. Thanks to the move from GREAs to SSAs, as the hon. Gentleman knows, in the long-term his constituents will be better off. Recalling what the hon. Gentleman said in July about the likely level of the community charge for his constituents, I am sure that he will be delighted that the figure now is a good deal less than he feared in July.

Photo of Mr Anthony Beaumont-Dark Mr Anthony Beaumont-Dark , Birmingham, Selly Oak

Does my right hon. Friend accept that this is not as bad as we had feared in July? Will he further explain the business grants, which look like a mystery wrapped up in an enigma, and how they will ultimately affect businesses because the business rate is particularly important in Birmingham? According to those figures—which we have had two minutes to look at while the Minister has had three months—it seems as though businesses will be confused about whether we in Birmingham will be reasonably off or two or three times worse off than many other areas.

Photo of Mr Chris Patten Mr Chris Patten , Bath

My hon. Friend knows a good deal about business problems not only in the west midlands, but well beyond as well. If my hon. Friend consults some of those representing businesses and business organisations, he will find that the 36p poundage figure is a good deal less than many were predicting. It enables us to continue to raise broadly the same amount of money as has been raised this year. I think it is a fair figure. As my hon. Friend knows, one consequence of the move to the uniform business rate is, on balance, a shift of resources to the midlands and the north. I hope that that will help some of the parts of our country that are so important to our manufacturing future.

Photo of Mr John Fraser Mr John Fraser , Norwood

Does the Secretary of State realise that, no matter how much he tries to stamp on the fuse, the poll tax time bomb will still explode in the Tories' faces next year? Lambeth has now had varying figures for the poll tax per head of the population, varying from £287 to £547. That is a wide variation. Which figure is likely to be true?

Photo of Mr Chris Patten Mr Chris Patten , Bath

The lower figure would be nearer to being true if the Lambeth local authority spent its money and administered its affairs as competently as many other local authorities in London, such as nearby Wandsworth. Given the additional resources that Lambeth is receiving from the ILEA grant and the additional assistance it is receiving from the shift from GREAs to standard spending assessments, I very much hope that Lambeth will find that it has adequate resources to do a good job without penalising its chargepayers. Of course, that hope might represent a triumph over experience.

Photo of George Young George Young , Ealing Acton

Is it not clear from table 2 that some of the high exemplifications that we saw a few months ago for some of the inner London boroughs have now been avoided and many chargepayers will be grateful for that, but is it not also the case that many will be protected by the transitional household protection? However, what will happen in year two, when the interim household protection begins to unwind and when many authorities lose the benefit of the safety net? Is there not a risk that, having secured low increases this year, there will be some high increases in year two?

Photo of Mr Chris Patten Mr Chris Patten , Bath

I believe that I am right in saying that the largest single loss for a London borough from the unwinding of the safety net is just over £1 per week. We are announcing today that the interim relief scheme will be unwinding at a rate of 25p in the first year. I do not think that my hon. Friend will find the situation as difficult as he had feared. In the second year of the interim relief scheme, we shall still be spending about £230 million of the nearly £700 million that we shall be devoting to the scheme in all.

Photo of Mr Peter Pike Mr Peter Pike , Burnley

Does the Secretary of State recognise that, because of the changes that he has announced today, the poll tax in Burnley will be £184 per head, which is exactly the same as the average rate per head at present? However, the majority of people in Burnley will pay more than they do now because they live in properties with low rateable values which means that the wealthiest people will be the ones to benefit from the change that he has announced.

Will the Secretary of State make it clear that when the safety net and the transitional arrangements are ended people will be able to see the full folly of the poll tax and how difficult it is to try to make it fairer when the basis of the system is totally unfair?

Photo of Mr Chris Patten Mr Chris Patten , Bath

The hon. Gentleman should recognise that poorer households will benefit from a more generous rebate system than that which exists for ratepayers. We will spend about £2·5 billion on rebates and increased income support. The hon. Gentleman and other hon. Members should not overlook that. Their constituents would suffer far more from the Labour party's policy—although I understand that it may not be the Labour party's policy any more and I look forward to seeing what it will do when it brings its next policy along.

Photo of Mr John Butcher Mr John Butcher , Coventry South West

Is my right hon. Friend aware that in some major cities Labour-controlled local authorities will be determined to overspend regardless of the methods by which they raise revenue? Can my right hon. Friend reassure me that he will not hesitate to use the expenditure-capping mechanisms as they will be the only protection for my constituents and for the poor constituents of Coventry where municipal Socialism is being built on the backs of ratepayers?

Photo of Mr Chris Patten Mr Chris Patten , Bath

I recognise the problem that my hon. Friend has identified. I shall once again make it clear, as I tried to do in my response to a similar question from my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi), that if local authorities insist on budgeting excessively, or spending too much money, we will have no hesitation about charge-capping them. I hope that local authorities will behave more sensibly, and I hope that their electors, as chargepayers, will ensure that they behave more sensibly.

Photo of Hilary Armstrong Hilary Armstrong Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

Does the Secretary of State recognise that in the standard spending assessment there is no acknowledgement of the needs of the under-fives? Given the additional duties that have been laid upon local authorities in the Children Bill by the Government, will he explain the extraordinary removal of the under-fives from the calculations?

Photo of Mr Chris Patten Mr Chris Patten , Bath

We have considered general additional education needs. A range of factors have to be taken into account in the next assessment. I think that the hon. Lady will find that all aspects of education provision have been taken into account. I am sure that she will be particularly pleased by the emphasis we have placed on the needs of children in some inner city areas.

Photo of Mr Barry Porter Mr Barry Porter , Wirral South

Is my right hon. Friend aware that my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), before he left the Chamber, initimated that these documents are incomprehensible? He is not alone. I can read the bottom line. For some reason that is unclear to me, the community charge with safety net for Wirral is £371, whereas that for Sefton, which is a not dissimilar area, and is represented by the hon. Member for Southport (Mr. Fearn), and that for Liverpool, where the council spends like a drunken sailor, are a good deal less. Will my right hon. Friend let me know, in simple terms, how I may explain that to the people of Wirral? At the moment I cannot.

Photo of Mr Chris Patten Mr Chris Patten , Bath

I think that my hon. Friend the Minister for Local Government and Inner Cities is better placed than I am to explain that situation to my hon. Friend. Perhaps the existing council has inherited a good deal of Labour overspending, which it has to deal with. My hon. Friend says that the documents are incomprehensible, but I hope that the consultation period that we have allowed will be helpful to hon. Members and to local authorities. Normally we would not make an oral statement on documents that were to be the subject of consultation at this time of the year. Normally we would make an oral statement when we agreed the distribution report, but, this year, since we were going over to a new system, I thought that it was important to make an oral statement to give hon. Members as much opportunity as possible to see what we were doing.

Photo of Derek Conway Derek Conway , Shrewsbury and Atcham

My right hon. Friend's statement displayed marked clarity. I am sure that my right hon. Friend will recall that under table 2 the average rate bill for my constituency is anticipated at £255 per head whereas the long-run community charge will be £247. Although that is clearly good news for my constituents, can my right hon. Friend tell me what advice I could give them on whether that charge would go up or down if the alternative proposals for a capital value and local income tax system, as advocated by the Opposition, were to be adopted? [Interruption.]

Photo of Mr Chris Patten Mr Chris Patten , Bath

I believe that I am right in saying that the figure for the hon. Gentleman's constituents would be more than £600—[Interruption.] If the hon. Gentleman doubts that, he should table a parliamentary question and we shall give the answer. We would be delighted to cost any Labour party policy which it puts on the table. Admittedly that means that we would have to answer for a different policy virtually every month, but we would do that.

Photo of Mr Allen McKay Mr Allen McKay , Barnsley West and Penistone

Looking at the figures for Barnsley and Penistone, it appears that some of the problems that we discussed with the right hon. Gentleman's colleague have been taken into consideration. After the safety net is removed, it appears that there is a £150 per head difference between the figure suggested by the Secretary of State and that suggested by our local treasurer. It is important to take into account the local problems. If the figures are worked out again, and if the same figures are arrived at, that will mean that my area will have to take £2·5 million out of its education budget, which it cannot afford to do. Is the Secretary of State willing to come to Barnsley to discuss the situation and to see for himself our exisiting problems?

The right hon. Gentleman has spoken about Labour party policy. I was in Canada last week and I had the opportunity to study how that country raises its money. It operates a federal tax, which is similar to our income tax, a sales tax and a tax on the capital value of property. That system has worked for the Canadians.

Photo of Mr Chris Patten Mr Chris Patten , Bath

It may well be that the hon. Gentleman's advocacy will encourage his right hon. and hon. Friends to pick up a policy which I thought they had dumped, but shall find out in due couse. The major reason for any substantial difference, such as that referred to by the hon. Gentleman, between the exemplifications in the tables and the sort of figure he mentioned is the decisions taken on spending by his local authority. Decisions on spending must, at the end of the day, be met by chargepayers. That is the point which Opposition Members——

Photo of Mr Allen McKay Mr Allen McKay , Barnsley West and Penistone

The right hon. Gentleman is missing it again.

Photo of Mr Chris Patten Mr Chris Patten , Bath

If that is the case I shall look forward to further discussions with the hon. Gentleman. As for discussing such matters with local councillors and local Government officials, I am looking forward to spending a lot of time doing precisely that in the next few months.

Photo of Mr Joe Ashton Mr Joe Ashton , Bassetlaw

In the past Bassetlaw district council never received any rate support grant from the Government as it had a high concentration of industry which brought in a massive amount of rates. That revenue came from the power stations and two or three pits, which are now closing. Is the right hon. Gentleman aware that he has taken the rateable income away from those massive industrial complexes to put it into a national fund, and that what he has given back to Bassetlaw district council and to the rest of Nottinghamshire in no way compensates for the loss of the rates that they receive from those heavy industries? Is he aware that the safety net contribution he has decided upon is far too low and that the people of Bassetlaw will have to pay a massive increase in their poll tax not because their authority is high spending—it is certainly not a high-spending authority—but simply because an enormous amount of income has been taken away from that authority by the right hon. Gentleman?

Photo of Mr Chris Patten Mr Chris Patten , Bath

I believe that the hon. Gentleman will accept that Bassetlaw is getting a fairly substantial contribution from the business rate pool. Obviously I shall look at the specific figures to which he has referred. In all, however, the contribution from the uniform business rate and from the revenue support grant—the total aggregate external finance—should ensure that local authorities are able to provide standard services at the price to chargepayers that I mentioned earlier. I very much hope that that is possible in Bassetlaw as elsewhere, but I shall certainly look at the specific figures mentioned by the hon. Gentleman.

Several Hon. Members:

rose——

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

Order. I regret that I shall be unable to call all the hon. Members who wish to put a question. I shall call two more from each side. We then have a Standing Order No. 20 application to follow and a long day ahead of us.

Photo of Mr Keith Hampson Mr Keith Hampson , Leeds North West

Is my right hon. Friend aware that the failure of the hon. Member for Bradford, North (Mr. Wall) to launch the expected onslaught on the level of RSG for Bradford may be an eloquent tribute to his success in getting a rather better deal than the Jeremiahs on the Opposition Benches were expecting? Will my right hon. Friend confirm that the result for the metropolitan districts, such as Leeds, is rather more neutral than option 3 for which they argued? I was pleased to hear my right hon. Friend say that the rate for the unwinding of the safety net would be at a quarter rather than the expected one third. Is that rate for the safety net and the transitional arrangements, as that is critical for industrial areas with older properties?

Photo of Mr Chris Patten Mr Chris Patten , Bath

My hon. Friend is right to point out that Bradford and a number of other local authorities with considerable urban problems have done substantially better than the Opposition prophesied. The safety net will be unwinding at a rate of £25, or 25 per cent., which ever is the higher, and the interim relief scheme will be unwinding in the first year to the tune of 25p.

Photo of Diane Abbott Diane Abbott , Hackney North and Stoke Newington

Is the Secretary of State confident that his standard spending assessments are computed sensibly? One of the indices that the right hon. Gentleman has used relates to the proportion of children or families born outside the United Kingdom, Ireland, the United States of America or the old Commonwealth—I presume that in this context that means the white Commonwealth. If that index is meant to refer to the number of black children and black families, the Secretary of State should be aware that that figure will be hopelessly out. In my community, in common with many others, many of the black children and many of the black families are second or third generation British citizens. If the number of black people in the community is an index of need, why does not the right hon. Gentleman use an accurate index?

Photo of Mr Chris Patten Mr Chris Patten , Bath

The hon. Lady has raised an extremely important point. When she looks at the way in which that assessment was calculated she will see that, as a proportion of the educational assessments, we have increased that covering additional educational need—that revenue is precisely directed at, among other things, the problem she has identified—from 11 to 24 per cent. of the total amount available. That is one of the main reasons why a number of inner city areas—I mentioned Birmingham, Liverpool, Manchester as well as London earlier—have done very well out of the move from GRE assessment to standard spending assessments. It is important that the hon. Lady's point is met, and I hope that I have done so reasonably well.

Photo of Mr Tim Rathbone Mr Tim Rathbone , Lewes

I congratulate my right hon. Friend on a statement which can only be categorised as magical. Can he reassure me that the bias hitherto in the RSG system against the south-east generally and against East Sussex in particular has now been eliminated and that proper allowance is being given to the vast numbers of elderly people in my constituency and the general area, to the large road building programme that must be constructed to join up with the Channel tunnel, and to meet the worries of the small business men in the south-east?

Photo of Mr Chris Patten Mr Chris Patten , Bath

My right hon. Friend is right in implying that we have moved to a fairer system for his constituents and those of many other hon. Members. We have ended the hidden subsidy which, for 30 years, transferred resources from high rateable value areas to low rateable value areas. In the standard spending assessments, which we have set out, we have made particular allowance for labour costs in London and the south-east which should also be of some assistance to local authorities in the area. On both those counts, as well as the greater generosity of rebates and the interim relief scheme, his constituents and those of other hon. Members have reason to believe that we have treated then extremely fairly.

Photo of Jim Cousins Jim Cousins , Newcastle upon Tyne Central

Does the Minister accept that it is staggering that, even according to the unrealistic figures that he has offered this afternoon, the average rate bill in my constituency is predicted to go up by 8 per cent. and that people in low rateable value properties, such as Tyneside flats, face an increase—even those affected by the relief scheme—of about £4·50 a week rather than £3? Will he have the courage to ask for more money for a better interim relief scheme and for that scheme to be permanant so that people who live in low rateable properties can look forward to a life of sense rather than the indecency which he offers?

Photo of Mr Chris Patten Mr Chris Patten , Bath

I would not get very far by arguing that an interim relief scheme should be made permanent. The point about the scheme is that it should help us to smooth the introduction of the changes in the way in which we raise funds for local authorities. The main reason for some of the problems to which the hon. Gentleman referred is overspending by local authorities. That will be the main reason why, if it turns out to be the case, some people will face larger charges than they would like.

Several Hon. Members:

rose——

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

Order. I am sorry that I have not been able to call all the hon. Members who wished to participate. It may be possible with ingenuity, for them to raise some of their points during the debate on the Local Government and Housing Bill.

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

On a point of order, Mr. Speaker.