With permission Mr. Speaker, I should like to make a statement about the Government's proposals for the local authority financial settlement for England for 1991–92 and about the review of the community charge. My right hon. Friends the Secretaries of State for Scotland and Wales will be making separate announcements about the arrangements in those countries in due course. I apologise at the outset for the inevitable length of my remarks.
In recent years there has been substantial growth in local authority spending. In the current year, local authorities are planning expenditure of £36.4 billion. That is an increase of 13½ per cent. over the comparable figure for 1989–90, and that came on top of a 9 per cent. increase over the previous year. So spending has grown by very nearly one quarter in only two years.
Local authorities, like other public sector bodies, should play their part in restraining expenditure if we are to maintain economic progress and limit the burden of national and local taxation.
As part of the settlement, the Government have to make an estimate of the total amount which it would be appropriate for local authorities to spend. That figure is known as total standard spending. From it is derived a standard spending assessment for each authority, representing the amount it should cost to provide a standard level of service.
For next year I propose to set total standard spending at £39 billion, compared with £32.8 billion for this year. This is over 7 per cent. more than likely expenditure this year. £39 billion should adequately fund local authority services next year, taking account of the additional pressures and burdens local government will face, and the scope for improved efficiency. Spending above that amount should not be necessary.
Most local authority spending is financed by Government grants and the business rate. This year those funds, known as aggregate external finance, were set at £23.1 billion, compared with about £10.5 billion from charge payers after allowing for rebates and transitional relief. I propose that the amount of aggregate external finance for 1991–92 should be £26.050 billion. This is an increase of very close to £3 billion or 12.8 per cent. above the amount being provided this year. This significant increase will necessarily mean that less can be afforded for other Government spending programmes next year. I expect authorities to pass on the benefit to their charge payers in their bills, rather than increase spending too much once again. As I shall make clear shortly, I shall be prepared to use my capping powers to ensure that that happens.
Proposals for the distribution of grant, including any changes which may be made to the methodology for standard spending assessments, will be announced in the autumn in the usual way. Earlier this year, I made it clear that I would be willing to consider new evidence about the way the standard spending assessments are calculated.
This year, with many councils overspending, the average charge after capping was £357. That, alas, is the position from which we will start next year. If local authorities play their part, as we have played ours by increasing external finance by nearly £3 billion, the average charge next year should be close to the community charge for standard spending of about £379. The majority of areas have charges below that figure this year, and many will benefit because no authority will have to pay into the safety net next year. Efficient authorities should be able to set charges below this figure, as should authorities who will still be receiving grant from the safety net.
Those local authorities which are not prepared to budget sensibly should know that I shall be prepared to make vigorous use of my powers for charge capping next year. As Secretary of State, I have power to cap in two ways. I can cap a council's excessive budget, or cap excessive increases from one year to the next. This year it was impracticable to use the latter power. Next year, I shall not hesitate, where authorities budget above the standard spending assessment—or SSA—for 1991–92, to use either or both powers to protect charge payers.
In deciding what is an excessive increase in an authority's budget, I propose to distinguish between those authorities which budget well above their SSA and those which spend above SSA by a smaller margin. I would expect to see smaller annual increases for the higher spenders, because the more profligate the authority the greater the scope for savings. As it would be the first time that authorities were capped on the basis of excessive budget increases, I have decided specifically for this year to give an advance indication of the proposed criteria for capping so that local authorities may take them into account in reaching their budgeting decisions.
In summary, while I would expect most authorities to budget at or below their SSAs, I intend to use my powers to protect charge payers. I want to ensure that the substantial amount of extra money contributed by national taxpayers to local government is not wasted in much higher spending but helps to keep charges to reasonable levels.
I now turn to our review of the community charge. The basic principle that all local people should make some direct contribution to the cost of local services through a charge levied on almost all adults has been accepted increasingly widely, but it would be surprising if a change of this magnitude did not require some adjustments in its second year of operation.
We have received many constructive suggestions from hon. Members and others. My proposals concern the standard community charge, non-domestic rating, the area safety net, the transitional relief scheme, the administration of the charge and improvements in accountability.
An issue which has given rise to a great deal of concern is the standard community charge. This charge applies where domestic property is no one's sole or main residence. It is right that owners of such properties should contribute towards the cost of local services. We have given local authorities a wide discretion in setting multipliers for the various classes of standard charge payer for the year ahead. It is disappointing that many have not used this discretion sensibly. There are many people, for example, who are required as a condition of their job to live in a particular property. They quite naturally wish to maintain another property which they would regard as their home, even though it is not their sole or main residence. The law allowed local authorities to set out a different approach to these cases, and I regret that many local authorities did not do so.
I therefore propose a number of changes for next year so as to reduce the maximum standard charge which local authorities can levy in a number of exceptional cases. Among those who may benefit are people such as clergy men, service men and some teachers who are required as a condition of their job to live in a particular property; people who have houses with an empty "granny flat"; people who find themselves paying a standard charge when their home is empty following repossession; people who have an empty flat over a shop which it would be difficult to let for security or other reasons; students who face a reduced personal charge, but who can face a double charge if they own a home elsewhere; people whose homes are empty because they have gone to look after a relative or friend, or to be looked after; and farm owners who have empty dwellings on their land which, because of planning restrictions, can be occupied only by agricultural workers.
We are also proposing to help people who are having difficulty selling a property, either on a move or after they have inherited it, by extending the period during which it is subject to a zero charge. Full details of all these changes are set out in a consultation paper published today.
These and other proposed changes will, I hope, be widely welcomed. Subject to consultation, we propose to bring forward regulations which will come into force before the end of 1990 so that authorities can give effect to these changes from 1 April 1991.
There has been concern about the position of owners of small businesses who live "over the shop". They pay rates on their business property, but they are, of course, also liable to pay the community charge. That is not in fact an anomaly: all adults have to pay a personal charge irrespective of where they live, and rates are paid on all business property. It would therefore be inappropriate to change the fundamental liability for either the community charge or the business rate for people who happen to live on their business premises. Like other businesses, they may qualify for transitional protection against large increases in rate bills and, like other former domestic ratepayers, they may be eligible for community charge transitional relief. However, I recognise that this group of businesses may need more time to adapt to the higher bills which they face under the new system and I propose to amend the business rate transitional arrangements, for what are called small composite hereditaments, so that from 1991–92 annual increases in the business rate will be limited to 10 per cent. in real terms instead of the current maximum of 15 per cent. That will help the occupiers of 95,000 properties in England.
There has also been concern about the liability for non-domestic rates of people who provide bed-and-breakfast accommodation in their own homes. The present exemption for people who make accommodation available for fewer than 100 days a year has caused some difficulty. We therefore plan to change this rule from 1 April next year. We will shortly issue a consultation paper canvassing a range of options based on the amount of accommodation which the household proposes to make available rather than the time for which it is available.
These are the main changes to the community charge and non-domestic rates. I am also proposing a number of minor changes, designed for the most part to improve the administration of the charge by local authorities. These are also included in the consultation paper which is being sent to local authorities today. Copies are in the Library and the Vote Office.
I also have in mind improvements to the community charge bill. The contribution of individual authorities to high charges is not clear enough on the face of the bill, and charge payers are inclined to think the council whose name appears on the top of the bill is responsible for the whole of any excessive spending.—[ Interruption.]
I shall therefore be proposing changes to ensure that the respective contributions of preceptirig and charging authorities to over or underspending are shown much more clearly. This will increase accountability. I propose to make—
Order. May I say to the hon. Member for Dunfermline, West (Mr. Douglas), who is shouting and pointing across the Gangway, that it is very bad behaviour. He should know better.
I propose to make an alteration to the area safety net. The safety net is designed to protect charge payers in those areas where the ending of cross subsidies under the old rating system caused the largest changes.
As the House will know, in 1991–92 gaining areas will not have to contribute to the area safety net, and this will enable 20 million charge payers to benefit by up to £75. I expect the authorities concerned to ensure that this benefit is passed on to charge payers, and is not swallowed up in higher spending. For those people in areas receiving the most support from the safety net, which is paid for from the Exchequer, I propose that support should be withdrawn more slowly than previously proposed, at a maximum rate of £25 per adult per year. This will help almost 3.5 million people living in 25 areas where the support received in 1990–91 was more than £100 per adult. This could be worth up to £28 a year for the charge payers affected.
Finally, I propose a substantial increase in comunity charge transitional relief in 1991–92. The transitional relief scheme was designed to help former ratepayers, and pensioners or disabled people who were not ratepayers, who faced significant increases in their bills as a result of the change to the new system.
I do not propose, as some have suggested, to change the basis of calculation to take account of actual charges set by local authorities. That would merely channel extra help to the areas where authorities have increased spending fastest. I propose changes which will, none the less, help those most affected by the switch from the rates to the community charge—typically, people who lived in a property with a low rateable value.
The improvements will more than double the amount of relief to be given in 1991–92 from the planned level of £260 million to £570 million. This is an increase of £310 million. I propose to distribute this extra help by requiring authorities to calculate relief in 1991–92 so that most households face no more than an increase of £2 a week because of the structural change from rates to the community charge. In other words, the threshold will be cut from £3 to £2. I also propose to postpone the phasing out of the relief for two years and to extend the scheme by two years to 1994–95. In all other respects, the scheme in 1991–92 will be unchanged. It will continue to be based on assumed charges for 1990–91, and will apply where people stay in the same home.
These changes will mean that every household receiving transitional relief at present will not only keep that relief in full next year but will see it increased by £52. Pensioners and disabled people who were not former ratepayers will also have an extra £52 of relief in their own right. On top of this, postponing the withdrawal of relief will be worth up to £13 in 1991–92 to everybody already entitled to relief this year. Many couples, instead of losing £26, will gain £52. In other words, as a result of these changes they will be £78 a year better off than they would otherwise have been. About 7.5 million people will gain in this way.
Furthermore, the lowering of the threshold will bring almost another 4 million people into transitional relief for the first time. These are people who lost between £2 and £3 a week as a direct result of the change to the new system. They will gain up to £52 a household. These changes will require amendments to the regulations which will be brought forward in the autumn. My officials will be discussing the administrative implications with the local authority associations.
The settlement I have proposed envisages 12.8 per cent. more support from Government grant and business rates towards local authority spending. That is generous by any measure, reflecting a substantial increase in real terms. If authorities budget sensibly, the average community charge in England should be close to the community charge for standard spending of about £379. But I can assure the House that if they do not I will use my powers to protect charge payers from excessive demands. I expect local authorities to set prudent budgets, so that the extra grant being provided goes to help charge payers through moderate charges, and not to boost spending.
The changes I have announced to transitional relief will benefit an extra 4 million people on top of the 7.5 million who already receive relief. They will represent a further £310 million of help on top of the previously planned £260 million for the relief scheme in 1991–92. Among those who will benefit will be elderly and disabled people who qualify for extra help under the current scheme. Almost 3.5 million people will benefit from the changes to the safety net. Many individuals and small businesses will benefit from the proposed changes in the rules concerning second homes, composite hereditaments, and bed and breakfast.
My announcement today means substantially more relief to those who most need help in the changoever to the community charge. It means a realistic financial settlement for local authorities. I believe that we have played our part in helping to smooth the introduction of this major reform. Now it is up to local authorities to play their part.
That statement is a double admission of failure which will disappoint many hon. Members on both sides of the House, and many millions of people outside as well. It is an admission, first, that the poll tax is and has been a disaster; and secondly, that it is a disaster from which nothing can be salvaged. The statement leaves the poll tax where it has always been: unfair in principle, unworkable in practice and fatally flawed.
Is not the message for the poll tax payer that no relief is in sight, and that for the majority, the bills will go up sharply yet again next year? Why should anyone rely on the Secretary of State's estimate of average poll tax bills, when he was so hopelessly and spectacularly wrong last time round? Is not his estimate for this year in any event more than £100 higher than his similar estimate for last year? Even the changes to the transitional relief scheme leave it still based on the same fairy-tale figures which have already meant that it is no more than a sham and a charade for millions of people. Will the Secretary of State confirm that, because the transitional relief scheme is still to be calculated on assumed rather than real figures it will provide no help to many poll tax payers who will be much more than £2 a week worse off?
Is not the message for local authorities from the Secretary of State's statement that they are again to be short-changed by the Government, that their independence is to be further eroded, and that, even after taking account of the shameful betrayal of those who pinned their hopes on community care, services will again have to be cut?
Has the Secretary of State learnt nothing from the disastrous experience of the past 12 months? Does he not recognise that it was his and his predecessor's insistence that local government spending would be £3.6 billion lower than it turned out to be which forced up the poll tax bills for this year, since every penny of that shortfall fell on the hapless poll tax payer? Why does he persist in repeating and compounding that error this year? Can he name any local authority association—including those under Tory control—that agrees with his assessment of local authority spending for 1991–92? Is not it the case that it is the hard-pressed poll tax payer who will again pay the price for the right hon. Gentleman's mistake?
What estimate has the right hon. Gentleman used for inflation—or is he too embarrassed to say, following his assertion last year that it would be less than half what it turned out to be? Will he confirm that the national non-domestic rate will be raised in line with the actual rate of inflation? What estimate has he made of the cost of new commitments imposed on local authorities by the Government, and how are those new commitments to be paid for? Will it again be the poll tax payer who picks up the total bill? What estimate has the right hon. Gentleman made of the costs of collecting the poll tax, and of the shortfall faced by local authorities in the light of worryingly low collection levels, not least in his own constituency? Is not his hint that he intends this year—unlike last—to publish his capping criteria in advance evidence that, whatever other lessons he has failed to learn from charge capping, he now concedes that penalising local authorities for breaking rules imposed on them after the event was a serious and damaging mistake? Is not the truth that this is a paltry package that fails to live up to its advance billing and represents yet another battle lost by the Secretary of State at great cost to other spending programmes? The right hon. Gentleman has squeezed out of the Treasury a package worth only a touch more than £2 billion. With that sum, he has first to try to make good the errors made last year; secondly, to allow for inflation, now rising fast; thirdly, to meet the cost of new commitments imposed by his Government; fourthly, to remove the most glaring anomalies from the first year's operation of the poll tax, and, fifthly, to allow for a frighteningly low level of collection. It cannot be done.
In view of that attempted abuse of the House's procedures, I will repeat that last paragraph.
With a sum of just over £2 billion, the Secretary of State now has first to try to make good the errors of last year; secondly, to allow for inflation, now rising very fast; thirdly, to meet the cost of new commitments imposed on local government by his Government; fourthly, to remove the most glaring anomalies from the first year's operation of the poll tax; fifthly, to allow for a frighteningly low level of collection. That cannot be done: the circle cannot be squared.
The message is therefore, a grim one for local authorities and for poll tax payers alike. Happily, it is also a grim message for a Government who are uniquely responsible for the mess that they have created.
I suspect that it is conceivable that the hon. Gentleman's questions were drafted before I made my statement. He suggested—it was the first of a series of clichés that were trooped before the House—that there was no relief in sight. There is relief in sight, in the form of more transitional relief for 7.5 million who are already receiving it. We are talking about 4 million more people receiving transitional relief, and 3.5 million being helped because of the modifications that I have made to the safety net. It is worth noting that as a result of the benefits that we provide, which are more generous than those available under domestic rates, and as a result of transitional relief, while the average community charge set for this year after capping is £357, the actual average charge paid is £286. The difference between the two is made up through benefits and transitional relief.
The hon. Gentleman said that community charge standard spending was much higher than community charge standard spending last year. He referred to the increase in total standard spending. We have had to take, account of a 13.5 per cent. increase in local authority spending— an increase of almost a quarter in two years. If we had not done so, unfortunately people would have faced community charges which were much too high in the coming year.
The hon. Gentleman said that local authorities were being short-changed, and referred to a £3 billion-plus package as "paltry". That reminded me of a remark made by my right hon. Friend the Member for Chingford (Mr. Tebbit) about a large Government subsidy. He said that, if that was beating someone to death, it was the first time that it had ever been done with a cheque book.
I shall go through the £3 billion. The £3 billion is a £2.95 billion increase in aggregate external finance and £310 million in transitional relief. With great respect, the hon. Gentleman does not yet understand local government finance. He cannot, and I cannot, say what the contribution from the non-domestic rate pool will be until September, because we do not set the multiplier until September. Of course there will be a contribution from business rates, just as there has been in the past.
The hon. Gentleman and I cannot say until we set the multiplier. The hon. Gentleman should recognise that if the cash did not come from the business ratepayer—I assume that even under the Labour party's proposals, when they emerge, businesses will pay something—it would come from the taxpayer.
I have not made a mistake. Unfortunately, the hon. Gentleman has shown once again that, even with his hon. Friend the Member for Sheffield, Brightside (Mr. Blunkett) sitting beside him, he does not understand local government finance.
The hon. Member for Dagenham referred to local authority spending assessments. He said that at least some of the local authority associations proposed a substantially increased figure for total standard spending over what we have suggested.
The figure of £39 billion that I suggested would mean an increase of over 30 per cent. in local authority expenditure over three years. Many of my hon. Friends will regard that as spectacularly too high. The figures suggested by the hon. Gentleman and some of his hon. Friends would imply a 40 per cent. increase in local authority expenditure.
The hon. Gentleman has to come clean. Not only must he tell us what the Labour party would do in place of domestic rates and the community charge—the Opposition have wriggled, squirmed and turned on that month after month and year after year—he must tell us how much more the right hon. and learned Gentleman the shadow Chancellor of the Exchequer thinks that he should commit the Labour party to spend on local authority spending. Is it £1 billion, is it £2 billion, is it £3 billion? How much more than £3 billion should local authorities have next year?
The hon. Gentleman will not tell us. He cannot tell us. It is a vacuous and cynical response that the Labour party makes to our proposals.
Order. I remind the House that we have a heavy day ahead of us. We have a series of Lords amendments to two Bills and, of course, the important debate on the televising of the House, to which the House is looking forward. I ask hon. Members to bear it in mind that there will be other opportunities to debate this statement. I shall allow questions to continue on it until half past 5. Then we will move on to the next business. I ask right hon. and hon. Members to ask single questions.
Is my right hon. Friend aware that the changes that he has announced will be greatly welcomed? In the first part of his statement, he made no reference to those prudent local authorities, such as West Sussex, that have spent below their SSA. Those local authorities have been unfairly treated for many years because the money from central Government has been going to profligate authorities to bail them out.
Could my right hon. Friend refer to the provisions relating to flatlet houses? Many owners of such houses are being charged the community charge whenever their accommodation happens to have one empty flatlet.
On my right hon. Friend's first point, I join him in commending those local authorities that have been prudent over the years and spent regularly at or below target. They have given extremely good value for money to their ratepayers or charge payers. Invariably they have provided a high level of service at the same time.
I hope that my right hon. Friend noted that, when I referred to capping for the future, I referred to those authorities that spent above their SSAs, either by a small amount or by a larger margin. It is on those authorities that we shall need to concentrate our particular attention. It would be intolerable if they were able to use the generous settlement announced this afternoon to push their spending higher, rather than to help their community charge payers.
I assume that my right hon. Friend was referring to what are sometimes known colloquially as granny flats. We propose to set a zero multiplier for such flats. All the proposals we are making on the standard community charge are contained in a consultation paper published today. We shall be anxious to hear contributions from right hon. and hon. Friends and others on those proposals. Once we have received those observations, we shall make a final announcement in the autumn.
Does not the Secretary of State realise that this will be an unsuccessful and expensive attempt to conceal the real unfair nature of the community charge for a little longer —until the other side of the general election? Does he not realise that a dozen sweeteners do not provide any substitute for a healthy diet? Will he come clean with the House by saying that all he has done today is to announce that he is buying votes and buying time? He has traded accountability of local government to local people for accountability to himself.
I am providing a decent and reasonable settlement so that local authorities can provide good value for money while they also provide the schools, fire services, and other community services that people want in their area. They want those services at a reasonable price.
I am bound to say that £3 billion-plus strikes me as more than a few sweeteners. I am sure that the hon. Gentleman will be interested to know that his constituents will benefit from the proposals that I have made on the area safety net system.
May I congratulate my right hon. Friend on the excellent package he has outlined, which will be extremely welcome to a great many people up and down the country, in spite of the churlish response it has had from the Opposition?
How will those who will benefit from the transitional relief changes—the disabled and pensioners—and those likely to benefit from changes in the standard charge, as well as all potential beneficiaries, know exactly what is proposed? How will they know what those changes mean to them, given that we cannot rely on the Opposition to give an honest picture of them?
It is interesting—we saw this in some of the advertisements that Labour local authorities financed earlier this year—that the Labour party, even when it talks about the take-up of benefit, is apparently more anxious not to let people know about the benefits to which they are entitled.
If the hon. Gentleman considers the example of the Association of London Authorities—a Labour organisation—he will know that that is true. I could have made that point a great deal more strongly in the past than I have this afternoon.
I shall certainly do what I can to ensure that the additional benefits that I have announced this afternoon, the extension of transitional relief, are made clear to all those who could receive greater assistance as a result.
Will not the Secretary of State realise that the package he has announced this afternoon clearly has the next general election in mind more than tackling the basic problem of the poll tax, the ability to pay? Nothing that the right hon. Gentleman has said today deals with that matter.
Will the right hon. Gentleman also admit that too many people on low incomes have to pay the full poll tax? Will he assure us that, when rebates are considered, he will use each of his votes in Cabinet to ensure that rebates are given to those people on higher levels of income?
The hon. Gentleman refers to ability to pay. I must point out that about 25 per cent. of all community charge payers are in receipt of assistance. A large number of them get 80 per cent. relief from their community charge with the rest covered by income support. In England, we are spending in all more than £2.5 billion in benefits for community charge payers. That recognises our responsibility to help the needier members of the community.
Against the background of the most generous settlement for many years —[HON. MEMBERS: "Come on."]—factually, the most generous—my right hon. Friend deserves particular congratulations on sending additional support to 4 million households that previously did not benefit from transitional relief. Will my right hon. Friend also note that the shallow criticisms by the Opposition Front Bench spokesman are more accurately reflected in the sparse attendence on the Benches behind him?
I had indeed noticed how interested the Labour party was in next year's local authority financial settlement. I wonder whether more Opposition Members will turn up on that afternoon, to which we are looking forward, when the hon. Member for Dagenham (Mr. Gould) outlines the labour party's policy on such matters. I am sure that it will be standing room only, but we might have to wait rather a long time for it.
My hon. Friend was right to refer to the size and generosity of the settlement. We are putting a large amount of money from taxpayers and business rate payers into local authorities. We have played fair by local authorities; local authorities should now play fair by the community charge payer.
I congratulate the Secretary of State on delivering a long, intricate and difficult obituary on the creature produced by the right hon. Members for Mole Valley (Mr. Baker) and for Cirencester and Tewkesbury (Mr. Ridley). The right hon. Gentleman's statement simply demonstrates that the concept of restraining local government expenditure has gone out of the window, as has the concept of accountability. Why does he not bury the corpse and go back to a system based on ability to pay?
I believe that the proposals for which we have legislated and the announcement I have made this afternoon will mean—I argued this in the debate a couple of weeks ago, part of which the hon. Gentleman attended—that there is a much more direct transmission mechanism between local authority spending decisions and local electors. People are already looking with a far beadier eye at the spending decisions taken by local authorities. Unfortunately, when we introduced the community charge, a number of local authorities thought that they could spend up and blame the consequences on the new system rather than on their spending decisions. It would not be right to let them get away with that indefinitely.
May I, as a critic of the community charge, congratulate my right hon. Friend on the amelioration he has brought forward today? Have the Government any plans to reduce the excessive assumed level of income from capital above the limit of £3,000 for the purposes of rebates?
I am sure that my right hon. Friend welcomed as much as I did the announcement that the Chancellor of the Exchequer made in his Budget statement on the capital limit. There is some misunderstanding about the implications of interest rates that are implied by the increase in the capital limit to £16,000. First, no account is made of the first £3,000 of savings. Secondly, benefit is not withdrawn at the rate of £1 for £1 of income, but at the rate of 15p for every £1 of income. That means that, at the top level, at almost £16,000, the most that somebody can lose is £7.80, which is an implied interest rate of about 2.5 per cent., so the position is not quite as some of my hon. Friends have sometimes argued. Nevertheless, I am sure that, with his customary courtesy and eloquence, my right hon. Friend will continue to pursue that argument with the Secretary of State for Social Security and with the Chancellor of the Exchequer.
I am sure that the general public will never cease to wonder at the hypocrisy of the Government. Does the right hon. Gentleman recall that yesterday—perhaps to obtain publicity for herself—the Prime Minister eulogised the family? Does he appreciate that the measures he has announced today will do nothing to stop the split-up of families because of economic pressure or for the conflict faced by women who are having to bear the poll tax charge for husbands, leading to the breakdown of families, or for the homeless in our streets? Is he aware that there is a vast army of people out there whose resolve will be reinforced by his statement today, and that the poll tax will be the rock on which the Government will perish?
When one is talking of hypocrisy, those whom I think of first are those elected members, whether of this House or local authorities, who are refusing to pay the community charge and who are urging—without, it must be said, according to a recent survey conducted by the BBC, much success—others to do the same, people who are attempting to act as free riders or freeloaders on the backs of the constituents.
As a strong critic of the sharpness of the initial introduction of the community charge, I warmly congratulate the Secretary of State and thank him for the tremendous way in which he has shaken the pockets of the Treasury and made highly intelligent and receptive spending decisions on the sums of money that he has achieved. Will he remind the Opposition that, under the old rating system, 18 million people paid and 5.5 million received relief, and that under the new system, with his statement today, 36 million people will be financially enfranchised locally and about 25 million people will have assistance to help them pay?
My hon. Friend is right. As I said, the average charge paid by community charge payers this year is £286, which is a reflection of the generosity of the benefits and transitional relief. The benefits available are much more generous than they were under domestic rates, a point which has never been recognised by Opposition Members, who are regularly—indeed, institutionally, as my right hon. Friend the Member for Woking (Mr. Onslow) pointed out earlier—churlish.
Does the Secretary of State agree that the fact that he has been forced to increase external financing by £3 billion next year and transitional relief by £310 million this year means that he has grossly miscalculated the revenue support grant settlement and the SSAs for local authorities in this financial year? Will he, even at this late stage, do something about the finances of local authorities, especially in view of the redundancies that will be caused by his clearly wrong figures this year? Will he also do something about the cuts in services that will come about as a result of his miscalculations?
Is my right hon. Friend aware that, while his statement is welcome, there are areas where local people increasingly find it difficult to acquire houses in the face of outsiders buying holiday or weekend homes? Will he give an assurance that, as a result of the changes that he has announced affecting second homes, the locals will not find themselves having to pay more to pay for the reliefs on houses that are purely holiday or weekend houses and which fall outside the categories he mentioned?
I hope that my right hon. Friend will be reassured when he sees the consultation paper that we have published this afternoon. The proposals to which I referred dealt with particular categories of people who, in the rather unhappy phrase used by my Department, are involuntary second home owners. The categories mentioned by my right hon. Friend are not covered in the consultation paper, and I hope that that reassures him. I hope that hon. Members in all parts of the House will respond to the consultation document. We are keen to try at this stage to remove as soon as possible any legitimate grievances that may have arisen over the standard community charge.
Does the right hon. Gentleman recall the several cases I have drawn to the attention of the Government for the Spinal Injuries Association, among other voluntary bodies, where families which include a severely disabled person have had to pay over £700 a year more than they paid in rates? That arises from the repeal of the previous Government's Rating (Disabled Persons) Act 1978, when the poll tax became law. Should not those families have far more protection than the right hon. Gentleman has announced so far?
With respect to the right hon. Gentleman, who knows a great deal about these matters, he is wrong to say that there is a connection between the consequence that concerned him and the Rating (Disabled Persons) Act 1978. Under the rating system, it was occasionally the case that disabled people would make changes or alterations to their property that would increase the rateable value of that property, and there was, properly, relief against that. The community charge is not in any way a levy on property: it is a levy on individuals.
The right hon. Gentleman should take account of the enhanced benefits for the disabled that have been introduced by the Government. If he is as concerned as I am sure he is about the impact on the disabled and others of the community charge in some parts of the country, I hope that he will be urging the leaders of Labour local authorities to set moderate levels of community charge.
My right hon. Friend's announcement, particularly in the way in which it relates to the extension of the transitional relief scheme, is welcome because it provides extra help and support for those who live in terraced houses with historically low rateable values, many of whom are pensioners and on modest incomes. But will he confirm that at the end of the day the level of the community charge in my constituency depends on the spending decisions of the local Kirklees council, and will he join me in urging it to get rid of the extravagance and wastage which undoubtedly now exist?
I am sure that my hon. Friend, particularly after the representations that he made to me on that point, will welcome the changes that we have made to the area safety net, which will benefit his local authority to the tune of £2.2 million. That is very much a result of the representations that he made to me and to the Minister for Local Government and Inner Cities. My hon. Friend is right to say that the level of community charge depends clearly and explicitly on the spending decisions taken by local authorities. We have provided a reasonable settlement. It is now up to local authorities to play their part.
We can cut through the Secretary of State's Elastoplast politics this afternoon and ask him if it is a fact that the aggregate external finance level that he has announced this afternoon is £1 billion less than the Tory-dominated Association of District Councils said was necessary next year merely to maintain existing services, and inevitably means hundreds of millions of pounds worth of cuts in jobs and essential services.
Is the right hon. Gentleman aware that the promise of limited jam tomorrow will not cut any ice with the 28 million people who are worse off this year because of the poll tax? Is he also aware that hundreds of councils are in chaos because of their inability to collect the poll tax following the strike action that is occurring because of the millions of people who are unable or unwilling to pay? Is he further aware that shuffling the deck chairs on the Prime Minister's flagship will not turn it into anything but her Titanic?
The whole House, whether properly or inappropriately, has from time to time taken a particular and keen interest in the hon. Gentleman's own relationship to the community charge. The whole House knows that the hon. Gentleman is—at least for the time being—better off on two counts: first, because he is a resident of Wandsworth and secondly, because in his own community he does not pay the community charge, but leaves it to his constituents to carry him.
Not all the local authority associations are endorsing the figure politically at the moment, but they are putting forward a paper drawn up by their officers—the equivalent in governmental terms of a bidding letter. They have suggested that they would need to spend £40.7 billion next year and I referred to that point earlier. Over three years, that would represent an increase in local authority spending of 40 per cent.
I should have thought that even the Labour party, especially given the Gladstonian fiscal rectitude of the shadow Chancellor of the Exchequer, the right hon. and learned Member for Monklands, East (Mr. Smith), would regard that as grotesquely excessive. It was, of course, a Labour Government who were the only Government in recent memory under whom local authority spending actually fell in one year by 6 per cent.
At first hearing, the arithmetic of my right hon. Friend's package sounds extremely attractive. He deserves to be congratulated on bringing his package forward in this way. Can he reassure the House that people living in areas of low-spending or prudent-spending local authorities—[Interruption.]—who this year face an enormous increase in their total bills, will not have the gains from his package eroded by further wildly optimistic estimates by the Treasury about the rate of inflation?
First, while my right hon. Friend was referring to low-spending and prudent authorities, he was interrupted by the hon. and learned Member for Leicester, West (Mr. Janner) and by the hon. Member for Newham, North-West (Mr. Banks)—my unofficial pair. [HON. MEMBERS: "Oh."] He was interrupted with the suggestion—
I make it clear straight away that all I am referring to is the fact that the hon. Gentleman and I have a relationship in the House of genial contempt, which has seen us through many long nights together. I do not want to get the hon. Gentleman into any difficulty.
The hon. Gentleman interrupted my right hon. Friend the Member for Guildford (Mr. Howell) to suggest that he was referring to rich or Conservative local authorities. With a bit of difficulty, I can think of one or two reasonably prudent, reasonably low-spending Labour authorities. [HON. MEMBERS: "Dagenham."] Yes, like Dagenham. We want all local authorities to provide value for money. At the moment, it is mainly Conservative authorities that do so.
Secondly, my right hon. Friend referred to the arithmetic of the settlement. In bringing forward this settlement, I have been absolutely determined to put forward proposals that would not only sound attractive in July, but would look equally attractive in September and in next March. We are talking about an increase in aggregate external finance of 12.8 per cent. and about an increase in total standard spending over this year's budgeted spending of 7.1 per cent. Those are extremely robust figures.
Can the Secretary of State explain—as no one else has today—why, when it comes to imposing the poll tax on the people, Scotland is first in the queue, but when it comes to hearing a Secretary of State explain the changes, we are the last in the queue? Does the Secretary of State not understand that one cannot solve the poll tax disaster by nibbling at the edges of injustice or by throwing money at it? The only way to make the poll tax acceptable is to relate it properly to ability to pay. Until that is done, the campaign of resistance and non-payment in Scotland—represented by half a million people 15 months into the poll tax imposition—will continue and intensify.
I am sure that, when my right hon. and learned Friend the Secretary of State for Scotland makes his statement, it will he as sensible and realistic as my statement this afternoon. I am sure that my right hon. and learned Friend will draw attention to the fact that, in its second year of operation in Scotland, one of the consequences of the community charge is that a number of local authorities have moderated their spending decisions.
I warmly welcome my right hon. Friend's proposals this afternoon, especially those on transitional relief and on business proprietors who live over the shop, and I also welcome his response to my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling).
Will my right hon. Friend examine how, between now and his announcement on SSAs in the autumn, he can ensure that charge payers in shire counties operate on a more level playing field than do charge payers in inner London and other local authorities, who have been rather well looked after this year?
We have made it clear, as my hon. Friend knows, that we are prepared to consider fresh evidence on the methodology of the standard spending assessments. I know that some shire districts and shire counties have expressed a number of criticisms. There has occasionally been a problem this year when the lack of level ground on the playing field has been a result of some of the spending decisions that have been taken by shire counties.
When the Secretary of State leaves the House, will he acquaint himself with the levels of income on which those on income support and state pensions have to live? Is he aware that the lowest income group in my constituency—those on income support—pay at least £4.95 a month in poll tax and that they were not properly compensated by the Department of Social Security for the poll tax?
When will the right hon. Gentleman do something about a pensioner in my constituency—and about many more like her—who has had to sell her mother's sideboard to pay the poll tax this year for herself and for her husband? When is the Secretary of State going to do something about people who are devastated by poverty and—
For one very simple reason. If the hon. Lady is refusing to pay her community charge, as I believe is the case, a consequence is that her constituents, including some of those to whom she has referred who are less well off, will have to pay higher community charges in due course.
It is preposterous for the hon. Lady to behave in that sanctimonious fashion. I am sure that she will be delighted to know that Calderdale is one of the areas that will benefit from the area safety net adjustments. My hon. Friend the Member for Calder Valley (Mr. Thompson), who also represents a constituency in Calderdale, has made that point to me on a number of occasions. Calderdale will benefit to the tune of £2.2 million.
Is my right hon. Friend aware that local government spending has moved from a seething cauldron of public indifference to a position in which the public are taking an acute interest in what councils are spending? Many local authorities are now looking at their spending plans far more prudently than ever before.
My hon. Friend is entirely right. One consequence of the introduction of the community charge is that public debate in local authority areas about spending decisions has become more acute and more lively.
I take it from the Secretary of State's remarks that transitional relief will be extended in my constituency for a further lengthy period. It is currently £40 per annum for the next three years, but I presume that it will be reduced. I understand that the unified business rate is also being reviewed, and that an amount will be transferred to compensate for the different amount of relief that is being given to private poll tax payers. Therefore, businesses in my area that expected some relief—the initial relief, although it was spread over 10 years, was welcome—will now find themselves zero-rated. I take into account the increase in mortgage and tax rates as well. May I also know—
The hon. Gentleman represents a constituency which, because of modifications to the area safety net, will benefit to the tune of £2.1 million additionally next year. In the hon. Gentleman's constituency and all others, the postponement of any phasing out of transitional relief will obtain. As I said earlier, we are extending that scheme for two years. As to the uniform rate, large and small businesses in constituencies such as Barnsley are among the main beneficiaries of the changeover to uniform business rate and of revaluation.
Does my right hon. Friend agree that the people most disappointed at the outcome of his statement today will not be charge payers but the Opposition, who see the community charge issue disappearing fast as one that can help them to win the next general election?
I draw my right hon. Friend's attention to the problem confronting prudent district authorities within high-spending county councils. Can he assure those district councils that, when he caps high-spending county councils, he will do so promptly, so that district councils know that their charges can remain steady and will not have to be revised?
Hon. Members opposite will look even more long-faced when the Opposition announce their alternative to domestic rates and the community charge, but we may have to wait some time for that. I sympathise with my hon. Friend's remarks, because I also represent a prudent district council which has to send out bills that are much larger than they should be, because of the county council's spending decisions. We must review the effects of high-spending county councils. I referred to our proposed changes to the Bill, and I hope that those relating to capping will help to ensure that county councils spend more sensibly in future.
Does the Secretary of State accept that his statement will create a group of 4 million people who he recognises have paid too much this year? We have constantly pressed their case. They include low-income earners, pensioners, the thrifty, and people generally who would rather die than be in debt. The Secretary of State now says that next year, they will be helped by £1 per week. Does the right hon. Gentleman believe that the spirit, integrity, consciences and values of those people are so cheap that they will be bought by £1 per week in the form of a post-dated cheque?
I am not seeking to do that, but to provide, at the expense of the taxpayer, greater assistance—perhaps to many receiving benefit. I am seeking to provide greater relief for those charge payers whom I think need it. It is preposterous to say, whenever a benefit is increased in a Budget or on other occasions, that, because that has not been done before, people who do not receive that increase are in some way disadvantaged.
My right hon. Friend has made a most ingenious and valiant attempt to respond to the many intense, varied and often contradictory pressures that have been brought to bear on him from all parts of the House. I wonder whether he shares my more fundamental concern. He will be raising some £3 billion in public expenditure, which the nation may understand better as a figure of roughly £60 per head of the population, or £250 per family, to deal with a series of phenomena which arise partly from profligacy and partly from inflation. Is not it dangerous at any time to encourage the nation to believe that phenomena of that kind can ever be dealt with fundamentally and finally by increasing public expenditure, when we already have 10 per cent. inflation?
I have a good deal of sympathy with my hon. Friend on two counts. First, he mentioned that I had been the beneficiary of a good deal of advice. He was right to say that it was not always consistent. Secondly, he is also right to say that we cannot continue indefinitely to bail out local authorities with increased support from taxpayers. Local authorities intend to increase their spending this year by 5.5 per cent. in real terms. From 1985 to 1991, they will have increased their expenditure in real terms by the best part of 20 per cent. That is a massive rise and it must be paid for by someone. Community charge payers will increasingly recognise that they will have to pick up the bills because of the lack of value for money offered by their local authorities.
Is not the truth that there has been a cut of more than £3,000 million in local taxes paid by the residents of large and expensive properties? The Secretary of State cannot for political reasons claw that money back. Is not that his dilemma? Is not that why £3 billion of taxpayers' money must now be found? My constituents in west Cumbria think that the poll tax is monstrous and appalling, and they look forward to a Labour Government who will abolish it.
As we all know, the Labour party's alternative involves local authorities spending more, but people being taxed less and also receiving free Esperanto lessons. The hon. Gentleman is wrong on every count. I am certain that he would not want to defend a system in which single pensioners, for example, pay exactly the same as a family of four or five wage earners living next door. Nor would he defend a system, I am sure, in which poorer families subsidised the domestic rates of better-off families. The real problem is the tendency of too many local authorities to spend too much money.
I wish that my right hon. Friend had been responsible for the community charge from the beginning. As to transitional relief from the uniform business rate, that disappears as soon as the premises change hands. Does my right hon. Friend intend to modify that arrangement, which hits small businesses in London and the south-east in particular extremely hard?
No, we do not intend to change that arrangement. One could not do so without also ensuring that similar provisions applied to new as well as existing property. In most circumstances, it would be very difficult to reach a decision. The transitional arrangements are intended to help business rate payers who were not aware before revaluation that their liability would dramatically change. That is not the case when someone moves premises.
The review acknowledges the hardship that the poll tax has brought upon many people, and a sensible Government would never have imposed it. But it does not recognise the effect on non-working partners, mainly married women, who must carry the full burden of the poll tax. Nor does it recognise the effect of the poll tax on small towns dominated by large businesses. They have lost a great deal in terms of the business rate, but they still have capital charges to carry. Nor does the statement acknowledge the stupidity of the standard spending rate calculations, which bear no relation to a local council's spending, be it Labour or Tory controlled. The review only serves to perpetuate an unfair, immoral and unconstitutional system which, if the Secretary of State had any integrity, he would denounce today.
I am afraid that the hon. Gentleman completely misunderstands the situation. Under the old system, if a local authority received a large amount in business rates from a big local employer—a point on which the hon. Member for Dagenham has been wrong on a number of occasions—the rate support grant would have been adjusted downward.
I congratulate my right hon. Friend on his statement, which has the hallmarks of practicality and common sense. In considering changes to the methodology of the SSAs, will my right hon. Friend give particular consideration to relating the system under which a notional sum is arrived at for the revenue from interest on capital that an authority receives to the actual revenue from an authority's capital? Secondly, will he bear in mind the importance of the tourist industry and the necessity to give a fair deal to authorities which have a large number of visitors?
As I said earlier, we are prepared to look at new evidence on the SSA methodology before we distribute grant later this year. I should make it clear that none of my proposals will involve primary legislation, although some will involve secondary legislation. The only change that we have not discussed which affects the business rate in a way which will involve legislation is the change that we have to make on caravans.
Does the Minister not understand that the people whom he is threatening all the time, saying what he will do to them, are local councillors who have been elected to provide services for local people? Does he not recognise that the more disadvantaged the area and the less well off the people in it, the more they need those services and the more anguished the decision for local councillors, Labour or Conservative, whether to cut education, social services or libraries—cuts which really affect people in their daily lives? Will he please stop hectoring councillors and understand what they do for local people in areas such as Leicester and elsewhere, where they are prudent and careful and deeply resent being called profligate when they are trying to serve the people who have elected them?
I particularly welcome the extension of the transitional relief arrangements, but will my right hon. Friend confirm that, among the 4 million additional individuals who will benefit are those lone-parent families with sole earners whose income levels make them ineligible for relief at the moment and who have been obliged to pay between £4 and £5 per week per household as a consequence of the changes in local government finance? Unless they are assisted, the measures that my right hon. Friend has announced today will not be as effective as most of us would wish.
The 4 million that I mentioned earlier are those who will now benefit from the transitional relief scheme because their losses in the move from domestic rates to the assumed community charge were between £2 and £3. Now that we have reduced the threshold to £2, they will benefit from the transitional relief scheme. I hope that many of those to whom my hon. Friend referred will also benefit from the enhanced assistance that we are giving in other ways.
The Secretary of State has sorely tempted the geniality of my contempt for him this afternoon with what he has announced, which was not so much a statement, more a redrafting of the poll tax legislation, made that much more cynical because he is attempting to bribe the electorate before the next general election. What calculation has he made of the increase in pay and prices that local authorities will face in 1991–92? What will the poor people of Newham have to do in terms of their further contribution to the safety net? [ Interruption.]
One or two of my hon. Friends are making remarks about what the hon. Gentleman's constituents might do which lack gallantry even if they are pointed and relevant. The figures that I mentioned earlier involve, as I said, increasing total standard spending from £32.8 billion to £39 billion, and an increase of 7.1 per cent. in the total standard spending figure over local authorities' planned spending for this year. Those are helpful figures.
I believe that the review will be seen as a thoughtful response by the Government to the concerns of many people, and I imagine that my constituents will be pleased, particularly those with low rateable values and those such as vicars and teachers who have to live in second homes while they buy properties for their retirement. Does my right hon. Friend agree that, as time goes on, any party that comes up with the idea of returning to some sort of domestic rating system will be seen as going back to the dark ages?
My hon. Friend is entirely right. He will know as well as I do some of the things which Opposition Members have said about the inequities of the domestic rating system, and he, like me, will have come to the conclusion that it is inconceivable that, after saying some of those things, they could even consider going back to domestic rates.
I am refusing to pay the poll tax because eight out of 10 of my constituents lose under the poll tax compared with the rates. Nothing that the right hon. Gentleman has said today will lessen their anger at the unfairness and injustice of the poll tax. Will he give an assurance that the people of Bradford, who last May exercised their local democratic rights by turfing out the Tories from control of Bradford city council, will not be penalised by any Government actions between now and the next general election?
I certainly will not penalise anybody, but the way in which I react to local authorities will depend what they do. Once again I must say that it is astonishing that the hon. Gentleman should take the view that his constituents should face larger bills so that he can have a free ride.
Will my right hon. Friend accept, from someone who does not love the community charge, that I think that he has done extraordinarily well to get £3 billion extra out of the Treasury? Is it not somewhat alarming and disturbing to hear £3 billion called "a piffling sum"? If £3 billion is a piffling sum, God knows what the socialists would spend.
Surely the whole idea of local government is that it should be local and that it should be government, so that the people know that, when they vote for a local government they are voting for one kind of authority or another. Instead of charge capping, which puts the albatross of overspending firmly around the Government's neck, why not put it firmly where it should belong—around the local authorities' necks, and penalise them a pound for every pound spent over the SSA?
We have both been in the House for the same period, and my hon. Friend will recall that we have in the past had clawback systems which approximated to the proposal he makes but they are not uniformly popular —for example, with my hon. Friends. My hon. Friend is right to say that the amount of money that we are proposing as an increase to aggregate external finance is substantial. For the Opposition to witter on about it not being £3 billion is equivalent to their saying that money raised through corporation tax and spent on public services is somehow not a contribution from the public Exchequer.
The Secretary of State has been wittering on about local authorities increasing their expenditure, but is not it true that that expenditure has been on important services such as home helps, provision for the mentally handicapped, education, housing and other obligations placed on them by the Government; and that local authorities have also had to cope with the inflation created by the Government's economic policies? Does the right hon. Gentleman recall that, when this malevolent and wicked tax was produced by the Government, it was said that it would be simple? Who will pay for the massive administration that his proposals today will entail? Will it be borne entirely by the Government? Does he realise that, as a result of his threat today to poll-cap every local authority, he has shifted from the liberal wing to the jackboot tendency in his party?
I leave knowledge of jackboots to the hon. Gentleman. It is entirely possible to provide good-quality services for the amounts that I have mentioned. It is also entirely possible for local authorities to provide a good standard of service with increased spending of 30 per cent. over three years. Plainly the shadow Chancellor of the Exchequer the right hon. and learned Member for Monklands, East (Mr. Smith) has his work cut out to convert the Labour party to fiscal probity.
Is not the additional allocation of £3 billion to local authorities next year more than they could reasonably have hoped for? Is my right hon. Friend aware that there is still an enormous gulf between the best and the worst local authorities in terms of price and quality of service? What steps will he take to bring greater efficiency, greater economy and greater effectiveness to local government?
The answer to my hon. Friend's first two questions is a strong affirmative. The answer to his third question is that we all look to the Audit Commission to continue to press for greater efficiency in local government. For example, the commission has identified £650 million-worth of possible savings that have still not been made. It has also pointed to about £150 million-worth of savings that could be made through energy efficiency, and no doubt all hon. Members would agree about that. There is plenty that could be done to achieve the objective to which my hon. Friend properly and eloquently referred.
I congratulate the Secretary of State on an undoubted sleight of hand, in which he was aided and abetted by the headline writers in some of our broadcast media, in pretending that an allocation of £3 billion is in some way a gift of Government through the grant system. Grant has increased by only £2 billion, two thirds of what has been talked about. The remainder comes from the national business rate.
The Secretary of State's announcement is a fraud. Will he confirm that the year-on-year increase in spending to which he has referred from last year, is well accounted for by the removal of creative accountancy measures, including the use of capital receipts? Authorities cannot be blamed for high poll tax charges, nor can they be blamed for spending cuts that are being considered by the Cabinet in its public spending review.
The amount of £2 billion is peanuts. What happened to the £5 billion that we heard about only a few weeks ago, and what happened to the Government's promise that they would look at those who had no income, people such as mothers looking after small children at home? What happened to the 43 suggestions put to him by his Back Benchers and what has become of the promised fundamental review of the poll tax?
I wondered whether the hon. Gentleman would continue with his list of rhetorical questions and ask what happened to those Labour Back Benchers who are not here, and what happened to the Labour party alternative. [ Interruption.] I shall deal with the hon. Gentleman's question, about which his hon. Friend the Member for Dagenham shouts from time to time. The hon. Gentleman knows too much about local authority finance to believe what he said.
Aggregate external finance to local authorities this year is £23.1 billion. Next year it will be £26.05 billion. That difference of £2.95 billion is made up of revenue support grant, specific grants and contributions from the non-domestic rate pool. For the hon. Gentleman to say that one should take no account of contributions from the business rate pool is like saying, as I mentioned earlier, that corporation tax should not be included in Government revenues because it comes from business. The hon. Gentleman's argument is ridiculous. He is trying to find some specious intellectual justification for spending the whole afternoon being churlish.
Further to that point of order, Mr. Speaker. Perhaps you will consider that on a day on which the Government put down a business motion requiring us to stay here all night, and as there is no pressure for business to finish by 10 o'clock, it should have been possible to call all hon. Members who were rising.
Further to the point of order by my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman), Mr. Speaker. We all appreciate your problems and accept your rulings. Will you bear in mind that you called the hon. Member for Workington (Mr. Campbell-Savours), which is a Labour voice for Cumbria, but did not call any Conservative voice for Cumbria?