With permission, Mr. Speaker, I should like to make a statement setting out my decisions on local government finance in Wales for 1991–92.
Before I do so, I want to pay a tribute to the late hon. Member for Neath (Mr. Coleman). He was a long-serving and much-loved Member of the House, and his dedication to his constituency and to the country of Wales generally is well known. For six and a half years he had been Chairman of the Welsh Grand Committee and had presided over most of its sittings. I believe that his wise and firm guidance of that Committee's deliberations played a large part in making its sittings both pleasant and effective. He will be greatly missed, and the House will wish to join me in sending sincere condolences to his widow and children.
As the House is already aware, the Government are undertaking a thorough, constructive and fundamental review of the community charge. In Wales, I have already had a very useful meeting with Welsh local authority associations, and I look forward to further discussions on these matters, including consultations with the Opposition parties in coming weeks. I have also looked at changes which can be made in the next financial year, and my statement today will explain my decisions.
The three reports that set out the final terms of the settlement will be laid before the House next Monday. I have today placed details of the settlement in the Library and I have arranged for essential data to be sent to every local authority in Wales.
The settlement allows for a level of total standard spending by Welsh authorities of £2,433 million—an increase of 14·9 per cent. on last year's figure and an increase of 8 per cent. on the aggregate of Welsh local authority budgets in 1990–91. Aggregate external finance in support of that level of spending will be £1,936·1 million —an increase of 11·2 per cent., or £196 million. Within that, the total of revenue support grant is £1,236·5 million, the distributable amount from the non-domestic rating account is £525 million, and the total of specific grants within the AEF settlement is £174·6 million.
The settlement is an excellent one for Welsh local authorities. The increase in total standard spending means that local authorities in Wales are set to spend on average more than £1,100 for each and every Welsh charge payer in 1991–92 and gives authorities every opportunity to maintain services and to develop them where appropriate. It provides an increase of 8 per cent. on budgets for the current year—which were set too high—which is 2 per cent. ahead of the level of inflation forecast for 1991–92. In addition, efficiency savings, including those identified by the Audit Commission, can release additional resources for service development and can also result in an improved delivery of services. I commend to the House the work of the Assembly of Welsh Counties, the Council of Welsh Districts and individual councils. The work that they have done to achieve the savings and better value for money is to be applauded.
Charge payers will expect their councils to set their budgets and community charges in line with the settlement. They know that expenditure increases that exceed this will mean higher charges than necessary. Similarly, charge payers will expect those councils whose spending falls below their standard spending assessment not to increase their spending by more than the amount for which I have allowed.
I must now explain to the House the implications of the settlement for Welsh charge payers. I am pleased to say that, for two reasons, Welsh charge payers will particularly benefit. First, it is good news for Welsh charge payers, because it means that the community charge for standard spending in 1991–92 will be £228—£4 less than the average charge in Wales in 1990–91. That is eminently achievable and means that, where authorities spend in line with the settlement, 80 per cent. of the cost of local authority services will be met by external finance and only 20 per cent. by Welsh charge payers. However, that figure of 20 per cent. takes no account of reductions in community charges made possible by direct Government assistance to charge payers.
The second reason why this is an excellent settlement for Welsh charge payers is that I am able today to announce a new community charge reduction scheme in Wales and a substantial increase in the sum available for reducing charges. For 1991–92, the amount available will increase from £20 million under the old transitional relief scheme to £62 million under the new scheme. Reductions in charges will benefit directly the residents of specified community areas and will be calculated by reference to the actual community charges set in 1990–91, rather than the notional charges used under the old transitional relief scheme.
The effect of that, together with the substantial additional resources that I am making available, will be significantly to increase the amount of help available to those who received help this year, and also to reduce the charges of the residents of many communities who received no relief this year. In overall terms, I expect the number of charge payers benefiting from reduced charges under the scheme to increase from 750,000 in 1990–91 to 1·4 million in 1991–92. In other words, 67 per cent. of Welsh charge payers, or two in every three, will receive assistance with their charges next year.
The average charge in Wales after the reductions should be about £200, and there is in addition community charge benefit to provide further assistance for those who qualify. When benefits and the new community charge reduction scheme are taken into account, Welsh charge payers should meet no more than 15 per cent. of the cost of local government services—provided always that authorities spend in line with my plans. It is of the greatest importance that this additional help from the Government should go to the benefit of charge payers, and should not be used as a cloak for higher spending.
Let me deal now with non-domestic rates. The rates contribution that Welsh businesses will make towards the cost of local government will be increased by the September retail prices index. I propose to set the multiplier—the Welsh poundage—at 40·8 this year, an increase of 10·9 per cent., as in England. Thus, Welsh businesses should again meet only about 20 per cent. of the cost of local government services in Wales.
My announcement is about revenue spending by Welsh local authorities in 1991–92, but I should inform the House that I also propose to increase the level of support for capital investment by £18 million and I shall announce my proposals on the distribution of these additional resources shortly.
Welsh local authorities are now considering their budgets for 1991–92. I have listened to the representations of the Welsh local authority associations, and have decided not to announce criteria now for community charge capping. But I have also made absolutely clear to every local authority in Wales that, if they budget excessively, they must expect me to act to protect the interests of their charge payers. It is of particular importance that councils do not regard my announcement today as an excuse for additional spending. Welsh charge payers and I will expect authorities to set charges which enable charge payers fully to enjoy the additional assistance that I have announced.
This is an excellent settlement, and charge payers have every reason to expect their councils to set their budgets and community charges in line with it. They should expect to receive community charge bills that reflect the full benefit of the additional resources that I have provided and to pay an average community charge of around £200. I commend the settlement to the House.
We shall miss the strong and honest voice of the late Donald Coleman. All of us appreciated the sincere remarks of the Secretary of State about our late colleague, who was a magnificent Member of Parliament. Only very recently, he was seen guarding his constituents' interests vigorously and well in the Chamber. Everyone will agree that Donald Coleman loved the town of Neath, its hinterland and its valley. He wished only to make a better life for his constituents, and we were witness to his fine attempts to do that. Neath could have had no better Member of Parliament.
Turning to the community charge reduction scheme —for that is what it is now called—if the unjust poll tax must remain in Wales, I broadly welcome the improvements. Will the new scheme now operate all over Wales? I emphasise that, at present, many communities do not share in transitional relief. For example, will any community in Alyn and Deeside receive benefit from the scheme? At present, no community does. The Secretary of State is merely tinkering. It is only a minor change. The only reform would be abolition.
The Secretary of State made a reference to charge capping. He tries to skirt the issue. Does he intend to apply caps? If so, why does not he announce the criteria? He could confirm now that the English criteria would be used. On the eve of the match, I may as well tell him that he is kicking for touch. Is the right hon. Gentleman asking local authorities to make the choice between cutting services and being capped? Surely he cannot be asking for teacher redundancies. Surely he does not seriously propose any implication of, say, the closure of rural schools.
Can the Secretary of State explain a paradox in his statement? At the beginning, he praised local authorities for their efforts to improve efficiency, yet he finished by accusing them of profligacy and waste. I challenge the right hon. Gentleman to name one local authority in Wales which has acted irresponsibly.
On capital announcements, does the Secretary of State realise that, for the Welsh districts, capital expenditure is an absolute disaster? I put it to him that, compared to the average for the past three years, investment plans for housing are down in real terms by one quarter. The shortfall is £75 million. Consequently, the extra and welcome £18 million of which he boasts must be insufficient, bearing in mind homelessness and the housing crisis throughout Wales.
Will the Secretary of State identify for us in the House tonight the precise cash provided for care in the community? He boasts of extra capital. Is it earmarked for community care? I want to give him a warning. Will not the increase in the business rate above the rate of inflation add to the problems of business in Wales in the increasingly serious recession?
The statement is basically all about the poll tax. When Wales has a new Government, Labour will abolish the poll tax. We say that the poll tax must be abolished. It is unjust and it is despised throughout Wales.
I shall come to the hon. Gentleman's peroration in a moment. First, I am grateful for his broad welcome of the new scheme that I have announced this evening. Secondly, on the coverage of the community charge reduction scheme, 67 per cent. of Welsh charge payers in over 600 communities out of 865 will benefit. In 1991, 35 per cent. of charge payers are covered in 320 communities. I may attract some criticism from behind me now, because I can reveal that, whereas no communities in the hon. Gentleman's constituency of Alyn and Deeside have benefited until now, under the changes that I have announced today, nine of his communities will benefit, and the average reduction in community charge bills will be £24.
I am grateful to the hon. Gentleman for saying, "Thank you," so gracefully.
The hon. Gentleman's third point was that the announcement is only a minor change. More than trebling the amount from £20 million to £62 million can hardly be described as a minor change.
The hon. Gentleman's fourth point was that I was kicking for touch. He drew a shady analogy with an important match that will take place on Saturday. I do not expect our side—the great Welsh Rugby Union side—to be kicking for touch on Saturday. It will be kicking for goal and scoring tries. I rest on what I have said already about charge capping.
The hon. Gentleman's next point was that I had accused local authorities of profligacy and waste. If he reads Hansard carefully, he will see that I did not use those words. I paid tribute to local authorities in Wales for the enthusiastic way in which they embraced the efficiency initiative and continue to do so. However, I said that I felt that their spending plans this year were too high. I hope that they can contain their spending plans within the limits of what I believe to be a good settlement.
I wonder whether the hon. Gentleman has looked at the overall figures on capital. I announced that assumed growth expenditure would increase to £528 million capital, an increase of £53 million, or 11·2 per cent., over 1990–91. It is a good package, which will enable local authorities to bring forward significant capital investment. It is a total investment of almost £240 per adult in 1991–92, whereas it was £200 in 1990–91 and £156 in England. He really should look at the overall figures.
We have made it clear that we recognise that some are disappointed that we had to delay community care. However, we are preparing actively. In many areas, the Welsh Office is pioneering with local authorities a great many new initiatives in community care. We are preparing for community care.
The hon. Gentleman's eighth point was about businesses. I merely confirmed the previous provisional announcement. The increase of 10·9 per cent. is exactly the same as the increase in England.
I shall now deal with the hon. Gentleman's peroration. He said that we should abolish the community charge or poll tax. I wish that we could engage in constructive, positive discussions about what should take place under our present review of the community charge. If I recall correctly, the Labour party has come forward with 60 separate schemes to replace the community charge in the past few years. I should like the opportunity to discuss just one with them.
In so far as this miserable system can be improved, my right hon. Friends the Secretary of State for Wales and the Secretary of State for the Environment have gone a long way to improving it. There must be something rather screwy about a system of local government finance in which two thirds of those liable to pay receive some rebate. However, a great many community charge payers in my constituency will live to bless what my right hon. Friends have achieved.
I do not know whether my right hon. Friend the Secretary of State for Wales makes the same deduction as I do from the Labour party's constant half-promises that it will abolish the poll tax. I take that as a clear sign that it has given up all hope of winning the next general election. It knows perfectly well that, if it came to power, it would take a long time to put an alternative system of local government finance in place.
My right hon. Friend was wise not to give any criteria for capping. There is no reason to anticipate that there will be any capping of local authorities in Wales if they continue to respond as they have to the leadership of my right hon. Friend. Does the settlement include any provision for the cost of the Towyn floods and its impact on community charge payers in Colwyn in the next financial year?
1 thank my hon. Friend for some of the points which he has made. I certainly intend that the review which we are conducting should be thorough and wide-ranging. As my right hon. Friend has said many times, we are prepared to consider the wide spectrum without preconditions. I also thank my hon. Friend for his remarks about the new scheme. To cover 67 per cent. is a substantial increase, and it will mean that 13 of his communities will benefit, with average relief of £25 per community charge payer.
If I may jump to the point which my hon. Friend made about Towyn, as he knows, I have on several occasions visited the area. We have announced a number of schemes which we believe will be of positive help to the communities there, particularly when we are taking the important step of looking to the longer-term enhancement of security for flood protection and to the revival of the communities. I know my hon. Friend's views. What we have announced is by no means the end of the picture.
May I add my tribute to those already given to Donald Coleman, the late Member for Neath? He was a man hewn from a rich seam of warmth, kindness, strength and determination, and we shall miss him.
While we must welcome any mitigation of the rigours of the poll tax, is it not right that the reductions referred to in the statement depend upon a bizarre difference of opinion between the Secretary of State and most of the public in Wales? For these reductions to take place, is it not inevitable that local authorities will be forced to close village schools, to hand over public sector retirement homes to the private secctor where they will be less well run, and to put off schemes which would enable those coming into community care to be properly looked after by the social services?
Having said that, I welcome the right hon. Gentleman's offer to consult the other political parties on the review of the poll tax. If he is persuaded that it would be fairer to have in Wales a tax based on ability to pay, like local income tax, which is the only scheme which my party has put forward over a quarter of a century, will we have that scheme in Wales even if his colleague in England does not agree?
Montgomeryshire will get a 15·7 per cent. increase in its standard spending assessment in the settlement announced today. In Powys, the increase is 12·9 per cent. We believe that the increases should be more than enough to accommodate the priorities in any local authority spending plans. In the hon. and learned Gentleman's area of Montgomeryshire, 35 out of 45 communities will receive help under the new scheme, and the average payment will be £14 per recipient.
The hon. and learned Gentleman kindly referred to consultation. I look forward to hearing from him. I am not prepared to say now what my conclusions will be when I have not yet had the welcome opportunity of listening to him.
I welcome my right hon. Friend's statement, and I note that he estimates that next year's community charge will be as low as £228. My constituents in Cardiff, North have been the hardest hit in Wales by the two local left-wing councils setting community charges of almost £100 more than necessary. Does my right hon. Friend agree that those constituents deserve a reduction because of the way in which they have been treated? Even though he has not yet set the criteria for capping, may I look forward to him being tougher than his predecessor on those councils?
The standard spending assessment for Cardiff will increase by 22·3 per cent. I believe that that is fair. As my hon. Friend will know, in Wales the distribution of the settlement is approved by the Welsh Consultative Council on Local Government Finance. That is a great asset in Wales, and I shall never cease to pay tribute to the local authorities which enabled us to bring it about. Within the overall distribution, Cardiff will get a 22·3 per cent. increase and South Glamorgan will get 13·2 per cent. I hope that the new scheme will be welcomed in Cardiff. Under the existing transitional relief scheme, two communities benefit; under the new scheme, 17 communities will benefit, with an average reduction of £41 per person in the next financial year. As to capping, I shall bear in mind what my hon. Friend has said.
The Secretary of State will be aware of the enormous burden faced by Swansea city council because of the need to demolish and rebuild about 900 PRC houses in Portmead, Blaenymaes and Clase. Given that the fault does not lie with the city council, is wholly unprecedented and will have great repercussions on its budget, will the Secretary of State undertake to consider sympathetically providing additional finance for the city council?
The hon. Gentleman knows what we have already said about this. Swansea has had a fair allocation of resources. It is for the city council to set its own priorities. I have always said that I look forward to meeting Swansea city council on some occasion; no doubt it will consider what points it wishes to raise with me.
I acknowlege the additional assistance which my right hon. Friend has gained for community charge payers in Wales, but does he agree that it is totally illogical that we should have a different transitional relief system in Wales from that in England? Does he agree that the system in England is fairer because it focuses help on individuals rather than on giving blanket assistance to everyone within a council area?
I have listened carefully to what my hon. Friend has said in his complaints on behalf of his constituents over the application of the transitional relief scheme in Wales. I hope that his constituents will recognise that he has played a part in the way in which I have extended the scheme. Whereas three communities in his constituency benefit this year, that number will rise to 17 in the next financial year, the average reduction being £26.
My hon. Friend has constantly maintained that we should have the English system in Wales. The circumstances are not appropriate for the operation of the English scheme in Wales. The Welsh scheme was introduced after full consultation and with support originally from the local authorities because it is such a simple system. Whereas the English system is very complicated, as I know well, with a substantial amount paid in administration, the Welsh scheme has the beauty of feeding help straight through to the community charge payer with very little administrative cost.
May I associate myself and my party with the remarks on the late Donald Coleman? We send our condolences to his widow and family. He made a great contribution to the House, to politics in Wales and to the work in his constituency.
The Secretary of State should be made aware that Gwynedd county council takes very little comfort from his statement today, because it has made an assessment that, based on the provisional figures that he has already announced, it will need to increase its poll tax by £40 in the county alone next year in order to maintain a standstill budget. The increase which he has announced is not on the actual budget for this year but on the notional budget that he set for the council.
The problem is that, in order simply to maintain services, the council will have to raise the poll tax by £40. Will the Secretary of State respond to that? Will he also acknowledge that, if the council has to do that, the blame will not lie with Gwynedd or any of the districts but with the Welsh Office?
We also welcome the talks that will lead to the abolition of the poll tax in Wales. Does the right hon. Gentleman have any faith in that tax in the long term?
I did not catch the hon. Gentleman's last question, but I believe that he was asking me to give the conclusions of the review before he and his colleagues have had a chance to see me. I do not believe that that would be right. I look forward to the discussions we shall have of their views on the future of local government finance. I should also welcome any of their comments about local government structure and functions.
I strongly believe that the increase of 8 per cent. over actual budgets—we are not talking about notional budgets—is a good settlement, despite the hon. Gentleman's attempts to throw it into doubt. In England, the increase is almost 1 per cent. lower. My announcement is not only a recognition of the more responsible local government spending that we have had in Wales, but an incentive to all local authorities to spend sensibly and to do so within the settlement I have announced.
I welcome the fact that the Secretary of State has admitted today that the Government have had to rectify the errors they made with the community charge when they got the balance wrong to start with between gainers and losers. Does he intend to improve things further by increasing to 100 per cent. the percentage of community charge payers who will gain? If he did so, he would be unique in the annals of economics for introducing a system in which there were no losers but only gainers.
I do not think that anyone, not even the Labour party, could bring in a system in which all were gainers. We must have a system of local government finance in which the settlement fairly reflects the spending needs of localities and local authorities, while spreading the burden in a proper way. That is why I greatly welcome the signs from the Welsh nationalist party and the Liberal Democrats of their willingness to discuss the future of local government finance. I hope that the hon. Gentleman, with all his influence in his party, will recommend the same course of action.
In common with other hon. Members, I welcome the fact that the Government are putting more money into local government finance, if only to sweeten the bitter pill of injustice caused by the introduction of the poll tax.
In this year's settlement, the Secretary of State has increased the number of communities that will benefit from the transitional relief scheme. Nevertheless, does he recognise that there are still many disabled people who will suffer unfairly because of the way in which the poll tax operates and because they do not live in those communities that now stand to benefit? I have sent a detailed letter about this today to the right hon. Gentleman, and I look forward to a brief reply now and a more detailed one later.
I have not yet seen the hon. Gentleman's letter, so I hope that he will allow me to consider it carefully; then perhaps we can have a word about it.
My hon. Friend the Member for Delyn (Mr. Raffan) has advocated the English scheme and I recognise that we would then be able to select specific groups of people and individuals for benefit. However, the administrative costs of that would he considerable; that is why we have decided to keep the fundamental basis of the old transitional relief scheme—we are continuing it under the community charge reduction scheme. I hope that the hon. Gentleman recognises that, by more than trebling the amount of benefit, we are giving real relief to Welsh community charge payers for next year. I am grateful for the welcome that that has received from both sides of the House.
I also pay tribute to Donald Coleman, who was loved and respected not only by his constituents who he represented so well for 25 years, but by the people of Barry in my constituency, which was his home town.
As a result of this afternoon's statement, will the Vale of Glamorgan borough council be able to reverse its decision of last week not to provide planned and much-needed accommodation for homeless families in the area? The number of homeless has doubled while the right hon. Gentleman's Government have been in office.
I recognise and endorse what the hon. Gentleman said about our late colleague.
The Vale of Glamorgan will receive a 17·1 per cent. increase in its SSA, which should be more than enough to cope with all reasonable expenditure damands. The hon. Gentleman will be well aware of the announcements that we have already made for special allocations for the homeless. I recognise that we have a problem, particularly in the city of Cardiff, which requires remedies, many of which we have already announced.
Does the Secretary of State recognise that the scale of reliefs that he has been forced to announce today is a confession of the hardship that he and his Government have imposed on the Welsh people in the past 12 months? Does he also recognise that calling a budget increase of 2 per cent. over inflation generous fails to recognise the cost structure of local authorities? At best, the right hon. Gentleman has made a standstill announcement, but it is not even that when one considers the problems of homelessness and care in the community. The right hon. Gentleman has also announced that the business rate will increase at double the projected rate of inflation. Surely he appreciates that, at a time when bankruptcies are soaring in Wales, that announcement is the death sentence for many small businesses.
I do not accept that. The announcement—it had already been made on a provisional basis, but I confirmed it today—will not produce that effect. I hope that the right hon. Gentleman will reconsider his words. I hope that he will recognise that, given its ingredients, this is a fair settlement.
On occasion, the Labour party has criticised us for failing to increase the revenue support grant under the new system. Today's announcement will mean that the revenue support grant will rise by 2·8 per cent. in real terms between 1990–91 and 1991–92. The right hon. Gentleman played a part in the previous Labour Government, and in their final three years of office there was a reduction of 4 per cent., 8 per cent., and 4 per cent. respectively in rate support grant.
Does the Secretary of State now accept that the people of Wales are thoroughly fed up with his poll tax, which has operated for the past two years?
The right hon. Gentleman said that he is ruling nothing out and ruling nothing in. Therefore, does he regret the statements of the past 12 months that have poured scorn on the Labour party's fair rating system? Many of his right hon. and hon. Friends believe that that is a proper alternative to his poll tax. If the right hon. Gentleman really wants the Labour party to engage in talks with him about a new local government financial system, he should be aware that we shall do so on the basis of two conditions. First, the poll tax should be abolished and, secondly, a finely worked out rating system, which the Labour party has agreed to, should be the basis for a new local government financial system.
It is no good trying to shout me down. I have already said that I am willing to enter into discussions, and that my precondition is to rule nothing in and to rule nothing out. If that is not a fair basis on which to have a grown-up discussion, I do not know what is. The sooner the hon. Member for Torfaen (Mr. Murphy) reconsiders the whole position, the better. When he criticises me for having poured scorn on previous schemes put forward by the Labour party, I hope that he will sympathise with me, because almost every time we had a debate, the Labour party put forward a different scheme. I am still catching up with its last announcement. It would be far better for Labour Members to come to see me without preconditions and get the best possible deal for the people of Wales.