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I do not underestimate the difficulty of hon. Members representing such counties as Shropshire and I understand what my right hon. Friend the Member for Shropshire, North (Mr. Biffen) meant when he said that he would like the settlement to be a framework rather than a straitjacket. However, I would like to say a few words in favour of the rate-capping settlement, in the context of a tight local government settlement, but one that I believe will be manageable.
I spent 10 years in local government—possibly not as long as many right hon. and hon. Members—and I had some sympathy for the hon. Member for The Wrekin (Mr. Grocott) when he said that the way in which grant is allocated in local government has become increasingly complicated over the years. There seems to be an unnecessary shuffling back and forth from Whitehall. It is a matter of regret that some 80 per cent. of resources in local government is now provided centrally rather than locally.
Local government should be vibrant and responsive to its local communities and raise a greater proportion of its revenue from them. In principle, I am against capping where it is not absolutely necessary, as it avoids the sins of profligate local authorities. Sadly, until two years ago, my local Labour-controlled Wyre Forest district council was overspending by some £2 million, or 20 per cent. per year. The cap let the council off the hook in respect of the local population.
As the Irishman said, "If you want to get somewhere, you have to find out where you are starting from". We start from a system of local government in which 80 per cent. of funding is provided by the taxpayer; we have a budget deficit and no less than 25 per cent. of total Government spending—something in the region of £43.5 billion this year—is spent by local government. Although only 10 out of 448 local authorities were capped and four of those had adjustments made to their caps as a result of representations to the Secretary of State, we need to control central and local government spending. Capping is one way of dealing with the most profligate or potentially profligate local authorities and providing an effective deterrent to other local authorities that might otherwise be tempted to overspend.
We have to consider, however, not only the possibly justifiable complaints from right hon. and hon. Members that some local authorities have a worse deal than others, but, as the hon. Member for Holborn and St. Pancras (Mr. Dobson) said, the deterrent provided by capping, and the standard spending assessment system in particular, meant that the increase in local government spending was only 5.2 per cent. Although that is higher than the rate of inflation, it is a better performance than local government has produced in recent years.
We also have to bear in mind long-term trends that will lead to significant additional proportions of gross national product—in addition to the 45 per cent. now being spent—going into Government spending because of the aging population and the tendency of local government to spend money on bureaucracy that does not directly benefit the population. The Audit Commission, in paying the piper, showed that between 1987 and 1983 the number of non-manual staff in local authorities rose by some 93,000 people—enough to fill Wembley stadium—at a cost of £10 billion.
Having heard the speech by my right hon. Friend the Secretary of State, I believe that the capping criteria have been sensitive to local needs generally, although people may disagree. The fact that he changed the formula for inner London boroughs and for police authorities is evidence of that. The fact that only six out of 448 authorities were capped and then were unable to achieve any adjustment after talks with Ministers, is evidence of a certain amount of flexibility and demonstrates that capping has not been oppressive for the majority of local authorities.
Before we fall out with the SSA system upon which the capping regime is based, we should bear in mind that the Audit Commission recently concluded that SSAs were
A more sophisticated system for equalising needs than any overseas system … and an improvement over its predecessor in many respects.
In another recent study, Rita Hale of CIPFA and Tony Travers of the London School of Economics said:
no overseas country appears to have a full grant system which goes so far in its attempt to achieve full equalisation.
I appreciate that the way in which the SSA is calculated for education and the police service is extremely complex and I do not agree with every instance of it. In the debate on the SSA, I argued on behalf of my own county that the area cost adjustment ought to be either reformed or abolished altogether and that SSA adjustments did not reflect the needs of relatively large towns with inner city problems that are situated in rural areas, such as Kidderminster, Worcester and possibly Bridgnorth and other towns in Shropshire.
As any system of allocated grant on a national basis on such a scale inevitably will have an element of sophistication and possibly even rough justice, and as independent reports suggest that it is about as fair as any in the world, it would be unfair and wrong to fall out about it and say that capping necessarily leads to injustice.
In my own county, we have a very tight settlement, particularly in education where teachers' pay has increased by 2.2 per cent. instead of 3.7 per cent. We know that it is a tight year, but we think that it is manageable. If, in the long term, the capping regime reduces local government expenditure and therefore the total demands that central Government make on the taxpayer to allow a lower tax base and a more vibrant economy, it is well worth supporting.