5.1 pm

The Secretary of State for the Environment (Mr. Tom King)

I beg to move, That the Rate Support Grant Supplementary Report (England) 1982–83, which was laid before this House on 16th December, be approved.

Mr. Speaker

With this it will be convenient to discuss the motion: That the Rate Support Grant Report (England) 1983–84, which was laid before this House on 17th January, be approved.

Mr. King

These reports come after nearly four years of steady pressure for restraint in local government spending which has led to a new understanding in local government about the need for current spending to be kept to levels that the nation can afford. There is a growing realisation of the strains that uncontrolled spending impose not just on the householder but, in particular, on business and commerce. It is that new and realistic approach that I want to encourage.

The proposals in the report are designed to encourage further restraint while allowing efficient and responsible authorities to provide a good standard of service at reasonable cost. The central concern must remain the enormous influence that local government expenditure has in the economy as a whole. In 1983–84, the year ahead, local government is expected to spend some £22,000 million on services, mainly in the form of salaries to its employees. Central Government—of course, that means the taxpayer—will contribute to that expenditure about £12,000 million of grant assistance. In that context, no Government could fail to honour their responsibility to set the boundaries of expenditure within which local government should operate.

The purpose of the two reports is to set the parameters for 1983–84 and to confirm the measures to hold back grant from those authorities that are budgeting to overspend both grant-related expenditure and targets in the current year. The supplementary report makes some minor adjustments to grant entitlement that mainly reflect reductions in interest rates. However, its main purpose is to confirm the principles of block grant holdback for 1982–83.

The total holdback for 1982–83, on the basis of local authority budgets, is £308 million. All the authorities that may suffer holdback had clear warning of the consequences that they would face if they increased expenditure above the levels that the majority found necessary. In deciding to reject the Government's request for economy, there could have been no misunderstanding about the consequences for the individual authority. I shall return to the subject of holdback in 1982–83 later, because some things may have changed. However, the tragedy is that the expenditure plans and decisions of some authorities that will incur holdback were clearly taken in a spirit of political dogma. The last to be considered were those—individuals, families and firms—who would ultimately have to meet the bills.

There are three main elements to the report for 1983–84: expenditure, grant, and the holdback proposals for those overspending their targets. On current expenditure, if authorities are prudent, the cash available next year should be about 5 per cent. more than spending this year. That is tough, but reasonable. It implies a continuing need for economies in current expenditure.

We are providing £11.8 billion of grant for 1983–84. That is £300 million more than the curent year. It represents 52.8 per cent. of relevant expenditure compared with 56.1 per cent. last year. We have made no major changes to the way in which grant-related expenditure is assessed, and the basic grant distribution mechanism is unchanged.

However, this is the first settlement that incorporates data from the 1981 census. I know that that will be welcomed, in particular, by those in expanding counties. I note the presence of my hon. Friend the Member for Buckingham (Mr. Benyon). We are conscious of areas such as Milton Keynes in Buckinghamshire and of the problems of expanding populations. The incorporation of the census data and their further updating represent a significant step forward in correcting the under-assessments of previous settlements. However, I also recognise that, because of the inevitable lags in the data, that problem has not been fully solved, and we shall give it further thought.

Mr. Eldon Griffiths (Bury St. Edmunds)

I am grateful to my right hon. Friend for his remarks and for the understanding that he has shown about the way in which the 1981 census can help in growing areas whilst still not entirely meeting the problem. I hope that he will bear in mind that it is difficult to explain to rapidly growing counties why they should get less on the grant-related expenditure assessment formulae than they might otherwise get.

Mr. King

I accept that there is a problem. Given my hon. Friend's constituency and his good understanding of such issues, I realise why he has risen on the subject of expanding counties and the problems of changing populations. No doubt other hon. Members who represent authorities with declining populations and, in particular, with rapidly falling school rolls, will advise the House about the difficulties of making immediate and equivalent reductions in education expenditure. Indeed, I seem to have struck a chord with some hon. Members. It is a question of balance. However, I hope that that brief exchange demonstrates that I am very conscious of the issue and of the need to tackle it.

The final target figures were issued to all local authorities in December, but only minor changes were made to the July figures, and all of those were increases. Local government—I am grateful to it—has given an appreciative welcome to the fact that it has had more notice this year than ever before of the likely settlement for the year ahead. We have received representations from local authorities but it is no good receiving the first intimations in January, by which time budgets must be made and rate fixing carried out. That is why I was determined and pleased that we achieved last July as the date at which to give the first guidance of the probable shape of this year's settlement. That will undoubtedly help local government.

Under the system of targets for the year ahead, our proposals are that most low-spending authorities should have a 4 per cent. increase in cash over their budget for this year, but that most high-spending authorities should be expected to make a 1 per cent. cash reduction from their budget this year.

The House will immediately recognise—many hon. Members could have reminded me if I had not mentioned it—that all authorities are invited to make economies, whether they be the lowest or highest-spending authorities. The highest-spending authorities are being asked to make overwhelmingly the largest contribution. That is right, and I am sure that many of my hon. Friends recognise that the highest spenders have more scope to reduce their consumption. Unless they do, the holdback scheme will bite hard in the coming year.

There can be no misunderstanding about either the intention or the detail of our proposals. The report describes in detail the proposed holdback scheme. During each of the first 2 percentage points of spending above target, grant will be reduced at the rate of 1p at ratepayer level for each 1 per cent. of overspend. For authorities which deliberately decide to spend more than 2 per cent. above the target, the grant will be reduced at the rate of 5p for each 1 per cent. That is very tough, and rightly so.

There is no need for any authority to suffer holdback at this higher penal rate. If they decide to do so, individual councillors will have made those decisions.

The report has been revised since December to make it clear beyond all doubt that the 1983–84 holdback scheme is continuous and will apply to all levels of spending above target. That has always been the intention, and local authority associations were well aware of it; but it was suggested to us that the wording of the earlier version of the report could be ambiguous. To avoid any misunderstanding, therefore, I have today tabled a new version of the report.

In the past three years we have seen many fierce arguments between central and local government about the change in direction that has been necessary. Together with virtually every other major industrial nation, we have tried to reduce spending on consumption, which has been financed in the past only at the expense of savage cuts in the capital programme.

I have had the honour to serve Britain, first, as Minister for Local Government and Environmental Services and now in my present position. During that time I have had to deliver fairly tough messages to local government about the need for economy. When local government is responsible for more than a quarter of all public expenditure, those messages and the delivery of them could not have been avoided by any responsible Minister or Government.

Faced with criticism from the Opposition, I have noted steps that other countries have had to take. France has had to face the possibility of cuts in social security and family and unemployment benefit because of its serious economic problem. We have sought, by means of economic restraint, to live within the bounds of what Britain can afford. I hope that the country will recognise, as do hon. Members, our inescapable duty to seek such economies.

Mr. Stuart Holland (Vauxhall)

The Secretary of State will no doubt wish to inform the House that the cuts in social security benefits that were introduced in France followed, for the first time, a genuine generalisation of those benefits that had been partial in crucial respects. Therefore, a considerable increase in expenditure was caused by the cuts.

On the Minister's main argument, if it is difficult for one country to go it alone with reflation, what action are the British Government taking in the international arena to avoid the beggar-my-neighbour syndrome of slump that is induced by the mutual cuts in public and local authority spending in several countries?

Mr. King

I cannot check the list of speakers yesterday, but that intervention sounded as though it came from a frustrated hon. Member in yesterday's debate. The point would have been of great interest to that audience. I am grateful to the hon. Member for Vauxhall (Mr. Holland) for confirming my point. Whatever his preamble may have been about the generalisation of benefits, he confirmed that the French Government—a Socialist Government—had to carry through cuts that would have caused multiple hysteria among Opposition Members had the British Government tried to introduce them. We tried an alternative and voluntary approach of co-operation, and I make no apologies on behalf of the Government or myself for having done so.

In the past, Britain financed the extravagance of current consumption by savage cuts in the capital programme. During the five years of the Labour Government, capital expenditure by local government was halved, while current consumption rose by about 6 per cent. Long-term investment was sacrificed at the expense of maintaining excessive levels of staffing and of current spending overall. That is why, when we came into government, we inherited the highest ever level of manpower employed by local authorities. We have been trying to reverse that trend. We have had to learn to live within our means.

During that time, I have had to listen to some extreme allegations and assertions. However, in the relative calm of today, I hope that some of the extreme reactions of recent years may now be passing. Too often in the debates there has been assertion and ignorance of the true facts.

I place in context what this great argument is all about, what the demands of a tough Conservative Government are alleged to have been and what they have actually been. The basic fact is that, during the first three years, central Government have asked local government for a cumulative reduction in the volume of its current expenditure of 5.6 per cent. That is 5.6 per cent. during a period in which school rolls have fallen by 8 per cent.—and every hon. Member knows that education is by far the biggest single cost for local government.

In the years before 1979–80, local authorities took some pride in spending in line with the Government's planned figure. Many authorities made that proud boast to me, but of course that happened when the fugures were rising. The trouble was that, when we had to call a halt to that rise, co-operation by several local authorities stopped suddenly. From the opportunity that I have had to observe local government, it is clear that the targets for reduction of less than 2 per cent. a year from the all-time record level of spending were not unreasonable and were well capable of being met by local government as a whole. But even when they were not, central Government responded constructively.

Hon. Members will be aware that the 1982–83 expenditure guidelines deliberately recognised the need to start not from the original targets that were not achieved, but from where we were. However, even then some local authorities deliberately ignored the new guidelines and budgeted to spend far more on consumption than the Government had planned.

Interest rates fell substantially in the summer, and there are now much better prospects for controlling inflation than when the budgets were framed. Therefore, my expectation is that the overspend for this year will be significantly less than was originally expected.

Figures for the current year increasingly confirm my point that the vast majority of local authorities have acted, and will act, responsibly. They understand as well as the Government that increased expenditure is financed through higher Government demands on the taxpayer, higher charges to the consumers of services or higher rates draining family budgets and the resources of industry. There is no other way to finance expenditure. That is the reality. At a time when the private sector in many areas is fighting for its very existence in the face of an unparalleled world recession, local government has an added responsibility to ensure that any additional burdens imposed are the minimum possible.

Sir Albert Costain (Folkestone and Hythe)

My right hon. Friend will recall the correspondence that he has had with Kent county council. Although the council supports him all along the way, councillors believe that, although they have made sacrifices because they have been good boys, they are now being penalised with the bad boys. Can my right hon. Friend assure us about that?

Mr. King

I know that my hon. Friend's anxiety is shared by many of my hon. Friends. I said earlier that we are asking all authorities to make a contribution to the achievement of the economies that we must make. However, I also said that every authority that has matched our targets in the past—Kent is a clear and exemplary illustration—will have a target this year of 4 per cent. above the current year's budget, which was framed when inflation and interest rates were significantly higher. With the normal shortfall that occurs between budget and outturn, I expect that for the low-spending authorities, with prudent and efficient budgeting, the target of 4 per cent. over this year's budget will be reasonable. I hope that my hon. Friend will find that to be the case in his authority.

Mr. Keith Stainton (Sudbury and Woodbridge)

Will my right hon. Friend pursue that point in terms of the relationship between the 4 per cent. higher target, which is a cash figure, and the grant-related expenditure level?

Mr. King

If my hon. Friend is saying that there is a difference between the targets, that is the whole point. On reflection, I should be grateful that GRE has become such a popular item in the House. I did not believe in the early days that it would catch on in the way that it has, but several of my hon. Friends are now dedicated enthusiasts. By definition, the GRE, which is our best effort, is the average expenditure of authorities that provide an average level of services. Some authorities will be above the average and some will be below. Those hon. Members who have had the misfortune, or whatever they wish to call it, to live with me through several such debates know that I have never claimed absolute precision for the scheme. It would be impossible to do so. It is simply an attempt to make a fair estimate. If it is an average and if we set that as the target, it would be unrealistic, because the high-spending authorities, which we expect to make economies, will still spend above it. A rate of reduction can be achieved beyond which it is impossible to go. I know that my hon. Friend will accept that if the Government are trying to achieve those overall levels of expenditure, we cannot avoid the conclusion that everyone must make a contribution. However, for the prudent authorities, the contribution is neither unreasonable nor unfair. I have adopted that position because of my observations, and I have put it to the House as frankly and as clearly as I can.

The tragedy of high rate increases is that many companies must close when the rate demand becomes the final marginal cost that they can no longer meet. That has happened in far too many authorities during the past three years. One example is Sheffield, where the chamber of commerce recently carried out a survey. Anyone who knows Sheffield would be worried about unemployment in that city. Yet, in a survey of 150 firms in the area, 49 per cent. said that high rates had contributed to reductions in their work forces during the past two years, and 34 per cent. were contemplating moving to areas with lower rates. That is hardly surprising, because the rate in Sheffield is now 233p in the pound, which is higher than for any other metropolitan district.

Mr. Stephen Ross (Isle of Wight)

I do not defend the example that the Secretary of State has just quoted, but many local authorities—mine is one—wish to help industry through the derating of industrial premises. At present, 50 per cent. rate charges can be applied for a three-month period. Has the right hon. Gentleman considered sympathetically a scheme to enable local authorities to extend that period and to be compensated for doing so, because they would be giving up a substantial sum?

Mr. King

There may be good news for industry in the hon. Gentleman's area, because the matter is entirely at the local authority's discretion. The 50 per cent. is the maximum at which that discretion can be exercised. It is entirely at the authority's discretion to charge no rates on empty premises. For once, it is a town hall, not a Whitehall, decision.

Mr. Robin Maxwell-Hyslop (Tiverton)

Although I agree with my right hon. Friend's moving description of the effect of the burden of rates on industry—he could also have mentioned trade and domestic ratepayers—is not the logic of his statement that he should have increased the percentage payment of rate support grant so that a lower percentage is based on this utterly unjust system, rather than decreased the percentage paid by rate support grant so that the unjust system pays a higher percentage of expenditure? Is he not, by his actions, contravening his thoroughly convincing argument?

Mr. King

The essence of my thoroughly convincing argument, as my hon. Friend describes it, is to try to strike a balance among the interests of the ratepayers, of the taxpayers, who will pay the grant, and of Britain's overall expenditure. A higher percentage grant might well encourage higher expenditure. We tried to restrain higher expenditure without putting an unreasonable burden on the ratepayer. I hope that events and what I shall say about rates will demonstrate that there is a good chance that that will happen.

Although I cited an especially extravagant authority, the majority of authorities take a more sensible view. The majority are trying to make economies and to hit our targets. It is interesting to note that there has been a reduction in manpower levels of about 5 per cent. since we came to office. We are now back to the manpower levels of 1972. That is a major achievement.

There is increasing evidence that more savings can be made in a number of areas. I could not help but remember, as I prepared for the debate, that a group of Labour Members, led by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), came to see me last year about the problems of Birmingham. They said that the crucial element in Birmingham's problem was a shortage of grant of £1 million. Hon. Members may know that a Conservative authority has now come to power in Birmingham. It has put refuse collection out to competitive tender, which will result in a substantial saving of £3.5 million per annum. I understand that this year, as a result of the improvements, there will be increased spending to improve the standards of the education service and, at the same time, rates will be reduced by 12 per cent. That is a classic example of a responsible Conservative authority at work.

It is time for a new philosophy and approach in local government. Local authorities are providers, organisers and contractors of a range of services. They have a range of specific duties and powers, but there is no need for the too prevalent conformity of approach that we often find in local government. I hope that local government will search much more diligently for the best ways in which to discharge its responsibilities. All too often things are done like that because things have always been done like that. It is time for some of the practices and approaches to change. We often hear about the "listening bank". I should like increasingly to see the "questioning council"—the council that examines each of its activities and questions whether it is really doing things in the right way. We are certainly anxious to co-operate with authorities in every way we can to help to achieve greater economies.

It is interesting to see how the message—that one can make economies and not destroy services—is getting across. I notice that even some of the least likely candidates are now accepting this assertion. The Labour leader of Avon last year defended rate increases of 40 per cent. as unavoidable to protect essential services. This year the song is a little different. He said: Economies are being achieved which will have no direct effect on the level of services which we provide. In West Yorkshire, another Labour-controlled authority, rates rose last year by 56 per cent. This year the leader is advertising an increase of 2.7 per cent. He said: The low increase … is the result of our unremitting search for economies. In Humberside last year there was a substantial rate increase of 61 per cent. This year, announcing a 6 per cent. rise, the leader said: It will be possible to meet the rate target without major cuts in services.

Mr. Frank Dobson (Holborn and St. Pancras, South)

rose—

Mr. King

Thinking back over the years in which we have been pursuing our policies of restraint, I remember all those extraordinary organisations that formed up against us. The hon. Member for Holborn and St. Pancras, South (Mr. Dobson) may remember the "Vegetarians Against the Cuts" and various other strange anti-cut organisations that marched. Now people are beginning to understand that there is a prize in value for money that can be achieved, that can make possible reductions in expenditure and still provide adequate services.

Mr. Dobson

rose—

Mr. King

I hope the hon. Gentleman will forgive me, but I have given way a number of times and I am conscious that other hon. Members wish to speak. I do not wish to detain the House too long.

I believe that we now have a changing attitude in local authorities. There is a growing professionalism and an improvement in management in many of the authorities. My concern is to see that practice and understanding much more widely spread. I want to consolidate the progress that we have already made. I would much rather work in partnership with local government than in a state of mutual suspicion. There is no reason why that should not be. If we can achieve that, the beneficiaries of the partnership will be the ratepayers and the people living in each of those local authorities, many of whom may depend anxiously on the services that are provided. They will benefit when local authorities spend within the guidelines we have sought.

The history is clear. In 1981–82 two thirds of all authorities budgeted to spend within target or within 2 per cent. above target. Nearly seven out of 10 local councils were able to demonstrate that the levels set were achievable. That pattern has continued in the current year. Two thirds of authorities are budgeting to avoid holdback. Conservative authorites are certainly the most conspicuous, but authorities of other parties are doing so as well. Only a minority persist in overspending, and a minority within that minority provide the worst examples year after year.

It is that background and the contribution of those authorities to it that explains the need for targets. We certainly did not wish to introduce targets but, in the face of the flouting of the understanding that all parties previously upheld, neither the Government nor the ratepayers could allow current expenditure provisions consistently to be exceeded. In the past it was the practice to take across-the-board measures which hit both the prudent and the extravagant. We have introduced more selective grant pressures.

We see a pattern emerging. We see three groups of local authorities—those controlled by the Conservative party; those with no overall control; and those controlled by the Labour party. I have examined the figures for rate increases in the current year. In the first group, the Conservative authorities, the precepts increased by 12 per cent. In the second group, those with no overall control and with minority parties, the precepts increased by 21 per cent. Traditionally and predictably, the counties controlled by the Labour party increased rates by a staggering 31 per cent. It is a simple fact that rate poundages and rate increases are and have been higher under Labour councils than under Conservative councils.

That is the reality that ratepayers have had to face in those areas but, even in those areas, times are changing. Authorities now have a chance, because of reducing inflation, falling interest rates and the earliest possible notice of the settlement, without there being any doubt about our intentions for that settlement, to achieve the guidelines that we have set. I say clearly to the House—the evidence is increasingly mounting—that if those guidelines are followed, as they will be, rate increases will be surprisingly low in a number of areas. Indeed, there will be some rate reductions.

The pattern is starting to evolve. I referred to Birmingham, which is to reduce its rates by 12 per cent. Conservative-led Waltham Forest will reduce its rates by 14 per cent. Perhaps the best news of all, when one remembers recent history, is that the reduction in Kensington and Chelsea may be 25 per cent. I am sure that my hon. Friend the Member for Kensington (Sir B. Rhys Williams) will agree that if that is the position in Kensington and Chelsea, many will say, "Would that the GLC and ILEA got the same message".

Our targets are fair. Authorities which have behaved responsibly will have a 4 per cent. increase in cash terms. That is a realistic and reasonable figure. There is no reason why the targets cannot be met. The settlement before us today offers local government every incentive to build on the progress that we have made. The trend of spiralling current comsumption has been reversed.

In 1979, we inherited a level of expenditure at an all-time high. By the end of 1981–82 there had been a real reduction from that level, which I want to see continued into the current year. It must be continued into next year. That is what the householder wants and what business, commerce and industry need most of all. It is what the country needs if we are to continue to see inflation reduced, interest rates depressed and the best possible prospect for restoring and strengthening the economy of Britain.

The objective of the settlement is continuing restraint and a return to the traditional co-operation in achieving the Government's overall targets which have marked the history of central and local government. The Government will certainly play their part. I shall seek to follow that objective. I want local government to succeed by its own efforts.

I commend the reports to the House.

5.40 pm
Mr. Gerald Kaufman (Manchester, Ardwick)

It is, first, my pleasant duty to congratulate the Secretary of State on his appointment. The right hon. Gentleman's promotion is good news for bridesmaids. He has waited a long time for the Prime Minister to pop the question, and she has finally done so. Ministers promoted to new responsibilities generally have to read themselves into their portfolio to acquire their predecessors' knowledge of the subject. In the right hon. Gentleman's case, to acquire his predecessor's knowledge he will have to forget a great deal of what he already knows. Bernard Shaw in his "Maxims for Revolutionists" said that the man with the toothache thinks everyone happy whose teeth are sound". With the departure of the previous Secretary of State, the right hon. Member for Henley (Mr. Heseltine), the ache has softened to a dull throb. Debating the rate support grant without him is like a performance of Peter Pan without Captain Hook.

In an interview with the Municipal Journal last week, the new Secretary of State hospitably informed local authorities that "my door is open". Unfortunately, his speech today showed that his mind is closed. He has already acquired some of his predecessor's bad habits, and anyone listening to him would never have guessed that the rate support grant is the worst ever recorded—52.8 per cent. compared with 61 per cent. when Labour left office. Moreover, Labour's percentage was a proportion of actual expenditure. This fourth Tory rate support grant will reach as high as 52.8 per cent. only if current expenditure adheres to the right hon. Gentleman's arbitrary spending ceilings.

For the first time ever, rate support grant in the forthcoming year may fall to less than 50 per cent. of outturn expenditure. One reason for the confusion is that the Secretary of State uses cash terms when he wants to pretend that he is being generous to local authorities. In paragraph 6 of the statement to the consultative council he misleadingly claimed that the grant was up by £298 million over last year. Yet in paragraph 17 of the same statement there is a sudden switch to what he calls a real level of spending". In annex L of the main report the right hon. Gentleman goes so far as to use a repricing factor. Even that is unrealistic, as it assumes an inflation rate throughout the financial year of 5 per cent.

It falls to the Opposition to give the facts about the settlement. The reduction in rate support grant since the Government took office, in proportionate terms, is 8.2 per cent. In constant prices, the annual award has fallen by an enormous £1,600 million. The cut in block grants in real money since Labour left office is no less than 15.4 per cent. Householders are worse off, because by keeping domestic rate relief at the same figure as it was eight years ago—18.5p—the Secretary of State is cutting the relief in real terms to 6p. That, not local authority profligacy, is one reason why rate bills will be higher in the spring.

The right hon. Gentleman has already had his ritual publicity pictures taken in Liverpool. Yet Merseyside and all the other inner-city areas will be hit even harder than the remainder of Britain. Their share of the savagely reduced total grant—and that in the improbable eventuality that they avoid any holdback penalty—will be at most 19 per cent. of the total, compared with 23.5 per cent. in the Labour Government's last settlement. That means that the most needy areas will lose £767 million in block grant—32 per cent. of the grant that they received under Labour. Their cut in grant will be more than twice the national reduction. That puts into perspective the sort of sanctimonious platitudes that we are accustomed to hearing from the Government Front Bench about their concern for the plight of the inner cities.

The Government bear much of the responsibility for that plight, yet they have attempted to adjust the rate support grant factors in favour of some of the deprived. For example, there is a recognition in the report of the impact of unemployment by the increase in the GREA youth unemployment factor from £120.58 per unit to £265.39 per unit. That is an effort to recognise reality, even though the weird position of the statistics is quite inexplicable. However, the anomalies in that lunatic system remain as mystifying as ever.

When the previous Secretary of State, two years ago, introduced his rate support grant under the new system he confidently informed the House: The new grant … is distributed in such a way that the system used for the purpose is clear and open."—[Official Report, 14 January 1981; Vol. 996, c. 993.] Let us consider some of the items in the clear and open system. The methodology of awarding grant for concessionary fares is still based on the number of potential travellers who would benefit if a concessionary fares scheme happened to be in operation, rather than on the number who benefit because one is in operation. Therefore, it pays an authority not to have a concessionary fares scheme, because it receives the grant without having to spend anything in return. Thirty-two local authorities that do not pay one penny towards public transport receive grant as a reward for not contributing. Thirty-one of them are Conservative-controlled—the thirty-second is not Labour-controlled.

The criterion for awarding grant for museums and art galleries has nothing to do with anything so obvious and boring as actually providing museums and art galleries. It is based on the total shopping floor space in a local authority area, presumably on the assumption that a housewife, exhausted from trailing around the shops in a vain search for bargains, will pop into the local museum to gaze at a Henry Moore while recuperating her strength. In Greater Manchester that fantasy has the consequence that Trafford receives 8 per cent. of the rate support grant available for museums, even though it has no museum. Trafford, instead of supplying the Henry Moore, provides the hole. Trafford is a Conservative-controlled local authority.

The Secretary of State spoke in a self-congratulatory manner about the treatment of Buckinghamshire, yet Mr. Roger Parker-Jervis, the Tory chairman of Buckinghamshire county council, has declared: Previous confusion is worse confounded and the handful of specialists who are able to interpret where the money will go already advise that the formula is demonstrably unfair to ratepayers in some areas and overgenerous to others". It is no wonder that he laments: Present proposals for its distribution are again incredibly complicated, once more use a fresh and untried formula, and are incomprehensible to the ordinary man in the street. I challenge the Secretary of State to stop a man in the street in Buckinghamshire or Bridgwater and put to him the formulae contained in the letter sent to local authorities from his Department. To be fair, the letter starts with a joke. It says "For convenience". It continues, and I shall quote just a small fragment, by saying that the formula is in 3 stages: 1) GRP=GRP*+(D)(A) where GRP* is the national standard poundage for the class, D is the expenditure difference from GRE for the authority in £ph, and A is the slope of the schedule below the threshold expressed in £'s per £ eg 0.006. This leads eventually to: the slope of the schedule above the threshold as: B+(Y)(X2) (D-TH)x-1".

There are four more pages of that. The letter is signed by the Einstein of the Department of the Environment, Mr. Phillip D. Ward. I hope that duty never requires me to read Mr. Ward's collected letters.

The press recently carried the following disquieting report: Profound alarm was felt yesterday among commercial organisations after news that a young Israeli mathematician had cracked the world's most secret code raising fears that no secret message can now remain secret for long. Mr. Adi Shamir, 30, of the Weizmann Institute, has broken the 'public key' code, invented by three American mathematicians in 1980. It was hailed at the time as the ultimate masterpiece of cryptography. … His discovery is highly alarming both for government spying organisations". I recommend that if these Government spying organisations want the ultimate masterpiece of cryptography, with which no young interfering young Israeli will be able to meddle, they should apply to Mr.

Phillip D. Ward, 2 Marsham street, London SW1. The complacency with which the Government regard the abtruse complexities is alarming. I invite the House to examine the report with its decimalised tables, algebraic formulae and all the other pages of arcane mathematics and reconcile it with the statement in the memorandum of the Department of the Environment to the Select Committee on Statutory Instruments which has been made available to the House today: The Department has been considering ways of reducing the length and complexity of rate support grant reports and supplementary reports and the Report in question was drafted with these objectives in mind". The impact of the rate support grant on local authorities is extremely damaging. Devon will lose 10 per cent. of its last year's grant. For Cornwall the reduction in grant will be 11.7 per cent. It is no wonder that Mr. Granville Sharp, a Tory councillor in West Sussex, said last week that the view of many—including Conservative county councillors like myself—is that Michael Heseltine's policies are a menace to good local government … This high-handed, grossly unfair and dictatorial attitude of the Marsham Street people not only penalises the needed work of low-spending councils, but also will alienate many Conservative and non-aligned voters. I hope Michael Heseltine's successor, Tom King, will be instructed to change drastically his Department's plans, which are so damaging to local government and the countryside. It is no wonder that Mr. Douglas Robertson, the chairman of Surrey county council policy committee, says that the rate support grant settlement places Surrey in an extremely grave situation. He goes on to say: It will undoubtedly mean either considerable reductions in our services in the year ahead or a substantial rate increase in April". The Secretary of State is so perplexed by the sheer lack of logic in grant allocation that he is spending up to £200,000 on commissioning the school of advanced urban studies of the university of Bristol to undertake a research project into the system and examine the scope for improvements. I can save the Government that money without any difficulty. The main cost-effective improvement would be to get rid of the zany system altogether.

One problem is that these days, when we consider rate support grant, the actual award of grant—crucial though it undoubtedly is—seems almost incidental. Far more time and thought—if the word "thought" is appropriate in this context—are devoted to spending ceilings and penalties for alleged overspending. Almost all of the Secretary of State's speech was devoted to penalties.

Today, in addition to the main report for the next financial year, we are considering yet another penalties report, this time for the current financial year, even though when the report was presented only two thirds of the financial year had elapsed and it was impossible to know what the actual expenditure figures would be. The penalties are linked to spending ceilings. The ceilings—targets, as the Secretary of State misleadingly dubs them—cause confusion, because every year the Government change the way in which they are calculated. They also change the penalties and the ways in which the penalties can be avoided.

The Conservative-controlled Association of District Councils calls this year's targets "unfair and arbitrary". Its chairman of housing, Mr. John Morgan, has warned the Secretary of State: Yet another switch in target methodology which for some authorities means cuts of up to 50 per cent. in the effective target can only do irreparable damage to the credibility of your"— that is the Secretary of State's— whole strategy". The Secretary of State claims that the supplementary report is justified because it penalises overspenders. Even if we accept—which I do not—that any authority is overspending because it spends more than the Secretary of State wants it to spend, the report penalises fewer than half of them. Whereas 268 local authorities spent above the Secretary of State's targets, only 126 are being punished. The remaining 142 escape because of the amnesty for councils which spend above their ceiling but below their GREA, even though the Secretary of State assured the House that grant-related expenditure assessments relate to the 'total expenditure' of each authority, whereas the volume targets relate only to current expenditure. They cannot, therefore, be directly compared."—[Official Report, 16 March 1981; Vol. 1, c. 46]. The House may not regard it as entirely coincidental that in this supplementary report, of the 96 Labour councils spending above their ceilings, 81 are being penalised, and that of the 148 Tory councils spending above their ceilings, 118 are not being penalised. Councils responsible for £405 million of what the Government call overspending will escape scot-free. Bristol, a Labour authority, with an overspend of 1.6 per cent., is penalised. Kingswood, which is Conservative, with an overspend of 36.7 per cent., is not penalised. In Derbyshire, North-East Derbyshire, a Labour authority with an overspend of 0.1 per cent. is being penalised. West Derbyshire, which is Conservative, with an overspend of 10.4 per cent., is not being penalised.

In Hereford and Worcester, Wyre Forest, which is not controlled by any party and has an overspend of 4.3 per cent. is penalised, but the Liberal-controlled Hereford authority, with an overspend of 14.5 per cent., is not penalised. In Hertfordshire, Labour-controlled Watford, with an overspend of 1.4 per cent., is penalised, but Conservative North Hertfordshire, with an overspend of 12.9 per cent., is not. In Nottinghamshire, Labour-controlled Mansfield, with an overspend of 6.9 per cent., is penalised, but Conservative-controlled Gedling, with an overspend of 15.7 per cent., is not. And so it goes on. The penalties are so irrational that 11 councils accused of overspending will lose more in penalty than they are said to have overspent.

In the coming financial year the sheer dishonesty of what the report proposes will make the anomalies even more unjustifiable. The Local Government Finance Act 1982, the statute that belatedly makes lawful these previously unlawful operations, provides in section 8(2): Any guidance issued for the purposes of subsection (6)(cc) above shall be framed by reference to principles applicable to all local authorities. Let us consider some of the principles applicable to all local authorities.

In accordance with the Secretary of State's preliminary statement last July, local authorities' spending ceilings were to be based on their budgets for 1982–83 as stated in their block grant claim form BG3. After submitting those forms, however, some councils found that, for reasons that we shall examine, it would benefit them to increase their budgets. This they did on another form called RER83. Paragraph 3 of annex E of the rate support grant report contains a little surprise—the higher of the budgets submitted in BG3 or RER83 is the one that will count in calculating the spending ceiling. The result is to increase the ceilings for 29 councils—17 Conservative-controlled and eight Labour-controlled. That is quite a nice principle applicable to all local authorities". Paragraph 2 of annex E makes another change when it lays down that where the spending ceiling stated last July would mean that the council's expenditure in the next financial year would fall below its budget for 1981–82 the ceiling shall be adjusted upwards to the level of the 1981–82 budget. The Secretary of State has invented a revolutionary architectural concept—he has provided a floor for the ceilings. That innovation, or this new principle, applicable to all local authorities raises the ceilings for 15 local authorities—all Conservative—controlled.

In addition, the preliminary statement last July provided that ceilings should be no more than 20 per cent. higher than a council's budget for 1981–82—in other words, there was a ceiling for the ceiling. That condition was introduced specifically to reduce the spending ceiling of the GLC, whose budget for 1982–83 was exceptionally high due to the deficit on London Transport caused by the Law Lords' ruling.

The Secretary of State wished to find a further way of penalising the GLC. To his dismay, however, he found that two other authorities would be caught by the 20 per cent. limit. Paragraph 2 of annex E of the rate support grant report therefore raises to 25 per cent. the July limit of 20 per cent. So keen are the Government to discriminate against the GLC alone that they even allowed the change to benefit a Labour council—Corby—as well as Tory Milton Keynes. This is what the Act describes as a principle applicable to all local authorities but it is specifically designed to penalise one authority out of 411.

There is, however, a limit to the extent to which even this Government can fiddle the rules to suit their friends or their prejudices. Thus, some authorities penalised under the supplementary report for this year will be compensated for their alleged profligacy by receiving more grant next year. There are 77 such authorities, 29 of which are so fortunate that their grant will be higher in real terms even if inflation is more than 7 per cent. Their good fortune is to be contrasted with the ill luck of a further 108 authorities which budgeted to spend so little this year that they are not only not penalised in the supplementary report but do not even need the GRE exemption to escape punishment. The prudence of the virtuous 108 is to be requited by receiving less grant in cash terms under the report. In real terms, their grant will fall by nearly 8 per cent.

There are then the idiots so loyal to the Government that this year they budgeted to spend below their ceilings—the councils which the hon. Member for Folkestone and Hythe (Sir A. Costain) described in his moving intervention as the good boys. Authorities that were less careful with their money are to be allowed to spend 5 per cent. more than their last year's ceiling or GREA without being punished. That is why some councils, having twigged the dodge, sent in RER83 forms to increase their budgets. The most penny-pinching and virtuous councils of all, however, having budgeted below their ceilings, are to be penalised if they spend not 5 per cent. above their ceiling but 4 per cent. above their budget, which itself is below their ceiling. No fewer than 108 councils are caught in that trap, and for 23 of them the cash ceiling is actually lower than last year.

The predicament of those councils was movingly described in a letter by Councillor Mrs. L. M. S. Anderson, leader of Tewkesbury council. This is her touching lament to the Secretary of State: My Council considers that it is being severely penalised because it produced a 1982–83 budget lower than the spending target set by you. This Budget was produced by curtailing some services and, indeed, by withdrawing others …. The decision that spending targets for 1983–84 be set at 4 per cent. above the 1982–83 Budgets and not 1982–83 targets inevitably leads us to the obvious conclusion that low-spending authorities are being unfairly treated. If Tewkesbury borough council had produced a Budget for 1982–83 in line with the spending target set for that year, its 1983–84 target would have been £2,565,000 instead of £2,289,000, an increase of £276,000. The letter continues: Although non-political with no distinctly drawn lines, the majority of the Councillors are Conservatives and in a paragraph that may lead the hardest heart to bleed in sympathy, Mrs. Anderson says: With District elections is prospect … the majority of Councillors are naturally concerned about their position".

Sir Geoffrey Johnson Smith (East Grinstead)

As the right hon. Gentleman has done so much research on this, can he tell us how many of the councils suffering in that way are Conservative?

Mr. Kaufman

The overwhelming majority are Conservative. That is why I say that although the Secretary of State fiddles as much as he can he has produced a system then even has the fault that he cannot fiddle it in favour of his friends as much as he would like. I have shown that where he can fiddle it, he does, but he has produced a system so insensitive to human influence that he cannot fiddle it wherever he wishes, even when it damages his friends.

Mr. Dobson

I have some sympathy with my right hon. Friend's clear exposition of the fact that the Secretary of State is incapable of distinguishing between wise and foolish virgins in local government, but I want to refer to his reference to the requirement that the Government can only enunciate principles covering all local authorities. Does my right hon. Friend agree that what has been done by a series of computer runs, coming up with a general principle which punished only the GLC, is clearly contrary to the spirit of the legislation? Does he agree that it may well be contrary to the letter of the legislation, and that consequently the Secretary of State, not for the first time, may find himself in the High Court trying to explain how and why he has been breaking the law in an effort to penalise Labour local authorities?

Mr. Kaufman

The Secretary of State for the Environment, in his incarnation as a holder of an office rather than as an individual, has left himself open to legal action before and has been held to have acted unlawfully. It would be interesting if local authorities, penalised by the way in which these alleged general principles have been manipulated, decided to test in the courts what the Secretary of State has done.

Mr. King

The right hon. Gentleman would not wish to mislead the House. He appears to imply that the change made in the principle to which he referred was intended to victimise the GLC. It actually had the effect of benefiting the GLC by increasing its grant. As I said in my speech, each of the changes involved increases for every authority concerned.

Mr. Kaufman

Yes, indeed. What happened was that the Secretary of State, by increasing the level from 20 to 25 per cent.—he chose 25 per cent. because that was the amount necessary to exclude Corby and Milton Keynes; he would be dishonest to deny that—for the purpose of avoiding difficulty for those two local authorities, was required to ease the position of the GLC. If he had really wanted to help the GLC, he would not have had the principle. The principle exists to penalise the GLC. The adjustment of the principle relieves the GLC of part of the pressure on it, but only part of that pressure. Indeed, the Secretary of State agrees with what I am saying. The GLC will read that with interest, because the Secretary of State now admits on the Floor of the House that that principle exists to hurt the GLC.

Mr. King

As the right hon. Gentleman seeks to misrepresent me, I shall make the position clear. All hon. Members know and understand why the principle is there. If one is fixing a budget and seeking to be fair to all authorities, there must be a limit on those authorities whose increase in expenditure has been substantial over the two years. We know why the GLC budget took the sudden leap that it did, but, in fairness, because this is an issue of fairness to all authorities in sharing out grant, that change was made. We received representations. One of those representations was from the GLC, and we responded in part to those representations.

Mr. Kaufman

I am sure that all those who study these matters will be grateful to the right hon. Gentleman for being so open with the House and admitting that this principle, a principle which the law says should be applicable to all local authorities, has been invented to deal with one local authority, the Greater London council.

That brings me to yet another group of councils which have cause for concern as a result of the report. If the hon. Member for Wirral (Mr. Hunt) is not interested in what is being said, I suggest that he goes back to his constituents and discusses with his local authority the problems in Merseyside, which are caused by what is being done to rate support grant for Merseyside.

I come, therefore, to the councils which in the coming year will have ceilings below their GREAs. It is a matter to which the hon. Member for Sudbury and Woodbridge (Mr. Stainton) drew our attention, and one about which the hon. Member for Folkestone and Hythe is worried. The House will recall that the GREAs are levels up to which the Department of the Environment says that councils need to spend to provide a standard level of services. However, with no GREA exemption from penalty next year, councils which spend over their ceiling and up to GREA will be punished, for the astonishing reason that they are trying to provide the services which the Secretary of State says they should provide. More than half of the councils in England—231 out of 411—face this problem. By a sad irony—I donate this point to the hon. Member for East Grinstead (Sir G. Johnson Smith)—most of them are Tory shire districts and Tory shire counties. Kent county council, if it provides the services which the Secretary of State says it should provide, will be penalised to the extent of a 20p rate in the pound.

By now hon. Members may feel that we have reached the politics and the mathematics of Bedlam, but in the words of Al Jolson You ain't heard nothin' yet, folks". Paragraph 38 of the main report promises that increased expenditure on the urban programme will escape penalty by being excluding from the spending ceilings. It said that such expenditure will be "specifically encouraged". However, there is nothing in this report to give effect to that exemption for expenditure which the Secretary of State says is "specifically encouraged". The fact is that inner city councils will be penalised by grant holdback for this specifically encouraged expenditure until the House approves a supplementary report some time in the unspecified future.

So benefits must wait, but penalties are immediate. In the debate on last month's penalties report, I drew attention to the plight of those councils which are to lose grant because their budgets are above the ceiling, even though their spending for the budget year, all properly audited, is not above the ceiling. These improperly and unfairly penalised councils have been told by the Government that their penalty cannot be withdrawn, even though they have done nothing to be penalised for, because the penalty is contained in a supplementary report, and the report, which is a parliamentary order, cannot be amended.

The Secretary of State gave this explanation in a letter to the hon. Member for Loughborough (Mr. Dorrell), who made representations on behalf of North West Leicestershire district council. He said: I can assure you that it is Parliamentary procedure, and not bureaucratic inertia, which prevents the existing report being amended piecemeal". Lord Bellwin, the new Minister for Local Government and Environmental Services, went into more detail in the letter to the council itself. He said: The reasons why the Supplementary Report which has been presented to Parliament cannot now be amended as you suggest, are entirely matters of Parliamentary procedure. Once an RSG report has been presented to Parliament, it cannot be amended, only withdrawn". What have we heard from the Secretary of State today? He admitted that, because of a ludicrous mistake, on Monday he withdrew the very report that we should have been debating today, amended it, and introduced in its place the report that we are now debating. He told the House in his speech this evening that he did that because the original report could be ambiguous. In fact he did it because, if he had not done so, local authorities could have taken successful legal action against him. In withdrawing the rate support grant report, amending it, and representing it to Parliament, he has done to suit himself what he told North West Leicestershire council he could not do to provide relief for it and other unfairly penalised councils. In an answer to me today the Secretary of State said that the cost to public funds of reprinting and redistributing the rate support grant report was £3,500.

Mr. Eldon Griffiths

The right hon. Gentleman has enlightened and entertained the House, but I am sure that he would not want to get away with something that is close to a deception. He must know from his experience, as all of us who have to do with rate support grant settlements know, that one cannot amend, take away or change an RSG once the House has considered it and agreed it.

Certainly my right hon. friend has taken back a proposal by the Government which the House at that time had not considered and had not agreed.

Mr. Kaufman

If only the hon. Gentleman had followed these matters, he would not have found it necessary to make that invalid intervention. In the case to which I referred, that of North West Leicestershire—another local authority, Knowsley, was affected—after the Secretary of State presented the supplementary report penalising those local authorities in the summer, they wrote and told him that their accounts had been audited and demonstrated that they had spent below his ceiling, so there was no valid reason for penalising them. They therefore asked him to change the report so that their penalties could be removed. The Secretary of State told them—and I have quoted it—

Mr. Eldon Griffiths

It was under the standing orders of the House.

Mr. Kaufman

It was not under the standing orders of the House. The Secretary of State told that local authority and others that he could not do that because the report had been presented and he could not amend it, only withdraw it and re-present it. It was open to him to do so. He had several months in which to do so, but he did not.

It was drawn to the Secretary of State's attention that the report that we are debating would damage a number of other local authorities. He withdrew it, amended it and re-presented it. Therefore, he did precisely what we recommended he should do for the other local authorities. I fear that the hon. Member for Bury St. Edmunds (Mr. Griffiths), in his eagerness to assist his right hon. Friend, has made a serious error, although I am sure that he has done so inadvertently, as he so often does when he is making errors.

In his parliamentary answer, the Secretary of State told me that the cost of the whole operation of withdrawing the report and re-presenting it was £3,500. I should be grateful if he would re-examine that figure and make sure that the cost of re-presenting a 64-page report—scrapping previous copies and presenting new ones—is only £3,500. If he confirms that it is only £3,500, I should be grateful if he would supply me with the name of the printer. At these prices, I should like that printer to print my election address for me when the next general election comes.

In fact, the right hon. Gentleman is showing himself to be a true disciple of his predecessor. The right hon. Member for Henley made a mess of two local government Bills and had to withdraw them and then reintroduce them. The right hon. Member for Bridgwater (Mr. King) has made a mess of his first rate support grant report and has had to withdraw it and then reintroduce it. That is what is known as continuity of policy.

Mr. King

I am sure that the right hon. Gentleman is a better student of history than that and has a good memory of dates. Surely he remembers who tabled the first rate support grant report.

Mr. Kaufman

I am delighted that the right hon. Gentleman has taken this early opportunity to dissociate himself from his predecessor. He has picked up the material that he used to collect on behalf of his right hon. Friend when his horse had travelled in front of him, and he has thrown it at his right hon. Friend.

Mr. King

I was intrigued by the right hon. Gentleman's opening remarks, when he compared me to a bridesmaid. This is the first bridesmaid that I have seen with a shovel.

Mr. Kaufman

The right hon. Gentleman is unfortunately, also, as his confessions come thick and fast, a bridesmaid who is clearly not a virgin.

In his statement to the House last month, the former Secretary of State, whom the new Secretary of State takes every possible opportunity to disown—I do not blame him—told the House, with the present Secretary of State sitting by him and nodding in agreement, that rate increases next year should for most authorities be nil or in low single figures."—[Official Report, 16 December 1982;Vol. 32, c. 489.] This afternoon the Secretary of State said that he thought that rate increases would be surprisingly low.

That is not how many Tory local authority leaders see the prospect. Mr. Ian McCallum, the chairman of the Association of District Councils, says: The combined effects of the reduction in total grant, which shifts the burden of paying for local services from the taxpayer to the ratepayer, together with technical changes in the distribution system itself, makes widescale lower rates rises scarcely possible. The Oxfordshire country treasurer has warned: Even though we may be on target for this year's spending there still could be a large rate rise next year because we may be getting a lower grant. Mr. Brian Tanner, the county treasurer in the Secretary of State's county of Somerset said: My immediate reaction is one of bitter disappointment. If we are to pursue our policy of maintaining services at the same level as last year with an extra one and a half million pounds in the education budget there is no way we can keep percentage rate increases in single figures. Whenever we hear from the Secretary of State now about local authorities—

Sir Geoffrey Johnson Smith

Come on.

Mr. Kaufman

If the hon. Gentleman did not wish me to take such a long time, he would have done well not to interrupt me and require me to answer him in such convincing detail.

Whenever the tale of woe of any council, Tory or Labour, is cited, the Secretary of State parades his new golden boy, Birmingham, as he did this afternoon. If Birmingham can do it, we are told, so can anyone else. Birmingham is to cut its rate by 12 per cent. That amounts to a saving of £24 million. How has that miracle been achieved? First, it has happened because the quirks of the rate support grant award have increased Birmingham's grant by £14 million, so that accounts for £14 million of the £24 million. That is not so much good housekeeping—it is more a lucky windfall. Although Birmingham now claims that it is increasing the social services budget for next year, it cut the social services budget for this year after it came to power in May.

Birmingham also increased rents three months ago by an average of £1.50 per week on top of last April's increase, so it saved money that otherwise would have been transferred from the general rate fund. What is more, it is planning another rent increase this year of £1.25 a week compared with the Government's guideline of 85p. All its cuts, together with windfall gains, have increased Birmingham's balances by £25 million. Rent increases alone will bring it £17 million. Add that to the rate support grant increase of £14 million, and one gets a total gain of £39 million. That is how Birmingham has managed a rate reduction of £24 million in the forthcoming financial year. It is easy to be so generous in the forthcoming financial year if one has been foresighted enough to make excessive cuts and rent increases in the previous financial year.

Local authority finances are in an almost inextricable mess. The ceilings are not being met. The Government have had to confess defeat by increasing provision for local authority spending this coming year by £900 million more than is allowed for in the public expenditure White Paper. The arithmetic is so perverse that any local authority spending up to 4 per cent. above its ceiling next year will suffer less than it does for the same excess this year. Therefore, the penalty system in many cases will result in extra expenditure. Camden is able to look forward to a single figure rate rise this year because for two years it has received no rate support grant whatsoever. Accordingly it can make plans without being subject to a penalty.

No wonder that, faced with that insane mess of their own making, the Government are so sick of local government finance that they are planning to divert attention by another local government reorganisation. The party that set up the Greater London council now says that London's problems can be solved only by abolishing the GLC. The party that set up the metropolitan counties states that the problem of England's cities can be solved only by abolishing the metropolitan counties. When it comes to excuses, this Government are endlessly inventive.

For the first three years of this Parliament the Government put the blame for anything that went wrong on the last Labour Government. As they approach an election they are turning their blame on the next Labour Government. The new Secretary of State caps it all by blaming the mess in local government partly on the last Tory Government and partly on the Tory Government before that. This will be the last Tory rate support grant report. The next report will be presented by a Labour Government. The task of restoring fairness and justice to our hard-pressed local authorities and their overburdened ratepayers will begin.

6.31 pm
Mr. Fergus Montgomery (Altrincham and Sale)

I am grateful for having been called in this debate. I shall make a short speech. We have just had a long and interminable speech from the right hon. Member for Manchester, Ardwick (Mr. Kaufman)—[HON. MEMBERS: "Fifty minutes"]. It seemed much longer.

The ratepayers of Trafford have come out of this settlement very badly. I understand that my right hon. Friend and his Department are checking several figures to see whether any mistakes have been made. I hope that a check will be made on the numbers of children in Trafford schools. I cannot for the life of me understand why the figures now show that the drop in school rolls in Trafford is much greater than in any of the other local education authorities in Greater Manchester. That is critically important to Trafford's rate support grant calculation.

Ever since the borough of Trafford was formed, it has been Conservative controlled, as the right hon. Member for Ardwick so eloquently said. It has watched the spending of ratepayers' money very carefully. As a consequence, it has levied the lowest rate support poundage of any of the 10 metropolitan district councils in Greater Manchester. That is a matter of pride for the Conservative-controlled council. It has been beneficial to the householders and to the industries of Trafford.

My right hon. Friend the Secretary of State talked about the problems facing industry in areas where there are excessive rate bills, and the effect that has on unemployment. Trafford has practised policies that have been prudent and has tried to look after its ratepayers' money, but that does not seem to have done the authority much good in this rate support grant settlement.

About three years ago the then Secretary of State brought in the present concept of the block grant. That idea was welcomed by the Conservative-controlled Trafford council. It believed that the new grant would be allocated according to an objective assessment of the needs and resources of local authorities and that it would no longer be based on the unjustifiable spending levels of certain spendthrift councils. Trafford has never asked for special treatment, only for a fair deal.

Trafford council believes that the new grant would be fairer to the prudent local authorities that closely examine expenditure. Previously, it had watched in disbelief while spendthrift councils were rewarded and encouraged by generous settlements from the same system that in 1974–75, when the Labour party was in power, had dealt a crippling blow to the new metropolitan borough of Trafford by under-providing subvention. Despite that, Trafford continued its policy of trying to put forward prudent policies, and it has been proclaimed by successive Ministers as a model local authority.

Every Government guideline that has been brought out has been scrupulously observed, services have been controlled, cuts—many of which Trafford has been unhappy about—have been made and implemented. Trafford Conservatives have prided themselves on an efficient financial administration. They had hoped that the new grant system would give them the fair deal that they sought. The treatment meted out to Trafford is unmatched in severity by anything suffered by any other metropolitan authority, certainly in the Greater Manchester area.

Statistics can be used to make a case for or against something, but statistics often confuse people. I should like to enumerate seven facts about the problems that face Trafford council.

First, it has been told that its grant is to be cut from £24.464 million to £21.339 million next year. That is a cut of more than £3 million before inflation is even taken into account.

Secondly, since the new grant was introduced in 1981–82, Trafford has been notified of no less than 10 reductions. How can it be expected to plan sensibly for the running of its services when that sort of thing happens?

Thirdly, the grant settlement of £26 million in 1981–82 is being knocked down to £21 million in 1983–84—a decrease in real terms of £8 million or 28 per cent.

Fourthly, in round figures, the 1983–84 settlement means an 18 per cent. rate increase, even though Trafford proposes to spend only at the level of the Secretary of State's guideline. It is not difficult to imagine the confusion caused to the leaders of Trafford council when, at the same time, the Department of the Environment released a local press statement saying that average rate increases will be very low indeed. Fifthly, Trafford's grant-related expenditure assessment has been reduced, not just in real terms but in cash, from £70.885 million to £70.775 million, while in the contrary direction its target has been increased from £66.597 million to £70.484 million.

Sixthly—this is one of the points on which I feel strongly—Trafford is regarded in the grant system as a high resource area because of its high rateable value per head. The practical result of the redistribution of resources that follows from this is that in the current year, including both district and county rate and grant-borne expenditure, while 25 metropolitan districts spend more per head than Trafford, in only 12 does the average domestic ratepayer actually have to pay more.

My seventh point is that last year Trafford council absorbed a cut of £2 million. At that time it went to the Department of the Environment to see the Minister to give early warning of the problems it would face if the situation deteriorated any further. We now know that the situation has deteriorated even further.

Some explanation must he given to the councillors and ratepayers of Trafford. My constituents feel that they have reached the limit at which they can be expected to absorb reductions in the grant. I ask my hon. Friend who is to reply to the debate to look very carefully at Trafford's case again.

I reiterate that Trafford council is not seeking any special consideration. Either there has been a mistake in the calculations or the formula being followed is at fault if a local authority such as Trafford, which has consistently implemented Government policy and controlled local government expenditure, is to be penalised year after year.

In last week's issue of the Altrincham and Sale Guardian, the leading article was devoted to this question. I do not think I can do better than to quote it: When other local authorities in the country were being condemned by the Government for over-spending or even refusing to follow Government guidelines, Trafford Borough Council was being congratulated for its good 'housekeepng' … and rightly so. For Trafford has been cautious—some would say over-cautious—in spending public money and as a result, ratepayers throughout the borough have not been faced with the massive rates increases, which have been evident in some parts of the country. The news, therefore, that the borough's rate support grant, had been cut by a frightening £3,125 million came as a bitter blow to finance chiefs in Trafford who, quite obviously are surprised and disappointed with the Government's action. A genuine mistake by Whitehall or a calculation which, in effect, gives Trafford the worst settlement of any metropolitan district in the country? Finance chiefs are investigating and we have no doubt that Whitehall has already felt the full force of Trafford's anger at being treated so unjustly. If an error has been made, we hope, for all our sakes, that the Government will quickly rectify the position. If not, then this drastic cut in the rate support grant, of about 13 per cent. will mean that Trafford is being treated shabbily and being penalised, whereas the high spenders are getting away with it. Such treatment cannot be tolerated by a local authority which prides itself on continually fixing the lowest rate in the Greater Manchester area. Like many others, we believed the Government's policy was to punish the high spenders. Given that a serious error has not occurred in calculating Trafford's RSG, it makes nonsense of everything that Trafford has tried to do. That leading article puts the case succinctly and much more effectively than anything I can say.

I have made this speech to protest to the Government about the treatment that has been handed out to the ratepayers of Trafford. I shall listen carefully to my hon. Friend's reply. How I vote will very much depend on the satisfactory assurances that I hope he will give.

6.41 pm
Mr. Stephen Ross (Isle of Wight)

I congratulate the Secretary of State on his elevation. Just before Christmas I said that I hoped that the right hon. Gentleman would receive good news during the recess, and it came just in time.

No one in local government ought to be surprised by the settlement announced by the right hon. Gentleman's predecessor on 16 December, because it was very much in line with the statement on 27 July. That does not mean that it is a good settlement, because palpably it is not. That is evident from the speech of the hon. Member for Altrincham and Sale (Mr. Montgomery). However, we had plenty of warning of what to expect.

There are many valid reasons why the settlement is unsatisfactory, some of which have already been outlined. First and foremost, the system is still enormously complicated. Any hon. Member who was present earlier and heard the algebraic calculations knows that that is true. That arises from using one method to assess the need to spend and to award GREAs, and a different method to set a target and to assess grant penalties for failing to observe it. The vagaries of the GRE assessment are such that the use of the 1981 census figures shows little correlation between client-population increase and GRE increase.

Metropolitan county councils with declining populations show the largest GRE increases, which leads one to suspect that the GREs are still unduly influenced by past spending patterns rather than client numbers. I am sure that that will be a consistent feature of the speeches we hear tonight.

It seems that a majority of the shire counties—about 59 per cent.—are likely to be penalised for spending below their assessed need for grant purposes. That is daft. I appreciate that in the coming year £904 million—about 4 per cent.—has been added to targets but not to GREs to help soften the blow. However, we are told this will not be repeated in 1984–85. How will that affect block grant entitlements in the coming financial year, and what can we expect in the following year? In other words, is the stated intention to withdraw the £904 million a threat or a firm promise?

As someone with responsibility for presenting the Isle of Wight county council's budget, I can say that that authority is extremely grateful for a generous transport supplementary grant offer. It hopes to take up that offer in full, despite revenue implications of about £365,000, which represents nearly a 3p rate. The county council has received a generous transport supplementary grant, and it would be foolhardy if it failed to accept it.

I hope that the Government will soon recognise our soundly based representations for help to reduce the crushing burden of our ferry costs, which are unique in the United Kingdom as they are in no way subsidised. Umpteen delegations have met Ministers and many letters have been written. There have been helpful noises from both parties. When the Labour Party was in office, the right hon. Member for Stepney and Poplar (Mr. Shore) tried to help. Equally, I shall never forget the speech made by the new Secretary of State for Defence when he was in opposition. Despite all that, nothing has happened.

I am prepared to say "Thank you" inasmuch as our pleas have been partially conceded. I should like to hear some reciprocation from Ministers, because until today most of them have come to the Dispatch Box and denigrated local authorities and the nationalised industries. The Secretary of State for Transport was at it only yesterday when he called for the privatisation of British Rail catering facilities, yet any fair-minded Member knows that British Rail has in recent years made great strides to improve that service.

It may be that Ministers spend too much time in their black limousines—certainly the Prime Minister does. I merely ask them to look at Waterloo and at the catering transformation that has occurred there over the past few years.

The same is true of local government. Too rarely is there a kind word for it, with the possible exception of Kent county council. It seems that if one serves on that authority one can run a garden centre in Liverpool or even take over the Bank of England. The vast majority of councillors and local government officers are doing their best, often under difficult circumstances and extreme pressures from outside groups, to honour central Government diktat. All too often all they get for their pains is a slap in the face. The previous Secretary of State for the Environment was a pastmaster at the game. I hope that that will now stop, or no one worthwhile will take on the job of councillor.

According to the Tories, the blue-eyed authority is Birmingham, but, as the right hon. Member for Manchester, Ardwick (Mr. Kaufman) clearly demon-strated, it has not worked any particular miracles. Indeed, what it is now doing with its waste disposal services, many councils, including my own, did months or years previously. Birmingham has had a cracking good settlement and probably had some damned good balances. As a result, it has been able to make a cut in its assessment for next year. Moreover, Birmingham was well managed under Labour, and its leader Clive Wilkinson, was a capable former chairman of CoSIRA. It does not help when this sort of tit-for-tat takes place, because Birmingham has had a well-run administration for many years.

No hon. Member is ever likely to praise a Liberal-controlled authority—not even the right hon. Member fo Ardwick—because that is not the done thing in two-party confrontation politics. I put on record my appreciation of the success that has been achieved by the six authorities under Liberal control. It is quite untrue to suggest that where Liberals are in control the rates have soared. The opposite is the case. This year, my own authority is likely to keep its increase below 6 per cent., and the borough of Medina, also under Liberal control, will probably impose no increase at all, despite the extra demands that we face from the problems of increasing old age and Government legislation.

We should like to help small businesses and industrialists who may wish to convert empty premises that cannot be refurbished or let. We should like to de-rate for longer than three months. That costs money, and if the Government are not prepared to make a contribution we must seriously consider whether such a move would be fair to others. In my constituency, an extra 1,000 adults each year reach retirement age. The burdens falling on our social services are becoming acute and the resources to deal with them are inadequate. We are, I regret, still below GRE on their service.

On 9 December, I received a reply from the Secretary of State to my request for extra financial assistance within the rate support grant to refund the extra local government costs involved in implementing the provision of the Social Security and Housing Benefits Act 1982. I got a raspberry in reply—no increase in expenditure was likely. This measure is likely to cost my authority an extra £28,000 a year, which I am told represents £50 million, or 350 extra staff, in local government as a whole.

The county treasurer of a large Conservative-controll