HC Deb 15 July 1987 vol 119 cc1204-19 8.20 pm
The Minister for Local Government (Mr. Michael Howard)

I beg to move, That the Rate Support Grant Supplementary Report (England) (No. 2) 1986–87 (House of Commons Paper No. 35), a copy of which was laid before this House on 9th July, be approved. This is the first rate support grant report which this Parliament has to consider. It will, I am afraid, he by no means the last. However, a new and greatly simplified grant system is on the horizon so in some ways I offer hope to the House. This debate marks the beginning of the end of the present system.

This supplementary report is concerned principally with school teachers' pay. The Government intend that school teachers should receive an average pay increase of 16.4 per cent. this year. They have already had half of this with effect from 1 January 1987. The Government's intention is that the second part should be payable from 1 October 1987.

We have already provided the Exchequer's contribution towards the cost in the present financial year. This supplementary report honours the Government's commitment that the taxpayer would make a significant contribution to the extra costs in 1986–87. It will make available an extra £51 million block grant to match the estimated extra cost of £111 million, from 1 January to 31 March. The extra costs are fully reflected in increases in education authorities' GREs. In this respect it follows exactly the method used in the 1987–88 first supplementary report considered by the House on 5 May. Like its predecessor, it is an extra supplementary report which would not normally be appearing now. It is brought forward at this stage at the express wish of local authority associations.

My predecessor, my right hon. Friend the Member for Brent, North (Sir R. Boyson) tried hard to explain the effects on education authorities of the 1987–88 changes. I shall follow his example. The increase on education GRE is £111 million and in block grant £51 million. This is the same grant percentage, 46 per cent. as in the settlement for 1986–87. However, hon. and right hon. Members will know that the block grant system does not give this percentage of grant to all authorities. The grant percentage in each case depends upon, among other things, the authority's expenditure in relation to its GRE and its rateable value. The block grant system is designed broadly to equalise the rate poundage costs to ratepayers of providing services efficiently at a standard level. That is why some local authorities seem to get a higher percentage of the cost of the teachers' pay rise in grants than others.

This supplementary report makes a number of other changes which together tend to make it difficult to see the effects of teachers' pay changes. The first is that it takes account of revised estimates of total expenditure for the year based on returns of expenditure and rates from almost every local authority. The previous teachers' pay supplementary report used essentially the same expenditure information, that is budgets, as the preceding main report. Most of the returns used in the present supplementary reports were completed long before accounts were closed, indeed most 1986–87 accounts are still not closed, and it will he many more months before audited returns are available. Nevertheless, we now have a better idea of what actual expenditure was in 1986–87 than was given by the budgets which were used in the last supplementary report.

Total expenditure in aggregate is lower than budgets by nearly £70 million but the picture is very patchy. There are some very large falls, and some large increases. Some changes are undoubtedly due to creative accounting and may not reflect real spending at all. The results of the changes in grant terms are to move quite large amounts of grant around England. The total goes up £51 million, but shire and metropolitan areas together gain over £61 million while London loses £10 million. This brings me to the second reason why the effects of the supplementary report are difficult to follow.

Those hon. Members who have taken part in these debates in the recent past will remember that 1986–87 is the last year for which we recycle grant. Let me embark upon the daunting task of trying to explain this piece of rate support grant jargon. Some authorities have chosen to increase their spending for this year. In most cases this reduces grant entitlements. The surplus grant which these authorities had previously received is returned to the pool and recycled—that is, distributed back to all authorities, including the high spenders. This had the serious shortcoming that every authority's grant depended in part on every other authority's grant and therefore authorities could not know precisely how much grant they would receive.

Legislation in the previous Parliament abolished recycling for 1987–88 and subsequent years, so that there is no longer a fixed grant pool. Any underclaim of grant will not be distributed. Conversely, if authorities were to make savings and spending fell below the amounts assumed in the settlement, there would be an overclaim and we would provide more grant. But for 1986–87, we still have recycling. My right hon. Friend the Secretary of State for Education and Science, when he was Secretary of State for the Environment, promised authorities that at least £500 million would be recycled in 1986–87. That promise was fulfilled in the first supplementary report. when we recycled £618 million. The recycled amount has changed very little in this report. It is difficult now to calculate the figure on a comparable basis because many of the parameters in the system have changed. Nevertheless, it still seems to be about £617 million. It is certainly much more than £500 million.

Like the previous supplementary report, this report makes certain other changes to grant related expenditures—for example, to take account of actual land drainage precepts and other later information, and it takes account of the boundary changes which took place at the beginning of 1985 and 1986.

Finally, we have removed the temporary safety net that was incorporated in the first supplementary report. This is another piece of RSG jargon. A safety net is a device which prevents losses of grant from exceeding a certain amount. I suppose the metaphor is that of grant falling. The consequences of too great a fall are being prevented by a safety net. In the first supplementary report, grant losses due to GRE changes were limited to the equivalent of a 2p increase in rate to ratepayers. But that particular limit was intended to be only temporary because, while the losses could not have been expected, it was right that they should flow through in full once authorities had had a chance to rate for them. We always said we would remove it to allow the remaining losses to flow through in the next supplementary report, and that is what we are now doing.

There are other consequences to that decision. Because of grant recycling, the cost of the temporary safety net was borne by All authorities. The other side of the coin is, therefore, that those authorities now get the grant that would have been theirs but for the safety net in the last supplementary report.

I turn now to another feature of the 1986–87 RSG. I refer to the matter which has become known as the Bromley error. The House will recall that there was an error in the 1986–87 RSG settlement. An inappropriate method was used when assessing how much extra expenditure each London borough would incur on highway maintenance following the abolition of the Greater London council. As a result, some boroughs, including Bromley, received no extra grant despite taking on new responsibilities. Other boroughs, including Greenwich, received more grant than was justified. This error was quickly spotted, and we undertook to correct it at the first available opportunity. The effect of the judgment in legal proceedings instituted by the London borough of Greenwich, however, meant that the Secretary of State did not have the power to make the necessary correction. The Secretary of State told the House on 5 March that he had appealed against that decision.

Since then we have been assessing the position. It has become clear that, even if we win the appeal, that will not necessarily be a complete solution. A successful appeal would allow us to correct the error for 1986–87, but the effects of the error have fed through to the 1987–88 settlement also. And, as the law now stands, even if the Greenwich judgment was reversed, it is doubtful whether we have the powers to effect a correction for that year. A similar situation will arise in due course for 1988–89.

Just to complicate matters further, since March the London boroughs of Bromley and of Kingston-upon-Thames have started their own legal actions challenging the Secretary of State's decision not to make the Bromley correction.

We have made it clear from the outset that we regard the situation as inequitable. We are determined that the error should be corrected so that the authorities concerned can receive their fair grant entitlements. It is clear, however that if we proceed with the appeal it may be some time before all the legal issues are resolved, and there is no certainty that the full implications of the original mistake could be corrected.

In the light of these factors, we have concluded that the best course is to withdraw the appeal. Instead we shall take a suitable opportunity in the current Session to take legislative powers to ensure that we have the necessary powers to correct the Bromley error in 1986–87 and 1987–88. In the meantime, the 1988–89 settlement will have to go ahead on the uncorrected basis. We shall then make the necessary correction for that year in a supplementary report when we have the necessary powers.

Mr. Roger Sims (Chislehurst)

Will my right hon. and learned Friend give way?

Mr. Howard

As the issue is known to all and sundry as the Bromley error, I should give way to my hon. Friend the Member for Chislehurst (Mr. Sims), who represents part of the borough.

Mr. Sims

If I have understood my right hon. and learned Friend correctly, those who represent Bromley in this place, and not least the ratepayers, will welcome his remarks. It seems, however, that it will be some while before the error is corrected. Am I correct in assuming that the £3 million a year that the Bromley ratepayers lost as a result of the error will be recouped for 1988–89 and retrospectively?

Mr. Howard

My hon. Friend is entirely correct. Let me take the opportunity of paying tribute to him and his colleagues from the borough, all of whom have paid close attention and taken a close interest in the matter, and have ensured that the views of residents are made known to me and to my predecessors.

Let me summarise the effects of the supplementary report. It increases block grant and the GREs of education authorities to help to pay for the teachers' pay increase from 1 January to 1 March 1987. It updates GREs to reflect later information and boundary changes. It removes the temporary safety net imposed in the first supplementary report. It has been brought forward now at the unanimous urging of local authority associations, and I am sure that it will be welcomed by them.

8.30 pm
Mr. Roland Boyes (Houghton and Washington)

Let me take this opportunity to welcome the Minister to his new post, but also to warn him that, as he probably already realises, he is entering a legal and financial minefield. Many of us spent nearly every Tuesday and Thursday morning for a whole year trying to put right many of the Government's errors following challenges made in court. The only people who seemed to benefit from the work that I did last year were the lawyers. However, I believe that the Minister is a lawyer, so I do not suppose that that worries him too much.

I describe the subject as a minefield because—as is clear from the Minister's summary of the "Bromley error"—it is impossible to predict when the next challenge in the courts will take place. If an appeal in court is successful, it means that we will be upstairs in one of the Committee Rooms week after week, discussing turgid legal briefs and deep financial affairs. However, we broadly welcome the main part of the Minister's statement. The report meets the request of the local authority associations for an early implementation of the extra grant consequent on the teachers' pay award. But some parts of the report are not consequent on that settlement, and will seriously affect the rate budget in 1987–88. I shall return to that in a moment.

Let me deal briefly with some of the consequences of the way in which the cash to pay for the teachers' award has been given to local authorities. As the Minister said, the estimated cost in 1986–87 is about £111 million, and the government promised an extra grant of £51 million. That is what the report is implementing. However, the local authority associations asked the Government to provide alternative funding arrangements rather than channeling the extra assistance through block grant, because there were obvious problems for some local authorities.

ILEA, for instance, receives no extra assistance as a consequence of the award, because it does not receive block grant. As ILEA is rate-capped in both 1986–87 and 1987–88, that is a double punishment. Moreover—the Minister may wish to comment on this later—I understand that some of the extra block grant will not go to local education authorities. The Minister ma), have made that point in his speech, in which case I apologise. But the Minister shakes his head. Perhaps he will look into the matter, either this evening or on another occasion. If the cash was intended to pay for the teachers' award, it should go to LEAs.

The net effect of the changes proposed in the report is that there will be some heavy gainers and some heavy losers. When he summarised the figures, the Minister said that there would be a loss of £10 million for London and of £16 million for the combined metropolitan areas. The shire districts would lose £28 million, and the shire counties £17 million. A point that the Minister did not make, and which I hope that he will take into consideration, is that many local education authorities paid teachers' back-pay in their May pay packets. The timing of the report means that authorities will not receive the extra grant until August, so that they will suffer an adverse cash flow. I should be glad if the Minister would look into that as well.

The matter of GREs is rather technical. Paragraph 1 (b) of the report says that one of the main objectives is to redetermine multipliers to remove the limit imposed in the first Supplementary Report on grant losses as a result of the fresh determinations of GREs specified in that Report. Being a lawyer, the Minister may be able to make sense of that, but I am sure that, if I set it as an examination question and they were asked to comment, many hon. Members in the Chamber tonight would hand in a series of blank pages at the end of the three hours. But let us try to translate it and to show what it means for some local authorities.

In the first supplementary report for 1986–87, the Secretary of State made a number of changes to authorities' GREs which resulted in changes in grant for authorities. To protect them from the effects of those changes—some of them unexpected—in the middle of a financial year, a limit equivalent to a 2p rate was placed on the grant losses that an authority could incur as a result of the changes. In rate support grant jargon, it is known as a "2p temporary safety net". The Government made it clear that that was only a temporary measure, and that the full effect would be implemented in a future supplementary report.

In the normal course of events, the "future supplementary report" would not have been implemented until April 1988. The removal of the safety net during 1987–88 will be particularly hard on rate-capped authorities. Those authorities' rate limits were set by the Local Government Finance Act 1987, which the Government had to introduce to restore the legality of the whole RSG and rate-capping system. The rate limits set out in the 1987 Act made no explicit allowance for the loss of 1986–87 grant, which authorities would not ordinarily have expected to be implemented until 1988–99. Furthermore, if authorities had been aware of the timing of the losses, and if the normal procedures under the Rates Act 1984 had been operating, the losses could have been taken into account in discussions with the Secretary of State over the rate limit. The procedures of the 1987 Act, which temporarily jettisoned the 1984 Act, did not provide for such discussions.

I am glad that the Secretary of State for Wales has come into the Chamber early, because he may understand the paragraph that deals with the rate support grant in Wales. He may have a translation of this complex sentence into meaningful language. Indeed, if he wants it in Welsh, I am sure that I can persuade one of my Welsh-speaking colleagues to come in in about 60 minutes to present the case in Welsh and to ask him a few questions, to which he will respond. The right hon. Gentleman is a very intelligent man. He will have been on a crash course in Welsh and, no doubt, in a few weeks will present the case on these complicated Bills in Welsh. However, in most cases, it does not matter whether the case is presented in English, Welsh or Afghan, as Labour local authorities always end up worse off.

I have here a table setting out the large losers in the Association of Metropolitan Authorities. One of them is the Tyne and Wear passenger transport authority. It is to lose £1.7 million. The area that I represent is part of Tyne and Wear, and it suffers from very high unemployment. It is absurd that any local authority or passenger transport authority should lose any money. The north-east of England needs every penny that it can get to help it over its dire and difficult problems.

My constituency suffers from massive unemployment. We are to lose a development corporation, but we shall not benefit from additional money, in the way that the inner cities will benefit. I digress slightly from this debate on the rate support grant settlement. We welcome the additional cash that is being made available to the inner cities, but there are other parts of the United Kingdom that suffer from just the same level of unemployment. They also suffer from poor housing and general deprivation and they, too, need additional cash. There is disquiet in my constituency and in similar constituencies about the fact that they are being shoved aside while attention is focused on the inner cities. The Minister ought to be aware of the problems that we face and of the issues that will be raised in the coming months.

Apart from those reservations, to which I know the Minister has listened carefully and to which I am sure he will respond, the Opposition welcome in general the rate support grant settlement for 1986–87.

8.42 pm
Mr. Roger Sims (Chislehurst)

My remarks will be brief, thanks to what my hon. and learned Friend said when he opened the debate. He explained what is to happen about the Bromley error, which deprived the ratepayers of Bromley of £3 million a year. I am delighted to hear that it is to be returned to us, even though it may be 1988–89 before that happens. When he replies to the debate I hope that the Minister will clarify what is to happen about the outstanding sums. Bromley has been deprived of £3 million a year and it has also lost interest on that money. We hope that we shall not be out of pocket and that the loss of interest will be taken into account when the final repayment is made.

The Minister is aware that the Greater London council operated a Londonwide concessionary fares schemes. The scheme that replaced it meant that the costs were shared, pro rata to population, but the way in which the money has been distributed bears no relation to its collection. Most inner London boroughs were presumed to spend far more than they do on concessionary fares, whereas the reverse applies in outer London—for example, in my borough. The cost of the concessionary fares scheme in Bromley for 1987–88 is £3.5 million, whereas the grant related expenditure assessment is only £1.4 million. That is inequitable.

I took up this matter with the previous Minister of State, and in his letter of March 1987 he explained that at the time of abolition his Secretary of State did not have the power to distribute concessionary fares in London in the way that I had asked him to do. He explained that the Rate Support Grants Act 1986 had changed the position and that his Department had considered the possibility of introducing a change in the 1987–88 settlement. He also said that after careful consideration he had decided not to do so but that that did not preclude it from being given further consideration for adoption in the following year's settlement. When he replies to the debate, I should be grateful if the Minister could assure me that the concessionary fares adjustment will be made in the forthcoming year so that Bromley will receive its fair share.

8.46 pm
Mr. Bob Cryer (Bradford, South)

This is the first speech that I have made in the House since May 1983, so it is opportune to say a few words about my predecessor before I deal with the rate support grant report. Tom Torney was a widely respected Member of Parliament and worked diligently for his Bradford, South constituency. I wish him a long and happy retirement, particularly in view of the fact that shortly before the election he lost his wife. In normal circumstances, he could have looked forward to spending his retirement with her. It was a sad end to his parliamentary career, but he can reflect on the fact that he made a distinguished contribution as a Member of Parliament. He was an unremitting critic of the Common Market, and he expressed his views clearly and pungently, whenever he felt that it was right to do so.

The unemployment in Bradford, South is relevant to the order, which will provide additional money for local authorities. That will help to create jobs. In Bradford, South, unemployment stands at over 13.5 per cent., so jobs are sadly needed in my constituency. Nearly 6,000 people are unemployed there. The Government are fond of omitting percentages and dealing with absolutes. They say that they have spent so many millions of pounds on creating jobs. However, 6,000 people in Bradford, South are still unemployed. The percentages are even higher in Bradford, North and Bradford, West. The talents of those people are being wasted. Unemployment creates a sense of alienation among people who have been on the dole for so long. It is all due to the Government's economic policies.

The rate support grant report is important because the local authority is the largest employer in Bradford. Every source of income is important. Bradford employs teachers, whose pay award is reflected in the order. I do not intend to comment on the pay award. That will have to be negotiated. However, there is a strong and enduring sense of injustice among teachers because of the arbitrary fiat of the Secretary of State for Education and Science. By it, their negotiating rights have been removed. That sense of injustice will continue so long as negotiating rights are denied to teachers. Deep as they are in their dogma, I hope that even at this late stage the Government will recognise that if people are in regular employment they should have the right to influence the terms and conditions of their employment.

There are a number of ways to create jobs. Money helps, of course. The order reflects the Government's response to the representations of the local authorities, but the money on offer is too little. The Government should have been much more generous. Money should have been made available much earlier, because money helps to create jobs.

There are a number of ways in which that could be done in Bradford, South. The local authority and local Members of Parliament have made representations about the reconstruction of some of Bradford's schools. The local authority wanted a total expenditure of £21 million a year for five years. Bradford is almost unique among significant towns and cities in the country in having an expanding school roll. However, central Government have allowed only about £6 million for one year and Bradford is not, therefore, in a position to plan ahead.

The Minister knows well that when money is injected into the economy through the rate support grant, it is, in the main, the private sector that is stimulated, as it does most of the work for local authorities. Therefore, the repair and refurbishing of schools would benefit the private sector. Of course, the community at large would also benefit from providing children with decent surroundings in which to be educated. At the moment, apart from any major refurbishments, about £3 million is needed to meet the bill for routine maintenance and repairs to schools in the Bradford, South constituency.

The second straightforward and rapid way of creating jobs in Bradford, South would be to improve the housing stock in the public and private sectors. There are many examples of Boot houses, which may be something about which hon. Members do not readily know. Such houses were built in the 1920s, in the prefabricated method. They are held together by large tie bolts and were built to have only a short life. Those tie bolts are now rusting and the houses must either be rebuilt, which is expensive, or demolished and replaced with new housing. Again, an injection of money by central Government for the difficulties facing local authorities would be only natural justice.

If the Department of the Environment were to restore its broken pledge to local authorities—that if they sold council houses, they could have that revenue for building new houses and for repair—by rights Bradford should have about £6 million to spend. If that pledge was restored, there would be a further cash injection to improve houses in the public sector and to help those in the private sector. The Government could assist materially by providing money for improvement grants, which have virtually dried up because of central Government's meanness.

Transport facilities are listed and included on the order. Deregulation has produced some horrendous ommissions in our bus services. In part of my constituency called Wyke, people used to be able to catch a bus into Bradford's city centre. Now they must catch three buses, with three fares. That is a significant item of expenditure for people who struggle from week to week to make ends meet. I know that that may seem trivial to Conservative Members but I advise them that during the election I received between 20 and 30 complaints about it. I have also had letters subsequently about it.

The passenger transport authority has said that, under the terms of the legislation, it cannot provide the type of service that it provided prior to deregulation. The Government should seriously take on board the fact that money should be made available to ensure that those services are restored to provide an opportunity for people living in Wyke to travel to the city centre, as cheaply and as reasonably as possible.

Jobs could be provided in other areas. Electrifying the line from Leeds to Bradford would enable Bradford to maintain, without qualification, its position on British Rail's inter-city map. The construction of a link between Bradford Interchange and Bradford Forster Square would also create jobs in the construction industry, in which about 400,0000 people are on the dole. Such capital investment would be welcomed. The Government are always complaining about the difficulties of creating jobs and about how hard up they are for doing that task. The Prime Minister goes on the Jimmy Young programme to say how concerned she is about the lack of jobs. If the Minister talks to the Prime Minister he can slip into her red box the suggestions that I am making so that they can be acted upon because these capital projects can be used to improve inner-city areas and to provide jobs for their citizens.

Bradford needs more rate support grant because it is facing difficulties in, for example, the National Health Service. I know that that is not absolutely germane to the order, but it supports my case for more rate support grant. Bradford has the longest waiting list in the region, with 6,874 people waiting for operations. I hope that the Government will discourage greedy consultants from encouraging people to go private in their attempt to avoid the long waiting lists. That is a temptation for many people. However, it should be a priority for the Government to cut waiting lists. If we had won the general election, it would have been a priority task for the Labour Government.

Finally, the Minister will no doubt say that money is in short supply, that the cake is limited and that the local authorities can have only a modest increase in this supplementary rate support grant. However, I must point out that the Government can provide money when they want to. The cost of their foolish Falklands expedition was £2 billion and there is an annual expenditure of about £800 million on fortress Falklands. When the Prime Minister, who is by way of being a nuclear nut, pushed through Sizewell B, and appointed an inspector to produce approval for it, as she did, and when successive Secretaries of State for Energy repeatedly state their sympathy for the Sizewell B nuclear power station, £1.5 billion is put forward for it.

Only yesterday there was jubilation from Tory members because there will be a slight saving on the Trident expenditure. It is a modest saving—the Trident programme will cost just under £10,000 million instead of £11,000 million. I know that the Minister is concerned about wider issues and I can point out to him that Trident is in breach of the United Nations nuclear nonproliferation.

Mr. Deputy Speaker (Mr. Harold Walker)

Order. We are discussing local government expenditure.

Mr. Cryer

That is absolutely right, Mr. Deputy Speaker. You have underlined the point that I am making. I am saying that the rate support grant order, allocating as it does a supplementary grant, is not sufficient. I am pointing out to the Government that they can come back to the House, next week if they like, with another order providing more money which we would all enjoy debating, if they cut expenditure on Trident and at the same time kept international treaty obligations, such as the United Nations non-proliferation treaty.

The measure provides a little more for local authorities, but it will barely enable them to keep their heads above water. They are short of cash. They provide vital services for our communities and I hope that this supplementary grant is not the last injection of cash to maintain those services and to provide much needed jobs, not only in Bradford, South, which is obviously an important area, but throughout the country, especially where unemployment is at its worst.

8.59 pm
Mr. Richard Tracey (Surbiton)

I am not sure whether I am supposed to welcome back the hon. Member for Bradford, South (Mr. Cryer). The other night I heard my hon. and learned Friend the Minister for Local Government refer to a similar Labour Member as a "parliamentary retread." Therefore, I welcome back the parliamentary retread for Bradford, South. I should warn him that retreads usually have attached to them a warning that they must not go too fast down the motorway. The hon. Gentleman may have been going a bit fast tonight.

I certainly endorse what the hon. Gentleman said about his predecessor, Tom Torney. I recollect meeting the present hon. Gentleman a few years ago walking through Wandsworth and I imagine that he was going through a process of re-education which I hope will serve him well in the House now.

I rise briefly to welcome the statement made tonight by my hon. and learned Friend the Minister, particularly about the extraordinary circumstances of the case which has affected the borough of Bromley and the royal borough of Kingston upon Thames. My hon. Friend the Member for Chiselhurst (Mr. Sims) also welcomed the announcement that the ratepayers of those boroughs would be completely reimbursed for the past peculiarities of the operation of the law as a result of the case brought by the London borough of Greenwich. I hope that this evening my hon. Friend the Parliamentary Under-Secretary of State will give a complete assurance that our ratepayers will in no sense suffer from the most peculiar anomalies of this case.

The case has been used in Kingston upon Thames by the present hung council, particularly members of the Liberal and Social Democratic parties, as a means of pillorying the Government for alleged inequalities and inaccuracies in their interpretation of the rate support grant. I hope that as a result of my hon. and learned Friend's statement we can return to the ratepayers in the royal borough with a complete assurance that in the near future they will be completely reimbursed for their rates. I look forward to such an assurance from my hon. Friend the Parliamentary Under-Secretary of State. With all due respect to my hon. Friends on the Front Bench it seems that the law has to some extent proved to be an ass and I trust that tonight they will fully reassure my constituents.

9.03 pm
Mr. John Cartwright (Woolwich)

I congratulate the Minister on the elegant way in which he tiptoed around the appalling jargon of the rate support grant. I fear it will not be long before he gets stuck into it and produces additional jargon of his own. That is the usual track record of Ministers in his Department.

I wish to comment briefly on two aspects of this settlement, both of which have been referred to. First, this settlement has had a curious impact on the Inner London education authority. The Minister said that the net effect for Greater London of the various elements in the order is a loss of £10 million, but he did not point out that the impact on ILEA is singularly curious. The object of the exercise in this order is to reimburse local authorities for the Government's share of the teachers' pay settlement. For the Inner London education authority in the current year that would be some £38 million, but because the Government have chosen to use the extraordinary mechanism of the block grant system to provide the extra money not one penny piece of it will go to the ILEA. That will mean that inner London ratepayers will have to pay all the additional cost out of their rates. In addition, they will have to pay, through their national tax, a share of teachers' pay in other parts of the country. In that sense, inner London ratepayers and taxpayers may be paying double their contributions.

No doubt Ministers will say that that is the direct result of the spending policies of the ILEA, and I am not here to defend all of those. The ILEA has some extraordinary priorities when it comes to spending public money. However, that is not much consolation if one considers that inner London ratepayers will be contributing £950 million towards the £1,025 million to be spent by ILEA this year.

My second point relates to the removal of the 2p temporary safety net. The Minister fairly pointed out that that was a temporary arrangement and that it had been planned to come to an end. However, it was generally thought in local government that it would come to an end in April 1988 at the end of a financial year. Its removal part of the way through the financial year will cause obvious problems. It is part of the general pattern that local government has come to expect in the past few years; the goal posts are constantly changed half way through the game. Uncertainty is the only thing of which one can be certain in local government finance.

The alteration presents particular problems for the rate-capped authorities which do not have the same freedom of manoeuvre. The rate-capped authorities, especially in inner London, will have problems. I remember the great banners draped across every public building in my constituency, which said, "Rate-capping means cuts." In the first two years, rate-capping has certainly not meant cuts. Spending has continued to increase, because the authorities have found every sort of ingenious technique of creative accounting, as it is called in the trade, and every ingenious system of borrowing to ensure that spending continues to increase. In some cases the authorities were frank about that strategy which was based on the hope that a Labour Government would come riding to their rescue and bail them out. That hope has not been fulfilled and the pigeons must now come home to roost. However ingenious the borrowing may be, it has to be paid back sooner or later and much of it is extremely short-term borrowing, based on public buildings, parking meters, street lights and so on. I think it was the leader of Islington council who said that debt in her borough had reached Third world proportions, and that is the case in a number of inner London authorities. They are beginning to realise that the happy borrowing has to come to an end and not on a planned basis but at some speed. Those of us who have experience of local government know that if cuts have to be made in a hurry they are not always the sort of cuts that ought to be made. One cuts the services that one can cut swiftly, and they are not always the low priority services.

We can all criticise those in power in the authorities who saw the iceberg in front of the Titanic and simply went full steam ahead into it, but now they are having to make cuts at speed. It is sad that at a time when the Government—I give them credit for this—are saying that more needs to be done to tackle the problems of deprivation in inner London, there are now to be unplanned and sometimes damaging cuts in local authority services. That will be in direct contrast to the Government's wishes.

Given the Minister's complicated preparations for the poll tax, I hope that he has not overlooked the problems of the inner-London boroughs. If it is possible to ease the further staging of rate-capping so that it is possible to enable those authorities to plan down their expenditure in some sensible way that would be in the interests of the people of inner London.

9.9 pm

Mr. Allen McKay (Barnsley, West and Penistone)

When the Minister opened the debate he said that this will probably be one of the last times that we discuss the rate support grant. The Minister said that he was looking forward to a new system being introduced. Given the majority that the Conservatives have got that will he done. However, it will not be as easy as the Government think. Many people are now awakened to what the poll tax means.

It is significant that we read in the newspapers that the Government are now thinking about bringing in the poll tax in stages. At last, they have realised the significance of the poll tax and the vicious way in which it will hit the majority of people.

My hon. Friend the Member for Bradford, South (Mr. Cryer) has just made his maiden speech. I cannot see why it should be called a maiden speech because if one looks at his record in the past years, both in voting and speaking, it is second to none. I look forward to the renewed partnership between my hon. Friend the Member for Bolsover (Mr. Skinner) and my hon. Friend the Member for Bradford, South. That partnership has been missed for a number of years.

My hon. Friend the Member for Bradford, South and I have had differences of opinion, but my hon. Friend would not want it any other way. I appreciate the feelings that my hon. Friend the Member for Bradford, South expressed about his predecessor, Torn Torney, who was a well-loved Member of this House. He was well known for his speeches and support on agriculture, which is a great interest in my constituency.

This debate gives us an opportunity to discuss a number of things. The teachers' strike is still with us. We are grateful for the amount of money that is being put back into local government to help with the teachers' pay award, but it is not sufficient to come up with a solution to deal with the teachers' strike. I remind the Minister of the effects of the Government's policies on rate funding and rates, especially in south Yorkshire and in my area of Barnsley metropolitan council.

I remind the Minister that representatives from South Yorkshire's fire service met his predecessor to discuss the serious state of affairs in south Yorkshire. Not too long ago I wrote to the Minister on this matter. If the letter has not reached him he will probably delve into his files to find out where it is.

The South Yorkshire fire service is in serious difficulty. That service has the remit of Home Office approval regarding the fire cover for that area. According to Home Office figures that service is undermanned. Last year the service had to tap reserves to try to maintain the present service. That present service is still not up to the level that the Home Office requires. If extra money is not given to the South Yorkshire fire service there will he serious cuts in manning and the number of appliances on the road. This is not a political gimmick or a political plea. The fact is that the fire cover in that area is necessary and at present that service is undermanned. If money is not forthcoming or the Government envisage further cuts, that service will be severely undermanned. That would be a tragedy.

I spent a long time as a retained fireman in south Yorkshire. I know of the essential necessity of maintaining a turn out of about three minutes for the first call, four minutes for the second and about five minutes for the third. If that turnout time is extended there is a danger, not to property, but to life. I ask the Minister to look al that situation carefully because there were clear indications from his predecessor that he realised that there was a problem and that there would be an attempt to resolve it.

Before the abolition of the South Yorkshire county council we enjoyed one of the cheapest and most efficient transport systems in this country. The Government did not like it because of its cost. The Government closed their eyes to the fact that it was not just a cheap transport system—it made it possible for people in remote areas to take jobs with low wages because they had a cheap transport system on which to travel. Once the cost of transport was increased, they were priced out of their jobs.

A lot of my constituency is rural. Any further cuts in transport will mean a cut in rural services. The popular services will be retained because they pay for themselves. The less popular services will be subsidised by the transport executive. However, the least popular services will disappear. In areas where there was a bus service once every two hours, there will he a service once every four hours, or it may disappear altogether.

In the Barnsley metropolitan area, things seem to be moving gradually in the right direction. There seems to be a levelling-off in unemployment. I look forward not just to that levelling-off but to a decrease in unemployment. To achieve that we need the co-operation of the local authority because central Government cannot do that. An amount of money has been put into the area for factories and such things.

The problem with the rating system is that it treats Barnsley more or less as a shire county. It is not. Nor does the rating system take into account the number of collieries which have closed and on which the town relied for its prosperity. That has not been taken into consideration, so we are getting too little, too late. The Government's intention to raise employment levels and decrease our problems will fail if they do not give sufficient cognisance to the problems within the rating system. The new rating system will not work in my constituency. That is why I intend to fight it to the bitter end. It will do my constituents no good at all.

I welcome what little relief there is in the Bill, but again it is too little, too late. The Government should learn a lesson from previous years. They should stop screwing local authorities into the ground. They have got their approach completely wrong. There should be a partnership between central Government and local government, not the enmity that is occurring. A partnership will improve the situation; the way central Government are going at present will ruin it.

9.18 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope)

This is the second supplementary report for 1986–87. Two more reports and another year will pass before we and local authorities will know the final grant settlements for the year which ended last April. That is just one indication of the complexity and instability of the current system. That is why we shall be introducing a new, simpler grant system from 1990. I hope that everybody present in the House tonight will welcome that. That new system will take full account of the different spending needs of local authorities. No longer will grant depend on authorities' levels of expenditure and nor will there be any need for resource equalisation, which produces many of the incomprehensible aspects of the present system and, for example, many of the debating points that have been made this evening about ILEA.

I pay tribute to my hon. Friend the Member for Surbiton (Mr. Tracey) for the work that he did when he was a Minister in the Department of the Environment. He now argues strongly on behalf of his constituents, as he did before, about the injustice of the Bromley error. He understandably asks for complete reimbursement of the money that was lost as a result of that error. As my hon. and learned Friend the Minister said at the outset of the debate, the Government are determined to put such errors right and to legislate. That will result in the losses that have been sustained by Bromley and Kingston councils, to name but two, being restored. I understand my hon. Friend's plea that interest should be included. I am sure that, from his experience in the Department of the Environment, he will understand that the system is too complex to permit anything as simple as paying interest on forgone money. That is largely because it is not a matter of additional money being available. The issue is about redistribution between authorities when some have received more than their fair share.

The redistribution process takes place every time there is a supplementary report. The matter is complicated enough at the moment, but if those who gain, and it is shown that they should not have gained, are required to pay interest on the money that they received, and those who lost receive such interest it would make the system even more complicated than it is at present. I understand and sympathise with my hon. Friend's point. I hope that he will be content with the fact that, following his strong representations and those made by my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont), the Financial Secretary to the Treasury, the losses that were sustained by Kingston will be restored.

My hon. Friend the Member for Chislehurst (Mr. Sims) raised the same point as he raised earlier, about the interest on Bromley's loss. On 5 March, my right hon. Friend the Secretary of State told the House that it was not a matter of additional money being available. I must give my hon. Friend the same answer; it will not be possible to pay interest.

As my hon. Friend the Member for Chislehurst pointed out, the matter of concessionary fares is not new. He argued that point strongly and strenuously. The news that I can give him is that we understand the wish of many London boroughs to see a change in the way in which the concessionary fares GRE is distributed in the capital. It has been raised by the London Boroughs Association for 1988–89, and we shall give it careful consideration. it is not a matter that we considered for the supplementary report before the House.

It would have required a significant methodology change that we would not normally have made retrospectively unless there were overwhelming reasons for doing so. My hon. Friend is the first to recognise that he has a difficult task. He is arguing from the point of view of his borough. All London boroughs entered into an agreement about how the concessionary fares costs should be distributed. That system has many critics, but, at the moment, the Association of London Authorities and the Association of County Councils are opposed to the sort of changes that my hon. Friend put forward.

The hon. Member for Houghton and Washington (Mr. Boyes) raised many issues. We shall certainly write to him on the Tyne and Wear passenger transport authority point and provide him with a more detailed explanation than I would be able to give him this evening. He asked why some of the grant goes to non-local education authorities. There is a small effect on the grant of non-local educational authorities, but, overall, local education authorities gain £51.5 million, and non-local education authorities lose £500,000. That is yet another of the quirks of the present system that we shall resolve when we introduce our new arrangements for the community charge.

This was the first time that I and my hon. and learned Friend the Minister of State had heard the hon. Member for Bradford, South (Mr. Cryer) speak in the House, so from our point of view it was his maiden speech. We were pleased by the tribute that he paid to his predecessor, Mr. Tom Torney, and if we did not know it before we have become aware of the hon. Gentleman's dexterity as a parliamentarian by the way that he was able to include, in a debate on the RSG, references to Trident and the Falklands.

The hon. Member for Woolwich (Mr. Cartwright) raised an issue that was first raised on the first supplementary report for 1987–88, concerning why, when extra money is being given to meet the cost of teachers' salaries, no additional money is being paid to the Inner London education authority in grant. It is because of the nature of a block grant system, which is broadly designed to equalise rate poundage costs to ratepayers for providing services at a standard rate. It does not aim to support expenditure at a common percentage rate of grant. ILEA is out of grant because of the enormous wealth of the central authorities on which it precepts. It is possible to demonstrate that by the fact that the cost of the teachers' pay award, after taking account of grant changes, is 0.7p on the rates in Inner London, whereas it is 0.8p elsewhere, even after the grant has been paid. Therefore, it is grossly simplistic and unfair to suggest that the Government have taken money which was due to ILEA. Under the present system no money was due to ILEA.

The hon. Member for Barnsley West and Penistone (Mr. McKay) raised the issue of the South Yorkshire fire and civil defence authority. I am pleased to tell him that if he looks at the detailed figures in the supplementary report he will see that some £158,000 is going to that authority, which means that its grant total will increase to over £6.40 million.

The main effects of the supplementary report are that the AEG increases by £71 million to £11,950 million to reflect the latest estimate of specific and supplementary grants, which is an increase of £20 million. The Exchequer's contribution to the extra cost of teachers' pay is an extra £51 million in block grant. Provision is increased to £111 million, all of which goes on to education authorities' GREs.

We are reflecting other later expenditure information in GREs, including the boundary changes that were made on 1 April, 1985 and 1986. We have removed the temporary safety net that was originally designed to help those authorities that would have suffered an in-year and unexpected grant loss from the correction of the Bromley error. We have carried out a further round of grant recycling and we have made the England-Wales pooling adjustment. I comment the report to the House.

Question put and agreed to.

Resolved, That the Rate Support Grant Supplementary Report (England) (No. 2) 1986–87 (House of Commons Paper No. 35), a copy of which was laid before this House on 9th July, be approved.