§ 3.46 p.m.
§ The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin)
My Lords, with the leave of the House, I should like to read a Statement made by my right honourable friend the Secretary of State for the Environment in another place. The Statement reads as follows:
"With permission, Mr. Speaker, I should like to make a Statement on local authority expenditure. The Government's overriding objective is to reduce the level of current spending by local authorities and thus to secure the low level of rate increases that are now possible and desirable. For 1981–82 I can tell the House that I shall be tabling a supplementary report later this week to reduce by £201 million the total of grant available for distribution. This holdback will fall on those authorities that did not meet the Government's targets in 1981–82.
"For 1982–83 it is also necessary to reduce grant for overspending authorities. Authorities will this week be sent details of the proposed grant reductions which, on the basis of their budget returns, will total £312 million. I propose to make a supplementary report in the autumn. For 1983–84 I am now giving local government the earliest possible indications of the Government's plans for local government spending and our proposals for the next year's rate support grant settlement. This will give all local authorities ample time to plan their budgets now and make what changes are necessary.
"As in 1982–83 I propose to give expenditure guidance to individual local authorities. There will be two basic rules: for those authorities who are budgeting to meet their targets: a 4 per cent. increase on their budgets for this year. After allowing for a difference of 1 per cent. between these budgets and likely outturn, this means an effective 5 per cent. increase on this year's cash. For the remaining authorities, we shall only assume that extra 5 per cent. on the targets that we set for this year. I am today sending to local authorities exemplifications for each authority, together with a memorandum explaining how we propose to calculate the expenditure guidance figures. Copies are being placed in the Library of the House.
"These targets represent an increase in the public expenditure provision of 5 per cent. or £900 million to £19.5 billion. In aggregate this is 2 per cent. more than provided in local authorities' budgets for 1982–83. It is probably 3 per cent. more than out-turn allowing for the possibility of a 1 per cent. 141 difference between budget and outturn. £19.5 billion does not reflect the Government's view of what ought to be spent. It rather reflects the problems of securing economies faster than local government has achieved. Accordingly, I propose that the current expenditure total on which grant related expenditure assessments will be calculated should be substantially lower at £18,800 million. This is £800 million above the total current expenditure component of GREs for 1982–83. Authorities which exceed these guidance figures will risk a more severe loss of grant than in this year.
"The rate levels in each authority depend not only on the expenditure levels but also on the level of grant. I propose that the amount of aggregate Exchequer grant should be £11.8 billion on the basis of local authorities spending at the level of their guidance figures. This is over £300 million or almost 3 per cent. more in cash than in the 1982–83 settlement. Our present estimate is that the aggregate Exchequer grant will be about 53 per cent. I shall announce details of grant distribution arrangements and of the grant abatement scheme later in the year.
"I shall be meeting representatives of local government in the Consultative Council for Local Government Finance later today to discuss these proposals. The decision about the level of rates is now entirely a matter for each authority. If they budget to spend within the guidance figures I have proposed, many authorities may find that they need no rate increases at all. That is the prize. With moderate pay settlements, and careful budgeting, it can be achieved".
That is the end of the Statement, my Lords.
§ 3.51 p.m.
§ Baroness Birk
My Lords, I have to thank the Minister for repeating the Statement and for doing so with such clarity, because the one thing that is lacking from the Statement is clarity. One could never accuse it of being a simple or simplistic Statement. The Secretary of State has announced what he is going to do in 1982–83 and he is using a number of supplementary reports, 1981–82 and 1982–83, to legalise his intentions—some might call them threatening intentions—which have been mooted. I would first like to ask; how can authorities plan expenditure with this spate of supplementary reports coming along at intervals when they need to know exactly where they are?
In 1983–84 the two targets set according to the rules are a 5 per cent. increase on last year's target and then a 4 per cent. increase on budget. This, I say with great respect to the Minister, means absolutely nothing until we have seen the memorandum setting out the guidance figures; and while I note that copies have been placed in the Library, it has been quite impossible, certainly for me, and I imagine for other noble Lords, to have caught up with them this afternoon in time for this Statement, which I have seen only in the last half hour.
I should like to ask the Minister: what allowance does this process, both the 4 per cent. and the 5 per cent., make for those authorities who are faced with increased demands from unemployed school-leavers, with more youngsters now staying at school because there is no hope of a job when they leave school? How is this 142 going to affect also what is needed in respect of increased demands on the welfare work of local authorities, especially with unemployment rising yet again? Then, what about the increasing number of elderly people who are not able to be cared for in the National Health Service? I could go on with a very long list of people who are suffering now, and who are going to suffer even more under this.
Expenditure guidance is referred to in the Statement. When does the guidance become orders? And does the Secretary of State intend to put in commissioners to monitor the expenditure of individual authorities? This is another further encroachment on local government which has been going in an unfortunately straight line and right to the heart of local government.
The Statement tells us that there will be 2 per cent. more in cash, but in real terms our figures show that there is a reduction of 2 per cent., so this, unfortunately, is a false hope, one which cannot be fulfilled. It is what I would call crazy cash planning. Cash does not mean anything at all unless it takes into account pay and price increases; and obviously these are going to be more than the Government are calculating in that rather vague overall figure. There is no point in issuing targets now if authorities do not know the consequences of deviating from them. So far as inflation is concerned, I should like to have a further breakdown of what is assumed for pay and prices. For example, will the police negotiating board give a police increase of between 9 and 10 per cent. tomorrow, as is very seriously rumoured, and how much will there then be for other local authority staff, many of whom come in the lower grades of pay?
The Statement refers to consultation with the Consultative Council on Local Government Finance. I would ask the Minister: why was this not discussed with them at their meeting last week? I do not understand consultation as being discussion after the event, but as discussion of what one has in mind with those who are most concerned. I would be very surprised if the Consultative Council does not take the same view. Finally, the Minister has said that many authorities may need no rate increases at all and, in the words of the Statement, "That is the prize". Unfortunately, that depends entirely upon an illusion. It is unrealistic, and it is an unrealistic assumption on inflation. The truth is that there are likely to be rate increases of 11 or 12 per cent., certainly not the single figures referred to in the Statement, and earlier. That, I am afraid, is what the Government are forcing upon local authorities.
§ 3.56 p.m.
§ Lord Beaumont of Whitley
My Lords, I too would like to thank the noble Lord the Minister for repeating the Statement. It is, as the noble Baroness, Lady Birk, has said, a very complex Statement, on a very complex matter, and we are going to need quite a time to digest it. Indeed, the local authorities are going to need quite a time to digest it and it is just as well that they have been given it.
The Statement says that the Exchequer grant will be about 53 per cent., which means that it will be down about 3 per cent. It is very difficult to see—and perhaps the noble Lord would like to comment on this—how on earth local authorities are to cope with a 3 per 143 cent. fall like that with no rate increases, and to maintain the services, let alone carry the great burdens which are put on them by the present economic situation, to which the noble Baroness, Lady Birk, referred.
It is a complicated Statement. I believe the question I have asked really goes to the heart of the matter, but that it separates what is a very complex matter from one of the most over-optimistic summaries at the end that I have ever come across:If they budget to spend within the guidance figures I have proposed, many authorities may find that they need no rate increases at all. That is the prize".It is indeed a prize, and if any of them manage it I, for one, will be extremely surprised.
§ 3.59 p.m.
§ Lord Bellwin
My Lords, on the noble Lord's last observation, I presume he was equally surprised last year when similar remarks were made and yet so many local authorities did manage. To deal first of all with the comments, I thank the noble Baroness, Lady Birk, and the noble Lord, Lord Beaumont of Whitley, for their first observations. I certainly agree with the noble Baroness that simple it is not, without any doubt; but then, how could we ever have a simple system when we seek to distribute some £11 billion or £12 billion of money and are talking of around £20 billion of spending among more than 400 authorities on the basis of assessment of need and so on? Simple it never has been, and simple it is not at the present time. Whether it ever will be, who can say?
The noble Baroness asked, how could local authorities plan with this spate of supplementary reports coming along. She certainly will know that local authorities were this time given more information about what the holdback rules would be earlier than ever before, certainly before the start of the 1982–83 year; and when I think back in my own experience of how information of this kind was often dropped upon us at the last minute with no intimation, I can certainly say that, whether one likes it or not, intimation there certainly was, and in my opinion that side of it will come as no surprise at all to local authorities.
I accept another point which the noble Baroness made, that the figures will be more meaningful with more information. That is true, but that is why, after all—although it sets out clearly what is intended—this is still a consultation document. I think that I should stress that. She asked what allowance the proposals make for various services which she mentioned. She said that she could have mentioned more, and I am sure she could. She could have gone through the whole list of services. To answer that, one would have to decide what view one takes about the ability of local government to reduce its expenditure from the 1978–79 level, which was the highest in its history, by just over 1 per cent. per year, which is what the Government have been asking for, and which point we shall have reached by this time.
I am far from satisfied that this is an unattainable figure. Indeed, so many authorities have achieved this type of reduction without any dramatic decrease in service levels that those which have not done so will need to look very carefully not least at the books which are published this week by CIPFA, which show 144 how some do certain things at a lower cost than others. That is not meant as a criticism of local government as a whole—Heaven forbid that I should make that—but it is a criticism of those who are not willing, or are not able, to achieve the provision of services at the same levels as are others. It is not good enough to say that the circumstances vary so much. Of course, the situations and circumstances of authorities vary, but there is a very considerable pattern which is not variation. So it is incumbent upon all sectors of local government to look at what others are doing and to get better value for money, if I may use that term.
The noble Baroness asked whether we shall need commissioners to monitor. No, my Lords, there is no question of commissioners being needed to monitor. That is the last thing we want. She said that this was a further encroachment. All I can say is that, certainly, more information of the Government's intentions was given this time than ever before. She also used the term "crazy cash planning". I should have thought it was about time that we got around to cash planning, and had a little less of some of the vague percentages that were talked about in the past. Lack of cash planning has led to many of the national problems that we have today, and it makes very good sense to have such planning.
The noble Baroness asked me what was assumed for pay and prices. I have to say that we have started from the Government's medium term financial strategy, as set out in the Financial Statement and Budget Report—the Budget Red Book. We have also taken into account the kind of pay settlements which we expect local government to reach—something less than the rate of inflation. In that we are now on a cash basis, that is a more sensible approach than some of the wild and woolly figures that were used in years gone by, which nobody in local government ever believed, so that, consequently, they made their own assumptions, often over-assuming, and thereby putting on one side more than was needed. I myself in another capacity—I will not say that I was guilty—was always very careful to make sure that I did my calculations on the right side, rather than the wrong side. But if it is done by over-assuming, it comes out at the expense of the ratepayer. However, that is for each authority to decide.
The noble Baroness made a point about consultation, and I do not know whether it was a fair one. I say again that, to the best of my knowledge, there has been more consultation than ever before. If the noble Baroness feels that the conclusions reached were based upon less consultation than she thinks is desirable, I shall just have to take what she says, because I really cannot comment on that. My information is that there has been great consultation and, of course, there will be even more with the further conversations that will take place.
As I come to the last of the points which the noble Baroness made, I do not at all accept her point about the likely average rate increases being 11 or 12 per cent. I stick entirely to what is said in the Statement on that. We are now, at last, talking in cash terms and the logic is clearly there that, allowing for the grant that we have said will be given and the basis on which it will be given, and taking into account what has happened last year and in the current year, if authorities will 145 work within the spending guidelines, I believe that there need be very little, if any, rate increase.
The noble Lord, Lord Beaumont, said that it would take time to digest and, as I said to the noble Baroness, I absolutely accept that. He asked about coping with 3 per cent. I said that we are talking more of 4 or, possibly, 5 per cent., although, in the event, it depends on the outturn. Without repeating myself, I make the same comments as I made to the noble Baroness, Lady Birk. Each authority will do its own thing in its own way, but I am very confident that they will cope all right. As regards being over-optimistic, that is a view one can take. Obviously, it is a view which I do not take, but I understand why the noble Lord speaks as he does.
§ Lord Davies of Leek
My Lords, is the noble Lord aware that some of us believe, quite honestly, that there is increasing interference with the democracy of local government by the centre? It is growing more and more authoritarian, and there is less belief in the capability of local democracy to develop. I have not had a chance to study these figures, so I have to be careful. But we are heading for destructive expense throughout the country, with the condition of the sewer systems of our great cities and the wear and tear on our roads. Far from wanting to be cutting, some Government—whether Conservative or not—in four or five years from now, will have a vast expense on its shoulders, because there has been a lack of constructive spending on necessary social things like sewers—omitting such items as social security—throughout the years. This never seems to be taken into account. Somebody will have to meet that expense with a contingency fund, or something from the centre, if the Government do not hand more democracy to local ratepayers.
§ Lord Bellwin
My Lords, the noble Lord has touched on two quite separate points. The Statement refers to the amount of money that will be given. Although the noble Baroness touched on it in a way, when she said that this would affect the ability of local government to do its own thing—which I understand, and from where she sits it was a fair point for her to make, although I do not agree with her—the necessity to spend more on the infrastructure, such as sewers and so on, is a point in itself. In no way can we equate that with local democracy and its freedoms. If we are talking, as we are today, of providing a cash increase in round figures of some 5 per cent. overall in relation to what is being currently spent, I do not think that that is being over-hard in any way. This is certainly a tough budget, but I think it is a fair one. When local authorities have looked carefully at what it all means, they may feel that it might be less tough than they might have expected, in view of the current overspend of £1¼ billion that we currently have.
§ Baroness Stedman
My Lords, from this Bench, we should also like to thank the noble Lord for the way in which he has presented the Statement, though whether we, or the local authorities, will be quite so happy with the contents of the Statement is another matter. We fought for a long time on the Local Government, Planning and Land Act against giving 146 the Minister retrospective powers, but we did. But, at the same time, we also gave him the right to call in individual authorities to discuss their problems with them, if they were given to overspending. May I ask the Minister how many local authorities are involved in both the holdback for 1981–82 and also the reduction in grant for 1982–83, and how many of those authorities the Secretary of State has seen to find out whether there is justification for some of their overspending because of additional services which they have to provide to cushion hard times in their area if they have high unemployment and similar problems? As has been said by the other two speakers, the increase which is allowed is nothing like enough to keep the status quo for the local authorities or to help them to meet inflation. It will certainly mean that there will have to be some cutback in services or increased rates. Quite frankly, the Government should not impose statutory duties on authorities unless they are also willing to ensure that the authorities have the resources to carry out those duties.
The Statement says that this reflects the problems of securing economies faster than local government has ever achieved. I am not quite sure how they are going to do that. My county treasurer told me this weekend that there is talk of introducing volume targets, which is a new piece of local government jargon, and that if these are introduced it will mean, so far as my county of Cambridgeshire is concerned, a cutback of £19 million. We are not one of the high spenders. We have always been a Conservative-controlled authority. In fact, we are beginning to get the name of being one of the mean authorities. Yet if this happens we shall have another £19 million cut off from us.
The noble Baroness referred to the question of consultation with the authorities. It seems to me that not a great deal of consultation has taken place. An announcement about the proposals has been made here this afternoon and the noble Lord says that he will be meeting representatives later today to discuss them. I should have thought that he would have discussed them in some detail before coming to the House with firm proposals.
We had the Green Paper earlier this year, and comments upon rating reform were asked for by 31st March. That is four months ago. How far have the Government got with making up their minds about rating reform, and at what stage can we expect legislation to deal with it? If seems to me that the sooner we get back to accountability downwards towards the electorate and away from accountability upwards to the Secretary of State the better it will be for local government.
§ Lord Bellwin
My Lords, on this point of consultation, your Lordships are being less than fair, or it may be that they do not know just what consultation has been taking place. I would say that, without any question, there has been, and there is today, more consultation on matters of this kind than there has ever been. That is quite a statement to make, because I do not know exactly what took place in the past. However, my own experience of the kind of consultation which went on and of what goes on at present leads me to believe, although I am open to correction, that local 147 government has never in the past been given as much intimation at this time of the year as I am giving today in your Lordships' House and as my right honourable friend is giving in another place. At least I can absolutely guarantee that this will be very well received by local government. In terms of time, it is far better than anything I have ever known before.
The noble Baroness asked me how many local authorities will be affected by hold back and how many have been seen. I do not have the exact figure. I shall certainly write and give it to her. However, the likelihood is that perhaps between one-half and two-thirds of local authorities will be affected. Turning to how many local authorities have been seen, based upon their having made representations, the noble Baroness will know from her experience that this is the time of the year for making representations. Again I do not have a number to give to her, but many local authorities do come, as the noble Baroness will know, and all who ask to come on these grounds are seen. If the noble Baroness would like more detail on that point, again I shall gladly give it to her.
The noble Baroness is also concerned about volume targets and asks what this means. I am not quite sure what she thought the treasurer to whom she spoke in Cambridgeshire meant, but I would doubt very much indeed whether the kind of figure which she gave in that case would apply in the kind of circumstances which I think she meant. If I am being very vague, it is because I am not too clear about exactly what was said. Perhaps, therefore, the noble Baroness would allow me to let that one go for the time being.
As to the Green Paper, I have said more than once recently in your Lordships' House that everything was in by the end of March. We know that a time factor is involved. The noble Baroness clearly does not expect me to give a firm response today. However, I can say that the Government recognise that this is something which calls for action in one form or another, and I do assure the noble Baroness that we understand all the implications and all the need for action in terms of time.
§ Baroness Platt of Writtle
My Lords, I thank my noble friend the Minister for that statement. I will take his advice and study the leaflet which he says is in the Library in order to see what this means for local government. It sounds to me as though it will mean that responsible local government will have a difficult task in carrying out its statutory duty, with yet a further reduction in grant. May I ask my noble friend the Minister whether the Government will pay particular regard to the needs of those low spending local authorities who over many years have followed the present Government's policy of reducing public expenditure, and also whether they will pay particular regard to the economies which have been made in the past when they set rate support grants, grant-related expenditure allocations and targets so that their decision will be fair to the ratepayers of those authorities?
§ Lord Bellwin
My Lords, I understand the concern of my noble friend and I share it with her. That is why I advise a careful re-reading and study of the Statement, 148 because it refers to two basic rules which differentiate between the two categories of authorities; those which are budgeting to meet their targets and those which are not.
My Lords, we have been on the Statement for 31 minutes. It would probably be appropriate to move on, since my noble friend has given fairly full answers. Perhaps the noble Lord, Lord Northfield, would put his question as succinctly as possible.
§ Lord Northfield
My Lords, may I follow up what was said by the noble Baroness opposite? Can the Minister offer some advice and perhaps some reassurance to those authorities which have met the targets set by Government and done their best but who now find, as the noble Lord knows very well, that, although they would like to get on with a lot of capital expenditure because they have capital available, they are deterred from that capital expenditure because of the revenue consequences? That is the point which is very worrying to a number of authorities which have done their best to play along with the Government rules. Can the noble Lord offer some advice and reassurance to those authorities?
§ Lord Bellwin
My Lords, it would depend upon the kind of capital spending that was involved. There are certain categories of capital spending which do not have the same revenue implications as others. As the noble Lord, Lord Northfield, knows very well, if one spends money on the rehabilitation of houses and so on, something which everybody ought to be doing if they are not already doing so, clearly there are not the same revenue implications as there are if one builds a sports hall which may involve all kinds of on-going debt charges, and also servicing. The noble Lord knows that in the capital field, especially where capital receipts are concerned, the Government hope that local authorities will use them to help the construction industry. It gives employment, and we are very much in favour of that. However, I must be frank and say that the noble Lord, Lord Northfield, has a point: there can be capital spending, in addition to that which I have just mentioned, which is very desirable but which will have revenue consequences, which in the longer term can be a burden. There is no other answer except to say that an authority has to look at its own situation and take into account what it can afford to do. That is the only advice I can give on that point.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers)
My Lords, I see that both noble Lords wish to speak but we are in fact in the middle of a defence debate for which there are 24 speakers, and so far we have heard three. We have had 33 minutes on this Statement and, although I would 149 not wish to truncate questions from any noble Lords, I believe, from the point of view of the debate as a whole and for the other Members taking part, that we have given this Statement a fairly full run. I would have thought it would have met the convenience of your Lordships if we were to move on.
§ Lord Harmar-Nicholls
My Lords, with great respect to my noble friend, may I point out that there have been four questions from the Benches opposite critical to the Government and only one question from this side? I believe that is an imbalance which would not, perhaps, be in keeping with what we would expect when matters such as this are being presented in the form of a Statement. In these circumstances is it not correct to suggest that one more question should be allowed?
My Lords, my noble friend puts one in a difficulty because it is not my intention to weigh up a balance of who has spoken and who has not spoken. The only balance I was trying to weigh up was the one of the length of time taken on this Statement in view of the 24 Members who wish to speak on the major business of the afternoon. With the greatest respect to my noble friend—and I do this with due deference to his parliamentary agility—I would have thought that if he could contain himself on this occasion it would have met with the approval of your Lordships.