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Mr. Gummer : Yes, but the hon. Gentleman's neighbour in Battersea lost his seat and a Conservative win was recorded.

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It is not surprising that the county with the highest rate poundage is our old friend Derbyshire, with 297.5p. Of the 10 counties with the highest rate poundages, none is Conservative controlled. Nationally, the picture is the same. Rate poundages in Labour areas are on average 35 to 50 per cent. higher than in Conservative areas. That is the position despite the unfair system which taxes people living in high rateable value areas to support those in low rateable value areas. That is why I said recently that if we had had the community charge the cost of living in a Labour area would on average be £100 per person per year.

In addition to the RSG report for 1989-90, we are today considering four supplementary reports for the years 1985-86 to 1988-89. Supplementary reports are one feature of this system that we are looking forward to getting rid of because they go on and on and we are still trying to unweave things going back years. That is why we believe that the new system is necessary. The system on which we have built year by year under Labour and Conservative Administrations was designed for a wholly different circumstance. The new system will be a considerable improvement on the present arrangements in a number of its key features. I intend to ensure that so far as possible in local government finance the new system is comprehensible, not just to the cognoscenti and the councillors but to the ordinary people who pay the bills.

Much of the disquiet about previous rate support grant settlements has stemmed from the fact that the system is virtually impossible to explain in simple terms. That has been the case for as long as most hon. Members can recall. I remember it in operation under Labour and Conservative Administrations. It is difficult to encourage local accountability and to draw a clear link between local spending decisions and local taxation when the linkage is vastly complicated by resource equalisation, a penalty system, inexplicable changes in GREs and the many other facets of the present arrangements. Few people will be unhappy to see the end of the present rate support grant system. Rates will become a thing of the past. Few will regret the passing of rates, except perhaps those Labour Members who would like to retain rates based on capital values and then to add to it a system of local income tax-- [Interruption.] The hon. Member for Hammersmith had better see what the result of such a system would be for his constituents. I hope that he will ask a few questions on that subject, because I can give him a few answers. It would mean two taxes in place of one.

A major advantage of the new system is that grant will in future be influenced only by a local authority's need to spend. This underlines clearly the Government's commitment to provide grant to meet real local needs. The criterion will be to each according to his needs. Just as with the community charge, the rebate system is designed to ask from each according to his ability.

Mr. Michael Carttiss (Great Yarmouth) : One is treading on dangerous ground when taking up points that my right hon. Friend has been making about next year. In terms of what he said about the whole system being much fairer, may I ask him to re-examine the question of leaving out of needs assessment for next year's revenue support grant the cost of coastal protection and of being a holiday resort? That will adversely affect my constituency according to figures now available to us.

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Mr. Gummer : In terms of deciding need, the Government are at present discussing that measurement with the various associations. No doubt my hon. Friend will bring to the notice of the association concerned the points that he wishes to be considered. We must remember that the various associations have differing views, even among people of the same political persuasion, because there are different pressures in different parts of the country. We must get the best balance between those pressures. That is what I am seeking to do and what the discussions are now about. I cannot tell my hon. Friend how that will come out because those discussions will have serious effects on the decisions that are made. But at the conclusion of them I shall be happy to discuss with my hon. Friend how matters affect his constituency of Great Yarmouth.

The grant will now depend not on a whole series of factors, nor indeed on a curious arrangement involving rateable values and comparative rateable values. It will depend on the needs of the local area. One of the great difficulties of the present system, which I find hard to explain, is why an area which is expanding in terms both of population and of business may end up getting less grant, although its needs have increased. It must be more sensible to have a system based on need.

I accept the point made by the hon. Member for Brightside, who makes such points with great care, that it depends on how one measures need. But one does not solve the problem by saying that because someone will have to decide what the need is we should not try at all. We are seeking a simple and clear way of doing it, and we are discussing with those most concerned- -the local authorities--how best to achieve that.

The most important advantage of the new system, with the exception of the needs grant, is the community charge, which will spread the cost of paying for local services more widely and fairly. It will give voters a direct financial interest in the decisions of their councils. That is for the future, but for next year we have provided a generous settlement and I commend the reports to the House. 4.49 pm

Mr. Clive Soley (Hammersmith) : We have just heard a squalid and disgraceful attack on local democracy, regardless of whether it be controlled by the Labour party, the Conservative party, or the Social and Liberal Democratic party.

We are supposed to be debating the last rate support grant under the old system. In future, we shall have a debate on revenue support grant. The move from one to the other is a move from disaster to catastrophe. The Government admit that the present system is bad, and they are right. It was designed and built by them and they have administered it. It is inefficiient, unfair and must go. They have replaced the old system with an inefficent and grossly unfair one. We must remember that the poll tax will be two taxes--if the business tax is taken into account--and will be unpopular and unfair.

Mr. McLoughlin : What is the alternative?

Mr. Soley : The alternative is much fairer. Almost every other western democracy uses models similar to those that we are proposing. Our proposals have been recommended by people who know, believe in and love local government.

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We are riding on the crest of a wave on that issue and only time will tell. People know that the poll tax is grossly unfair and that it will hit hard many on low incomes.

The Minister spoke of the needy being hurt. How can he justify the fact that under the poll tax two pensioners living in a flat will be paying more than a millionaire living in a mansion? As Conservative Members know, there is no justification.

Whenever we have these debates--and, sadly, many other debates--we must bear in mind that Government statistics should carry a health warning, preferably from the late but not much lamented former Parliamentary Under- Secretary of State for Health, the hon. Member for Derbyshire, South (Mrs. Currie). For many years, the Minister and his predecessors have thrown out misleading rate support grant figures. The Minister made something of misleading information being put out by local authorities, which he claimed was political. The Minister for Housing, Environment and Countryside has refused my challenge to submit the Government's leaflet--tens of thousands of which were put out by them at the taxpayers' expense and is known to be grossly misleading and highly political--to the independent judgment of the National Consumers Council, which is chaired by a former Conservative Member of Parliament, or the Institute of Housing, which I will accept as independent bodies. That is one of a number of issues that the Government are pedlling as information, but which are political propaganda. They are doing so at the taxpayers' expense, but when a council tries to put out information it is jumped on by the Government, who prevent it from doing so. That is the worst form of authoritarian centralism.

Mr. Jacques Arnold (Gravesham) : The hon. Gentleman is talking about misleading information, but is it not relevant to mention the 9 million people who will be covered by community charge rebates? Is it not highly likely that the poor pensioners to whom the hon. Gentleman is referring will be covered by those rebates?

Mr. Soley : Much will depend on their circumstances, but nobody is suggesting that the rates of a millionaire will be increased. Taxation is normally progressive. The reason why everyone dislikes the poll tax is that for the first time this country wil have a tax that is not progressive.

Mr. McLoughlin : I ask the hon. Gentleman a simple question that was acknowledged by the hon. Member for Copeland (Dr. Cunningham). Does he believe that the present rating system reflects the ability to pay?

Mr. Soley : No, of course it does not, because the Government have consistently cut rate support grant, which has driven up rates. The rating system was never truly progressive, but it was much fairer and rates were more equitably distributed before the Government began slashing rate support grant.

Mr. Eric S. Heffer (Liverpool, Walton) : My wife and I will pay less under the poll tax then we pay at present, but poor constituents of mine will pay more than me. What is just about that? I am prepared to pay more rates than I do at present, as long as poor people get a fair deal, but they will not.

Mr. Soley : My hon. Friend is right, but one must also take into account the quality of service.

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The Government present themselves as the party that cuts taxes, but that is not so. The most recent figures show that the taxation burden of a man on average wages with two children increased from 35.1 per cent. of gross earnings in 1978-79--the last year of office of the Labour Government--to 37.3 per cent. this year.

Although the Government have cut income tax--especially for those who are highly paid--rates, national insurance, VAT and indirect taxes have increased dramatically. The tax burden of the average man with two children has increased by about 2 per cent. Affluent people have had a dramatic cut in their tax base, which gives the lie to the Minister's protestations that he is concerned about the effects of rates on low-income people.

There is no evidence that any Minister is concerned about what happens to people on low incomes. If they were, they would not have voted against the uprating of child benefit. If they were, they would not have given massive tax handouts to the rich. I notice an unpleasant or embarrassed silence among Conservative Members. This subject is the Achilles' heel of the Conservative party, because in the long run no society can claim to be just, equitable and fair if it hands out to the rich when at the same time- -for the first time in my memory--men, women and children are begging in the streets and sleeping rough. How can anyone who advances a Christian morality, as does the Minister, justify that? How can he speak of condemning people yet do nothing about the problem? It has led people to comment that London is beginning to look like a third world city.

Mr. Harry Greenway : The hon. Gentleman is putting his heart on his sleeve. We all care about disadvantaged people. Perhaps he would like to note that many of my pensioner constituents, and those who are disabled, are having to go without food to pay the rates that have been levied by Labour-controlled Ealing council, which wilfully wastes that money.

Mr. Soley : The hon. Gentleman is wrong to say that it wilfully wastes money. His constituents, who neighbour mine and are not radically different, are going without food because housing benefit has been cut eight times, because social security has been cut, and because the cuts are funded on a midnight army of low-paid people who are paying about 7 per cent. more tax.

The Government whom the hon. Gentleman chooses to support have cut the rate support grant and when a Labour administration took over from a Tory one in Ealing and Hammersmith and Fulham and tried to improve services, it also took over a rate rise which was in the pipeline. In Hammersmith and Fulham that rise was about 30 per cent. and would have taken place even if a Conservative administration had been elected, which of course it was not.

Mr. Boateng : Does the hon. Member for Ealing, North (Mr. Greenway) accept that in some respects the problem is worse here than in a so-called third world country? At least in a third world country there is an extended family system that is capable of nurturing and caring for those who are disadvantaged by virtue of age or ill-health. The poll tax discriminates against the extended family and will make it more difficult for people who want to look after their young, unemployed sons or daughters or elderly relatives.

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In his speech--I regret that I did not hear it all because I was in Committee on the Water Bill--the Minister was less than fair to my borough of Brent in its attempts to collect overdue rents. He will recognise that the borough has only recently introduced a new system of rent collection that uses external agents who seek to step up the rate of rent collection. They are taking efficient steps to match the concerns he has mentioned. His colleagues in the Department of the Environment praised Brent housing department for its innovation.

Mr. Soley : My hon. Friend the Member for Brent, South (Mr. Boateng) is right. Brent council is seeking to do something about its problems. It would help local authorities if the Government showed confidence in them, regardless of their political complexion, and helped them when they ran into problems, instead of trying to trip them up and put the boot in. They act like political bovver boys who destroy, undermine and devalue local democracy, whether in the form of councillors or council officers. Why are so many council officers, not just councillors, demoralised about their role? Why is it becoming increasingly difficult to get members of any party to stand for local authorities? Is it not because the Government are taking away their powers, circumscribing their activities and taking from the local electorate that which, in the past, both Conservative and Labour Governments have felt was its proper job?

I was talking about the way in which the Government manipulated the statistics. The most important fact to bear in mind during debates on the rate support grant is that there was a massive cut in it. I am sure that the Minister will not deny that the cut took place between 1980 and 1988. It was the Government's policy. The Conservative party's 1979 election manifesto said that a Conservative Government would cut public expenditure in order to transfer the money saved into tax rebates and thus regenerate the economy. That did not happen. North sea oil was used to finance the economy in the south while the plug was pulled on manufacturing industry in the north. One can continue selling the family silver for as long as one likes, but when it has all been sold, people must be asked to pay.

Rate support grant as a percentage of relevant expenditure--the aggregate Exchequer grant--has fallen from 46.2 per cent. in 1988-89 to 43.3 per cent. in 1989-90. In 1979-80, the last year of the Labour Government, it was 61 per cent. The Government's philosophy on public expenditure has been to say to local authorities, "Do not do as we do, but as we tell you." They made local authorities cut their expenditure and, at the same time, particularly in the early 1980s the Government increased public expenditure. It was increasing, not just in real terms but in percentage terms, because the Government were financing mass unemployment from a sinking industrial base.

Mr. Irvine Patnick (Sheffield, Hallam) : The Department of the Environment's circular 88/75, called, "Local Authority Expenditure 1976-77- -Forward Planning", says :

"The Secretary of State for the Environment said in reply to a Parliamentary question on 5th August, there will have to be a standstill next year'."

That was a Labour Minister speaking to the House.

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Mr. Soley : There is no problem about that. The hon. Member for Sheffield, Hallam (Mr. Patnick) is trying to skate around his party's philosophy--broadcast loud and clear in the 1979 election--to cut public expenditure. The Government failed to do so but they forced local authorities to cut and do what they could not. The Labour Government tried to bring about a standstill in public expenditure when they did not have the benefit of North sea oil. The hon. Gentleman failed to take into account the fact that since 1980, as North sea oil has come ashore, combined with the selling of the state silver--as the late Harold Macmillan described it--the Government have channelled large sums into the south of Britain at the expense of the north and have allowed manufacturing industry to collapse. If one examines the regional distribution of wealth through the European Commission, the tragedy for this country is that the south, one of its most prosperous regions, is still well behind many of the regions in Europe. The poorer regions in the United Kingdom are way behind the European average. That is a measure of how far the Government have misused our oil wealth.

The cumulative loss, in real terms, of the rate support grant from 1981-82 and 1988-89 is £27.7 billion. If the hon. Member for Hallam and the Government had stuck to the Labour Government's policy, even accepting that there was a standstill at that time, local authorities would have had an additional £27 billion to spend. Of the 20 local authorities that levied the sharpest rate rises in the 1980s--the Minister tried to dodge round the parliamentary question tabled by my hon. Friend the Member for Copeland (Dr. Cunningham) who, sadly, cannot be here--half were in Tory- controlled areas. Six of those which levied the sharpest rate rises were Labour authorities, two are hung councils run by Labour. Eight of them are run by Tories or Tories plus independents and four are run by the SLD, the SDP or hung--what we might call also-rans. At the other end of the scale, 21 councils have cut the rate, of which nine are Labour, and only one was rate-capped.

Evidence of the unfairness of the Government's cuts on local authorities is shown by the figures behind the percentages, and the percentages. They show that there is no link between rate rises and increased spending. That is why the council of the hon. Member for Ealing, North (Mr. Greenway) is in difficulty. The reason for the figures is the irrational grant system devised, developed and enhanced by this Government. They are also due to the individual needs and different procedures in local authority areas.

The Minister's constituency of Suffolk, Coastal has shown the second largest rate rise over seven years, 218 per cent. Spending has increased by only 132 per cent. So his local authority has been clobbered by its own Government. If I was a ratepayer in the Suffolk, Coastal constituency I would be asking questions not only about coastal defence, which the Minister is right to do, but about why on earth I was voting for a Tory Minister who was cheerfully increasing the rate burden on his constituents while public expenditure was being cut.

Mr. Gummer : Will the hon. Member for Hammersmith (Mr. Soley) explain what he would say to my constituents when they find out that they are 46th among districts in the poundage they pay, and that those who pay the most come

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under Labour councils? We are changing the system to get rid of the very thing he has been complaining about. We are changing the system and he is not supporting it.

Mr. Soley : The Minister cannot wriggle out of it like that. The question for ratepayers in his area is why it is that their rates have risen far more than spending. Fundamentally, the reason--as everyone knows- -is the rate support grant cuts made by this Government. There may be other reasons of needs and procedures for all local authorities, but the central reason is the RSG. The Minister cannot explain that to his constituents and he will have no way of softening the burden for them, although he will try, because the Government have tried, through this rate support grant, to bridge the gap between rates and the poll tax. They were embarrassed by the figures that were put out by the Labour party which showed how severe the poll tax would be. To try to soften the blow, the Government have spent rather more this year than in previous years--not much more, but a bit more. If they are to survive the argument politically, they must make the rates and the poll tax more in line than they would have been had the figures been left as they were in the previous year. At the same time, they try to put the blame for increasing the poll tax on to local authorities.

I give the Government full credit--if that is the word--for their incredible skill at deception, which I consider to be immoral. This Government, more than any other that I have experienced, have managed to blame other people for matters for which they are responsible. They do that whether they are talking about law and order, homelessness, rates or taxes. It is always somebody else's fault--usually the fault of someone who is in a weaker position than the Government. That shows the moral bankruptcy of this Government. As a result of the £22.7 billion cut, in real terms, local authorities of all complexions have had to cope with a devastating and unpredictable financial regime. I cannot emphasise that enough. The Conservative party tells us that it is the party of efficiency in business. What efficient business would try to plan expenditure on the basis that it often did not know how much it would receive from a regular grant-making body--often until a few weeks before the grant was made? Yet that is what the Government have imposed on local authorities, whether they are Labour, Tory, Liberal or whatever. It is gross to put local authorities in that position.

The introduction of the poll tax imposes additional financial burdens this year. I have two questions for the Minister on that, if I may have his attention, or perhaps the Parliamentary

Under-Secretary will answer them in her winding-up speech. First, will there be an increase in the Government contribution if the poll tax preparation costs are higher than forecast? I have asked that question because the basis on which the Government have calculated those costs is considerably lower than that being forecast now, as the Government seem to be acknowledging. If that turns out to be the case, local authorities will have to find that money and Mr. Rentaquote, the hon. Member for Ealing, North, will stand up in the House and talk about wicked local authorities. However, those local authorities will have had to put up rates to pay for the administration of a poll tax that almost all local authorities think is unfair and irrational. Will the Minister tell us whether, if the costs are higher than forecast, the Government will fund those increased costs?

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Secondly, I want to ask the Minister, or the Parliamentary Under-Secretary, about inflation. He used a figure of 2 per cent. and I told him what the independent view was. I shall now give my view. The rate support grant that we are discussing today is based on 4 per cent. inflation in 1989-90. Does anybody believe that inflation will be only 4 per cent. in 1989-90? Does the Chancellor of the Exchequer believe that? No, he says that there will be a bleep--[ Hon. Members : -- "A blip."] The blip will push inflation up to at least 6 per cent. and most observers of the economy believe that inflation will be at least 7 per cent. and, possibly, even 8 per cent.

Mr. John Battle (Leeds, West) : My hon. Friend may be aware that in the Electricity Bill, which is in Committee at present, the Government have estimated that inflation will be 8 per cent.

Mr. Soley : I am grateful to my hon. Friend, who is a member of the Committee, for keeping us informed of the latest moves in the Chancellor's ever-moving strategy. Let us assume that inflation will be 7 or 8 per cent. I want to know--either now or at the end of the debate--whether, if inflation turns out to be 7 or 8 per cent., the Government will uprate the present rate support grant to meet that. The Minister can simply answer yes or no. It the Government do not do that, every local authority--whether Labour, Tory or Liberal--will know who to blame. There is no doubt that inflation will increase the rate burden on people. If the Minister is so desperately concerned--as he tried to tell us he was--about the effect of rate increases on the people and if his prediction of 2 per cent. is wildly wrong--as we all know it will be because of inflation, if nothing else-- will his concern extend to telling the Secretary of State that he must uprate the rate support grant to take account of the full costs of inflation? If he does not do so, let him never come to the House again and tell us that he is concerned about the poor ratepayers who have to pick up the bill when it comes through their letter boxes. Those bills will have risen because of his Government's behaviour. The 2 per cent. mark is well below what is expected, so the costs will hit people in their pockets. But it will also hit people in their services. The Government have suddenly discovered nursery education. They want good nursery education because the Prime Minister has suddenly discovered that it is popular. The top 24 providers of education in nursery schools for three and four-year-olds are all Labour authorities. On the other hand, the bottom 19 are all Tory authorities--or Social and Liberal Democratic authorities in a couple of cases. Yet the Government have said that nursery education is a good thing and they have apparently discovered that we are light years behind the rest of western Europe in the provision of nursery education. The Government have said nothing, but they must have discovered that Labour local authorities are doing the most for nursery education. What did the Government do to some of those authorities? They rate-capped them. So much for the concern about nursery education. If the Government had any concern about nursery education, they would not be talking about setting up committees to consider it and to make recommendations. They would do what the Labour party did in office and what Governments in Europe have been doing for far

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longer than us. They would allow local authorities--which are properly elected, democratic local authorities--to spend their money on nursery education.

We know that children who receive nursery education do better at school, in their social behaviour, in training for skills and in employment-seeking and functioning. But the Government did not care about that. They were quite happy to rate-cap local authorities that provided good nursery education. It was not their kids, was it? Those authorities could be clobbered. I see that the Minister has again sunk his chin into his shirt-- which is, perhaps, the best place to keep it. He has done so to avoid not only the Government's embarrassment over their lack of support for the poor, but to avoid putting their money where their mouth is on education.

Mr. Jacques Arnold : The hon. Gentleman would give us comparative figures if he were to put back in them the voluntary playgroups that are provided inside county council education premises in and near primary schools.

Mr. Soley : Who provided the premises and the heating but the ratepayer? Who tells us over and over again that nursery education must be well funded? The Government tell us. The hon. Gentleman said that nursery education must be provided on a voluntary basis. Why does he not tell the Prime Minister? She says she wants to put money into nursery education. Let us not talk about voluntary efforts. I admire the voluntary contribution, but nobody in his right mind--certainly nobody on the other side of the English channel, from where so much of our competition will come in the future--believes for one moment that the voluntary sector can provide all nursery education. It is a pretty desperate state of affairs if the hon. Gentleman has to fall back on that to defend his party.

Mr. Derek Fatchett (Leeds, Central) : My hon. Friend may be interested to know that it is not just the Labour local authorities that make up the top 24 in the league table that have an impressive record on nursery education. In the period 1975-80, under the last Labour Government, the pace of nursery provision--both in nursery schools and in rising-fives places in primary schools--was much quicker and sharper than at any time in the lifetime of this Government.

Mr. Richard Caborn (Sheffield, Central) rose--

Mr. Soley : I shall give way for the last time, to my hon. Friend the Member for Sheffield, Central (Mr. Caborn).

Mr. Caborn : Do not the Government realise that the removal of the community programme has been one of the major factors contributing to cuts in nursery education--particularly for the under-fives and in the inner cities? That has had a devastating effect. Although the local authorities have provided buildings, heating and so on, the real service has come through the community programme and a considerable number of places are now to go as a result of the Government's attitude to it.

Mr. Soley : I am grateful to my hon. Friend for reminding me of that point, which had momentarily escaped me. We know that that is having a dramatic effect.

The Under-Secretary of State will know that her own area, West Sussex, is bottom of the league in providing nursery education. [ Hon. Members :-- "Surrey, South-West!"] I do not mind being wrong about the Minister's constituency ; that is not the problem. West Sussex, the

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neighbouring area to it, is bottom of the league. In the south one does not have to look far to find some pretty bad Conservative local authorities. For example, in Horsham an empty council house was given over for use as an office by none other than the Horsham Conservative party. The authority had to provide the local Conservative party with an alternative office because of redevelopment--that was quite right--but it did not have to give it an empty council house at a time when there are homeless people in the streets. We should not merely condemn such authorities. We should ensure that they make good use of their properties to house the homeless.

It seems that the Minister wants to pick on individual local authorities, but it would be far better if instead the Government addressed themselves to the drastic decline in the provision of low-cost accommodation for rent or sale, particularly in the south. For many people, there is no alternative to that, which is why men, women and children have to sleep in the streets--not just in London but now in many of our towns and villages. That is what is so wicked. If the Government are so concerned about these things, why do they not put more money into housing, education and care in the community? We have heard all this talk about the closure of long-stay psychiatric hospitals and support in the community, but where will that support come from if the councils cannot provide it? Some years ago the Government embarked on a profoundly dangerous course. They have not only damaged the morale and confidence of council workers and councillors, who do their job voluntarily ; they have increased centralised control in Britain. The Minister should bear in mind the development of local authorities in Europe. After the disaster of world war 2 one of the first acts of the countries that had experienced dictatorship was to devolve powers to local authorities. They made sure that local electors could decide who was doing a good job. They did not rely on papers like The Sun or The Evening Standard or on Ministers to say that such and such an authority was of the loony Left or the loony Right and should be got rid of. They left it to the electors to decide. I would rather do the same, even in Horsham and West Sussex. I would not say that we should undermine those councils or chuck them out. That is up to the local electorate to decide.

When Franco went, the first thing that the newly elected democratic Government did in Spain was to devolve power to local authorities, because they knew that pluralism is essential to democracy, and pluralism means good local government. One cannot have good local government unless one encourages people to stand for office, supports them when they do so, and ensures that they have genuine powers to use. If we move towards some form of united Europe, Ministers will not like it if Brussels starts treating them as they are treating local authorities. Perhaps that is why some of them are getting increasingly worried about the prospect, although that has wider implications. If, like the Opposition, the Government believe in local democracy, let them fund it properly and allow it to get on with the job, and allow the local electorate to decide whether that job is being done properly.

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5.26 pm

Sir David Price (Eastleigh) : I shall resist the temptation to try to answer in detail a number of questions asked by the hon. Member for Hammersmith (Mr. Soley). I would take the House back a long way to the days of the royal commissions. I remember pointing out then that discussing the reform of local government in terms of geography and function without discussing taxation and finance was like putting on Hamlet without the Prince of Denmark. The failure to do that has haunted us ever since and we are at last beginning painfully to address ourselves to it.

A new element with which I am closely involved is loosely called care in the community--the hon. Member for Hammersmith touched on it briefly--and I await with great interest the Government's response to the Griffiths report and look forward to hearing how the Government intend to handle care in the community, and, above all, to finance it. I think that the good Sir Roy Griffiths dodged all the main issues, and wrote a rather general injunction to those who went along with his organisational proposition that he who wills the end must will the means. That was nice shorthand but it does not help the House by telling us how we ought to finance care in the community. Having made that general point, I do not apologise for coming right down to the particular. It is a good idea to see how those complicated matters work in the particular. It will not surprise the House that in this case the particular is the borough of Eastleigh. We are very unhappy at the manner we are being treated by my right hon. Friend the Secretary of State in his proposed rate support grant settlement for 1989-90. Under that settlement, we in Eastleigh are to suffer a loss of more than 36 per cent. We appear to have been selected by my right hon. Friend for particularly harsh treatment. If we look at how our neighbours in the other districts of Hampshire have been treated--equity is not unimportant in these matters--we find that a number have been given a percentage increase, while the vast majority are to suffer only a modest reduction. Portsmouth is to get an increase of 6.66 per cent., Gosport an increase of 6.25 per cent. and Havant an increase of 5.71 per cent. Southampton is to get an increase of 5.48 per cent., and I can hardly complain about that as I also represent part of Southampton. My right hon. Friend gets brownie points for that. In East Hampshire and Hart, there is no change, and no authority is to suffer a reduction of more than just over 8 per cent.--in the case of Test Valley- -yet Eastleigh is to suffer a reduction of 36.27 per cent.

Naturally, we have taken up the matter with my right hon. Friend, and he can congratulate his civil servants on producing a reply that would do justice to any episode of "Yes, Minister". That letter alone would justify at least two programmes. In an idle moment, if my right hon. Friend has one, he will be good for two programmes.

My right hon. Friend described the adverse treatment which is selected for Eastleigh in his letter thus :

"The reason for Eastleigh's particular position is that its rateable value is increasing faster than the average, while our assessment of its need to spend shows an increase only in line with the average, so that each year your authority receives more from the rates, even without increasing the rate poundage".

If we compare Eastleigh with our neighbours in the Test valley, we find broad comparability, both of population and of rateable value. Our populations differ by the

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enormous amount of 0.5 per cent. When we look at the rateable value, the difference between us just makes 2 per cent. On that basis, how can a difference between a reduction of about 8 per cent. and one of more than 36 per cent. be justified? I could show even more of an inequity with Winchester, where the reduction is only 3.26 per cent. I hope that I have made my point ; I will not labour it any further. Eastleigh borough council also tells me :

"Whilst it is true that our rateable values have increased, the resultant increase in rate income is only some £120,000, compared with our grant loss of £162,000. That acknowledged loss of £162,000 is a comparison with the revised grant settlement for the current year. Compared with the original settlement, the loss is over £200, 000."

As we all know, the mathematics of the rate support grant is byzantine in the extreme. Nevertheless, I had hoped that the basic "Axioms" of Euclid could be accepted and applied by the statisticians in my right hon. Friend's Department. Perhaps I am wrong and it was the augurer to the Department rather than the statistician who produced the RSG. No doubt a mythical wyvern was disembowelled in Marsham street to see which way its liver went ; hence, Eastleigh got hammered. Hon. Members will recall the "Axioms" of Euclid, which stated :

"Things equal to the same thing, are equal.

If equals are added to equals, the sums are equal.

If equals are subtracted from equals, the remainders are equal. Things which coincide with one another are equal to one another." On the basis of Euclid, I suggest that Eastleigh should receive the same treatment as the Test Valley borough council and the city of Winchester.

We must now revise the "Axioms" of Euclid and at the end of each axiom write :

"Things equal to the same thing are equal, except in the case of Eastleigh"

and so down through the axioms--always excepting Eastleigh. Doubtless the Department prefers a different branch of mathematics--more up to date than Euclid--which is the mathematics of topology. I do not know how familiar right hon. and hon. Members are with the mathematics of topology, but it is described as the mathematics of distortion. We presented these distortions- -this topological argument--to my right hon. Friend and gave him an opportunity to restore some equity into his proposals for Eastleigh. He will know that there is another branch of mathematics called network analysis in which it is possible to find one's way out of a maze by use of an especially complex set of equations. I am told that it is even more complicated than the maze itself, which again would do justice to the mathematics of the rate support grant. However, he scorned our advances. He said in his letter :

"We decided that we should not amend the settlement in a way which would give Eastleigh more grant."

Therefore, he had his chance. That was not pure determinism but an act of free will, which I know my right hon. Friend practises and believes in.

I have not dwelt on the needs and expenditure side of the equation, because that would be to try to describe that which is inexplicable. I invite hon. Members to look, for instance, at appendix 2 to annex J, entitled "Definitions of GRE Indicators". As an example, let us look at C9, which states :

"Residents--effects of area's social conditions."

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That is an object with which we would all agree. Need should include social background and the problems in inner cities. We read in the appendix :

"The resident population of the area multiplied by the sum expressed to two decimal places, of the factors below :"

Ten factors are then listed. I shall give the House the relish of those factors. The first one is a constant of minus 41.82. I ask the House, why minus 41.82? Why not 40? Why not 39? Why not 50? Why this curious accuracy of 41.82? Obviously, some statistician has made the elegant point that it is not 41.0 but 41.82. I must confess that the reason for that escapes me.

We come to (b), which is interesting :

"indicator B3a(i) divided by population (A1), multiplied by 0.21233a".

I will give the top prize for topology to anyone who can tell me the basis upon which that has been worked out.

Mr. Gummer : Could I claim my hon. Friend's prize? So impossible to explain is it that we have kicked the entire thing over. We shall not do it again on this system. He is entirely right--it is absolutely unacceptable.

Sir David Price : That is well established. On the subject of local government, I am sure that the House can now understand why those wise city fathers of Florence at the end of the 13th century passed laws against--I translate from Italian--the then "upstart" decimal numerals. They were needed to protect honest citizens from the easy changes which forgers of bank drafts could ring on the numbers 0, 6 and 9. I would just say "e sempre vero".

The GRE formulae remind me of the Schleswig-Holstein situation, which taxed the diplomats and politicians of Europe through the 19th century. It was said that it was so complex that there were only three people who knew the answer to the question--the first was dead, the second had gone mad and the third had forgotten the answer. I have a feeling that that is what has happened over GRE and its remarkably complex rate support grant formula.

My right hon. Friend, in intervening, has saved me from quoting his letter, where he declared complete dissatisfaction with the rate support grant system, which I share with him. He says that that is the reason why the Government will be abolishing it and replacing it with a needs grant in future years. When that happy day comes, my right hon. Friend will have my enthusiastic support. However, for the present settlement he cannot in conscience expect my acquiescence in this harsh treatment that he is meting out uniquely to Eastleigh in Hampshire. An especially masochistic twist of that treatment is that Eastleigh loses grant because of the way in which the safety net operates. I say : some safety net!

5.38 pm

Mr. Matthew Taylor (Truro) : I found the speech of the hon. Member for Eastleigh (Sir D. Price) most entertaining, but I hope he will forgive me if I do not respond to the points he made about Eastleigh but make a rather broader speech. I hope, too, that he will find that what I have to say will in some measure support the case he so eloquently made to the Minister.

The first problem is that the Government have grossly inadequately estimated the amount that local authorities should spend. I hope that the hon. Member for Eastleigh will agree that that is the starting point ; I hope the

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Minister can be convinced of it as well. Time and again, three reasons have been put to the Minister why this is so. He may feel that he has answered them, but few others do.

First, the Government's expenditure estimates are under-estimates. According to their own officials' figures, as set out by the grant working group--the expenditure steering group of local and central government--the Government have undercut local authorities by £400 million. So even on Government officials' estimates, the sum has been reduced. This same working group anticipates a sum of £180 million, which the Association of County Councils believes will no longer be met.

As we have already heard, the forecast of inflation at 4 per cent. in the expenditure provision for 1989-90 is inaccurate. In July, the Secretary of State for the Environment could say that the increase of 4.7 per cent. was above the expected rate of inflation. The Chancellor wants to take mortgage interest rates out of his calculation of inflation. He should look around the corner at the Secretary of State for the Environment, who appears to have done that already--and more! If the increased provision for poll tax costs of £110 million is removed--that in itself is inadequate--the increase is only 4.3 per cent. Although the rate of inflation was 4.8 per cent. in July, it has dramatically increased since, and now stands at 6.4 per cent. The forecasts are that it will continue to rise. I raised this matter during the brief debate on the Rate Support Grants Act 1988. I asked the Government then to introduce some flexibility to cater for rising inflation. Now I ask the Minister again to do that.

Secondly, and in addition to this small rise, the Government have imposed pay increases higher than 4 per cent. on local authorities. They have asked the board to investigate the possibility of an increase of 5.1 per cent. for teachers. There are rumours that more will be needed to ensure adequate recruitment. That is all very well--I believe that teachers deserve these rises and I am sure the Minister does, too--but if central Government imposed these increases, why will they not fund them? Why are local authorities to be penalised for Government decisions?

These are not the only wage increases above 4 per cent. Local authorities will not be able to tell their workers that at a time of inflation of more than 6 per cent. they should get only 4 per cent. Local authorities are expected to pick up the tab, when the person who claims to be responsible for tackling inflation and for economic miracles--the Chancellor--has messed up and let inflation go over the odds. That is the Government's, not local authorities', responsibility.

Finally, it was assumed that local authorities which controlled education would be able to make savings by closing down schools because of falling rolls. But the Government's opting-out provision has effectively put a semi -permanent moratorium on local authorities closing down schools, because that provision does not allow them to close down schools that try to opt out. Almost by definition, schools trying to opt out are the ones facing closure. So the savings written into the rate support grant cannot be realised by local authorities, or at least not in the coming year--

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