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Column 267

Richardson, Jo

Roberts, Allan (Bootle)

Robertson, George

Robinson, Geoffrey

Robinson, Peter (Belfast E)

Rooker, Jeff

Ross, Ernie (Dundee W)

Ross, William (Londonderry E)

Rowlands, Ted

Ruddock, Joan

Sedgemore, Brian

Sheerman, Barry

Sheldon, Rt Hon Robert

Shore, Rt Hon Peter

Short, Clare

Skinner, Dennis

Smith, Andrew (Oxford E)

Smith, C. (Isl'ton & F'bury)

Smith, Rt Hon J. (Monk'ds E)

Smyth, Rev Martin (Belfast S)

Snape, Peter

Soley, Clive

Spearing, Nigel

Steinberg, Gerry

Strang, Gavin

Straw, Jack

Taylor, Mrs Ann (Dewsbury)

Turner, Dennis

Vaz, Keith

Walker, A. Cecil (Belfast N)

Wall, Pat

Walley, Joan

Wardell, Gareth (Gower)

Wareing, Robert N.

Welsh, Andrew (Angus E)

Welsh, Michael (Doncaster N)

Wigley, Dafydd

Williams, Rt Hon Alan

Wilson, Brian

Winnick, David

Wise, Mrs Audrey

Worthington, Tony

Wray, Jimmy

Young, David (Bolton SE)

Tellers for the Noes :

Mr. Martyn Jones and

Mr. Jimmy Dunnachie.

Question accordingly agreed to .

Bill read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 61 (Committal of Bills) .

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Rate Support Grant (Sandwell)

Motion made, and Question proposed, That this House do now adjourn.-- [Mr. Durant.]

10.25 pm

Mr. Peter Snape (West Bromwich, East) : The measure of the importance that those of us who have the honour to represent constituencies which include parts of the borough to Sandwell place on this debate is reflected by the fact that the four Members of Parliament for the borough-- including yourself, Madam Deputy Speaker--are present. If, as I hope, my right hon. and learned Friend the Member for Warley, West (Mr. Archer) succeeds in catching your eye, he will let the House know about the problems that his constituents face in the part of the borough that he represents with such distinction.

In October last year, the Association of Metropolitan Authorities circulated a report based, it was suggested, on the Department of the Environment forecast of the likely block grant distribution for 1989-90. The AMA produced the report because it thought that it would help local authorities in their rate planning for 1989-90 and that it would allow them to make a more considered response to the Secretary of State's proposals. The report made allowance for community charge preparation costs and for the transfer of higher education establishments from the control and funding of local authorities to polytechnics and to the colleges providing those functions in April 1989. Grant implications were shown for a range of grant distribution arrangements throughout the country, and Sandwell's block grant estimate was raised from £55.7 million to £58.3 million.

In November 1988, the Secretary of State issued full details of his proposals for the 1989-90 rate support grant settlement. From this report, Sandwell's grant was calculated on a relevant amount of expenditure amounting to £177.5 million, including an allowance for community charge preparation costs of only £295,000. However, Sandwell's total revenue costs next year for community charge preparation will amount to £2.3 million.

The Department also announced a reduction of £2.6 million in respect of the amended financing arrangements for higher education establishments, to which I have already referred. Accordingly, therefore, Sandwell's grant- related expenditure assessment was put at £172.74 million, with a block grant entitlement of only £50.8 million. On receipt of this information, the borough's councillors made strong representations to the Secretary of State and sought a meeting with him. The request for that meeting was declined. On 19 December 1988 the Secretary of State laid a report before the House of Commons, describing the rate support grant settlement for 1989-90. It transpires from the settlement that the relevant amount of expenditure for Sandwell has been reassessed at £177.7 million. That consequently gives a slightly higher block grant entitlement for the borough of £51.06 million, which is a mere £278,000 more than the figure for the current year. The base budget for Sandwell for 1989 -90 is £188.3 million, which allows for no growth whatsoever. In the light of the block grant settlement, and even if Sandwell uses all its balance of £22 million or so, the borough's rate will still have to rise by 12.7 per cent for services to be maintained at their present level.

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Clearly, as a local authority that is attempting to care for its community and to meet the severe level of deprivation faced in the borough, a standstill budget is unlikely to be acceptable. The budget requires some growth, and the council has determined that it will try to allocate that to the areas of greatest need. It has also put in train a major efficiency exercies to try to make some savings in the borough. Nevertheless, the consequence of the grant allocation for Sandwell is that instead of the anticipated grant of between £55.7 million and £58.3 million it faces a block grant of £51 million-- that is, £4 million to £7 million less than expected when the figures were first prepared last year.

Over the years, the borough of Sandwell has been a consistently low-rated authority. In the current financial year, the borough has a rate in the pound of 251.50p compared to the average of all metropolitan authorities of 288.05p, so the difference is 36.55p. In each of the past six financial years, the rate in Sandwell has been significantly lower than the average for all metropolitan district authorities, and that has produced substantial savings for all domestic and industrial ratepayers. To give an example, the saving amounts to £10 million over a period when grants from central Government to local authorities have been consistently reduced. The settlement already announced would mean that Sandwell would need a heavy rate increase merely to stand still. That settlement, and the rate increase that I have already mentioned, would include throwing in all the borough's revenue balances to keep the rate increase at that level. Bearing in mind the Government's devotion to so-called sensible financial policies for local authorities, I hope that the Minister will agree with me that no organisation with a £200 million revenue budget can operate without balances.

The facts are even worse than I have outlined. Sandwell is in the top five metropolitan authorities in terms of deprivation--a fact readily demonstrated by district audit figures and many other sources. The recent district audit service report on the borough said in the summary :

"The deprivation of the borough and its population is self-evident. Research showed that it was if anything even worse than it appears." On expenditure in the borough over the years the report said : "The Council has always been a careful spender, and has built up substantial balances. Its expenditure on many heads is well below average for Metropolitan Districts, and for social services it is below even the allowance for them in the block grant calculations. Social services and housing appear to be the Council's most daunting challenges."

The Government set up that audit, but far from helping the borough of Sandwell in the the two areas mentioned in the report, the Government have considerably reduced the housing allocation entitlement in the next financial year. I hope that my right hon. and learned Friend the Member for Warley, West will say something about the social services and the growth that is needed there. [Interruption.]

Although unemployment has been falling slightly faster in the borough than in England and Wales as a whole, we still have one of the highest proportions of unemployed people who have been out of work for more than a year. [Interruption.]

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Madam Deputy Speaker (Miss Betty Boothroyd) : Order. Hon. Members are showing great discourtesy to the hon. Member who has the Floor, because of the noise that is going on.

Mr. Snape : I thought that Whips were traditionally silent, but that is obviously not the case in the current Administration. Only four wards in Sandwell have unemployment rates below the national average. The average income in the borough in 1984-85, the last year for which figures are available, was only 67 per cent. of that in Great Britain as a whole. Fifty -six per cent. of Sandwell's employed earned below average incomes in 1986. The West Midlands low pay unit estimated that 40 per cent. of full-time employees were earning less than two thirds of median male earnings compared with 25 per cent. in Great Britain as a whole.

Another measure of poverty in the borough is the high proportion of households in receipt of housing benefit. As I have said earlier, the cut in housing allocation finance in the next financial year already means that the 78 per cent. of council tenants who claim housing benefit are likely to be even worse affected and 57 per cent. of private sector tenants are also poor enough to claim that benefit. A recent university of Warwick study entitled "Local prosperity and the north-south divide" found that of 280 local labour market areas Smethwick ranked 276th and West Bromwich 240th in terms of economic performance between 1981 and 1986. Yet this is the borough that is facing swingeing rate increases. Those unfortunate enough to live in council property face a rent increase of £5 per week, which is due entirely to the financial policies of the Department of the Environment in 1989-90.

One further illustration of the shabby way in which the Government have treated this most militantly moderate of local authorities is the fact that out of budgeted expenditure of £104.4 million in the financial year 1981-82, the council's initial grant entitlement amounted to £43.1 million or 41.2 per cent. of budgeted expenditure. Without a change of heart, out of estimated budgeted expenditure of £190 million in 1989- 90, Sandwell will receive only £51.06 million, or 26.8 per cent.

I make a further plea to the Minister. For years, the Government have castigated a small minority of well-publicised local authorities, most of them in this part of the world, for what they consider to be unwise and unnecessary expenditure. We in the borough of Sandwell--heavily Labour- controlled though the borough is--do not believe that the onset of global thermo-nuclear war can be prevented by hanging signs from lamp posts, and we have no obviously unnecessary expenditure. Yet the borough is to be heavily penalised under the settlement.

We all know why the Government are cutting the rate support grant for Sandwell and other boroughs and refusing to fund poll tax preparations. The Government have a big enough majority in the House to introduce the poll tax, but we believe that the Secretary of State wants to discredit the rating system so as to make the poll tax look a better prospect than it really is. It is unfair to treat a borough like Sandwell in the way that the Government seem determined to treat it. It is particularly unfair to do so having trailed views in the middle and latter part of last year which suggested that the borough's rate support grant settlement would be far higher than was eventually announced.

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I appeal to the Minister to reconsider, even at this late hour. It is not just Sandwell's domestic ratepayers who face dramatic increases. The increase will also have an enormous impact on the business rate in the borough and on small businesses already struggling to cope with nine increases in interest rates in the past year. The consequences in the borough of the Department's parsimony in the rate support grant settlement will be enormous. If the Minister cannot or will not tell the four hon. Members who have the honour to represent the borough that the Department is prepared to reconsider the settlement, we shall do our utmost to ensure that the blame for the swingeing increases that all our constituents face is placed firmly where it belongs--in the laps of Ministers at the Department of the Environment.

10.38 pm

Mr. Peter Archer (Warley, West) : I am grateful to my hon. Friend the Member for West Bromwich, East (Mr. Snape) for allowing me part of his time. I congratulate him on making available to us the opportunity to ventilate the problems that we face in Sandwell. My hon. Friend has painted a clear picture of the problem that confronts Sandwell council--a problem not of the council's making, but imposed on it by the Government. It faces the choice of denying local services which are urgently needed, or imposing a massive rate increase--or sharing out the burden between ratepayers and those who need the service, many of whom will be the same people and thus will bear both halves of the burden.

I shall not seek to improve on the account given by my hon. Friend the Member for West Bromwich, East. The figures that he gave speak for themselves. To most of us, those figures are so large that they are difficult to take in, and we would find it difficult to notice if a nought were added or left off. However, it was not an academic exercise because those figures break down into smaller sums which might have been used for specific purposes.

My hon. Friend mentioned social services in Sandwell. I have constituents who are handicapped and will remain trapped in their homes unless a ramp is constructed allowing access for a wheelchair. As the ramp has to be constructed by the council, the council holds the key to their freedom. I know many people who enjoy a totally different life because the council has constructed a ramp, a rail, a shower unit or in some cases a stair board. I am sure that my hon. Friend--or you, Madam Deputy Speaker--could produce similar examples. All those facilities require council officials who are experts in that subject. The council do not have enough experts, so people are kept waiting--sometimes for months--and that is time out of their lives. The social services committee of Sandwell council understands the problem and wants to deal with it. It wants to provide for expenditure on the revenue account for people with disabilities of £94,000 in the next financial year and £111,700 the following year. I am sure that you, Madam Deputy Speaker, and my hon. Friends, have the same experience as I when at every advice bureau I see people whose lives are dominated by environmental problems. The environmental committee of Sandwell council wants to double expenditure on dealing with air pollution and noise. People come to us in tears because of housing conditions. The housing committee wants to increase revenue grants from £24,000 in the next

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financial year to £101,000 in the following year. The education committee wants to provide four nursery nurses for special needs at a cost of £25,700 in the next financial year and £27,200 in the following year. With that increase in rates which is now contemplated, I doubt whether that money will be available. Almost certainly the council will have to make choices between those purposes. Those are the sums into which the macro-figures quoted by my hon. Friend break down. They can all be translated into human misery or relief. If the Minister says that there is no more money and the council cannot have an increase in rate support grant, they represent part of the even larger sums with which the Chancellor of the Exchequer was dealing last year--the sums that he gave to taxpayers on high incomes. When the Government do that, this is what happens to the other half of the equation.

10.43 pm

The Parliamentary Under-Secretary of State for the Environment (Mrs. Virginia Bottomley) : First, I congratu-late the hon. Member for West Bromwich, East (Mr. Snape) on securing the debate, and the right hon. and learned Member for Warley, West (Mr. Archer). I note that the hon. Member for Warley, East (Mr. Faulds) is also present. It seems something of a Sandwell occasion, with all its Members of Parliament present--including you, Madam Deputy Speaker.

The hon. Member for West Bromwich, East suggested--the council has made similar comments--that any local rates increase next year will be a direct result of central Government. That is not the case, and I shall explain why.

First, the hon. Member should know that the present rate support grant system is mechanistic. Ultimately, an individual authority's grant entitlement is decided not by Ministers in some arbitrary way, but by the block grant formula, which must be based on general principle. I am sure that all hon. Members would not in fact wish it to be otherwise, but I accept that the present system is over-complex and incomprehensible. That is why we are abolishing it and setting up a simpler system which will be based solely on authorities' needs. On current exemplifications, that system could bring real benefits to community charge and business rate payers in Sandwell, to which the hon. Gentleman referred, by way of lower bills. But that will not be the case if the council continues to increase its expenditure as it has done in recent years.

I shall deal with Sandwell's expenditure shortly, but I want to make it clear that, nationally, for next year's settlement, we have provided £1.1 billion or some 9 per cent. more grant in aggregate than is being paid out this year, after making allowance for the transfer of funding to the Polytechnics and Colleges Funding Council. By any account that is a generous settlement, and it is pointless to speak of reductions in grant percentages.

Mr. Snape : I am not talking about the global figure. Will the Minister accept that the figure that has been announced for Sandwell is, in actual terms, £280,000 higher than the total block grant settlement given by the Department of the Environment in the current financial year. How, given inflation of about 7 per cent., nationally agreed pay rises and other unavoidable items of expenditure with which the borough is faced, can that extra £280,000 be stretched to meet all the other factors over which the council has no control whatever?

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Mrs. Bottomley : These are complex matters. I am trying as fast as I can to explain the detail of them to the hon. Gentleman, and I am coming to precisely that point.

It is not the case, as the council and the hon. Gentleman have suggested, that Sandwell will receive less grant next year. The fact is that, after making the necessary adjustment for the effects of the changes in funding for further education, the settlement actually provides extra block grant of almost £2.9 million--6 per cent. more than it is receiving this year. What is more, our proposals for closing down the present rate support grant--now enacted in the Rate Support Grants Act 1988--mean that the council can have much greater certainty of its grant entitlement next year, because the Act provides that there is no grant penalty for spending up--a difficulty faced by Sandwell on several occasions.

Hon. Members might ask why Sandwell's increase in block grant of 6 per cent. is less than the 9 per cent. that I have mentioned. Although I was referring then to the increase in aggregate Exchequer grant, there is in fact a similar increase in block grant next year. The simple answer to hon. Gentlemen's questions, is once again the grant formula. Specifically, the council gains some £7 million grant from changes in its gross rateable value, in its population and from changes in other detailed factors in the formula ; but it loses some £4 million of that potential gain because its grant-related expenditure assessment increases by less than the average, largely as a result of the use of up-to-date information on capital and other financing items.

I hope that I do not have to explain GREs to this House tonight. All I would say is that an authority's GRE is essentially our assessment of that authority's spending need, calculated on the basis of principles applicable to all authorities. Each year, we discuss proposals for improving certain elements of GREs with the local authority associations.

The system works in such a way that, even if an authority's GRE increases-- as it does for Sandwell next year, by 9.6 per cent. per head--if that increase is less than the average, its share of grant falls. There is no question of any Government interference in particular cases. While, as I say, the changes next year are not all to Sandwell's benefit, it is still the case, as hon. Members have said, that its GRE is the ninth highest of any metropolitan district in the country, in recognition of the area's real needs, which the hon. Member for West Bromwich, East has so powerfully spelt out. The result of all that is that Sandwell will receive over £51 million grant next year, or £171 per head of the population-- as I have said, some 6 per cent. more than the grant paid to them for the current year.

The hon. Gentleman asked why the proportion of Sandwell's total expenditure, which is to be met by block grant, is lower than the overall figure of 43.3 per cent. nationally. I think that, once again, that shows a misunderstanding of the system, which I can sympathise with only too well. The 43.3 per cent. refers to the proportion of relevant expenditure met from aggregate exchequer grant. But AEG and relevant expenditure include many specific and supplementary grants, such as police grant, certain housing and environmental improvement grants, transport supplementary grant and many others. The proper comparison is not between AEG and

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relevant expenditure but between block grant and the level of total expenditure, which is the measure used in calculating authorities' grant entitlements.

Looking at those figures, we have provided £8,840 million, or £715 million more block grant than this year. If authorities spend in line with the settlement, block grant will be 32 per cent. of their total expenditure. Sandwell's grant entitlement, which would represent 28.7 per cent., is lower than the national figure because of differences between GRE and total expenditure and the way rateable values are reflected in the current system. In short, it is less not because Government say it shall be less, but because of Sandwell's spending decisions and the way in which the formula works.

The hon. Gentleman also suggested that we are making Sandwell pay for most of the costs next year of preparing for the introduction of the community charge. Again, that is not the case. We are actually providing local government generally with £110 million for the current costs next year. This is very much in line with the independent Price Waterhouse report and other estimates. Fifty per cent. of this sum is to be met by specific grant and the remaining 50 per cent. is taken into account in the RSG settlement in the normal way. We estimate that Sandwell will receive specific grant of some £0.295 million with, as I say, the remainder reflected in its grant entitlement.

Hon. Members should also be aware that we have provided extra capital allocations of some £135 million next year. Sandwell will receive £0.72 million in addition to its allocation for this purpose of £0.158 million for the current year. Clearly, we do not accept what the hon. Gentleman and Sandwell are saying about the costs of setting up the community charge.

Returning to why it is simply wrong to suggest that Sandwell's suggested rate increase is somehow the Government's fault, I must point out to the hon. Gentleman that the rate levy is a matter for Sandwell. Clearly, this will depend to some extent on the amount of block grant the authority estimates that it will receive. Given closedown arrangements, this amount no longer depends on what the authority spends. But as I have said, Sandwell is getting 6 per cent. more grant next year, so why a rate rise of perhaps as much as 18 per cent.?

The answer lies not in the settlement nor in grant reductions for earlier years, which I understand had been fully taken into account by the council. It lies in the council's decisions on spending--not necessarily decisions this year, but certainly spending decisions at some time. It is always the case that, as expenditure increases, sooner or later the bills for ratepayers are higher.

One way for an authority to cushion ratepayers from the immediate effects of such increases is to use its general rate fund balances to finance part of its expenditure. This is a device used for a number of reasons, but perhaps often when a council believes that a high rate increase might be politically damaging. Sandwell has done just that. It took the decision to increase budgeted total expenditure this year--1988-89--by some 12 per cent. over estimated outturn for 1987-88. Not only was this a significant increase in real terms ; it was also well above the average increase for local government generally, and came on top of an above average increase in the previous year.

This level of expenditure would have required a local rate increase of almost 30 per cent. in 1988-89, but that would have made its rate the highest in the west Midlands and well above the average for metropolitan districts

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generally. I can understand why it chose instead to draw some £23 million from balances to keep the actual increase within single figures and to camouflage its existing spending from its ratepayers.

Mr. Snape : The Minister will concede that Sandwell's expenditure in the current financial year was entirely in accordance with the advice given by the Audit Commission, which pointed out that, particularly in areas such as housing and the social services, Sandwell in effect needed to spend more, which is just what it has done.

Mrs. Bottomley : I have little time in which to complete my remarks. Our proposals have been enacted in the Rate Support Grants Act 1988 and I can add nothing to what was said during the passage of that measure. Our proposals are the only practicable way forward. No system allows the truth to be hidden for ever. Sandwell council overspent in previous years and drew on its balances.

It was suggested that there had been difficulty in Sandwell having its representations heard. The letter from the Council arrived too late to arrange a visit, but the hon. Gentleman's representations were taken into account. My right hon. Friend had a meeting later with the West Midlands passenger transport authority on the points that it wished to raise.

As I said, no system allows the truth to be hidden for ever. An authority can hide its true level of spending, by using reserves and other means, for some time--certainly as long as the money holds out--but, if it does not curtail its spending, the bill must eventually be paid.

That is happening in Sandwell. This is why ratepayers face much higher increases next year. It has nothing to do

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