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Mr. Kenneth Hind (Lancashire, West) : My right hon. Friend touches on an important point. If Lancashire county council were setting its rates today, it would have to increase them by 31.4 per cent., because it has increased its expenditure during the past 12 months by 16 per cent. That must surely increase the community charge to be paid by Lancashire ratepayers by £70 or £80. Much of that is unnecessary and casts a burden of hardship on many sections of the community that cannot afford to pay it.
Mr. Patten : I agree with my hon. Friend. As he suggested, the main reason for increases in community charges will be large increases in spending. It is important for the Government to emphasise that point during the next few months. There has been a great deal of dispute about the figures during recent weeks. We are allowing for £32.8 billion of local authority expenditure next year, which represents an increase of 11 per cent. over what we were prepared to provide this year. Is that future unfair because of some meanness with the figure this year? It is difficult to argue that it is because this year's figure is 9.9 per cent. higher than the provision for last year, which itself was 7.3 per cent. higher than the figure for the year before.
There has been a consistent run of high figures for increases in total provision. Even with that 9.9 per cent. increase in provision for this year, all local authorities tell us that, on average, they are intending to budget over that provision by 7 per cent. That is 7 per cent. on top of the 9.9 per cent. increase in provision ; that represents an additional £1.9 billion. In those circumstances, it may not
Column 429surprise my right hon. and hon. Friends to know that about three quarters of the contingency reserve this year has gone in meeting overspending by local government.
Mr. A. J. Beith (Berwick-upon-Tweed) : The Secretary of State must be aware that all local authorities--including all those under Conservative control--have to meet nationally negotiated pay deals for teachers, policemen and firemen. Those are key elements in the contingency fund point that the right hon. Gentleman has just made. The local authorities have to pay higher interest rates. All those charges are falling not just on what ghe describes as profligate Labour authorities, but on the Conservative authorities. The complaints from local government come from all parties.
Mr. Patten : I am coming directly to that point. It was not the Government who negotiated the 8.8 per cent. pay settlement with NALGO last year--it was the local authorities. Presumably they realised the consequences for their charge payers. The basis of the local authorities' case is that whatever the level of overspending, whatever the outturn of spending in one year, that should be taken as the base line for increases in spending for the next year. The logic of that argument is that local authority public expenditure would never be within control ; that it would increase every year as a proportion of public expenditure ; and that it would increase every year as a proportion of the gross national product. Taken to its extreme, the logic of the argument is that eventually local authorities would consume the entire gross national product. I do not think that that is an ambition in the breasts of most district treasurers, but I cannot say the same for county treasurers.
Mr. Nicholas Winterton (Macclesfield) : Does my right hon. Friend agree that central Government have placed huge and costly additional burdens on local government, not least in education, and that education is one of the largest elements of local government expenditure? Will he seriously consider transferring the cost of teachers' salaries to central Government, and to taxpayers nationally? That would make the new system much more acceptable.
Mr. Patten : As I am sure my hon. Friend would be the first to point out, as well as giving local authorities new responsibilities, we have taken some burdens off them. Many of those who now own their council homes are, I am sure, particularly grateful for that. We have also given local authorities the opportunities to become more efficient through compulsory competitive tendering, which I know has given so much encouragement to the Opposition.
I come to the point raised by the hon. Member for
Berwick-upon-Tweed (Mr. Beith). The best figures to compare year on year are the total amounts of the so-called aggregate external finance going into local government--the total amounts from business ratepayers, revenue support grant and special grants. The external finance going into local government next year will be £23.1 billion, which represents an 8.5 per cent. increase over this year. This year we have seen an 8.9 per cent. increase over last year's amount. On top of that, £1.85 billion goes to pay for the cost of community charge benefits and income support in England and a further £300 million to pay for the cost of the transitional relief scheme. That should
Column 430mean that, with spending at the levels that we believe are reasonable, the community charge payer would have to meet only about £1 of every £4 of local government spending, which is a reasonable level.
Mr. Alex Salmond (Banff and Buchan) : Will the Secretary of State address the question that the Prime Minister dodged this afternoon--why so many English Conservative Members who were happy to vote for the poll tax in Scotland are in open revolt against these measures, despite the concessions that the right hon. Gentleman parades? Might that be because, when it comes to Scottish legislation, those Members vote whichever way the Whips tell them, regardless of the issue or the views of the Scottish people?
Mr. Patten : I do not believe that. I am content to leave that issue to the judgment of my right hon. and hon. Friends, who I am sure will reach the right decisions in the Division Lobby this evening.
Mr. Jessel : I am grateful to my right hon. Friend. Before he leaves the point about local authority expenditure, may I ask him whether he is aware that my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) and I deplore the extravagance of the Liberal-controlled Richmond upon Thames borough council? That council is constructing a new town hall in Twickenham which it calls a civic centre, at a cost of £12 million, which is certain to increase the community charge for residents throughout the borough. Will my right hon. Friend send for details of this reckless piece of civic extravagance and conceit?
Local authorities say that, because we are not providing them with enough money, the community charge will be higher next year than we have suggested it need be. The argument comes down to their proposition that the £278, which we have said should represent a reasonable level of community charge on average across the country, will be exceeded by £50 or £60--some say that on average it will go up to £340 ; others say that it will go up to £350.
My point is simple : the difference to the country between a community charge of £278 and a community charge of £340 is £2.2 billion of public expenditure. The basic local authority case is that, in addition to the £1.8 billion extra that we are putting into local government this year through external finance, we should put in another £2.2 billion, making a £4 billion increase overall. I cannot believe that anyone really thinks that that would represent a sensible prioritisation of public expenditure or that it would be sensible for the management of the economy.
Mr. Tony Banks (Newham, North-West) rose --
Mr. Brian Wilson (Cunninghame, North) rose --
Mr. Michael Welsh (Doncaster, North) rose --
Column 431Mr. Patten : I want to move on, but I shall give way to the hon. Member for Newham, North-West (Mr. Banks) because I like him.
Mr. Tony Banks : The right hon. Gentleman has totally disarmed me. I put it to him in a helpful way that surely the Government's calculation that local authorities will increase their spending by only about 3.8 per cent. next year, when it is known that inflation is about 8 per cent., lies at the centre of the problem for local authorities.
Mr. Patten : I am afraid that either I have been extremely poor in putting my argument across or the hon. Gentleman misunderstands me. I have set out in detail the figures for local standard spending and aggregate external finance--the 8.5 per cent. increase. The hon. Gentleman's figure of 3.8 per cent. is valid only if one assumes that whatever is the outturn of local government expenditure for one year should be taken as the base line for the next. As I have said consistently, that is a recipe for local government taking an increasing share of public expenditure.
Mr. Shepherd : I am grateful to my right hon. Friend,. Does not the discrepancy partially arise because local authorities are expected to chip in the same amount from balances this coming year as they did last year and that many of the local authorities depleted their balances so they are not able to do it this coming year? Were local authorities advised in early discussions of the consequences of dipping into their balances this year?
Mr Patten : Local authorities have been constantly advised about the consequences of dipping into their balances and of boosting them immediately thereafter. The House knows that the pattern of balances tends to bear some relationship to the electoral cycle. It would be preposterous if whatever an authority decided to do about balances meant that in the following year the taxpayer met the difference. In other words, if a local authority draws down balances one year to boost spending, I do not see why the taxpayer should increase spending the next year by that amount just because of the local authority's behaviour.
I want to come to three issues that allegedly blur the question of accountability. Reference has been made to the first by several of my hon. Friends--the issue of charge capping. Under legislation, we have power to charge-cap, just as we previously had power to rate-cap. Many people argue that it would be wrong to charge-cap because they think that it is wrong to interrupt the transmission mechanism between what a local authority spends and the purse or wallet of the community charge payer. I understand that argument particularly well, but if some of the horrendously high figures for the community charge bandied about are set next year, we will have no hesitation in capping the authorities concerned.
Mrs. Maureen Hicks (Wolverhampton, North-East) : My right hon. Friend has dealt with the issue at the heart of the matter. Is he aware that many of my constituents have lived year after year with double figure increases in rates? Many of them say that if we achieve our objectives
Column 432with the community charge, it will be fair, but that if we let the likes of Labour-controlled Wolverhampton council continue to get away with murder, not to live within budgets and to set a figure in excess of £400 when we have given a guideline of £268, the Government will be getting away with murder as well.
We must not do what we did with council house sales. We left it too long before we took action and under the authorities that did not push through council house sales, people were left waiting for years. If local authorities do not see sense after April, will my right hon. Friend take action immediately and cap them from day one?
Mr. David Blunkett (Sheffield, Brightside) : Will the Secretary of State tell the House and the nation how what he has just described as a necessary measure to hold back poll tax charging squares with what he himself described on 6 November 1989 as a poll tax which would put the community in charge?
Sir Hugh Rossi (Hornsey and Wood Green) : Until accountability at the election box begins to work, constituents such as mine still need the protection of central Government from councils such as Haringey, which will have a community charge of about £650 a head.
Mr. Wilson rose
Mr. Fraser rose
The second issue that has caused some concern is the transitional relief scheme. A number of my hon. Friends and a number of other commentators--
Mr. David Winnick (Walsall, North) : On a point of order, Mr. Deputy Speaker. Is it in order for various Whips and the chairman of the 1922 Committee to go round various Conservative Members to try to persuade them to vote for the Government tonight?
Mr. Patten : Some people say that the transitional relief scheme in some way blurs accountability. They have suggested that we should cover any losses in the transitional relief scheme, whatever the level of overspending by a local authority. That is neither true nor reasonable, as it would lead to the Treasury, in effect, meeting the costs of overspending by local authorities and it might encourage some to spend up. My hon. Friend the
Column 433Member for Horsham (Sir P. Hordern), my right hon. Friend the Member for Worthing and others have referred to the particular problems that are posed where local authorities have been spending below their grant-related expenditure and are now spending below their SSA.
That is especially difficult. Many of the ramifications are not easy to work out, but I assure my right hon. and hon. Friends that we shall try to find a way through the problems by the time that we debate the order on the transitional relief scheme in a few weeks' time. If we have not been able to do so, we shall have to explain ourselves extremely convincingly to my right hon. and hon. Friends.
Mr. Fraser : Is the Secretary of State aware that, as a result of a mistake by the Inland Revenue, Lambeth borough council has to repay £1 million to the London residuary body? As a result, the poll tax will rise by £30 per person in Lambeth. Lambeth will receive £4 million of transitional relief, whereas Wandsworth will receive £24 million. Would it not be fair at least to increase the transitional relief by £11 million to compensate for the Inland Revenue's mistake and to treat a Labour and a Tory borough even-handedly?
Mr. Patten : I have gathered from what has been said in my left ear that the facts may not be quite as the hon. Gentleman described. I shall ask my hon. Friend to respond to the hon. Gentleman's point in his winding- up speech. I wish that that was the only increase in spending that Lambeth ratepayers or chargepayers were having to meet in the coming year.
The third issue that has caused particular concern to many of my hon. Friends and which is alleged to blur accountability is the safety net.
My hon. Friends will know that, with the ending of resource equalisation, we have ended the hidden subsidies from high rateable value areas to low rateable value areas. We originally proposed that authorities that lost as a result should have their losses phased in over four years, with the cost being met by local authorities that were substantial gainers from the ending of resource equalisation. A number of my right hon. and hon. Friends argued that we should be more generous and we decided, as we announced last autumn, that, after the first year, all the gains would come to local authorities that were benefiting from the new arrangements straight away and that the losers would have their losses met by the Treasury to the tune of about £850 million over the remaining three years. Many of my right hon. and hon. Friends have said that we should go still further and meet the cost of the safety net in the first year as well, at a cost of £650 million.
I want to face the issue squarely. One cannot bring much in the way of scientific judgment to the matter ; it is wholly a matter of political judgment and of one's views of priorities. When I considered the other areas in which we need to spend money next year--and in which we shall spend more money--I could not press the case for spending £650 million extra on parts of the country that will benefit from the changes that we are making.
I apologise to my hon. Friends for putting it as bluntly as that when some of them would doubtless have liked me
Column 434to put it more mellifluously, but that is a fact. It is not unreasonable that people should wait a year for half their gains when the gains coming to many local authorities will be so coinsiderable in year two. Expenditure of £650 million on the safety net in year one would not be justified in comparison with many other areas in which all of us want to see additional spending.
Mr. Dennis Turner (Wolverhampton, South-East) : The people of Wolverhampton will not appreciate that statement. The Secretary of State is not prepared to respond on the £47 surcharge that the Government are imposing on the people of Wolverhampton. Why did the hon. Member for Wolverhampton, North-East (Mrs. Hicks) not support her constituents and ask the Government to remove that surcharge? The Secretary of State talks about equity and fairness. He is suggesting that Wolverhampton should spend £56 per head of its population--£10 million--below the Government's own assessment of the city's needs. That is on the Government's own figures. Will the Secretary of State tell me whether that is fair?
Mr. Patten : I can tell the hon. Gentleman what is especially fair to Wolverhampton--perhaps some of my hon. Friends may think that it is fairer than some Wolverhampton councillors deserve : Wolverhampton is to gain £88 per head out of the new system and will contribute about half that sum to the safety net in the first year. The best thing that the hon. Gentleman can do for community charge payers in Wolverhampton is to go back to Wolverhampton and tell his council to sort itself out.
Several of my right hon. and hon. Friends have mentioned the consequences of the move from grant-related expenditure assessments to standard spending assessments.
Mr. Patten : I hope that the House will find it acceptable if the Minister for Local Government and Inner Cities, my hon. Friend the Member for Wirral, West (Mr. Hunt) deals with the uniform business rate, the revaluation and the phasing that was agreed by the House under the Local Government and Housing Act 1989, because I must finish my remarks at some point this evening--
We are moving from a system of GREAs to a system of SSAs--I apologise for all the initials--on the ground that the new system is much simpler than its predecessor, although this is another illustration of the fact that all things are relative. For many years, the GREAs were widely condemned for being much too complicated, and many hon. Members on both sides of the House argued that we should move to a very much simpler system. Some suggested that we should go over to a system based entirely on population-- that we should distribute all our grant on a population basis.
Column 435I do not think that that would be a fair basis for the distribution of all grant. It is reasonable to take some account of need, but as soon as one starts to try to define need and develop a methodology, one finds oneself in a situation in which some people lose and others gain--in other words, a situation such as that in which I find myself at the moment. Excluding the parish councils, there are 426 local authorities in England, and the more deputations I have received concerning SSAs, the more I have realised that there are at least 424 special cases--424 because neither the constituency of my hon. Friend the hon. Member for Wirral, West nor my own of Bath is allowed to count.
It is true that the SSAs probably take a greater account than GREs of additional educational need in inner London and in some inner-city areas, but the ending of resource equalisation means that counties in the south- east, for example, will do rather better out of the new system. We arrived at the SSA system after an inordinate amount of consultation and discussion with local authorities and the local authority associations and it is perhaps understandable if my Department does not view with unbridled enthusiasm the prospect of another round of consultation. I want to make it clear to my right hon. and hon. Friends however, that the SSA methodology is not cast in stone. [ Hon. Members :-- "More."] If my hon. Friends, the local authorities in their constituencies or the local authority associations wish to come to us with fresh evidence in support of a new methodology for SSAs, we shall be quite prepared to consider changes that we can put in place for next year.
I want to make it clear--
Mr. Bruce : My right hon. Friend has rightly drawn attention to many overspending local authorities. If he runs his finger down the SSA column, he will find in table 2 that Dorset--in particular my constituency of Dorset, South--has the lowest SSAs in the country. Can he explain why, although he assured my constituents that the new system would be very much fairer and that they would be receiving more grant, education in Dorset, which must have among the lowest resources in the country, is to lose £6 million in grant? Yet the Government say that we are already underspending. Clearly, the SSA system is not fair to the community charge payers of Dorset.
Mr. Patten : I believe that I am right in saying that the move from GREAs to SSAs will mean an increase of about 7 per cent. overall in Dorset and that there will be a rather larger increase of about 11 per cent. in the total aggregate external finance going to Dorset next year. I am quite prepared to look at new evidence brought by my hon. Friend and other hon. Members concerning the SSAs.
Mr. Bowen Wells (Hertford and Stortford) rose --
Mr. Ralph Howell (Norfolk, North) rose --
Mr. Hugh Dykes (Harrow, East) rose --
Mr. Wells : I am deeply grateful to my right hon. Friend for giving us the assurance that he will look again at the method of calculating the SSAs. Is not the difficulty with the present method that on the one hand my right hon. Friend claims that the calculation of the SSAs is an objective assessment of what each council should be spending but on the other hand he is forced by Government policies and the needs of inner cities and other areas to alter their SSAs? That being so, the SSA cannot be an objective assessment of what each council needs to spend. That surely invalidates any rhetoric to the effect that councils are overspending on that objective assessment. Is not that what my right hon. Friend needs to alter?
Mr. Patten : I am accustomed to agreeing with my hon. Friend on completely uncontroversial matters such as overseas development, but, with respect, I do not think that what he says necessarily follows. Any attempt to introduce the concept of need into a distribution methodology can create problems and one has to try to be as scientific about it as possible. One could produce methodologies that were plainly unfair. We think that this one is broadly fair and that we have got things broadly right, but we are quite prepared to look at the evidence again and to make adjustments.
Mr. Wilson : On a point of order, Mr. Deputy Speaker. Would it not help our proceedings if all those Conservative Members who were told that everything was going to be wonderful, who passed that message on to the constituents and who now feel that they have been swindled, rose at the same time?
Mr. Howell : May I ask my right hon. Friend to stop bothering his head with SSAs, or whatever they are, and recognise that the scheme was flawed from the start and that nothing can repair it? Will he scrap the whole idea and replace it with a 6 per cent. charge on VAT, which everybody would pay and which would be totally fair?
Mr. Patten : I am not absolutely convinced that my hon. Friend's methodology for increasing VAT by 6 per cent. would necessarily commend itself to his electors, to mine or, for that matter, to anybody else's.
Mr. Ron Leighton (Newham, North-East) : On a point of order, Mr. Deputy Speaker. Is it in order for the Patronage Secretary continually to intimidate and harass the Secretary of State by instructing him very audibly not to give way to his hon. Friends who are concerned about
Column 437the inequity of the poll tax for their constituents? Should not the Secretary of State have the right to listen to the worries of his Back Benchers?
Mr. Patten : If what the hon. Gentleman says is true--[ Hon. Members-- : "It is true".] Well, I have plainly blighted my career, because I have given way about 20 times. However, I do not want to give way any more, because we are--
Mr. Dykes rose --
The reason I am not intending to give way is because none of us can wait for the opportunity, in response to the few remarks that I have made, of hearing the Opposition's alternative to our proposals. We know very well that the hon. Member for Dagenham (Mr. Gould)I has one of the most creative minds in politics. We also know that he was so creative that halfway through the last general election campaign he sank the Labour party's then proposals on local government finance. We are looking forward to the hon. Gentleman bringing forward his new proposals on local government finance. Until he does so, we shall greet the Opposition's contributions to these debates with the genial contempt that they deserve.
I believe that the debate is about the sensible control of public expenditure. It is about priorities for public expenditure and priorities for managing the economy. I very much hope that, bearing those things in mind, my right hon. and hon. Friends will join us in the Division Lobby at 10 o'clock tonight and for some time to come. 5.12 pm