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Mr. George Kynoch (Kincardine and Deeside) : My contribution will be brief. Listening to Labour Members, one would imagine that the Government were cutting their support to local government rather than providing a significant increase.

We must remember that inflation is very low. As I said in an intervention on my hon. Friend the Member for Tayside, North (Mr. Walker), 60 per cent. of local government expenditure goes on employees' wages ; so if we could hold wage costs level by whatever means--through efficiency and improvements or by making savings elsewhere--the whole revenue support grant contribution could be spread over 40 per cent. of the expenditure. If we take the current rate of inflation to be the full 2.5 per cent., we would need an increase of only 1 per cent. to cover the total. In other words, there has been a significant increase in the contribution to local government expenditure.

I agree with my hon. Friend the Member for Tayside, North that in Kincardine and Deeside--

Mr. George Robertson rose --

Mr. Kynoch : I shall give way in a minute ; the hon. Gentleman kept me waiting.

I agree with my hon. Friend the Member for Tayside, North that there had been an increase of almost 6 per cent. in the revenue support grant settlement for Kincardine and Deeside. The same is true for Grampian region, which has also received a significant increase. Both councils have said that they intend to maintain the present council tax level.

Mr. George Robertson : Why does the hon. Gentleman not believe the Chancellor's estimate of inflation, as stated in the Red Book, at 3.5 per cent.?

Mr. Kynoch : I base what I am saying about expenditure on the current rate of inflation. I believe that my right hon. and learned Friend the Chancellor, quite rightly, has been prudent and sensible in his projections. It may well be that inflation is a little higher ; hon. Members will appreciate the fact that if it applies to only 40 per cent. of local government expenditure, it accounts for only 40 per cent. of the increase. Mathematically, it does not make a lot of difference.

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Local councillors must play a significant part in ensuring that their local taxpayers get value for money. I give the example of Kincardine and Deeside district council which faced a 4.2 per cent. increase in the draft budget for next year. The councillors simply said to the executives of the council, "This will not do. We have to get the budget level. We cannot stand a council tax increase at this time." Surprise, surprise, the second draft budget came in significantly less, to the extent that council tax will be held level. Whether it is to the credit of the Scottish National party, as the hon. Member for Banff and Buchan (Mr. Salmond) claims, or whether it has rather more to do with the fact that we face regional council elections this year, Grampian regional council, miraculously in election year, has managed to come in with a level council tax. I now turn to the move towards the unified business rate. Non- domestic rates play a part in the equation about which we are talking tonight. I very much welcome the fact that the variance between Scotland and England, which was 64.6 per cent. in 1990-91, will go down to 14.7 per cent. in 1994-95. Even that percentage does not tell the whole story because it is an average. Kincardine and Deeside, Gordon, Moray, Berwickshire, Tweeddale, Orkney and Shetland are all level with England. Their rates cushion the fact that the rate in Glasgow is still significantly higher than the average, with a rate poundage of 52.9p, which compares with the average in England of 42.3p. The message is loud and clear. The trend continues throughout Strathclyde, where the variances are between 19 per cent. and 20 per cent. from the English average. The clear message is, therefore, that Labour councils are not as good at getting their business rates down.

Mr. Brian Wilson (Cunninghame, North) : Does the hon. Gentleman live in such a fantasy world that he seriously believes that there are comparable social and economic problems in Glasgow and in the other authorities to which he alludes?

Mr. Kynoch : I certainly believe that the affairs of that council can be managed as efficiently as those of other councils. In other cities that have problems similar to those of Glasgow, there is a lower rate poundage. That proves the point.

Mr. McMaster : In an intervention, I asked the Minister about the way in which aggregate finance was calculated. He told me that indicators such as poverty, deprivation and poor housing were taken into account. As the Government are responsible for about 88 per cent. of the money that local authorities receive, why will the hon. Gentleman not allow local authorities to apply the same logic?

Mr. Kynoch : I believe that I correctly heard my hon. Friend the Minister say that the formula for the revenue support grant split was discussed jointly by the Scottish Office and COSLA. COSLA must, therefore, shoulder its responsibility for the way in which the split has come about.

I summarise by saying that I believe that the level of revenue support grant that has been applied in the order is more than adequate if councils use their best initiative to ensure that, on the labour side, they keep settlements this year to a level that can be self-financing. They therefore have plenty left with the remaining 40 per cent. to fund services so that there are no cuts whatever.

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7.53 pm

Mr. Archy Kirkwood (Roxburgh and Berwickshire) : The hon. Member for Kincardine and Deeside (Mr. Kynoch), to whom I listened with interest, is totally unrealistic if he expects local authorities in Scotland to be able to cope with the wage demands that they will receive this year and to make the savings that he suggested were possible. The evidence coming from south of the border, where some of the settlements are a little further on than they are in Scotland, suggests that that is hope above expectation. The hon. Gentleman also forgets that the local government settlements are nationally negotiated ; they are not in the hands of individual councils because the rates are set nationally, as the hon. Gentleman knows as well as I do. It is, therefore, a bit ridiculous realistically to expect such savings.

I should like to make one or two general observations before turning to some of the detail of the orders. Over many years, I have become convinced of the need to look a bit more closely at the way in which we finance local government. The existing system is not transparent. It is very difficult--I say this neutrally--for ordinary council tax payers to determine for their own purposes exactly where the responsibility for some of the increases that they have to pay lies. If that is true, the system needs to be looked at again. It is now descending into a war of attrition between local government and central Government, in which each side tries to be the first to get in its retaliation and public relations so that it can attribute the blame for the increased cost of local government to the other side. The system is so complicated that the only person in the world who understands it, outside the Scottish Office, is Mr. Albert Tait, who does wonderful work for COSLA. The Minister was right to pay tribute to him and colleagues, who supply us with the information that we require to inform these debates. We must get a system that is more transparent and with which people can cope. We need a system that people can comprehend and about which they can make sensible judgments. That is not possible with the current system.

It is not sensible to have a system, which we all now accept as a matter of course, that requires central Government to fund 88 per cent. of local authority spending. It is time that we stood back and looked at exactly what that means for the autonomy of local government and how local councillors can best discharge their duties. An important factor in the debate, which has been mentioned earlier, is that 66 per cent. of all local authority spending goes on staff-related costs. For the Government simply to say, as a matter of course, that they are giving increases that take account of inflation does not begin to meet the true increases that local authorities will face. We all know that, year on year, earnings invariably rise faster than prices. In Committee, we are now contemplating our system of reform for local authority organisation in Scotland, yet we are not looking in any detail at the system of finance. That is stupid. It is not possible to reform the system of local government north of the border without looking carefully at a more sensitive, coherent and transparent system of finance.

The relationship between central Government and local government is appallingly bad. We should try to repair that relationship to achieve a greater feeling of partnership and a far lesser sense that there is a constant war of attrition between St. Andrew's house and the local authorities

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collectively north of the border. I am very concerned that the results appear to be that no one is listening to the other side of the argument and that power is being gradually and inexorably drained away from the local authorities, which is a bad thing in principle.

Sir Nicholas Fairbairn (Perth and Kinross) : Does the hon. Gentleman agree that it would be wise to inquire into the number of people who are employed by local authorities? General extravagance and over-employment are the real cause of the burden on the citizen.

Mr. Kirkwood : The hon. and learned Gentleman, as usual, anticipates my next point. I agree with him to an extent, but there is a factual increase which is difficult to justify unless one considers the additional duties, responsibilities and liabilities that the House is placing on local government. I need to use only one example to demonstrate my point. The community charge legislation, which was succeeded by the council tax legislation, required even local authorities in south-east Scotland and other non-profligate authorities to hire extra hands and computers to deal with the work that we as a legislature perforce required them to undertake. The hon. and learned Gentleman is right. We as legislators should be much more careful before we willy-nilly overlay new layers of duties on local authorities, as we often do. His point is valid to that extent.

My next point in general terms is that I am suspicious of the client group approach, as it is currently implemented and introduced into the method of calculation of the relative amount that each authority receives. It is flawed. In my experience, it is certainly flawed in the way in which it calculates the share-out of local authority revenue in rural areas.

Primary indicators basically count heads. For example, if money is to be paid to local authorities for primary education, one considers the first primary indicator, which is the number of children in schools. That is a common-sense approach. However, secondary indicators do not take nearly enough account of the factors that apply in rural areas which have disparate populations and a series of problems. Their problems might not be as great as those of urban areas but, in their own way, they are just as important to local areas in rural landward parts of Scotland. I do not believe that the client group approach, as currently drafted and implemented, takes those problems properly into account. I hope that the Minister will give the House some comfort by saying that he is prepared to consider developing and refining the way in which the client group method is calculated in practice.

I had a slight difference of opinion with the hon. Member for Kincardine and Deeside about the ability of councils to accommodate wage costs and then redistribute savings. Of course I am in favour, as everybody is, of local councillors achieving efficiency, but that is a bridge too far. It is totally impossible for local authorities to make savings of the kind to which he referred ; indeed, the reverse will occur.

There is evidence that there will be job losses if central Government limits and capping rates are implemented in the way we expect. There are some problems. It is stupidity itself that we have a local government settlement that takes

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no account of the realistic increases that are bound to be in the pipeline in the way of public sector wage settlements which, again, are negotiated nationally, not locally.

I have concluded that there will inevitably be job losses or reductions in services. In my own regional authority, which is not a profligate authority, we have to find savings of about £400,000 in social work and about £200,000 in education. That means that all sorts of sensible, planned, service delivery projects will have to go by the board. Throughout Scotland, there is great need for nursery education--there certainly is in the borders. There is a great need in the border towns that I represent to develop, extensively, better facilities for young people. The social work and community education authorities have worked out plans and are doing their best to develop those services, but they are being hampered by a shortage of finance.

The hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) mentioned the maintenance of school buildings. I agree. One price that we will have to pay for the orders is that maintenance schedules will be delayed and delayed again. As he mentioned, that is a short-sighted, short- term policy. Another consequence of the orders will be further delays in making improvements in the safety of school transportation which, as hon. Members know, is a matter of great concern to community councils and school boards in rural areas after the recent terrible accident in Biggar.

As for social work, in the near future we will be able to determine the consequences of the orders. Already, in my authority, the charges for home helps and meals on wheels and other charges have been increased. People are already in severe financial circumstances, which will be exacerbated by the imposition of VAT on fuel on 1 April. They are being hit twice. It is a double whammy in terms of the effects of some social work cuts, not to mention the closure of the old part IV accommodation and residential homes, many of which are institutions in their localities. That accommodation will have to go by the board.

Another example--it is not an exhaustive list--is that the ability to develop future industrial sites and engage in an industrial strategy at regional authority level will be severely hindered and hampered by the orders. Another point that is directly relevant to the non-domestic rate aspects of the orders is the effect on local authority finance in relation to the uniform business rate. The hon. Member for Kincardine and Deeside mentioned that point. I am also concerned about some of the issues about which he talked. What worries me more than anything else is that, using the evidence of my own eyes and ears, high streets in market towns throughout Scotland are being decimated by a combination of factors, not just the non- domestic rate imposed on them. Our high streets are under tremendous pressure. The amount of rates that businesses now pay in place such as Kelso and Jedburgh is worrying. The effect is available for all to see. Many of our high streets are suffering and paying the price. The orders take out an extra £12.5 million, according to the COSLA figures, from what local authorities would otherwise have expected had the old non- domestic rating system applied. That money would have helped them to address the problem.

I wonder, too, whether the allowance for loan and leasing charges of £750 million or thereabouts for 1994 is enough. With a bit more leeway, local authorities would be able to develop capital projects. I can list several capital projects in my constituency--for example, the new school that is needed in Jedburgh, the new bridge that is urgently

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needed as a matter of safety in Kelso, the redevelopment scheme at Gallalaw in Hawick and the Eyemouth harbour development project. They are examples--again, it is not an exhaustive list --of projects that could be brought on stream by local authorities in a way that would put local people back into work and assist the national finances very positively.

Finally, I shall refer to something that was mentioned by the hon. Member for Hamilton (Mr. Robertson). The allowance for transitional costs to the new local government system is severely understated, at £5 million for this year, £25 million for next year and £50 million for the year after that. I ask the Secretary of State--he is the Treasury Bench note- taker while everyone else is out having his tea, and we are not complaining about that--whether, if we bring evidence in the coming weeks and months that shows that the figures are inadequate for 1994-95 and subsequent years, he will give an assurance that he is willing to look at that evidence and bring back more realistic estimates. The whole of the local government establishment north of the border is severely exercised and worried about that question.

A whole series of worries relate to the orders. I do not think that it is anything like good enough for the Government simply to say that there is price protection and a bit more, so why is anyone worrying? That is a superficial and disingenuous approach. When the detail of the orders is studied with care by people north of the border, and if they get to the stage where they can understand the full consequences of the orders, they will be very unhappy that the settlement reached for next year is unfair to local authorities north of the border. 8.10 pm

Mr. Phil Gallie (Ayr) : I did not come here armed to speak today. Having heard the rate support grant settlement, I honestly thought that all hon. Members would be amazed that the Secretary of State has been able once again to increase the levels of rate support grant beyond the level of inflation. That is a remarkable achievement which goes back year by year throughout the 1980s. Bearing in mind the comments by the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) on education, I must repeat that if we go back to 1978 and 1979, there were no rose-coloured spectacles ; the fact is that at that time the rate support grant was cut in real terms. It beats me why hon. Members hark back to those times. The reason why they criticise the settlement announced by the Secretary of State is beyond my comprehension.

More than £6 billion has been allocated through Government supported expenditure this year. That is a remarkable sop. If we analyse it further, we find that that accounts for some £20 per week for everyone in Scotland in 1994-95. Scotland receives greater central Government support for local spending than the rest of the United Kingdom. That means that we have higher expenditure of about 34 per cent. per head in Scotland than in England. That tells a story.

The hon. Member for Hamilton (Mr. Robertson) suggested that the people of Scotland will have to pay more because of the generous rate support grant settlement. Of course, they will have to pay more. If the Government spend more, taxpayers must take more out of their pockets, whether through council tax or general taxation.

Mr. Salmond rose --

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Mr. Gallie : If the hon. Gentleman lets me finish my point, I shall give way. The charge today from Opposition Members is that the Government are not putting enough into the kitty through revenue support. If the Government put more in through revenue support, their only option will be to raise taxes, although Opposition Members continually condemn them for taxing at the current levels. What I have not heard in this debate is how on earth Opposition Members would bring in more money through the general taxation system and where they would put that money with regard to local authority expenditure.

Mr. Salmond : In the hon. Gentleman's comparison of Scottish and English local government figures, has he allowed for a different range of responsibilities? Obviously, in the current circumstances English local authorities do not control water and therefore do not spend anything on it, although there were substantial green dowries when English water was privatised. Allowing for that difference in responsibilities north and south of the border, can the hon. Gentleman tell the House the real figure?

Mr. Gallie : The hon. Gentleman refers to water. The rate support grant for water in the Strathclyde region is absolutely infinitesimal. Basically, the charge for water and sewerage services is set by the councils and I see no reason to change the figure of 34 per cent. along the lines suggested by the hon. Gentleman. Perhaps my hon. Friend the Minister will be able to clarify that point further as the debate continues.

As to the charge that the rate support grant is not sufficient for local authorities to sustain services and thrive in the years ahead, I must come back once again to the stated intent of Glasgow district council to cut back on the council tax. At the same time, I do not hear a charge that Glasgow will cut services. Glasgow seems to be able to live with the settlement and has adapted it to meet the needs of the people in its city without passing on the massive increase that we heard so much about from the hon. Member for Hamilton. Indeed, there have been numerous examples of other local authorities announcing standstill and reduced council tax settlements, despite what Opposition Members said.

I have every reason to feel a certain degree of pride with regard to Kyle and Carrick district council. When that council changed administration almost two years ago, it inherited a massive deficit of £2 million on the revenue account, which it has turned round. That is a sign of good Conservative management in local authorities. That must not be condemned but applauded.

When I examine the spending programmes for this year, and had I been a councillor on Kyle and Carrick district council--we have been told that it is a radical right-wing council, yet it seems to be going on a spend, spend, spend programme, as the local paper suggested ; and perhaps I am a bit more right than some members of the council--I would certainly have looked at a reduction in council tax charges for next year. That would have been meritorious. The rate support grant means that expenditure will be directed at improving the infrastructure and aspects of Kyle and Carrick. It means that new jobs will be created as a result of the way in which cash is spent, and Kyle and Carrick will prove that its cash investment will be advantageous to council taxpayers in the future.

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Stirling district council was condemned for laying off 18 people and much has been said about job losses. The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) suggested that there are problems for local authorities in this area. He referred to the imposition of the community charge and the fact that that had created many more jobs in local authorities. If that is the case, and given that the hon. Gentleman has got his way and we have returned, somewhat reluctantly as far as I am concerned, to a property-based tax for funding local authorities, perhaps local authorities should now be examining the manpower that they are using in this area. If there had been a massive increase in the requirement for labour at the time that the community charge was introduced, and if Opposition Members are correct now, perhaps there is an opportunity to cut the number of people employed in this area.

Mr. Kirkwood : Will the hon. Gentleman allow me to buy him a cup of tea afterwards and explain to him how a local income tax would mean significant staff reductions? I would like to see that, and we have been arguing for it for many years.

Mr. Gallie : I recognise that the hon. Gentleman is an ardent supporter of a local income tax, but I think that he will recognise the impossibility of introducing such a tax against the background of the numerous local authorities in Scotland. His argument might gain a little value following the changes that we are studying.

Having said that, I have no wish to see a local income tax introduced in Scotland. It would not be rational, and it would be highly bureaucratic. Those involved in the tax would be looking deeply into the affairs of individuals, and I would not support that intrusion.

Mr. Bill Walker : My hon. Friend might care to inform the Liberal Democrats that some of us have examined the working practicalities of a local income tax in great detail. My information--based on research which I have done during a number of years--suggests that such a tax would be even more costly to operate than the community charge, and would cause far more resentment.

Mr. Gallie rose --

Mr. Deputy Speaker : Order. Before the hon. Gentleman goes down that way, I remind him that we are talking not about the council tax or any other tax but about revenue support grant, and the hon. Gentleman should stick to that.

Mr. Gallie : I was talking about revenue support grant and the adverse effect on jobs that that would have, as has been suggested by Opposition Members. Advantage could be taken of recent changes which would allow additional cash through revenue support to be used in a different manner.

Dr. John Reid (Motherwell, North) : Given that revenue support grant is dependent in its proportion on the manner in which other local finances are raised, and given that the hon. Gentleman has ruled out a local income tax and has, in addition, ruled out a property tax, will he put on record for the people of Ayr that he still supports a poll tax?

Mr. Gallie rose --

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Mr. Deputy Speaker : Order. I do not want the hon. Genteman to go down that way and talk about the poll tax, the council tax or any other tax. We are talking about revenue support grant.

Mr. Gallie : I respect that view, Mr. Deputy Speaker, and it is with great reluctance that I do not respond. I would certainly have liked to respond in a positive manner to the hon. Gentleman's comments. Given your guidance, I will attempt to stick to revenue support grant.

With your indulgence, Mr. Deputy Speaker, I shall concentrate a little further on jobs. A local authority must look at the number of people it employs when considering revenue support grant as an element of its financing. With about 60 per cent. of local authority expenditure going on the wage bill, that is very relevant. It is the responsibility of every local authority to look at its staffing structures and to attempt to get the right structure to meet its needs.

After all, running a local authority is not much different from running any business, if one considers the turnovers for each local authority. In Kyle and Carrick, for example, about £14 million comes in revenue support grant from the Government.

We have heard no whining from Kyle and Carrick. The council is holding its council tax, and it is still managing to spend £2 million on capital projects. That is despite the fact that Kyle and Carrick's revenue support grant has been reduced during the current year. We have heard no one whine- -the council has got on with the job, and a dashed good job it is doing.

It is not just local authorities who have been forced into cutting jobs. The Daily Record has cut 200 jobs, and the House has not heard the Opposition complaining about the cut in the newspaper's staffing. Yet Opposition Members think that the loss of 18 jobs in local government is a major disaster. That is a logic which escapes many of us, and certainly escapes the workers at the Daily Record. I have heard comments about cuts in the education budget as far as it affects school buildings. It is my view that Strathclyde regional council has failed to address the real problems of sound maintenance and management of its school building programmes. I did protest about the closure of Castlehill, a school which had a 70 per cent. occupancy rate and a set place in its community. I protested against the background of Strathclyde having promised a replacement school for Castlehill up till the eleventh hour, when there was a sudden change and the council went for hon. Gentleman was elected."] The closure was wrong. It was bad management, and that was what I criticised. That record in the management programme for the provision, new build and maintenance of school buildings has continued for 10 or 15 years.

Mr. Thomas Graham (Renfrew, West and Inverclyde) : I thought that it was on record that the previous Secretary of State for Scotland had mentioned how prudent and good an authority Strathclyde regional council was. Many of the council's management plans saved a lot of money. I was interested to hear the hon. Gentleman's statement on management or mismanagement. Will the hon. Gentleman put that on record so we can see clearly where he believes the deficiencies were in Strathclyde?

Mr. Gallie : I must say that the hon. Gentleman's reading is not mine. If he cares to present to me the statements made by the various Secretaries of State who

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have commended Strathclyde regional council on its schools maintenance programmes, I shall take them on board.

Mr. Stewart : Did my hon. Friend hear the sedentary comment from Opposition Members to the effect that Strathclyde proposed the closure of Castlehill because he had been elected to the constituency?

Mr. Gallie : I must think carefully before I respond to my hon. Friend. I must say that it is not the first time that I have heard that remark. Certain remarks were made along similar lines with respect to a sewage works at Greenan. I would like to discount those comments, because I do not believe that any authority with any credibility could consider making judgments in such a way. On that basis, I shall dismiss the comments that my hon. Friend heard from the Opposition.

The hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) referred to the much-needed link between the A77 and the M8, and to the link between the M77 and the A77. The hon. Member for Kilmarnock and Loudon (Mr. McKelvey) and myself have both been chasing my hon. Friend the Member for Edinburgh, South on that matter over recent months.

Strathclyde regional council has had capital consents given over the years which should have allowed it to make progress on that length of road, but year by year that cash has been diverted elsewhere. I am well aware of the delicate state of the negotiations between my hon. Friend the Member for Edinburgh, South and Malcolm Waugh, the convener of the transport committee of Strathclyde regional council. I do not wish to aggravate the position and I shall not comment further. I should like to think that agreement can be reached in the not-too-distant future and that plans for the road link will come to fruition.

The hon. Member for Carrick, Cumnock and Doon Valley made some remarks about sewerage facilities in Ayrshire. Here again, there are instances--

Mr. Nigel Griffiths (Edinburgh, South) : I am not sure whether I misheard the hon. Gentleman or whether he referred to my constituency when he meant to refer to that of someone else.

Mr. Gallie : I have referred to the hon. Member for Edinburgh, South (Mr. Griffiths) when I should have referred to my hon. Friend the Member for Edinburgh, West (Lord James Douglas-Hamilton). Apart from the pleasantries exchanged outside the Chamber, the fact that I used the words "hon. Friend" speaks for itself.

In drawing my remarks to a close, it would be churlish of me not to refer to the generous increase of more than 8 per cent. in housing capital allocations given to my local authority recently. I recognise that that is not revenue support, but it is worth noting and I thank my right hon. and hon. Friends on the Front Bench for it. It is also worth while extending my comments to the housing non-revenue account payments which will also meet with satisfaction in my area. I recognise that I am beginning to stray a little, Mr. Deputy Speaker, so before I incur your wrath, I shall take my seat.

8.30 pm

Mr. Robert Hughes (Aberdeen, North) : The hon. Member for Kincardine and Deeside (Mr. Kynoch) made a commendably brief speech. It was fascinating because it

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revealed how his mind operated. He sought to give us a lesson in elementary economics of such naivety that I suddenly realised how lucky we were to see the hon. Gentleman in the House at all. If he had applied such simplicity in his business affairs, he would have gone bankrupt long ago and would have been unable to take his seat in the House. I have never heard such misrepresentation of the facts on expenditure, revenue or proportions grossed up or grossed down. I do not think that he understood what the order was all about. The difficulty that we have in discussing the orders is that we have little to go on when we try to work out how the different figures in the orders have been arrived at. The Minister would have us believe--I apologise for missing the early part of his remarks--that expenditure figures are calculated according to some sophisticated mathematical formula. He would have us believe that everything is worked out to give authorities their proper due. [Interruption.] If my hon. Friends will allow me to speak, I will not barrack them in the middle of their speeches.

The approach of the Minister and of many Conservative Back Benchers is simple. They take the general view that local authority expenditure is bad and Labour local authority expenditure is worse and not to be tolerated. I will give the Minister at least some credit. I think that he was trying to be accurate. All that I can do is be charitable to him by saying that he does not understand the formula.

The Minister's view is that any wage increases must be paid for by efficiency savings. That view is commonly reflected on the Conservative Benches. Many Opposition Members know that that is unrealistic. In many cases, the phrase "efficiency savings" is a euphemism for driving down wages and sacking people. That is what it amounts to.

Everyone knows perfectly well that it is unrealistic to expect efficiency savings to meet all the increases which are in the pipeline. Let us take the example of wage increases. We know for a fact that teachers in England and Wales have already received a 2.8 per cent. pay increase. We do not know what the figure will be in Scotland. I should be surprised if it was less than 2.8 per cent. We know that other wage claims are in the pipeline. The Minister cannot expect ordinary people to put up with large increases in tax from April this year and the imposition of VAT on electricity and gas without seeking recovery for that in their wages.

It is bad enough that the Minister says that there should be no pay increase. He is asking for a severe reduction in people's living standards. People are right to seek at least to maintain their current living standards. Our ethos should be to increase people's living standards. There is no way in which the pay increases that are in the pipeline can be met by the settlement. Indeed, there is no way in which those pay increases can be matched by loss of jobs or anything similar.

Mr. Salmond : I noticed the Minister shaking his head when the hon. Gentleman was making the point about efficiency savings in the public services. The hon. Gentleman is familiar with my constituency and with the Willowbank adult training centre for the mentally disadvantaged. Does he think that efficiency savings in that centre can be used to pay reasonable salary increases to the extremely committed staff who man that centre?

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Mr. Hughes : I certainly do not believe that efficiency savings, particularly in places dealing with the mentally handicapped, should be the way in which staff wages are increased. Many of the staff who put in for pay increases are dedicated people who offer a service more often than not above and beyond the call of duty. They do not simply see their way through the day from 9 am until 5 pm, or whatever time, and then go home. People take their work home with them. They have a commitment to the people whom they serve. That is not confined to those who deal with the mentally handicapped.

Mr. Bill Walker : I wish to understand clearly what the hon. Gentleman is saying. As I understand his argument, his view is that it is unrealistic to expect the wage increases that are in the pipeline to be met by efficiency savings. He is not saying that there is no such thing as efficiency savings ?

Mr. Hughes : Of course I am not saying that there is no such thing as efficiency savings. However, for at least the past five years, if not longer, we have been told that tale every year. We are told that there must be efficiency savings and efficiency gains. The facts and figures show that local authorities throughout the country have made large efficiency savings and gains. They have squeezed and cut the services down to the bone. When I give some examples of how that has been done, people will understand that we have gone so far that we cannot go any further.

The Minister praised some authorities for holding their council tax down. I wonder how many of them are spending their reserves. Perhaps he can answer that. In my view, to spend the reserves simply on keeping the council tax down is bad. If there are reserves, they ought to be spent on the people directly by providing services. We have this sterile argument year after year. The Minister and Conservative Members say that so long as an authority holds its rates, poll tax or now council tax steady, with no monetary increase, it is a good authority. I say that that is not necessarily the best test. It is not a bad test, but it is not necessarily the best of tests. We need to look at council tax and service provision together. Let us consider what is in store for local authorities. I am told that a 3 per cent. pay award across the board cost Aberdeen city district council £5 million on its band D tax. That will take a lot of recovering in council tax.

The trouble is that Ministers do not take into account the many demands being made of local government. The population is increasing in the north- east of Scotland, which implies increasing demand in the city of Aberdeen and the region. We are entitled to an explanation from the Minister of how he arrives at his figures for the area.

Mr. Stewart : The hon. Member will appreciate that not all the council tax figures for the north-east of Scotland are in. However, he will also appreciate that the recommendation to the Grampian region is for a zero increase in council tax, that Banff and Buchan has decided on a 4.8 per cent. increase and Gordon on a 4.7 per cent. increase. Those figures are not compatible with the argument that the settlement is somehow unfair to the north-east of Scotland.

Mr. Hughes : That goes to show that one should never give way to a Minister in the middle of one's speech because one will not get the answer one expected. I did not

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ask the Minister about the figures. I asked how many authorities in Scotland are using their reserves to keep the council tax down. I shall now deal with what I regard as the unfairness to the north-east of Scotland. The aggregate external finance has been cut by 3.3 per cent. for the city of Aberdeen, but it has increased in Grampian by 2 per cent., in Banff and Buchan by 1.8 per cent., in Gordon by 1.2 per cent. and--the oddest of all and I cannot understand any reason for it--in Kincardine and Deeside by 5.1 per cent. What are the factors that govern such huge differences in aggregate external finance in a fairly compact and cohesive area?

Why should the aggregate external finance for Aberdeen, which faces the tremendous social problems normally associated with cities, decrease by 3.3 per cent. while Kincardine and Deeside which borders it--the constituency overlaps the local government boundary for the city--gets a 5.1 per cent. increase? I know that there are problems in rural areas, but why should there be such a difference?

I know that the Minister's stock answer will be that the distribution figures are worked out by the distribution committee of the Convention of Scottish Local Authorities. The decision on the figures is not taken by COSLA, but by the Minister. He cannot duck his responsibilities by saying that such matters are discussed or decided elsewhere.

The explanations for expenditure decisions and how they are arrived at are inadequate. What about community care? We have been told that much money has been transferred to local government so that it can deal with community care. Yet we are also constantly told, and given example after example, that the amount of money transferred is inadequate to deal with the social problems involved.

We have all been made aware in our constituencies of examples of the lack of follow-up care and attention--examples of people being put into local authority houses and left on their own without supervision. Who is responsible for supervision? Is it the hospital or the regional authority? Is it the health trust or the social work department? No one seems to know.

As far as one can discern, the distributions seem to mix up community care expenditure and expenditure on aids and adaptations to houses, which is unfair. The Minister must look more closely at the way in which, under the tenants' rights legislation, so-called amenity houses can be sold while sheltered housing cannot. That is resulting in severe problems with the provision of aids in amenity houses. Authorities are beginning to wonder whether they should spend money on anything except temporary adaptations, which can be taken out. That is bad economics. It is much better to make proper, permanent provision for the people who need such aids so that the houses can be transferred to other needy people later.

We mentioned education and I hope that the Minister will listen closely because expenditure on education has been cut so much that Grampian region, which the Minister keeps telling me is a very good authority--I am sure that that remark in Hansard will be used in election manifestos in May--

Mr. Stewart rose--

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Mr. Hughes : I shall not allow the Minister to renege. I had a ringing endorsement for Grampian regional council from him and it will have to stay in the record. He is not going to wriggle out of it now.

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