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anyone would wish that he does not care for the future of Welsh local government, which has co-operated with the Government for the past 15 years.

Mr. Donald Anderson (Swansea, East): Is it not an interesting commentary on what the Secretary of State said that he seemed to equate the quality of a school with the size of its balances?

Mr. Davies: I shall return to that point. However, I shall first deal with some of the generalities in the Secretary of State's statement.

It is worth looking at what the right hon. Gentleman said last year when he announced an increase of 4.2 per cent. in total standard spending. He said:

"the settlement proposals are fair and will mean that good quality services can be delivered by councils throughout Wales, and that they offer enough money to avoid sacking essential staff."--[ Official Report , 15 February 1994; Vol. 237, c. 876.]

Those objectives could be achieved with a 4.2 per cent. increase last year. This year, the increase is 2.7 per cent. Judging the Secretary of State by his own standards and using his speech, what will the settlement mean? If 4.2 per cent. was fair, is 2.7 per cent. unfair? If 4.2 per cent. was the minimum necessary to allow councils to avoid sacking essential staff, what will be the consequences of a 2.7 per cent. increase in total standard spending? It means that essential staff will be sacked. The Secretary of State is condemned by his own arguments.

Mr. Redwood: Has not the hon. Gentleman noticed that the inflation rate has gone down?

Mr. Davies: By the Government's own estimate, the current inflation rate is 3 per cent. How can the Secretary of State expect local authorities, which will receive a real terms funding increase of 0.4 per cent., to cope with inflation of 3 per cent.?

Why will the right hon. Gentleman not tell us what the inflation figure will be for teachers' salaries? Once the Government have agreed to that inflation figure--it will be 2.5 or 3 per cent.; good luck to the teachers- -the Government will have direct responsibility for it. Will the Secretary of State make complete resources available to meet the full cost of the teachers' pay award? Perhaps he will answer that question. The Secretary of State should get to his feet and give the House a proper answer.

Mr. Redwood: For about the third time: yes, of course we have taken full account of the likely teachers' pay award in the settlement. It is in the funding that we have described.

Mr. Davies: They are weasel words. When the Government say, "We have taken it into account," the House knows that they will underfund the teachers' pay award in the current year.

This is a harsh settlement by any standards. How can it be reconciled with all that we have been told over the past 12 months about the country's economic performance? The Secretary of State comments at every opportunity about how well we are doing. If we are doing so well, why will we have to sack teachers and stop caring for the elderly and the infirm in our communities? How is that a measure of economic success?

This year the effective increase in aggregate external finance support for standard spending assessments is 87.6 per cent. The Secretary of State did not mention that

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because last year the figure was 88.5 per cent. If he had managed to maintain AEF at last year's level, the council tax increase this year would be 2.5 per cent. rather than the 10 per cent. which every council tax payer in Wales now expects to pay.

The Secretary of State has managed his own unique triple whammy. As a consequence of the financial settlement, we have cuts in services, tax increases and a boost to inflation. Economic success, as defined by the Tories, brings cuts in public services and tax increases. The Secretary of State knows that the funding cuts will hit the education sector hardest.

The Secretary of State and his colleagues must understand that if we are to begin to address the problems of the economic and social malaise which their policies have created, we cannot neglect the educational needs of our society. Only one strategy matters to the Government: the political strategy of achieving tax cuts before the next general election.

The Government have no economic strategy, otherwise they would not cut education standards. They have no strategy for dealing with the increasing problems of alienation and unemployment among young people, otherwise they would not cut education standards. They have no strategy for dealing with drug abuse, crime and related social problems, otherwise they would not cut education standards. I will tell the Secretary of State what goes on in Wales because he does not know much about it. Since 1990 there has been a four-fold increase in the number of registered drug addicts. Since 1979 the number of drug offences has increased by 184 per cent. I will use Islwyn as an example--if the Minister bothers to talk to the people, they will tell him what is happening.

In Gwent police C division, which is centred on Blackwood, the number of recorded drug offences has increased from 81 in 1990 to 294 in 1993. The Secretary of State says that he is good at percentages, so he can work that one out for himself. At the same time, the force strength in C division has fallen from 259 to 253. This year the county council is being forced to cut its expenditure on education and social services in that area by £5.5 million. The Secretary of State's arguments do not hold up, even if we accept his basis for presenting the figures. For those who are responsible for local government, the reality is far worse.

I acknowledge that there has been an increase of £87.6 million in total standard spending over last year and that is welcome. But let us look at it. It includes £38.4 million transferred to fund community care. That is not new money or additional expenditure, as the Secretary of State implied; it is a straightforward transfer from a different budget. It is ring-fenced and hypothecated for a new statutory duty; it is not available for expenditure on any other sector.

There has been a £37.5 million increase for police authorities. That is welcome, but it is a belated acknowledgement by the Secretary of State that his initial proposals were inadequate. All Welsh Opposition Members went to the Home Office or the Secretary of State last year to protest about the inadequate level of funding of our police forces in Wales.

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What was the response of the police forces to the initial settlement that the Secretary of State proposed in December? Barely two months ago, he tried to tell us that it was satisfactory. The North Wales police had to announce an immediate freeze on recruitment. They prophesied that in 12 months' time there would be 60 fewer police officers as a result of the Secretary of State's proposals; there would be a freeze on recruitment of special constables, the closure of smaller police stations, community projects would be cut and there would be a failure to invest in communications, which the chief constable described as possibly catastrophic.

In Dyfed Powys the police faced a 10 per cent. reduction in the number of serving officers--a reduction of 100 police officers. The chief constable's view was that policing would be decimated, with a consequent inability to protect the public.

South Wales, which this year has had the lion's share of the increase and has done relatively well under the settlement, was underfunded, settlement by settlement, in previous years by the Government and the Home Office. Even after the increase, the treasurer of the police authority comments:

"with the settlement for 1995-96 we are able to look at increasing the operational strength of the force but even now we are not able to return to previous levels."

All that the Secretary of State has done to improve police funding is to ameliorate a crisis of his own making. If he now expects us to give him credit for correcting his own mistake, he will be disappointed.

Mr. Redwood: Surely the mistake was made by Labour councillors who would not support the police.

Mr. Davies: That is not true. The Secretary of State knows full well that he was asked time after time--certainly by my hon. Friend the Member for Cardiff, South and Penarth (Mr. Michael)--whether under his budget he would give Wales the same indicative SSAs as were available for English local government and he refused.

The Secretary of State bears full responsibility for any underfunding of the South Wales police. He also knows that, whereas for one or two years the police authority received less than the SSA that he knew existed although he would not tell the public, in other years, because of how local authorities were budgeting capital expenditure, it received in excess of what was in the notional SSA. Given that the Secretary of State is telling Clwyd to cut a few caretakers here and a few administrators there, and he is prepared to lay down to Clwyd what it should do now in response to the current crisis, why on earth did he not over the years give any indication to Mid Glamorgan, South Glamorgan, Gwent or West Glamorgan of the indicative strategies for police funding that he had in mind? Why?

Mr. Redwood: The Government always made it clear that it was the responsibility of local authorities. The money was there within the settlement and we wanted them to spend it.

Mr. Davies: It is a changed story now. In respect of Clwyd county council, the Secretary of State is prepared to look at the budget under a microscope and say item by item where the cuts should be. How can the Secretary of State say on the one hand that it is perfectly proper for

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authorities in south Wales to fund the police authority according to their own priorities and it is not a matter for him even to give the indicative SSAs, and on the other hand tell Clwyd county council almost item by item how it should organise its affairs? It is completely unacceptable.

Mr. Redwood: It is entirely similar. The Government always made it clear that they disagreed with the policing priorities established by Labour councils in south Wales. If Clwyd goes ahead with some of its threats to school budgets, I shall disagree with those priorities in the same way. I have no powers to stop those concerned, but I hope that common sense will prevail.

Mr. Davies: That shows the Secretary of State's double standards. Of the 38 Members of Parliament representing Welsh constituencies, 27 are members of the Welsh Labour group. Twenty-seven of us wrote to the Secretary of State expressing our concern and asking to meet him to discuss the police funding crisis in Wales. I am sure that hon. Members from other Opposition parties would have joined us. Such is the right hon. Gentleman's sense of accountability and sensitivity to public opinion that he refused even to meet us. The Secretary of State has no credibility in these matters.

Mr. Redwood rose --

Mr. Davies: I know the cheap point that the right hon. Gentleman wants to make. If he intends to refer to this side of the House, I remind him that the Under-Secretary of State with responsibility for education in Wales has not even shown the courtesy of attending this debate.

Mr. Redwood: My hon. Friend is fulfilling the engagements that I would have undertaken if this debate had not been held today. I am sure that Wales will welcome my hon. Friend, who is to present awards and to hear the views of people in north Wales. The hon. Gentleman is right to be nervous. Why are only 13 Labour Members present out of 27? Why is Labour unable ever to marshall the majority of its Members of Parliament to support the hon. Gentleman--whether in the Welsh Grand Committee in Cardiff or for this debate, which the hon. Gentleman says is crucial?

Mr. Davies: The right hon. Gentleman answered his own question. My hon. Friends are fulfilling other duties--as Conservative Welsh Members are doing, no doubt. Of course the hon. Members for Vale of Glamorgan (Mr. Sweeney), for Monmouth (Mr. Evans) and for Brecon and Radnor (Mr. Evans) are fulfilling other duties.

Mr. Redwood rose --

Mr. Davies: There is no need for the right hon. Gentleman to become agitated. He knows that all Members of Parliament have other responsibilities. Even if only one third of the members of the Welsh Labour group were in the Chamber, we would still outnumber Conservatives from Wales by two to one. The right hon. Gentleman should not labour the point.

Mr. Redwood: My hon. Friends are entirely happy with the settlement and think that it is good news for Wales--so they do not need to be present. Only the

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Opposition tell me that it is a bad settlement. Why cannot at least half of Welsh Labour group members turn up to tell me that in person?

Mr. Martyn Jones: There are 14 of us present, which is more than half.

Mr. Davies: I am sure that Hansard will record my hon. Friend's sedentary intervention.

The Secretary of State wants to divert attention from the funding question. Community care, which is hypothecated, and police expenditure together total £75.9 million, leaving an increase of more than £11.7 million--4 per cent.--for all other services. Local authorities are required to cope with inflation, which is near 3 per cent., new legislation, increasing numbers of elderly people and a massive backlog of essential repairs and maintenance to buildings, roads and bridges.

The Government have scored their most spectacular own goal in education. First, they changed the composition of governing bodies to do away with party political influence and replaced people appointed under that system with teachers, parents, business men and others from the community. The Government then changed the rules governing finance, to give greater local discretion. They altered the rules governing local education authority financial allocations, giving less discretion to central services. Next, the Government changed the rules governing central Government allocation to local government, to give greater control to central Government. They changed the rules again, to rate-cap local government and prevent it meeting local needs. At the same time, the Government established new quangos under their control, with open-ended purse strings.

After spending 15 years constructing a system that the Government wanted, the people whom they chose to run it in the way that they wanted are in open rebellion. There are hundreds if not thousands of decent, law-abiding, respectable school governors in Wales who are now being placed in an impossible position. They are being asked to take decisions to cut the services that they are in public life to protect. What sort of Government are doing that to our communities? Only a party stupid and inept enough to give us the poll tax, VAT on fuel and the Post Office fiasco could plunge our education service into such chaos.

The Secretary of State has made three fundamental mistakes with education funding. First, the settlement itself is inadequate. Secondly, no provision has been made for the continuing increase in the number of pupils in Wales. Last year, there was an increase of 7, 000 and next year there will be an increase of 8,000. That is roughly the equivalent of a new, large comprehensive school for each county in Wales. The full running costs of that new comprehensive school will have to come from the existing schools budget. That is a measure of the increase in pupil numbers alone.

In addition, the Government have made wholly inadequate provision to fund the teachers' pay increase. A 0.4 per cent. increase in the standard spending assessment falls far short of the 2.9 per cent. widely trailed as the teachers' pay award. That pay award alone will cost Welsh counties £17.5 million. That money has to come from somewhere--from other services or from the education budget itself. If the money has to come from education spending, there will, as a direct consequence,

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be between 500 and 600 fewer teachers in Wales next year. If there are 8,000 more students, the inevitable consequence will be larger class sizes which will, in the words of the Secretary of State for Education, "shoot up" and falling standards of education. In typical fashion, the Secretary of State has tried to divert attention from his own inadequacies by attacking schools, teachers, governors and local authorities with the ridiculous claim that they are not spending the money allocated to them. The fact is that they are following very specifically the advice given by the Department for Education which states in its circular that balances are "an essential feature of schemes of local management". Despite repeated requests over the past 12 months from Welsh education authorities, and despite repeated promises, none of which has been fulfilled by the Welsh Office, the Secretary of State has refused to give schools and local education authorities his advice on the question of building up balances.

One would have thought that the Secretary of State would at least acknowledge his own inadequacies and have the modesty to refrain from attacking the people who have been asking for advice for the past 12 months. In typical Tory fashion, he is now going to penalise most unfairly schools without balances for the supposed failings of schools with balances because they did not foresee that his views would apparently differ from those of the rest of the Government. He knows that he has no mechanism within local management of schools to divert the funds in these particular circumstances that he now chooses to criticise. Inevitably, the schools with the smallest balances are in the least prosperous parts of Wales and they will be hardest hit.

Mr. Gareth Wardell (Gower): Will not one of the consequences of what the Secretary of State has said be that outlined clearly by the Audit Commission in its document entitled "Adding up the Sums"? The governing bodies of schools will have to reduce the number of highly qualified and trained teachers and substitute less qualified and less trained younger teachers. It will be the quality of education and the quality of teaching that will suffer as a consequence.

Mr. Davies: My hon. Friend is absolutely right. That is one of the many inconsistencies in the system. Having established local management of schools on the basis of a desire for local accountability and decision making, how on earth can the Secretary of State now criticise schools for operating the very system that he wanted?

Mr. Jon Owen Jones: May I draw my hon. Friend's attention to yet another consequence? The very few grant-maintained schools that exist in Wales, with their additional funding, will not be as badly hit as state schools. Could that not be portrayed as an attempt to hit state schools hardest, to persuade those that have so far resisted the call to adopt grant-maintained status to adopt that status in order to secure the funds that they need to maintain their teaching staff?

Mr. Davies: It hardly constitutes gentle persuasion, but I suppose that it is the sort of genuflection to democracy that we expect from the present Government. I have already mentioned an article in, I believe, last week's The

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Times Educational Supplement about the balances held by grant-maintained schools in England. I have tabled a parliamentary question to the Secretary of State; I hope that the few schools that have been misguided enough to opt out of local authority control in Wales will be given an honest answer. Certainly, according to published figures, grant-maintained schools have carry-over budgets far in excess of those of locally managed schools.

Sir Wyn Roberts: Will the hon. Gentleman give way?

Mr. Davies: I will, but I am anxious to finish my speech. This is the last intervention that I will take.

Sir Wyn Roberts: Is it not inevitable that grant-maintained schools will have larger surpluses? They receive 100 per cent. of the money due to them, while schools in Clwyd receive only 68p in the pound.

Mr. Davies: Grant-maintained schools are in a better position to build up carry-over surpluses because they receive more money than locally managed schools. As a former Minister of State in the Welsh Office, the right hon. Gentleman knows the consequences of that very well. When he presided over the Welsh education budget, once grant maintained schools had been established he top-sliced the budget to try to bribe Welsh schools to become grant-maintained. It was plain that, if they did so, they would have a direct relative advantage over schools that remained under local education authority control. That was a specific attempt to destroy the idea of a planned comprehensive education system. Unfortunately, at every opportunity, the people of Wales have overwhelmingly shown that they do not want a different system.

Let me give the Secretary of State an example of the impact that his policy is having. My hon. Friend the Member for Gower (Mr. Wardell) referred to the district auditor. Let me refer the Secretary of State to the Office for Standards in Education, which was set up to monitor standards. It has recommended, time after time, that local schools use the roll-over facility to meet the needs that have been identified.

One of the schools that the Secretary of State chooses to criticise happens to be in my constituency. I know it well; it has the distinction of having taught Neil Kinnock, my former colleague in Islwyn. Lewis boys' school in Pengam has a balance amounting to just over 3 per cent. of its budget. It desperately needs investment in buildings and facilities: some of its buildings date from 1860. Following Ofsted's recommendations in a report on the school, it is trying to purchase new information technology equipment. The school has to find £20,000 and it cannot get it from the local education authority. One of the consequences of the settlement is that schools like that across the length and breadth of Wales will not be able to secure the minimum finance necessary to equip themselves with new information technology.

Mr. Alan Williams: Is my hon. Friend aware that the Secretary of State for Education in England has announced in the past couple of weeks that she is making available money for IT in English schools and that the Welsh Office has refused to introduce a similar scheme for Wales?

Mr. Davies: That point invites me to use one of my favourite arguments in favour of devolution, which will,

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no doubt, give my right hon. Friend the Member for Swansea, West (Mr. Williams) palpitations. Enormous powers have been devolved to the Secretary of State for Wales. He can choose the ways in which the education policy and the funding of education schemes in Wales differ from those in England. So there is already devolution of power in Wales--to the Secretary of State for Wales. I very much look forward to the day--I shall invite my right hon. Friend the Member for Swansea, West at some time to warmly endorse our view--when power will not be devolved to the Secretary of State for Wales, who represents an English constituency, but to the people of Wales and their elected representatives.

As a result of the settlement, schools such as the Lewis school in Pengam will be forced to try to second-guess the Secretary of State. He will not tell us what he has in mind. Schools will have to wonder what is a reasonable budget, what is a prudent percentage to carry over and how much their funds should be. If they try to build balances for a new science laboratory or new IT or, perhaps, to build a new sports hall, they will not know whether the Secretary of State will change the rules and penalise them the following year. His settlement has implied that intention this year.

It is typical that, under the Secretary of State's uncaring regimes which lack understanding, schools such as the Lewis school will be penalised. Once again, this centralising, dogmatic, intolerant Government have sought to remove local discretion, to reduce the powers of local government and to undermine accountability to the people. They have got it hopelessly wrong; the settlement is hopelessly wrong and that is why my colleagues and I will be voting against the motions tonight.

4.52 pm

Sir Wyn Roberts (Conwy): My right hon. Friend the Secretary of State said that the settlement was good, the hon. Member for Caerphilly (Mr. Davies) called it a harsh settlement and, in the spirit of compromise, I shall call it a fairly tight but, nevertheless, manageable settlement, as has been almost every settlement that I have known.

There are certainly very good points to the settlement. The increase of 3.2 per cent. in total standard spending is welcome. Indeed, my understanding is that no less than 89 per cent. of it is being met by central Government. Some specific features have caused concern, but have been resolved. The police settlement has been greatly welcomed by the police force in Wales and substantial provision has been made for local government reorganisation. I also welcome the 4.5 per cent. increase in capital grants and credit approvals, which, I am sure, will be put to good use by Welsh local authorities.

The point has not been made that this year is the last for the Welsh counties and that some, if not all, have substantial balances. My county of Gwynedd, for example, has balances amounting to £8.6 million and it has already taken the view that it could reduce them to £6 million and possibly less to cushion the effect of the settlement. Other counties must be in the same position. If the Liverpool Daily Post is correct, Clwyd has already

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decided that it may devote at least £1 million of its £6 million in balances to strengthening services following the settlement.

Mr. Llwyd: In the light of the right hon. Gentleman's opening remarks which, because of the tone in which they were delivered, I heard some of my colleagues describing as almost rebellious, may I ask him whether he received the briefing from the chief executive of Gwynedd county council, which says clearly that there will be a cut of £3.346 million? Is he saying that that man is misleading Members of Parliament about Gwynedd?

Sir Wyn Roberts: I am grateful to the hon. Gentleman for leading me on to exactly what I was going to say next. When the counties talk about reductions they mean not that the 1995-96 settlement is less than the 1994- 95 settlement but that the 1995-96 settlement is less than their actual budgets for 1994-95. That is precisely what the treasurer of Gwynedd said in the report to his finance committee, of which I do indeed have a copy. If the hon. Gentleman looks at the bottom of page 1 he will see that like is not being compared with like. As I said, the 1995-96 settlement is being compared with the council's actual budget for 1994-95, which was indeed higher than this year's settlement.

Of course the 1995-96 actual budget is also likely to be higher. Indeed, the Government permit counties to spend an average of about 3.3 per cent. over and above their SSAs before the cap comes into effect. The report by Gwynedd county treasurer shows that there is an anticipated increase in the budget for almost every individual service. In education, for example, the budget for this year is £86.894 million and the base for next year it is £89.21 million. Of course there is concern about the level of the teachers' pay settlement and about inflation, and there is clearly a need for contingency reserves of about £2.9 million to cover those, but, as my right hon. Friend said, it is not only the counties that have balances. We heard yesterday that about £700 million was available in reserves in school budgets in England, and now we hear that Welsh schools too have about £47.6 million available in their reserves. The Opposition have made a great deal of what my right hon. Friend said, but surely he would reply--I certainly would--that schools cannot have substantial reserves yet at the same time complain of an inadequate settlement. They can use their reserves. Of course there are schools that may not have reserves, in which case there is nothing to stop the county education authority coming to their assistance with its balances. I am sure that in practice that is what will happen.

There is no excuse for a drastic reduction in teacher numbers or in staffing generally in Gwynedd. Work has been done on some options, such as a 1 per cent. cut in the staffing budget, with a 1 per cent. cut in the total budget and up to a further 2 per cent. I dare say that those exercises are good for the souls of those concerned. The Audit Commission would approve, and I am sure that we should do so, but, given the balances available, it does not seem that drastic cuts will be necessary.

The hon. Member for Caerphilly should bear in mind the fact that expenditure per primary pupil in Wales is now 52.6 per cent. higher in real terms than it was in 1979-80. Expenditure per secondary school pupil is 64.2

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per cent. higher in real terms than in 1979- 80. Considerable expenditure has been made on education in Wales, with real terms increases.

Mr. Jon Owen Jones: Does not most education expenditure go on capital equipment, teaching or buildings? Throughout the period to which the right hon. Gentleman refers, the number of pupils declined enormously and a great percentage of the money was required simply to keep empty classrooms and school buildings. The Government's policies of opting out have made it difficult for local authorities to do anything about surplus places. Does not that artificially inflate the figure that is allegedly spent per child?

Sir Wyn Roberts: The hon. Gentleman is protesting too much and is seeking a complex explanation for the fact that expenditure per pupil now is much higher. If he had visited classrooms, he would know that that increase has shown up in the facilities available.

There are a substantial number of surplus places in schools in Wales, and whatever policy is pursued it must certainly be adhered to. Some grant- maintained schools might otherwise have been closed by local authorities, but there is still a duty on local authorities, which they must not shy away from, to get rid of surplus places. I do not think that the hon. Member for Cardiff, Central (Mr. Jones) can use the policy on grant- maintained schools as an excuse for not getting rid of surplus places. I do not want to pursue this argument too far as the amount of time available is limited.

My right hon. Friend the Secretary of State has been able to increase the moneys available for community care, which was something of a pinch point. Gwynedd's social services budget will increase from £29.328 million this year to £33.5 million next year. That, and total expenditure of £124.4 million in Wales, will be widely welcomed in Gwynedd.

The failure of my borough of Aberconwy to secure a significant allocation under the strategic development scheme has caused it disappointment, which I share. I have been dealing with the matter in correspondence with my right hon. Friend, and I am grateful for the letter that I received today in which he emphasised the strength of competition for SDS funds and stated that only seven out of 35 projects succeeded in attracting funds.

The borough welcomes the increased funding for housing renovation grants, which are much needed in the renewal area of Penmaenmawr. Aberconwy has a surplus on its collection fund, which will help to keep down the council tax, but the gross cost of rent allowances will have risen by about 300 per cent. between 1991-92 and 1995-96. The borough's director of financial services therefore suggests that the rent allowance element be excluded from the capping calculations, because councils have little or no control over it. Rent allowances are in the hands of landlords and rent officers, and I hope that my right hon. Friend will look into the matter. I listened carefully to the hon. Member for Caerphilly, although I am bound to say that his speech sounded rather like an old, clattering alarm clock. He failed to wake us up for the simple reason that he did not answer the key questions: would the Labour party, if it were in

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government, increase grant and, if so, by how much, or would it remove the cap and allow the council tax to rise? Those are the alternatives open to the hon. Member for Caerphilly. He has not told us which he would choose, and neither has he said by how much he would allow the council tax to rise.

More surprisingly, I heard no mention of the Opposition's local government policy document, "Renewing Democracy, Rebuilding Communities". I have used the title of the document to oblige the Opposition and to ensure that it is placed on the record. The Opposition's policies are explained in the document: to abolish the cap and compulsory competitive tendering, to return business rates to local authority control and to release capital receipts and payments to councillors. Are those Labour policies or not? If they are, why on earth did we not hear about them?

Mr. Ron Davies: Let me reassure the right hon. Gentleman that it is a consultative document. --[ Hon. Members:-- "Ah!"] Unlike some of his hon. Friends, the right hon. Gentleman will appreciate the virtues of consultation. I look forward to him writing to me with his detailed observations on that consultation document.

Sir Wyn Roberts: If I can help the Labour party by contributing my views, I may do so--if I thought that it would have any effect. I am bound to say that the tone of the document suggests that the consultation is not very real. The precise propositions to abolish the cap and so on are likely to be adopted by the Labour party, which will lead to a return to the old, profligate, bureaucratic and inefficient local authorities of the 1970s and 1980s.

I think that Mr. McKinstry was right, and in case any hon. Member does not know what that former Labour councillor and adviser wrote in The Spectator on 21 January, here it is:

"In my job with the Labour party at Westminster . . . I could see only too clearly that the spirit of Labour in local government--that mean minded cocktail of political correctness, bureaucracy, intervention and abuse of public money--pervaded the whole party". I am disappointed that we did not hear what the Opposition would do if they were in government. Until we know rather more positively what they will do, we shall continue to be disappointed.

I began by saying that this was a fairly tight settlement but a manageable one. I shall finish by joining my right hon. Friend the Secretary of State in describing it as a good settlement.

5.10 pm

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney): This is the first opportunity that I have had to follow the right hon. Member for Conwy (Sir W. Roberts) since he returned to the Back Benches. It would be wrong if we did not put on the record the great kindness and courtesy that he showed to those of us who came to see him on various issues and problems. It was always appreciated. We welcome him back to the Back Benches. I hope that his successor will learn the right hon. Gentleman's courtesy, style and kindness as quickly as possible. Our personal relationships with the right hon. Gentleman have certainly been beneficial.

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For a moment at the beginning of the right hon. Gentleman's speech it sounded, on the Richter scale of language that we have come to expect from him, as if he was going to be slightly rebellious. He managed not to be. I saw slight signs of worry on the Secretary of State's face. If the right hon. Member for Conwy starts to rumble him, the Secretary of State really has to worry.

There are a number of symptoms of the late stages of a Government in decline. We saw an extraordinary set of them today. Financial decadence has been preached by the Secretary of State and, believe it or not, even by the right hon. Member for Conwy, who suggested that because county councils were to be abolished in 12 months, they ought to clear their balances out. Is that the official position of the Government?

How much does the Secretary of State think should remain in the balances of county councils in their last year? What sort of assumptions does he make in his plans for the changeover from county to unitary authority? Has he made assumptions about the amounts of money that will be transferred and how they will be transferred? I should be grateful if the Secretary of State could advise us on that. The recommendation of the right hon. Member for Conwy was that county councils should clear out their balances in their last year of office. That is a sign of a Government preparing to leave office. Then there was the prescription of the right hon. Member for Conwy that balances should be run down to cover the costs of the failure of the Secretary of State to reach a satisfactory settlement with the Treasury.

Mr. Jon Owen Jones: I wonder why my hon. Friend is surprised. Does he recognise a parallel between the subject that we are discussing and what the Government are doing with the Welsh Development Agency? They are running down the assets of the WDA in preparation for the time when they are no longer in office. We shall then have to refund that organisation for the capital assets that it has been forced to spend.

Mr. Rowlands: I said that there were a number of symptoms of a Government on their way out. They have been manifested in the debate this afternoon. The concept of running down one's assets and balances is a striking contrast with the Thatcherite prudent housekeeping about which we had lectures for a decade and more. None the less, it is interesting to note the right hon. Gentleman's solution for local authorities which face tight financial problems such as those described by my hon. Friend the Member for Caerphilly (Mr. Davies), those referred to by Welsh Members in their representations to Ministers and those which I am sure will be described in the debate. I know that among Conservative Members there is a feeling that local government cries wolf every year when this annual ritual takes place. That seems to be the idea. I will tell the Secretary of State the symptoms that have appeared this year which I have not seen before. I have never received so many representations from governors of schools as I have this year. Governors of schools took on the greater responsibilities placed on them by the Secretary of State and in the overwhelming majority of cases rose to the occasion. As a result, they recognise forcefully the consequences of some of the decisions that have been made by central Government. Whatever the Secretary of State may think about previous years' ritual objections and criticisms--I gather that in England criticism has reached monumental proportions when

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Shropshire is up in arms--I have received more representations from governors of schools than on any other settlement.

I have never received so many letters from headmasters in the terms that I have received this year. They do not speak for the National Union of Teachers. The Secretary of State ought to distinguish between the stolid representations against which he has gained a level of immunisation and the new phenomenon this year of representations from head teachers who do not necessarily belong to a union. They may or may not belong to a union, but they have written and spoken to me in terms different from anything that I have heard before.

Head teachers feel that the system and the financial arrangements are closing in on their schools and on the type of education service that they are capable of providing. They have been told that they should spend their balances, as should the county councils, while remaining prudent. We repeatedly asked the Secretary of State during his speech to tell us what percentage was a prudent balance. Time and again, the Government have been more than willing to give the strictest possible advice on capping formulae. We need a new formula to determine what constitutes a prudent remaining balance. The nature of the representations that I and many hon. Members have received this year compared with previous years should at least make the Secretary of State think that he might be the one who has got it wrong. Just for once, he should consider that the various representations received indicate that there is at least a genuine major doubt about the financial settlement.

We have had some comments not from the Secretary of State but from the right hon. Member for Conwy about surplus school places. In his ministerial days, the right hon. Gentleman used to lecture us about surplus school places. I do not know whether he has gone to look for surplus places in his constituency or campaigned in his constituency to close down school places. Perhaps as a new Back Bencher he will now suddenly find that when one talks about surplus school places one is talking about schools that are cherished and loved by parents and their young children.

It is easy to talk about surplus school places. The right hon. Gentleman should visit Bedlinog and see the concept of surplus school places in practice. There is a small nursery school and primary school at the top of a hill and another school right down at the bottom. Both schools are loved by the community, by the parents and by the pupils. When people say, "Let us remove X thousand school places from the system," they really mean that schools in villages should be closed down, creating in a village already suffering from dereliction--a pit may have been closed, for instance--yet more dereliction. The last school that was closed lay derelict and empty for years. Closing schools to deal with surplus places would create more dereliction in small communities such as Bedlinog. I am sorry, but I will not advocate that.

The county council made a proposal as part and parcel of its attempt to balance the books to close schools in Pentrebach and Bedlinog. There was an immediate, natural and full reaction by the community to the idea of its schools being closed. It is easy to talk vaguely about surplus places, but in fact they represent much-loved schools.

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