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Loyden, Eddie

Lynne, Ms Liz

McCartney, Ian

McCrea, The Reverend William

Macdonald, Calum

McFall, John

Mackinlay, Andrew

McMaster, Gordon

MacShane, Denis

Madden, Max

Martin, Michael J (Springburn)

Martlew, Eric

Michael, Alun

Michie, Bill (Sheffield Heeley)

Michie, Mrs Ray (Argyll & Bute)

Molyneaux, Rt Hon James

Morgan, Rhodri

Morris, Rt Hon Alfred (Wy'nshawe)

Morris, Estelle (B'ham Yardley)

Morris, Rt Hon John (Aberavon)

Mudie, George

Mullin, Chris

Neubert, Sir Michael

O'Brien, Mike (N W'kshire)

O'Brien, William (Normanton)

O'Hara, Edward

Orme, Rt Hon Stanley

Pawsey, James

Pike, Peter L

Porter, David (Waveney)

Purchase, Ken

Quin, Ms Joyce

Raynsford, Nick

Redmond, Martin

Robathan, Andrew

Rogers, Allan

Rooker, Jeff

Rooney, Terry

Ross, William (E Londonderry)

Sedgemore, Brian

Sheerman, Barry

Skinner, Dennis

Smith, Llew (Blaenau Gwent)

Smyth, The Reverend Martin

Snape, Peter

Spearing, Nigel

Spellar, John

Taylor, Mrs Ann (Dewsbury)

Taylor, Sir Teddy (Southend, E)

Timms, Stephen

Turner, Dennis

Vaz, Keith

Wicks, Malcolm

Wigley, Dafydd

Williams, Rt. Hon. Alan (Sw'n W)

Young, David (Bolton SE)

Tellers for the Noes: Mr. Ray Powell and Mr. Derek Enright.

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Question accordingly agreed to.

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

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Local Government and Housing (Scotland)

7.12 pm

The Secretary of State for Scotland (Mr. Ian Lang): I beg to move,

That the Local Government Finance (Scotland) Order 1995, a copy of which was laid before the House on 2nd February, be approved.

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): I understand that with this it will be convenient to discuss the following motions: That the Revenue Support Grant (Scotland) Order 1995, a copy of which was laid before the House on 2nd February, be approved. That the draft Housing Support Grant (Scotland) Order 1995, which was laid before this House on 2nd February, be approved.

That the draft Housing Support Grant (Scotland) Variation Order 1995, which was laid before this House on 2nd February, be approved.

Mr. Lang: This is the annual opportunity for the House to debate the local government finance and housing support grant orders. Traditionally, the debate provides an opportunity to consider not only the detail of the orders but the wider issues relating to local government and housing finance.

I propose to speak briefly to the orders and then make some general comments on matters relevant to them. I hope that that will enable the debate to move forward.

I start with the draft Housing Support Grant (Scotland) Variation Order 1995, about which I need say little. It is necessary because of a reduction in the pool rate of interest used to estimate local authorities' loan charges. It is accepted and normal practice for Ministers to bring forward a variation order in these circumstances. That will reduce total housing support grant payable in 1994-95 from £25.7 million to £24.2 million.

The draft Housing Support Grant (Scotland) Order 1995 provides that the total level of housing support grant payable in 1995-96 will be £22.3 million. Broadly speaking, that sum represents the difference between the eligible expenditure and the relevant income of those authorities which, in the absence of grant, would have a deficit on their housing revenue accounts. Its purpose and the assumptions used are explained in detail in the report that accompanies the order. Our estimate of management and maintenance expenditure is based on an assumed average spending level of £748 per house. That represents a 7.5 per cent. increase over the equivalent average for the current year and is further evidence of the Government's commitment to the maintenance of the physical condition of Scotland's housing stock. For the purpose of the HSG formula, the assumed average standard rent for next year has been set at a notional £37.48 per house per week. I should stress that that is not a forecast, nor is it a guideline or even a recommendation: it is an assumption used solely for the purposes of grant calculation. The actual rents charged by authorities may be higher or lower according to the local decisions about housing income and expenditure that local authorities have taken over the years.

I shall discuss the implications of the subsidy settlement for actual rents in a moment, but before doing so I should draw the attention of the House to the question

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of general fund contributions. Such contributions represent a subsidy from council tax payers to council tenants. That kind of subsidy is indiscriminate in that it benefits all tenants, regardless of their personal circumstances; and it is unnecessary to the extent that tenants who are unable to meet the costs of their housing receive assistance in the form of housing benefit. As in previous years, therefore, the proposals in the Housing Revenue Account General Fund Contribution Limits (Scotland) Order 1995 prevent authorities from budgeting to make general fund contributions next year.

The effect on local authority rent levels will be relatively small, as the large majority of local authorities in Scotland do not receive housing support grant in respect of their mainstream council housing. Clearly, the subsidy proposals will have no impact on the rent decisions of those authorities. On the 11 authorities that will receive grant in respect of their council housing, the effect of the change in grant will vary. In most cases, grant is a relatively minor component of housing revenue account income and the impact is likely to be outweighed by the authority's own decision on such matters as management and maintenance spending.

As Government subsidies form a small proportion of housing revenue account income, it is difficult to forecast average rent increases with any degree of accuracy. I expect, however, rent increases for 1995-96 to average between 4 per cent. and 5 per cent., as was the case in 1994-95. That is on the assumption that local authorities will wish to make real improvements in the housing services that they provide to their tenants, and it is right that the extra costs should be met by the tenants who benefit.

The Government's proposals for housing support grant next year are, I believe, a fair and reasonable subsidies package that balances the interests of the tenants, the council tax payer and the national taxpayer.

I now turn to the Revenue Support Grant (Scotland) Order 1995. Its purpose is explained in detail in the report that accompanies the order.

Mr. Nigel Griffiths (Edinburgh, South): Before the Secretary of State does that, can he perhaps explain to the House why, once we remove the community care element of about £40 million from the settlement-- money that is, of course, rightly and properly set aside for the community care developments that we all want to see--he is imposing on Scottish councils a cut of some 10 per cent. or 11 per cent? How does he expect the councils to maintain the level of service to their tenants without pushing rents through the ceiling or cutting services drastically?

Mr. Lang: I do not recognise the figures to which the hon. Gentleman refers. The grant to which I have just referred is payable only to 11 authorities and represents a relatively small proportion of support for council housing. The vast majority of support comes through housing benefit, where an anticipated £800 million will come through next year.

The purpose of the Revenue Support Grant (Scotland) Order 1995 is explained in detail in the report which accompanies the order. The position is relatively straightforward and, again, I do not think that I need say very much about the order itself.

Dr. Norman A. Godman (Greenock and Port Glasgow): The tenants of Greenock and Port Glasgow are

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slowly beginning to stand on their own two feet, and I understand that just over the horizon is the enticing promise of several hundred jobs. May I plead with the Secretary of State, however, to respond favourably to the representations of Inverclyde district council concerning what a constituent recently described to me as "that damned eyesore"--the Gourock rope works? I personally have made numerous representations--I would like the thing to be pulled down--but will the Secretary of State please respond to sincere representations made to him and his ministerial colleagues by members of the council?

Mr. Lang: I share the hon. Gentleman's hopes for the employment prospects of Greenock and Port Glasgow, and I note what he has said about the Gourock rope works. I know the building well. The matter involves Historic Scotland, however--the building is listed--and it would be inappropriate for me to comment, even if the issue were covered by the terms of the Revenue Support Grant (Scotland) Order 1995. I suspect that if I tried to respond in any detail I would be ruled out of order, so I shall press on.

Under the so-called AEF guarantee, the level of revenue support grant payable to local authorities for each of the years 1990-91, 1991-92 and 1992-93 is adjusted either up or down in the light of any variation between their estimated and their actual level of non-domestic rate income. The objective of the arrangement--which has been fully accepted by the Convention of Scottish Local Authorities--is to ensure that each authority receives the combined amount of revenue support grant and non-domestic rating income that they were promised at the time when authorities were first notified of their settlement for the year in question. At that stage, my Department made an estimate of the level of NDRI that each authority would receive. The guarantee arrangement has been necessary because of the difficulty of estimating NDRI with any accuracy, mainly because of appeals against valuation that take some time to be resolved.

The order makes a further adjustment to the levels of revenue support grant payable for each of the three years covered by the guarantee in the light of returns that local authorities submitted to my Department last autumn showing their actual levels of NDRI for the years in question. Because of the effect of successful appeals against 1990 valuations, there has, in general, been a reduction in the level of NDRI in comparison with previous estimates. The order, therefore, provides for the payment of extra revenue support grant, totalling nearly £65.7 million, to compensate for the reduction. I should make it clear that that figure is net. Although 61 authorities will receive extra rate support grant, the remaining four will receive less. That is because, against the general trend, their level of NDRI has increased as compared with previous estimates. Subject to the House's approval of the order, the extra RSG will be paid to the authorities concerned in April.

Mr. Thomas Graham (Renfrew, West and Inverclyde): This may appear to be a convoluted question, but it is not intended to be. The health board in my area proposes to close Ravenscraig, Bridge of Weir, Merchiston and Dykebar hospitals. Has any consideration been given to the stress and strain that that would cause

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to Inverclyde and Renfrew district councils, which would have to provide health care in the community? Has the Secretary of State included that in his budget?

Mr. Lang: The hon. Gentleman has put his point on the record very effectively, but it does not relate to the order that we are debating--and, to the extent that it might relate to it at the margin, it would relate to the distribution formula used for the allocation of resources between different authorities. That formula is agreed with COSLA and reviewed every year.

Sir Russell Johnston (Inverness, Nairn and Lochaber): The Secretary of State must know that, owing to a combination of the financial arrangements that he is imposing and the capping regime, Highland region will be down £12.9 million this year. That will undoubtedly have an adverse effect on local services. The council currently faces a choice between closing its job and enterprise unit, with the loss of about 120 jobs--which would be a very bad thing--and sacking an uncertain number of teachers, perhaps 200 or 300.

Mr. Lang: The hon. Gentleman anticipates me: I have not yet reached the order to which his comments relate. However, in the light of what I am about to say about the Local Government Finance (Scotland) Order 1995, I shall be happy to give way to him later if he wishes to pursue the point. The order that I have just been discussing relates specifically to the adjustment of non-domestic rating income to take account of the outcome of valuation appeals, so that local authorities receive exactly what we undertook to give them.

Certainly in terms of the amount of money involved, the Local Government Finance (Scotland) Order 1995 is the main order that we are debating. It represents the final stage of the local government finance settlement, details of which I first announced on 29 November last year. The settlement provides for the level of

Government-supported expenditure--that is, total grant-aided expenditure and provision for loan and leasing charges--to be set at £6,116,900,000, an increase of 1.72 per cent. on the current year's figure. It also provides for aggregate external finance--which comprises revenue support grant, non-domestic rating income and a number of specific grants--to be set at a level of £5,306 million. The report that accompanies the order provides a detailed explanation of its purpose, but it may be helpful if I briefly summarise the position. The order has three separate purposes. The first is to distribute the revenue support grant and NDRI components of AEF for 1995-96 to individual local authorities. The specific grants component of AEF, which for next year totals just under £397 million, is distributed on the basis of claims by authorities, and is therefore not covered directly by the order itself. A total of just over £3,716 million is distributed as revenue support grant, and £1, 193 million is the distributable amount of NDRI.

As in the past two years, NDRI is being distributed to regional and islands councils only, with the agreement of COSLA. That means that district councils will again receive their AEF support solely in the form of revenue support grant and specific grants.

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The distributable amount of NDRI takes into account my Department's estimate of the amount of business rate income that local authorities will collect next year on the basis of the unified business rate poundage of 43.2p which I also announced on 29 November. When we took over control of business rates from local authorities, businesses in Scotland faced a local business rate that averaged 76.6p in the pound. The Government, with the full support of the Scottish business community, have spent the last five years, and £440 million, working towards a unified business rate throughout Scotland and England. Next year, for the first time, Scottish business will operate on a level playing field with business south of the border. Our unified business rate policy has already delivered significant benefits to Scottish business--at least £440 million worth per annum. What is more, the guarantee that we have given to maintain that level playing field permanently will ensure that the benefits continue.

Mr. Archy Kirkwood (Roxburgh and Berwickshire): I acknowledge and welcome the movement that has been made to try to reconcile the positions north and south of the border, but will the Secretary of State re-examine the exemption scheme carefully? I do not think that the orders for the exemption scheme that he has announced have yet been laid. I think that, when the revaluation details are known to small businesses in south-east Scotland, they will cause considerable concern. I know that transitional protections will limit the amount of the actual bills, but the increases will nevertheless be substantial in relation to anticipated inflation rates. That will affect small businesses throughout Scotland, not just in the south-east. Will the Secretary of State look again at the exemptions and transitional protections that he has announced, so that the amounts paid by small businesses can be restricted even more than he intends them to be?

Mr. Lang: I constantly review such matters, but I must point out that the benefit of the reduction in the business rate from 76.6p in the pound to 43.2p makes a dramatic difference to businesses large and small throughout Scotland. We have also introduced transitional relief schemes in the light of revaluation--schemes that are specifically more beneficial to small businesses than to larger ones. I expect the benefits to be widely felt by businesses in Scotland.

Mr. Alex Salmond (Banff and Buchan): On the subject of assistance to business, will the Secretary of State reconsider the effective prohibition of purchase and lease-back schemes from the end of this financial year? Does not he appreciate that, in a range of regional councils in Scotland, those schemes are an important part of industrial strategy, and that their effective cancellation will cause great damage to many businesses? Will he reconsider that point?

Mr. Lang: I do not accept that anything like the damage implied by the hon. Gentleman will be caused. There is no reason why local authorities should not, for the rest of this year, continue to take advantage of the schemes that we have announced. Most local authorities are doing so. The exception is Grampian regional council, which seems unwilling to deal with the realities of the scheme. My officials are more than willing to continue to make the position clear to that council.

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The schemes are available until the end of the current financial year and we are considering various aspects that we may wish to clarify further. I am confident that the limited effect of the schemes in relation to local government expenditure overall does not justify the sort of comments that have been made. Our measures are sensible in the context of overall public expenditure.

Mr. Jimmy Wray (Glasgow, Provan): Does the Secretary of State agree that his figures and calculations are based on a notional figure of £37 average rent throughout Scotland, when the average rent is only £27? On the general fund contribution, does he agree that everyone who applied last year was refused?

Mr. Lang: The hon. Gentleman rose to make a point that I covered some five or 10 minutes ago. I made it clear to him that the rent figure of £37.48p per house was used exclusively as a notional figure, and solely for the purpose of grant calculation, in the context of local authorities' resources under the HSG formula, and taking account of management and maintenance costs. He is right--rents are some pounds lower. Indeed, they are some pounds lower than in England. But making a direct relationship between rents and the figure that I mentioned is not relevant.

Mr. Andrew Welsh (Angus, East): Is the Secretary of State creating a level playing field by setting that universal business rate level? How does he react to the criticism that the estimated target yield will be exceeded by almost 3p in the pound, which will put an extra burden on Scottish businesses?

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