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Volume 961: debated on Wednesday 31 January 1979

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asked the Secretary of State for the Environment what he expects to be the average increase in rates in 1979–80.


asked the Secretary of State for the Environment what is his revised estimate of the average increase in rates, following the Government's announcement of increased pay for the low paid and other changes in pay policy.

As I told the House when I announced the RSG settlement last November, the settlement was compatible with a national average for domestic rate increases in single figures. The actual level of increase will, however, depend on the level of expenditure authorities decide to undertake, the provision they make for inflation and the extent to which they are prepared to draw from balances.

As to the announced changes in pay policy, my right hon. Friend the Prime Minister announced on 16 January that the cash limits on rate support grant will be increased to take account of the Government's initiative on the low paid. That will not, therefore, significantly affect the level of domestic rate increases.

Is my right hon. Friend aware that some Tory-controlled county councils are now inflicting demands for increases of as much as 25 per cent. on their unfortunate ratepayers, and that some of those are the authorities that have been underspending, and even cutting back on housing maintenance and repairs and on personal social services? Does my right hon. Friend foresee the need for these authorities to apply for supplementary increases later in the year, as some of them have been threatening?

I ask my hon. Friend on this occasion to be a little more merciful to county councils than perhaps we have felt appropriate in the past. I do so for one special and particular reason. We have shifted the needs element payment this year to shire districts for the first time. That means that the shire counties will be obliged to some extent to increase their precept, but that should be followed by matching decreases in the rate calls of the shire districts that will benefit.

As the Prime Minister said that if the wages of local authority manual workers went up by 15 per cent., rates could be expected to rise by as much as 27 per cent., is the Secretary of State prepared to take any steps to ensure that average rate increases are kept to single figures?

I am not prepared to do what I understand was the proposal of the Opposition Front Bench some time ago and say in an authoritarian way that local government must limit total expenses. I still counsel the House, however, not to jump to conclusions because of the recommendations by borough treasurers and finance committees. I am not aware that any—but, if any, certainly not more than a handful—rates have been struck throughout the country.

Is the Secretary of State aware of the nasty situation that is building up, which appears to be a repeat of the 1974 rate revolt but which this time may be more serious than before? Is he also aware that very few counties and districts in rural areas will be able to keep their rate increases below 20 per cent.? Is he, therefore, prepared to announce today that any settlement in the public sector that is above the 8·8 per cent. already stated by the Prime Minister will be met out of central funds?

I am not prepared to say that, and it is too early for the hon. Gentleman to say with such emphasis that his expectation will turn out to be correct. In any event, I reiterate that this year a proportion of the increase should be matched by a reduction of rates in the shire districts, which for the first time are benefiting from the payments of the needs element.

Is my right hon. Friend aware that the high rate increases in many inner city areas, including the London borough of Lambeth, are a direct result of councils attempting to implement the Government's inner city programmes, with policies of better housing, amenities and more jobs? Will he take steps to make special funds available so that the expectations that he has rightly raised, both in his White Paper and since, can be met in the inner city areas without an undue burden on local ratepayers?

I am deeply aware of the financial problems of the inner cities. But in terms of both the special allocations that we have made to the inner cities, including the Lambeth partnership area, with regard to urban grant, and the way in which the rate support grant has operated in favour of inner city areas, particularly the settlement for London with its emphasis on inner London, I believe that this will be helpful, if not completely satisfactory, to the inner city boroughs affected.

Is the Secretary of State aware that today he is playing the role of an ostrich, firmly burying his head in the sand and ignoring the reality around him? Is he persisting in telling the House that, with the current pressure on local authority wages, he expects rate increases to remain in single figures, bearing in mind that the Prime Minister recently said that if average wage settlements went up to 10 per cent.—which is the new average level for the low-paid—rates would go up on average by 18 per cent.? Will he now seriously consider calling together the local authority associations to renegotiate the settlement this year and, if necessary, to discussing the possibility of cutting services?

I do not intend to call the local authorities together to renegotiate the rate support grant, and certainly not to invite them to cut back on their services. I shall continue to invite them to negotiate realistically and sensibly to achieve a settlement that is compatible with the maintenance of public expenditure and a reasonable level of rate increases.

Is the Minister aware that one of the reasons why rates are likely to rise more than expected is the increase in minimum lending rate to 12½ per cent., which has resulted in local authorities paying more in interest charges across a whole range of their services? Incidentally, that policy was pushed by friends of the Tory Party in the City. Will the Minister also take into account that when the wage settlements for local authority employees are finalised, which will be above the amount already suggested by the Prime Minister last week, there will be offsets such as family income supplement, offsets for those paying increased taxes and in terms of rent and rate rebates?

On my hon. Friend's second point, I shall consider what the offsets may be. As he will realise, it is difficult to predict this on an across-the-board basis when measures for assistance to particular families are involved. I can give him considerable reassurance on his first point. We have always excluded interest rates from our calculations for rate support grant. At the time of the increase order, which we shall make in six months' time, we shall take full account of changes in interest rates. There is that help to local authorities.