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Rate Support Grant (England)

Volume 113: debated on Wednesday 25 March 1987

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3.43 pm

I beg to move,

That the Rate Support Grant Report (England) 1987–88 (House of Commons Paper No. 253), which was laid before this House on 20th March, be approved.
Perhaps it will be for the convenience of the House if we also consider the other two motions relating to English reports:
That the Rate Support Grant Supplementary Report (England) (No. 3) 1985–86 (House of Commons Paper No. 259). which was laid before this House on 20th March, be approved.
That the Rate Support Grant Supplementary Report (England) 1986–87 (House of Commons Paper No. 258)., which was laid before this House on 20th March, be approved.

The House is aware that I was unable to lay those reports until the Local Government Finance Act 1987 had received the Royal Assent. In my statement of 13 January I announced my intentions for the 1987–88 rate support grant settlement. Those remain largely unchanged, apart from the modifications required as a result of the High Court judgment in the Greenwich case, which I announced to the House on 5 March, and which in the main affects authorities in London. I do not therefore propose to describe that report in detail. Despite all the difficulties that have arisen this year, I am glad that we have been able to lay the report, particularly the main report, before the new financial year starts, so that grant can be paid. I am extremely grateful to Opposition Members for their help and support in achieving this great success.

I must remind the House that we have provided a generous settlement for local authorities. The aggregate Exchequer grant of £12,842 million is an increase of over £1 billion—9 per cent. more than in the settlement for 1986–87. Provision for local authority current expenditure at £25,251 million is 13 per cent. more than last year. Those figures exclude the additional provision of £460 million, and the grant of £183 million which we have said will be made available for the teachers' pay settlement for 1987–88.

The settlement allows for non-rate-capped authorities to increase their current expenditure by 5·25 per cent. When teachers' pay is taken into account, that will allow education authorities to increase expenditure by 7·75 per cent. Those increases are more than the rate of inflation that we expect next year, which my right hon. Friend the Chancellor of the Exchequer forecast in the financial statement and Budget report last week to be 4·5 per cent. on the GDP deflator. Therefore, there is no reason why prudent and responsible authorities could not have chosen to set reasonable budgets and rates.

This year, we are in a position to know how much local authorities have, in practice, chosen to spend, and the consequent effect on their rates. In most years we do not know that when we debate the settlement, but most of them have now declared their budgets and rates. That makes this debate a little more interesting than normal, because we can read the book, instead of having to gaze into the crystal ball.

If authorities had budgeted to spend at the settlement assumption, plus the allowance for teachers' pay, the average increase in rates would have been about 2·9 per cent. In practice, we find that, in aggregate, authorities are budgeting for an increase in total expenditure of around 2 per cent. more than has been provided for. That higher spending means that rates will increase by around 6 per cent. on average. Although 6 per cent. is much lower than last year, it is still too high and higher than is necessary.

The figures—I stress that they are averages—disguise the wide variations between individual authorities. Many authorities have clearly sought to restrain expenditure and limit rate rises. Others have chosen to pursue profligate spending policies at the expense of the ratepayers.

Let me give the precept increase figures for the shire counties, for which we now have all the reports. In Conservative-controlled counties, precepts will increase, on average, by 6·5 per cent. In Labour-controlled counties, they will increase by an average of 8·7 per cent. In Lib-Lab pact counties, they will rise by 9·1 per cent., and in the one Liberal-controlled county—the hon. Member for Isle of Wight (Mr. Ross) is not in his place, but that is the one jewel in the Liberal crown—that figure is 10 per cent. It seems that one pays a 2 per cent. premium for living in a Socialist county, and an extra 0·5 per cent. on top of that for the price of alliance support.

I am grateful to the Secretary of State for his mathematics lesson. If what he has said is right, why does the Conservative leader of the Dorset county council, Councillor David Fox, when relating the Secretary of State's figures to his own county, say that the Government are not living in the real world'? If that is what a Conservative county council leader says, the figures are nonsense.

The hon. Gentleman is not living in the real world, and there is a message in this for the electorate. We all know that Tory councils keep rates down and that Labour councils are high spenders and do not care about ratepayers. The new factor is that Lib-Lab-controlled, hung councils are equally high spenders. It must be depressing for those who thought that voting alliance was an anti-Labour vote to see alliance councillors supporting the same old Socialist policies of high spending and giving the Labour tail a chance to wag the Liberal dog.

In the metropolitan areas, the average increase in the local rate of non-rate-capped Labour authorities is about 11 per cent. Compare that with Solihull—the only Tory-controlled metropolitan council—which has managed to reduce its rate by 1 per cent. [Laughter.] That is the difference. If all the others were controlled by the Tories, they might have done equally well.

I am grateful to the Secretary of State for giving way, especially since he has just given the "average" of the single Tory authority in the metropolitan districts under Conservative control. Is not the real message of what he has said that overwhelmingly in the metropolitan districts in England the Tories have been kicked from office because people do not like their policies?

If the hon. Gentleman wishes to make a point of the fact that there is only one Conservative-controlled metropolitan council, let me, too, point out that there is only one Liberal county council. The hon. Gentleman was happy to accept my figure of a 10 per cent. rise in the rate of the Isle of Wight council as being the highest of all the party averages. Similarly, I am happy to accept that the sample is small for the metropolitan counties.

But it is when we look at London that we see the biggest differences in rate increases. In inner London, as a result of our successful rate-limiting policies, rates bills will be lower than last year for many ratepayers. Also, prudent authorities have budgeted sensibly, so have no rate increases—for example Westminster and Kensington and Chelsea. However, the ratepayers of Hammersmith and Fulham are not so fortunate because their council has increased its local rate by a staggering 127 per cent. Happily, our precept limits, particularly on the Inner London education authority, mean that rate bills in the borough will increase by rather less—by 50 per cent., which is still too high. Ratepayers in Wandsworth will still enjoy the lowest rate bills in London. Wandsworth's general rate will rise by 2 per cent. and it has just announced a record capital programme.

In outer London, Ealing has increased its local rate by 72 per cent. and Waltham Forest has increased the local rate by 67 per cent. Hon. Members are already aware of some of the ridiculous ways in which Ealing proposes to spend all that money. Council workers have celebrated the council's largesse by going on strike. One local resident, the right hon. Member for Islwyn (Mr. Kinnock), the Leader of the Opposition, is reported to be happy to pay more in rates. But ratepayers in Ealing have a double bonus: they will apparently have to pay an extra 72 per cent. more for no services because the service workers are all on strike.

Ratepayers in the alliance-Labour controlled borough of Kingston fare no better than their counterparts in the counties. In Kingston, the alliance councillors wanted to put up the domestic rates by 20·6 per cent. and Tory councillors by 5·9 per cent. The four Labour councillors got the alliance to compromise at their figure of 16 per cent. So much for the middle way.

Is my right hon. Friend aware that services in Ealing are at a complete standstill, that people cannot be admitted to hospital for essential operations because nobody can be discharged as there are no home services and that people in sheltered accommodation are having horrendous difficulties in getting hold of their milk, laundry and mail? Those are merely a few of the terrible effects of the horrendous rate increase and the strike.

In addition, 30 or 40 schools, including special schools, are closed and children are being sent home. That is what Socialism is about in practice. Will my right hon. Friend compare that with the 4 per cent. rate reduction last year in Ealing under the Conservatives?

The tragedy is that, until this year, Ealing managed to hold its real spending almost level for the eight years from 1979. For all that time, it managed to provide better services at the same real cost to its ratepayers. All that achievement has been thrown away in one year. I have every sympathy for my hon. Friend's ratepayers.

Next year there will be no grant recycling. The House has passed legislation to bring that to an end. Opposition Members have tried in the past to scare us with stories about the consequences. The hon. Member for Norwood (Mr. Fraser), for example, told the House on 4 February:
"On one low estimate, the loss will he £⅔ billion. On a higher estimate it will mean a loss…of £1,000 million." —[Official Report, 4 February 1987; Vol. 109, c. 1315.]
That would be lost through the abolition of recycling.

The local authorities maintained that at least £400 million would he lost. I can now tell the House and Opposition Members that on the basis of the current information on spending plans available to my Department—a high proportion of all returns are now in—the grant underclaim will be around £200 million, after taking account of the changes for teachers' pay. It need not even be that high. Local authorities have only themselves to blame if they forgo grant.

Authorities have plenty of scope for improving their efficiency and reaping the benefits in reduced costs. The benefits to be gained by putting services out to competitive tendering have been well established. The Audit Commission has done much valuable work on the scope for savings from improved efficiency. In particular, the commission's report on eight deprived London boroughs pointed out that there were specific opportunities in those boroughs for improvements of about £100 million a year —£100 million currently wasted on gross inefficiency. Its recent report into competitiveness and contracting out generally suggested that nationally some £500 million could be saved.

I am glad to see that at last I have the support of the Labour party and that of the hon. Member for Copeland (Dr. Cunningham) in demanding more efficiency from local government. I have a copy of the new Labour party publication entitled "Best Practice News" and I am sure that Opposition Members will be very familiar with that. Its aims are
"To show how Labour control not only means better levels of service but also better management of services".
and to
"Give value for people as well as value for money."
It is that aim for value for money that I also welcome from the Opposition.

However, when we look inside that document, it is not quite so rosy. The report of the Leeds conference contained in the document on improving services gives the game away a little:
"Planning improvements to services and opposing compulsory competitive tendering legislation go hand in hand."
I am not sure that they do go hand in hand in my book.

The deputy general secretary of the National Union of Public Employees also gave the game away when he said:
"There will be times when the interests of the consumer won't match exactly what suits the work force."
There is no mention of value for money when we get down to the fine print.

The truth is:
"The services which local councils provide make all the difference to the quality of life for working people…But Labour councils are generally bad at providing them. The trouble is that municipal Socialists—most Socialists really—aren't that interested in how to run things. Lately, too, Labour councils have given too much power to the local trade unions and they have been able to stop or slow down important changes…the result is a welfare state at a local level which is generally wasteful and oppressive to work for and unresponsive, unaccountable and unpopular".
Would any Opposition Member care to disagree with that?

Does the Secretary of State understand that report after report from every independent voice of which one can think, ranging from the Church to health authorities reporting today, show enormous inequalities of wealth and advantage between the haves and the have-nots? Will he for once show some awareness of those problems and act like a Secretary of State responsible for the inequalities that face our people and not give a speech reminiscent of a third-rate local leader of the Conservative party, blind with prejudice and ignorance?

The last six sentences which I quoted were not from a third-rate, blinded-with-prejudice leader of a Conservative council. They were a direct quotation from an article by a certain Mr. Hoggett from Bristol university in this month's edition of the official Labour party publication New Socialist. That is what the hon. Gentleman's friends think about Socialism in municipalities in action. I would never dare use words like that. [Interruption.] Now that my cover is blown, we shall not get the hon. Gentleman on his feet so quickly again.

Since pay accounts for 70 per cent. of local authority costs, they should seek to reduce the impact of pay increases by seeking savings. In particular, local authorities should look to their manpower requirements. The Civil Service has reduced its total manpower by 18 per cent. since 1979. Compare this with a 3·25 per cent. reduction in local authority manpower. I was most concerned to learn that figures issued by the Joint Manpower Watch yesterday show that, for the sixth successive quarter, local authority manpower is increasing, despite the savings from abolition.

I stress again that we have provided a generous settlement for authorities which should seek to take full advantage of it. One would hardly believe, with all the complaints that we hear, including those by the hon. Member for Copeland, about the need for Labour authorities to spend more, that local authorities as a whole are already spending 13 per cent. more this year in real terms than they were in 1978–79 and have budgeted to spend even more next year. One wonders how local government survived in the austere days of the Labour Government.

I remind the House of the two supplementary reports for which I am also seeking approval. The third supplementary report for 1985–86 will provide a further £385 million grant previously withheld, as authorities have brought their spending closer to target. It will also adjust grant to take account of provisional outturn expenditure and certain changes in education pool contributions.

I have been obliged to make certain changes to the supplementary report for 1986–87 as a result of the judgment in the Greenwich court case, as I explained on 5 March. That report will, however, still distribute the block grant underclaim of some £618 million consequent on estimates of total expenditure received from authorities on or before 19 December. My predecessor guaranteed that £500 million of grant would be recycled in the first supplementary report for 1986–87. This report will honour that guarantee.

Will my right hon. Friend please help those of us in Essex who have noticed that Essex and Hampshire have almost identical grant-related expenditure and almost identical populations but that Essex has a rateable value only 10 per cent. more than Hampshire, yet Hampshire has a 40 per cent. greater grant for 1987–88? There seem to be some inconsistencies between the two counties.

It is very difficult to give specific answers to problems raised in interventions. Since 1979, Essex has increased its real terms spending by 8·5 per cent. whereas Hampshire has increased it by only 1·1 per cent. That might well be the territory in which my hon. Friend's question lies, but I should like to supplement it by giving him a more detailed response when I have had time to look more carefully at the figures.

The House will wish to know that, when I laid the reports on 20 March, the Department notified the 20 high-spending authorities of their rate limit, which flows from the formula in the Local Government Finance Act 1987. The responsible Departments have also notified the 20 joint authorities automatically selected for precept limitation of their precept limits produced by the formulae in the Bill. I ask the House to approve these three reports.

4.5 pm

We have just heard a speech of the most sickening irrelevance to the problems of our people and the country, a speech devoid of any scintilla of understanding of the nature of the problems that people face or of the urgent need to change direction to bring new policy initiatives to our inner cities, to education, to housing and to the creation of jobs. It was at least mercifully brief by the right hon. Gentleman's standards. It was difficult to discern from what he was saying that we are debating very important issues which contain many decisions of considerable social and economic importance, and the very language of the report, the speech and the title of the debate do not convey any sense of the wide-ranging implications for essential local services, education, housing, social services and environmental health of what the Secretary of State had to say and what the Government are doing. The technical jargon often employed seems calculated to obscure those real issues, perhaps for the satisfaction of the Government, who take every opportunity to disguise the real intentions of Conservative policies.

The debate is about why the Conservative Government refuse properly to finance services which are essential to the social and economic well being of people, young and old, employed and unemployed alike. The debate is about the Conservative Government's refusal to accept the validity of local democracy.

I am surprised that the hon. Gentleman is persisting with his prepared text. Did he not hear me say that since 1979 the total spending of local authorities has gone up by 13 per cent. in real terms? How can he claim that authorities are deprived now, whereas presumably they were not deprived when he left office in 1978–79, although they are spending 13 per cent. more in real terms? I cannot understand the logic of that.

We are well aware that the Secretary of State does not understand the issues, nor does he seem to care about them. He does not need to tell us what we know only too well. The Government have done everything to stop local authorities from investing in services. That is what the Rates Act 1984 is all about. That is what the total of £18 billion-worth of accumulated cuts in rate support grant has been all about. That is what the right hon. Gentleman was referring to in his speech when he accused authorities that spend more than he deems necessary of being "profligate". All those Government attempts have been to reduce local government's facility to support decent levels of service and provision. After all, that has been the hallmark of eight years of this Government. Is the right hon. Gentleman suddenly denying that?

The hon. Gentleman cannot get away with that argument. It is true that the percentage of rate support grant has been cut and that authoriries have been involved in creative accounting, but the point that I am trying to get home to him is that the net result of everything that has happened in the eight years is that local authorities are spending 13 per cent. more. The point that he cannot substantiate is that they are short of resources. If they are short of resources now, how short of resources were they in 1978?

We are beginning to see the Jekyll and Hyde nature of the right hon. Gentleman's political character. Now he is apparently, on behalf of the Government taking credit for the increase in expenditure which for eight years they have been denouncing. He had better make up his mind on which side of the argument he really is. We know which side we are on. We are in favour of more investment in people, and in the services that are so essential to their economic and social well-being.

The Secretary of State mentioned Ealing. I am sorry that his hon. Friend the Member for Ealing, North (Mr. Greenway) has disappeared. Does the right hon. Gentleman support the expenditure decisions of the now Labour-controlled Ealing council, which he was denigrating a few moments ago—the reintroduction of places for rising-fives in primary schools, the deals to acquire 600 new homes in the face of the housing crisis and the employment of extra home helps and extra staff to deal with the under-fives? The council is taking on much-needed local housing repair teams and recruiting 150 extra teachers. Does the right hon. Gentleman support those decisions? Does he support the extra expenditure about which he has been boasting in that context? What is the answer? It is that the right hon. Gentleman has not the guts to say that he does not support it. That is the reality of the Government's pathetic position.

The proximity of this debate to the Budget reminds us of the Government's continuing policy of switching the burdens of such services from the taxpayer to the ratepayer—a policy pursued relentlessly for eight years and accompanied all the time by the crocodile tears of Tory Members about the inevitable rates increases that have resulted. Today's debate is about the Government's determination to enforce more and more central control—more powers for Ministers who abuse them all too frequently, using them to prevent and to crush sensible and sensitive public investment in people, their families and community services wherever they can.

Yesterday's announcement about the widening health gap in our country should shame Conservative Members, especially those Ministers who have deliberately and massively reduced investment in housing and employment. It should especially shame those Ministers who have planned and organised a systematic withdrawal of cash from the inner cities, where some of the worst problems in Europe persist. The reality is that the cuts in rate support grant are more than 10 times the additional support under special measures given to the inner-city authorities that are most in need. That is the damage that the Government have done to the most deprived communities in our country.

Yesterday's attempt to suppress the report of the Health Education Council is typical of this shameless Government, who also tried to suppress the earlier report of Sir Douglas Black. The latest attempt to stifle debate contrasts embarrassingly with the weekend leaks of the Prime Minister's alleged concern for the plight of neglected inner-city areas, which is so much a legacy of eight years of Thatcherism. Those very conditions of bad housing, poor environment, inadequate social services and health care, poverty and unemployment, which has trebled under this Government, led to the widening health gap that is so damaging to individuals, families and the national wellbeing. It is the Government's failure adequately and responsibly to deal with those problems that we are debating today.

Even worse, those Conservative failures result from the deliberate intention of policy. They are no accident. In addition, we have seen how the volume of complicated, contradictory and inconsistent local government law—the force-feeding of the Tory right with statute after statute—has reduced any attempt at sensible planning of local government finance to a shambles. We are told that the Secretary of State has been reduced to impotent rage by the stupidities of the system which his colleagues have created and which he has inherited and supported consistently over the past eight years.

The journal Public Finance and Accountancy states:
"Local government is suffering from a surfeit of new legislation. Each successive piece of legislation seems to increase rather than reduce uncertainty".
But still the Government plough on into the mire. Today, Parliament is asked to accept a report first announced by the right hon. Gentleman in 1986, when he published a consultation paper and wrote to all the Conservative councillors in the country recommending his proposals.

The Secretary of State published his first set of detailed proposals on block grant distribution on 3 October 1986. A further set of detailed proposals were published on 3 December, and another set on 13 January 1987. Following the decision on the Greenwich borough case, yet another set was published on 5 March. We understand that if the Secretary of State is successful in his appeal against the Greenwich decision a further set of proposals may be put forward for the coming financial year.

What, we wonder, is the purpose of the right hon. Gentleman's appeal? What is he hoping to achieve by trying to obtain a decision that will yet again cause confusion and uncertainty in local government finance, when budgets will already be fixed and rates will already have been set?

The changes in provisional block grant entitlements for some authorities alter substantially from one consultation paper to another. As the hon. Member for Ravensbourne (Mr. Hunt) and his colleagues in Bromley know only too well to their cost, and as is known in the city of Birmingham and in other towns and cities up and down the country, fluctuations running into millions of pounds occur almost weekly—certainly monthly—as a result of the incompetence of the right hon. Gentleman and his policies.

Despite the uncertainty about block grant entitlements, county councils and other precepting authorities are required by law to make their precepts for 1987–88 not later than 10 March, before the report has even been approved by the House, and rating authorities are required to make their rates not later than 1 April. Local authorities no longer have any right to make a supplementary rate or precept if their income from grant or other sources falls short of that taken into account when those rates or precepts were set. That, ' again, is the fault of the Government. The combination of lateness and uncertainty about grant entitlements for the coming financial year makes it harder for local authorities to plan sensibly, and inadequate planning leads almost inevitably to poor financial administration.

Since July, the right hon. Gentleman has made five announcements affecting grants to councils, and during that time there have been four Acts affecting local government finance. And Ministers have the gall to criticise councils for inefficiency! The Government have demonstrated an unprecedented level of bungling incompetence, and they cannot escape responsibility for the mess.

In a damning editorial, Local Government Chronicle, under the heading
"Ridley in a Central Mess",
says the position
"typifies the woeful mess the Environment Secretary has allowed and encouraged his senior civil servants to get him into".
In addition to the legal shambles of the Government's own creation, there has been the political fiddling of the system to buy off the much-leaked Tory revolt. How ironic it is to see Tory Members who demanded those policies being attacked by their own colleagues in local government, and by their own local Tory associations, for the capricious failures of those same policies—failures described by the editor of Local Government Chronicle as
"mere financial gerrymandering without accuracy,"
and, in a classic line, as the "height of loony government". How right the editor is.

All that was too much for the staunchest of Conservatives in the borough of Bromley, who watched in bemused disbelief as their grant went up and up, only to plunge down again by £3 million this year following the Secretary of State's failure to deliver his promise to make good their loss of £3 million last year—that is £6 million in two years from the staunchest of true blue supporters. How angry they must all feel.

Does the hon. Gentleman accept the logic of Bromley's case and recognise the injustice of the court result, which has meant that Bromley is deprived of that money? Will he go on record as saying that he recognises that the court got it wrong?

I recognise that the London borough of Greenwich did not act on some piece of arcane local government law dug up from the middle ages. It acted on an Act of Parliament of 1986, introduced by the Government. The hon. Gentleman voted for it. Greenwich took advantage of that Act of last year, which the hon. Gentleman and his colleagues from the London borough of Bromley supported. So we are not talking about some little error. We are not talking about some computer miscalculation. We are talking about Conservative Government law. That is what has caused the problem in the borough of Bromley. That is what Greenwich acted upon, and that is what it won the court case on. That is an accurate record of what happened.

I shall give way in a moment. I have not finished with the hon. Member for Ravensbourne.

I say to the hon. Member for Ravensbourne and his hon. Friends from Chislehurst, Orpington and Beckenham: in view of what has happened to the Conservative borough of Bromley, will they go into the Lobby and vote for the report? Will they support the taking away of that money from their borough? Will they support the incompetence of their own Government and, even worse, the failure of their own Secretary of State to honour his promises? Will they vote for that? We shall watch with interest, and so will the voters in the borough of Bromley.

The final irony is that the hon. Member for Ravensbourne's own friends and colleagues in the local Tory association—in Tory Bromley—are now taking this Government to court to sue them because of what has happened. I can well understand the Secretary of State reaching for yet another Silk Cut and nipping out of the Cabinet Room for a quick fag, in the face of that irony and the disbelief of his colleagues around the Cabinet table.

The question asked by my hon. Friend the Member for Ravensbourne (Mr. Hunt) was not answered by the hon. Gentleman. I leave aside the point of law that is the subject of a legal action and will be decided on appeal. I have made it clear that I believe that the rate support grant distribution resulting from that decision is inequitable to the boroughs concerned. I ask the hon. Gentleman a straight question: does he think that it is equitable? Would he be in favour of the distribution being put back to what everybody thought it was, or would he not?

The right hon. Gentleman must think that all of us in the Opposition are daft. He made an allocation of resources. He then decided to change the allocation. He was challenged by several authorities. One went to court and won. The right hon. Gentleman asks us to justify those actions. Of course we would not justify them for a moment. The right hon. Gentleman has been caught fiddling the books and now even his own side, the Conservatives, are complaining about it. It is totally unjustifiable behaviour and we would not support it for a moment. We have considerable sympathy—

The Parliamentary Under-Secretary of State for the Environment
(Mr. Christopher Chope)

Does the hon. Gentleman support Greenwich?

The hon. Gentleman had better keep quiet, or we shall come to him and some of his decisions and speeches.

We have considerable sympathy with what has happened to the people of Bromley and of the borough of Greenwich. The reality is that this shambles will not be ended until the Government are out of office and new policies for local government finance are introduced. That is how I respond to the right hon. Gentleman.

Order. If the hon. Member for Copeland (Dr. Cunningham) is not giving way, the Minister cannot intervene.

I shall give way in a moment.

The Secretary of State is asking the House of Commons to approve the report, but he is appealing against it in the House of Lords at the same time. This is absolutely unparalleled. On the one hand the House is recommended by the right hon. Gentleman to say yes to the report, and at the same time he is taking a case through the courts to have it set aside. It is cloud-cuckoo-land in the form of benighted Tory bungling. That is the reality that the right hon. Gentleman has got himself into. If he is successful in the court case, further changes will be necessary. They will affect 13 London boroughs in a major and serious way, and many other authorities in less serious ways.

I should simply like to ask the right hon. Gentleman, when he has stopped waffling, whether he realises that Greenwich has benefited from an error to the tune of 3 million quid at the expense of Bromley, and whether he would be in favour of having a grant that is paid to the roads paid to the borough in which the roads are situated. That is the question which, three times, the hon. Gentleman has refused to answer—because, of course, he does not have the guts to say what is right.

The right hon. Gentleman is now being less than candid with the House. He is falling back on the myth that somehow there was an error. There was no error. There was a change in the basis on which the grant was allocated. There was no error. It is a Government excuse for the cock-up that they have engineered. When the right hon. Gentleman lost in the courts, he announced his intention last year to change the law, and in doing so—[Interruption.] It is no good the right hon. Gentleman waving for his hon. Friends to intervene. They will not take any notice. It is no good sending for the Tory party equivalent of the fifth cavalry, because most of them are laughing their heads off at the predicament that the right hon. Gentleman has got himself into. I expect that some of them are even gritting their teeth at the prospect of having to walk through the Lobby to vote for this nonsense.

The reality is that no reasonable purpose can be served by the Secretary of State trying yet again to change all the figures. Rate-limited authorities in particular will lose cash and be unable to change their rates to make up the shortfall. Authorities could be forced into deficit as a result of the combined incompetence and gerrymandering of the right hon. Gentleman. When the Association of London Authorities asked the Department of the Environment about the matter, it was told:
"Ministers have not yet considered the matter".
Apparently Ministers have not even considered the implications of the changes that may result from the appeal.

The Government have made much of an alleged increase of £1 billion in aggregate Exchequer grant. It masks an increase of 15 per cent. in specific and supplementary grants and an increase of only 6 per cent. in block grant itself. That increase in specific and supplementary grants carries with it yet more central control over local government services. Much of the remaining increase in block grant—£530 million—may not materialise because of the end to grant recycling. The right hon. Gentleman suggested that the figure might be only about £200 million. I ask the obvious question: why is his right hon. Friend the Chancellor of the Exchequer planning, in the Budget Red Book, to recoup at least £400 million? That is what the Budget document says. The right hon. Gentleman must be aware of it. Is he trying to mislead the House in what he has been saying today? Is he trying to disguise the nature of the clawback?

The Rate Support Grants Act 1987 abolishes grant recycling, the process by which initial claims on the block grant pool are rescheduled so that all available grant is distributed. The distribution of the total block grant pool is crucially dependent upon the expenditure assumption that the Secretary of State adopts. He assumes in the report that authorities will increase their expenditure by only 2·8 per cent. in the coming financial year. This is an unrealistically low estimate. If authorities spend more than the right hon. Gentleman deems necessary, they will lose grant.

Only last week the Chancellor of the Exchequer said that general inflation would rise to 4·5 per cent.—at least the Secretary of State got that figure right. Grant-related expenditure assessments, on which grant entitlements are based, have been set at £1 billion lower than total expenditure provision. That unallocated sum will have a serious effect on grant distribution, disbenefiting high-need authorities, many of which are metropolitan authorities. It is merely a means of reintroducing expenditure targets in another guise. Severe block grant mechanisms are designed to force expenditure restraint. This is contrary to what the Secretary of State tried to say earlier about increasing expenditure. The implication of what he said was that the Government thought that that was good and wanted it, but the mechanisms is the report deliberately act against it.

The grant proposals include a continuation of severe financial penalties, which are made worse by the abolition of recycling. Many authorities lose £1 of grant or more for every additional £1 of spending, making a cost to the ratepayer of £2 or more. That penal regime is made worse by the loss of grant that is recycled to the pool. Instead, it will go direct to the Chancellor of the Exchequer, who calculated in the Budget statement documents that he would recoup £400 million in that way. That is not the much smaller sum to which the Secretary of State referred.

This rate support grant report does nothing to address the criticisms of Government policy failures made by the Audit Commission in its report on the management of London authorities. The authorities concerned have made positive responses to the recommendations in that report and are acting on them. Some boroughs have already established teams to work with the Audit Commission to deal with those issues. That is a much more positive response to the report that anything that has come out of the Department of the Environment to date.

In addition to the plan to recover that £400 million from the total available to councils as set out in the Budget documents, the Chancellor and the Secretary of State outline plans in those same documents for an increased rates take of £1·5 billion. That is what the Chancellor's Red Book says. Thus, the Government are assuming that rates will rise as a result of their policies by an average of 9 per cent. The Secretary of State was trying to convey the impression that the Government were assuming that the rates increase would be 6 per cent. or less, but the Reel Book directly contradicted that. Who is telling the truth —the Chancellor, or the Secretary of State? So much for the Secretary of State's claims in the House in July, in January and again today that no rate increases—or only low ones—would be necessary.

In the context of ministerial pronouncements anticipating lower rate rises, it is significant that the Treasury is forecasting a substantial rise in rates income for the coming financial year. Table 1·2 of the Financial Statement and Budget Report for 1987–88 shows that rate receipts are forecast to increase by 9 per cent.—that is the Chancellor's figure—compared with a 4·2 per cent. increase in income tax receipts and a 6 per cent. increase in general Government receipts.

Why does the Secretary of State repeat his claims, knowing that his colleague in the Cabinet, the Chancellor of the Exchequer, who is in charge of running the economy, does not agree and is quoting a higher figure? Is the right hon. Gentleman trying to mislead the House?

A key component in the mechanism to distribute grants to local authorities is the grant-related expenditure assessment that is assigned to every local authority, which provides a measurement of what the Government consider that each authority should spend to provide a similar level of services. For the coming financial year the GRE total will be £23,742 million, which is £961 million less than the total expenditure that local authorities anticipate.

The gap between the two totals—total expenditure and GRE—is important, because spending more than the Government's assessment — particularly above threshold—leads to a high rate of grant loss for each additional pound of expenditure. Therefore, the failure to increase the total of GRE in line with total expenditure will result in many authorities running into a higher rate of grant loss for increased spending.

Following the intense Tory lobbying from shire counties, in southern England in particular, the settlement includes a limit of 7p at ratepayer level on grant losses arising from changes in the block grant mechanism, and a limit of 12p on grant gains. The major beneficiaries of the Secretary of State's fiddling in the current financial year—compared with the Government's previous plans, as set out in October—are authorities such as Surrey, which will receive £7·7 million extra, Hertfordshire, £6·4 million, and Hampshire, £3·9 million. Here again the Government are redirecting cash to areas that are least in need of it and away from many other areas that need it more.

Is it not true that Hertfordshire and Surrey will receive less grant than this year? Does the change not mean that the reduction in grant has been alleviated, not that there is a new bonanza for the home counties?

That is true. In general, those authorities have lost grant every year under this Government. I hope that the hon. Gentleman will ponder that before voting for the motion tonight and that he will make it clear to his electors that every year people in Surrey, Hertfordshire and elsewhere have lost support for essential services such as education and social services as a direct result of Government policy. That is what the policy is about.

Have not the shire counties, such as Essex, lost grant because the Government are directing more funds to the urban and metropolitan counties? That shows that they are being immensely fair in helping counties that are Labour-controlled and, unfortunately, penalising Conservative-controlled counties.

I am sorry to disagree with the hon. Gentleman, because he and I are the only two hon. Members with a PhD in chemistry, but if he believes that, he will believe anything.

The reality is that every year the Government have cut what they pay to local authorities as a percentage of their expenditure. Grant has decreased from 62 per cent. in 1979–80 to less than 46 per cent. now. Each year the amount has been lower, and all authorities have suffered. The inner cities have suffered grievously as a result of Government policies. It is not a matter of taking money from the shires and giving it to the inner cities. There may have been some adjustments within the smaller total, but all authorities have lost heavily, and I am sure that in his heart of hearts the hon. Gentleman knows that, too.

The Government cheat local councils in another way. The assumption that total expenditure will increase by only 2·8 per cent. in the coming financial year is contradicted by the Financial Statement and Budget Report, which forecasts a rise in the gross domestic product deflator—the Government's own measure of the probably rise in costs across the economy—of 4·5 per cent.—a significantly higher figure. If the Government had been more honest, if that figure had been used, a higher total for local authority costs would have resulted. The Government, then, have deliberately planned a shortfall in what they are prepared to make available.

We are told that the answer to all this is a new system, a medieval solution, a poll tax with a uniform business rate attached to it—proposals already widely condemned by business, commerce, local government and political parties.

The Secretary of State says, "Rubbish." I can tell him that at a very recent meeting with the London chamber of commerce, even it condemned the proposals, and it wrote to the Chancellor of the Exchequer saying so. I do not know where the right hon. Gentleman is looking for friends in support of a poll tax with a uniform business rate, but they are not too thick on the ground. The proposals have indeed been condemned not only by Opposition parties, but by the Tory Reform Group, in a massive, damning report, in page after page of it. The Tory Reform Group has such patrons as the right hon. Member for Mole Valley (Mr. Baker), the cpresent Secretary of State for Education, the right hon. and learned Member for Rushcliffe (Mr. Clarke), another current Cabinet Minister, and the right hon. Gentleman the Home Secretary.

Will the hon. Gentleman read out the disclaimer on the second page of that report, which dissociates those patrons of the Tory reform Group from the content of that report?

Is that not typical of the Tories? All their names are on the front page to give the thing credibility and standing, but in the small print they say that they want nothing to do with it. That is typical of the Tory party's approach to these matters. No doubt the Tory manifesto will say the same. If it does not, it should, because that is what it will be like.

In addition to giving the Government effective control over almost 80 per cent. of local council finance, the social, economic and administrative implications of a poll tax are horrendous and grotesquely unfair. The veil of secrecy over the impact of a poll tax was lifted a little by the Minister of State, tantalisingly, on Monday, when apparently he embarked upon a major press briefing session about the consequencies. I am quoting the hon. Gentleman's words exactly from his Department of the Environment hand out. I have picked the one concerning Lancashire, but there are several others. This is what the Minister of State had to say about the consequences of the poll tax in Lancashire:
"for the average two-adult household in north east Lancashire, the community charge"—
that is, the poll tax—
"is likely to produce a substantial increase in the amount to be paid. This is because domestic rateable values in the area at the moment are among the lowest in the country. This means that the people in north east Lancashire are getting local authority services far more cheaply than those elsewhere. Although. when community charge is fully introduced, bills will rise, the community charge will still (on the basis of 1986–87 spending) be in the range £180 to £215…
The Government is still considering what transitional arrangement might be introduced to help those in areas where bills would rise substantially as a result of the introduction of the new system."
This is the wonderful alternative to the rates, to help people. The answer is that they pay more, and we have that on the hon. Gentleman's own admission. The news will really buck up the Tories canvassing for local government elections throughout the country. We are grateful to the Minister of State for his candour, because in Blackburn, Darwen and Rossendale, Pendle, Hyndburn and elsewhere we intend to help him get his message across to people. We intend to ensure that in the local elections, and especially in those parliamentary constituencies that are marginal in the general election, the people know exactly what the Minister of State wants them to know about the consequences of a poll tax.

Would my hon. Friend care to inform the Minister of the hostility that is building up in west Cumberland, in my hon. Friend's constituency and in my constituency, to the news already circulating about the level of new rates that would be paid by our constituents if this Government were to be allowed to win? Would my hon. Friend care to comment on the document which we have produced and which sets out in great detail the effects that this will have and shows that for the great majority of people in west Cumberland the new rates will mean a massive increase in what they pay? The only people who benefit from this new system are people who live in expensive property. They are the only beneficiaries. Is that not quite disgraceful?

I am grateful to my hon. Friend the Member for Workington (Mr. Campbell-Savours), not only for his intervention, but for all the work that he has done on the details of the local consequences of the introduction of a poll tax, not only in his constituency in the borough of Allerdale, but in my constituency in the borough of Copeland, because the same fate awaits thousands of families in west Cumbria, as he has rightly made clear.

The irony is that in my own constituency of Copeland, with an excellent Labour council, there has not been a single increase in rates for six years. Indeed, this year the Labour council of Copeland is reducing the rate, but it is to have this poll tax imposed upon it, which will force it to charge people more as a result of this Government's policies. It is exactly the same in my hon. Friend's constituency in the borough of Allerdale. People will be appalled to learn that a Tory Government will ensure that they pay more in local taxes, regardless of their income, the size of their property or anything else.

At least in my hon. Friend's part of the world this is still a hypothetical question. Would he spare a thought for the predicament of the people in Scotland, for whom the Government have already got legislation, not only through this House, but on its way through the House of Lords? The people of Scotland are to be used as guinea pigs for this appalling new taxation.

I agree with my hon. Friend and I think that the people of Scotland agree with him. The way things are going, the Tory party will be lucky if it is not completely wiped out in Scotland when the general election takes place. The same is likely to happen in the north of England, too.

It is also very significant that the Government are being evasive about rebates and reductions for those families and individuals facing financial difficulties. Everyone will have to pay at least 20 per cent. of the tax, regardless of income. Even rebates may apply only to a fixed amount, less than the total tax charged, according to a recent article in New Society.

While Ministers announce a speeding up of these unfair proposals, they operate a go-slow on the highly sensitive issue of rebates. It took the Prime Minister more than two months to reply to a letter from Councillor Jack Loyden, the leader of the Association of Metropolitan Authorities, on this issue and then her reply was completely vacuous, giving no answer at all. As I have said, even the Tory Reform Group, with several existing and many former Tory Cabinet members as patrons, has rubbished the Government's own proposals.

The country is facing a mounting crisis in housing in parts of our major cities, in education and training and., not least, in research establishments and the consequent brain drain. Local government has a crucial responsibility in many of these policy areas. Undermining local government, demeaning it, as the right hon. Gentleman does every time he speaks in the House and elsewhere, serves the nation ill. Undermining local government finance, taking more central powers, and preventing better and more effective investment in people is guaranteed to make those problems worse. As the new director-general of the Confederation of British Industries has said, city technology colleges are an irrelevance in the face of these problems, for without decent homes, good schools and better training and skills our country is doomed. No amount of manipulation of trade figures and unemployment statistics, in a post-Budget, pre-election Tory propaganda effort can solve those critical problems.

Labour party policy on new skills, jobs and industrial strategy offers effective solutions and a clear choice to the people. A clear majority of the British people prefer investment in jobs and services to tax cuts. The majority support investment in people—in ourselves and in our communities, schools and hospitals. That cannot be achieved without effective, improved and strengthened local government, which is an urgent national requirement. Those objectives cannot be achieved by this Government, by their policies or by reports such as this. That is why we oppose it.