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Rate Support Grant (England)

Volume 129: debated on Wednesday 9 March 1988

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Motion made, and Question proposed,

That the Rate Support Grant Supplementary Report (England) (No. 4) 1983–84 (House of Commons Paper No. 325), a copy of which was laid before this House on 19th February, be approved.—[Mr. Chope.]

On a point of order, Mr. Deputy Speaker. I inquired after this report a moment or two ago in the Vote Office. It appears that there are no copies of it, although copies are being brought. The Leader of the House has a responsibility to ensure that copies are available. The Government Whip is passing me one, but another half dozen hon. Members may want copies, too. It is inadequate that the Leader of the House has not ensured that sufficient copies are available.

1.30 am

I shall briefly refer to the report, because it would be wrong to allow it to go without comment. It is the fourth supplementary report to the main 1983–84 RSG report in four years. I understand that the Secretary of State has consulted local authority associations on the content of the report. The main points raised by the Association of Metropolitan Authorities related to the GRE, and data corrections. Certain errors were made by the Department of the Environment in the social services GRE, which, when corrected, had devastating implications for GRE revisions and consequential grant reductions, which are significant for some authorities.

I shall give some examples. Newham lost £1·1 million, Wandsworth and Waltham Forest lost £1 million, and Hammersmith and Fulham lost £700,000. The biggest loser was Southwark, which lost £2·5 million. The adjustments were made retrospectively, after the local authorities' accounts had been audited. Therefore, the Association of Metropolitan Authorities takes the view that, as the errors were of the Secretary of State's making, they should be corrected at his expense and not at the expense of local authorities. The grant pool should be increased to compensate the authorities which have lost by the error; otherwise, all other authorities' grants will be reduced to pay for the correction. Obviously, the AMA's representation has been ignored. Therefore, other authorities will be unfairly penalised for an error made by the Secretary of State's Department.

I refer also to relevant and total expenditure and specifications under the Local Government Finance Act 1987. The Secretary of State intends to amend the definitions of relevant and total expenditure under powers in the Local Government Finance Act 1987. The proposed amendment would take out transfers to special funds that give rise to a deficit on the rate fund revenue account, which are not in respect of specific liabilities, or transfers back to the rate fund account of sums so transferred—so-called deficit financing transfers.

The association objects to the fact that the adjustments are made retrospectively. The proposals require authorities to change their earlier accounting practices, which, at the time, were quite proper and have not been subject to any criticism from external auditors.

The grant implications of the enforced change in accounting practices have not been revealed by the Government, but it is thought that in some cases there could be significant reductions in authorities' grants. All the representations that have been made by local authority associations have obviously been ignored. The issues are important to local government.

I draw attention to annex 1 of the report. The estimates in the third supplementary report, compared with the one that the House is now considering, show that there has been no increase in domestic rate relief. The report also shows a continuing reduction in local government expenditure in significant respects, such as education, school meals and milk, libraries and museums, police, local transport, local environment services and employment. Other services are also affected.

In the report, the Government make provision for police pay and the policing of industrial disputes, but they disregard the increase in police recruitment. During the past four years, local police authorities have made representations for additional resources to make sure that the streets of our towns and cities are safe. Their requests found no favour with the Secretary of State. The adjustments in the report are retrospective and require authorities to change their accounting practices. I put it to the Minister that that principle is wrong and that local government is entitled to better consideration.

I ask the Minister to consider carefully the implications that face local authorities, because of what has been reported to the House tonight, and that certain provisions should be made to ensure that local authorities do not suffer because of errors that have been made by the Department of the Environment. I ask the Minister to take note of those points with a view to correcting the errors.

1.36 am

Given the fact that the hon. Member for Normanton (Mr. O'Brien) said that the London borough of Southwark is most severely affected by the report, it will not surprise the House that I intervene briefly to make a specific point about my local authority and the people of Southwark, although it applies generally to the nature of the report.

Last month we debated the rate-capping order on a series of local authorities which included Southwark. We debated that the day after we had debated the other supplementary rate support grant reports, with which this report was originally intended to be debated. As the House will remember, it was withdrawn at that stage because there had been some Government error and it could not be debated.

At that stage, the effect of the remaining supplementary orders in relation to other years, was that Southwark received a £2·7 million reduction in the money it was to receive for the coming year. By the rate-capping order the following night, Southwark was not allowed to raise any more money to compensate for that. The effect of that was a 5 per cent. to 10 per cent. cut in real services.

When, within a matter of weeks, we are back again to have another slice of money taken off, we have to ask Ministers why the system is working in relation to the financial year 1983–84 to remove more money from Southwark at this late stage with no compensating recovery.

I do not propose to examine the subject in great detail, but in general terms we all understand that a corrective mechanism is built into the existing rate support grant allocation system whereby grant entitlements are altered depending on the latest information as to what local authorities spend, the changes in the methodology of calculating grant-related expenditure assessment, new principles for calculating grant-related poundages and on certain local authority expenditure being disregarded.

The figures in Southwark give rise to questions as to whether it has worked out fairly for Southwark. If it has not, presumably other boroughs and districts have also been affected. Between the third and the fourth supplementary reports laid this year, relating to four years ago, Southwark has lost £2·6 million. The figure for the supplementary grant in the third report was £38·13 million, and in the fourth report the figure was £35·53 million. The total loss of grant between the original 1983–84 rate support grant settlement and this report is some £3·806 million, according to officers in Southwark whom I have consulted today and during the past few days.

I could go through a list of the effects in each year during the past five years. Without going into detail, they show that there is a substantial net loss to Southwark, which at this late stage, only three weeks before the end of the financial year and too late for Southwark to do anything about the next financial year, will result in a loss of income to Southwark and less money being available to the borough.

I should like to ask the Secretary of State a specific question that follows the general point made by the hon. Member for Normanton. Is it fair to justify to a particular borough and its residents—in this case, Southwark—how the miscalculations and wrong estimates given four years ago can be corrected at this late stage to the detriment of a community of 250,000 people? If the Government are arguing that theoretically the rate support grant should enable a standard level of services to be provided, by removing at this stage £2·5 million the Secretary of State is saying that the local authority cannot be allowed to provide a standard level of services.

Is there any way in which the Secretary of State could concede that Southwark's rate-capped figure or grant-related expenditure figure for next year could be looked at again to compensate for this late-in-the-day withdrawal of a substantial sum of money? The council has a budget of only about £130 million. To take £2·5 million out of it would have a substantial effect on its provision of services. The borough's resources are being enormously stretched to provide nursery places and home helps. It is threatening to close homes for the elderly, lunch clubs, day centres and the like. It does not seem that the borough will be able to recoup the £2·5 million.

Greater accountability is not achieved, four years after the event, by readjusting the figures to compensate for a miscalculation four years ago. About an hour ago Southwark's budget for next year was set in Southwark town hall. The rate has also been set and is now in place, but it was set without this report having been approved, without its effect having been worked into the Southwark system and without Southwark having been able to compensate adequately, both this year and next, for adjustments that have nothing to do with Southwark's alleged failings or defects.

I cite Southwark as an example of the way in which the report appears to be unfair to the borough, but I believe it to be unfair generally. The report is very much a last-minute adjustment to an accounting year that is now nearly four years ago. On the face of it, it is very much a tidying-up exercise and involves millions of pounds. It ought not to be approved without representatives of those communities seeking assurances that money lost through no fault of their own can be recouped in some other way.

I hope that the Minister will consider ways in which he can help Southwark. I hope that he will be prepared to meet representatives from Southwark and other communities that will be affected by the report so that means can be found to compensate them for these late-in-the-day losses and so that justice can be done, even at this late stage.

1.42 am

The order shows how the Government are making a trawl, four years after the relevant year, in order to make adjustments to expenditure. It also shows how scrupulous the Government have been in battening down local authority expenditure. Increases in the rate poundage have been brought about in every case by the cuts, the clawbacks and the rate capping by central Government. In our earlier debate, several Conservative Members said how proud they were that local authority expenditure had been squeezed.

The order provides for a wide range of services. The poorest, those who need the most help and guidance, are in difficulties because of the constant adjustment of local authority expenditure by central Government. It would be useful if the Government applied the same scrupulousness to their own expenditure, but they do not. Local authorities nearly always meet their expenditure targets. It is central Government who are sloppy.

For example, defence expenditure is out of control. If some items of central Government expenditure were incorporated in a report such as this—for example, the millions, even billions, of pounds spent on devices such as the Sting Ray torpedo by the Ministry of Defence—the Government would press forward eagerly to the Dispatch Box to attack the local authorities responsible, whether Conservative or Labour. Naturally, however, the Government would be more gleeful if they attacked a Labour-controlled local authority. However, the Government cannot pick out any local authority in that fashion because such things do not happen: scrutiny is tight and central Government weigh down heavily on local authorities.

Four years on, this scrutiny seems unnecessarily zealous, especially when we consider that the order provides for disregarding expenditure on several items, such as the 1983 police pay award, which is perfectly reasonable; civil defence, which is some of the lunatic expenditure that the Government insist that local authorities undertake as part of the Government's cloudcuckoo-land of a radioactive cinder heap—part of the Prime Minister's vision for the future; and expense incurred in policing the miners' industrial dispute of 1984 and the mass demonstrations at Ministry of Defence sites—presumably against nuclear weapons.

Instead of following the example of the ordinary sensible housewife—so beloved of the Prime Minister's vision—and being paid on the nose at the time and with a clear object, the expenditure is often shielded by being forced on local authorities, although at the time of the dispute some local authorities refused to sign the cheques for the extra police time and police costs. I am convinced that it was forced on them because, if central Government had been seen to spend millions of pounds policing the miners' strike, that would show how much public money—not their own money, as the Prime Minister keeps inveighing about Government expenditure—was spent on attacking the miners; then the shift of mood and opinion might have been much more marked.

Section D of the introduction provides for that sort of disregard. I assume that the mass demonstrations at Ministry of Defence sites were associated with nuclear weapons. Again, the cost of policing those demonstrations was unnecessarily high because the Government wanted to demonstrate a paramilitary might to intimidate the demonstrators, which they nevertheless failed to do.

The report is a demonstration of the crushing weight placed by central Government bureaucracy on local authorities, instead of giving them the freedom of choice—much vaunted by the Conservatives—and allowing them some choice in expenditure so that they can improve services. The report is introduced by the Government at a time which forbids or inhibits the detailed examination that could usefully be given to such a report because the Government seem absolutely obsessed with filling the House with legislation.

The Committee Rooms are bursting with people working at all hours for some frenetic purpose that is quite beyond the comprehension of the ordinary average sensible citizen, who does not think that Lords amendments to the Local Government Bill need to be dealt with tonight. We could usefully have spent a great deal more time on this report, which is important as it points to the structure of the local government system, which is vital to us all but which is being increasingly pressed by the Government.

1.48 am

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

The report is important. As a result of new information from the local authorities, we have made changes.

The report reflects the final outturn expenditure information which, for most local authorities, is certified by the auditor. That is why the report has been introduced rather late in the day.

There are a small number of cases where deficit financing issues have led my right hon. Friend to the conclusion that total expenditure figures, other than those given to us by the authorities, are the correct ones. The final figures show that the relevant expenditure for the year was £34 million less than the amount estimated in December 1984 for the previous supplementary report. We estimate that the relevant expenditure was almost £23 billion, which is £700 million more than the amount provided for in the 1983–84 settlement. We now estimate that the total of specific grants was £42 million higher than in the last report. There are no changes to be made to the total of rate support grants. Therefore, this report increases aggregate Exchequer grant by £42 million to £11,528 million.

I would impress upon the House that the sum of £11,528 million is substantial. The report brings up to date our assessments of what authorities needed to spend to provide a standard level of service—that is, their GREs. We have incorporated into the revised GREs a final estimate of the level of interest rates paid to local authorities on their cash balances, final outturn information on non-discretionary expenditure on certain items such as mandatory student awards and land drainage precepts to water authorities.

We have made other changes affecting individual authorities, including the effects of the boundary changes made at the beginning of 1982 and 1983. We have corrected an error which was made in the personal social services components. When the numbers of elderly people in certain categories in each local authority were calculated from census information, the wrong scaling factors were used and that also affected several other indicators. We have now put that right.

The hon. Member for Normanton (Mr. O'Brien) said that it was extremely unfair that the consequences of that change will be paid for by local authorities.

The cut in the allocations to personal social services is the most important part of the report. Serious consideration should be given to the joint financing between health and local authorities. The House is aware that more and more elderly and mentally sick people are being discharged by health authorities into local authority care. No provision is made in the report to cover the additional expense that must be borne by local authorities. The cut in the allocations to the personal social services is denying local authorities the resources to provide the services that they are being forced to provide by health authorities.

The report has nothing to do with the GRE indicators for the community care programme. The provision for personal social services has changed because of new information that became available. Incorrect population figures were used in the 1983–84 settlement main report to scale the numbers of elderly living alone. There were various other errors and changes resulting from that information. The effect of those changes has meant some losses for some local authorities.

Those losses are nothing like the £2 million that the hon. Member for Southwark and Bermondsey (Mr. Hughes) says has been lost by Southwark. As a result of the social services changes, that borough has lost £43,000. I accept that Southwark has suffered some other losses, but the borough has been aware of those impending losses for some time and they were the result of other changes to the GRE.

The hon. Gentleman understands local government finance and he will know that changes to GRE feed through to alter the amount that is given to individual local authorities. The hon. Gentleman will be aware that the rate limit for Southwark for 1988–89 took account of the estimated effects of this supplementary report. There is no significant difference between our estimates and the actual effects arising from the supplementary report. I believe that the treasurer of Southwark exaggerated when describing to the hon. Gentleman the effects of the supplementary report.

I will confirm the treasurer's remarks later. Will the Minister confirm that the change between the No. 3 and No. 4 supplementary reports means a loss of £2·6 million for Southwark? The change in the original rate support grant report means a loss of £3·8 million for Southwark. Although an authority budgets against the contingency of money being taken away, it is clear that an assessment of Southwark's needs made a few years ago has been altered to Southwark's detriment and has affected a substantial proportion of its allocated budget. Over the past few years we have not gained; we have lost. Surely the Minister accepts that, even though only a small part of that is due to the technical changes made since the report was originally tabled and then withdrawn.

I cannot accept that. On the latest information, Southwark received more money than it was properly entitled to. It has benefited from that money over a period and it is only as a result of this latest adjustment, following the final audit, that we can see that Southwark has been overpaid in the past. Naturally enough, that money is being clawed back from Southwark. The Southwark treasurer, as a prudent man, will have been able to anticipate that.

We are talking about one of the effects of the present rate support grant system. As the hon. Gentleman knows, when we move over to the new system, each local authority will know in advance of each financial year exactly how much grant it will get, and the grant will not vary according to the authority's level of expenditure over the year. There will be much more certainty and simplicity, and we shall not be debating supplementary reports going back four years.

I hope that the Minister will not mislead the House into thinking that the new community charge or poll tax system means either that there will not be a rate support allocation or its equivalent or that there will be absolute certainty from one year to the next. There will always have to be a rolling method of calculating allowances for local authorities. Of course the prudent treasurer budgets for potential take-back, but what happens if he has nothing left in his reserves because he has had to spend it all? There is nothing more to provide from the budget. That is the problem for overstreched authorities such as Southwark.

Those considerations were taken into account in arriving at the rate limit for Southwark this year. I do not say that under the new system the grant will be the same each successive year for each local authority, but it will not be subject to the same degree of variation as under the present system. In the year that we are discussing—1983–84—not only did we have variations resulting from individual changes in expenditure by individual authorities, but those changes had an effect upon the grant of every authority as a result of recycling.

We have covered the points raised in the report. The new changes to the revenue support grant and the grant system that will come in in 1990 will make debates such as this a thing of the past. I am sure that most hon. Members will welcome that change when it comes.

Question put and agreed to.

Resolved,

That the Rate Support Grant Supplementary Report (England) (No. 4) 1983–84 (House of Commons Paper No. 325), a copy of which was laid before this House on 19th February, be approved.