HOUSE OF COMMONS
Third Standing Committee on Statutory Instruments, &c.
REVENUE SUPPORT GRANT (SCOTLAND) (No. 2) ORDER 1992
Tuesday 30 June 1992
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The Committee consisted of the following Members:
Chairman: MR. NORMAN HOGG
Atkinson, Mr. Peter (Hexham)
Bendall, Mr. Vivian (Ilford, North)
Body, Sir Richard (Holland with Boston)
Bray, Dr. Jeremy (Motherwell, South)
Carlisle, Mr. John (Luton, North)
Connarty, Mr. Michael (Falkirk, East)
Conway, Mr. Derek (Shrewsbury and Atcham)
Duncan, Mr. Alan (Rutland and Melton)
Gallie, Mr. Phil (Ayr)
Griffiths, Mr. Nigel (Edinburgh, South)
Kirkhope, Mr. Timothy (Leeds, North-East)
Kirkwood, Mr. Archy (Roxburgh and Berwickshire)
Macdonald, Mr. Calum (Western Isles)
Maxton, Mr. John (Glasgow, Cathcart)
Moonie, Dr. Lewis (Kirkcaldy)
Squire, Ms. Rachel (Dunfermline, West)
Stewart, Mr. Allan (Parliamentary Under-Secretary of State for Scotland)
Walker, Mr Bill (Tayside, North)
Wolfson, Mr. Mark (Sevenoaks)
Mr. R. G. James, Committee Clerk2 3 Third Standing Committee on Statutory Instruments, &c. Tuesday 30 June 1992
[MR. NORMAN HOGG in the Chair]
The Parliamentary Under-Secretary of State for Scotland (Mr. Allan Stewart): I beg to move, That the Committee has considered the Revenue Support Grant (Scotland) (No. 2) Order 1992. As the Committee recognises, this is a technical measure which will increase the 1992 revenue support grant to Scottish local authorities. The order has been fully discussed with the Convention of Scottish Local Authorities which is content with its provisions. I am, of course, happy to answer any questions.
Mr. John Maxton (Glasgow, Cathcart): I would hate to disappoint you, Mr. Hogg, and not make at least a short speech to keep hon. Members here. As the Minister said, COSLA has been consulted about the order and, as far as I am aware, agrees about the distribution of the extra money. The order raises one question. It will cut the non-domestic rate in Scotland. The extra money that the Government are providing will compensate for that cut. It is the Government's aim, and that of Scottish local authorities, to equalise the non-domestic rate between Scotland and England. That is why the Government introduced the cut—to attain harmonisation at a slightly faster rate. However, even with that cut, the average Scottish rate will remain well above that in England and Wales. That is a cause of concern. There will still be great disparity between the highest non-domestic rates in Scotland and the uniform business rate in England. Unless the Government take urgent action to solve that problem and reduce the high rates in some local authorities, it will be many years before equality is reached. Instead of providing for a flat-rate reduction in the non-domestic rate across all local authorities—whether their rate is below or above the English average—Scottish local authorities do not understand why the Government have not cut by a greater amount the amount due from the higher-rated local authorities in order to bring them faster towards the point of equality with the uniform business rate in England and Wales. That is the aim. While welcoming the order, Scottish local authorities feel that it will not accelerate that process as quickly as many of them would have liked.
Mr. Stewart: I do not agree with the hon. Gentleman's analysis, but he has raised a legitimate point. He is substantially correct in his description of the order. I have to say that 6·7 per cent, of the £47·7 million represents an increase on the overall 1992–93 aggregate external finance settlement. That followed the formula consequences of the 4 teachers' pay settlement south of the border which my right hon. Friend the Chancellor of the Exchequer, with his customary generosity, allocated to Scottish local authorities.
Mr. Maxton: Do not push us too far.
Mr. Stewart: I shall not rile the Opposition by expanding on that point. The hon. Member for Glasgow, Cathcart (Mr. Maxton) is substantially correct, in that the remaining £41 million is a straight switch between the revenue support grant and the non-domestic rate income components of the original AEF settlement. That followed the reduction of business rates in Scotland that was announced by my right hon. Friend the Chancellor of the Exchequer in his Budget on 10th March. The hon. Member for Cathcart should realise that we have made substantial progress in reducing the burden of non-domestic rates on industry in Scotland. They were reduced by £80 million in 1991, by a further £100 million 1991–92 and by a further £100 million in the current financial year. Scottish businesses are substantially better off than they would otherwise have been. The question of top slicing was raised. That point has been legitimately raised by local authorities and business interests in the west of Scotland. I assure the hon. Member for Cathcart that the Secretary of State now has the relevant powers. I assure him that the matter will be taken fully into account as we move towards equalisation of the non-domestic rate burden north and south of the border. That remains a firm commitment of the Government.
Mr. Maxton: Under the Government's proposals, within what time scale does the Minister expect equalisation—two, three, 10, 20 or how many years? Scottish businesses and local authorities need to know what time scale they are operating within.
Mr. Stewart: The time scale has not changed. It is the time scale for full implementation of the uniform business rate south of the border. That has always been the time scale.
Mr. Maxton: That is for average implementation.
Mr. Stewart: That is for full implementation. The hon. Gentleman asked about top slicing for authorities where the business rate poundage is particularly high. That is a legitimate point that we have already taken into account and will continue to take into account as we move towards our objective.
Mr. Nigel Griffiths (Edinburgh, South): Can the Minister justify three figures that three local authorities will not consider adequate—those for Lothian regional council, Edinburgh district council and Eastwood district council?
Mr. Michael Connarty (Falkirk, East): I find the manipulation of figures fascinating. I was a council treasurer in a previous incarnation. It is interesting that the jargon has changed and that we now talk about top slicing. We invent new jargon to confuse the public. The reality behind the answer given to my hon. Friend the Member for Cathcart is that there was a loss, reduction or cut—call it 5 what you will—of £100 million in business rates as a source of revenue for local authorities. A sum of £41 million was repatriated by the order. By my arithmetic, that amounts to a loss of £59 million of revenue from that source for Scotland. We regret that loss, because the money must come from another source: either from cuts in services, a prime aim of the Government in the past, or from increasing the rate burden. I live on a low-tax area but I know the difficulties that will be caused when trying to maintain services. In a previous incarnation, my authority and I took a high-tax position, because we did not believe that the Government's vision of services was correct. I hope that the Minister has more accurate figures than those he appeared to be unable to give to my hon. Friend the Member for Cathcart on how much revenue from non-domestic rates will be lost to local authorities by the time that the process is completed. I am not sure that the Minister knows where he is going when it comes to income from non-domestic rates. What reductions in income from non-domestic rates will local authorities in Scotland face? Will the Minister give me the figures for the regions and for the districts, specifically Falkirk district?
Mr. Stewart: I shall come back to the hon. Gentleman's last point, because I think that he is under a misapprehension about it. I shall deal first with the point of the hon. Member for Edinburgh, South (Mr. Griffiths), which is one that he constantly makes—that the whole system is unfair to Lothian and Edinburgh.
Mr. Nigel Griffiths: And Eastwood.
Mr. Stewart: If, as the hon. Gentleman alleges, the system is also unfair to Eastwood, no doubt Eastwood district council will make representations to me on how its allocation should be increased. As the hon. Gentleman knows, Lothian has an overall lower level of support because its assessed needs are lower. Similarly, the hon. Gentleman constantly alleges that the system is unfair to Edinburgh at the expense of Glasgow. Glasgow has a higher assessed need than Edinburgh, for some fairly obvious reasons. If he is criticising the allocation, I suggest that he takes it up with the Convention of Scottish Local Authorities. This methodology has not been dreamt up in Conservative central office or by Ministers. There can be, and are, legitimate arguments between the parties on the total resources made available to local authorities in Scotland, but the distribution formula—
Mr. Connarty: Is the Minister telling us that the Government have at last abandoned the position that they held in the 1980s when everything fitted into the formula, except what the Government decided did not fit? In that way, the Government could—and did—target a number of councils, including Stirling district council, of which I was treasurer and leader for a decade. It seemed as though there was a non-formula group of councils which was being punished by the Government, who could set those councils apart from any formula that had been agreed with COSLA.
Mr. Stewart: Things have moved on since the hon. Gentleman was treasurer and leader of Stirling district council, which is now controlled by the Conservative party—something of an advance.6
Mr. Maxton: On the toss of a coin.
The Chairman: Order. The hon. Gentleman should not make sedentary interventions, certainly not while the Chairman is Mr. Hogg, the control of whose council was determined by the cut of the cards.
Mr. Stewart: I shall not comment any further on that point, which is not central to our consideration of the order. The hon. Member for Falkirk, East (Mr. Connarty) is under a genuine misapprehension about non-domestic rate policy. The local authorities lose nothing from the uniform business rate policy because the reduction in the non-domestic rate income is fully made up with the extra revenue support grant. That is what the order is about. If that had not been the case, COSLA would not have been content with the order.
Mr. Connarty: I may be under a misapprehension, or perhaps I just misheard the Minister. I used the figure of £41 million to answer the inquiry of my hon. Friend the Member for Cathcart and I heard the Minister mention £100 million. I must admit, having talked to finance officials around Scotland who do their sums diligently without thinking of party politics, that I have the clear impression that they lose money from non-domestic sources when compulsory reductions are brought in. They do not seem to think that they receive pound for pound compensation from the Government for that loss. Did not the Minister mention £100 million and £41 million?
Mr. Stewart: Yes. I understand what the hon. Gentleman is referring to. There is a general policy of moving towards parity in the rates burden north and south of the border. There are various components in the financing of that, including efficiency gains. I can reassure the hon. Gentleman that the reduction in non-domestic rate income, to which the order refers, is wholly made up by the extra revenue support grant, which consists of the £41 million to which I referred.
Mr. Nigel Griffiths: The Minister quickly moved away without finishing his case on the weakest point of his argument. He grasped the lifeline thrown to him by my hon. Friend the Member for Falkirk, East, having failed to complete his explanation of the distribution formula. Perhaps I can help him to complete it by bringing a ring of truth into the proceedings. The Minister and his Department propose the formula to COSLA. The ability of COSLA to influence or modify it in any significant way is very limited because of the total amount that the Minister has prescribed. That left Lothian with the lowest share of revenue support grant per head of any council for the past nine years at the same time as its spending per head for the past nine years was below the Scottish average. It now suffers the penalty of having to impose the highest poll tax in order to make up for the Government's pennypinching methods. The Minister was wrong about any comparison that I might have made with Glasgow. I, my colleagues in Edinburgh and, I am sure, in other Scottish local authorities do not resent, for one minute, the money that is going to Glasgow. We believe it is not enough. By comparison with Glasgow and all other regional authorities, there is no reason why Edinburgh's citizens should receive lower subsidies, lower Government grants 7 and a lower return from their very own taxes than any other regional council area in Scotland. That is what the Minister quickly skipped over when he allowed my hon. Friend the Member for Falkirk, East to intervene. It is significant that he did not return to that point and that he would have been happy to let it rest, had I not risen to my feet to press him on the point.
Mr. Stewart: I was being a little too polite to the hon. Gentleman and I shall rectify that. He constantly makes allegations about the distribution formula and he is always wrong about it. He has never made a specific allegation about a specific part of the formula and justified his case. May I emphasise that the prime mover in determining distribution is not the Scottish Office but COSLA. The 8 Scottish Office rarely, if ever, seeks to influence the situation. The hon. Gentleman must differentiate between the total settlement and the distribution formula. If he has any specific criticism of a particular formula—there are very many of them, as he is aware—I suggest that he writes to me, and then I shall look at it because he keeps making allegations that he cannot justify.
Question put and agreed to.
That the Committee has considered the Revenue Support Grant (Scotland) (No. 2) Order 1992. Committee rose at eleven minutes to Five o'clock.
THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:
Hogg, Mr. Norman (Chairman)
Atkinson, Mr. Peter
Body, Sir Richard
Carlisle, Mr. John
Griffiths, Mr. Nigel
Walker, Mr. Bill