Part of the debate – in the House of Commons am 12:00 am ar 20 Rhagfyr 1973.
Of course, but the hon. Gentleman is entirely on the wrong track. We are dealing with the increase in costs, of pay and the costs of materials during 1972–73 and 1973–74. My right hon. Friend has called upon local authorities to make a reduction in their expenditure. That follows the settlement which had already been made. I call it a settlement because we had the statutory meeting between the local authorities and the Ministers. That had already been made on previous figures. Local authorities are now asked to reduce capital expenditure by 20 per cent. and procurement by 10 per cent. That includes goods and services and excludes pay and debt charges. That is for future expenditure in 1974–75. We are dealing with anticipated expenditure as increased during 1973–74.
If the hon. Gentleman wishes to develop that matter, and if he catches your eye, Mr. Deputy Speaker, I shall try to answer him in more detail towards the end of the debate if I, too, catch your eye. I cannot see that that matter is relevant to the increase orders dealing with the position only up to March 1974. The only options to the Secretary of State in making an increase order are either to make the increase order and to take into account all the changes in prices, costs and remuneration which have come about at the time when the order is made, or to decline to make an order. As the 1966 Act has been interpreted, those are the only options he has.
In 1968, the then Government took the option of not making an increase order. Apart from that, in each year an increase order has been made. There is no flexibility about this. The order has to be made taking into account all the cost increases, or no order has to be made. If the House accepts the provisions of the Local Government Bill now before it the Secretary of State will have a little more freedom in this respect.
I deal now with the No. 1 order. This is the third increase relating to the year 1972–73, the grant for which was originally settled in 1970, increased in 1971 and 1972 and is now being increased for 1972–73 for that period remaining after November 1972 of the year 1972–73. The main arrangements for 1972–73 are covered by the 1966 Act provisions, that is to say, the original settlement was made three years before the end of the year to which it relates. We have a third increase order for that year to take account of the pay and price movements in the five months November 1972 to March 1973 when that financial year ended.
The No. 1 order and the explanatory papers show that there was a net increase in costs between November 1972 and March 1973 on the relevant services of £12·9 million. The rounded figure is £12 million. The figures are clearly set out in the explanatory papers and in the order. In the No. 1 order the effect of the increases for that year is to add £6 million to the rate support grant for the year 1972–73, all of which is allocated to the needs element. With an increase of this sort one applies the formulae for the resources element and the needs element. In some cases it will come out as a division between the resources element and the needs element. In other cases it will be found that the resources element is sufficient even with the increase in relevant expenditure. In this case the formula applied the whole of the increase to the needs element.
The No. 2 order covers 1973–74 taking into account the net increased costs between November 1972 and November 1973. I need not go into the figures as the details are clearly set out in the explanatory papers, which show that the total net increase in costs of pay and material prices amount to £396·7 million. The final result of the No. 2 order is that, allowing for all the figures set out in the explanatory paper No. 48, the rate support grant is increased by £223 million. The order allocates the increase in the rate support grant between the needs and resources elements, and it allocates £30 million to the resources element and the remaining £193 million to the needs element.
Many of the detailed estimates on which these figures are based have been supplied by the local authority associations or the Greater London Council. Other estimates are provided by the Government Departments concerned and discussed with the local authority associations. Figures have been agreed with the local authority associations for these orders.
Almost invariably when an increase order is made some increase falls on the wrong side of the line. In this case it is regrettable, perhaps, that it has not been possible to take into account the increase awarded to the firemen and the increase which is under discussion for the manual workers. These matters have not yet been cleared by the Pay Board so they do not come within the definition in the 1966 Act of figures which have definitely been decided. The effects of these can be taken into account in next year's increase order, or we shall consider whether it is possible to take them into account in the main settlement order for 1974–75. I do not think that I need to go into the figures in detail. If any hon. or right hon. Gentlemen have queries on the figures and I am able to catch your eye, Mr. Deputy Speaker, and have the leave of the House to reply to the debate, I will endeavour to deal with the figures.
On behalf of my right hon. and learned Friend and myself I express our great gratitude to all those in the local authority associations and the Greater London Council who have co-operated in working out these figures. As usual with an increase order, the figures are agreed. Once one has accepted the estimates, the increase order is automatic. It is of great importance to the local authorities that we should take into account the increases that have occurred since the first estimates were made. That is what the orders do, and I commend them to the House.