NB: THIS TRANSCRIPT WAS TYPED FROM A TRANSCRIPTION UNIT RECORDING AND NOT COPIED FROM AN ORIGINAL SCRIPT: BECAUSE OF THE POSSIBILITY OF MIS-HEARING AND THE DIFFICULTY, IN SOME CASES, OF IDENTIFYNG INDIVIDUAL SPEAKERS, THE BBC CANNOT VOUCH FOR ITS ACCURACY. ............................................................................... ON THE RECORD RECORDED FROM TRANSMISSION: BBC-1 DATE: 29.11.92 ............................................................................... JONATHAN DIMBLEBY: Good afternoon and welcome to On the Record. In today's programme: the Council Tax has arrived but not yet on your doorstep. What are you in for? I'll be asking the Environment Secretary Michael Howard: how do model councils avoid charging higher bills for cuts in service? This week, momentarily overshadowed by the announcement that the Queen was to pay tax, the government unveiled the first details for England of the new tax which from April you will pay instead of the Poll Tax. After the fiasco of the Community Charge the government is acutely anxious about the likely reception for the Council Tax. It's still of course early days but already there are murmurings of revolt - and most especially, as Martha Kearney now reports, in the Tory heartlands of southern England. ********* DIMBLEBY: Secretary of State, you are aiming a double-barrelled shotgun at many millions of households, most of all in the South and the South-East. Higher taxes on the one hand, and poorer services on the other. MICHAEL HOWARD, MP: I'm not sure that shotguns is a very helpful metaphor at all. What we have to do is to try and make sure first of all that public spending is kept under control and Local Authority spending is a very important part of that (over a quarter), secondly, that bills are kept to reasonable levels. I have every sympathy with Tessa Gibbons who said that her income isn't going up and she doesn't want to have to pay bigger bills. And that is why we have emphasised that it's important for Councillors to keep within the public sector pay guidelines that we've set out, to make the most of their resources, to use them efficiently and we believe that if they do that they will not have to cut services. DIMBLEBY: Let's look at those things in more detail. There is your transition relief that is designed to ease the pain, but people should not run away with the idea, should they, that that pain is removed - it is simply partially deferred until next year and maybe the year after. In the end, the full amount has to be paid. HOWARD: Transitional relief is what's its name implies. If you are changing the basis on which people pay towards the cost of Local Authority services and, of course, it's a smaller proportion, less than a fifth of the cost of Local Authority services will be raised through the Council tax, but if you are to change the basis on which that money is raised, there will inevitably be some people who pay more than under the system it replaces, and some people who pay less, and in order to ease that transition, we are providing three hundred and forty million pounds to make sure that those in modest value houses at the bottom bands - in Band "A" pay no more than one pound seventy five pence a week extra - and then that increases until you get to Band "H", where we think that they ought to get protection if they're to be asked to pay three pound fifty a week extra. DIMBLEBY: But none the less, they will not only be paying millions of households in the South-East relatively more this year, they will be paying relatively more next year and it is concentrated in your own heartlands - as Sir Rhodes Boyson's pointing out when he talks about being fair to our people. HOWARD: Well, the principle that lies behind the Council tax is that if you live in the same Band property anywhere in the country you will pay the same Council Tax, if your Council behaves sensibly and is reasonably efficient, across the country, so that does provide a kind of benchmark for accountability. But, of course, if you have a property-based tax then those parts of the country which have the highest number of high value properties will pay somewhat more. DIMBLEBY: But then what the people in the South are going to say is "We pay more for our houses, exactly the same kind of houses they have in the North - that's enough of a burden now in any case - and on top of that he's going to dump this tax round our neck". HOWARD: Well, I think that we have done a great deal to limit that effect. As you know, people in the top Band will pay no more than three times as much as people in the bottom Band. It'll be a hugely fairer system than the old Rates system - six million people will receive single person discounts, where there's only one person in the house - three million people won't pay anything at all, people on income support, and a further two million people will get help with their Council Tax. So I think it is a fair system that tries to reflect the needs of everyone. DIMBLEBY: At the moment, you well know people in the South and South-East especially are having terrible trouble because of the fall in value of their properties. You would not dissent from the view that the impact of the Council Tax on property prices in the South-East is likely to be depressive. HOWARD: Oh, I would dissent from that because.. DIMBLEBY: It's hardly likely to stimulate is it - the prices? HOWARD: I remember people saying that the effect of the Community Charge was going to be that prices of properties would go up, and we certainly didn't see that after the Community Charge had been brought in. So I think that any effect which the Council Tax would have on house prices is likely to be very, very marginal and insignificant. I don't think that's going to be an important factor. DIMBLEBY: But it's not going to be marginal upwards, is it? That would be a daft notion. HOWARD: I don't think it's likely to have any significant effect on the price of property. DIMBLEBY: Now, let's look at the other barrel that I put to you - the cuts barrel. Not least in model Tory Councils, Councillors are saying "we are going to have to make serious cuts". In Barnet "arms and legs" he was talking about. Now, you have to take what he says seriously, do you not? HOWARD; Well, of course I take what everyone says seriously and I don't want to see cuts in services. I think there perhaps has been a bit of a tendency to rush to judgement on the figures which were produced last Thursday. There are a significant number of changes - Barnet, for example, as you pointed out - won't be responsible for Further Education next year. We've had to adjust the budgets to reflect that. We've had to adjust the budgets to reflect population changes, and so the comparisons that are being made are sometimes comparisons that don't fully reflect all these changes. DIMBLEBY: But not, for instance, in the case of Barnet, just on this point - because these are complicated areas - they have taken Further Education into account. You have taken Further Education out, yet, and you've taken the money out, so the effect of that is entirely neutral and they're still saying we're going to have to find more money and we're not going to be able to find it within your rules. HOWARD: Well, I can tell you that the standard spending assessment, which we have provided for Barnet for next year, is an increase on the notional standard of spending assessment for this year, and it's notional because of these adjustments which I've just described. Now, the figures that I produced last Thursday are part of a consultation exercise - they are there for consultation purposes. People from Barnet can come in and talk to my officials and talk to me and say "we don't think that you've got these figures right; we think that you've made a mistake; we think you are not taking this or that into account and, of course, if they convince us that we have made a mistake, or that we haven't properly reflected what we have set out to reflect, of course we will look at these figures again. We think we've got them right. DIMBLEBY: And I'll come to that again a little bit later, but this - what you refer to as this notional increase - the truth is notional increase is at three point one per cent generally that you're allowing for spending increased. It's "funny money". This is not money that's available to spend in Councils that have already this year spent more than you had expected them to spend. There's no increase at all for those. HOWARD: Well, first of all, first of all, it is not a notional increase. It is an actual increase - this year's standing, standard spending assessment over last year's standard spending assessment.
It has to be a notional standard spending assessment to take account of the changes, but it's a real increase. DIMBLEBY: But the standard spending assessment, Secretary of State, as you know, is not in practice what people have spent in this year. They've spent more than that. (BOTH TALKING TOGETHER) HOWARD: I have to compare like with like and I compare this year's standard spending assessment with next year's standard spending assessment. Now, of course, it's perfectly true that councils quite often spend more than the standard spending assessment. They find some money from their balances and they spend more and I daresay a number of councils will want to do that next year. They will find money from their balances and they will spend more. But I can't - that is not to compare like with like. I am comparing like with like. DIMBLEBY: Let's take Barnet as one example - and we could take a host of other not dissimilar examples in the South as you know - they are saying we need fifteen million pounds, even if we make efficiency savings, we still need eleven million pounds more than you're going to let them have after you've put the cap on. Well, they can't get that out of the balance - out of a little bit here and there in the budget. HOWARD; Yes, but we've never approached these matters on the basis of giving Councillors what they say they need. Of course, Councillors will always come - they do every year. They come to the Department and they say this is what we need and the figures which they produce are always much higher than what the country can afford. We have to take into account what the country can afford and where people are experiencing difficulty, where we have had a very difficult spending round in which we've tried very hard to protect capital spending, then we have to say to Local Authorities - "You too must share in trying to keep Government spending, public spending, under control, and you will have to husband your resources sensibly and efficiently. There is a very, very important consequence of following the public sector pay guidelines, which I would like you to do, and that will enable you to provide the services which your residents expect you to provide next year, without increasing Council taxes and without increasing your spending. DIMBLEBY: Now, Secretary of State, given all that you've just said and for the moment take all of that for granted, and I'm going to come back to a couple of things in a moment. Take it for granted first, these Councils (like Barnet, Harrow, you name them) are, by their own account, and generally by your account, prudent, sensible Tory model Councils. That's the first point. Second point is - in the real world, because they HAVE spent more than your assessment, they WILL have to make cuts. That's not to discount that you're asking them to be in the national interest - they will have to make cuts, won't they? HOWARD: Not necessarily. DIMBLEBY: How not? HOWARD: Because as you yourself have pointed out, they have spent more than their standard spending assessment in previous years... DIMBLEBY: So they've got to claw it back... HOWARD; No, not necessarily. Local Government in general, Local Authorities across the country, have two billion pounds worth of balances. They very frequently seem to be able to find money in their balances to spend more than their standard spending assessment. Councils which have done that in previous years may well be able to do it again next year. They have balances, they are free to spend them. What I have to do is to set standard spending assessments and the Government grant is based on those assessments, and provides a very large proportion indeed of the total spending which Local Authorities undertake. DIMBLEBY: You are capping at something like eleven million below what Barnet, for example, thinks it wants to spend. Now, let me put to you one aspect of spending which you - and certainly I haven't seen anywhere else - touched upon at any detail. You talked about (what I said I was going to come back to) the pay question - the guidelines up nought to one point five per cent increases only next year in public sector pay across the board, on average. So far, already, Local Authorities are committed to pay settlements for next year way above that - three or four times above that - four per cent, five per cent, in the case of the police, six and a half per cent. Now, given that that's the case, in order to get back to your figure of one point five per cent, they'd have to be cutting pay next year. HOWARD: No, I don't believe that that is the case - the police pay settlement extends into part of next year. DIMBLEBY: Six months. HOWARD: And it's perfectly true that it is higher than the guidelines but I don't believe that it is the case that local authorities will have to cut pay as you suggest, I don't believe that will be necessary. But it is very important when people in the private sector are having to accept pay standstills and are indeed, in many cases, having to accept pay cuts and redundancies, it is very important that people in the public sector should make similar sacrifices so that jobs can be preserved. DIMBLEBY: I'm not quarrelling with your general... HOWARD: Can I just add this. DIMBLEBY: Yes. HOWARD: We've seen statements in the last few days from the heads, the leaders of local authority associations in which they have acknowledged that it will be necessary to keep within the guidelines to save jobs, that there is a trade-off between pay and jobs and that is the case. DIMBLEBY: But I'm suggesting to you that that would be fine if there weren't already these commitments. You said you don't believe it will be necessary. Let's take the police for example, your example. National decision, this isn't local authorities saying we want to pay you so much, six and a half per cent, it runs at six and and a half per cent for the first six months of next year. The other manual workers are over four per cent until later in the year. The fire services until November next year, at five per cent. That's fifty per cent, half the workers in most local authorities have these kind of increases and you're telling me that they can all stick within one point five per cent for the year without either massive cuts or, which is surely what will happen, laying people off, more on the dole queue. HOWARD: No, I don't accept what you're putting to me. I think that it will be possible for local authorities if they spend sensibly and if they maintain any public sector pay settlements which they have to make and haven't yet made within those guidelines, to be able to continue to provide services without laying off people. Of course, they must look to see that they provide those services efficiently, of course, they must look to see that they're not employing three people to do a job which two people can do. DIMBLEBY: Barnet's already been doing that. (BOTH TALKING TOGETHER) DIMBLEBY: They say the most they could save, up to five million, if they're really...if they pare away at the bone now let me put it to you, with respect, it is not credible for you to say they can square this circle. They can't both meet all their service requirements including the new statutory ones which were touched on in that film - the homeless, more people needing free school meals and so on, as well as preserving nursery classes, preserving teacher numbers and at the same time pay these increased bills when you say in order, in order to achieve a preservation, a protection of the services, they've got to get their wage bills down to nothing or one per cent. HOWARD: You very frequently find councils saying at the start of a exercise of this kind, well, we couldn't possibly do that... DIMBLEBY: They're lying to you are they?... HOWARD: Of course, I'm not saying they're lying. DIMBLEBY: Having you on, crying wolf? HOWARD: No, I'm saying that this is their first reaction and that when they look at the figures much more carefully and when they look at the figures in more detail and when, no doubt they consider, as they have in previous years, the extent to which they can spend more by using their balances, I believe that they will come to conclusion that if they keep within the guidelines and if they spend their money sensibly, they will be able to continue the services which they have provided for their residents. DIMBLEBY: You use this wonderful, political, bureaucratic phrase, using money sensibly. These people are not about to be spending their money sillily are they? HOWARD: Well, it's neither a bureaucratic nor a political phrase, it is something which is at the heart of the responsibility of local government and indeed, central government for that matter. And if you're to do it... - just let me finish if I may - if they're to do it, it does mean a constant re-examination of the services that they provide, of the way in which they provide them, of the arrangements that they make, looking to see if they are making the most of competitive tendering, if they market testing their services in order to ensure that their residents get the best possible value for money. And it would be very remarkable if local authorities, even local authorities like Barnet and Harrow and the other ones you've mentioned, are going absolutely everything that they can at this moment in order to achieve maximum efficiency in the services which they provide. DIMBLEBY: So you're saying that these councils, these good, solid, Tory councils, can do so much more by way of efficiency and meeting the need that they can save figures of nine, ten, eleven, twelve, fourteen, fifteen million pounds and pay these extra wages that they have to pay. HOWARD: No, because in most cases, you will find that the figures that you've just mentioned, the need to save fourteen, fifteen million in an authority like Barnet, is a figure that is arrived at on the basis of a false comparison. A comparison such as the one which you put to me earlier, comparing budget with standard spending assessment not a sensible comparison to make. I would suggest to... DIMBLEBY: They talking about real savings to get back into your capping level. HOWARD: I would suggest to you that when people make sensible proper comparisons, comparing like with like and fully explore the need for savings and the potential for savings in their budgets, they will find that they will be able to achieve what I say they can achieve. DIMBLEBY: Okay, suddenly now Barnet starts to look at these figures sensibly and Harrow and all the rest, they look at them sensibly rather than in the excited way in which you clearly think they must be looking at them so far and they're watching this programme and I should think now they're saying, he thinks we haven't look at them sensibly, he must be... Well, I don't now what they're saying. I wouldn't dare to say what they're saying. HOWARD: Let's not speculate. DIMBLEBY: let's not speculate, Secretary of State,
but you said earlier in the interview and want to pursue this just briefly. You said that they can come and see you if they think they've been unfairly treated and you'll listen to them, you'll hear what they say. What's the point of that if you don't give them more money if you're persuaded they're right? HOWARD: Well, if we've got something wrong, if we have made a mistake in our calculations, if we have failed to reflect something which we wanted to reflect because we've set out in tremendous detail in the reports which we published on Thursday, the precise approach which we've taken to decide how much money we think they need to spend next year. Then, of course, we will listen to them and we will look again at all the figures which we have used in the light of the points which they've made to us. DIMBLEBY: Now does that mean if you look again and you accept the points and you accept they've got a case that you are able to say, we will under certain circumstances come up with more money or not? HOWARD: What we set out on Thursday was the basis on which we intend to distribute the very large amount of money that the government will make available to local authorities next year and remember that that grant is one point two billion pounds more than we made available this year. A very significant increase, three point seven per cent more than the money we made available this year. So we're not cutting the amount of money we make available to local government, we are very significantly increasing it. DIMBLEBY: We're been through that side of the argument. Now let me put the question again, are you able to find more money in principle or not? HOWARD: In the figures which we published on Thursday, we set out the basis on which we intend to distribute that amount of money. Now if local authorities come to us and say, your proposed distribution is wrong, it doesn't fully reflect our needs, you've made some mistake in your figures, whatever. We will look at what they say and we will look again at our figures in the light of the points which they make. That is the purpose of the consultation exercise on which we've embarked. DIMBLEBY: I'm sure that's what goes on. The question I asked and what people want to know is: is that figure of one point two billion it, or is there more because you're certainly aren't going to have people coming forward saying you've got your figures wrong, you're paying us too much. HOWARD: Well, it may well be that as a result of some point or other which one council makes, we need to look at the way in which we've treated that across the board and we may find we haven't been consistent and there may need to be adjustments elsewhere. DIMBLEBY: Rob Peter to pay Paul? HOWARD: No, no, no, of course, there has to be a limit because there has to be a limit to the amount of money the country can afford...(interruption) just as... - just let me finish - just as we in central government were capped by the Chief Secretary to the Treasury in the amount which we can spend on all sorts of desirable services. We had to form a view as to what the country could afford and we've had to form a similar view as to what we can afford by way of grant to local government. It's a very significant increase on this year - three point seven per cent increase. DIMBLEBY: And that's it? HOWARD: That is it in terms of the total amount but if we have got something wrong in terms of the distribution, then, of course, we will look at the points which Councillors make to us. DIMBLEBY: So overall there is no new money even if they come and see you and persuade you that they're being hard done by. One final and very brief thought, if you've got all this wrong, they ain't going to show you any mercy, are they, in the Tory heartlands? HOWARD: I don't believe we've got it wrong and I'll tell you one important thing which people shouldn't leave out of the count. I believe there's a very general desire across local government, Labour local authorities as well as Conservative local authorities, to put these arguments behind us to make a success of the Council Tax. No-one wants to go through the upheaval of introducing yet another new system of financing local government. I believe the Council Tax will succeed. DIMBLEBY: Secretary of State, thank you. ...oooOooo...