Tory attacks on local government spending have reached unprecedented heights. Steve Marks argues that Labour's traditional 'municipal socialism' will be totally undermined unless a mighty movement of opposition to the Tories is launched.
A major escalation of struggle around the question of cuts is on the [illegible] conference [illegible] of the platform, a motion moved by Lambeth Council leader Ted Knight, which called for 'a major campaign to defeat' the proposed new Tory legislation to abolish local authority autonomy. Labour councillors 'must refuse to make the cuts that will be needed' if the laws go through. And the NEC should 'co-ordinate the struggle of Labour councillors making this stand, and call on the trade unions... to use their strength to defend Labour councils in this fight'.
Cynics might recall similar speeches from Ted Knight at last year's national conference on the cuts called by Lambeth [illegible] labour movement, which was nonetheless followed by cuts and job losses in Lambeth itself. But this time the bolt-hole of rate increases as an alternative to defying the government is being removed. Calls for action to stop the cuts and defend councils which refuse to make them, must be taken seriously. But to deliver on them will involve the Labour left in organising in a [illegible].
Heseltine's promised new laws would stop councils from spending above government-set limits and paying for the excess out of the rates. It would leave Labour councils with no legal alternative but to carry out Tory cuts, and would turn councils into nothing more than local outposts of central government. As Ken Livingstone, the Labour leader of the Greater London Council (GLC) has rightly pointed out, this will raise the question of why the Labour Party bothers to fight local elections at all.
Behind the laws, and the new system of local authority finance which came into force for the current financial year, is a determined effort by the Tory government to cut the services provided by the local state, even where they form part of the longer-term social infrastructure needed by capitalism itself, in a desperate monetarist bid to restore the rate of profit in the short-term by cutting taxation and reducing working-class living standards.
This has involved a ruthless recasting of the financial and political arrangements for the running of local state services, in which Tory ministers have shown themselves to be admirably from their class standpoint hard-headed, and free from woolly abstractions such as 'our glorious traditions of local autonomy'. Their opponents will need to be equally hard-headed and explain the issues in class terms, rather than eulogising a local government system which most workers, indeed most voters, see as bureaucratic and alien. This is a feeling the Tories have so far been able to exploit to their advantage, by capitalising on the unpopularity of the anomalous rating system of local authority taxation, and manipulating financial arrangements so that the villains of the piece appear to be not government cuts but local authority bureaucratic spendthrifts.
Changing the system
They have done this through a new system of Block Grants, which replaces the previous method of calculating and allocating the rate support grant (RSG) from central government to each local authority. Each year the government decides what proportion of anticipated local government spending it is prepared to subsidise. It then works out how that total subsidy will be allocated between different councils.
Under the old system, the formula for deciding how much subsidy went to a given authority had three parts. The 'resources element' was aimed at ironing out differences in rateable value between rich and poor areas, so that councils with a lot of highly-rated property in their areas would get less grant.
The 'needs element' was meant to reflect the differences in the degree of need between various areas. This was worked out by a complex system of 'regression analysis' which few people were ever able to understand, but which tried to reflect the degree to which different indicators — family size, poor housing, number of one-parent families — tended to be combined in areas of greatest need.
The formula was changed from time to time to reflect changing judgements, and the Labour government of 1974-79 was accused by the Tories of rigging the regression analysis to favour Labour inner-city authorities at the expense of Tory rural counties.
To this the offical reply was that the greatest need was concentrated in the inner cities, and this, rather than party, was the reason for the shift in resources to those areas. It was also [illegible] the formula was not [illegible] back when many urban local authorities went Tory [illegible].
The third element in the RSG formula was a subsidy to domestic ratepayers to keep their rates below those of commercial and industrial ratepayers. This element has been preserved in the new system. But the old needs and resources elements have been combined in a new Block Grant. By this system the Department of the Environment fixes for each local authority a figure which it thinks the council ought to be spending to provide an 'adequate' level of spending.
The government then fixes the level of rates it considers a council would need to charge to provide that level of service taking into account differences in rateable value between areas and allowing for the proportion of rate-borne spending which the government has decided to subsidise (59 per cent for 1981/82, as against 60 per cent in 1980/81, the last year of the old system).
Any spending by the council above the level which the government has decided is proper has to be met 100 per cent out of the rates, without any government subsidy at all. And if a council spends more than 10 per cent above the government set figure, it will lose some of the grant already allocated to it for its spending within the government approved limit.
The result has been to escalate drastically the effect on the rates of 'overspending' by councils above the government limit, in the hope that infuriated ratepayers will vote recalcitrant Labour councils out, and save the government the trouble and embarassment of putting in commissioners. Thus the new Labour majority on the GLC will have found that for each £1 it spends on reducing bus and underground fares, it has to raise £1.70 from the ratepayers. The new system also gives Heseltine greatly-increased power to punish authorities he deems to be 'overspending' by depriving them of grant, and requiring them to submit new budgets in mid-year.
It also resulted in a massive shift of resources within the reduced total, from (Labour) metropolitan areas to (largely Conservative) shire counties. This is because the new formula calculates required spending on various services on the basis of average cost per head. This is a much cruder method than the old regression analysis, even though it is simpler, and essentially means that grants are allocated between authorities according to population rather than needs.
London in particular has lost some 14 per cent of its grant as against last year, and 25 per cent in inner London, as against an 8.2 per cent national average cut.
What is more, the degree to which the new system shifts grant away from big cities to rural areas will increase over time, as the impact of the new system was deliberately cushioned by a 'damping formula' which ensures that no authority will gain more than the equivalent of a 6p rate in any one year. While authorities due to lose grant can lose up to the product of a 13p rate in any one year till they reach their new levels.
This shift in the allocation of grant is widely believed to be part of the government's pay-off to the Tory shire counties for their help in breaking the united front of opposition to the new scheme by local authorities, and thus helping to get the legislation through the House of Lords within the Parliamentary timetable.
But there are now informed reports that as a result of the summer riots the government is thinking of reversing this trend in the 1982/83 RSG settement. If so this could only antagonise the counties, and make it harder for the government to get its new anti-councils legislation through Parliament this winter (as local government, especially the counties, makes up a considerable pressure group among Conservative and Independent peers, as well as in the local apparatus of the Tory party).
The new system has led to such massive cuts in grant for some London authorities, such as Camden, the GLC and the Inner London Education Authority, that there is little incentive for them even to attempt to keep to the government's spending targets, since any but the most massive cuts would still leave them so much above the target spending level as to lose them all their grant entitlement in any case.
Apart from the cuts for big city authorities resulting from the new method of distribution, the 1981/82 RSG settlement also cut the overall level of grant by some 8.2 per cent.
The government claimed that the figure was only 3.1 per cent but that was based on a comparison with what authorities were told to spend in 1980/81 rather than what they actually spent and on unreal official estimates for inflation in 1981/82.
The government is clearly preparing to play the same trick next year. The Treasury maintains that the 1982/83 RSG settlement will only include cuts of 1.2 per cent. But Department of the Environment officials privately confirm local authority claims that these will in fact be cuts of nearer 9 or 10 per cent. Of this over 5 per cent will be alleged 'overspending' above government targets this year, to be carried forward for next year if not achieved. And up to three per cent could result from a new cash limit system being adopted by the Treasury by which no extra allowance will be paid for additional inflation this year. Local authority leaders have warned that cuts on this scale could mean 250,000 sackings, 100,000 of them in education.
The rates solution
Some Labour local authority leaders, such as Ken Livingstone and Ted Knight, have argued for rate increases to maintain services, pointing out that as a high proportion of rates, 60 per cent nationally, are paid by businesses the effect of rate increases to support services is to redistribute wealth between the classes. Even at the best of times, this argument must be modified to take account of the lower-than-average rateable value and the consequently high level of rates which must be charged to generate a given revenue.
But even allowing for this, Labour authorities have traditionally stood for improved services financed out of the rates, and this has had a redistributive effect to the extent that rate income is mainly contributed by commerical and industrial ratepayers, and rate-borne services are largely consumed by local authority workers.
These, however, are not normal times. The effect of the new subsidy system means that Labour councils are increasing rates not to provide extra services, but to finance Tory cuts. This hardly has a progressive effect. And newly-elected Labour authorities, which are increasing services, are having to raise rates by more than the value of those services.
At a time of falling real wages, this means that the burden of rate payments is more than many families can afford, especially when combined with rent increases. This could well lead, as in Lambeth during the GLC elections, to massive Labour losses at the polls.
In addition, the strategy of rate increases is (or was) divisive as between Labour councils, as those with lots of high-rated property could get away with rate increases for longer, while those in poorer areas had no legal alternative to cuts from the start. It is also divisive between working-class ratepayers, as even where most of the rates are paid for by business, the tax is so anomalous as between individuals, falling more heavily on working-class householders than on richer ones, that it makes it easier for the Tories to divide workers and turn ratepayers against particular groups who use council services.
The new laws might appear to make this debate redundant.
The May elections
In fact it was the election of new Labour councils this May pledged to improve services, and prepared to increase rates to pay for them, which led Heseltine to seek his new powers. In June he announced that he was imposing penalities totalling £450m on councils that failed to bring their spending down to 5.6 per cent below the 1978/79 level, and called on local authorities to submit mid-year budgets to show how they meant to reach his target. He would cut subsidy payment in mid-year for the culprits.
Most Labour metropolitan authorities simply resubmitted their existing budgets, with the increases resulting from their May election pledges. The exercise ended in projected spending up £15m, instead of down.
But Tory councils too were falling out of line. Of councils over Heseltine's limits 61 per cent were Tory-controlled, and 59 per cent of the overspend came from county councils, all but 3 of them Tory-controlled, when the budgets were fixed. True, 258 councils had cut a total of £202m by June. But 51 councils had offset this by increases totalling £208m. Of this 80 per cent was accountable for by the GLC, Merseyside and the West Midlands — all Labour gains in May.
This was one major reason for Heseltine's new law. Another, according to the government, is the crippling effect of rate increases on businesses. The CBI agrees, and joins the chorus of complaint about the damaging effect of rate rises on employment, as firms are driven into bankruptcy by 'socialist bureaucratic empire-builders who spend other people's money with no understanding of or sympathy for the wealth-creating process etc, etc,'.
All very touching, but without a fact to back it up. The available evidence, according to both the Association of Metropolitan Authorities and the Financial Times, suggests that rates are no higher a proportion of industry's turnover today than in 1975. Since 1975 they have risen less than the Retail Price Index, the price of manufactured goods, the cost of materials and fuel, or the average of manufacturing industry earnings, And between 1978 and 1980 rates rose by 48 per cent while interest rates rose by 94 per cent.
Nor is it true that industry pays an ever-rising share of the rates bill. The share of rates paid by industry and commerce has fallen each year since 1975-76: from 60 per cent to 54 per cent in 1981/82.
The real cause of industry's hubbub over rates is political. Faced with the despair of small, and not-so-small, firms at the impact of monctarism, unemployment and high interest rates, the CBI leadership has come under a lot of pressure from its members to criticise government policy. Having a go at rates is a politically more acceptable target, and one in which the government will be on the CBI's side.
Heseltine's proposed new law will prevent these problems in future — unless councils lead successful campaigns of mass action against the government, Any authority which wants to spend more than a 'significant percentage' above its permitted level will have to raise the extra through a 'supplementary rate' of which industry and commerce will pay a smaller share, through special protecting mechanisms, than they do of the ordinary rate bill. So the burden on householders will be increased to the benefit of business, and, the Tories hope, the council will lose votes at the next elections.
But this first supplementary rate will only be able to raise a fixed percentage above the government limit. Any further spending will require a second supplementary rate to be levied in October, on the same rigged basis giving industry and commerce relief. But this time there will have to be a referendum, held on the same day in every overspending authority, with a standard question fixed by the government, and with the council sending each voter, with the ballot form, a statement of how much he or she would have to pay extra if the vote went 'yes'.
If a council loses this referendum, the Sectretary of State will, in effect, take control of the council's finances for the rest of that year and for the following financial year, in that s/he will have to give advance approval before any rate for the next year can be levied.
The government will have complete discretion to decide each year what will be the level of overspend at which new rates and referendums will be necessary. This, it is clear, will be used to divide councils, with 'generous' limits fixed for the first year so that only a small handful of 'extremist/Marxist' Labour Councils will be affected. The Tory councils will moderate their opposition, which would never go beyond speeches anyway, and Labour's new NEC will not do anything in practice to organise opposition that goes beyond the law. Then, the government hopes, when the Bill is law, the powers can be used in subsequent years to cut spending as much as it likes.
But the ability of council leaders such as Ted Knight to deliver the type of struggle they are now calling for must be affected by their earlier decision to go for the soft option of rate rises. There is no guarantee at all that a course of defying the government would have succeeded. But the alternative path has now failed, True, the new laws bring all Labour councils up against the crucial choice of whether to operate within the law. So it could be argued that delay and rate-rises reduced the risk of left councils being isolated. But the present 'unity' created by the Tory laws and the Labour conference vote will not stave off disaster unless left councils are prepared to give the sort of lead which they were not prepared to give when they went for rate increases. It would nonetheless, be irresponsibly sectarian to concentrate fire on left councils such as Lambeth or South Yorkshire when most Labour councils have been far worse, and carried out cuts without even a show of defiance.
How to defeat the Heseltine proposals
In fact the Bill can be defeated but only if Labour councillors, MPs and constituency parties organise and act politically in a way they have never done before. The Bill is very vulnerable to disruption of the Parliamentary timetable, as it will have to be law by February if it is to have effect for the financial year starting in April.
But once it is law there is no way that local Labour councils can be saved from destruction within the law. The Labour conference resolution's reference to refusing to make cuts is not much help in itself. Under the new proposals, refusal to make cuts could only mean bankruptcy and removal from office, leaving the Tories to carry out the cuts without opposition. This, and similar proposals for Labour councillors, even when a majority, simply to refuse to form an administration and leave the Tories to do so, while voting down their proposals from the opposition benches, can at best be only a publicity stunt, and ultimately ineffective unless there is a campaign of mass action involving strikes and withholding of rents and rates, for which such gestures could raise publicity.
Ken Livingstone had the right idea when he pointed out that the battle in Parliament over the new laws should coincide with the first battles over the 4 per cent limit in the public sector, and that this was the best opportunity for uniting the fight of council and public sector workers with the fight against the government and to defend services.
For good measure he pointed out that London Transport workers by refusing to collect fares, could lose the Tories, if they put a Commissioner into London's County Hall, more money in a week than their cuts would save in a year. And it would be popular too!
But action of this sort has to be organised now, not just by conference resolutions but by support for the struggles by public sector workers that are already under way, such as the Liverpool typists dispute. For a Labour Left which, as in London, is still almost entirely based in constituency party organisations, this will mean new and hitherto unfamiliar forms of organisation and political work.
It must be the job of Marxists in the Labour Party and in the unions to urge help and encourage them to make that leap, for otherwise Heseltine, when the dust has settled, will have destroyed the oldest arena of independent Labour representation at a stroke and without a real fight.
Before Labour representatives ever entered Parliament, workers saw the need for their own representatives on councils, instead of the shopkeepers and millowners. Once there, the argument went, they would use the power of the councils in the interests of the working people.
Marxists have never believed that such 'municipal socialism' can ever lead to a fundamental change in the class relations in society. Much worthy and useful work in improving the conditions and quality of life for working people did nonetheless result.
All that will now be ended if Heseltine is not beaten. The old reason for electing Labour councillors will simply not apply. There will be no conceivable role for them to play except to implement Tory cuts.