Grants deal puts council jobs at risk: Former Secretary of State accused of giving in to Treasury over cuts

LOCAL authority services and hundreds of jobs will be at risk from next April because of a deal to cut council grant between the Treasury and Michael Howard, the former Secretary of State for the Environment.

A leaked confidential memorandum to Michael Portillo, Chief Secretary to the Treasury, written shortly before the May Cabinet reshuffle shows Mr Howard, now Home Secretary, agreeing to 'live with' a 3.5 per cent increase in total standard spending (TSS) by councils - although 5.2 per cent is needed to protect services.

Mr Howard's ready agreement to Treasury pressure to effectively cut next year's TSS would mean a pounds 700m shortfall in council budgets, according to Stephen Byers, Labour MP for Wallsend, who received a copy of the memorandum from an anonymous source.

Attacking Mr Howard for 'giving in' at a very early stage in next year's public spending negotiations, Mr Byers said 5.2 per cent was the minimum needed 'just to stand still' and warned that the final picture could worsen by the autumn.

Mr Howard made clear in the paper that he was against the idea of local authorities charging more council tax, the introduction of which had gone 'as smoothly as we might have dared to hope', although he backed phasing out transitional relief by April 1995, a move likely to cause alarm among Tory backbenchers in the South-east.

Mr Howard said the 1.7 per cent shortfall should be tackled by forcing authorities to look for greater efficiency savings. Pay would also be a key factor. Pressure on John Gummer, Mr Howard's successor, to keep grant as low as possible will intensify as one of the toughest-ever spending rounds progresses. The paper reveals the hard bargains the Treasury is prepared to drive.

Dealing with one of two alternative options, Mr Howard points out that even with a 1 per cent pay policy, John Patten, Secretary of State for Education, considered that keeping TSS down to 1 per cent would mean 4,300 fewer teachers at a time when pupil numbers were growing.

Under a third scenario of a 1.5 per cent reduction, 19,300 teaching jobs would go, with 'widespread compulsory redundancies', the document says. 'Without a pay policy these effects would be greatly magnified.'

Even under the less harsh option endorsed by Mr Howard, hundreds of teaching, social work and care jobs would be at risk.

The paper reveals a warning from Virginia Bottomley that a 1 per cent limit would mean a catalogue of cuts in jobs and services, including more than 6,000 home helps, 3,000 social workers, 3.5 million meals on wheels, 11,000 residential care places and 4,000 day care places.

Mr Byers said: 'All the discussion about 'scare stories' over benefits obscures the fact that these cuts will affect the most vulnerable members of society. Yet what has happened here is that Mr Howard put his hands up.'