RATE SUPPORT GRANT

HC Deb 15 December 1975 vol 902 cc980-1098

4.21 p.m.

The Secretary of State for the Environment (Mr. Anthony Crosland)

I beg to move, That the Rate Support Grant Order 1975, a copy of which was laid before this House on 5th December, be approved. With this, I understand we can discuss the second motion, That the Rate Support Grant (Increase) (No. 2) Order 1975, a copy of which was laid before this House on 5th December, be approved. The first order relates to the rate support grant settlement for 1976–77 and this will inevitably be my main theme this afternoon. But let me first say a brief word about the increase order.

This applies to grant for the financial year 1975–76. Exchequer grants for that year were originally determined at November 1974 prices. We now have to adjust those grants to take account of changes in costs since then. I have decided to accept for grant increases in costs totalling £1,739 million. The grant for 1975–76 was 66½ per cent. and that percentage applies also to the increase order.

We shall therefore pay a further £1,042 million in grant, bringing the total of rate support grant for 1975–76 to £5,747 million. The additional grant will be distributed on the same formula as was used to distribute the original 1975–76 grant.

I turn now to the year ahead, 1976–77. I need not dilate this afternoon on the general economic background. It is widely agreed that in the present economic crisis the prior claims on our resources must be, first, the balance of payments and, secondly, higher investment. This means that public expenditure cannot maintain the growth which it has had in recent years.

This growth has been particularly marked in the field of local government current spending, which has increased at a rate far exceeding the growth in our national resources. If we take the last three years, in 1973–74 it increased by about 8 per cent. in real terms compared with a growth in gross domestic product of 2½ per cent. In 1974–75, it rose by 10 per cent., GDP by only 2 per cent. This year the growth in spending will be much less—of the order of perhaps 5 per cent.—but at a time when, in the wake of the world recession, GDP is actually falling.

Hon. Members opposite will no doubt raise this afternoon their usual chorus of protest at this growth in public spending, which it has become fashionable to blame on waste and extravagance in local gov- ernment. I do not take this view. Of course we can always find individual examples of extravagance, but by far the greater part of the growth has been due to the demands of the public and the encouragement of central Government. Let me quote a typical ministerial speech: This is the decade of the personal social services … We have now surging social service departments and a higher growth trend than almost any other part of the public sector though not enough … This is … a tribute to you". This was said by a Secretary of State for Social Services—but not my wicked right hon. Friend the Member for Black- burn (Mrs. Castle). The date was October 1973 and the speaker was the right hon. Member for Leeds, North-East (Sir K. Joseph). No doubt he has had a public conversion since then. But I hope that today we shall be spared little homilies against "spendthrift" Labour Governments.

However, the point is not to apportion blame. The critical point is that this large disparity between our rate of economic growth and the rate of growth of local spending cannot now continue. Originally, we hoped that there would be room for some growth in local authority current spending next year. In his Budget Statement, the Chancellor provided for an increase in 1976–77 of about 1–1- per cent. But later information has shown that local authorities are spending somewhat more this year than was allowed for in last autumn's RSG settlement.

Spending this year is likely to reach the level which we had planned for next year. I cannot hope in present circum- stances to find additional money for local government next year. This is why I have had to call for a standstill next year in local government spending.

I take no pleasure in doing so. The great bulk of local spending is on essen- tials. It is on schools, social workers, play spaces, parks and emptying dustbins. It follows that the implications of a standstill are unpleasant, even harsh.

To achieve a standstill, authorities will have to take a long, hard look at all their present policies. They will have to define their priorities rigorously and ensure that every penny is spent to best effect. Even given the maximum attention to priorities and to efficiency, a standstill will still have some unpalatable implications for services.

The Government will give help and guidance in the forthcoming circular on the rate support grant settlement. But in the last resort the decisions are for the local authorities themselves. They, and not the Government, best know their own local circumstances, and they and not the Government must take the final decisions on priorities in the light of those circumstances.

In deciding how to implement the standstill, local authorities will, I am certain, seek to minimise the effects on their existing staff. There will be cuts in some services in order to accommodate inescapable commitments in other services, but I see no reason to expect significant redundancies if authorities use natural wastage whenever they can. They will need to have close and continuing consultations with employees' representatives at local level, and at national level I have instituted, for the first time, regular meetings with the TUC local government committee to discuss the manpower implications of Government policies.

But total staff numbers must not increase. In partnership with the local authority associations and the trade unions, we shall be scrutinising the quarterly returns of manpower which are provided for the Joint Staff Watch. While it is too early to draw firm conclusions from the returns so far available, it seems that some expansion may still be occurring. Future returns will provide a more reliable guide, a more reliable basis for judging how the employment situation is developing—and we may need to give further advice in the light of those future figures.

Mr. Eldon Griffiths (Bury St. Edmunds)

As the right hon. Gentleman is anxious to see the numbers employed in local government not increase—and I am sure that he speaks for both sides of the House—will he be very careful to see that the Government do not lay upon local authorities increasing duties which make it inevitable that its numbers will increase? In particular, will he put off the operation of the Community Land Act, which will inevitably add to the numbers he says he wishes to reduce?

Mr. Crosland

We have discussed this matter again and again and the hon. Member knows that I shall not suggest that we should postpone the Community Land Act.

The basic responsibility for keeping staff numbers down to the essential minimum lies with individual authorities. All this places a heavy burden on local authorities. They feel deeply the need for the services which they provide for the community. Their whole instinct is to expand these services. So I appreciate all the more the loyal and responsible way in which they have responded to our call for economy in the wider national interest. In my view, local government has not been given sufficient credit for its reaction.

I turn to the RSG settlement itself. I have already discussed the expenditure base. "Standstill" means no increase next year on the estimate of current expenditure being incurred this year. Translating this year's expenditure base into the relevant expenditure terms which we use for the Order, we have arrived at a figure of total relevant expenditure at November 1975 prices of £10,461 million.

We then had to decide on the grant percentage. Last year, local government faced an unprecedented financial crisis. There was a danger of rate increases of a quite intolerable severity—a national average of perhaps 70 per cent. or 75 per cent. We met this unprecedented crisis by paying an unprecedented rate of grant. The 66½ per cent. grant was six points higher than it had been in the previous year—as large as the increase in the whole of the previous seven years during which the present system had been operating.

The situation next year will be very different. Local authorities should budget for a standstill in current expenditure, not for growth. Because of the Government's counter-inflation policy, they can expect a sharply declining rate of inflation—I shall say more about this when I come to cash limits—and authorities' general financial situation is much healthier now than it was a year ago.

In these circumstances we have decided to reduce the grant percentage to 65½. That brings the aggregate Exchequer grant to £6,852 million at November 1975 prices—still an increase of £1,418 million on last year's settlement. Specific grants amount to £643 million, national parks supplementary grant is £3 million and transport supplementary grant is £285 million. When these are deducted from the aggregate Exchequer grant, we are left with the rate support grant itself, which for 1976–77 will be £5,921 million.

So much for the total, I turn now to the distribution of the grant. Connoisseurs of rate support grant orders will have noticed that next year's distribution formula is the longest and most complicated ever. This is not the result of wilful obscurantism on the part of the Government. Rather, it is a recognition of the enormously complex variations in the needs of individual authorities, and in the resources available to them to meet those needs.

For next year we had three particular aims: first, to give London a fairer share of the cake; secondly, to reflect more fully social needs and the needs of expanding areas; thirdly, to keep the fluctuations in grant distribution within tolerable limits. With hindsight, I accept that London was hard done by in the 1975–76 settlement. Rate rises in London were certainly well above the national average. In this rate support grant settlement, for the first time, we are taking full account of London's actual expenditure in determining its share of the needs element.

But we also have to take account of London's very high rateable resources—about £100 more per head of population than in the rest of the country. We have therefore had to make a compensating adjustment to London's needs element share. But because the London ratepayer has to pay his bills on very much higher property values than those which apply elsewhere, we have limited the amount of that adjustment to only one-third of the advantage in rate revenue which London authorities enjoy as a result of their extra rateable value.

This process of adjustment has, I regret to say, become known by the ugly and emotive term "clawback". It has even been suggested that London is positively to be taxed for the benefit of the rest of the country. I should therefore make it plain that the net result will be an increase in London's share of the needs and resources elements of rate support grant from 12.4 per cent. this year to about 14 per cent. next year.

Next, there is the distribution of the needs element between individual authorities. Here we use what are in effect two separate formulae, one for London and the other for the rest of the country. Each formula derives from a statistical analysis of the spending of the authorities concerned. Each includes for next year new indicators of social needs, related to overcrowding, poor housing conditions, numbers of single parent families—outside London—and, in London, numbers of children in care. We have also introduced a factor related to the number of new housing starts in an authority's area.

I am sure that these new formulae more accurately reflect the true social need of different areas. They will lead, for example, to a further redistribution of grant away from the prosperous Home Counties towards the hard-pressed urban areas while protecting the remote rural areas. But, because they are new and different, their immediate adoption in full could have meant large and disruptive changes in the sums payable to individual authorities. For that reason, and at the request of the local authority associations, only one-third of the total needs element will be distributed on the new formulae. The remaining two-thirds will be allocated in proportion to the sums which authorities are receiving in needs element for this year.

I should say a brief word about the resources element. This is the part of the grant which compensates for differences between local authorities in their rateable value per head. In the light of the views of the local authority associations, we have decided to devote the same proportion of the total of the needs and resources elements to the resources element as in 1975–76—that is, 32i per cent.

For the domestic element, as for the resources element, all the local authority associations have asked us to make no changes for 1976–77. As right hon. and hon. Members will know from their constituency correspondence, there has been growing concern about the rate burden on the non-domestic ratepayer, particularly the small shopkeeper. By keeping domestic relief to its present level we have ensured that a greater proportion of the grant than last year will benefit the non-domestic ratepayer.

I now turn to cash limits. As the House knows, cash limits will be applied to grants to local authorities in 1976–77. The effect will be to introduce a ceiling on the grants paid to local authorities under increase orders. For next year the ceiling will be £480 million. In other words, if costs rise in such a way that, under the normal increase order procedure, authorities would get additional grant of up to £480 million, they will get it. But if costs rise to such an extent that, under the normal procedure, they would get more than £480 million, the cash limit will bite.

This limit of £480 million for 1976–77 is based on the Government's intention, as stated in the counter-inflation White Paper, of reducing the rate of inflation to 10 per cent. by the late summer of next year and to single figures by the end of that year.

In fact, we expect that the rate of inflation in local authority costs will be not more than about 11 per cent. for the period from average 1975–76 costs to average 1976–77 costs.

Mr. Graham Page (Crosby)

Has the right hon. Gentleman allowed for the rate of inflation in the rate support grant itself, and, if he has, at what rate? If not, is he relying entirely on the increase orders to take account of inflation from 1975–76?

Mr. Crosland

What I am saying applies entirely to the increase orders. The sum of £480 million is a ceiling on the increase orders. The main rate support grant order covers only the period up to the present time. It does not look forward to inflation in the coming year. That is entirely a matter for the increase orders.

Mr. Graham Page

Is the right hon. Gentleman saying that he has taken no account of inflation in the main order, but is relying on the increase orders to take that into account?

Mr. Crosland

As usual, future inflation is taken account of by the increase orders. There has been no change in the practice that has operated since the right hon. Gentleman was responsible for these matters.

Mr. Timothy Raison (Aylesbury)

Surely inflation taking place between now and the end of this financial year is reflected in the order for next year, and surely the rate increase orders relate to inflation after the next financial year begins.

Mr. Crosland

Perhaps I may finish this part of my speech in the hope that I shall clear up these matters, although I confess that I find them as complex as anyone in the House.

The cash limit I have announced however, does not amount to 11 per cent. of the total amount of grant to which it is related. It amounts to only 7 per cent. The reason for the difference between 11 per cent. and 7 per cent. relates to the different time periods involved: 11 per cent. is a full-year effect. But the cash limit must be related to price changes from now onwards which will affect local authorities' expenditure next year.

The main rate support grant order is determined at the level of November 1975 prices. I think that answers the question of the right hon. Member for Crosby (Mr. Page). As such it already includes, for example, the full-year effect of the recent £6 settlement for local authority manual workers. There is thus significantly less than a full year's pay and price movement to be taken into account. In technical terms, and I think his will answer the question put by the hon. Member for Aylesbury (Mr. Raison), the cash limit includes the grant proportion of the estimated effect on expenditure in 1976–77 of cost increases from November 1975 to March 1977, which equates to an increase in expenditure of 7 per cent. above the settlement figure.

If local authority expenditure increases because of changes in Government policy or the introduction or enactment of new legislation, the cash limit will be reviewed. Equally, if inflation, as it affects local authorities, turns out to be substantially higher than is implied by the cash limit, the Government will again be prepared to review the position. But I regard this as highly unlikely.

The House will note that cash limits apply to Government grants and not to expenditure. The hon. Member for Aylesbury has been reported as wanting us to go further. He asked me to "grasp the nettle" by putting cash limits also on the share of expenditure paid out of rates as well.

I cannot accept this proposal for two reasons. First, it would represent a fundamental erosion of local government autonomy. I prefer to work through co-operation and consensus, not compulsion. Secondly, I do not believe that it would be as effective as our present proposals. I agree with the Economist which said on 29th November that our blend of financial control with respect for the existing system of local government may work better than more dramatic, and superficially attractive alternative". I shall not attempt to prophesy the likely rise in rates next spring. I was over-optimistic last year, because the assumptions which I laid down were not fulfilled. Most authorities overspent and many appear to have rebuilt their balances to an unexpected degree. I will say only that rate increases next spring will be very substantially lower than those this spring.

The reaction to this year's settlement has been subdued but not, I think, basically hostile. For example, the Daily Telegraph reported on 22nd November: Sir Meredith Whittaker and other local authority leaders stressed the determination of councils to co-operate with the Government". Sir Lou Sherman said: I believe we shall all play the loyalty game. If there are a few maverick authorities throughout the country the finger of scorn will be pointed at them". As to the likely rise in rates, Sir Robert Thomas is quoted as having said If the Government's estimates are borne out this would put increases below 10 to 11 per cent. Sir Lou Sherman was quoted as saying: I hope that London increases will be kept down to single figures. I invite the House to stand back for a moment from the details of the 1976–77 rate support grant settlement and consider the wider background against which we are debating this Order. A year ago, the RSG settlement was in effect a rescue operation. We were in the middle of the most severe inflation. Local authorities' finances were in disarray following the improvement advice and inadequate provision offered by the previous Administration. Expenditure had been rising at a rate far above that allowed for and this reflected not the delinquency of the local authorities, but the irresponsible profligacy encouraged by Mr. Anthony Barber, as he then was, and his ministerial colleagues. That was our inheritance.

In the past 12 months we have sought to improve the situation in many different ways. To begin with, we have enormously strengthened the whole relationship between the Government and local government. The Consultative Council on Local Government Finance has been established, and there is now a continuing series of meetings which provide an opportunity for exchanging ideas and understanding each other's problems.

I think that local government leaders would agree that the Council has been an outstanding success, the more so since circumstances at the time could not have been less propitious. The Council was born in a period when the message of a Labour Government had, sadly, had to be the pressing need to restrain expenditure. So again I pay willing tribute to the co-operation that we have received from local authorities and their leaders on the Consultative Council.

Mr. Raison

I acknowledge that the idea of setting up the Consultative Council is useful. But what is the right hon. Gentleman doing about the Prime Minister's contribution to the debate when he suggested there should be anti-council watchdog bodies?

Mr. Crosland

This is not something which the Prime Minister has invited me to do anything about. At Eastbourne the Prime Minister was trying to throw out to local authorities an idea for more public participation. I have no doubt that some people will have gone away to brood over this interesting proposal. That is the whole object of throwing out ideas. We look forward to debating this matter with the Opposition, because we know that they are all for public participation and democracy.

There is no area of similar size where we can point to a comparable achievement of changing from a rate of growth in expenditure of over 10 per cent. per annum to a virtual standstill in the space of two years.

Next, we have brought the rates situation under control. The exceptionally generous RSG settlement last year, our joint success in restraining expenditure, followed now by a fair settlement this year, mean that, after the chaos and crisis of the years 1973 and 1974, local government finances are now in a far healthier condition, and the public can face next year's rate increases with reasonable equanimity. The whole picture has been transformed from the one which we inherited in February 1974.

Mr. Max Madden (Sowerby)

Another body which has been looking at the problems of local government finance is the Layfield Committee of Inquiry, which was set up by the Government. Is the Committee to report by the end of the year, as originally intended?

Mr. Crosland

My hon. Friend must have second sight. Perhaps I can proceed immediately to read the next sentence of my speech, which I will address personally to him.

Lastly, by setting up the Layfield Committee, whose report I expect to receive early in the New Year, we have focussed attention on the long-term future. There has, I think, been a change in public consciousness in recent months on the issues of local government finance. Last year, there was an enormous out- cry about rates, but we are coming to recognise that it is far too simple an approach to be concerned only about the level of the rates. Indeed, there is a common misconception about the rate burden. As a percentage of personal disposable income, rates have stayed remarkably constant over the past 40 years. The average domestic rate bill was 2.71 per cent. of personal disposable income in 1938, 1.92 per cent. in 1955, 2.24 per cent. in 1964 and 2.49 per cent. last year—still lower than in 1938.

Mr. Julian Ridsdale (Harwich)

There are 24- million people drawing rate rebates and 2 million on supplementary benefit. Therefore, there must be 25 per cent. of ratepayers contracting out of paying rates. Has the right hon. Gentleman taken this into account?

Mr. Crosland

The figures I gave represent the domestic rate bill actually paid, allowing for rebates. But I will ask my hon. Friend to refer to this matter when he replies to the debate.

The issue is not simply one of a tax base for local spending. It is also, and even more, one of the use of resources. Now, as at periods in the past, the debate about local government is about how resources should be used—what should be the total level of expenditure and what the priorities between different services. It is on these matters that we have, I believe, made good progress over the last year.

Previously, the Government put out figures for spending on local services in the annual public expenditure White Papers, but then did little, if anything, certainly not enough, to relate them to the reality of what local authorities were spending on the ground. This year we have kept much more closely in touch with local authorities.

The 1976–77 settlement has for the first time been directly related to the Government's public expenditure plans, and only minor modifications have been made to the figures which were laid down as long ago as the April Budget. We want to build on this advance by involving local authorities in our expenditure planning for future years, so that the previous gap in thinking and planning between central and local government can be narrowed still further.

The belief that expenditure and not financing is the crux of the matter is also reflected in our decision to introduce cash limits. Once again, local authorities will know where they stand. They may not all like the consequent restrictions on their grant, but this is a financial discipline which can operate while preserving the essential freedom of local government to decide its own priorities.

I believe that this Order is both a fair settlement for the year ahead and a further step in the right direction for the long term, and I commend it to the House.

4.51 p.m.

Mr. Timothy Raison (Aylesbury)

Every year this debate becomes more important and more melancholy. I think that no one could grumble about the rather funereal nature of the Secretary of State's speech. There was but one moment of light relief, and that was when he talked about the Prime Minister's proposal. His attempt to provide some reassurance to ratepayers in the latter part of his speech seemed rather unconvincing. He tried to do the same thing last year, and at least he has had the grace to acknowledge that he was wrong then. I shall be surprised if, in a year's time, we are congratulating ourselves on an easy year for the ratepayers.

The House recognises that there is a grave situation for local government finance. We have to recognise also that the present system is quite unacceptable in many areas. Last year, as the right hon. Gentleman acknowledged, it was the domestic ratepayers who were the most unhappy this year, the commercial and business ratepayers are equally miserable. They feel unprotected now that they no longer have any vote in local elections. There is real hardship among many smaller businesses. One of my hon. Friends made some attempt to remedy that with a Private Member's Bill in the last Session, but it was not successful. I hope that the right hon. Gentleman will take the matter very seriously.

The Secretary of State said—and I do not dispute it—that rates do not account for an increased proportion of incomes compared with pre-war, but we must recognise that the rate of increase in the rates has made them peculiarly intolerable, and on top of that there is the well-known fact that they are capricious and unfair in their incidence, and that fundamentally they are not related to people's incomes.

We also have to recognise another factor. I believe that the way that the rate support grant is used as an instrument of redistribution between areas ignores the fact that the apparently richer areas—the so-called prosperous Home Counties of which the right hon. Gentleman spoke—contain plenty of poor people. One of the difficulties about any kind of system of distributing resources on a geographical basis rather than on an income basis is that it is going to be unfair. A poor person is a poor person in Buckinghamshire or in Manchester. It does not give consolation to people with low incomes in those parts of the country where the standard of living is alleged to be higher to be told that they are going to have to pay through the nose in terms of rates.

No doubt it is right to aid the inner cities, but the right hon. Gentleman will acknowledge that the Conservative Government made an important step towards this through the rate support grant. But the poor, everywhere, get a raw deal.

Mr. Joseph Dean (Leeds, West)

Anyone who is involved knows that under the Conservative Government there was no method to correct the imbalance in the formula which mitigated against the stress areas for which the hon. Gentleman claims to be appealing. I was in a deputation that went to see the then Secretary of State for the Environment, but our case was completely rejected. It took his successor, my right hon. Friend the present Secretary of State, to take steps to correct the balance, although it is still heavily not in favour of the stress areas, the big cities.

Mr. Raison

I cannot accept that point of view.

Mr. Joseph Dean

The hon. Gentleman should check his facts.

Mr. Raison

Perhaps my right hon. Friend the Member for Crosby (Mr. Page) will correct the hon. Gentleman if he catches the eye of the Chair. But my right hon. and learned Friend the Member for Hexham (Mr. Rippon), as Secretary of State, introduced into the rate support grant positive help for the inner cities. There is no doubt of that.

Another problem, which may not have been sufficiently recognised, is that the annual reallocation of elements in the rate support grant also contains difficulties. For one thing, there is the risk of political jiggery-pokery in relation to elections. Secondly, the fact that it changes each year adds to the feeling that the system is unfair. This year it is London's turn to gain, and once again, also, the metropolitan counties.

I do not grumble that London has benefited in this grant, but the position is now getting very difficult in the non-metropolitan counties like Buckinghamshire. The idea that we have a period of nil growth ahead of us is just a sick joke. In the non-metropolitan counties, we are having an inevitable reduction in services. In particular, there is little alleviation for those areas that have increasing populations. They have to provide additional schools, roads and services of all kinds. Some small help is given on the housing side, but Buckinghamshire has shown clearly that this help in no way meets the problem that it has to face in coping with a drastically growing population.

Although the system has something to do with the current crisis, as the right hon. Gentleman said, the problem goes deeper. It is two-fold. It consists, first, of the Government's failure to control inflation and, secondly, some profligacy on the part of local government and considerable profligacy on the part of national Government. It has become increasingly plain over the past 12 months that the Government's economic policy from March 1974 onwards was irresponsible to the point of wickedness. After all, the energy crisis began in September 1973 and the Barber cuts came in December 1973. Yet, from the moment they came to power, the present Government let things rip. They made no attempt to restrain pay and the electorate was repeatedly bribed that summer, and public borrowing became astronomic.

I believe that these things are the cause of the present crisis in local government, which is, of course, a crisis not just about the rates but about spending generally. We felt during the summer that the Secretary of State was beginning to be more realistic about all this. He made his famous speech in Manchester about the party being over, but even that is not wholly true. He is still pursuing extravagant ways of providing housing with far too little regard for realities. He is still pursuing the Community Land Act. It is no wonder that many Labour local authorities have given the impression that they are still oblivious to the crisis facing the country.

A year ago the Secretary of State said, in the corresponding debate, I intend to do everything within my power to ensure that the Government do not urge expenditure on services with one hand while restricting expenditure with the other."—[Official Report, 12th December 1974; Vol. 883, c. 793.] Does that apply to housing, land, consumer protection, to secondary education? Evidently it does not. These are all areas in which the Government have encouraged additional local authority spending.

The truth is that the Government, including the Secretary of State, have been thoroughly ambivalent about this problem. At one moment, the Secretary of State talks about the desirability of the maximum possible public expenditure. Then he switches to his "The party's over" theme and goes back to the revisionist point of view, which he made public in what was rather nicely described over the weekend as his "Epistle to the Costa Ricans".

It is time for forthrightness. The Secretary of State told us clearly that we could not allow public expenditure to be maintained at the ever-increasing rate of the last few years, and that both national and local government would collapse if it went on.

Mr. Crosland

Will not the hon. Member for Aylesbury (Mr. Raison) be forthright himself and explain to the House why, during the last three years of Conservative Government, local spending rose from 8 per cent. to 10 per cent. and it took a Labour Government to bring it under any kind of control?

Mr. Raison

If the right hon. Gentleman thinks that it has been brought under control, he must be living in cloudcuckoo-land.

These Orders are alarming documents. They reveal an alarming situation. Ihe Secretary of State gave us the figures. He told us that the Rate Support Grant (Increase) (No. 2) Order 1975 showed how revenue expenditure for 1975£'6 had soared by £1,739 million on last year's original estimate. Can he really be satisfied with that?

The Rate Support Grant Order 1975, which is the one covering next year, shows how relevant expenditure is to rise to £10,461 million. In that, the rate support grant, together with the specific and other support grants, is to be nearly £9,000 million. These are vast sums of money, yet, as we know there will be no growth in real spending and the grant is to be reduced by 1 per cent.

How do the Opposition view the right hon. Gentleman's proposals? We have to say again that this is a very tough settlement in many parts of the country. In my own county, it looks as though the size of the grant will be £1 million down on last year. But it had to be tough. We accept that. Perhaps it should have been tougher. We also accept the introduction of cash limits, for which, after all, we have been clamouring for some time. The real test of cash limits will be how they operate in practice. The country is not clear about what the Government mean in Appendix E of the Report, where it says that the limits will be reviewed if the pace of inflation generally or the rate of cost increases affecting local authority expenditure were substantially higher than those implied in the cash limit. What will happen to the limits after the pay policy runs out in the late summer of next year? After all, the present policy covers only part of the year. The House recognises that next year's pay settlement in local government will be of crucial importance. It may still depend on bargaining. The present situation is still meant to depend on bargaining. If so, the Government must not destroy the position of the local authorities, as they did this year by making it clear that despite what had been said the £6 pay limit was in reality an entitlement and not a maximum.

Incidentally, it is an irony that the Rate Support Grant Report talks of the Government's policy, agreed with the TUC, rather than referring to the Act of Parliament which embodies that policy.

Again, what happens if the Government's target of single figure inflation by the end of next year is not reached? What can the local authorities expect? How should they budget? Do cash limits mean anything? I hope that the Secretary of State for Wales will return to these matters later in the debate.

I come, then, to my second major doubt. From the Report it looks as though the Government are seriously playing down the difficulty and gravity of the situation, so that local authorities will underrate the size of what has to be done or will find themselves being treated as scapegoats for the failure of the Government.

In my view, the Association of County Councils was right to say in its memorandum on the rate support grant: The tone of the report does not indicate sufficiently the severity of the reduction in the standards needed to achieve the financial objectives. Likewise, the Association of District Councils said: … the report glosses over the severity of the settlement, particularly for district councils, where a cut-back in real terms of between 5 per cent. and 10 per cent. is implied. I am talking primarily of the non-metropolitan areas, but I believe that this may be true overall.

The Government should be giving a clearer, braver lead. They should not hide the actual reductions in services that will take place in many areas by their general statement about a standstill and no increases in services. They should give the facts, for example, about what they expect to happen to our teaching forces. Are we likely to see substantial numbers of unemployed teachers?

At the same time, the Government should give a much clearer lead about the other side of the coin, which is the vital necessity not to pile it all on the rates. They reject the notion of a statutory limit on next year's rates. Therefore, they must exercise far greater pressure on local authorities to hold down rate increases. It is not enough to rely on elections, because many parts of the country will not be holding elections next year.

I hope that the Secretary of State will be prepared to go further in saying what he regards as an acceptable rate increase next year. He will have to tell Socialist local authorities that piling more on the rates does not even help the poor.

The Secretary of State has often said that rates are a regressive tax. The Prime Minister now recognises that there are limits to taxation. Equally, the Secretary of State said, in that same "Epistle to the Costa Ricans", that The increase in taxes on ordinary working people has without doubt both disappointed expectations and contributed to inflation. We have reached the stage at which the tax burden cannot be increased without causing an explosion on the part of those who have to pay these taxes. It is not selfish to seek to hold down rates; indeed, the reverse is now true. The local authorities must economise and must realise that the burden carried by the economically productive or wealth-producing sector of the community is altogether excessive.

I return to the Rate Support Grant Order. As I have said already, it indicates a bleaker outlook than the Government's tone suggests. It is interesting to see where the reductions in the Order, compared with the current year, are being suggested—first local transport finance and, secondly, housing.

It is clear that transport will feel a very sharp squeeze in the next few months. It is inevitable. The notion that transport can be regarded as an ever-expanding social service is one which is proving hideously expensive. But what pressure will the Government bring to bear on authorities like South Yorkshire, which threatens to transfer the burden on to the rates instead of increasing the fares, in flat contradiction to Government policy? A very close watch will be needed also on counties like the West Midlands and the GLC, which, after all, came to power only a short time ago promising free public transport for everyone. That now seems to be a far-off dream.

The other area in which there is some reduction in the Order is housing. Again, I do not grumble at the implication that housing subsidies, through the rate support grant, should be trimmed. I take it that this refers to the contribution that can be made by the rate to housing revenue accounts. However, it is now clear that the relation between the size of housing subsidies and the rate of new council building is almost nil. The recent Shelter report made that point very forcibly.

What certainty have the Government that local authorities will achieve the standstill on maintenance and management that they are asking for, or, for that matter, will put up rents by 60p? I recognise that the bulk of housing subsidies do not come through the rate support grant, but are a separate realm of finance. The Government must recognise that new housing imposes big costs on local government through services needed for providing the infrastructure which goes with new housing. Therefore, will it all just be piled on the rates?

The Secretary of State must make it clear that if councils are irresponsible over this, they can do grave damage to the whole repute of local government. People will be bound increasingly to question their unlimited rate-raising powers in the short term, quite apart from the long-term question that the Layfield Committee is now considering.

There are other areas in which severe cuts are implicit in the Rate Support Grant Report, notably the environmental services in some areas at least. Perhaps I may quote one small example. The encouragement to raise cesspool emptying charges will certainly cause difficulty. This is a peculiarly unfair burden on the poorer people in country areas where sewerage is not provided. There is some compensation, in that there is rate relief, but the poorer people get less rate relief than those who live in larger houses. I hope that the Government will look carefully at the possibility of doing something to help those who have to have their cesspools cleared.

This raises another matter of great importance, although I recognise that the Government cannot say anything about it—namely, the whole question of what the Government are to do about the Daymond verdict in the House of Lords, because that will have an important bearing on local government finance.

I have one puzzle about the services listed in the Report. Why is there no mention of the substantial increase in town and country planning? The relevant expenditure for town and country planning was to have been £139 million in the current year, and the estimate for 1976–77 was £201 million, which is a substantial increase. Why is that increase taking place? Can it be that it has something to do with the Community Land Act? Perhaps the Secretary of State for Wales will tell us.

Will the Government now say something about the argument put forward by the Association of District Councils that part of the needs element should be paid to district councils? It seems that the association has argued this case with considerable force, and I do not think it fair that the matter should be shelved until after the Layficld Report has been published.

Will the Secretary of State for Wales give details about exactly what happened to the heavy local government borrowing that the Secretary of State spoke about in the debate last year?

I go back to the picture as a whole. I said earlier that the fundamental need is to control spending at national and local level, and, of course, it is. There is no question—I agree with the Secretary of State—that this represents a very difficult task for local authorities. They have been encouraged to spend. They have manned up to spend. Now we recognise that this has got to stop.

The Camdens, the Wandsworths, the GLCs, the West Midlands and others, to whom the Press has drawn largely legitimate attention recently, have to realise that the everlasting increase in municipal activities and spending is damaging the nation as a whole and damaging in particular those people whom they quite genuinely seek to help.

Everywhere there is a terrific responsibility on councillors and officials. It is they who have to do the job and it cannot be handed over to fantasy creations like the Prime Minister's watchdog anti-councils. Local government will have to make its own decisions. Indeed, the whole justification for local government is that decisions should be made locally. I recognise that the hardest of all decisions to take, whether it be in local government, industry, or anywhere else, is the one which entails cutting the size of staff. Such a decision represents a human problem which all of us want to duck, but it is something which has to be faced.

However, I believe that local government is entitled to ask for understanding from the public and for fair play from Government. Our criticism of Government today is fundamentally that they are not making the realities of what the Rate Support Grant Order entails anything like clear enough. We might ask, what about their own example? It is all very well talking, as the Prime Minister did the other day, about Chiefs and Indians in local government. There is no doubt that the Chiefs have proliferated, although I believe that some councils are now seriously looking at their organisation to see if they can produce more economical staff structures. It is a great pity that the Government, when they came to power, suppressed the work that the Pay Board was then doing in scrutinising local government staff.

What about the Chiefs and Indians in the Department of the Environment? There is no lack of either there. I believe that there are now well over 70,000 Indians in the Department and nine or 10 ministerial Chiefs, starting, of course, with "Big Chief Clay Crossta-Rica" who spends most of his time, fortunately, in Tokyo, the Caribbean or some far away place, but every now and again we see a puff from his cigar and no doubt the braves are summoned to his wigwam in Marsham Street and given a lecture. Then we have not quite so "Big Chief Silkin-Glove" who spends most of his time trying to grab the land from the other braves. There is also "Medium Chief Free-House", who is keen on municipalising wigwams, and "Medium Chief Gilbert", who spends his time propelling canoes, so far as he can, on to the rocks. Heaven knows what they all do, but we all know that they cannot resist inflation and control expenditure effectively. Hence, we have the present plight of the ratepayers and the country generally.

I do not propose to ask my right hon. and hon. Friends to vote against these Orders because local government has to be financed. However, I ask them to subject the Government policy in this area to the most searching examination.

5.18 p.m.

Mr. Jack Ashley (Stoke-on-Trent, South)

I wish to offer some criticism and a few constructive suggestions to my right hon. Friend during my brief contribution. I do not want to raise party political issues, as did the hon. Member for Aylesbury (Mr. Raison). I did not realise until today how seriously in trouble the Opposition are. If in a debate of this kind they have to fall back on party political platitudes after a constructive speech by my right hon. Friend the Secretary of State, they are in desperate need to recover some degree of popularity with the ratepayers.

I am surprised that the hon. Member for Aylesbury, who is highly respected, should indulge in the platitudes and bromides which we heard today about the failure to control inflation, extravagance by local authorities, the need for restraint on public expenditure and councils becoming scapegoats. The Opposition must make up their mind. A number of their criticisms are self-contradictory. If anyone is seeking scapegoats, it is the Opposition.

But I should like to leave the party political aspects on one side and put my point of view to the Secretary of State.

This Order is not only legitimate but realistic, because it takes account of our grave economic circumstances. In line with my right hon. Friend's understanding and knowledge of economics, the Order conforms to the requirements of the economic situation. There will be hardship in consequence of the Order, and some of us are extremely unhappy about the hardship involved. I have no doubt that the Secretary of State is as concerned as anyone. Nevertheless, had he been extravagant at this stage, he would have been attacked far more vehemently by hon. Members on both sides and many of us would have been most unhappy.

I congratulate my right hon. Friend on this Rate Support Grant Order and on his wise and intelligent contribution. But I am concerned about the need to encourage local authorities to share the burden of cuts sensibly and appropriately between the various sectors and to ensure that short-term economy does not lead to long-term waste.

Today I speak primarily for the all-party group on disablement. That group, which has been actively helped by Mr. Peter Mitchell, who has done a great deal of research on this problem, is very concerned about the rate support grant and its allocation. I believe that my right hon. Friend could do a great deal to help us.

The personal social services are in a special position, primarily because they deal with people in need and because it is a developing service. Any slamming on of the brakes creates difficulties for the people concerned, and it is particularly difficult to undo any damage which may be done.

Local authorities have many buildings—I could detail them, but I will not do so in view of the time—for adult learning centres, hostels for the mentally handicapped and children's homes in different parts of the country. Those buildings will remain empty as a result of the future effects of cuts which the Secretary of State has had to impose.

I do not want any cuts to be made in domiciliary services—I appreciate that my right hon. Friend does not want to cut those services either—and I do not want to shift resources from domiciliary services into buildings. Nevertheless, I do not want the buildings to be left vacant. Therefore, I suggest that the Secretary of State, possibly with other Ministers, should initiate urgent discussions with the voluntary societies and organisations to consider ways of utilising those buildings during this difficult economic situation.

This regrettable situation has been created by the missing £5 million. That is the shortfall of the requirement necessary to continue the services now being developed. The Government are to pay £180 million to preserve 50,000 jobs in Chrysler Limited. I am not happy about that, but I would not be too happy about mass unemployment either. Yet they cannot afford this additional £5 million for vital facilities for thousands, if not millions, of old and disabled people.

I am afraid that the Government go much further than cutting cash. My right hon. Friend has suggested ways in which local authorities can economise. For example, he suggested that they should cut the provision of telephones for the old and disabled. That is a mistake. I should like my right hon. Friend to reconsider that suggestion. Other senior Ministers—I do not want to name them—have said that it is incumbent upon local authorities to make provision for the requirements of the Chronically Sick and Disabled Persons Act. Of course it is. Local authorities have a legal requirement to meet the needs specified in that Act. But if the Secretary of State is recommending fewer telephones for the old and disabled it can mean-4 realise he does not mean this—recommending local authorities to flout the law because they have this mandatory requirement to meet the requirements of the Act. I hope that that proposal will be reconsidered. Any cutting of the lifelines of old or disabled people would be strongly resisted by the members of the all-party group on disablement. Therefore, I ask my right hon. Friend to look at this matter again and to give me some indication of his thinking through his right hon. and learned Friend the Secretary of State for Wales who I understand is to reply to the debate.

Some social factors do not appear to have been given sufficient attention in the needs element of the rate support grant. I warmly welcome the new factors for one-parent families and new houses, which show that the Secretary of State has a social conscience and is aware of existing and future needs. However, I regret the apparent reduction in the allowance for old people living alone, and they represent one of the main deserving groups in our society, apart from the severely disabled.

I suggest that my right hon. Friend should introduce special weighting for the disabled based on the numbers on the disabled register. I realise that it is not a precise register and that there are some shortcomings in it. Nevertheless, this is a long-overdue reform. If my right hon. Friend could institute this reform, he would go a long way towards helping the disabled, who are in great need. I should appreciate some indication in the winding-up speech whether my right hon. Friend will consider this suggestion, which I believe would go a long way towards meeting this problem.

For the moment we are left with weighting for old people living alone, which probably gives a reasonable reflection of areas with high concentrations of old and disabled. I recognise and accept that these areas are likely to make heavy demands on social services departments, but the vital social need factor is to be reduced from £249.42 to £17729. The Government are thereby cutting assistance to areas with a high proportion of old and disabled people. That aspect gives rise to great concern.

I hope that the Government, instead of acquiescing in this cut, will show their concern by considering some of the proposals that I have put forward. I apologise for focusing almost entirely on the old and disabled, but I am particularly concerned with them. I know that hon. Members on both sides of the House who are closely associated with the old and the disabled would greatly appreciate my suggestions being considered by the Government.

5.28 p.m.

Mr. Jasper More (Ludlow)

Local government is under great criticism—perhaps it has never been under greater criticism—but we in this House ought to recognise that no real service is done by criticism if it is only generalised.

I believe that there are good and bad councils. The Secretary of State for the Environment has told councils, "The party is over". It is time that he had the courage to pinpoint some of the councils which are disgracing the national record of local government and to which that ought clearly to be said. It may also be that the Government should have the courage, when faced with a particularly flagrant example of local council irresponsibility in spending, to say that they will take over the administration of that council and run it centrally until a better state of affairs can be secured.

Constant criticism based on untypical and fringe examples could destroy public confidence in any form of local government. Is that what the criticis want? Should not the Government offer more positive support to the generality of local government, while criticising the specific examples of waste? I believe that a well-run local authority, responsive to its ratepayers and responsible financially to them, can be much more responsive than a nationally organised administration.

The Minister spoke about the problems of London. I want to declare my conviction—and I think that this corresponds with what has been said by the County Councils Association—that the Orden is not fair as between the metropolitan and non-metropolitan counties. Great difficulties will be put on the non-metropolitan counties by the limitations and reductions which the Order implies. I ought to declare an interest as a serving county councillor in the non-metropolitan county of Shropshire, where we have our special difficulties. These are not confined to us but relate to a definite class of non-metropolitan county.

We are faced with the position in Shropshire that we have an increasing population due specifically to the creation in our midst—which I may say we welcome—of the large new town of Telford. This brings with it constantly increasing responsibilities to the county council and to local government generally in the provision of services, and the problem of counties such as Shropshire is not recognised in the Order before us.

I now propose to say something about the mechanics of the control which the Government are apparently seeking under the Order. They are seeking to control authority expenditure in total and, secondly, they are trying to influence the standards of individual services. They seem to be seeking to achieve the first object by means of the second one, because they offer no other advice on how any individual authority should determine what is its fair share of the national cake.

The implications as expressed in the Order are of limited value in helping any individual authority with its own problems, and I cite again the case of a new town, to achieve the right balance between, first, the need to help the Government to meet their objectives of a standstill in total local government expenditure and, secondly, the need for that authority to provide a reasonable level of service.

Surely what is required if we are to retain a meaningful discretion in local government is less advice by Government on details of individual services and a move towards a clearer definition of total resources which an individual authority can reasonably deploy at its discretion according to its own priorities.

In his celebrated speech at Eastbourne the Prime Minister referred to Chiefs and Indians, and the Secretary of State today urged us to brood and think about that. I did a certain amount of brooding and thinking about it before coming to this debate, and I say that the Prime Minister is fundamentally at fault in suggesting that local government expenditure can be improved or contained by an admixture in its administration of ratepayers and serving officials. Surely the essential in local government is to pinpoint the responsibility on to the councillors.

In this House we try to exercise some control over Government expenditure by means of our Expenditure Committee. We have today had a not very happy example of how the dedicated work of our Expenditure Committee can be treated by the Government. Nevertheless, the system is there, and I believe that it is a good one, because we have this group of Members reviewing Department by Department what has been done, how much has been spent, and how far the policy implications have been justified in the event in terms of expenditure.

Surely that ought to be the model of what should happen in local government. I am sure that some local authorities already have a system of that kind. May I say in criticism of the Prime Minister that that is what local authorities should aim at? They should have responsible expenditure committees made up of their own councillors. If the problem of Chiefs and Indians really does exist, that is the best way of getting it ferreted out.

5.36 p.m.

Mr. Sydney Irving (Dartford)

Like the hon. Member for Ludlow (Mr. More), I am a member of a local authority—indeed, I am chairman of the finance committee—very much involved in the difficulties and problems facing local government. I understand the experience and the sympathy that the hon. Gentleman brings to this subject, and I very much appreciated listening to him.

This is the first year in which the Consultative Council has been in operation and I think that it has been a welcome innovation that everyone involved in it believes to have been successful. Its operation has, however, highlighted two difficulties. The first is that of communication during discussions—that is, discussions with the grass roots of local government—as to what is to be kept confidential and what can be discussed during the discussions themselves. The result of this confusion this year was a great deal of speculation during the discussions as to what was being discussed, especially about cash limits, some of which turned out to be wrong and, indeed, unnecessarily alarming. It may be that there is no satisfactory answer to this problem, but I hope that the Secretary of State will give some attention to it next year.

Secondly, there is an urgent need for longer-term planning of local government finance. Most authorities have had virtually to complete their estimates in the main essentials before the publication of this Order. Indeed, I think that even now it is not easy for a local authority to be precise about what rate support it will get even after the Order has been published, and this is not satisfactory.

It is clear that in every way local government does not get the close examination that it deserves, and the result is that much of the criticism this year has been ill informed. How many people even in local government know some of the basic facts about the finance of local government? Do they, for example, know that it carries a debt burden equal to two- thirds of the total National Debt? The debt burden for local government is £25,000 million. The National Debt, which has been going on since the South Sea Bubble, is between £35,000 million and £40,000 million. A good part of the servicing of this debt arises because of the manipulation of interest rates by successive Governments for reasons that had nothing to do with local government. Is it not time that some of this debt was written off? The debt of nationalised industries since the war has been written off to the tune of £3,000 million. I think that it is the turn of local government to have some consideration in this respect.

How many people know how small a proportion of total tax is constituted by rates? Sir Harry Page, who needs no introduction to people in local government, has produced some evidence before Layfield in which he says that if the total fiscal revenue is set at 100 per cent., direct taxation provides 49 per cent., indirect taxation provides 41 per cent. and the residue of total fiscal revenue from all other sources, that is rates, is only 10 per cent. Of that 10 per cent., only half is domestic rates. This is a very small percentage of the total.

He also indicates something which I am sure many people do not understand. He says that at no point in the scale—and it operates regressively—does the amount of domestic rates exceed about 7 per cent. of the total income. Indeed, when it comes down to people with high incomes where they may be paying 50 per cent., 60 per cent., or 70 per cent. of their total income in tax and surtax, the amount that they pay in rates is only about 2 per cent.

Local government has been attacked for extravagance. Neither the unions nor the local authority associations know of any survey by the Department of the Environment in this respect. Indeed, they welcome the Prime Minister's statement that staff numbers are to be closely studied. The whole of local government deserves better consideration. We have about 40 Select Committees of this House but the area in which more money is spent than in any other—local government—has no such consideration. It is long past time that we had a specialist committee devoted entirely to local government.

Most of the criticism of local government this year has been on the assumption that rates have risen faster than prices or incomes. The Secretary of State has given some figures. A valuable paper was produced by Professor Foster, the head of the Centre for Urban Studies of the LSE, in which he demonstrated that rates as a percentage of disposable income in 1938 were 2.53, whereas in 1974 the percentage had dropped to 2.49. The estimate of relevant expenditure for 1975–76 will probably be within 1 per cent. of the agreed figure. So much for extravagance in local government. Certainly there may be some abuses which we should root out and there is an inequity in the way in which the rates are levied, but local government should be examined on the basis of fact and not surmise.

The Budget would have allowed a very small amount of growth, but, as the Secretary of State said, the small margin of potential overspending has pre-empted this. This limitation does not allow for any normal progression of existing services. To achieve that would have required another 2 per cent., or about an additional £200 million, in this Order.

Therefore, a standstill in fact means a cut-back in total expenditure, which unhappily is bound to fall more often than not on the personal services. We have to accept this as part of the necessities of our present economic situation, but I hope—I understand the Government's difficulties—that the ratepayer will recognise the problem and not blame local authorities for the outcome.

Unfortunately, the grant distribution formula does not sufficiently recognise the extra responsibilities of non-metropolitan authorities, particularly in respect of population. Therefore, the non-metropolitan counties will face a larger increase than the metropolitan areas, especially London. I therefore cannot rejoice with the Secretary of State in the shift in the formula in favour of London, especially in respect of the transport support grant, which will have serious consequences for bus services.

Bus fares have risen, certainly in the outer London areas, those just beyond the GLC area, by 50 or 60 per cent. in the last 12 or 18 months. The Secretary of State promised, when the transport support grant was computed last year, that he would correct the imbalance between London and the non-metropolitan areas. During this last year there has been a serious deterioration in services, as well as a dramatic increase in fares. Districts have had to pay, as mine does, about £100,000 for half-fare concessions for pensioners, while the GLC has been able to provide a concession of free fares—not only in GLC areas but running, as in the case of my constituency, right outside its area.

While the GLC can pay London Transport, from taxes and rates, about £70 million, the London country buses get only £50,000 of the transport support grant. If that situation is not corrected, there will be a continuous decline in services, which will be serious for pensioners and everybody else as well.

This unfavourable comparison with London has properly been the cause of serious dissatisfaction to pensioners, members of local authorities and others. Now the concession is to go up again with effect from 1st April, changing from a half-fare concession to an off-peak concession as well. It is long past time that the concession given to a pensioner was uniform nationally, the same for everyone, where-ever he lives.

It would add further to the feeling of unfairness that pensioners have if the non-metropolitan authorities had to accept not only a half-fare concession but an off-peak concession and possibly a charge as well, if the GLC were able, despite the more favourable formula which has been introduced, to continue with its free concession. I therefore urge the Minister to consider the consequences for pensioners and for bus services outside London and to act to avoid a further decline in the service.

Mr. W. R. Rees-Davies (Thanet, West)

The right hon. Gentleman is on to a very good point. However, does he not recognise that if, for example in Kent, particularly in the coastal resorts and the poorer areas, we tried to give a uniform, flat-rate advantage by way of concession to old-age pensioners, we should need a great deal more subsidy than many other parts of the country? Is he advocating that the Government grant should be balanced so as to give that even level throughout the country?

Mr. Irving

That is exactly the point that I am seeking to make—that the imbalance between the rural areas and the outer metropolitan areas should be corrected by an additional amount on the transport support grant, which would make possible a uniform concession throughout the country.

Councils face serious difficulties in providing against inflation. They will have to finance any inflation over 11 per cent., except in the event of inflation being substantially higher than expected, in which case the Government has undertaken to consider increasing the £480 million at present fixed. This could mean that certain prudent authorities will levy a higher increase than they otherwise would, contrary to what the Government wish to see, if the Government had given a different undertaking—say to provide 65 per cent., or even less, of any additional expenditure caused by inflation.

If the Government are to require this 01 local authorities, between £480 million and whatever interpretation is put on the phrase "substantial increase", then it can be done in certain of the counties only by some form of redundancy. In many of the counties particularly, not so much in the districts, there is no other way of cutting back expenditure in a short time. That result would be singularly unfortunate.

The Daymond judgment on sewerage charges cannot be dealt with in this Order, but it is nevertheless urgent. The regional water authorities will now levy the total amount on the general ratepayer. There are two points to be borne in mind. First, it would be unfair to the general ratepayer to have to bear this burden, which would be an additional burden in a time of economic difficulty. But second, it would be a total departure from the principles which have informed the way in which rates are levied at the moment. Therefore, both to secure relief for local authorities against the burden which will be imposed on them by regional water authorities and also to adhere to sound principles of rating—that one does not pay exactly and precisely according to the service one gets; one pays for education, for instance, whether one has children or not—the Government should ensure that a similar principle applies also to sewerage charges. If the decision is to stand in this way, some of the very people who have been given relief by the Daymond judgment will suffer, because it will then be imperative for regional water authorities to charge out the whole cost of clearing the cesspools, which will be infinitely higher than it is at present. I hope that the Government will give attention to this matter.

Local government is going through a very difficult time. I hope that nothing will be done because of economic difficulties that will do permanent damage to local government. It is still the most advanced form of electoral participation we have and is still, with all its problems, the finest system in the world.

5.50 p.m.

Mr. Wyn Roberts (Conway)

This is not the first time that I have followed the right hon. Member for Dartford (Mr. Irving). As I shall be referring indirectly to a great many of the points he made, I shall not deal directly with any of them now.

I wish to speak about Wales. The announcment of the amount of the rate support grant has aroused less excitement among Welsh local authorities this year than in previous years because their expectation has been less. The authorities are fully aware of the country's economic predicament and of the need to reduce inflation, which has added so much to their costs. They are also aware that the Government are diverting resources—resources that might otherwise have been available to them—to the Welsh Development Agency, the Welsh Land Authority, nationalisation and so on. They are not surprised, therefore, by the percentage reduction in the award for 1976–77, which will undoubtedly mean a reduction in services and probably some increase in rates.

We have to recognise that the public will have difficulty in understanding the combination: why should they pay more and get less? That will be the question which they will be addressing to many hon. Members. I hope that the Government will have the courage to explain that their percentage contribution to local authority expenditure has been reduced and that reductions in services coupled with rising rates are, therefore, pretty well inevitable.

I understand that a circular is to be issued shortly to local authorities spelling out the likely impact of the present grant arrangements. The Association of County Councils has this to say in its brief to Members: The Association maintains that the inevitability of significant reductions in levels of service should be clearly acknowledged by the Government, and such policies as the likely level of unemployment of teachers and the insufficiency of certain services, such as Personal Social Services, Highways and Transportation, and many environmental services, clearly stated. The Association of District Councils says much the same thing. It pleads that: Ministers and Departments recognise the severe limitations imposed by the Government and avoid exhorting local authorities to spend outside the limits implied in the settlement. I go further and urge the Government to make all this known to the public. Last year the circular to local authorities in Wales was issued two days before Christmas and had very little publicity on that account. Perhaps it was not intentional, but I stress again that the Government must have the courage to make the contents of this year's circular known to the public so that people do not demand of the authorities services that the authorities are in no position to supply.

The implications of the grant are briefly outlined in the White Paper of 5th December "Local Government Finance". On education it says that there will be no scope for any improvement in staffing standards and there will have to be significant economies within the existing services.

In Wales we already have significant unemployment this year among teachers. How many more will be unemployed next year and what are the Government proposing to do about it? Some retraining for other jobs will be necessary. Would it not be wise to postpone secondary school reorganisation and to devote the £2 million set aside for this to teacher retraining or to improving the quality of education in Wales, which I regret is no higher than that in other parts of the United Kingdom?

There will also have to be savings in personal social services and in local transport services, which means higher bus fares. The settlement does not allow for any extension or improvement in concessionary fare schemes. There is not a single Welsh Member of Parliament who is not faced with increasing demands for concessionary bus fare schemes.

In housing, there is to be a standstill in management and maintenance expenditure. On maintenance, perhaps the Government should consider allowing tenants to do what they can in this sphere. Many council tenants come to my surgeries and complain of inadequate maintenance. When I ask them why they do not carry out these simple jobs themselves, they say that they are not allowed to do so.

I urge the Government to make the facts known to the public. I should have thought that it was in the Government's interests to do so and an important aspect of their attack on inflation. I am certain that it would be very wrong for the Government to seek a little temporary, even bogus, popularity by making a song and dance about the increase in their grant in purely money terms. This would only lead to the public to expect more and better services, which the Government know very well the local authorities cannot provide.

Inflationary expectations must be broken in local government, as elsewhere. Indeed, these expectations have played a major part in adding to the cost of local government. I am pleading for an honest presentation of the facts. Local authorities are not popular these days. They are subject to severe criticism. Reorganisation is often blamed by the Labour Party and others for defects which are more correctly attributable to inflation and the imposition of additional duties by central Government.

I have been examining allegations of overstaffing, for example, in Wales. In Wales there has been an increase in full-time and part-time employees in local government between June of last year and June this year of 5,800. When we analyse this increase, which is generally attributed to reorganisation, we find that the two largest elements in it are the increase of 2,359 in the number of teachers and lecturers and 2,392 in the number employed in construction. Both could be justifiable increases in view of the raising of the school leaving age and the increase in council house building, which we have been hearing about from the Government.

It is only fair to consider the causes of staffing increases in other sectors of local government and their costs. There is no doubt that central Government have imposed heavy additional burdens on the local authorities which have necessitated staff increases and increased costs. The proper implementation of the Chronically Sick and Disabled Persons Act, for example, has introduced a whole range of new responsibilities. I am told that during the past five years there have been no fewer than 67 Acts of Parliament affecting local government.

Mr. Dafydd Wigley (Caernarvon)

The hon. Gentleman gave increases of staff between June 1974 and June 1975. He will be aware that the full reorganisation of local government was in effect from April 1974, and staff had been taken on in the year prior to that. I suggest that his comparison does not bear out what he tries to draw from it.

Mr. Roberts

I think that there could be some argument between us about that. Most of the people who went into the reorganised local authorities in Wales were already serving in local government in Wales. I am by no means exonerating the local authorities completely. All I am trying to do is to say something on their behalf.

I have, for example, already drawn to the attention of the Welsh Office the comparatively high cost of consumer protection in Wales, and I hope that the Welsh Office is looking hard at that to make sure that our high costs are justified. The Welsh counties spend £552 net per 1,000 of population on consumer protection, compared with £452 per 1,000£100 less—spent by metropolitan counties in England, and, what is more, £183 less is spent by the English non-metropolitan counties. These are significant differences in cost, and they must be looked into.

The defence of local government is not a popular cause today, but local authorities are nevertheless entitled to fair criticism, and I do not consider that the central Government, who have imposed some of the additional duties on local authorities, have shouldered their fair share of the responsibility for rising costs and increased expenditure. It is all very well for the Prime Minister to say that there are too many Chiefs and not enough Indians—I suppose that any Sitting Bull could say that—but he cannot rid himself of his responsibility in the matter quite so easily.

The key question now, it seems to me, is whether the Government have allowed sufficient rate support to enable the local authorities to avoid significant rate increases next year. The people of Wales could not bear such increases, and 1 am sure that the rest of the country is in a similar situation. Obviously, the Government have favoured the urban areas in their distribution of grant. The extra £120 million given to London is viewed with as much disfavour in Wales as it is in other non-metropolitan areas. It will mean an extra 1p or so on the rates, and the 1 per cent. reduction in the total grant will mean another 1p on the rates simply to maintain a standstill position.

Apart from those factors, the Welsh authorities' share of grant is, I understand, about the same as last year, with Clwyd losing and Powys gaining. My own county of Gwynedd is in a better position this time on the transport supplementary grant, and we are grateful for that.

Perhaps the Secretary of State will tell us more about how Welsh local authorities are likely to fare, but I hope that he will not succumb to the temptation to tell us that things are better than they are. Everything in the garden is not lovely by any means. I hope that he will tell us also what level of rate increases he expects from the Welsh local authorities next year, and that he will put a realistic ceiling to them, because, as I have said, people cannot take further substantial rate rises in either the domestic or the commercial sector. Many business people have already been bankrupted by this year's rate increases, and more will be driven out of business altogether if we have further substantial rate increases.

The Secretary of State will be aware that the Government's proposals for devolution are totally unacceptable to Welsh ratepayers because the Assembly will have power to levy a surcharge on the rates, and however much the Government protest that the power need not be used except in the event of expenditure exceeding the block grant or in the event of general agreement on the worth-whiteness of additional expenditure, this proposal for a surcharge on the rates will never be accepted.

I understand that a Plaid Cymru Member, who is not here at the moment, is already talking about a special tax on tourism and a special Welsh wealth tax. I assure the hon. Member for Caernarvon (Mr. Wigley), who is here, that these ideas do not advance the cause of devolution one bit.

There is one other point to be made in connection with devolution and local government, and this concerns the suggestion, which has been made in several quarters, that in the event of the Welsh Assembly coming into being, one tier of local government will be done away with. The Secretary of State should make his views known on this issue, for there is considerable uncertainty and anxiety in local government circles, and it may be positively harmful if it is not dispelled.

There are hard times ahead for local government and for those it serves. The authorities must face that fact and cut back, as the Government have done in the rate support grant which allows for only minimal growth in real terms. Local authorities would be very unwise to try to raise more out of the long-suffering ratepayers, who are still suffering from the current year's high increases, coupled with the general recession which has adversely affected local trade.

I hope that the Government agree with that view and will say so unequivocally in their circular to the authorities and in public statements by Ministers. The time for soft talk and illusory promises is past. There must now be straight talking and a firm call to ecorlomy. I assure the Government that it will be appreciated by the public, who have been deceived and lulled into a false expectation of continuing betterment in local government services for far too long. The authorities, too, must match that spirit and not seek from the ratepayers what they have failed to get from the Government. The ratepayer's pocket is emptier than they think.

6.8 p.m.

Mr. John Cartwright (Woolwich, East)

It is inevitable, I suppose, in a debate about rates that we spend a fair amount of time on our individual local situations. I am sure that the House will not be surprised to hear that, as a London Member, I greatly welcome the Secretary of State's partial conversion to the case for giving London a better share of rate support grant, though inasmuch as it was not a total conversion to the London case. I shall return to London's situation a little later.

The Secretary of State made clear that the 1976–77 Order enshrines what might be called the nil growth strategy for local government, and that view has been echoed in virtually every speech since. I believe that many of us on this side of the House understand and accept the need for that sort of approach, but what worries us is the lack of sensitivity in a policy of total standstill. For example, it does not recognise social changes and population movements and growth such as were referred to by the hon. Member for Aylesbury (Mr. Raison).

I have in my constituency a substantial new town development known as Thamesmead. We have thousands of people moving in, and even more to come during the next 12 months. We cannot say to them "We are sorry, but because there is a standstill in local government expenditure, we cannot give you the services which you need and must have".

If we are to do anything about the worsening condition of the inner city areas and the great urban centres, we shall have to spend more money rather than less, and in these circumstances a policy of standstill will simply worsen the decay of many of our inner city centre areas.

Secondly, the policy of total standstill does not recognise the momentum in local government spending, particularly capital spending, where decisions taken two or three years ago begin to affect revenue expenditure only in the current year or the year to come. That is particularly true of the social services capital programme. I am glad that my right hon. Friend made clear that local authorities had undertaken substantial programmes of capital spending on social services as a result not only of public pressure but of considerable pressure from Minsters of both parties. If local authorities, because of the running costs of the facilities, leave old people's homes standing empty or nurseries unused, as is happening now, that is a waste of resources which many of us do not accept and which many ratepayers will not understand.

Thirdly, the policy of standstill does not recognise the duty of local government towards what might be called the casualties of the economic crisis. This Government were elected on a clear pledge to protect those most in need as a result of the harsh winds of our economic difficulties. We should realise that local government has a particular role to play in meeting that need. It will mean that the bread and butter services, such as home helps, meals on wheels, lunch clubs, day centres, and all the services for the disabled, handicapped and deprived will have a bigger burden to carry rather than a lesser one.

Given that some services must be allowed to develop and grow against a background of standstill and nil growth, some local government services clearly will have to be cut and will have to decline. The fact that local authorities have recognised this says a great deal for the realism and patriotism of our colleagues in local government. Local councillors were not elected to preside over a decline in the services for which they are responsible. Most were elected on a clear programme of trying to improve services. The fact that they accept the limitations of our economic difficulties is a great tribute to them.

Many of us are concerned about the risk to local government, in the face of some of the pressures applied, that there will be unselective cuts in services across the board. We want to see a great deal more time and effort given by local authorities to determining their priorities. It is a far from easy matter. I spent a great deal of time as a leader of a London borough trying to sort out problems of priorities in local council spending. My right hon. Friend is right when he says that priorities should be determined locally in the light of the particular problems facing an individual local authority. It is vital to urge local authorities to ensure as far as possible that the inevitable cuts fall on those services which are not essential for people most in need.

When we talk about public concern over local government spending and the level of rates, we should bear in mind the considerable resentment caused by precepts, particularly those of undemocratic, non-elected bodies. The fact that the Metropolitan Police Receiver has power to levy a rate without any democratic involvement or public control over what he does with the money has caused a great deal of criticism in London local government for a long time. In many parts of London the precepts imposed by the police and the water authorities constitute a significant proportion of the rate collected. Many ratepayers blame the local authority for something that is totally outside local government control.

The criticism from London representatives over the past few years has been based on the fact that London spending was previously excluded from the formula on which the needs element of rate support grant was calculated. It was generally accepted that London had a much-higher-than-average need for local government spending, but it was argued that London's much higher rateable resources were enough to offset that greater need to spend. Now, as a result of a decision by my right hon. Friend, London's higher levels of spending have been included in the analysis, though not totally. The London local authorities maintain that about £80 million has not been taken into account in the regression analysis, and that that represents a rate of about 4p in the pound.

Having included the London spending situation in the analysis, my right hon. Friend has now denied London the full benefit of that decision by deciding to claw back—to use the Department of the Environment's delightful term-33⅐ per cent. of London's need element payments. The only reason we are given is that 16 London boroughs have resources above the national standard, as measured by the rateable value per head of the population, and the Grants Working Party believes that those extra resources are available "to some extent" to be shared by other London boroughs. But many of us have argued for a long time that rateable value per head of the population is a very unrealistic test of resources or ability to pay.

That view is supported by a great deal of the evidence to the Layfield Committee. The Department of the Environment said, for example: Rateable values of comparable properties vary greatly across the country—far more than do average incomes. A three-bedroom Parker Morris house in Outer London, for example, has two and a half times the rateable value of a similar house in West Yorkshire. I do not believe that anyone would suggest that average earnings in Greater London are two and a half times those in West Yorkshire. There is a great deal of evidence to Layfield, provided by professional bodies and individuals, indicating that the use of rateable value per head of population as a test of resources available to local authorities is very unsound.

There is also concern in London that the claw-back arrangement will hit every London borough, whether or not it has the excess resources that I have mentioned. There are eight districts outside Greater London which have a rateable value per head of the population above the national standard, and also above that of 13 of the London boroughs, yet they are not to suffer the claw back which is the fate of the London boroughs. All the remaining authorities outside London whose resources are below the national standard will receive resources element to bring them up to the national standard. Only the 17 London boroughs with below-standard resources are to be penalised by having some of their needs element grant removed.

The rates paid in London are already much higher than the average for the rest of the United Kingdom. In 1975–76, for example, the average rate payment in Greater London is £138.87, compared with an average for England and Wales of f92–86. The situation worsened considerably over the past year. In 1974£75 the London average was 28 per cent. above the average for England and Wales. In 1975–76 it has worsened to 50 per cent. above that average.

I accept that the gap will be narrowed as a result of my right hon. Friend's action, but London ratepayers are hit in two ways. Their higher rateable values mean that they pay higher rates, but because they have higher rateable values they are to be denied their fair share of the needs element. This places them in something of a Catch 22 situation.

I question whether there was a substantial need for the claw-back, based on the share of resources which would have gone to Greater London if there had been no claw-back. London's share of the resources element and the needs element would have been about 16.6 per cent. of the total for England and Wales without any claw-back being applied. The claw-back reduces the share to 14 per cent. There is an improvement on what we have had in the past, but when we bear in mind that London's share of total local government spending represents about 20 per cent. of the figure for England and Wales it is clear that even an allocation of 16.6 per cent. would not have been an excessive share of the rate support grant.

The need for a higher level of spending in London has been argued very often in the House. The case rests on the obvious fact that land costs and building costs are very much higher in London. There are precious few green field sites in the London area. We have to face the problems of urban decay and renewal and a monumental traffic problem in the Greater London area. London's social service problems and the incidence of housing stress are much greater than the average for the rest of the country. That is because within the population of Greater London a greater proportion of the elderly, the disabled and children need care.

There is almost an Oliver Twist situation in that London has been given something but it still asks for more. The local government leadership in Greater London accepts that to have a sudden, sharp variation in rate poundages due to sudden changes in the rate support grant would clearly be unwelcome, it accepts a phasing-in of changes as reasonable and acceptable, but it does not accept the idea of an arbitrary claw-back based on unsound decisions relating to ability to pay on the part of local authorities.

We welcome what my right hon. Friend has done for London as a reasonable compromise, bearing in mind the great difficulty now being faced by the nation, but we shall never really be satisfied until London's case is met in full. We can only hope that the justice of London's case will be fully met by the Layfield Committee.

6.23 p.m.

Mr. Peter Fry (Wellingborough)

I begin by making three general points. First, the Secretary of State quoted the percentages of income taken up in rates. Perhaps it has escaped his notice, although it has not escaped the notice of the rest of the country, that other taxation has increased considerably since 1938. Any extra taxation is regarded with disfavour.

My second general point relates to the Secretary of State's rather proud statement that he hopes that rates will not increase by more than 25 per cent. this year. Most people will consider such an increase to be totally unacceptable this year after the increases that they have seen in recent years.

My third general point relates to the £120 million that is drawn by claw-back to London from the non-metropolitan counties. One major concern is that the £120 million will not encourage retrenchment on the part of some local authorities, but will encourage them to spend more. There is concern that they will regard it as an extra subsidy. If the public statements of the Wandsworth Council are to be taken at face value, that is the likely outcome. Many non-metropolitan counties have done their best to reduce their spending in the light of advice from the Government, and it seems that they will suffer more.

I have to ask myself how the rate support grant will apply to my own county, Northamptonshire. It is somewhat ironic that Northamptonshire will receive a little less because certain moneys are to go to London. Northamptonshire and its ratepayers have done much in recent years to assist in solving London's problems. We know that the new towns will attract some help, but I must point out to the Secretary of State that although we have an expanding town in the county, we shall receive no extra help. If the expansion of Wellingborough takes place, a greater strain is likely to be put on the ratepayers.

I find it totally inexplicable that the right hon. Gentleman should recently refuse to allow Corby to expand when a massive amount of money has already been injected to provide the necessary infrastructure. As the same time, the right hon. Gentleman has given the go-ahead for Wellingborough's expansion, involving millions of pounds of ratepayers' and taxpayers' money. Those two decisions make me think that the right hon. Gentleman does not understand the Problems of my county.

I shall address the major part of my remarks to the transport implications of the rate support grant. At first sight the figures do not look too unpromising. We see that the transport supplementary grant in cash terms is to be only £1 million less over the next year than we shall vote for the current year. The figures for current expenditure for this year and next year indicate that we can expect a shortfall of some £55 million. Allowing for inflation, that will mean a real reduction. The Government must come clean with the public and show quite clearly how serious that reduction will be.

There is a tendency to gloss over certain significant matters in the Secretary of State's report. It is true that he lists five main policy implications for local authorities. First, it is suggested that there should be a reduction in expenditure on highway maintenance. That is a popular idea for all Secretaries of State, but the House should put matters into perspective. In 1968 there was a 15 per cent. cut in highway maintenance and even now the great bulk of local authorities have not fully made up for that cut. The further cuts being suggested by the Government would probably have taken place in any event, but the fact that they have been highlighted in the report will probably make them even greater.

Further cuts in highway expenditure could be quite serious. Of course, we are all aware that savings can be made. For example, perhaps road sweeping could be reduced. Perhaps the provision of road signs need not be so extensive. Grass-cutting may not be so necessary. Those reductions could be made without too much harm, but there is serious danger in delaying attention to secondary roads for too long.

One county surveyor has estimated that 12 months' delay could double the cost of repairs. In that same county only 60 per cent. of all highway expenditure is used for surface dressing—not complete resurfacing. It seems that 40 per cent. of the total highway maintenance allocation is used on "wallpapering" cracks. With increased commercial vehicle traffic, the cost of maintenance is continually increasing.

The engineers say that two results will emerge unless carriageways are strengthened towards the end of their life. The first result will be a need for much more patching of roads. In the end, the roads will consist of more patches than original surface. The large-scale patching which takes place is a waste of money in the long run as it does nothing to add to the strength of the carriageways. The second result is that if we have a severe winter—there are already indications of that—carriageways reaching the end of their life will be susceptible to water and frost damage. When the roads have to be repaired owing to extreme damage, we shall discover that the cost will be four times as much as the bill which would now have to be met.

In the short term, less expenditure on structural maintenance will mean a rapid increase in the cost of patching and reconstruction. I make these points not because I do not appreciate that there has to be a cut-back in transport expenditure, not because I think that transport must not take its share of the cut-back, but because I believe that there are some areas in which cut-backs are acceptable and others in which they are dangerous, merely storing up further trouble. Certain areas of highway expenditure are just such a case. Instead of presenting us with airy-fairy general advice, the Secretary of State might have examined some of the more expensive urban road improvements with a view to considering whether some of them could be cut back, thereby ensuring that our inter-urban communications remain at a relatively high standard.

The second policy implication mentioned in the Secretary of State's report is an increase in car parking charges. Not many of us will be opposed to a sensible, economic, pricing system. There are many factors that have to be borne in mind. The first is that the motorist has already had a high level of taxation imposed upon him. Second, if the charges are increased by too much, there is a danger that this will have a detrimental effect upon some shopping centres. Shops and businesses which have moved into these centres and which already pay a large amount in rates and rent will not be pleased if they discover that their area is being boycotted by the motorist who will not pay excess parking charges. There are already some city centres suffering from that effect.

The most serious implication of this rate support grant is its effect upon bus services. The Secretary of State said that increases in bus fares should be at a rate in excess of the general movement of prices. In other words, the increases should be more than the general increase in the rate of inflation. He went on to say that these increases should apply particularly where bus fares had not been raised to keep pace with past costs. As the Association of District Councils has pointed out, it would not only be authorities like South Yorkshire—which has failed to increase its fares in the way that it should have done—that will be affected. There is every likelihood that increased bus fares will result in increased passenger resistance. That will lead to fewer passengers, greater losses and, inevitably, fewer services.

As the Association of County Councils has said, although the Secretary of State's report highlights the increase in bus services, it does not point out that it is difficult for passenger transport authorities to avoid reductions in bus services, particularly in the more rural areas, which have already suffered heavily. If the fears of the Association needed any confirmation, an examination of last year's supplementary grant for transport shows that the metropolitan boroughs did far better than the rural areas in the allocation of money. There was an increase of 7 per cent. between 1974–76 for the metropolitan boroughs compared with a reduction of 11 per cent. in the non-metropolitan areas for the same period.

There is, therefore, a danger that the rural areas will lose out yet again. If the aims of the Government's Circular No. 171/74 are to be achieved, there will need to be a progressive policy of reducing Government subsidy. The figure suggested was £50 million at November 1973 prices. If that policy is to be realised there are three options for public transport. The first is that there should be higher fares. As I have suggested, this can only lead to a loss of passengers and a reduction of services.

The second option would be a high additional subsidy from the rates. Even the present Government are rapidly coming to the conclusion that this is not the way to deal with the local transport problem. Third, there could be an attempt, at least, to deal with the problems of local public transport. This is something about which the Government have talked but about which they have done almost nothing in the 21 months since they came into office.

The fourth policy implication about which the Secretary of State talks is that of holding down administrative costs to current levels. While I do not believe that there will be any quarrels about this from the Conservative side of the House, hon. Members and the country at large must realise that if there is to be proper co-ordination of public transport, we need at county council level at least much more urgent and greater attention being paid to the problem than has hitherto been the case. There is not yet sufficient expertise to deal with the complicated and differing problems of local transport. It will be cheaper in the long run to ensure that the co-ordination of public transport is prepared with the advice of officials who have not only the relevant qualifications but the necessary seniority in the local authority hierarchy. This will be much better than the present rather longwinded muddle and delay involving increasing fares and rate-borne subsidies.

The fifth implication in this report is a reduction in capital expenditure as compared with the levels allowed for in the 1975–76 statement. The Department of the Environment in its Circular No. 43/75 on the transport supplementary grant submissions asks local authorities not just to consider the present year, but to look ahead to a five-year, fully-costed transport programme. One would imagine in those circumstances that the Government had some idea of what their plans were over the next five years. Amazingly, we are still awaiting the White Paper on transport and any statement on rural transport. This has been much heralded, but it is taking a long time to appear. If the Government expect local authorities to do their planning five years ahead, the least the Government can do is to have their own programme similarly organised.

It is becoming increasingly clear that subsidies alone are not the answer. We have already heard of local authorities which promised free fares. As my hon. Friend the Member for Aylesbury (Mr. Raison) pointed out, these are now almost forgotten. Other local authorities are also producing schemes which, frankly, are ludicrous and which will cost enormous amounts of money. Let me give an example. I recently visited Nottingham where a much-heralded new traffic control and transport scheme has been brought into operation. Basically it is a "park and ride" scheme. Motorists are encouraged to leave their cars and travel into the city in specially provided buses, thus reducing congestion.

The only trouble with this wonderful scheme was that for the first two months of its operation, the city authorities having allowed for nominal bus fares, each double bus journey cost the ratepayers £12.84. It is a ludicrous scheme bringing no credit on local government control of public transport. Having achieved this wonderful result, the Nottingham County Council decided to alter the scheme. Now, instead of charging fares, a fiat fee of, I think, lop for car parking is charged for all of the occupants of a car who leave the vehicle in one of the car parks and use the buses. The only trouble with this is that if three people decide to use a car, they can show a considerable saving of money by using the normal bus service, because the fare in that event is about 13p or 14p. Not surprisingly, not many people are taking advantage of this scheme.

There is a need for the Government to address themselves to the whole problem of public transport. So far they have manifestly failed to come out with any new ideas. Surely, at this time in our economic affairs we deserve more than pious hopes and promises from the Secretary of State. There is a danger that public transport will collapse. So far there has not been a squeak from the Government. We have had these rather misleading and unhelpful comments about the rate support grant. We Conservatives do not believe that there has to be a definite subsidy. We believe that there has to be a constructive and coherent policy. We are still waiting for that policy.

6.40 p.m.

Mr. Stephen Ross (Isle of Wight)

There is general, if reluctant, acceptance in local government circles of the Secretary of State's decision on the level of the rate support grant. There is disappointment at the reduction by 1 per cent. down to 65½ per cent., there is suspicion that the allowance of 11 per cent. for inflation is not enough, and there is disappointment at there being no increase in the domestic element.

Councillors and officials are well aware of the country's problems and economic position and are fully prepared to play their part, as they always have been. This debate is in danger of developing into a defence of local government. There is resentment about the attacks that have been made upon councillors and officials, and I am glad that the Secretary of State referred to it. No doubt there are instances deserving of adverse comment, but monthly league tables in the Press detailing councillors' expenses are unnecessary. Ill-considered attacks made upon them by the Press and, at times, in the House lower morale, whereas it is important that morale in local government should be maintained.

When the new local government structure was set up, councillors and officials had high ideals. There are many faults in the system, which I will not enumerate. I do not agree with the structure and I wish that we did not have it, but, as we have it, we must make the best of it. Most new authorities set out with high hopes and it must be part of our job to support them in a particularly testing time and not to avoid taking the responsibilities which lie within the House.

To illustrate some problems faced by local authorities I need turn no further than my local weekly newspaper, which this week reports the meeting of the county public protection committee. Its draft budget for next year is £1,407,560, which includes £97,000 for future pay awards. The budget was found to be £19,560 above the allocation. The committee set about reducing the budget. It was thought that £15,300 might be saved on the fire brigade pensions reserve account, but, following a draft Home Office regulation, which, by including war service, allowed firemen to retire earlier, the committee had to put back that figure to avoid running into heavy deficit.

A further £5,000 is needed for new bulk measuring equipment for the trading standards department—no doubt at the behest of the Department of Prices and Consumer Protection. A further £3,000 is needed for equipment to combat oil pollution, which is vital for an island in the English Channel. A further £3,000 is needed for a commitment under the new health and safety at work legislation. Those may be small sums, but they illustrate how regulations and legislation coming from this place make the task of councillors more difficult. In the end, the committee resolved that it could not cut any more from an already restricted programme.

The Secretary of State has issued guidelines on the implications of expenditure cuts for local authority services. We should try to give priority to social services and education. It is right that we should give prior place to the old and the young. I am pleased to inform the Secretary of State that the Hampshire and Isle of Wight police force has already taken action by instructing some of its desk policemen to get out on the beat.

I am concerned about local transport services, especially concessionary fares and in this I support the right hon. Member for Dartford (Mr. Irving). In my constituency there have been two, if not three, sharp increases in fares this year. It now costs £2 for a husband and wife with two teenage children to travel six miles and back. Yet we are talking seriously of putting up fares still further. All that does is to drive people away from public transport.

In my constituency old-age pensioners get little in concessionary fares. It amounts to about £6,000 or £7,000 and represents four or five vouchers a year. Those old-age pensioners look across the water to some of the bigger Hampshire towns and to London, where people may travel free between 10 a.m. and 4 p.m. and after 7 p.m. Even the small allowance given to old-age pensioners in my constituency is threatened with withdrawal. They are envious of their counterparts and think that something should be done. The Government must take action over what is becoming a major grievance in my constituency and in other parts of the country. Let us have a national standard of aid which applies fairly throughout.

I gather that the metropolitan transport authorities are concerned about the future of their services. They consider that £285 million is inadequate to cover their increased costs. We look to the Government to make their overall public transport policy clear and to do it soon, and in that I echo the words of the hon. Member for Wellingborough (Mr. Fry). We are all concerned about the rumours circulating in the newspapers, rumours which appear to put "Beeching" completely in the shade. Fares are already high enough. If they go up again, more and more people will cease to ride on the buses. The high fares have already had a disastrous effect on inter-city travel.

I take the point that it is no use calling for cuts in public expenditure which we all know must be made, if we are not prepared to indicate where the cuts should fall. Savings can be made through natural wastage, by not replacing officials as they retire. There must be flexibility within local authorities and officers must be prepared to move around. Some salary scales are completely out of line, as is made abundantly clear by comparisons given to me this weekend. The Secretary of State must be firm and say that there must be no re-grading to enable staff to get more than the £6 limit. Officials must stay within their present grades.

I come back to what was said by the hon. Member for Aylesbury (Mr. Raison). When the new local authorities were set up, the establishment and the pay scales all seemed to come down from on high. We had a fulcrum. We could put officials two or three points below or above the fulcrum. These matters were fixed under the previous Conservative Administration and it is a bit late now to talk about the Pay Board.

We were all keen advocates of the Bains Report and followed it like sheep. There is one good idea in the Bains Report, and that is the performance review sub-committee. A few authorities—one a Liberal authority—make much use of that suggestion. Local authorities could play a much more constructive role if they all made full use of performance review techniques, that is to say, comparing performance one year with another. I echo the view that there is no need for lay watchdogs in local government.

It must be clearly understood that most cost increases are the fault of legislation passed by successive Governments. It is unfair to pass the buck to officers and councillors of local authorities. The cut-backs, which are inevitable, must clearly be shown to be due to Government policy and not to the defects of local government.

6.48 p.m.

Mr. John Forrester (Stoke-on-Trent, North)

There is much in what was said by the hon. Member for Isle of Wight (Mr. Ross) but I must resist the temptation to follow him along the road of whence came the orders from on high at the time of local government reform. I am attracted to the hon. Gentleman's views on concessionary fares, which follow closely those of my right hon. Friend the Member for Dartford (Mr. Irving). I hope that the Secretary of State will be able to make order out of the chaos of the concessionary fares scheme and perhaps introduce a national scheme.

The one thing on which both sides of the House might agree is that the debate is taking place at a time of almost unprecedented economic difficulty. Most of us will agree that it is essential for public expenditure to be contained, if not reduced.

This has not stopped us individually from disagreeing with one or more of the Government's proposals for expenditure reductions, and no doubt between us we shall have disagreed with everything in the Orders tonight.

A major problem is that people have rising expectations. They expect better educational facilities, more health facilities and better care for the old, the sick and the disabled. Politicians are as responsible as anyone for creating this atmosphere of over-optimistic expectations. We must grasp the nettle and get to grips with the reality of the problems facing us. We must not be afraid to tell Mrs. Smith that if she has a telephone installed, the hole outside Mrs. Jones's house will not be repaired.

I had some sympathy with my right hon. Friend the Secretary of State when he talked about an intermission in the saturnalia, but it should be an intermission for Parliament as well as for local authorities. There has been a feeling in local government for some time that successive Governments have passed legislation, some of it essential, much of it highly desirable, but a lot as change for change's sake, and if the Government want local authorities to contain their expenditure, it is imperative that Parliament does not add to their burdens. If in this very difficult period the Government feel it is essential to improve certain services, we should consider whether they ought not to foot the whole bill.

With the financial difficulties in industry and the small increase in personal taxation due to the £6 pay limit and unemployment, it would be very difficult for the Chancellor of the Exchequer, despite his good intentions, to play Santa Claus. It is incumbent upon Parliament to restrain its exuberance for reforms, at least until the inflationary spiral is over or the economy has turned the corner.

Local authority treasurers and most councillors have come to terms with the new situation. They should be congratulated and encouraged when they deserve it. They have received a fair amount of criticism recently and much of it has been unjustified in view of the relationship between Parliament and local authorities. I have brooded long and reflected hard on the suggestion that local authorities should have their accounts audited by self-appointed, non-elected pressure groups, and I could not disagree more with such a suggestion.

It would be immensely helpful to local authorities if the RSG formula could be adjusted to take account of responsible attitudes shown by individual authorities. This would be far more effective than lecturing the spendthrifts and then subsidising their profligacy. It is particularly discouraging for local councils when the rules are changed in the middle of the game. There may be compelling arguments for altering the formula, but this should only be done after adequate notice. Very often local authorities have spent several months working out the plans and details of their budgets.

The reduction from 661 per cent. to 651 per cent. is a blow to the prudent as well as to the spendthrift councils. A 1 per cent. reduction in the total grant means that 3 per cent. more of the expenditure will have to be borne by the rates, and this comes on top of the decision, albeit agreed with the local authorities, not to increase the domestic rate element. There will have to be severe cuts in local government services if we are to meet the rate increases sought by the Secretary of State.

1 recognise and sympathise with the problems of London and other metropolitan conurbations, but we must not lose sight of the fact that there are major cities in the shire counties with similar problems. There are very strong arguments for paying part of the needs element direct to district councils.

When recommendations are being made for saving money, can we be sure that the Government are not adopting a Jekyll and Hyde posture? In one of the Orders local authorities are urged to cut the opening hours and reduce the maintenance of recreational facilities. Expenditure is to be reduced by about £10 million. However, the Minister of Sport would rightly urge us to use these facilities even more. There seems to be a contradiction here. What criteria will be used to decide what charges the market will stand for these facilities? Will the imposition of charges mean that the facilities become the exclusive property of the better-off?

In Stoke-on-Trent we have an excellent record of land reclamation. Inevitably, this means an increase in the annual charges for maintenance by the parks and recreation committee, which looks upon this work not as a luxury, but as an essential rejuvenation of the area for the future. I hope we can be assured that the support received from the Government in the past will be continued.

The Government are also recommending increases in cemetery and crematoria charges. In order to achieve the figures suggested, these increases would need to be very large. The death grant now paid by the Department of Health and Social Security is inadequate for even a modest funeral, and many old people have insurance policies geared to the charges of a past era. If increases in cemetery charges result in a demand for higher death grants, local authorities may win, but the Government will lose.

Last year, in Stoke-on-Trent we decided not to increase car parking charges. It was our modest attempt not to add fuel to the inflationary spiral. Whatever the merits of increased charges, we must be sure that they do not add to the pressure for wage increases and so defeat their object.

I appreciate that it is not easy to find ways of saving money. Those who suggest that it is possible to save £1,000 million overnight are barking up the wrong tree. We must be absolutely certain that when we ask local authorities to reduce services—for example, to make fewer dustbin collections—we are not at the same time increasing health hazards that will in the future cost more than they save.

7.0 p.m.

Mr. Arthur Jones (Daventry)

I agreed very much with the hon. Member for Stoke-on-Trent, North (Mr. Forrester) about the degree of unanimity in the debate. The Secretary of State for the Environment must welcome this general recognition that expenditure by both central and local government must be significantly reduced. I also agree with the hon. Member about what he described as the over-optimistic expectations by us, down the years, of local government services, an attitude which has arisen from the decisions and policies of consecutive Governments in the post-war period. To some extent we are now paying for that approach at a time when our economic circumstances make those expectations unrealisable.

I congratulate the Secretary of State on his measures this year to contain local government expenditure. In the debate on the rate support grant last year he said: the Government are determined to give a lead to authorities in indicating where they consider the cuts in the rate of growth of services might fall. I do not think he has done that to the extent some of us expected, and perhaps that is understandable, for a variety of reasons. But he told the country during the year that on local government expenditure "the party is over", and I am sure that other hon. Members, like me, will remember that phrase.

In last year's debate the right hon. Gentleman also said: We simply cannot afford a continuation of the massive short-term borrowing which local authorities were forced into this year. We must re-establish the principle that current expenditure is met from the general rate fund and not from borrowing."—[Official Report, 12th December 1974; Vol. 883, c. 793–4.] He has not discussed the question of capital expenditure and the loan consents which are required by local government for that type of expenditure. We have yet to see the full implications of what he said then. The proposals for 1976–77 are a start, but there is a very long way to go, with inescapable reductions in the scope and standard of services.

This means that if targets are to be reached in the context of the recent wage awards of £6 per week for manual workers in local government and the as yet uncommitted increase for next year, the wage content of services will have to be reduced, with a consequent loss of jobs.

The £480 million limit on the amount available to meet pay and price increases rightly carries with it the warning that there is to be no bailing out of councils which wilfully over-spend. I hope that the Secretary of State has the courage, when the crunch comes, to stand by his present policies. A note of caution to this effect was referred to in a leader in The Times on 1st August last. It said: Many local councils … will probably doubt the credibility of his threat. They will question his ability to maintain such a stead fast policy of economy in the face of many claims for more. Indeed, his earlier retreats on the cuts in housing rehabilitation grants and the increases in council house rents show how difficult it is for a Minister—particularly a Labour Minister—to resist such claims. The level of central and local government public expenditure is unacceptable. The present standards of our services are maintained only by substantial borrowing at home and overseas, and it is Government Departments which must accept the responsibility for the increasing scope and higher standards now being provided. I was very impressed by the point raised by the hon. Member for the Isle of Wight (Mr. Ross) in this context. As he said, so much of the increased local government expenditure arises from the demands upon local authorities by central Government Departments. As I see it, they are not co-ordinated, and that sums up the burden of my contribution to this debate. This is a reflection on the Government and the Treasury, both of whom have failed to play their proper role of ensuring that the level of expenditure is commensurate with the realities of our increasingly adverse situation.

During the first day's debate on the Gracious Speech the Prime Minister actually claimed credit for the outrageous increases, totalling no less than £3,200 million, in last year's expenditure by central Government. While congratulating himself and the Government on the one hand, he none the less criticised local government for similar feats of increased expenditure in its sphere of activities. He failed to point out—and I find this quite unacceptable—that much of what has been spent locally has been spent in accordance with the requirements and edicts of central Government Departments.

In its comments on this year's rate support grant, the Association of County Councils says: One important point which should be emphasised is that despite many widely publicised prognostications of 'enormous' overspending—and often wild criticisms—as far as can be seen at this stage local government expenditure in 1975–76 may not exceed the agreed relevant expenditure by more than 1 per cent. This is in real terms and does not include inflation. I agree with what was said concerning criticisms directed at local government, many of which are quite irresponsible. Here we have a definitive statement from the Association of County Councils, and if central Government were able to tell the same good story our affairs would be in a very different shape today.

Hon. Members on both sides of the House who are interested in Treasury Questions will be aware of the apparent lack of overall control on expenditure. I believe that the evidence is overwhelming that present arrangements are totally inadequate in our current economic circumstances. There is a report in the Daily Telegraph today that Messrs. Phillips and Drew, stockbrokers, have made a research study of local authority borrowing. It draws the conclusion that local authority financial activities are much more closely controlled and determined by central government than is generally recognised. What is true of current expenditure applies also to capital expenditure incurred by central Government Departments by way of loan consent. Here, clearly, is a complete Treasury responsibility. There are a number of pieces of evidence which were submitted to the Select Committee on Expenditure and its Environment Sub-Committee. In evidence taken before the Committee in the 1974–75 Session, the statement was made on behalf of the Department of the Environment on 21st April this year, at page 103, that The difficulty … with monitoring local authority expenditure is that the local authorities do not really cast up their final accounts until the end of the year, so that they do not themselves know what their precise expenditure patterns have been until some time after the end of financial year in question, and then they have got to be audited. To my mind that is a quite misleading statement and is not a true reflection of the monitoring of expenditure which continually takes place, certainly in those local authorities of which I have had experience.

Mr. Graham Page

That is an extraordinary statement. Local authorities of course estimate their expenditure. They have to do so for the year in order to come to the relevant expenditure figure. Is it being suggested that the Department of the Environment cannot monitor that? It did when I was a Minister. We certainly monitored the estimates of local authorities.

Mr. Jones

The quotation was of evidence given to the Select Committee on Expenditure. I question the validity of it myself, and I am glad to have my right hon. Friend's support on that score. In my experience it is not a true reflection of the facts. If it were true it would be an entirely unsatisfactory state of affairs in terms of availability of information and budgetary control. On the following page the same witness remarked: Much of this is a confused area, and one in which we are very conscious that we do not know enough. I would be interested to hear my hon. Friend's observation on that. In further evidence, the Chairman, the hon. Member for Nottingham, West (Mr. English), referring to separate departmental responsibility, referred to … an extraordinary hotch-potch of systems of control over itself, which surely leads to confusion". Another witness from the DOE replied: I do not think I could deny that there is some confusion otherwise you would not be questioning us. On page 104 of that evidence, a DOE witness said: The philosophy of all governments has been very firmly that the central government should be organised on a functional basis. The Treasury also revealed its view during evidence taken by the Environment Sub-Committee of the Expenditure Committee in its inquiry into new towns. My hon. Friend the Member for Melton (Mr. Latham), raising the question of expenditure on the London docklands, major inner urban developments and new town designation, asked how the Treasury would seek to involve itself financially. The reply by the Treasury witness was that there were no basic rules or common approach. My hon. Friend inquired: Would you say that this is an area of policy when Treasury advice is likely to be decisive or not? The reply from the Treasury witness was, "Frankly, no."

We have a situation in which there are departmental demands for massive expenditure, according to these witnesses, but without overall Treasury control. Surely this must lead to what the Director of Applied Economics at Cambridge University, Mr. Wynne Godley, referred to as the missing billions.

The Treasury apparently conceded to him that expenditure rose by about £5,800 million between the November 1971 Treasury White Paper estimate and the January 1975 White Paper. The Prime Minister apparently takes credit for uncontrolled expenditure increases in central Government, talking in terms of failure to control and accountability by local government. Two judgments are being made by the Prime Minister. The evidence to which I have drawn attention points to a state of affairs which is quite the reverse to that suggested by the Prime Minister. According to the evidence, local government expenditure is monitored far more effectively than central Government expenditure.

In support of my proposition that the entire responsibility lies with central Government and lack of Treasury control, I refer to evidence given to the Expenditure Committee on 21st April, page 105, by the DOE representative: Of course, we have independence of local Government, but it is an independence which in public expenditure terms is exercised at the margin. Local government expenditure is open-ended in terms of the demand imposed upon it by central Government, and the judgment which local councils bring to bear is exercised only at the margin, as the Treasury witness tells us. In this context, it is clear that no amount of buck-passing from Westminster to local councils, nothing achieved by the Consultative Council and no institutions such as that proposed by the Prime Minister to monitor the decisions of elected councillors can or should absolve the Government or Treasury from overall responsibility.

Above all else there is a need to restore financial control—to introduce central control of departmental expenditure and the will to contain and reduce the utterly unrealistic scale of public expenditure.

7.16 p.m.

Mr. Dafydd Wigley (Caernarvon)

Last year's debate on this subject was very heated—largely, I suspect, because the momentum of change in local goverment was being brought suddenly to a halt. I expected this heat to have increased, but tonight the debate is in a very different key and seems much more subdued, possibly because of the inevitability of the local government situation, but partly, perhaps, because many people in local government have become punch drunk and there is a certain degree of inertia.

One basic question has not arisen in the debate as much as I thought it might—the critical question of whether inflation can he contained at 10 per cent. If that cannot be done, there will be chaos next year. There will be uncertainty, at least about inflation.

I wish to speak of the effects of the Government's proposals in Wales. On broad principles, as a party, with most people in Wales we believe in the need for local government to be local. But so much expenditure in local government is determined by this Chamber and so many resources come from this Chamber that the degree of freedom of action is minimised, and erosion of responsibility arises when this situation occurs. Nothing brings people more to realise the reality of a situation than to have total freedom in decision making together with the responsiblity of facing the consequences The effect of freedom of decision with out responsibility might be a drift towards relaxation from responsibility which could be serious.

The third broad principle is the need for there to be in local government, certainly in its present framework, a degree of equalisation. This is very important in that there may be great discrepancies in personal incomes and in gross national product per county. For example, Wales has 85 per cent. of the United Kingdom income average, the old Caernarvonshire having 53 per cent. of the United Kingdom level in 1972. Such discrepancies need a mechanism for equalisation. It may well be that local government will need finance for such changed mechanism and, if that is accepted, there will be the economic effects of a spin-off in determining the structure of local government finance.

In Gwynedd over the past 12 months we have seen redundancies among road workers—a regrettable situation in an area where male unemployment is between 10 and 15 per cent. It is an area of depressed income which needs economic stimulus, even though the overall situation in the United Kingdom may be one of neutrality. In an area such as Gwynedd, there is need for positive action, even if it differs from action taken in other, more prosperous areas. I suspect that in the present structure there is not sufficient ability to provide some degree of local stimulation in areas such as Gwynedd, even though there may be need overall for a standstill.

We in Plaid Cymru urge a greater capital programme for such things as housing, roads and schools, whereby there would be an opportunity to pump more money into a local economy needing it. But if that is done, there will be greater need for the local councils to have ways of channelling the maximum possible expenditure direct to local firms rather than the money going outside the area and being dissipated generally into the economy. This aspect has not been sufficiently examined in the context of finance for local government.

What has happened in the past 12 months in my area? Twelve months ago, we were perhaps castigating the Government on their proposals, particularly in relation to Gwynedd. It was a hot potato in the Press and elsewhere. Sadly, the record since then has largely borne out these fears. I have referred to road workers being laid off. Bus services have been chopped while fares have been increased in proportions previously unknown. If bus services are cut to such an extent in rural areas of low income, where car ownership is a luxury yet a necessity because of the lack of public transport, the effects can be chronic.

Also during this past year the maintenance of local authority housing has been cut. In my part of Wales there is a danger of the local authorities being taken to court as delinquent landlords. They are today's Rachmans. They are not managing to keep up their estates as they should. Streets have not been cleaned, dustbins have not been cleared. New homes for the elderly, ready for occupation, have not been opened.

We have seen local authorities under such pressure looking for loopholes to avoid responsibility for the homeless. We have seen disputes between county and district councils because neither has the ability to face the responsibility for the homeless, a responsibility which may be loose in the letter of the law but which is, nevertheless, a moral responsibility. There is a shortage of money for mortgages. Clearance schemes have been held up, with appalling environmental results. Cuts have been made in the social services—in some cases it is massacre. In this context, a standstill cannot be good for such an area.

If, on the other hand, rates were increased to try to relieve the problem, it could be one last step for many ratepayers. Small businesses are often only marginally in existence now and a further increase in rates could push them over the edge. They are in a situation where a marginal income barely covers basic living costs, and any further increase in costs could make them bankrupt. We face potential depression, and it will become real if pressures increase and there are any miscalculations of the effects of inflation during the next year.

We agree that the new formula is complicated, but it will be slightly better for transport in my area than was the case last year. We welcome that, but it is a qualified welcome because last year was so grim. We hope that this year will not have the same effects on transport as was the case last January.

But in the new formula not enough consideration is given to the effects of sparsity of population on costs. Many hon. Members representing rural constituencies have referred to this aspect in the past. Perhaps the Government still do not recognise the complicated nature of on-costs where there is sparsity of population.

Secondly, there is reluctance to recognise the effect of movement of population in terms of tourism. Calculations are made on base populations, but sometimes a town may have 10 times as many people in summer as in winter. This can happen in the city as well as in rural areas. Where it happens, it imposes extra costs and strains on local government. Therefore, there should be an element in the formula to cover that aspect, even if it would render the formula more complex.

Very often rural poverty is not recognised. There is an idea afoot that poverty is an urban feature: it is not. There is rural poverty in my constituency. Bus services and other basic services have been cut. All these factors can have an even greater effect than in city areas.

There is to be an element in the formula for new houses. That is welcome also in areas in need of more housing. But there is another side to the coin. Populations are moving into some countries and out of others. Very often it is the people of working age who move leaving the rest of the community to bear the burden of school and geriatric costs for example. A moving population means additional costs for both donor and receiver authority.

In the past year there have been anomalies in relation to caravans and caravan sites. These have produced numerous problems for local authorities. Fortunately these problems will be alleviated to some extent next year we hope but something must be done because it is extremely serious.

In dealing with the problem of job creation my county council has taken the initiative. If the Government get 50 percent from the European Social Fund towards the cost of some of the programmes they are bringing forward the local authorities too should have the benefit. The money from the Fund should find its way straight through to the local authorities and should not be treated by the Government as miscellaneous income.

I could not speak about rates without referring to water rates in Wales. I am sure that hon. Members would be disappointed if I did not. Unfortunately, the saga continues. Only last week I heard of a factory which had had an increase of 4,000 per cent. in its water charges because of the new idea of a minimum payment where there are meter charges.

It may be necessary to increase charges to industry in the circumstances, but to do so in one 4,000 per cent. increase is crazy. We have had one such episode after another from the water authority in Wales and it is high time for common sense. I want speedy action on the Daniels Report. I hope that we shall have had action by this time next year so that there will not be any greater burden on water rates in Wales.

Many hon. Members in the debate have referred to Chiefs and Indians. When I was in industry, we used to pay great attention to the relationship between direct employees and indirect employees—those working on the factory floor making the goods and those carrying the burden of costs on their shoulders. That concept should be developed in local government terms, where there can often be an imbalance. We need to ensure that the maximum possible number of people give direct service to the community in relation to the number of people organising them.

The hon. Member for Conway (Mr. Roberts) referred to the Welsh Assembly, and I agree with what he said about the possibility of rates surcharge. One of the greatest pieces of nonsense in recent months is the suggestion of using a system already condemned by the Government and by all parties. Indeed, because the system has sunk to such disrepute the Layfield Committee has been investigating it. For the Government not only to continue to use it but to try to extend its use into this new area is simply not on. The Government will not get that part of their devolution proposals through the House—of that I am sure.

There is also the question of the effect of the Welsh Assembly on local government costs. There may be beneficial spin-offs, but it depends on the Government's attitude towards local government in Wales after setting up the Assembly. The Labour Party in Wales in the 1960s at least had good ideas, which it put to the Kilbrandon Commission, about unitary authorities in Wales. Unfortunately, those ideas were not borne out on a United Kingdom-wide basis and have been excluded from the proposals in the White Paper on devolution. I urge the Government to look seriously at the local government structure in Wales in the context of what they are proposing in terms of the Welsh Assembly. It may be possible that such elements as teachers' pay, as part of further education, can be operated on an all-Wales basis and therefore alleviate the burdens on local authorities.

I want also to make the point, in reply to those who argue that the additional costs for the Assembly will fall on local government, that it will be within the Assembly's capability to spend the money that it has for local government as it sees fit. Therefore, equally it could mean 10 per cent. less falling on local government. This is a subject which I notice is carefully avoided in Press comment.

Even though next year may not be as bad as last year in terms of the effect of deterioration, it still may be bad enough to push many areas like my own over the top. The general deterioration of services may become worse as inflation affects these areas and as the cash limits start to bite. In terms of the local public sector there may be no alleviating effects on the local economy because of the lack of financial resources, and the local economic situation may deteriorate because of the cutbacks. Many people now on marginal survival may become marginally unviable, and depopulation may follow.

The outlook is extremely bleak, and tonight's silence reflects the numb anticipation of what is ahead for the ratepayer, the council employee and every citizen concerned with local government services in Wales.

7.31 p.m.

Mrs. Millie Miller (Ilford, North)

As one who for many years burned the midnight oil trying to keep down rate demands upon local residents, I appreciate the tremendous effort which must have gone into local authority considerations in deciding how to cope with the demands from the Government that the rates and the services of local government be depleted seriously. I was interested to hear the hon. Member for Daventry (Mr. Jones) talking about the response of people from Whitehall, especially from the Department of the Environment and the Treasury, and the reactions that they have to local government budgeting. However much knocking goes on in the Press and the media about local government members and officers, there is no doubt in my mind that the hon. Gentleman's point about the way in which local government budgets and is able to account for its expenditure in comparison with this House is relevant in the situation that we face today.

I find it remarkable that civil servants should say that they are unable to monitor local government expenditure because local government itself is not able to do so. Having served for many years on local authorities, I know how at the end of each monthly or six-weekly cycle the borough treasurer is bound to give his council a current report of the state of expenditure of every department of the council. I cannot imagine how it is possible to say that this cannot be monitored.

In recent months, it has become more fashionable to knock local government, and it is very easy to do so from a position where one is sitting above looking down on a situation which is far more complex than many people outside realise.

In relation to London local government especially, I take the point made by the hon. Member for Caernarvon (Mr. Wigley) about additional consideration being given to mobility. Many of the most serious problems of the inner London boroughs have come about because of the movement outwards of population, leaving the inner London area to the social casualties—the old, the disabled and the sick and the large immigrant populations. Providing for them, trying to maintain the structure of existing housing, trying to redevelop housing, especially at a time when the cost of land in central London has escalated beyond all imagining, has been a very serious problem which local government has had to face at times of chopping and changing in Government policies.

We have the position today where many local authorities have co-operated to the fullest extent with the Government in trying to put some control on local government services. But I do not think that we should overlook the effect that this will have on many of the disadvantaged groups. Although we are told that there is not to be a cut in education, we know in advance that unemployed teachers will not be employed to reduce the number of children in classes. We know that in the most disadvantaged areas of our urban distncts there will be larger classes than we would have envisaged a year or two ago. We know that disabled children will often suffer as a result of cuts which are made in the social services. We know, too, that the social services are bound to be affected adversely by these cuts especially because, at the time of the Seebohm Report, which was taken on board so enthusiastically by the Government of the day, unlimited funds were poured in without serious consideration of the way in which the social services were developing.

When we talk about Chiefs and Indians, there is no sphere in which this criticism applies more than in local government. Over the past year, I have spoken to many groups of social workers who are completely devastated by the fact that the most junior social workers usually are doing the most challenging work in the field, when those with long experience in field work and in the specialised social services sit in town halls writing reports or carrying round pieces of paper from one department to another.

It is tragic to think that we have to look at the relative values of another 50 social workers and a new telephone for a disabled person. Until now, that has been the pattern of local authority choice. I wonder whether the Secretary of State realises the effect of a telephone on the life of a lonely and isolated disabled person whose family has been uprooted and sent to a suburb, a new town or a development area. Contact has been lost almost completely because of the domestic problems of the family who find it difficult to come back in view of the tremendous increase in fares over the past year or so. Without a phone, the old disabled person is often completely cut off from the community.

If we are unable to provide visiting services, home help services and eventually even meals on wheels for such people, their plight will be even greater. Many of them have told me that a telephone is or would be the one lifeline in maintaining contact with the rest of the community. For us to be looking at savings at this level seems to be the complete antithesis to what we talk about when we say in the Labour Party manifesto that the broadest backs will bear the greatest burdens.

The other liberating factor in the lives of old people in London—the greatest improvement since the introduction of the old-age pension—has been the introduction of concessionary fares. Although the Secretary of State talks about new concessionary fares areas as being his targets for savings, I fear that there may be a move to reduce expenditure in existing areas. Here again this service has provided the freedom to elderly people to travel about and to visit their families, assuming that they are mobile enough to do so.

Another aspect discussed by the Secretary of State in his suggested economies was a reduction in expenditure on the collection of waste. If there is one topic which arouses anger whenever the subject of waste collection is raised it is the common practice of commodities which could be salvaged and re-used being thrown into the communal dustbin never to emerge again, after individual housewives have taken great care to separate them. I wonder whether this is not another item concerning which the Government are acting as Jekyll and Hyde, where, instead of making sure that waste is used to the benefit of the population and re-used to save on imports, the Government are telling local authorities to reduce waste collection and thus we have additional expenditure instead of benefits.

I wish to refer briefly to London. I know that London local authorities greatly appreciate the help which, for the first time, has been given to them this year. It is a step forward which we should acknowledge and for which we should thank the Government and on which we should congratulate them. However, there are still problems, and certainly the claw-back proposal will cause great difficulty for London local authorities. It is all very well to talk about rateable resources being so much higher in London, but it must be remembered that rateable resources do not pay the rates. We have already heard that a family in outer London in a constituency such as my own is paying two and a half times as much in rates as a family in a comparable situation in Yorkshire.

In London many of the problems of this claw-back have already been acknowledged but there are others which have not yet been recognised. I am disturbed that local authorities such as my own, when economising and, as they say, taking into account the needs of the ratepayers, choose to go not just for nil growth in local government expenditure but for a 3½ per cent. cut in services. I consider this is a very serious matter because already we know that with nil growth services will be seriously reduced. If a local authority chooses to go for a 3½ per cent. cut in existing services, there will be devastation, especially in some of the personal social services.

I have heard of other authorities where the appeal for economy has given them the opportunity to get out an axe which they have had in store for some time. They have been waiting for the opportunity to cut back on services which mean so much to the poor people in the community. I doubt whether even the ratepayers in the London Borough of Redbridge, which has gone for this 3½ per cent. cut in services, will be prepared, as the Secretary of State said in his opening speech today, to accept with equanimity the rate increase for next year. I suspect that they will still think that the rate increase is inordinately high. We know that this is a salutary period for everyone in the community and not least for the elected councillors who put forward programmes which they hoped would lead to better social services.

I wish to refer to something which happened to me. In the early 1960s I gave evidence to the Herbert Committee on the reorganisation of local government in Greater London. One of the questions which was put continually to all the borough representatives who gave evidence to that Committee was whether the reorganisation of London government would not eventually result in a better calibre of member. In 1967 there was another enquiry into the management of local government. During that inquiry the same term was used—"a better calibre of member". One aspect has often puzzled me. There are people in Whitehall who consider themselves in a position to judge the calibre of members of local government. However, those same people are incapable of realising what happens when they urge local government to provide more housing, to buy more houses and to provide better social services, thereby trying to boost their own ego with the introduction of new aspects of spending. There is nothing more inhibiting to people of "a better caliber" than for them to offer better services to the local community and subsequently to find that, because of changes of Government policy, their own policies are completely destroyed.

I do not think there is any hon. Member—certainly there is no Labour Member—who is happy about reductions in local authority services. I hope that we shall bear this in mind when proposing how to cope with the forthcoming Session's legislation. If we are to pass more legislation in line with our policy of social reform, the money to pay for it will have to come from specific Government grants.

7.46 p.m.

Mrs. Jill Knight (Birmingham, Edgbaston)

I should like to follow the trend partly set by the last two speakers. I wish to depart from the broad and lofty uplands of local government finance and the rate support grant to talk for a moment about the way in which these matters affect people's lives.

I should like to refer to a particular problem affecting Birmingham. In that city there are groups of parents who had planned that their children would start primary school directly after Christmas. Those children are the "rising fives", the children who will be five before the end of the term in which they plan to start.

The tragedy for many people in my constituency is that their children were offered places in primary schools. As the people who run the schools are enlightened and gentle, the children were invited to the schools to see where they would sit in the classroom and sometimes they were invited to attend assembly. Some children have even attended the Christmas plays and parties of one kind or another. Their parents have spent what to some of them is quite a considerable sum on fitting them out with school uniforms.

Now, just a week or two before the term is due to begin, those parents have abruptly been told that their children will not be allowed to start school. I do not know whether hon. Members can appreciate how much this means to a small child looking forward to beginning school and to that child's mother, who may have accepted a job on the understanding that the child would be attending school. It also means a great deal to the father who has had to pay for the uniform. By the time the child actually starts school in the summer or in the autumn of next year, he will have outgrown that uniform. It is not surprising that a considerable number of parents are writing to their Members of Parliament about this matter.

The local authority says that it is not its fault. It says: the Government has taken powers to allow reduction of rate support grant for expenditure above accepted levels. A rate support grant statement as late as November 21 and a Government circular quoting specifically the need to confine expenditure in schools to children of statutory school age and above, i.e. those who were five the term before they were admitted has been received. At this time of the financial year with the Birmingham share of rate support grant not yet clear, with four months of the financial year yet to run, and with the size of the education budget not known, decisions cannot be taken to admit children who would still not be accepted for grant purposes in the summer. The places are vacant in the classrooms. There is no question of extra expenditure by permitting the children to take up the places which they have been promised. In the light of this I find their rejection difficult to accept, and so do the parents.

At the request of some of the parents, I asked the Secretary of State for Education and Science—he was here earlier, but has now left—whether he would see a deputation about this matter. Understandably, the right hon. Gentleman passed the matter to his Under-Secretary of State who has responsibility for primary schools. The letter that I received from the hon. Lady filled me with joy, because in it she said that there was to be a joint circular on the rate support grant settlement for 1976 and 1977 before Christmas, that that would contain guidance to local education authorities on the admission of under-fives, and that it would supersede former guidance. The hon. Lady also said that if they still wished to see her after they understood about this new guidance, she would receive them in the New Year. The inference was clear.

When I heard that there was to be this debate today, I rushed into the House in a fervour of anticipatory optimism to hear what the Secretary of State had to say. Alas, from his lips dropped not one word that would please my constituents or solve their dilemma. Could I have missed some vital circular which had been produced?

Having heard the Secretary of State to the end of his speech, I rushed out to the Vote Office and received a heavy handful of orders of one kind or another emanating from the Department of the Environment and concerning local government finance. I scrutinised them carefully, but not one was the necessary circular. So I approached the Library and asked whether there was any knowledge of a circular there. But so far the Library has had no information about the circular.

Will the Secretary of State for Wales, who is to reply to the debate, give guidance to my constituents about what to them is the important matter of the education of their children? I shall not be surprised if the right hon. and learned Gentleman has children of his own. I know that he will appreciate that parents want to know about this urgent matter. School starts very soon after Christmas and parents will want to know where they stand in the light of local government finance cuts.

I was very alarmed when the Secretary of State said that ratepayers need not worry because the increase that they would be asked to pay next year would not be as great as the increase they faced last year. I should jolly well hope not! They will have to pay the inflated amounts which they now face, which worry them very much. Apparently, there may even be an increase on that. I do not know whether I misheard the Secretary of State, but the thought that there are to be more increases, even though they may not be large, is gravely worrying.

Like most hon. Members, I have to stay in London while Parliament is sitting. I have a small place in a street about five minutes away from the House. I should like to draw attention to one matter where I consider that, as a ratepayer, my money is being grossly, flagrantly and repeatedly wasted. There are parking meters in my street. At least ten times this year the parking meter outside my house, as well as others in the street, has been vandalised.

I made inquiries about the cost of repairing a parking meter. Apparently, it is £40 a time. There are 10 or 12 meters in my street. The meter outside my house has been vandalised 10 times this year. That means that £400 has been spent on repairing that one meter. There being 10 meters in the immediate vicinity which have been vandalised, that amounts to £4,000 in one small street. There are many thousands of similar streets in London.

I put a Question to the Home Department on this matter. It was smartly passed to the Department of the Environment. I asked how many parking meters have been vandalised in the inner London area in the last year? The answer was: Parking meters are the responsibility of local authorities, and in London information of this sort is held only by the boroughs."—[Official Report, 1st December 1975; Vol. 901, c. 455.] I am sorry to say that that information is not available. If more hon. Members realised how much of the ratepayers' money was being spent day after day, week after week, on the repair of vandalised parking meters, I am sure that they would in a body demand that the Department of the Environment did something about it.

Of those two matters, 1 hope that the right hon. and learned Gentleman will appreciate that by far the more important matter to me and my constituents concerns their children, and I hope that he will deal with it. Will he also consider the example where money is being grossly wasted?

7.58 p.m.

Mr. Michael Morris (Northampton, South)

Before making my annual plea for special help for the New Town of Northampton. I should like to look at a number of the broader aspects involved in the rate support grant.

It would be churlish of hon. Members not to recognise that the Government have taken the first step along the road to getting some degree of control over local government expenditure. I welcome the improvement in the grant mechanism and particularly the basis of relevant expenditure. That is probably as far as my praise will go this evening.

It is interesting to reflect whether the 7 per cent. or the 11 per cent., whichever basis one takes, will be attained in the coming year and to consider what will happen when it is not, because that level is unlikely to be reached.

Rumour has it that if, compared with the 7 per cent., inflation were to go up by 8 per cent. or 9 per cent., it would be tough cheese on the local authorities, that if it is 10 per cent. and they yell hard enough, they may get some help, and that from 11 per cent. onwards, it will be OK because the Secretary of State will cave in.

If the Government are in earnest about wanting to control local government expenditure, they need to make two things clear. First, they must say that all local authorities must estimate at a constant 7 per cent. Otherwise, we shall get a situation throughout the country where the clever boys will vary the amount that they anticipate they will have and juggle their balances accordingly. There is something to be said for having a good director of finance, but it would seem fairer if the Government were to indicate that all local authorities should calculate on the 7 per cent. level.

Secondly, if the Government are serious, they should set a 7 per cent. maximum and say that if, by bad luck or bad management on their part, the level becomes higher than 7 per cent., nevertheless they look to local authorities to hold down to the 7 per cent. The Government have missed a golden opportunity to make these so-called cash limits binding.

The time has come for the Government to ask themselves whether they really believe that local government expenditure can continue at an increasing level as a proportion of GNP. Even with the nil growth that is being forecast for the coming year the proportion of GNP going on local government expenditure will increase. I do not believe that the present level of about 19 per cent. is any longer acceptable to the community. I challenge those hon. Gentlemen who insist that the public are demanding more and more expenditure on one thing and another. I do not believe it. In the 1950s and 1960s local government expenditure as a proportion of GNP was about 10 per cent. We must get down from 19 per cent. to perhaps about 15 per cent.

I believe that those hon. Members who reflect the true views of the public feel that local government expenditure is still given too high a priority in relation to total Government expenditure. There have been many rumours in the past few days about defence cuts. At Question time today the Secretary of State for Trade said that it would be expensive to improve the export credit guarantee system to allow for cost escalation and therefore, by implication, it was out of court. Those two areas, defence and export incentives, are far more important than the vast majority of local government expenditure, and if they are being cut, it is only right to look to local authorities to have their provisions cut.

One cannot help but have enormous sympathy for those who are having to implement local government expenditure. The majority of hon. Members who have spoken in this debate have served their time in local authorities and we all know that too often the Government are concerned with the minutiae of what local government is doing and take little or no interest in some of the vast areas of expenditure.

If the Government are concerned about getting public spending down or controlled, they must begin to tackle the areas of waste. One of the areas of waste that is beginning to rear its head again is direct labour. Those who have been in local government remember all too clearly the 1950s and 1960s. We remember the Salfords, the Coventrys and the Liverpools. It is 15 years since those days, and it is not surprising that this area of waste is rearing its head again.

One can find many examples of excessive direct labour costs. There is the example at Norwich of the loss of £213,000 on four housing schemes. There has been overspending by Sedgefield District Council, Durham, of £241,000 on the modernisation of 124 homes. The Sunderland leisure centre has nearly doubled in cost to £3.8 million and is running 13 months late. Glasgow—dear old Glasgow again—hoping to have completed 2,000 homes in the past year has completed just over 350, and when asked in evidence the housing convenor admitted that he had not the slighest idea of what each house was costing. Those are tips of the iceberg, and when ratepayers hear Ministers suggesting that direct labour should be increased in the months ahead, they shudder at the thought, because they know that although there are some efficient direct labour departments, the majority are not adequately controlled and are a passport to waste in Government expenditure.

I am sorry that the hon. Member for Ilford, North (Mrs. Miller) has left the Chamber, because she has a lot of experience of Camden. I was interested to read the article in the Observer of 30th November. Having at one time been the leader of a neighbouring borough, I had always thought that Camden spent over the top but I had not kept up to date with how far ahead it was in the league table compared with everybody else, and perhaps I may mention one or two figures.

It is interesting to see that in Camden the housing subsidy to each council tenant is running at £850 per year compared with the national average of 237. Rent arrears in Camden are £65 per dwelling compared with the national average of £6. Management costs—and it is interesting that in the Order the right hon. Gentleman suggests that housing maintenance and management is an area where more should be put on the tenant—are £174 compared with the national average of £47. The paint costs the same, and the bodies cost the same. It is difficult to see how Camden can have such excessive figures. To top it all, if someone wants a new flat in Camden he can have one for £73,000. Unfortunately, I cannot afford a flat at that price.

I hope that that is the pinnacle of spending by a Labour-controlled inner London authority. I hope, too, that the right hon. Gentleman in his monitoring through his Department will ask the leaders of the London Borough of Camden and, indeed, the London Borough of Wandsworth, which has tossed in the gauntlet, to explain what they have done. I hope that he will take them to task and tell them that they are letting down not just other boroughs, but the whole of local government by this profligate spending.

We are promised in the months ahead the West Midlands County Council Bill. It is full of interesting prospects. The local authority there, keen to look after ratepayers' money, has decided that local traders are letting everybody down and therefore it will take over certain areas of activity. I do not believe that the Government can sit idly by and let that Bill come before the House. The Secretary of State should tell the local authority that the Bill is totally unacceptable, and chuck it out.

I suggest to the right hon. Gentleman that he ought to think again about the £20 million transfer on social services. We have the situation that the Government, having got to the final stages of negotiations, but still a bit short of the pleas from local authorities, tell them that for the year ahead £20 million can come out of social services capital and be put into social services revenue. From any financial accounting basis that is unacceptable.

What is even more extraordinary, and where the whole edifice collapses around the Secretary of State's ears is that at the same time the same Department has issued a circular saying that £32 million should be spent to encourage employment on environmental buildings, and of that figure £4 million should be for social services buildings. We thus have the extraordinary situation that capital expenditure is to be cut by one office while another office a floor higher up in Marsham Street says that the figure is to be increased. The whole arrangement is totally cosmetic and idiotic.

It would be right in terms of waste again to say to the right hon. Gentleman that the numbers in local government are still increasing. It is worth reflecting that from 1963 to 1974 the figure increased from 1.9 million to 2.7 million. The really worrying aspect is that some months ago the right hon. Gentleman said from the Dispatch Box that there would be a nil increase in staff. I think that the increase amounts to 27,000, but I quote from memory. These are astronomic figures when there is supposed to be no increase in staff. If it was 27 it would be believable, but not that sort of number in thousands.

I have quoted four specific areas of waste with which I hope the Government will deal. I am afraid that we in this honourable place ask too much of local government. In the past five years, we have passed 67 different Acts affecting local government—a horrific number for any local authority to get hold of. They include Acts dealing with land compensation, fair trading, safety at sports grounds and so on. There is also the implementation of earlier legislation which has not come to total fruition—like the Fire Precautions Act 1971. There are also the circulars in which the Secretary of State and his Department are so prolific. As one who receives them, I find it difficult to keep up with the number produced. There are also orders and other statutory instruments.

We forget too easily that the worrying aspect for anyone in local government is that every local authority is bound to implement this legislation. There is no evading or forgetting it. A council can be taken to court for failing to comply with the law. I rather wish someone would do just that. The time has come when a Select Committee or some other appropriate body should take a look at all these Acts and take evidence from local authorities as to their priority and relevance to local government needs. That would be a salutary lesson for all of us. I am not expressing a party political or partisan point of view. There is great concern throughout the House that we are overloading local government nad leaving it to take the can back.

I could not miss this opportunity of critically examining how the rate support grant affects an expanding county such as Northamptonshire. I am worried by the fact that £120 million is being transferred to help London particularly. There have been reports to the effect that this is no more than political bribery. There have also been reports that this is the final compromise figure reached in Cabinet, whose members could not agree how much was appropriate to bolster London, most of whose boroughs are Labour-controlled.

But it is strange that any Government could give extra support to London when some of the expanding counties are helping to alleviate London's problems. We in Northamptonshire willingly take people from London and give them decent new homes, with resulting enormous deficits on the housing revenue account. We are taking our share of disabled and other disadvantaged people, yet we are discriminated against in comparison with London. I am enormously disappointed by what I can only see as an expensive political bribe, which is not even likely to work very well.

The RSG has become a fairly sophisticated piece of machinery. So many factors are built in that one or two more would not hurt, and I have one suggestion to make. The area health authorities can anticipate incoming population on a weighted basis. The Department of Health and Social Security can organise this so it should not be beyond the wit of the Department of the Environment to find out how it does it and to put it into the rate support grant. That would help the expanding counties more than anything.

If the Secretary of State wants money transferred from housing maintenance, how about allowing development corporations to sell their houses? A plea to this effect has been made to the Department. Most of the chairmen are not of my political persuasion, but they are supporting this suggestion. Everyone wants the corporations, specifically that in Northampton, to be able to sell their properties. The only person holding up the process is the Secretary of State for the Environment. There would be an enormous gain in sheer capital from such a sale.

I have spoken against a background of the domestic ratepayer in a place such as Northamptonshire not being happy about next year. I suppose that a rate increase of 15 or 25 per cent. is better than the 50 to 100 per cent. increases of last year and the year before. But, even so, the ratepayers are looking this year and in future for next to no increase. Until we have a Government prepared to get hold of Government expenditure, particularly the desire to produce more and more legislation, a Government prepared to take real control of capital expenditure—which always has income and revenue implications a few years ahead—our ratepayers will be disappointed.

8.17 p.m.

Mr. J. W. Rooker (Birmingham, Perry Barr)

I would follow two points made by the hon. Member for Northampton, South (Mr. Morris). First, I agree that local authorities have to implement a great deal of legislation, but one of my concerns in Birmingham is that they do not have to implement it all. For instance, they do not have to implement the Chronically Sick and Disabled Persons Act. But smoke control orders under the Clean Air Act, desirable though they may be, are implemented ad nauseam, creating a good deal of spin-off work for many small builders, while the disabled cannot get telephones and other aids and are told they must get rid of their coal fires. I question the priorities here. It is our fault for passing legislation, giving local authorities enabling powers and not discriminating in favour of socially important legislation.

A good deal of criticism can be levelled at direct labour departments, but I understand, both from one or two national figures and from a technical college in my constituency which is the specialist college for the building industry, that half of all apprentices in the industry are from direct labour departments. This is significant, because it is the lack of trained and skilled manpower which has brought about the rise in lump labour and the decline in the numbers available to do skilled work, which has itself raised wage rates astronomically. This had added to the present inflationary situation and caused much anger in the building trades. At present local authorities are taking on a responsibility which ought to fall to industry.

I do not accept the criticism of local direct building departments. In Birmingham we have resurrected a scheme which was abolished by the Conservatives some years ago and it is going great guns. There are not the problems in Birmingham that the hon. Member for Northampton, South identified in other parts of the country.

I wish to raise some points which are important to the ratepayers of Birmingham. First, I shall deal with the situation in the housing department. Birmingham has been unique in the past two years in preventing old people from dying of the cold. It is as simple and as crude as that. The local housing department set up a scheme known as the "HARP scheme" a heating and rent payment scheme—in which pensioners who were tenants of the local council could pay their heating bills with their rents. When the scheme first started 20,000 pensioners joined it. It was not envisaged at that time that there would be an astronomical increase in energy costs. The result is that in the first 18 months many thousands of old folk have been prevented from dying because they have been freely allowed to use their electricity and gas during the winter. This cannot be denied and the social services department of the council would support that claim.

The basic idea of the scheme is that a pensioner pays a set amount, which is included in the rent, and can use as much energy as is required. During 1975 the price of the scheme more than doubled. I am sure that the hon. Member for Birmingham, Edgbaston (Mrs. Knight) will confirm that. Now many of my constituents have dropped out of the scheme altogether. Many people have abused the scheme. I have been to the homes of constituents who have said "It is free, we can leave the heating on all day". It is a tragedy that people have left the scheme and transferred to another scheme which is not so beneficial.

As a result of the ratepayers of Birmingham have to foot a bill of £700,000 due to the astronomical increase in energy costs. I understand that at present the district auditor is questioning this amount. I hope that the Minister who is responsible for this area of Government policy will take cognisance of the fact that Birmingham is not renowned for its militancy in local government. Far from it. I only wish that some of my colleagues on the city council were a little more militant. I assure the Minister that the problems of Clay Cross will be minuscule compared with the problem in Binning-ham if there is any trouble with the auditor over that £700,000.

The city council seeks to put matters right but the result is that more people will die in Birmingham this year due to lack of warmth than died last year. This can be put down to the rise in energy costs and the fear that the city council has rate problems especially over the use of rate revenue in this scheme.

I agree with the point that the hon. Member for Edgbaston made about the rising fives—the youngsters who are being told that they cannot start school in January. Some of my constituents have received letters telling them. "Bring little Sandra along on 6th January, make sure she has some plimsolls, and can she go home for dinner the next week?" The very next day they have received a letter from the headmaster or the headmistress saying, "Please disregard the letter we have just sent you. Due to Government cuts you cannot bring little Sandra along". This is an area of contention and I am sure the hon. Lady will have come across those letters.

I take issue with her on two points. First, it is not the rising fives, who are the problem. It is those who became five between January and April. We are told that they are likely to start school in January. At present there is an area of haze around this aspect.

Mrs. Knight

The hon. Gentleman is right when he says that there is an area of haze around this. Some of my constituents say that their children will be five and a half by the time they begin school and many will be five in the term beginning in January. I understood that those children were called the "rising fives". Perhaps it is different in some areas of Birmingham, but I presented the case as clearly and as accurately as could, and this is what affects my constituents.

Mr. Rooker

The hon. Lady is right in some respects. For the two years 1972 to 1974 I was a co-opted member of the Birmingham education committee, not a city councillor. It was during that time that the policy was instituted of children starting school not simply in the term in which they became five but in the term before, which is the pre-rising fives. That is where the problem lies. I have come across children who are rising five who will not be taken into school.

I want to make a strictly party political point because this is the place in which to make it. The policy was instituted in 1973 by the Labour-controlled city council after six years of inaction by the Conservative-controlled city council. It was only when I joined the education committee that this issue ever got off the ground because in the previous six years even the rising fives did not get into school. I accept that the statutory obligation is not to accept them at school until the term after they become five There are children in Birmingham who will be five and a half before they start school. I deplore this as much as does the hon. Lady.

Mrs. Knight

I was not stating that it was right or wrong that they should not be going to school. What is wrong—I think the hon. Gentleman will agree—is that a promise was given that a certain number of children would start school. If that promise had not been made the situation would not have arisen. That has been my argument.

Mr. Rooker

I agree with the hon. Lady 100 per cent. That is the argument. However, she has said that it does not matter whether it is right or wrong that they should not be going to school. It is wrong that they should not be going to school. The promise has been made. The places are available in the school, as are the staff.

The chief education officer has told me that it is not quite as simple as that, because resources have to be reallocated and it is difficult to explain the situation to the public. He was saying that I was too thick to understand what the local government officials were planning to do. They were planning to take reception classes which now have 12 pupils and to disperse those children into other classes. That will leave the school with a spare member of staff and, come the summer, that member of staff can go to another class and the authority will not need to employ as many staff as it would otherwise employ. That is a way to cut the number of teachers in the local education service. I deplore that way of going about it. It is not an open way—not open with parents, not open with the local representatives, and certainly it does not seem to be open with the teachers.

I am assured that, in the event, the situation in Birmingham will not be as bad as both the hon. Lady and I have been given to understand by our constituents. However, that remains to be seen. The children have been told that they cannot start in January. If they cannot start at Easter, there will be an uproar, and rightly so, the promise having been made to both the children and their parents. My right hon. and hon. Friends will have seen letters on this subject—I know that they have received letters from the hon. Lady—and a good many Questions have been put from this side of the House. The chairman of the Birmingham education committee is extremely concerned about it. The Department is well aware of the problems and of the representations which have been made.

I have referred specifically to one or two matters directly related to Birmingham, and I turn now to another aspect of the effort to reduce local government expenditure. In my view, local government must set an example, and if any town council chairman, lord mayor, mayor—or whatever he may be called—has the effrontery in 1976 to hold a function remotely resembling a lord mayor's ball or dinner, I hope that the ratepayers will rise up in wrath. They will be right to do so.

Birmingham's record here is good. We are basically a fairly puritanical part of the country—I think that the hon. Lady will probably agree—and there is not all that much flummery in the Midlands. But there is a hell of a lot of flummery in other parts of the country, and I think that the call should go out in a circular from the Department that there be no more of it. There are hundreds of circulars issued all the time. The last one I looked at was No. 88, which told local authorities to chop back in 1976, but that was a few weeks ago and I strongly suspect that there have been another couple of dozen since then. As I say, a circular should go out saying that mayoral functions should be abandoned in 1976, to set an example.

Coming back to my own patch—as I say, I think that Birmingham is not guilty in that respect—I turn to the West Midlands County Council Bill, to which the hon. Member for Northampton, South referred. There is a point here which can usefully be made in the present context. The hon. Gentleman did not make it, and, oddly enough, the traders do not make it, either. The traders are dead against the Bill on the trading clauses, but they keep very quiet about anything in it which will benefit them.

A great part of that Bill is directed to the idea of a grand prix formula 1 motor race round the centre of Birmingham. It so happens that I am in a minority among my hon. Friends, the 10 Labour Members representing constituencies in the area, in being opposed to it.

Mrs. Knight

I am opposed, too.

Mr. Rooker

I did not know that the hon. Lady was against it. I thought that she favoured it because it was good for traders. However, I am opposed to it, and I shall take every step open to me in the House to take that provision out of the Bill. I shall do so not just because it will be a charge on the rates—it will be argued that it is not—but because, quite frankly, it seems to me to be provided just for the 38 night club owners of Birmingham, not for the ratepayers of the city. I can only say that here at this point, but when the Bill comes forward a lot more will be heard about it.

My right hon. and hon. Friends concerned with the environment and with education will have to pull their socks up. We have been told about cuts of £3,700 million and my hon. Friends and I will not support them. We shall use every endeavour in this place to oppose them, and we hope to be joined by some hon. Members opposite who will not choose an occasion when there is no Division but will join us when there is a Division and help to stop some of the cuts which they are constantly calling for but about which they complain when the cuts actually take place.

8.33 p.m.

Mr. John MacGregor (Norfolk, South)

I hope that the hon. Member for Birmingham, Perry Barr (Mr. Rooker) will forgive me if I do not take up his points of detail in relation to Birmingham since, although I visit his city quite frequently, I am not as familiar as he is with circumstances there. However, I shall return later to one of the themes which he introduced at the beginning of his speech when I speak about the position of under-fives in Norfolk.

I shall first take up three major matters which have been themes in the debate and then raise one or two smaller points of practical detail. The first major matter can be dealt with briefly since it has been much discussed already. I refer here to the distribution of the rate support grant and the formula which is used, as well as the bias given towards London this year. I acknowledge that the Secretary of State must always labour under a difficulty when he tries to reach a formula fair for all parts of the country. Nevertheless, I am greatly concerned that the switch from the rural areas has continued since this Government came to power and is still continuing. The Secretary of State said—these were his words— that the balance this year was to protect the remote rural areas. In tact, the real problem concerns not just the remote rural areas but rural areas with substantially increasing population.

In this connection I take my example from Norfolk. This year we have a 0.8 per cent. increase of population and we are one of the fastest expanding parts of the country now, yet we have a declining needs element. This is bound to put great pressure on the rates. I do not accept some of the projections which the Government have been bandying about, and I noted that the Secretary of State did not give any figures today, saying simply that he would not make any forecast, but I fear that some of the forecasts will prove too optimistic, at least for non-metropolitan counties in an expanding position.

I give but one example. I am glad to say that this year we have succeeded in obtaining a fairly big increase in our allocation for the education capital building programme. Despite the difficulties that it will face in financing it, the Norfolk County Council intends to make full use of it. It is necessary, because without it we should very soon face a shortfall of roofs over heads of about 17,000, particularly in the primary schools.

I reiterate the point made by my hon. Friend the Member for Northampton, South (Mr. Morris)—that much of this expenditure is to help London with its problems, to cope with the London overspill that we are absorbing. The problem is the cost of financing a fast-expanding education programme to meet this growing population. Simply to meet this year's increased allocation will mean a roll-forward of the programme for next year, which will increase our local authority expenditure by 2.7 per cent., before taking account of next year's growth through increased pupils coming into the schools next year. That gives some idea of the difficulty in the provision of services to meet a fast-expanding population.

As my hon. Friend said, there is one way in which the problem can be at least partly dealt with. That is by reflecting in the rate support grant formula the fact that the population is increasing so fast. I acknowledge that the Secretary of State has done a little by making the formula not relate to the population of two or three years ago, but it would be much more sensible to throw it forward. If area health authorities can do it, so can local authorities and the Department of the Environment. It would do much to cope with the problem of the fast-expanding rural areas.

The other two major matters that I wish to touch on concern reining in public expenditure rather than increasing it. I am well aware that we must all be positive and constructive in the present economic situation. I am as fully conscious as anyone of the dangers of the present level of public expenditure and the need to cut it back.

My second point has been taken up by many hon. Members, but it needs to be said time and again in the House. It is that we are as responsible as anyone for the increased local authority spending, because of the new duties we are constantly imposing on local government. There was a fair degree of hypocrisy recently from both the Prime Minister and the Secretary of State for the Environment in blaming local authorities for the expansion of staffs and the enormous increase in their spending programmes. They said that without recognising that even as they spoke the House was imposing further burdens on the authorities. There is no need to look at major items, such as the Community Land Act, among the 67 Acts passed in the last five years to find examples. A simpler example is to be found in a proposal which was supported by both sides of the House and which has effects on local authority spending programmes.

My county council of Norfolk is accepting in its expenditure programmes this year a 2 per cent. growth to meet increased population needs, because of our particular problems, and, above all, the fact that we have a higher than average population increase to cope with. That is a 2 per cent. growth above what the Government's present direction suggests. Yet two items alone which could by no means be described as essential could well pre-empt most of that 2 per cent. growth.

First, I am told that to meet the provisions of the Health and Safety at Work Act etc. which was passed last Session, and which we all support, the county council should be spending another £1 million next year. It now has to provide two men on bulldozers in the rural areas where previously there was only one man. That is desirable for safety reasons, but there have not been all that many problems in the past, and we should ask whether this is the right time to make this extra imposition. I am told that the provision of toilets for road gangs as a result of the Act will also result in quite an increase in expenditure. In the past the men went behind hedges. That seems a simple, small example, but it will preempt much of the growth.

The second example is the increments to local authority staffs. I am critical of the inclusion of increments in the pay policy anyway, but in relation to local authorities the position is even worse. The increments concern mainly teachers. They will provide a heavy extra burden on our budget next year. Partly because of the increased pay scales in the recent teachers' award, the increments will add about 1 per cent. to the total expenditure of Norfolk County Council next year. The key point is that the incremental part of any wage and salary increase has to be set against growth. With the two items that I have mentioned we have already eliminated most of the growth that was available. Cuts will have to be made elsewhere.

Much of what we are doing in the House is desirable, but the question we must always ask is "Can we afford it?". It is clear that something must go, and the cuts come down to local authority level. We are reaching the point where it will be right to support local authorities that say that in the following year they will not be able to meet all the statutory impositions that we bring about without making more drastic cuts elsewhere. The alternative is for local authorities to cut back on existing desirable services.

I am worried about one part of the report on the Order which suggests in Appendix E that the Government have not learned their lesson and which casts considerable doubt over the seriousness of the way in which they are approaching cash limits. Appendix E is about cash limits, and in paragraph 5 it says that the cash limits on grants to local authorities … will also be reviewed"— I am talking of the Secretary of State's own cash limits in the rate support grant increase and not about local authority spending— (i) if new legislation is enacted, or brought into operation, after November 1975 which entails an increase in local government expenditure or (ii) if changes are made in Government policy which entail an increase in local government expenditure …". In other words, there is the distinct possibility that if the Government add to local authority services, they will meet at least part of that addition through an increase in the increase order. That casts doubt on the seriousness with which the Government approach cash limits. Even more, it casts doubt on whether they have taken on board the fact that we are imposing too many burdens on local authorities.

In the coming year, and perhaps the year after, we should do better to impose a moratorium on new duties to be imposed on local authorities. If we applied such a test every time we tried to impose new statutory duties on local authorities, we might well be doing the best thing possible for the ratepayers.

Another major topic, raised by my hon. Friend the Member for Aylesbury (Mr. Raison), is the importance of pay. In the opening paragraph of Appendix E the importance of pay in terms of local authority expenditure is recognised. It is important largely because of the dominance of the labour-intensity aspect of local authority services.

We all know that the Government's pay policy this year made it clear that the £6 was a limit and would not necessarily be met if individual employers could not afford the full £6. We could well argue that this year local authorities should have fitted into that pattern classically. With the heavy burden on local authority expenditure, it must be questionable whether they could afford the full £6.

However, I am fairly certain that in the year ending 1st August 1976 we shall see everyone in the public sector receiving the full £6. That will cost the Government £650 million, local authorities £740 million and nationalised industries £580 million. That is a total of additional expenditure in the coming year of nearly £2,000 million. I recognise that for the Government and in terms of the public sector borrowing requirement part of that sum will come back in increased taxation, but that does not help local authorities. In addition, there are increased pension contributions.

There is no question but that pay settlements will add considerably to the expenditure of local authorities in the coming year. Therefore, there is a need to cut back on desirable services, such as telephones for elderly pensioners living in remote areas and for the disabled.

A further fact, perhaps outside the scope of the debate but relevant to the situation, is that many outside employers who were unable to meet the full £6 without seriously risking their profitability and capacity to invest came near to agreeing settlements below £6, but manual workers in local authorities enjoyed a £6 settlement, which came through very quickly and which torpedoed the whole arrangement. They immediately received the full £6.

There is a danger that what we are doing in the public sector is increasing the problems of companies in the private sector and leading to unemployment. I very much agree with my hon. Friend the Member for Aylesbury, who said that next year's pay settlement would be of crucial importance. I hope that the Minister will make it clear that when the time conies—and I recognise that it is not now—the Government will stand firm behind the principles of their pay policy after 1st August next year. They patently did not stand firm this year and support local government employers, who tried to keep down the expenditure burden in pay negotiations and settlements. Next year, if the Government are to stick by some of the projections they have made in this Order, they will certainly have to stand firm after 1st August.

There are three points of detail which I wish to raise. The first concerns education. Here I refer particularly to the under-fives. My authority was greatly concerned about this matter and it has been in correspondence with the Secretary of State for Education about its growing programme, to which I have referred. Originally, it was told that there would be no general increase. Subsequently, it was informed that there would be, as is clear in the Order an expectation of a 2 per cent. increase in real terms—in volume terms—in education expenditure in the coming year.

There are two points which arise here. The first is that the Government originally said that it was in the area of the rising fives and under-fives that some cut-backs would have to be made. My authority has been concerned about this, as I am, because I am a firm and fervent supporter of nursery education and of a further expansion of education for the under-fives and rising fives. I should like to see greater flexibility in the school leaving age so that more resources could be concentrated on that area.

My authority ultimately succeeded in preserving its programme for the rising fives and under-fives despite its growing primary and secondary school-building programme. It managed to ensure that the under-fives and rising fives would get the school places promised to them. That was as far as it could go, given its other education problems.

On 3rd December, my authority received a letter from the Secretary of State for Education in which he said, dealing with the 2 per cent. growth: Moreover, further consideration may reveal scope for increasing the admission of under-fives to primary schools, although probably at a slower rate than in 1974–75 and the current year. To do something of that sort when at the same time the Secretary of State for the Environment is urging local authorities to cut back in every possible way is totally unfair to the local authority concerned.

The Secretary of State for Education clearly did not know the circumstances of the local authority. It will, therefore, either have to cut back elsewhere yet again, or it will have to make it clear that that particular sentence does not apply to it. The Government are trying to have it both ways, with one Department saying "cut back" and the other Department saying there may be scope for more expenditure.

If some authorities are to have an increasing programme about the 2 per cent. limit, others with fewer education needs will have to cut back if the objectives of the Secretary of State for Education and, indeed, those of the Secretary of State for the Environment are to be achieved. I see no indication that the Government have any plan for achieving a cut-back to enable the growing areas to move ahead of the average areas. I hope that the Minister can comment on that.

My second point of detail relates to concessionary fares. Like many hon. Members, particularly those with scattered rural areas in their constituencies—in which some authorities have operated concessionary fare schemes—I am greatly concerned about old-age pensioners. I wish to know what paragraph 27 in the Order report means. After saying that the availability of concessionary fares at peak periods adds to the general difficulties of travel at those times and to costs and resources, it goes on to say: The Government therefore consider that that aspect"— that is peak periods and concessionary fare schemes— should be critically examined. The settlement does not allow for all the expenditure forecast on the basis of no change in such schemes, or for the extension, improvement or introduction of schemes in 1976–77. That is a somewhat euphemistic turn of phrase. I hope that the Minister will make clear that it means that there is no scope for introducing new concessionary fare systems and that existing ones will have to be cut back.

I finish on a topic which has greatly concerned me since I became a Member of Parliament—the impact of rates on small businesses. I had the good fortune to win the Private Members' Ballot last year and I chose rate relief for small businesses as the subject of my Bill. I could see that many small businesses and shops, especially, though by no means exclusively, in rural areas, were finding that with their turnover not increasing, and a squeeze on their margins in every other direction, the rate burden was beginning to endanger their existence, particularly because of the dramatic increase in that burden as a proportion of their total expenditure over the past two or three years. To come down to the level of rate increases we have been talking about in the debate will be no solution for small businesses, many of which will probably tip over the edge.

The Government were unable to accept my Private Member's Bill on the ground that we should wait for the Layfield Report. I have since had much evidence from small businesses that this is a continuing and growing problem. We are all clearly aware that a considerable time will elapse after the publication of the Layfield Report before we get a substantial rate reform—if rate reform is the outcome of the report. There will have to be time for Government debate, debate in the House, formulation of Government policy and pushing legislation through the House. The measure will be major and may take four years. There are many small businesses that cannot wait that long. I hope that the Government will accept that there is a need in the interim for a measure of relief to assist small businesses in the same way as domestic ratepayers are assisted.

The problems of local government finance and control over expenditure may lead us to start thinking what was unthinkable two years ago. We shall certainly have to stop adding to services, we shall have to find a new way of continuing existing services and we shall have to establish new priorities. Given the momentum of local authority programmes and the revenue implications of new capital expenditure programmes, this may be the only way to continue our local government operations as a whole without intolerable burdens on our citizens and on the businesses from whom come the resources for local expenditure.

8.53 p.m.

Mr. Graham Page (Crosby)

My hon. Friend the Member for Norfolk, South (Mr. MacGregor) referred to the effect of the rate increases over the last few years on small businesses. That is of vital importance. Small businesses employ more people than Chrysler employs, and if they are hit as severely as they have been hit this year by rate increases, there will be a serious threat not only to the businesses but to their employees. I hope that the Minister will take to heart what my hon. Friend said about small businesses.

My hon. Friend offered solutions to the problems of local government expenditure and local government revenue. I have offered mine many times to the House. They are simple solutions such as removing the cost of education, fire services, police and courts from the back of the ratepayer to the taxpayer, abolishing rates and replacing them by local income tax and obliging local authorities to hive off more of their functions to contract so that they need not employ such a large establishment. We have been told today by the Secretary of State that the Layfield Report is expected early in the New Year, and I shall wait patiently for it. I am sure that I shall be justified by that Report and I hope that the Government will act quickly on it.

We go through this ritual annually of debating these Orders, but our debate can have no effect. It is very depressing to debate an Order for 3} hours or more when the debate can have no effect. The Rate Support Grant Order is the culmination of a procedure which goes on behind closed doors. Some time in the early summer, officials of Government Departments concerned and officials of local authority associations—not even the officials of local authorities—meet to decide what is to be the relevant expenditure of local authorities for a year from the following April. They chew this over behind closed doors and we know nothing about the figures they are discussing. Eventually, in the late autumn the figures are presented to the Secretaries of State in each Government Department concerned and the statutory meeting takes place. Once again, we are told nothing about it.

Why is there such secrecy about these matters? Why should they not be debated? After all, the meetings are called to decide the relevant expenditure of local authorities for the following year. It is not like deciding a tax. At the end of the statutory meetings, the Secretary of State decides what percentage of relevant expenditure is to be met by the rate support grant. Why should there not be a public debate through the summer and the autumn on the anticipated expenditure of local government.

The Under-Secretary of State for Wales (Mr. Alec Jones)

Defective as the system is today, it is exactly the same system as that which operated when the right hon. Gentleman was a member of the last Conservative Government.

Mr. Page

My answer is "So what?". One learns in Government. When one is given the responsibility of ministerial office, one finds out what is happening. I complained about this matter behind those closed doors when I was a Minister and I do not mind disclosing the fact now. I have always wanted to reform this process and I hoped the things I said at that time would have percolated through to this Government and we would have had some reforms.

The only contact between the Government and local authorities on the subject of expenditure is in these discussions between officials about the grant. We have been told that there is now a consultative council and some nice things have been said about it. I still have to see what will be produced by the council. I am told that discussions are taking place and that there is now real contact between the Government and local authorities. I hope something comes of it because up to now the only contact on local government finance has been in these secret and phoney discussions behind closed doors. Furthermore, there is still no contact between local authorities and hon. Members on the finances of local government. We need a Select Committee of this House to deal with local government matters, particularly local government expenditure. This suggestion was made by the right hon. Member for Dartford (Mr. Irving) earlier in the debate.

This is the only debate we have about local authority finances. When we do have it, all that we discuss is revenue. What is the extent of local authority borrowing, and what is the interest charged on that borrowing? The hon. Member for Dartford mentioned a debt figure of £25,000 million. The last official figure that we have on this subject is for the year 1972–73 which showed that the debt of local authorities in England and Wales was £17,000 million. It was reported in the newspapers recently that local authorities in the United Kingdom owed a total of £24,000 million in the form of capital debt. The significance of that figure for the ordinary ratepayer is that it needs servicing to the extent of £2,300 million a year. That figure is equal to the domestic rate. I know that the rate support grant takes account of two-thirds of that, but it is a subject which should be debated fully in this House, and we never got the chance to discuss capital expenditure by local authorities.

If the House had a Select Committee dealing with all local government expenditure and finance there would be a report from the Committee which the House could debate. At present we are discussing only half the problem. The more capital expenditure there is, the greater the revenue commitment. If the Secretary of State gives a local authority permission to borrow and spend £1 million, he is agreeing to something which will be a call on revenue expenditure for years. We never debate the allocation of capital expenditure and borrowing to local authorities. We should have a commit-mittee which could examine this topic from the local authority point of view and report to the House.

A great deal of local authority debt could be written off. It is suggested that that might encourage local authorities to borrow and spend more, but I do not accept that. If there is justification for repeatedly writing off the debt of nationalised industries—and requests from those industries to that effect are granted—it could be done for local authorities. That would save a great deal of revenue expenditure from falling on the taxpayer and on the rate support grant. At least the local authority debt to the Public Works Loan Board could be written off. That is merely a paper entry. The local authorities must pay interest on the debt, and some of it is met by the rate support grant. If that were wiped off it would lift a burden from the ratepayers' shoulders and the authorities would be dealt with fairly as compared to the nationalised industries.

I reiterate that we do not debate sufficiently the revenue and capital affairs of local authorities. We should be the watchdogs by means of the normal Select Committee procedure, not by means of some stupid little committee set up, as the Prime Minister suggested, by the local authorities, an undemocratic body consisting of local people who would criticise the democratically-elected councillors.

The rate support grant debate as we know it, and have known it for many years, is unreal. We should have a better procedure in the House to debate local government finance. We should not be kept in secret about the figures as they come out during the year, nor should we be kept in secret about the borrowing estimate. There should be a public debate while these figures are being considered by Government Departments and local authority associations. It should not come before us, as it does now, as a fait accompli. Hon. Members could contribute far better if there were a debate before the rate support grant proposal was put before us.

9.6 p.m.

Mr. George Cunningham (Islington, South and Finsbury)

I want to speak very briefly, although I understand that the debate is not limited to 10 p.m. Could you confirm that, Mr. Deputy Speaker?

Mr. Deputy Speaker (Mr. Oscar Murton)

That is in fact the case. The debate may continue until 11.30 p.m.

Mr. Cunningham

The House tonight is authorising expenditure of just under £6,000 million. Anyone either participating in our proceedings or watching them might well say that there must be a better way of authorising the spending of this sum than by means of a debate in the Chamber without any previous debate in any Committee of the House. I am delighted to follow the right hon. Member for Crosby (Mr. Page) who has stressed this point very strongly.

We have a Committee of the House which could perfectly well take up these Orders and give them a preliminary going over before they come to the House—namely, the Environment Sub-Committee of the Expenditure Committee. This is certainly very much an expenditure matter, but because Committees of the House prefer to indulge in quasi-academic studies of a long-term nature, rather than the nitty-gritty business of scrutinising this Order and others like it providing for massive sums of money, it has never even passed before the eyes of members of that Committee. It is time the House got round to making better use of its Committees than is the case at the moment.

These days a large part of public expenditure is represented by salaries paid by local authorities. Traditionally, we have taken the view that the numbers of staff in local authorities and their salary levels are not matters in which the Department of the Environment ought to intervene except, from time to time, when we are struck by an economic crisis. It is impossible, over five or 10 years, for the Department of the Environment to effect any change on that basis. The Government cannot suddenly get the local authorities to sack the staff that they took on last year, or expect them to accept salary levels which are less than those negotiated last year. In the end, we shall have to accept that there needs to be constant and continuing scrutiny by central Government over local government staff salaries. The Department of Education and Science exercises a veto over the total value of any increase in teachers' salary levels. So far as I know, the Department of the Environment does not exercise any such veto over increases in salaries at local level. We shall have to change our general traditional approaches to this matter.

I am sure that all London representatives are extremely grateful that my right hon. Friend has broken with tradition and has, for the first time in recent years, brought the needs of London, which are special and greater than those of the rest of the country, more fully into the formulae for the distribution of the needs element. That will bring to London this year about £110 mililon.

But there is, it seems to me, an odd by-product in that for the inner city areas outside London the distribution of the needs element is being done by means of a needs formula related only to the pattern of expenditure outside London. The London peculiarities are not being allowed to affect the formula for distributing the non-London part of the needs formula. The consequence is that the inner city areas outside London will not get an increase in their allocaton such as they would have got if the weighting for inner London had been allowed to take its effect in the formula for distributing the non-London needs element.

It seems strange to me that at a time when everyone at least pays lip-service to the need to help inner city areas—my right hon. Friend does more than that—something is being done which is good for London but has a by-product of penalising particularly the inner city areas outside London as compared with the other areas outside London.

I accept that other factors are operating which might operate against the non-metropolitan areas as opposed to the metropolitan areas but there is this fact operating, too. The inner city areas outside London would have done better if the formula for distributing the needs element outside London had had the London ingredients in it.

I want to say particularly one thing, and only one thing in essense, about the situation within London itself. The £110 million coming the way of London is, as everyone recognises, less than London would get by a normal application of a needs formula, and it is only a first tranche or application of what one hopes will be a full application of these procedures in later years. The £110 million represents an average over the whole London area of a 5.4p rate. When the remaining negotiations with the London authorities on London rate equalisations are concluded and we know exactly how much each London borough is to get at the end of the day, if the inner London areas get an advantage compared with last year lower than 5.4p, I shall not say that the exercise has been a failure, but it will be decidedly curious if, having done something in order to bring into the formula the particular needs of inner city areas, the inner city areas of London benefit less than the outer city areas of London.

My right hon. Friend has to accept that here is a conflict between the idea of giving preference to the inner city areas and the concept of equalising rates in the pound as between inner and outer London. This is not the occasion for a full discussion of the London rate equalisation scheme. Unfortunately, there is no occasion for a full discussion of the London rate equalisation scheme. What I have to say about it I said in my Adjournment debate last Friday, and I shall not repeat it now. But I impress on my right hon. Friend that it will look particularly odd if, having done this marvellous thing for London, which is particularly intended for the benefit of the inner city, at the end of the day the outer city should derive greater than average benefit while the inner city derives less than average benefit.

9.15 p.m.

Mr. Keith Speed (Ashford)

This has been an interesting and wide-ranging debate which has shown a remarkable degree of unanimity on all sides of the House about a number of aspects of the way in which local government and local government finance are run. It is fair to say, too, that most hon. Members have not altogether shared the degree of optimism with which the Secretary of State finished his speech in commending the Order to the House.

A fair degree of suspicion has been voiced about the effects that these cuts will have upon services. I have no wish to go through them again, because many hon. Members have given their own interpretations and pointed out that paragraphs 17 to 34 of the report accompanying the Order spell out the dramatic reduction in some services, and this could be underlined substantially when, as inevitably will happen, local authorities have to make some tough decisions in the months that lie ahead.

My own interpretation is that there will be substantially lower standards, especially in non-metropolitan areas. These standards will hit rural transport, the old the disabled, the handicapped and, of course, education. The Association of County Councils estimates that it is a real cut-back of about 2 per cent. in the standards of services, and I presume that the Secretary of State does not disagree with that.

The hon. Member for Islington, South and Finsbury (Mr. Cunningham) was on to one or two technically valid points as regards London. But my interpretation of the RSG is that it is not only London but metropolitan areas generally which will get more grant and will be able to maintain their present poundages and to avoid a reduction in services very much better than the non-metropolitan areas.

This was a matter raised by a number of my hon. Friends, among them the Members for Wellingborough (Mr. Fry), Ludlow (Mr. More), Norfolk, South (Mr. MacGregor), who were concerned about the way in which this trend has been going on over the last couple of years. Certainly London has had a rough time this year, but we have to be careful not to throw out the baby with the bath water and to make matters that much more difficult for the non-metropolitan counties.

I can speak with intimate knowledge only of my own county of Kent, but I know that many non-metropolitan counties have been indulging in very sensible budgeting to ensure that they have not been over-spending in the past year. They have been criticised roundly for doing so. But the effect of their sacrifices will be largely lost because they will lose out compared with the metropolitan areas.

I do not think that anyone mentioned—although the hon. Member for Stoke-on-Trent, South (Mr. Ashley) hinted at it—the effort that voluntary organisations could make to meet the shortfall in services. This is quite important, and, in a time of national economic crisis, we should not underrate what can be done in rural transport, if we could get some of the present laws on transport altered and made more flexible, and in social services for the young and old. Both East and West Sussex County Councils are doing a great deal already in this direction. I hope that officers of the Department of the Environment will look at what is being done, because it might form the basis for advising other local authorities of what can be done. It might make all the difference between maintaining and not maintaining a service, and I shall do all that I can to encourage it.

I regret that I did not hear the whole of the speech of the hon. Member for Birmingham, Perry Barr (Mr. Rooker) but I gather that there will be a revolution in Birmingham if the so-called free heating scheme comes to an end. For the hon. Gentleman, apparently, the party is not over indeed, it has not even begun. However, I am sure that he will find his answer next May when the electors of Birmingham return a Conservative metropolitan district council there. [Interruption.] The hon. Member laughs. I beg a pint of best "Fed" across the Table of the House that the Conservatives win back Birmingham next May. [Interruption.] I am glad that the Deputy Chief Whip takes my bet. I shall be happy to collect it at the end of the first week in May.

I turn to the subject of cash limits. We got ourselves into a muddle about them earlier in the debate. It is a very complicated subject, but I shall try to be as clear as I can about it. The going figure for the rate of inflation is 11 per cent. from mid-1975 to mid-1976. That is the figure which is used for calculations. As the Secretary of State said, this means for local authorities a 7 per cent. increase in costs which, in cash limit terms, is an increase of £480 million.

The Government's present anti-inflationary policy comes to an end in July 1976. That is when the £6 limit ends. If I have done my sums correctly, one then extrapolates the 7 per cent. increase in cost. I think that at one point during his speech the Secretary of State said that the 7 per cent. continued into 1977. That suggests to me that the next maximum weekly payment which will be allowed under whatever follows the July 1976 termination of policy, will be £4.50 and not the present £6.

I shall not go into the matter in detail. However, if I am right about the 7 per cent. and 1977, as £6 is the present limit under the present policy and as the Government must have something in mind unless the whole arrangement is to end in 1976, that suggests that in any new policy the new norm will be £4.50 a week and not £6, because we know that that figure comes to an end next July. It may be that the Secretary of State cannot give me an answer tonight, but I am sure that many hon. Members would like to know the basis of these figures.

Another point concerning cash limits is that some hon. Members think that it has gone a long way down the line and they are worried about what will happen to local authorities if inflation is greater than the Government and the right hon. Gentleman think it will be. I confess that I fear that these cash limits are not, in fact, cash limits. If one reads paragraphs 4 and 5 of Appendix E of the report one finds that one could drive a coach and horses through the cash limits, if that was what one wanted to do. The appropriate paragraphs have already been read so I shall not read them again. Although we talk about cash limits, I do not think we have reached the situation where one says to local authorities that unless there is something totally cataclysmic or the Government introduce legislation which will put a tremendous extra burden on them, there will be no more rate increase Orders. At the end of the day that is what cash limits is all about.

It is clear that both sides of the House agree not to go along with the Prime Minister's speech about Chiefs and Indians which he made at Eastbourne a week or two ago. If central Government are properly limiting public expenditure and the local authority section is being limited, but imperfectly, the answer is not to have special watchdog committees, which I believe would be an extraordinary amalgam of elected councillors, ratepayers and officers. That would undoubtedly generate a new bureaucracy. The answer is to ensure that the councillors do the work properly and that central Government take their share of the responsibility by not adding burdens.

My hon. Friend the Member for Ludlow and the hon. Member for Isle of Wight (Mr. Ross) mentioned performance review committees. At the end of the day who is running the local council? Is it the officers or the elected members? I am old-fashioned enough to believe that it is, and should be, the elected members who look at what their officers are doing in performance reviews and who monitor their staff levels so that they realise how many staff they are engaging and how many staff they are employing. At the end of the day they can make policy decisions in accordance with that information. We must not try to introduce all kinds of red herrings by suggesting that a new kind of committee will solve the problem. Councillors, like Members of Parliament and Ministers, are elected to do their job. Why was the manpower watch which was set in train by my right hon. Friend the Member for Crosby (Mr. Page) at the beginning of 1974 abandoned? Why were the references which he set in train to the Pay Board on local government pay settlements also abandoned? As the right hon. Gentleman knows, both those proposals were introduced before February 1974. It is extremely unfortunate that they were both abandoned.

We are entitled to say to the Government, "All right, cut back on local government expenditure, cut back on local government staff in certain circumstances, but what is happening in central Government Departments?" For example, what reductions have there been in the staff of the Department of the Environment? I have great affection for that Department, having served in it as a junior Minister. I know that the staff there are second to none. However, we are talking not about the wholesale sacking of civil servants but about the non-replacement of people who retire, resign or are transferred to other Departments. The Secretary of State knows that in that way substantial reductions in staff can be effected over a period.

But that has not been the situation. The staff has grown and is growing. Staff costs in the last six months, according to a Reply which I had, added an extra £45 million in that Department alone. Therefore, it is fair to ask the Government when they will practise what they preach to local government by cutting back in their own Departments. That seems a reasonable proposition. Councillors throughout the country, including councillors not of my political persuasion, have made the same point to me.

One aspect which came through the debate generally which I wish to underline concerns the abysmal lack of knowledge about local government throughout the British public as a whole. That point came as much from the right hon. Member for Dartford (Mr. Irving) in an excellent speech as from anybody else. That matter could be tackled by using extra year at school to educate young people, possibly under the heading of Civics, about the set-up of local government and who is responsible for drains, housing, roads, and so on. At the same time we could tell them how to go about getting a house, whether buying with the aid of a building society or by a local authority mortgage, or renting from the council. There is an enormous area of what should be fundamental knowledge for good housekeeping, let alone good citizenship, which our educational system seems to be ignoring—with one or two notable and honourable exceptions. If we are to get a better understanding of local government in this place and in the public as a whole, our schools must do more in helping to get this message across.

The burden of central Government was mentioned by many hon. Members, particularly by the hon. Member for Ilford, North (Mrs. Miller) and by my hon. Friends the Members for Conway (Mr. Roberts), Norfolk, South and Daventry (Mr. Jones). I estimate that the duties of local authorites are 80 per cent. determined by central Government one way or another by various statutes and regulations. We have a plethora of Acts, regulations and circulars which increase manpower and expenditure. The hon. Member for the Isle of Wight referred to this matter.

I choose at random three Acts of Parliament—first, a Private Member's Act, the Chronically Sick and Disabled Persons Act; second, a Conservative measure, the Fair Trading Act; and, third, an Act passed by the present Government, the Children Act. All three are excellent Acts of Parliament. I do not criticise any one of them. However, all of them lay an enormous, almost open-ended, burden in terms of both manpower and money on local authorities, and not one of them specifies what those burdens are. All political parties are guilty in this matter. We must discipline ourselves in future, first to see what the effects of legislation will be and, secondly, to spell out the manpower and economic consequences for local government. In the new régime of, I hope, even tougher cash limits, we must make it clear that the resources will be made available rather than have this wishy-washy open-ended commitment with which responsible local government finds it almost impossible to cope.

We have had the Community Land Act and other current legislation cited. These are perhaps controversial measures to which I should be greatly opposed. But even non-controversial Acts play their part in making the lives of responsible councillors and officers almost impossible.

The question of small businesses was raised particularly by my right hon. Friend the Member for Crosby and by my hon. Friend the Member for Norfolk, South. This rate support grant, and indeed what has been happening during the past couple of years, gives little help not only to the small shopkeeper, although he is perhaps the hardest hit, but also to the small professional partnership, warehousing or manufacturing firm. Earlier this year my hon. Friend the Member for Norfolk, South introduced the Local Government (Rate Relief for Small Businesses) Bill, which the Minister for Planning and Local Government dismissed sharply in this place one Friday afternoon.

The situation is now more critical than it was then. We have the problems and nonsense of multi-rate VAT which hits many shops. There are rules, regulations, price lists and higher taxation, to say nothing of the unpredictability of the increases in rates. They go up by 60 per cent. one year and by perhaps 30 per cent. the next year. Small firms have great cash flow problems, and they are not allowed by law to pay their rates by instalments.

If one looks at the redevelopment of town centres, one finds that often there is a small shopkeeper who would like to stay there, and perhaps can just afford the rent but the new rates mean that he goes out of business altogether or is forced out of town and out of the main shopping area. If, at the end of the day, we want our new town shopping centres to be nothing but multiples, there is no need to change the system, but I believe that the small shop, giving individual service, is good for the consumer as well as being good for the shopkeeper. I put it to the Minister that unless we tackle this problem as a matter of urgency, many of these small businesses will not be around for long. The time scale of four years mentioned by one of my hon. Friends is realistic.

Mr. A. P. Costain (Folkestone and Hythe)

Has my hon. Friend come across the small shopkeeper who lives above the shop premises and is particularly concerned because his income is often below that which would allow him to get a rate rebate if he lived in normal domestic premises?

Mr. Speed

There are many anomalies in the situation. When rates were going up by only 5 per cent. or 6 per cent. the situation was not too bad, but with the present dramatic increase in rates, and without the benefit of the domestic rate relief, the survival of many of these shops is seriously at risk.

Reference has been made to the West Midlands County Council Bill, which we shall no doubt discuss at some stage, as we shall the Government's attitude to municipal trading. One of my hon. Friends said that he hoped that the Government would come out against the Bill. I do not think there is a cat's whisker of a chance of that, because earlier this year the Minister for Planning and Local Government supported his hon. Friends below the Gangway when they wanted to extend the powers of local government to go into undertaking, taxi driving, soliciting and estate agency work. [Laughter.] Hon. Members can take that whichever way they like.

I believe that we have to make up our minds whether we want to see the extension of municipal trading. The chances are that if it happens it will be at the cost of the ratepayer. The very people paying for the services will be those paying the maximum rates, the shopkeepers and the traders themselves, and they will be subsidising their own competition. The Opposition are vehemently opposed to any such extension.

My hon. Friend the Member for Northampton, South (Mr. Morris) raised the question of direct labour in an admirable way and gave a number of examples of wastage. It is the poor old ratepayer who picks up the tab at the end of the day. The Chartered Institute of Public Finance and Accountancy made an independent Report and recommendations on this subject. We know that the Government have set up an inter-departmental working party, but why cannot they now accept the main recommendations in that Report and have open competition, proper accounting and separate trading and profit and loss accounts so that everyone can see whether the operation is running properly? We are all supposed to believe in open Government, and the same considerations should apply to local authorities running direct labour departments.

A number of Conservative-controlled local authorities have responded to my invitation to accept the CIPFA Report, and I hope that Labour-controlled local authorities will do the same. Hope springs eternal, and I hope that even now the Secretary of State will endorse the main recommendations of the CIPFA Report without prejudging what may come out of the proceedings that he has set in train. I hope that the Minister who replies to the debate will give us that endorsement.

A number of ideas have been put forward on the general question of policy for the future of local government finance. I find myself in considerable sympathy with my right hon. Friend the Member for Crosby and the hon. Member for Islington, South and Finsbury in their criticism that this is a crazy way in which to discuss the expenditure of great sums of money and when they ask why there is so much secrecy. Is it not possible to have a Select Committee of the House, be it a Sub-Committee of the Expenditure Committee or some other Committee, to look into these matters before they are debated? That would need to be thought through, but at this moment both my hon. Friend and I are in fairly considerable sympathy with these proposals.

I believe that the House as a whole thinks that the time is coming when we shall not be able to go on having just this one debate a year—at least we had the papers a few days before hand, rather than on the morning of the debate itself—after which we all forget about local government finance until the next year, while the officials of the local authority associations beaver away for the next instalment. We must change that, and in that respect these suggestions are valuable.

There is concern about the rating system, although some hon. Members felt that it was a good system. I do not share their enthusiasm for it. Equally, we are concerned about curbing overall expenditure. Local government expenditure now accounts for nearly a third of public expenditure. No Chancellor of the Exchequer can give an open-ended commitment on this front.

Similarly, we should not only be looking at how we can curb overall expenditure but at the same time giving a genuinely greater freedom to local authorities. One example that I have been given which the Secretary of State, too, must have heard is that even on minor matters like home improvement schemes, the councils pore over details, so do his officials, and they go backwards and forwards with an enormous waste of time and effort and massive duplication. We should look at every statute which lays duties on local authorities and ask ourselves whether this is now necessary or shall we give them more power and trust than we have before.

When will Layfield report? We were told that it would be early in the New Year. That is fine, but when will the general public and hon. Members be able to see that Report? The Secretary of State may get the Report in January, but if he hangs on to it for two or three months, it could be Easter or Whitsun before the public see it. A more precise date would be helpful.

Reform is in the air on local government finance, on the controls of expenditure, on new methods of revenue raising, on new calculations on the formula from central Government, on local government help and certainly on a more open way of making these calculations known and on a better way for this House to monitor these affairs. I welcome that very much.

As several hon. Members have said, this settlement may result in the unemployment of teachers. Figures of up to 10,000, including those trained teachers unable to enter the profession, have been bandied about. Presumably some research has been done by the Department of Education and Science and it would be helpful to know what it is.

One of the ideas for local authorities to save money is to increase the trade charges for refuse collection. One could argue that traders already pay considerably higher rates than domestic ratepayers, yet the latter get their refuse collection free. But what about commercial organisations competing with local authorities, as happens to good effect in the United States and Germany? Are the Government's minds closed to that idea, which at least would monitor the efficiency of local authority refuse collection?

Another suggestion is that part of the burden of maintenance should be passed on to council house tenants. Why not pass on the whole burden and encourage councils to sell their houses to tenants, where appropriate? This surely is an extension of the Government's own suggestion.

I reinforce the question the hon. Member for Stoke-on-Trent, South asked, namely, does the Secretary of State expect that newly-built schools, old peoples' homes, community centres and other local authority buildings will be unable to open as a result of this settlement? If so, are there ideas for ensuring that the buildings do not stand empty and idle? After the settlement is it possible for the Secretary of State to say whether the demostic rate bill as a proportion of average earnings will be higher outside London than in London? The hon. Member for Woolwich, East (Mr. Cartwright) raised this matter.

I understand that the Government are still using the 1971 census data to decide the distribution of the grant. All hon. Members hope that it will be possible to update the data sooner rather than later because clearly those figures are four or five years out of date and the whole situation has changed fairly dramatically since 1971.

On 21st November the Secretary of State was reported at, I presume, a Press conference as saying that he would be surprised if many authorities increased their rates by more than 25 per cent. He did not say that today, but I presume that it is still his view. If that is so, we shall have lower standards. The party may be over for local government and the country may have to face the hangover shortly. Until central Government are prepared to cut back on their staff, policies and programmes, they are not in the strongest position to put those views forward to local government. We still have a long way to go until central Government are prepared to do what they are telling local authorities they must do.

9.41 p.m.

The Secretary of State for Wales (Mr. John Morris)

My hon. Friend the Member for Stoke-on-Trent, North (Mr. Forrester) summed up the debate when he said that we all agreed that there should be restraint, but we disagreed about particular restraints. This is what has happened throughout the debate. We have all agreed that there should be containment, but, when it comes to a particular issue—and I do not blame any hon. Member for this—we all have a particular hobby horse to ride and want to ensure that cuts or restraints do not affect it.

The hon. Member for Aylesbury (Mr. Raison) opened the debate for the Opposition with, if I may use as neutral a description as possible, a rather restrained speech. At the beginning of his remarks I was not sure whether he was taking the line that we were too tough or not tough enough. At the end of his speech I was not sure whether he was taking either of those two courses. Having listened carefully to him I was no wiser.

I do not want to do the hon. Gentleman any injustice, but at one point he seemed to attacking our housing provision and at another he seemed to imply that we were causing a reduction in housing expenditure. This continued throughout his speech—he was not sure on the one hand, whether we were profligate or, on the other hand, Scrooge-like. He seemed to impale himself on the fence of righteousness. He wanted to contain public expenditure, but he did not want the unpopularity that would come if he endorsed the level of rate support grant that we proposed. The posture was a painful one and did not carry the argument very far.

It would have been wiser, better and more statesmanlike if the Opposition had had the courage—that word has been bandied about from one side of the House to the other—to support what we are doing, to indicate that our suggestion is what the country can afford and that we are proposing the right balance. But, no, we had none of that. We had a speech from the hon. Gentleman which left us regrettably no wiser as to what stance the Opposition were taking. I quite understand why the hon. Gentleman said at the end of his speech that he could not recommend his right hon. and hon. Friends to vote against the proposal.

I turn to other issues raised in the debate. The hon. Member for Ashford (Mr. Speed) referred to the Layfield Report. It has already been indicated that the Government hope to receive that report early in the New Year. I assure the House and the hon. Gentleman that it will be published as soon as practicable after my right hon. Friend the Secretary of State has received it. We hope and intend that there will be no undue delay.

Mr. Raison

The other day we had an instructive experience of the way the Department of the Environment works. A report was completed by the Pilcher Committee on 12th August, a report about the commercial aspects of the Community Land Bill, and it was specifically completed in a hurry by 12th August so that it would be ready for the concluding stages of that Bill. It was not published until after the Bill was passed through Parliament. That was an absolute disgrace, and that is why we do not trust the Department.

Mr. Morris

I give an assurance to the House, and then I hear an hon. Member on the Opposition Front Bench say, from a sedentary position, "I do not believe it". I take that very much amiss, and in my short experience of the House I have never hitherto heard such a thing said from the Opposition Front Bench. However, we all live and learn in this world. The hon. Gentleman is responsible for his own words. I have given an assurance to the House, and I noticed that the hon. Member for Ashford seemed to nod in welcoming that assurance—a rather different attitude from that of his hon. Friend. I say no more about that.

The Order before us comes at a time of exceptional difficulty for local government and for the economy generally. Over recent years, there has been extremely rapid growth in expenditure by local government. This must be recognised, and our proposals come before the House in that context. As my right hon. Friend said in opening the debate, this growth has been a great deal faster, especially in some areas, than that of the economy as a whole, and if we forget those facts for one moment, we fail to understand the Order.

To say that, however, is by no means to say, as some commentators are altogether too ready to say, that local government has been profligate or irresponsible. On the contrary, I believe that, in general, the standards of financial responsibility which obtain in local government are commendably high, and, as the representatives of local government justly point out, the increase in local government expenditure is at least in part a necessary consequence of policies pursued by the central Government—the hon. Member for Ashford referred to this—which involve new duties and responsibilities for local authorities. This happens whichever political party is in power.

The period of rapid growth is now over, and the overriding need is to contain expenditure at its present levels. This process of containment itself presents formidable difficulties, not least the need for a rigorous and often painful reexamination of priorities. I am happy to add to my right hon. Friend's tribute to local authorities for the success they have already achieved this year in cutting the rate of growth of their expenditure by half. I shall come back to the figures later.

As my right hon. Friend said, that achievement is something for which local government has not been given enough credit, and I hope that the commentators to whom I referred a moment ago will take due note of it. I am confident that local authorities will now set about completing that achievement by coming down to nil growth—in other words, a standstill in 1976–77.

My right hon. Friend referred also to the important rôle played this year by the Consultative Council for Local Government Finance. I, too, welcome this development. From what I have seen of its working, I am sure that we have here the makings of a much better mutual understanding between central and local government in the years to come than anything we have had in the past. I have its counterpart which works as a direct channel for me in communication with local authorities in Wales. I believe that these are important steps forward by which we can understand one another much better, seeing the needs of central Government, on the one hand, and where the priorities of local government lie, on the other.

Several of my hon. Friends, notably my hon. Friends the Members for Stoke-on-Trent, North and Stoke-on-Trent, South (Mr. Ashley), spoke of the needs of the disabled. My hon. Friend the Member for Stoke-on-Trent, South said that we should include a factor related to the number of disabled people on the register in the already complicated formulae for these settlements. We can certainly look at the matter again for 1977–78. There is always room for improvement in this very difficult formula. However, there are possible dangers. No doubt it would encourage authorities to keep their registers up to date, but I am not sure that they would always show the same zeal in removing from the register people who should no longer be there.

My hon. Friend also deplored the decrease in the weighting for elderly people living alone. We have now added several completely new indicators of social need—I shall not go through them at this late hour—and I can say that in total we have a better balanced and more comprehensive coverage of social needs. I do not take the dogmatic view that there is no room for improvement in the years ahead in what has always been a difficult matter—the drawing up of formulae that would meet as many contingencies as we should like.

The help given by the right hon. and learned Member for Hexham (Mr. Rippon) to urban areas was mentioned as if it had been an enormous achievement which put right all the difficulties of local government finance. It is true that the right hon. and learned Gentleman took steps to improve the needs element formula in its application to inner cities, but what he gave with one hand he took away with the other by his extraordinary proposal for a variable domestic relief scheme which would have deprived inner city householders of the whole benefit of the changes in the needs element. It is no wonder that we could not go on with that.

The hon. Member for Aylesbury mentioned the view of the Association of District Councils that a share of the needs element should be paid to the non-metropolitan districts. If he had carried his studies a little further and had bothered to ask the Association of County Councils for its view, he would have discovered that it was strongly opposed to the idea. The fact is that this is an issue on which local government opinion is, not unnaturally, deeply divided—and not on party lines. My right hon. Friend therefore decided that it would be wrong to make any change in the payment procedure, which has been used for the past few years, a matter of some weeks before the Layfield Committee is to report.

Mr. George Cunningham

Will my right hon. and learned Friend draw to my right hon. Friend's attention the fact that boroughs within London are likely to be divided in that kind of way, and that it is appropriate to hold up any further redistribution between inner and outer London just a few weeks before the Layfield Committee reports on the basis he has just mentioned?

Mr. Morris

My right hon. Friend has heard those remarks. It is a question of the need to pay the money.

I turn to the observations by the hon. Members for Aylesbury and Ludlow (Mr. More) on the needs of growth areas and new town areas. The counties concerned are discussing with my right hon. Friend the Minister for Planning and Local Government whether there is a case for a special contribution from the Exchequer under the New Towns Act. We are not yet persuaded of the existence of any undue extra burden. There is nothing exceptional about the level of rates levied in those areas, even if they have gone up sharply in recent years. The discussions are continuing. I would have expected a more generous response from Conservative Members to the inclusion, for the first time, of a formula relating to new housing stocks. It will not revolutionise the finances of the areas concerned, but the authorities will be better off than they would have been without the change.

We have been asked whether inflation is allowed for in the Order. The main Order is based on November 1975 prices. Wage and other cost increases that occur later will be covered up to the cash limit in the later increase order for 1976–77.

I tried to follow the last few remarks of the hon. Member for Ashford on cash limits. I tried to follow his arithmetic as best as I could. Perhaps I was not all that successful. If I have not been successful, I blame myself rather than the hon. Gentleman. I cannot accept what the hon. Gentleman was seeking to put before the House.

I can assist to the extent of saying that the cash limit calculation of £480 million includes an assumption on pay increases after the present incomes policy comes to an end in August 1976. Pay increases which do not start until after August 1976 will not have much of an effect on the total cash limit figure. The assumption made about pay increases after August 1976 is that the increases will be between 5 per cent. and 10 per cent. We cannot say now what that will mean in terms of a money rate increase. I do not think that I can add to the hon. Gentleman's assumption or comment on the way in which he put his case.

Accusations have been bandied about regarding responsibility for local government expenditure in the past few years. The House should note when the increases occurred. In 1971–72 the increase over The previous year was 4.9 per cent. In 1972–93 there was an increase of 8 per cent. The increase for 1973–740 was 8.8 per cent. and in 1974–75 it was 10 per cent. We estimate that the increase for 1975–76 will be approximately 6 per cent. That is an indication of what has been achieved. The figures I have quoted indicate when the rising trend took place and who was responsible for it. I hope that those figures deal with the issue of responsibility once and for all.

The hon. Member for Aylesbury asked about the increased provision for town and country planning, an increase of about 2 per cent. I can assure the hon. Gentleman that it has nothing to do with the Community Land Act. The cost of that Act is not relevant expenditure. It does not receive rate support grant, and my right hon. Friend the Secretary of State for the Environment has already made it clear where we stand on that Act. I believe that the hon. Gentleman has tabled a question on this issue. Perhaps he has not yet received his Written Answer.

Mr. Raison

Will the right hon. and learned Gentleman explain how an increase from £139 million to £201 million can be 2 per cent?

Mr. Morris

I have some figures which have been prepared for me. The outturn for 1975–76 is £196 million. For 1976–77 the RSG settlement is £201. That explains the 2 per cent. Perhaps Opposition Members will laugh on the other side of their faces when they examine the figures I have put before the House.

Mr. Graham Page

The figure in the previous rate support grant was £139 million and it is now £201 million. The outturn, as the right hon. and learned Gentleman has said, is £196 million. How can he explain the large increase between £139 million and £196 million?

Mr. Morris

I can give the right hon. Gentleman an assurance that the figures I am giving compare like with like. My right hon. Friend is, perhaps, trying to meet the problem in a different way with the figures he has given. If I am wrong, I shall be the first to correct my error. The increase is minimal, about 2 per cent.

Mr. Rees-Davies

One important matter raised by the right hon. Member for Dartford (Mr. Irving) was that of fares concessions for old people. Does the Minister intend to deal with whether we might be able to even out the concession and subsidies for old-age pensioners? The concessions are so much larger in London than in Kent and other counties. What is the Government's attitude towards ensuring that there is a levelling-out of these concessions, which would be of the greatest importance to old people?

Mr. Morris

This is a question of great importance in many parts of the country, which are at different stages in the development of concessionary fares. I attach great importance to this subject, for I was one of the architects of the Transport Act 1968, which removed a host of anomalies surrounding the issue. As we all know, concessionary fare schemes had been growing rapidly but, because of financial considerations, there has recently been no room for expansion. I hope that when we leave this period—when there is not such pressure on public expenditure—we can approach this subject in a new light.

There is a Scottish debate to follow and in fairness to my Scottish colleagues I will not take up more of the time of the House save to say that last year we had a discussion about super-sparsity and sparsity. I hear that in my absence tonight the hon. Member for Caernarvon (Mr. Wigley) raised the subject. No doubt he will have noticed that there is no super-sparsity in the 1976–77 formula. He will also have noticed that next year authorities will get £2.18 for every acre in excess of 1.5 per head of population instead of only 63p as in 1975–76. This has been generally welcomed. The overwhelming number of counties benefit substantially from it.

I emphasise a point made by those with long experience of local government—namely, that local government is not merely a machine for providing services. Rather it is the embodiment of a living democratic institution in an era when such institutions are under considerable pressure. I believe, as do my right hon. and hon. Friends, in the importance of the British local authority—

Mrs. Knight

rose—

Mr. Morris

I know what subject the hon. Lady wishes to raise. The circular about which she is anxious cannot be issued until the House has approved the Orders. We hope to issue it shortly after Christmas. It will give guidance about the rising fives, which the hon. Lady mentioned, as did my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker).

In enabling local government to face these stresses, the rate support grant settlement is soundly and fairly designed to meet the needs both of local government and of public expenditure policy as a whole. I commend the Orders to the House.

Question put and agreed to.

Resolved, That the Rate Support Grant Order 1975, a copy of which was laid before this House on 5th December, be approved.

Resolved, That the Rate Support Grant (Increase) (No. 2) Order 1975, a copy of which was laid before this House on 5th December, be approved—[Mr. Crosland.]