HC Deb 30 September 1909 vol 11 cc1523-33

(1) There shall be charged on and paid out of the Consolidated Fund or the growing produce thereof in every financial year a sum equal to one-half of the net proceeds in each year of the duties on land values under Part I. of this Act (including Mineral Rights Duties).

(2) The sums so charged shall be carried to a separate account, to be established under regulations made by the Treasury for the purpose, and, subject to such regulations as may be made by the Treasury in respect of accounts, audit, and accumulation of moneys standing to the account, be appropriated for the benefit of local authorities in the United Kingdom in such manner as Parliament may hereafter determine.

Question proposed, "That the Clause be now read a second time."


I think something should be said about this Clause. It has been discussed already, but I am bound to point out to the Committee that the attitude adopted by the Government this Session in this matter is rather different to that adopted by the present Prime Minister when Chancellor of the Exchequer in connection with previous Budgets during the currency of the present Government. In his Budget speech of 1896 the Prime Minister said, "I must say emphatically that I regard this procedure of the earmarking of particular Imperial taxes for local purposes as in its nature fallacious and misleading. It complicates and confuses the national tax, and urgently calls for prompt and thorough reform." In his Budget speech of 1907 he used equally strong expressions condemning entirely this practice of diverting funds to local authorities from the Imperial Exchequer on no settled plan. This is an aggravated offence, if I may use the expression, because, as has already been pointed out in a previous Debate, these sums are not really allocated at all. In fact, it was a question of considerable doubt whether it was in order to make such a proposal as is now being considered. It has been ruled that it is in order, but it is a very remarkable procedure. Probably the justification which the Government would make for this is that if it is an offence at all it is a very small one, the amount of money actually allocated being extremely minute. I do not know when you will arrive at the point when these taxes are to be levied, but the amount obtained during the current financial year must be extremely small so far as the State is concerned, because £300,000 in the present year is the estimated cost of valuation. I understand that the entire cost of valuation is to be paid by the State, and that the proceeds of the taxes, after the State has paid for valuation and collection, are to be divided between the local authorities and the Treasury. If that is so, the local authorities will not fare well, but they will fare better than the Treasury. I do not think this Clause will be of much value to the Treasury or to the local authorities. I should be inclined to say that the Chancellor of the Exchequer would have been wiser if he had deferred the making of any such change in the present Budget. He is overloading the Finance Bill with every kind of consideration, and every kind of new proposal, affecting not only the present year, but many years to come. It is practically true to say that no money will come in under this Clause or no appreciable amount will be collected during the present year, and therefore I cannot understand the object, unless it be an electoral object, in burdening the Finance Bill with this somewhat controversial and difficult matter in direct contravention of the principles laid down so recently by the Prime Minister. I must say it would have been better if it had been deferred until next year, when there might be time to consider it. It is quite obvious that the Government have not had time to consider this and a large number of the other proposals made in connection with the Budget. I really do think, considering the question raised by this Clause, and considering the precedent it sets, that it would have been better to defer it for a year. It has been recognised throughout that this method of dealing with public money is a regrettable makeshift. Why we should add to the difficulties and aggravate the grievance at the present time, for no advantage whatever, either to the State or the local authority, passes my comprehension. As a matter of practical business, a matter of precedent, and a matter of finance, it would be very much wiser for the Government to drop the Clause out of this Bill, merely stating the principle that they do intend to divide this money where there is any with the local authority, and that they will make the necessary provision in their Finance Bill next year.


I should have thought that the hon. Gentleman (Mr. Pretyman) would have welcomed the proposal to devote half the money derived from these Land taxes to the relief of local taxation. There is a very small amount available now, but there is every prospect that it will come to be a considerable amount. I should have thought also that he would have welcomed the mode in which the money is being unapportioned at the start. I had the pleasure of taking part in a large deputation which waited on the Prime Minister and the Chancellor of the Exchequer in regard to the reform of local taxation. That deputation included representatives of county councils and chambers of agriculture, and municipal boroughs, and, with one voice, we urged that the best way, in our belief, to reform local taxation was that the Imperial Government should take bodily over some services which are now paid for partly by the Imperial Government and partly by the rates. This is a reasonable beginning, with that end in view, and I am very glad that the views of that large and influential deputation were listened to by the Prime Minister, and that this money is being kept together until it is appropriated in a definite form for the relief of the ratepayer. The best way, I think, would be to fall in with the idea which I have referred to of relieving the ratepayer by the Government taking over entirely, as they did in the case of prisons, some definite form of services to which the rates contributed largely at present. This is a reasonable proposition, and I very much rejoice that the proposal is in the form in which it is.


I quite sympathise with what the hon. Member who has just spoken said as to the necessity of a reform of local taxation. Many of us in this House know very well that the present local taxation is absolutely idiotic. The hon. Gentleman referred to all sorts of services being paid for out of local revenue which ought to be charged to the revenue of the State. But there is not on word about reform of local taxation in this new Clause. If there were it would be a very different thing, and we might try to get some idea of what the Government propose with regard to reform of local taxation. What I object to in this Clause is that it is taking money out of the pockets of the taxpayer this year to be spent in future years. It is true that the amount this year will not be very large, but whether the amount is large or small I object to taxes being raised one year to be spent another year. It is bad finance, and produces confusion in the finance of subsequent years, when it does come to be dealt with by Parliament. There is no promise that the Government are going to deal with it next year. I thought the programme of the Government for next year was rather full already of measures which would take up a great deal of their time. I hope that the Government are not going to sit until the middle of October every year to finish their programme. Local taxation takes with it probably a great deal of informal Poor Law. I for one do not contemplate with pleasure a Session which is to begin with disestablishment in the Welsh dioceses and to take local taxation by way of bonne bouche at the end. It will be at least two years with all the measures that have accumulated before the question of local taxation can be settled, and then the Treasury will have a growing produce to distribute according to no settled principle by doles to be made out to help this or that locality or to pay this or that particular charge. The reform of local taxation means that the State does assume, as the hon. Member has said, a certain fixed proportion of certain burdens, and, of course, the State should pay those charges each year as they accrue out of the revenue of that year. The Chancellor of the Exchequer each year will have to provide, and ought to provide, for the revenue of that year and for the payment of these charges. But in this case the Treasury will have a sum of money more or less large, according as the tax brings in more or less money, and more large as the years pass by, before local taxation reform is taken up. The hon. Member opposite and I have sat in this House a good many years. We have had reform of local taxation dangled before us from both sides of the House, and I am rather sceptical of its being taken up within the next three or four years. All the time this huge sum will be coming into the Treasury, doing no good to the country, but being merely reserved to be spent in the future; and the taxpayers will be mulcted year after year in sums of money which will be no use to them at the time, and which when they are used will be used in the form of doles and not in the form of relief of local taxation. Therefore I hope that even now that the Government will be urged to withdraw the Clause, and not transgress what they know themselves are the canons of good finance by taking out of the pockets of the people money not intended to be spent this year, and which very likely will not be spent for three or four years to come.


The hon. Gentleman who has just sat down has, as I have done in past years, looked at this question from the point of view of the county councils and local authorities, and he desires, as I still desire, to see a complete review of the whole system on which local taxation is conducted in its relations to Imperial taxation, and when that happy time comes I am sure we shall be able to co-operate for the purpose of putting on a far more satisfactory footing than at present exists the relation between the two sets of exchequers. As regards the point raised by the hon. Member for Chelmsford (Mr. Pretyman), I am not quite sure whether I understood him to grumble at the payment which was being made to the local authorities or whether it was that he was only rather concerned at the small amount which would accrue to them this year. I take it, however, that his proposition was that the amount which would accrue after all cost of collection and all the incidental expenses in connection with the collection of money would be so small that it would be a perfectly negligible quantity, and one upon which if the local authorities were well advised they would insist on the House of Commons taking out of the Budget Bill.


My point was that the finance was bad, and that it would be much better to put it off to next year in order that the matter might be dealt with in a complete manner.


Altogether the amount will be from £650,000 to £675,000 for the year. One-half of that sum will go to the local authorities, and they cannot afford to despise it or treat it in the light-hearted way in which the hon. and gallant Gentleman appears to treat it. On the contrary, so far from looking the gift-horse in the mouth, I think they will welcome its appearance in their stable, and they will be disposed to ask for much more than they can get from us of the same sort of gifts. The hon. and gallant Gentleman asked whether the amount paid to the local authority would be the gross or the net sum, or whether the cost of collection would be deducted from the half of the total paid over to the local authorities, the other half being paid to the Imperial Exchequer. My answer is that the half to be paid over to the local authorities will be the net amount; they will get the whole of the proceeds of this tax. The hon. Gentleman referred to the speech of the Prime Minister made in 1907, when he was making a change in the form—and, after all, very little more than the form—under which money which goes into the Local Taxation Account was paid into the Exchequer instead of being paid first of all to the Local Government Board, and when it was intercepted before it entered the Treasury. It is quite true that the proposal under this Clause reverts to the older practice, but the Prime Minister at the time he made that change was contemplating a larger and wider revision of the whole of our relations to local authorities. So far as the system has gone up to the present time, it is really very much a question whether you intercept the money before it enters the Treasury or whether it should go first to the Treasury and then be paid out afterwards. For the moment, and having regard to the exceptional circumstances in which we find ourselves this year, we think it very much better, as the Clause proposes, to pay it direct to the Treasury, and that it should be paid out under regulations made by the Treasury subsequently.

10.0 P.M.


We all know the genesis of this Clause. We know that the original programme of this taxation was set on foot by certain local authorities. We know that when the Government set its hands upon the whole of the plunder it found it to be policy, after it had gone on for a certain time, to hand over a certain share to the local authorities. Here we have a Clause dealing with this division of the plunder, but I maintain that this is all a part of the botching and wobbling which are inherent in the Bill, which changes in every phase from time to time, and now, in this particular case, is striking at what was the very principle of those who originally made this proposal. I wish to point out certain serious difficulties and imperfections which will grow up under the Clause as it now stands. Supposing the money is there. It will not be for a good while, because the sum of £675,000 which the right hon. Gentleman mentioned has been whittled down within our experience. But supposing the money is there, is there any better method of bringing about extravagant expenditure than is that which is proposed by this Clause. If the local authority is to be responsible for expenditure, then you ought to make it raise the money itself. Nothing encourages extravagance in a local authority more than to throw a large sum at its head, for the raising of which it is not responsible, and which comes to it as a sort of windfall. I have had the handling of large sums of money of this sort in connection with the local taxation accounts to the local authorities, and I know how ready they are to spend it upon any fad which occurs to them. A sum of £100,000 or £150,000 is suddenly handed to them for the raising of which they are not responsible to their Constituents, which does not put an immediate burden upon their Constituents, and which is thrown at them without any very serious need having previously arisen. The local authorities accounts are audited according to statute, and the auditors are appointed by the Local Government Board under statute. The Imperial authorities accounts are equally audited under statute by the Auditor-General. But how are these accounts to be audited? They are to be audited under such regulations as may be made by the Treasury in respect of accounts and audits. Are we to overturn all the statutory provisions which this House has made for the audit of local and Imperial accounts, and hand the whole over to such rules and regulations as the Treasury may think fit to institute? Can there be any better contrivance to let slip out of our hands the whole expenditure of this money. Parliament has before it the Report of the Controller and Auditor-General, and it has provided, by means of the Local Government Board, a complete statutory audit of local accounts; but here the audit is to be deprived of any effective control at all. The sums paid out of the local taxation account, these subsidies, are handed out to the local authorities and the local taxation accounts are subject to no definite audit whatever. Anyone acquainted with the arrangement of the Treasury and the arrangement of the administration of public accounts must be aware that the audit of these local taxation accounts is absolutely futile. It slips between two stools—the Controller and Auditor-General, and the regular statutory audit of the local accounts by the Local Government Board. You are now handing over to some plan to be established by the Treasury the whole of this work of audit. My third objection is that the last words of the Clause virtually make the whole of the rest of it absolutely futile. How are you to divide this money between England, Scotland, and Ireland, and between the different localities? There is the crux of the whole question. If you pass this Clause without establishing the principle of distribution amongst the nationalities and amongst the local authorities you are passing a Clause which you know perfectly well no person in the world can put into force. It is only so much waste-paper. Surely the Secretary to the Treasury might answer us on that particular point, and tell us how does he mean to make this Clause effective at all. Until you have put forward rules authorised by Parliament for determining the distribution as between the nationalities and the localities, the Clause remains absolutely ineffective. You may get your money, and we do not think you will get much, but it remains absolutely useless in your hands. You are passing this Clause simply in order to conciliate and placate your enemies amongst the municipalities whose plunder you have stolen from them.


I listened to the very pious expression of opinion by the right hon. Gentleman (Mr. Hobhouse) that he would like to see local taxation on a better basis. I quite agree with him, and think it ought to have been put on that more satisfactory basis before this arrangement was proposed with regard to allotting a certain amount to the local authorities. I think they are putting the cart before the horse. I can assure the right hon. Gentleman, as far as regards the municipalities which I have knowledge of, that I look upon this as the case of the Government poaching on our preserves, and will consider, at any rate in regard to the Increment Duty, that the Government have no right whatever to that Increment Duty. Take a city which has embarked on a large amount of expenditure in developing a tramway system, and take the instance of the tramways from a central railway station to one of the suburbs of the city. The effect of that tramway system being laid down has been that a large amount of valuable property on the tramway route has been absolutely reduced in value, while that at the tramway terminus has risen in value. There the local authorities have lost the rateable value on the route, and look forward to getting the proceeds of their enterprise at the terminus. The Government steps in and say, "We are going to take possession of that increment value," an increment value brought about not by the efforts of the community as a whole but by the local community. We maintain that anything that arises from the efforts and the sacrifices of the local community in taxation ought to go to the benefit of the local community.

Then the right hon. Gentleman tells us that they are going to give us half of £650,000, but I cannot help remembering that to raise that, at any rate this year, they are going to spend £600,000 in valuation. Is the Government going to bear the whole of the cost—£600,000—and give us half of the £650,000, or are they going to give use £650,000 leas £600,000, which means £25,000, which is all the difference in the world? I maintain that the Government are not going to give anything this year, and yet they dangle this bribe before the municipal and local authorities. I want to know has this Parliament the power to enact that in every financial year in the future one-half of this amount shall be paid, while another Parliament may be in power and another Government which might upset the arrangement altogether? Then the Clause enacts further on that this amount is to be divided as Parliament may hereafter determine. Just think what that means. Suppose the Irish party are paramount in the next Parliament, as they may be, and that they demand that more than half shall go to Ireland. Who is to prevent it? The only safeguard to my mind is that the local authority ought to collect this money itself. They are the people that are entitled to it, and ought to collect it. I do think that the right hon. Gentleman ought to take care that before they deal with this important question they ought also to have dealt with the question of putting the whole of local taxation on a more satisfactory basis than it is at the present time. I know that these are the opinions of the members of a municipality with which I am connected, and they are far from satisfied with half of these taxes. They consider they ought at least to have two-thirds of them, if not the whole of them. I am bound to enter my protest against the proposal made on behalf of the Government.


I do not know whether the Amendment of which I have given notice is in order, but I am afraid it is not. The Amendment was to leave out the word "half" and insert the word "whole," so that the whole of the proceeds of these taxes would be given to the municipalities. I confess, personally, and I am speaking now absolutely and entirely and exclusively for myself, that I should have felt better disposed towards these taxes generally if the whole proceeds had gone to the municipalities. I think that the one great blot upon the whole taxation involved in the different Land Taxes that this Commitee has considered is that it prevents, by imposing this particular system, the municipalities from eventually getting the whole of what they were legitimately entitled to. I look upon that as being a very serious blot. I am opposed to this Clause in itself, because it does not go far enough. I suppose I am in order in objecting to the Clause on the ground that it has only got a "half" in it, although I should not be in order in moving to leave out the word "half" so that the whole of it should go to the municipalities. There is an old proverb that half a loaf is better than no bread. I think in this particular case, where half a loaf would have simply the effect of starving the garrison, that half a loaf is worse than no bread at all. I think it is a very great pity, after all the trouble that has been taken, and all the money that has been spent during these last 25 years, to thoroughly inquire into a system under which the municipalities would have been able not to have imposed taxes in the extraordinary way imposed in this Bill, but would have been able to have assessed their rating in such a manner as to bring about an equitable division of the real burdens upon the citizens in proportion to their opportunities, namely, the site value, and not in proportion to their enterprise and energy, which is the real effect of the present antiquated system. I do think it is a very great pity that these taxes should be brought forward in this way, and that we should have to deal with a clause such as we have now before us, which has the effect of bribing the municipalities to accept on the basis of getting half of these extraordinary and somewhat ridiculous taxes, and bribing them to forego their legitimate claim to have their rating arranged in a proper manner. I have always contended that when the land system came to be considered by Parliament, we should have a number of valuable reforms—reforms in the system of dividing the taxation, in rating, and in valuation—instead of which all the existing evils are crystallised and continued. There is no attempt at reform. There is simply a new set of taxes, and the municipalities are to hold their peace because they are to get one-half. That is a very bad solution of the difficulty. I should have liked to have been able to move my Amendment; but I realised when I handed it in that in all probability it would be out of order, because the financial Resolution distinctly says one-half, and I presume it would be impossible for the Clause to deal with any other proportion. I object to the whole system, and particularly to the Clause in the way it is now brought forward.


I associate myself with the view just put forward. I cannot understand how the amount, £650,000 or £675,000, is arrived at as the sum to be given to the local authorities, as the Clause expressly says that all they are to get is one-half of the net proceeds, which will not amount to anything like that sum. What local authorities are to get this money? As far as I can see, there is no definition of local authorities in the Bill. If that is so, it will be necessary to remedy the omission.


If there is any doubt about the matter, it can be put right. I thought it was the whole of the local authorities—county councils, urban district councils, and so forth.


But what does the "so forth" mean?


District councils, rural district councils—


Parish councils?


I can hardly say; but if there is any uncertainty I will give an undertaking on behalf of the Chancellor of the Exchequer that it shall be made clear, cither in the definition Clause or in some other place, on Report.


It is unsatisfactory at present, and it is still more unsatisfactory if the money is to be set aside for bodies which the Government cannot definitely name.

Clause read a second time, and added to the Bill.

Mr. HOBHOUSE moved, after Clause 72, to insert the following:—