§ Mr. BRUFORD
I beg to move,That, in the opinion of this House, the Present system of adjusting the burden of local and national taxation is obsolete and should be revised in such a way as to lay upon the Exchequer its fair share of the cost of national and semi-national services, while giving the spending authority the utmost inducement to economy coupled with the minimum of central control.Owing to the fortune or the misfortune of the Ballot, I have a somewhat dry, very contentious and difficult subject to deal with, namely, the unfair distribution of the rating burdens of this country. Some hon. Members may ask what is the matter with our present rating system, which was established first in the days of good old Queen Bess, and was, I think, slightly amended in the days of the good Queen Victoria, in 1840. I have had some figures taken out dealing with 100 fairly typical rural parishes in England and Wales, and, if I may, I will give 2482 just a very few of them, to show some of the inequalities of the present system. In the Northern portion of England the rates in 1913–14 varied, in 29 parishes, from 3s. 4d. to 8s. 2d. in the £, while in 1922–23 they varied from 7s. 4d. to 25s. 1d. in the £. In the South-Western district in 1913–14 they varied from 2s. 9d. to 7s. 4d., and in 1922–23 from 8s. 10d. to 17s. 4d. In the South-Eastern part of England they varied from 3s. 6d. to 9s. in 1913–14, and from 7s. 6d. to 16s. 8d. in 1922–23; while in the little Principality of Wales they varied from 3s. 8d. to 5s. 11d. in the former year, and from 7s. 4d. to 24s. in the latter. If that does not show inequality of rating, I do not know what it does show, because, presumably, the inhabitants of those parishes are getting the same benefit from the rates in each parish, whether they are high or low.
The figures I have given are for large districts, and I will now give some instances from the same county where the assessments are the same for the county rate. They varied there from 12s. 6d. to 24s. 7d. in the £, from 9s. 2d. to 14s. 3d., and from 9s. 6d. to 25s. 1d.; and yet these places have to pay exactly the same to the county rate. I do not think it is necessary to give any more figures in order to prove the unfairness of the rating system. I have been speaking hitherto about communities, and, if I may, I will now take the personal case. Let me take the case of a doctor, or one of our legal friends, or almost any other professional 2483 man. He is earning, say, £1,500 a year. Very few would earn less than that, and I know many who earn more. He is probably living in a house rented at £80 a year, and that house would be assessed at £80. Of course there would be deductions, but I do not want to go into them for the sake of comparison, because I will not take them off on the other side. With rates at 10s. in the that professional man, earning £1,500 a year, has to pay £40 in rates. I am not speaking of Income Tax at the present moment, because he pays Income Tax just as any other man does, and just as farmers pay, if they are making profits, which they have not seen lately. Then let me take the case of a farmer who rents a farm at £500 a year. That, too, is rated at £500, and he pays rates at 10s. in the £; that is to say, he has to pay in rates £250, and if he can earn a gross income of £750 he is a jolly clever fellow. I do not know how to do it, and I do not think that any other farmer around me does. Hon. Members may smile, but if they tried it they would know something about it. Look at the bankruptcies among farmers, which tell their own tale. I repeat that if a farmer can earn £750 a year he is a clever man, and, out of that £750, he has to pay £250 in rates, whereas the professional man, who is a town dweller, has to pay £40 out of his £1,500.
Is that fair? If it is, I do not know the meaning of the word. I do not wish to ask too much for agriculture. I am an agriculturist, and I do not mind owning that I am proud of the title, but I want to see fair treatment. Our rating system was instituted in the days of good old Queen Bess, and the chief burden was placed on the land, because, in those days, there was practically no other property upon which to base it; and the rates were to be raised principally, and, indeed, solely, for the maintenance of the poor. Since those days times have changed, possibly for the better—I hope so—but they have brought other expenses with them. Parliament in its wisdom has decreed that many local and national services shall be paid for out of our local rates, and the result has been that our expenses have gone up by leaps and bounds, although the source from which those expenses are collected has not been expanded to any extent. 2484 I submit to the House that it is time that we revised our rating system. I have mentioned other expenses put on by Parliament. There are many Imperial burdens which are borne by the ratepayers to-day. Chief among them are the roads, education, the Poor Law, lunatics—I think those are enough to mention. All of these are national charges, and they are borne to-day to a far too large extent by the ratepayers.
I do not want to put everything on to the National Exchequer. Some of my Friends want to go the whole hog and put the whole of these services on to the National Exchequer, but I do not agree with that, and I will tell the House why. It is because, directly you put the whole cost on to the National Exchequer, the National Exchequer will very probably say, "We must have the whole of the control," and I would ask hon. Members what generally happens when you get Government control? There is red tape, inefficiency and higher cost. I say, without fear of reasonable contradiction, that the national services will never be carried out better than by the local authorities. They have the local knowledge, they are on the spot, they can see what is going on and put their hands on waste, and they have the interest to keep down expenses and get the best value for money. There is no one that can spend the State's money better than can the local authorities. Therefore, I do not ask that the whole of this expense should be cast on the National Exchequer, but I ask and demand, on behalf of the ratepayers—not only the agricultural ratepayers, but the general body of ratepayers—that these national charges should receive a fair subsidy from the Government.
May I just tell the House what has happened in my own county? I cannot go all over the Kingdom, because it would need more time than I have to give. The Government are supposed to subsidise the roads to an extent to make them pay for motor taxation. In 1903 our rates in Somerset cost us about £63,000, speaking from memory. That was just at the time that the use of motors came in. Last year, supposing we had not had any increase of traffic, they would have cost us double the amount because the value of labour, materials and various other things has gone up. But the traffic has altered, and those roads are now costing us a very 2485 much larger sum. We have certain grants from the Government for these roads, and they amount to £51,000 less than double the cost of 1903, plus the Government giants, with the result that Somerset today is paying about £51,000 more for her roads through motor traffic. I ask if that is fair? That is roughly a sevenpenny rate. My own rural district council, one of 17 in Somerset, is paying a very much bigger sum, and we do not get a penny towards that, and the ratepayers in my own district through the county rate and the rural district rate are paying 1s. 2d. in the £ on their roads to make up for motor traffic. That is what we have to pay after we have got our grant from the Road Board Fund. Is it fair to place that extra burden on the rural ratepayer in order that mechanical traffic should use our roads?
Some people say the value of property has gone up because you have better roads and you have this motor traffic. I think anyone who knows anything about the country will bear me out that the value of our land has not gone up but has gone down. I do not say it has gone down from 1903, but it would be higher to-day if we had not these beastly things about the roads. Possibly you do not know, Mr. Deputy-Speaker, anything about haymaking. I do not think any the less of you if you do not. We cut a new road last year through the field of a neighbour of mine and he wanted to charge us, and swore he was justified in charging us £30 for damage to his hay through dust. He did not get it, because we had not had a motor on the road before he cut his grass. Consequently we had a good answer, but he had a good claim against us for cutting a road through his place. The dust from the motors did damage it. I ask hon. Members opposite if they had a little house near the road would they like motors close to it?
§ Mr. BRUFORD
I am grateful to the hon. Member for that admission. It 2486 makes my case good. It is also said we should be glad to see motor chars-à-banc. I am very pleased for my town neighbours to come into the country and enjoy themselves, but when they come with rattle, drum and fife, concertina and other kinds of music, are we supposed to fall down and worship the cloud of dust whence the noise emanates? This kind of traffic is a detriment to the country dweller and the agriculturist, and those who benefit by the traffic should pay for it, and that is all I ask. We should have the national and semi-national charges picked out and paid for more largely by the Exchequer while keeping our local control. I stick to that. I know some of my friends think we should place the whole of these charges on the national Exchequer. I say no. I feel sure we should do better by managing our own local finance than by entrusting it to the Government. Do not think I am speaking wholly for agriculture. I am asking for justice to all men. I believe in every man paying his fair share of local and national burdens, but I do not believe in any man having to pay more than his fair share. I am asking for justice here. I am not going to be presumptuous enough to put forward a scheme, but if the House will accept my Motion and will induce the Government to bring in a Bill which will give us a fair system of rating I will support it and will get to work with them in endeavouring to produce the best thing we possibly can.
§ Mr. S. PATTINSON
I beg to second the Motion.
The Mover of the Resolution told us that there had never been any Act passed substantially to amend the rating system since the time of good old Queen Bess. I suppose that is the real reason why so many hon. Members are so interested in the subject. We are always told that the party opposite do not believe in changes. It is evident that they have been content to go on without any change whatever; but during the years that have passed enormous grievances have crept into the rating system. Therefore, it is a fit and proper time to raise the question once again. It has been raised on many occasions. Commissions have sat time after time, but with no result. [HON. MEMBERS: "Yes!"] Well, with very little result. The only Act that has been passed was 2487 passed in 1840, and it rendered real estate liable to be rated, but exempted personal estate. The time has come when we should have some readjustment, and should see whether it is not possible to take the burden, not only off the land, but off the houses and cottages even of the towns. The towns are as heavily burdened as we are in the country. I live in a small town but I was born in the country, so I have had experience both ways.
One thing that never seems to have entered into the minds of the Commissioners has been the ability of people to pay the rates. Surely that is the fairest method by which you can regulate these matters. We want the assessment for rating to be somewhat similar to the assessment for taxes, and that is, that you take into consideration, not only the ability to pay, but the benefit which people receive from the rates. Agriculture has been mentioned, and, as the representative of an agricultural constituency, I maintain that agriculture has suffered. In years gone by, the agriculturists have taken up poor land, and have cultivated it highly and made it productive, whereupon the rent has been raised and they have been rated on the higher rent. In other words, they have been rated on their improvements. I think we are all agreed that that is not fair and that any men who put their best energies into any industry, whether they be workmen or masters, are entitled to the reward of their labours.
There is one great grievance which we feel in the country, and that is, that we labour under the disadvantage of a huge industrial system, under which great burdens are being placed on the rates which are not really local matters but national matters. The greatest number of these burdens were placed on the rates in 1914 and later. From 1914 onwards, there has been an enormous increase in the burden placed on the rates, and we think—and it applies equally to the towns as well as the country—that the rates should not bear the burden of national services, but that these national services should be placed on the taxes, so that we know when we are paying our taxes what amount we are paying towards those national services, and that we are not paying 2488 something to the rates which we never intended to pay towards those services. I feel that we have been rather jockeyed in this matter. We have had enormous burdens in regard to education and health services, etc., which are really national affairs, placed upon the rates. It is time that the whole matter was inquired into, not only as to the basis of rating, but what are national services and what are not national services. That appeals to hon. Members irrespective of party.
The Mover of the Resolution made reference to the increased rates. As chairman of the rates committee in the county in which I live, I can give a few instances of increased rates. In 1895, our county rate was only 4½d., which was about the same as in most counties. In 1902, the county rate had risen to 8d., 3d. of which went towards paying for a lunatic asylum, where I hope very few hon. Members will ever get. In 1913, the rate amounted to 1s. 10d., and in 1923 it had risen to 4s. 6d. Within 10 years it had risen from 22 pence to 54 pence. The money did not go towards helping the local people, but towards the upkeep of the roads, and that very necessary thing, which we all believe in—education. We educate our children and send them to colleges, but they do not stay with us, they go to the towns. Everybody wishes these children to have that education, and if it is a national asset that they should be educated, the nation should pay for it, and not put it on the local rates, especially in those districts where we do not receive the benefit of the expenditure incurred.
If we take the matter on a broader basis, we shall see that the increase in the amount of rates has been enormous during the last few years. I wish to speak generally, and not only as an agriculturist. In 1902, the total amount raised by local rates was £46,500,000, and 20 years later it amounted to £173,000,000. However uninteresting figures may be, at least these are startling figures, and when you consider that the assessable value has only risen during that time £60,000,000, we see what an enormous increase it has meant to the rates not only in the country but in the town. I sympathise with the people in the towns with rates of 20s. in the £, just as I sympathise with the farmer with his rates of 5s. in the £.
§ Mr. PATTINSON
It is as essential for the people in the towns as it is for the people in the country that there should be a thorough inquiry into this question, and that the rates should be based on ability to pay and on the benefits which the people receive in the neighbourhood.
§ Mr. RILEY
The hon. Member who moved, the Resolution is to be congratulated on having brought before the House a very important and pressing matter. So far as we are concerned on these benches we will give him all the assistance we possibly can to press this matter upon the Government, and to find a solution. The case for readjustment of local and national burdens is overwhelming to-day. It was regarded as pressing over 25 years ago. To-day there is a necessity for almost immediate action. In 1896 a Royal Commission was appointed by the present Lord Balfour to inquire into this question of the pre-sure of local and national taxation. The Report of that Commission stated:First, complaint is made on behalf of ratepayers in general that there is thrown on the rates too much of the cost of certain national services which the State requires to be undertaken, and the burden of which it is alleged ought in consequence to be borne on the broader back of the taxpayer, and, second, complaint is made on behalf of ratepayers in certain districts that the burden of these services is heavier than in other districts.At that time the burden of rates, both for local and national purposes, was by no means so heavy as it is to-day. The hon. Gentleman who seconded the Motion gave some figures as to the present position, compared with the pre-War position. I would like to emphasise those figures. In 1919 the amount realised from local rates was £84,700,000. In 1920 it had risen to £105,000,000, in 1921 to £151,000,000 and in 1922 to £173,000,000. In 1914 the amount levied for all purposes was £71,000,000, but the burden has now increased over 100 per cent. compared with 1914. In 1919 the burden of rates upon local ratepayers per head was £1 18s. In 1922 it had risen to £4 11s. For an 2490 average family of five persons in 1922 it works out at £22. That is a tremendous burden. The case for a readjustment is now overwhelming.
Whatever may have been the case in years gone by—I am not going back to the days of Queen Bess, but, say, 50 or 100 years ago—as to the equity of localities bearing certain burdens, there can be no doubt that many of the burdens which they are bearing now are essentially national obligations. The Commission to which I have referred reported on three matters. They said, with less or more qualification, that the following services were essentially national—Poor Law relief, including the maintenance of pauper lunatics and the provision of asylums, registration, valuation, taxation, etc., police, criminal prosecutions, education and main roads. In more recent years we can add emphatically provision for the unemployed. An immense amount of the burden of dealing with unemployment throughout the country has had to be borne by local ratepayers. There can be no dispute to-day that education is a national service. It is to the interest of the whole community that education should be of an official character. It is equally essential that conditions of unemployment not caused by people in the respective localities, but due to national and international causes, should be a national obligation.
Now as to the method by which these adjustments may be made. I regret that neither the Mover nor the Seconder of the Motion made any reference to the method by which the adjustment of these burdens was to be carried out. They merely suggested that in some way the local ratepayer was to be relieved of the burden and the State was to take on responsibility. I do not to-night want to make any criticism against the speech of the Mover simply because I am on these benches, but Members must know that if the localities are to be relieved they must be relieved of these crushing burdens by payment of taxes to the State or in some other way the State must find the money of which the localities are to be relieved. We on these benches suggest that there is only one equitable way in which you can get adequate relief for the growing local burdens, and that is by justifiably more and more calling upon the people 2491 who are in receipt of unearned income, especially from the mere ownership of land, so that they should contribute larger amounts to the upkeep of the country. Unless this House faces the necessity of providing for essential services, which cannot be neglected, by calling upon people who are receiving immense sums of money through the mere ownership of land, the value of which is created by industry, commerce and public expenditure, and calling on people who are receiving unearned increments from the social organisation of the country, then we must accept increasing national taxation.
If we are simply to relieve localities of the burden for services which are admittedly of a national character, the aggregate burden on the localities will be increased rather than otherwise in the long run, unless we tap new sources of revenue in taxation. Assume that the Exchequer takes on the total cost of education, or the total cost of the Poor Law, or the total cost of providing work for the unemployed, and suppose that there is no new source of revenue from taxation, and that it is a case of relieving the local ratepayers from the National Exchequer. What will occur? Inevitably any apparent advantage due to relief of the burden of the education rate or the health rate or the poor rate would find its way sooner or later into the pockets of the owners of land and of the leaseholders in the towns. In 1896 a Conservative Government passed an Act of Parliament to relieve the occupiers of agricultural land of half the rates on their land. I do not know how many hon. Members realise that from 1896 up to now the Exchequer has contributed no less than £35,000,000 of the nation's money towards the relief of the rates on agricultural land. Since 1896 the occupiers other than agricultural have contributed in additional rates no less than £150,000,000 to make up for the loss of the revenue from the land. So that to-day we have before us the fact that in the last 27 years £185,000,000 has been given in the relief of rates upon agricultural land, and that the occupiers of hereditaments are no better off but are paying higher rates than they were paying in 1896. Members of this House are about to ask for another quarter to be taken off agricultural land. The House should face the fact that these burdens 2492 cannot be adjusted equitably until the incidence of local revenue and taxation is placed on the owner of income from land the value of which is created by the community.
The hon. Member who moved this Resolution is a farmer. Let me quote a farmer as to what has occurred. I refer to a little book published recently, called "The Farmer's Problem." It was written by a farmer. [HON. MEMBERS: "A journalist!"] On the question of rates this farmer writes:Clearly, then, if there is subsequently any reduction in the rates, the landlord will, sooner or later (even if it be deferred until the expiration of the tenancy) increase the rent proportionately. If any rebate is allowed under existing conditions it will be stopped if rates are reduced. This did actually happen when the present relief of one-half the assessable rates was given in 1896. In the long run, then, rate relief will give a large rent to the landlord.I want to quote another authority, which hon. Members opposite may accept. My point is that unless we face the fact that the mere transfer of the burden of rates from the locality to the National Exchequer will not decrease the burdens of the country as a whole and there will be no solution of the problem. The authority I am about to quote is, no doubt, very well known to hon. Members. He is Sir Trustram Eve, and the journal in which he wrote was the "Morning Post." On 3rd October, 1921, Sir Trustram Eve wrote:Whether the incidence of rates rests on the owner or on the occupier is an obscure point, but economists are agreed that in the case of agricultural land the incidence is in the long run on the owner. The higher the cheque for rates the lower the cheque for rent and the higher the cheque for rent the lower the cheque for rates.That is our point of view. It is no use thinking that there is some way in which the burden can be shifted from the localities without tapping other sources of income, unless you are prepared to ask the taxpayer to bear an additional burden. We agree that there is an overwhelming case for re-adjustment. When we have a system under which the landowner waxes fat without doing anything it is a matter of simple equity that the burden should be borne on the increased values of the land, especially in the urban areas. I will point to the source from which this relief would come. We ask hon. Members to 2493 demand of the Government that there should be a separate valuation of land and the placing of the burden upon site values. According to the "Evening News" a site for a new building in Cockspur Street, London, was recently sold at £100 per square foot. That means £900 per square yard, or £4,000,000 per acre. Another site, the Tivoli in the Strand, was sold at £14 per square foot, which works out at no less than £608,000 per acre. There is the source from which this House can be enabled to make these re-adjustments which are long overdue, by which the ratepayers can be relieved without placing additional burdens on the national taxpayers and by which we can have the income for social purposes, which will enable progress to be made.
§ Sir WILFRID SUGDEN
I rise to support the Motion which has been moved by the hon. Member for Wells (Mr. Bruford). While I certainly think that agriculture is especially concerned in respect to the extreme anomalies which obtain in connection with local rating, I intend to approach the subject on the basis of industry generally. First of all, however, I support the Motion in regard to the greatest industry in the country, the agricultural industry, and speaking from the agricultural standpoint, I want to put in a special plea for the agriculturists in the Northern Counties of England as well as those in Scotland. Those who are pursuing that great industry within striking distance of our great towns and cities are handicapped a great deal more than those belonging to the localities for which hon. Members on both sides of the House have already spoken. For example, the cost of a vital essential, namely rich, good milk, it is more costly for a farmer to produce first grade milk when he is within six or seven miles of those great mill chimneys, which at the present time we cannot dispense with in the Northern counties. It is more costly for him, he is under a great handicap because of adverse climate and soil which is not so rich as in the South. Believe me he has greater drawbacks and hardships than those which obtain in regard to agriculture in the Southern counties of England. Agriculture has a right to every help and support in connection with the reconsideration of the 2494 method, form, and relief of local rating that she is able to obtain. I, for one, am prepared to move, not that a Royal Commission be appointed—because we younger Members regard that as a nightmare which means years and years of waiting before anything will happen, and the happening thereafter offtime a disappointment—but that some other quick action be taken. I for one would prefer a swifter and more businesslike procedure in dealing with this question as it affects the great agricultural industry, especially in the Northern Counties of England as well as that part of the United Kingdom of which we hear so much in this House, namely, the great Scottish territory of the British Empire.
But there is a graver and more terrible problem in regard to the other great sections of industry than is generally understood. The House will forgive one for again referring to one's own county—the County of Lancashire—in this matter. While I and many others in the House are most earnestly desirous that the time should come when it will be possible for our women folk not to be compelled to take a hand in providing that which is necessary for the sustenance and upkeep of the home by participating in industry; while we endeavour by the highest scientific industrial research to bring that day nearer, I suggest that the anomalies which exist and the heavy over-plus of rates which obtain, form one of the factors which at present compel women to go out and work in order to help in the upkeep of the home. The matter has a further bearing, in respect of the physique and health of the people. While much may be said in regard to book learning—and I am in favour of it though, as you know, I do not accept the theory that book learning necessarily means education—I suggest that the mother in the home can do more for the education and health of the child and to enlarge the character of the child, than, with very great respect, can be done or is being done to-day in connection with education and hygiene as dealt with from the national, Governmental and less human standpoint. So the question of how to end the anomalies which are obtaining at the present time in respect of rating upon the industries and common life 2495 of the country must and does require very earnest attention. Again, in connection with industry, why should it be that a commission agent with a very big and profitable turnover, either on the racecourse or elsewhere—a bigger and more profitable return frequently than obtains in regard to those great boxes of machinery which we have in our county and in other great industrial areas of the country—why should it be that a commission agent shall contribute only in very small degree to local rates and national taxation in comparison to that contributed by the great hives of industry which we have in our midst? Yet such is the case.
I do not think for one single moment that the great professional classes of this country desire in the slightest degree to forfeit any of those financial obligations which they carry in respect of local and national taxation. Yet, whether you will or no, under our present system of local taxation many of the professional classes are, at the present time, not contributing pro rata with the great industrial section. Why? Not be cause they desire to escape any legitimate local taxation obligation, but simply because of the fact that the system belonging to the days of good Queen Bess still obtains in a very large measure in regard to our taxation. His Majesty the King, when he came from one of his great journeys, said to us that he had seen wonderful progress in the co-ordination of different phases and sections of life in our British Dominions, even in respect to methods of taxation, and I hope the day is very near when more forward scientific and yet practical financial considerations will obtain in regard to methods of raising money by taxation. May I say here that we have at the present time no definite tested efficient scheme as to how and in what fashion the cost of local rating may be made cheaper than it is. It is a wonderful factor in respect to the esprit de corps and public spirit of many of our great industries that, when His Majesty's Government were paying in the War days 6 per cent. for money, these great industrialists were obtaining all the money they required from the folks participating in those industries at 4 or 4½ per cent. Why? Because many of these great industrial sections have a 2496 greater and more practical knowledge of finance than that which obtained at Whitehall or even in His Majesty's Treasury. I suggest that when, as at present, in regard to our local requirements and schemes, money is called for on the market, we could save 1 per cent. in regard to the cost of our local rates were we to operate as our great business firms and leaders do, for thus the money could be obtained on the security of the Empire, and given to local authorities under such a scheme much cheaper. There would not be that internecine competition for moneys which now obtains between the different urban boroughs, county boroughs, and county councils, and which has resulted in raising the price to the small people in our urban districts, who then are compelled to bear the higher cost of the rating in such small localities than in great cities. I say that, in regard to general industry, as well as the agricultural industry, it is a vital essential that the local as well as the national in regard to these moneys shoud go together, each securing definite and business-like method in respect to the acquirement of money. I have not time to show how highly taxed (by rates and national claims) industry is handicapped in the world markets and unemployment is caused thereby.
The final point I want to make, and a very vital one, is, What are national and what are local services? Something has been said in respect of cost on local rates of health, roads, and education services. But I want to say that there would be a definite and helpful contribution to the enormous cost which the unemployed grant is on the local rates were it possible again for that specialised scientific knowledge of use in cheap money under of course proper supervision and consideration were free, loaned money to be available to such industries conditionally they absorbed a number of the unemployed, for then there would be product and result, instead, as at present obtains, the simple grant for which there is no return in products. That to-day has a distinct bearing on the local rates. From the days of the Romans themselves—who were one of the first instigators of capitalism in its finest and best form—such a system obtained, and while unemployment exists if capital were allowed, under proper care and safeguards to municipalities 2497 and urban councils, as well as to the best types of employers, under scientific supervision, it would be possible to relieve the rates in this manner, without a claim being made also on national taxes.
The very last argument one must present is this: To-day we are in a very welter of social reform. I am not sure whether everything which is called social reform would very properly fit such designation. Therefore, I feel, in respect of such matters as town planning, if one—whilst having in mind the bearing which the right redistribution of the rate contributing areas has upon the highest form of physical and moral culture—were to have regard when considering these schemes as well not only to the theoretical view but the practical, for it would be possible, instead of in some cases as we are doing to-day sweeping away helpful rate-earning properties which contribute to the general rates, scientifically to arrange helpful industrial centres which would be useful in the contribution to local rates as well as giving also that possibility of best hygiene and space in the home life and physical progress so essential.
To-day, neither in this country nor in any other European country, is there a perfect system of national and local rating or taxation, I feel that at the present time there is an essential need for relief from the shoulders of those at present carrying much of the burden of local taxation. Where there is a will there is a way, and I suggest that His Majesty's Government might very properly in this Session or the next formulate a scheme by consultation with the leaders of the business houses and of the trade unions of the country and in co-operation also with the different professions in the country which, to my mind, would produce the effect which this Resolution desires.
Mr. TREVELYAN THOMSON
I am afraid that a debate displaying so much unanimity often results in the passage of a pious opinion, and nothing being done. I hope, however, that the Government, in view of the unanimity that has been shown, will realise that it is time that this problem was settled. We have had reference made mainly to the agricultural side, and I would like, therefore, for one moment, to ask the House to consider the urban side which is just as pressing, if not more so, than that 2498 of agriculture. More so, I suggest, because already the supporters of the Government have had held out to them promises of further assistance to relieve the distress which no doubt is in existence in rural England. While one does not grudge that assistance, one hopes it may be the forerunner of similar assistance given in urban areas. One hopes that assistance will not be delayed until we get that perfect system of rating which we all desire, but which, unfortunately, we have not yet seen materialise. The speaker who opened the Debate, and to whom the House is indebted for using his opportunity to bring before the public the necessity of something being done, referred to the differentiation in local rating in rural districts ranging from 7s. 4d. to 25s. 1d. in the pound. The same, or even greater differentiation, exists, unfortunately, in urban areas. You have rates of 8s. 7d. extending to 27s. 8½d. If, therefore, the need for reform is pressing in rural England that in urban England is even greater.
I would like to give one or two illustrations of the extraordinary way in which this burden falls unequally on different parts of urban England. There is an interesting publication produced year by year by the urban authorities showing these variations of rating. It is in alphabetical form, and whereas I find the rates last year for East Ham were 23s. 11d., for Eastbourne they were 10s. 8d.; for Halifax 23s. 5d., for Hastings—of which the Noble Lord (Lord E. Percy) has good knowledge—11s. 1d.; for Merthyr Tydvil 27s. 8½d.; for Oxford 8s. 7d. There you have a much greater variation than in rural England, and I submit that that variation is not duo to the incompetence of the administrators of Halifax or to the special knowledge and diligence of the administrators of Hastings, but is because of the incidence of the burden which falls very differently on those different districts. A reference has been made to education, and one knows that by the irony of fate on those very districts where the assessable value is least, you have at the present time a much larger burden of education because of the larger child population. In teeming centres of industry you have infinitely more children to educate, as compared with the rateable value, than you have in residential areas where the rate-able value is high and the cost is very much less.
2499 Other speakers have referred to the necessity of these charges for education and Poor Law being made national to a much larger extent than they are at present, and to show that the education rate accounts very largely for this difference, I will take a few other cases. For Bournemouth, the education rate last year was 1s. 4d., for Bristol 3s. 4d., for Hastings 2s. 0¾d, and for Halifax 4s. 4½d. That is the contrast between the busy industrial town with a large child population and the residential area with its small burden of children who require to be educated. When you come to the question of Poor Law, you have even a greater difference. Some figures were taken out quite recently for last year to show how the burden of expenditure for Poor Law purposes, largely augmented on account of the exceptional unemployment, was hitting the different districts unequally. Last year you had, for Poor Law purposes alone, an expenditure equivalent to an average for the whole of the country of England and Wales of 3s. 2d., in the pound whereas in Bedwelty it was 13s. 3d., in Sheffield 11s. 6d., and in Middlesbrough 7s. 6d., showing a variation from 13s. 3d. to 3s. 2d. in the pound which is the average, and, as a matter of fact, if you take the smaller rates, you get down to under 1s. in the £. There you have variations for which the local authority are in no way responsible, because investigations have been made, and it is not a question of one local authority distributing public money with a more liberal hand than another. Curiously enough, in these cases which I have quoted, the average amount distributed per head of persons relieved is considerably less than the average for the whole of the country, showing conclusively that it is not on account of local extravagance, but rather on account of local need, owing to this abnormal unemployment falling with undue harshness on certain industrial areas.
In the old days when industry was more circumscribed, when the manufacturer lived amongst his people, when the share capital, such as it was, was owned by the local residents, there was something to be said for the system which has grown up of the local authority shouldering its own burden, but when, as we know, owing to modern industrial developments, the 2500 share capital of these large industries is to a great extent not held in the locality, but throughout, not only the length and breadth of the land, but throughout the world, then it is not equitable that the whole burden of unemployment should fall on that particular district, a district which has not drawn the dividends in the fat, good years. It is only right that those who have profited in the good years should bear to a much greater extent the burden which falls upon this particular industry in the lean years.
Over-rating does very much more so. I referred just now to Sheffield in regard to the heavy cost of rates. The manufacturers of Sheffield got out recently some interesting figures dealing with the burden of their local rates on industry. I am speaking from memory, but I believe that, whereas the charge for local rates before the War on the manufacture of steel was something like 6d. per ton, it had advanced in Sheffield to twenty times that amount. In my own district, figures were got out of the local rates in 1914, which averaged 5d. per ton of steel produced at certain works, and the same figure last year was over 4s. 2d. a ton, a charge directly on industry, which is making it more difficult for our manufacturers to compete in the foreign markets of the world, and whereas, if it were put on to Income Tax that burden would be heavier, it would be more equitably spread. There is some soundness in the contention that, whereas rating is a direct charge on production, taxation is rather a charge on profits made, and therefore is not, to the same extent, a burden upon industry.
May I appeal to the Noble Lord (Lord Eustace Percy) representing the Government, who, I know, is seized with the importance of this question and with its difficulties, to impress on the Government the necessity in the interests, not merely of agriculture, but also of urban areas and of industry as a whole, of tackling this question? We do not want any more 2501 Royal Commissions or Committees of Inquiry. We want action, which will render more equitable that burden which falls so unequally, not only on different parts of the country, but also as between one ratepayer and another. The size of a man's house and the rent he paid in the old days may have been a rough and ready method of ascertaining the capacity he had to bear the burden, but, as other speakers have said, that is now a thing of the past. One man keeping the same kind of office or house may be earning hundreds a year, and another man may be getting his thousands a year, and yet they are contributing on the same basis so far as local expenses are concerned. That wants altering. The Noble Lord shakes his head, but let me give him another illustration. Take the case of a firm of merchants, importing and exporting, with a big turnover and a big profit, employing a handful of men, and the offices they occupy pay a small rent. You have in the same town big manufacturers with no greater turnover, making less profits, employing thousands of men, and they are contributing to the local rates ten times as much as the wealthy merchants who are making a much greater profit. There, I submit, you have an inequality of burden which calls for redress, and I hope the Government will, even this Session, produce the Measure which I believe they have in preparation dealing with this question, so that it may pass into law at any rate before the end of this Parliament.
§ Mr. SHEPPERSON
I rise simply because, in my opinion, the question now under discussion of the incidence of local rating is one which will enable us to give an answer to the criticisms which have been applied to us, to a very great extent by all Members of this House, and particularly hon. Members opposite, who represent large industrial areas. These criticisms have been to this effect: How is it that you agriculturists cannot produce the foodstuffs which you are growing as cheaply as your foreign competitors? I submit that the question of agricultural rating is a direct answer to these criticisms. There may be, and there probably are, a great many Members of this House who do not understand fully the effects that rating has upon the cost of production of agricultural crops. It has been said, and, I think, somewhat truly, that 2502 the land is the raw material by which the farmer manufactures his wheat and his oats. I know that that statement has been criticised, and that it has been said that the land is not the raw material, but simply the factory, but I submit that the land itself is the raw material which produces the foodstuffs from which the manufactured article, wheat, is made. The land of this country is in many cases rated to the extent of 30s. per acre. If you were growing wheat in this country, and you could get on an average four quarters of wheat per acre, you would be doing well. With a rate of 12s., therefore, every quarter of wheat you grow is paying 3s. as a rate or a tax on the food produced. So I do suggest to the House that we in England, as home-growers of food products, are not meeting our foreign competitors on a fair and equitable basis. I submit to the House that we should be put on fair terms with the foreigner, and that we are not asking too much of this House to grant that.
The second point shortly is this: that if the rates collected from the agricultural industry are going directly to benefit that industry there might not be so much to say. What, however, are the great costs which we in the agricultural districts have to put up with? For what purposes are these rates going chiefly? They are going in the cost of the roads, of education, and of the police. The roads are not to-day kept up for the benefit of agriculture, but, to a very large extent, they are being used for the convenience of the large industrial centres, who remove from one industrial point to another by means of motor traffic goods and population; and the point is that the highways and permanent ways for that motor traffic are, to a very large extent, being kept up by the agriculturists of this country. I do not want to lay myself open too much to criticism on the matter of education, for I consider that in the country districts as well as in the towns one of the most essential duties is that of giving a good education to the young. We desire our young people in the country to have the same opportunity and the same power of getting a good education as our young people in the towns. But while we are benefiting our young people, are we in the country districts getting the benefit of that education? By the education of our young 2503 people you are taking away from the country districts the best of them. They are going from the country. Therefore, whilst I agree that the country children should have the very best opportunity of going, if they like, from the country to the towns, what I object to is that we, the agriculturists in the country districts, are paying for that education.
The next point is the cost of the police. I do most respectfully submit to this House that the agriculturist, both farmer and labourer, is known throughout the whole world as an honest person. It is not the farmer or the agriculturist who requires the police to look after him. We as agriculturists have to keep up our police because they have to look after other people who come to the countryside. Probably there are hon. Members opposite who do not realise as I do myself that absolute honesty and steadiness of the agriculturists. The only point I am going to put to the House in conclusion is this: I suggest that it would be well that the great costs of the roads, which are national in character rather than local, should be borne by the nation and not by the locality. I submit that the agriculturist should be put on a fair basis to compete with our foreign competitors, and that it is time that this tax should be taken off home grown wheat.
§ Mr. WILLIAM GRAHAM
The hon. Gentleman who introduced this Motion has opened a subject of such great width that I think, in justice to other hon. Members who desire to take part in the Debate, those who speak must confine themselves as far as possible to one or two specific points. I should, therefore, like to ask the Ministry of Health represented at present on the Government bench some questions in regard to one or two aspects of this problem which, I believe, to be of very great importance. It has been admitted in this Debate that within recent years there has been an enormous increase in the amount which we receive annually from local rates. The figure has been quoted to-night as £172,000,000 per year, and we may take it roundly at something less than £160,000,000 at the present day. When we put that alongside over £800,000,000 which we receive from national taxes, there is no doubt whatever that a very serious burden appears to rest upon the localities at the present time.
2504 The practical question we have to face is: what is the best way to bring about any readjustment, if readjustment is to be made, in the allocation of that burden? May I also point out that a very large part of the increase may be traced to the legislative and other activities of quite recent years. A very large part comes from what we commonly call the percentage grant services, in which are included education, tuberculosis, venereal diseases, maternity and child welfare, and one or two others. With the exception of venereal disease, which is on the 75 per cent. basis grant from the State, the majority of the other services, excluding one or two, are 50 per cent. from the State on approved expenditure, and 50 per cent. from the locality. I do not know what view the Government hold in regard to this 50 and 50 allocation, but many of us have never been able to see any particular merit in the scheme, because it does not follow that, by adopting the 50 and 50 allocation as between the State on the one side and the locality on the other, we are spreading this burden evenly over the community. A very great deal depends upon the variety of local circumstances and local needs, and upon the general conditions of taxation or rating in the different districts in this country. This matter has been discussed with great vigour, practically from the time when that scheme was introduced, and there is now, of course, further inquiry into it.
May I draw attention to one real difficulty in connection with this allocation? If we take the case of the police, we find that that is generally on the basis I have described, but the curious thing is that, for all practical purposes, control of the police in this country does not really reside in the locality at all, but is highly centralised in London, or at Westminster: and the localities are practically compelled to adopt the scheme of police pay laid down, to pay the charges enforced on a national basis, and to foot the bill. I entirely recognise that there must be some kind of national basis of remuneration, and most of us on the benches on this side of the House, at any rate, support a principle of that kind. What I desire is to ask is whether it is necessary to accompany the existing scheme in the case of the police with 2505 the very rigid centralisation which appears to obtain at the present day?
On that question of the percentage grant, may I draw attention to one or two suggestions which have been made within recent times? Hon. Members, mainly on the other side of the House, in drawing attention to the very grave burdens which fall on the localities, have suggested—I sometimes think without considering the problem at all, if I may say so, respectfully—that in order to reduce national expenditure we should embark upon block grants. That is, that the State should fix the sum which is to be set aside for the local services, say to the local authorities that they will get a proportion of that block grant, and no more, and that they are to raise the whole of the rest of the expenditure from the local rates. On that question, there is one very important consideration. Most of the services to which a block grant would be applied, if I exclude education for the moment, would be the comparatively new services of tuberculosis, child welfare, venereal disease, and one or two others. Those services are in course of their initial development in this country. Many of them are only beginning to find out the extent of the problem with which they have to deal, and it seems perfectly clear that if an overhead block grant were fixed—and the basis of recent years has been suggested as the initial block grant—there would be a simple choice before the average local authority in this country. The average local authority would either have to raise extra rates, in order to discharge that service efficiently in its district, or would require to curtail and restrict the service in some way in order to keep down local expenditure. In that connection a very grave danger is involved. There is no real national economy of any kind in restricting unnecessarily services of that character at the present time. I do not defend, and we do not seek to defend, wasteful expenditure; but we say, when you are only beginning to understand the need, the scope, and the extent of a problem, that is not the time to curb the local authority in trying to do its best to overtake the difficulties.
The other effect of a block grant undoubtedly would be to raise the burden of local rates still further in this 2506 country, and both in England, and more particularly in Scotland, if I may refer to a country which has always suffered in its finances. The Dunedin Committee has just reported that local rates are carrying a burden just as big as may safely be imposed on them. That is to say, the local authorities, particularly in the country districts, can hardly do more. So that what we have to consider to-night is what method we are going to adopt to try to secure a better allocation. The only course, of a practical and immediate character, which I see before us at the present time is the extension of the system of percentage grants, with larger allowances to the local authorities. Most of the services, as other speakers have indicated, which are being covered by the percentage grants are really national, or very largely national, in character. In any case, some of them have very little reference to the locality, which has to find large rates in order to maintain them. The 50–50 per cent. allocation has ceased to be a practical proposition, and I would suggest, as the policy for the Ministry of Health, that they should extend the system of percentage grants. It is not necessary, in so extending that system of percentage grants, to accompany it with any larger measure of centralised control. There is, on that question of centralised control, a good deal of misapprehension. Much of the centralisation could be very easily removed, if not improved in its character, by entrusting the localities with duties which quite clearly the localities could easily overtake. For example, at the present time there is a widespread duplication of audit, which costs this country a good deal of money from year to year. There is not the slightest reason why a thorough and honest local audit could not, in most cases, be accepted, with great saving to the State.
That is only one example of the difficulties of centralisation which, in my judgment, could be quite easily altered. There are two other suggestions which I have only time to mention now. The first is that very soon—I think immediately—the Ministry of Health must try to come to some conclusion on the problem of necessitous areas. It is one of the curious and tragic paradoxes of the existing system that enormous local rates 2507 are being imposed on the very districts which are the least able to bear them. You have widespread unemployment and distress; you have wretched housing conditions, and low rateable value; and in those districts the rates are higher than they are in other parts of the country which have largely or partly escaped the distress through which we are passing. I do not say it is easy to arrive at a definition of necessitous areas. There are many ingredients which have to be taken into account, but in any case, whatever the definition may be, it should not be hard to improve on the perfectly unjustifiable system which is now in force, and which penalises, as I have said, the districts which are most hardly hit. There is a formula which is partly in force, for the time being, as regards necessitous areas, but I beg the Minister of Health to have regard to the suggestions which have been made by high authorities within recent times, and, in any case, to come to a definite conclusion for the better assistance of these localities.
My second suggestion is this. In evidence which has been tendered to committees dealing with national and local taxation and rating, many people have urged that there is a distinct case for what is commonly called a local Income Tax. That does not mean an Income Tax reduced to the area of the locality. It may mean, in practice, nothing more than an allocation of part of the aggregate revenue of the Income Tax of this country to local needs. That is one suggestion which has been made, among others; but the value of that suggestion lies in this consideration, that there is not the slightest doubt that Income Tax probably goes as near as we can to ability to pay, whereas local rating, in most cases, can hardly be regarded as having any strict reference to ability to pay at all. They are levied upon classes of property which have been described to-night in which people are making all kinds of income and in which the circumstances vary very widely. My suggestion is that we should try somehow to lift the burden of taxation, national and local, from property itself, or from the things which men and women use for making their living, and place the burden more and more upon strict income related to ability to pay. 2508 There is no reason why we should not in a quite healthy way extend that principle. I believe this question bears closely on the problem, and I hope the Minister of Health will be able to give us some reply in regard to it.
§ Mr. PRETYMAN
I should like to say a few words in reply to the very thoughtful and interesting speech which has just been delivered, and on which I congratulate the hon. Member for Central Edinburgh (Mr. W. Graham). He has evidently given a great deal of thought to this question. It seems to me that the real problem for us is not so much a question as between rating and taxation, but it is the enormous growth of expenditure which has been superimposed upon a system which was never intended to bear that kind of expenditure at all. The problem seems to me to divide itself into two really different classes of adjustment. The inequality between the different classes of ratepayers can only be met by an adjustment of assessment. Take, for instance, two matters which are immediately before the House. There is the question of the rating of machinery and there is the question of the rating of agricultural land. These questions can be best dealt with by the revision of assessment. Then there is the other question, quite separate, of the adjustment of contributions as between national and local exchequers. In order to get clear thought on the whole problem you must separate those two questions. The question of contribution between the national Exchequer and the local ratepayer seems to me to be a very weak point, and the weak point is really this, that all Bills on such subjects and all proposals as between Parliament and local authorities in regard to finance are prepared by the Treasury and passed by this House without a real knowledge of their exact bearing in the present and future upon local taxation and local authorities and local rates.
It seems to me to be worth consideration whether, instead of setting up Committees to investigate circumstances which have passed away before the results of their deliberations can ever be submitted to this House, we should set up another form of Committees. This is dynamics and not statics. This is a constantly moving problem. What you need is something in the nature of a Standing Joint 2509 Committee. Where any expenditure is proposed in this House, part of which is going to be thrown upon local rates, a Standing Committee should be appointed of the representatives of local authorities all over the country, who should have the right of hearing from the Treasury before financial proposals are made in this House, and they should have these proposals laid before them in order to give advice upon them and be able to advise their representatives in this House—because we represent ratepayers as well as taxpayers—and this House ought to have before them when considering expenditure the ratepayers' case as well as the taxpayers' case. What we get now is only the taxpayers' case while we are legislating. We get the ratepayers' case afterwards, when the ratepayer finds his burden enormously increased. He then comes to this House and complains, and we have endless trouble. I put it, that the only basis on which we can work is a basis of percentages. I do not think my hon. Friend opposite will be able to find a satisfactory solution in the Income Tax proposal. People's incomes are now spread over every kind of source. I was once an advocate of the local Income Tax. I gave evidence on that subject before Lord Balfour's Commission which sat, I think, about 1906, but after a great deal of thought I have come to the conclusion that it is impracticable and that the only way in which you can apply the principle of local Income Tax for rating purposes is these contributions from the national Exchequer, a large proportion of which comes out of the Income Tax which must be and can only be levied by the Central Authority here. I do not believe it is possible to find a really satisfactory solution of the question of local taxation by which you are going to adjust it to everybody's satisfaction as between the two principles of taxing the individual according to his ability to pay and taxing the property of the individual in a district in proportion to benefits received. The variation is so great that you will never get anything more than a rough approximation. You will never get it scientifically. I do not agree with what has been said, that you have to seek out some perfect scientific principle and endeavour to apply it. I do not think that can be done. I think we have to deal with existing circumstances. The hon. 2510 Gentleman who spoke first from the Labour benches advocated an entirely new source of income. He said you want to tax unearned income. He used that phrase several times. I do not know if he can point to any unearned income that is not taxed.
§ Mr. LANSBURY
I will give you one case. The local ground landlord in our district takes from a piece of land on which one house stands £20 a year. He never comes near the place; he never pays a farthing to the local burdens; we have never seen him, and that £20 is only for one piece of land. He takes money for very many other pieces of land.
§ Mr. LANSBURY
I understood the right hon. Gentleman to ask where we could tax unearned income for the benefit of any locality. I say this £20 is not taxed for the benefit of the locality.
§ Mr. PRETYMAN
Possibly. But at present the owner who receives that £20 income pays Income Tax on that £20 just as every other owner does.
§ Mr. PRETYMAN
Yes, some proportion of that income goes in relief of local rates, just as it does in the case of every other owner. Therefore whether income is earned or unearned, every penny of it is liable to contribute to the local rates through the contribution paid to the State. The hon. Gentleman is quite wrong in saying that you are going to find a new source of taxation by taxing unearned income.
§ Mr. LANSBURY
If that £20 happens to be profits made by a manufacturer, he would pay Income Tax, but he would also have to pay rates to the district where he made that £20. When that sum is received by a ground landlord he does not pay anything whatever locally.
§ Mr. PRETYMAN
The hon. Gentleman is quite wrong. In one case there is an industrial factory, and it pays local rates. There is also Income Tax paid on any profit made by runinng that factory for a year. It may be in that case one person owns the factory and makes the profit, but he pays Income Tax on the profit and he pays rates as well. If a person takes £20 as the rent of a house it may be quite true that another person pays the rates, but in each case rates are paid on the property, and Income Tax is paid on the whole of the profit derived. On all realised profit Income Tax is paid, and on every unit of property, whether land or houses, rates are paid.
§ Mr. R. RICHARDSON
In Durham the royalty owners take £1,250,000 every year. It is true they pay Income Tax, but they do not pay towards the maintenance of public buildings and roads, and they get off without paying a penny to the local rates.
§ Mr. PRETYMAN
So far as the State is concerned, I repeat that on every penny of income earned or received or profit the State takes Income Tax, whether it happens to be royalties, rents, profits on trade, or salaries, or whatever it may be. On all these things the State takes a tax, and that tax when taken contributes the same proportion as any other tax in relief of local rates. So far as rates are concerned, the whole of real property pays rates according to its assessment. It may be that the rates fall upon different individuals in one case, and where you have a single property one person may be taking a part of the profits, and another person, who may be taking another part of the profits, pays the rates, but there is no exception to the statement that all property pays its due share of rates according to its assessment. I agree that there should be a readjustment of assessments, but that is quite a different matter.
There are some properties, and particularly agricultural land, possibly machinery, and other classes of property which, in proportion to other forms of property, are bearing what this House might decide is an undue share, because they are assessed out of proportion to one another, and therefore there may be an adjustment of assessment. Putting that on one side, and taking the present basis of assessment, and admitting that it might possibly 2512 be altered, with advantage, it is true to say, and there is no hon. Member in this House who can contradict it, that every bit of real property in this country, whether it be land or houses, pays, without fear, favour or affection, its share of the rates. [HON. MEMBERS: "No!"] That is absolutely true. What hon. Gentlemen have, I think, in their minds is that there are certain unrealised values. [HON. MEMBERS: "Hear, hear!"] But that does not contradict the statement I have made. I am perfectly ready to join issue on that. The statement I made was that all realised value pays, and all existing property pays, rates. The idea that, I understand, hon. Gentlemen have in their minds is that, by some extraordinary method, or by some machinery—I do not know whether it will be spiritualistic machinery, or something of the nature of what is called a psychic process—you are going to get taxes out of a value which has never been realised at all, something which is in the future. I think that those who go in for the psychic theory are always dealing with the past—something that is imaginary that may have happened in the past. This is something imaginary which may happen in the future, and how you are going to get large taxes out of imaginary values which do not exist today, and which never have been realised, we shall, no doubt, learn in due course.
I do not want, however, to be led away on that. I want to stick to my point, which I believe I have made, namely, that, so far, everyone pays taxes at present on his income or his property, and everyone pays rates on his property, and the taxes, of course, at present, contribute to a certain extent to local taxation. I do feel very strongly that when we in this House are dealing with expenditure which has to be divided between the responsibilities of this House and the local authorities—and I think that every hon. Member in this House will agree that, generally speaking, the work of the local authorities in this country is admirably done; it is done with knowledge, it is done with public spirit—I do not think it would be in any way derogatory to the dignity of the Government or the Treasury that they should be asked to take the local authorities into consultation before putting responsibilities upon them, before putting burdens upon the constituents of those local authorities in the local districts, so that they might have 2513 from them their opinion, both as to whether they agree in the proposals as to administration, and whether they agree in the proposals as to finance. The Government would then have before them proposals which would enable them to lay their opinions before those Members of this House who represent the districts in which those local authorities operate; and then, when we came to debate the question here, we should have both sides before us, and could see fair play before we legislate instead of after.
That, I think, would go a long way to prevent mistakes. We have made mistakes, because we did not realise, at the time we were placing burdens on local authorities, that those would be growing burdens, that they would vitiate the principle which we here have always endeavoured to enforce, that Imperial and national taxation should be on the basis of ability to pay. I do think that you cannot put that principle upon local taxation. The general consideration that I would put before the House is this: There has always been a liability, for hundreds of years, to rates on property, and everyone who has bought property or who owns property buys or owns it subject to that liability. But no one realised, when they bought property up to within the last few years, how that burden was going to grow. I do think you can and ought to maintain the principle of ability to pay so far as Imperial taxation goes. When you come to local taxation, you can leave that liability to fall upon property as it does to-day, provided that you see that the burden is not unduly and unfairly increased, and that, where you cannot find ability to pay, you can supply that by grants from the central purse, from money which is raised on the principle of ability to pay. I do not believe any amount of examination is going to enable us to arrive at some Heaven-sent system of adjustment of local taxation, and it can only be approached on the basis I have suggested.
§ Major DUDGEON
I welcome the right hon. Gentleman's suggestion that a tribunal should be set up to adjust the differences that exist, and to consider fresh legislation in regard to the contributions to be made from the National Exchequer and from local sources. It has been the practice of Governments of recent times to make very careful provisions 2514 with regard to their own liabilities in passing fresh legislation with very little consideration for the liabilities they were throwing on the shoulders of local authorities. As a member of all descriptions of local authorities for a period of about 15 years, I have come to the conclusion that percentage grants are not sound. I have known documents brought out by all sorts of local authorities showing that the State is contributing £2, and the particular local authority will only have to contribute £2, so they go on with the scheme. If the percentage was £3 from the State and £1 from the local authority, I am certain it would not tend to give us either economy or efficiency in local administration. Being a Scot, I claim that we never can have true efficiency by paying 1s. for a thing we can obtain for 11¾d. There are four services which are very distinctly national in character, namely, education, main roads—classified first and second class roads—public health and police. For these four services the State sets the standard and lays down certain conditions that the local authorities have to fulfil, and it is only a fair argument that the State should find a much larger portion of the money that is necessary to carry out these services, which I quite agree it is essential should be carried out by local authorities. You get people serving on local authorities who have local knowledge and who, as a rule, are willing to practise economy combined with efficiency. For these services I believe the ratio of 50–50 is totally inadequate. I am inclined to think, even under the system of block grants, the arrangement should be that the State should find three-fourths of the expenditure, and if the suggestion of the right hon. Gentleman the Member for Chelmsford (Mr. Pretyman) was extended a little and a joint tribunal, represented on one side by Members of the House and on the other by representatives of local authorities, could at periods of three or five years adjust these block grants according to the various liabilities thrown on the shoulders of the local authorities at the time of adjustment, that would be a much better method of financing these schemes, which are truly national in character, than a percentage grant.
I am very grateful to the Government for the steps they are taking towards relieving 2515 the great burden which has been thrown for many years on the shoulders of the agricultural community; but I hope the full question of rating will be taken up in the very near future. In an agricultural constituency like the one which I have the honour to represent, at least 80 per cent. of its population is engaged in agriculture, and there are also 20 per cent. who are engaged in allied industries which depend absolutely for their prosperity on the prosperity of the agricultural community. These allied industries are as depressed, if not more depressed than the agricultural industry itself. Even the relief that is going to be given to the agriculturists will not affect these allied industries immediately; it will have an indirect effect. It is absolutely essential for these allied industries, as well as for those who live in urban districts, that the whole question of rating should be taken up in the near future, and I trust the Government will bear this in mind and pass legislation on the subject during the currency of the present Parliament.
§ The PARLIAMENTARY SECRETARY to the BOARD of EDUCATION (Lord Eustace Percy)
I do not intervene in this Debate with any intention of offering the House any definite advice as to how it should treat this Resolution. The Government will leave the Resolution to the free judgment of the House, and I only intervene because so many questions have been addressed to the Government during the Debate that it would be lacking in courtesy to the House if I did not say a few words upon some of the points that have arisen. The House is indebted to the hon. Member for the Wells Division (Mr. Bruford) for having brought forward this Motion. It deals with a subject of the utmost importance. I do not think there is any subject at the present moment of more importance, nor do I think there is any subject which is more deeply engaging the attention of the Government. The Government have, of course, given some preliminary evidence that they realise the difficulty from which agriculturists suffer under the present rating system by their recent proposals; but, beyond that, there are certain conditions of the problem, which have been 2516 raised to-night, on which I will say a few words.
In the first place, with regard to the figures which have been adduced as to the inequalities of rates between different areas I should like to emphasise what the right hon. Member for Chelmsford (Mr. Pretyman) has said, that it is useless dealing in figures of this kind so long as there is no uniformity of assessment in the country. That makes much of the language in which we are speaking and many of the instances given by the hon. Member for West Middlesbrough (Mr. T. Thomson) more or less meaningless. I emphasise this because the Royal Commission of 1901—which has been mentioned several times to-night—laid it down quite clearly that before any revision or reform of the rating or grant-in-aid system could be brought about, it would be necessary to have a revision of the assessment system.
To such revision of the assessment system the Government, as the House knows, is pledged, and that is the first and necessary step towards carrying out any of the proposals made to-night to relieve any of the hardships in necessitous areas and towns or agricultural districts. The question as to a shaking of the head by me which seems to have puzzled the hon. Member for West Middlesbrough has been dealt with effectively by the right hon. Member for Chelmsford. Emphasis has been placed so often in this Debate and elsewhere on national service, semi-national service as distinct from local service, that it obscures the fact that from the very beginning of the grant-in-aid system, from the report of the Select Committee of 1834 onwards, grants-in-aid have been regarded not merely as contributions in respect of particular national services, but as a contribution out of taxation of personal property to equalise what would otherwise be unfair local taxation of real property, and it is to forgetting that fact and talking so much about the services being national that a great deal of this misunderstanding as to the non-taxation of personal property in localities is due.
Further, there has been a great deal of talk to-night, and the word is used in the Motion itself, about the obsoleteness of our present system. As regards assessment, that is no doubt true, but it is not so true to-day of our grant-in-aid 2517 system. It was true enough for the Departmental Committee on Local Taxation in 1914 to call our system obsolete, but it must be remembered that out of the £151,000,000 local taxation in 1921 an amount, which I think is in the neighbourhood of £135,000,000, was for the services in respect of which the grant-in-aid system had been radically revised within the last few years. There is the whole of our educational expenditure, and as the hon. Member for Central Edinburgh (Mr. W. Graham) pointed out, all the expenditure to which the percentage grants apply, and they now apply to main roads, so that even the large expenditure on highways cannot be regarded as expenditure which we have not reviewed with a view to reforming the grant-in-aid system. Therefore the trouble about distribution between imperial and local taxation is not so much that it is obsolete, but that we have embarked to a very large extent on a new experiment which is bringing its own troubles with it.
The hon. Member for Central Edinburgh invited me at considerable length to enter into the question of percentage grants. That is an invitation which I must deny myself the pleasure of accepting, because it is still sub judice. Lord Meston's Committee is still considering it and I do not think there is any use in discussing it or at any rate in my expressing an opinion about it pending that Committee's report. The proposition has been put forward that an extension of the percentage grant system and an increase of the percentage do not necessarily involve strict centralisation of control. That may be so. The extent to which central control is necessary is an open question; it is an administrative question about which it is very difficult to make a general statement off-hand. But there is one practical difficulty which escapes the attention of hon. Members very often. What is necessary is that the Government, which is granting (say) a 75 per cent. grant to the local authorities, should be able to estimate in its Estimates presented to Parliament year by year what this liability is. As is well known, local authorities are not very early with their Estimates for the coming year's expenditure and they are usually very wide in estimating what their expenditure will be. [HON. MEMBERS: "No."] I know of local authorities 2518 which are very generous in their Estimates.
§ Mr. A. V. ALEXANDER
Surely the Noble Lord also realises that the State is not always very prompt in paying the grants in respect of those Estimates?
§ Lord E. PERCY
That only emphasises what I said—that the grant is constantly being paid in respect of a year behind. The difficulty of making anything remotely resembling an accurate estimate of the grant to be paid to local authorities will become enormous if there is a widespread relaxation of central control, while the grants still continue on a strict percentage basis. That is a difficulty which hon. Members too often forget. On the general question of the burden of rates, the hon. Member for Central Edinburgh rather assumed that the Mover of the Resolution had said that the rate burden was £173,000,000 in 1922, and that, therefore it must be considerably more now. Of course, that is not the fact. It is possible to be too pessimistic about the local taxation position. Between 1922 and 1923 the rate burden has fallen from £173,000,000 to £159,000,000.
§ Lord E. PERCY
I admit that point, but the amount is on the down grade, and we are seeing reductions in local burdens in various directions. I must say a few words about necessitous areas. As hon. Members know, certain representatives of necessitous areas have been in consultation lately with the Minister of Health and with officials of the Ministry. I cannot say anything now as to the extent to which, or as to the manner in which, the needs of necessitous areas can be met. Nor can I give any pledge in the matter. But everyone realises that this is a real problem which needs to be met if a feasible scheme can be produced within the financial limits at our disposal. There is no question of the Government ignoring the problem. I want to repeat that the hon. Member for Wells has done a great service in bringing this matter forward. We are fully alive to the problem on which he and others have laid stress, the problem of the rural districts, and we are equally alive to the problem of the necessitous urban areas. In addition to the Measure which we have already announced, and 2519 which we have in preparation, this whole group of subjects will increasingly engage our earnest consideration during the months to come.
§ Mr. ALEXANDER
One always appreciates the speeches of the Noble Lord. I used to appreciate them very much when he was not occupying a position of such responsibility, and one perhaps regrets that nowadays when he speaks with some Governmental responsibility, he does not speak quite as freely as he did in former days. It is rather a pity when he is addressing himself to local government subjects of such importance as that which we are discussing, that he is unable to give us more freely of his known wide experience in these matters. I was hoping, even if it meant talking out the Motion, that he would have given a more full and satisfying reply to some of the speakers to-night, than he has given.
We have not touched on controversial political party ground to-night, but it becomes increasingly evident to those who represent industrial constituencies that a considerable part is being played by party expediency in dealing with the question of rating. It seems perfectly clear from repeated statements from the Government Benches that hon. Gentlemen opposite, and also some hon. Gentlemen who sit below the Gangway on this side, feel that the Labour party is getting an increasing hold on the industrial constituencies and that it is essential for them, if they are to maintain even a semblance of power for any great length of time to come, that they should "dig themselves in" in the rural constituencies. So they are throwing sop after sop to the agricultural industry. We know the Government receive all kinds of urgent entreaties from the agricultural industry and I recognise that the agricultural industry has its burdens at the present time. I am not unmindful of that fact, but when the Noble Lord deals with the question of necessitous urban areas as he dealt with it to-night and says the Government has "lately" been considering applications on that question, surely it is not treating the subject fairly. The question of bringing relief to heavily rated necessitous areas, where the burden of relieving unemployment has become absolutely intolerable, has not been before 2520 the Government only "lately." We have been putting that case forward for a long time.
§ Lord E. PERCY
I did not say it was only lately under consideration by the Government. I said there had lately been a deputation from certain representatives of necessitous areas to the Minister of Health and that the discussions were proceeding.
§ Mr. ALEXANDER
I hope I am not misrepresenting the Noble Lord. I would point out to him that as far back as last June a deputation from the local authorities concerned waited on the late Prime Minister in Downing Street and there was not room to accommodate them and they had to overflow into the open air. Ever since then, this burden has become more and more intolerable, and when the Noble Lord speaks of a decline in the rate level he is making no suggestion to us as to how to deal with the enormous debt piled up in industrial areas where poor law relief has become such an important factor. If it is true that in some of the most necessitous areas we at the present moment have a very slight decline in the rate level, we are unable to make a real attempt to tackle the enormous burden of debt placed on us by the necessity of coming to the relief of the unemployed, and, which, in accordance with the terms of the Motion, ought to be a national burden and not a local responsibility at all. The Noble Lord said one or two words about percentage grants. I am very interested in the general question of the method of making grants to local authorities. He said there was always a very great difficulty in dealing with the matter, because local authorities were not very early with their estimates. For my sins, perhaps, for nearly 17 years I was engaged in some form or another in preparing estimates for a county council, because at that time I was on the staff of a county council. We usually had those estimates prepared almost fully for the year commencing 1st April by January of that year, and I am perfectly persuaded that if this is one of the difficulties he has in mind it ought not to be outside the bounds of possibility to get local authorities' estimates in much earlier than he says they are at present getting them, and that that ought not to be an obstacle in dealing with that 2521 particular point. Though I do not gather it from his speech, I hope the Government are not going to be moved by such an appeal as that made by an hon. and gallant Gentleman below the Gangway to do away with the percentage grant system altogether.
We had experience, even in rural areas, of the very different way in which local authorities tackled problems which this House set them. An hon. Member opposite spoke for an agricultural constituency, I think from Herefordshire. Let me take one point as to how the percentage grants operate. The Board of Education before and in the early days of the War issued a circular to all local authorities, as to the way in which these authorities were performing their responsibility in regard to the training of teachers. We had any number of authorities, and I believe Herefordshire was one of the very worst offenders in this way who did nothing towards contributing to the general teaching supply of this country. If you are going to get away from the percentage system of grants, it means that the authority which is not pulling its weight or doing its best to carry out the wishes of this House in legislation is going to get the best end of the stick after all, and I hope the noble Lord will not be led to advise the Government to give way on the question of percentage grants. It was rather naive of the hon. and gallant Gentleman below the Gangway to put that request to the noble Lord when he said that though it might get to block grants he would like to ask for a contribution from the Government which would make the State give about double that coming from the locality. You will have to deal with the cost with the safeguard you generally get in regard to your percentage system when you actually examine the estimate of the local authority before you give a definite pledge to make a percentage grant. In conclusion, I do want to impress upon the Noble Lord that in such an area as the area I represent, one of the constituencies of Sheffield, we are absolutely overburdened to-day because of the unfair incidence upon that area in dealing with what is a national problem. It is some weeks now since we met the Minister of Health. The Noble Lord says the matter is under consideration. Will he please impress upon the Minister 2522 whom he is representing here to-night that it is becoming increasingly difficult for Sheffield and other similar authorities to carry on. Let him not put us off with the remark that, whereas immediate relief can be given to agricultural constituencies, necessitous areas, industrial centres like Sheffield, Middlesbrough, or Newcastle-on-Tyne must wait until the Government have been able to revise the whole of the rating system. If it be necessary for us to wait for a revision of the whole rating system, why could not agricultural areas wait similarly? I hope the Noble Lord will press that point on the Minister of Health.
§ Sir FREDERICK BANBURY
The hon. Member for Hillsborough (Mr. A. V. Alexander) commenced his speech by saying that the object of this Resolution was to induce the rural areas to vote for the Conservative party, because, as I understood him, he is of the opinion that in the near future all the industrial districts are going to return Labour Members, and that, therefore, this side of the House are taking steps to secure, by what, after all, falls very little short of bribery and corruption, the support of the rural areas. I would remind the hon. Member of the old proverb, "Never count your chickens before they are hatched," and I do not think he need be quite certain that all the industrial areas are going to return Labour Members. I would point out that we are discussing a Resolution. I did not gather that the Noble Lord who spoke for the Government (Lord E. Percy) quite said what the hon. Member represented him as saying, but if he will look at the Resolution he will see that there is nothing whatever said in it either about rural areas or urban areas. What the Resolution says is thatthe present system of adjusting the burden of local and national taxation is obsolete and should be revised in such a way as to lay upon the Exchequer its fair share of the cost of national and semi-national services.Therefore the Resolution, as far as it goes, does not in any way touch the question of rural or urban areas. I agree that the method of raising national taxation should be revised. Apparently, from the statement of the hon. Member for Bow and Bromley (Mr. Lansbury), at any rate, one unfortunate person who derives his income from a certain 2523 property is going to have it all taken away from him.
§ Sir F. BANBURY
Probably the hon. Member often says things that he does not quite mean, but he said this about an hour ago.
§ Mr. LANSBURY
I can only give people arguments; I cannot invent the intelligence to understand them.
§ Mr. MacLAREN
rose in his place, and claimed to move, "That the Question be now put," but Mr. Speaker withheld his assent, and declined then to put that Question.
§ Sir F. BANBURY
I am afraid I cannot agree with the hon Member for Bow and Bromley in the case he gave, but—
§ Sir F. BANBURY
I think this is an extremely harmless Resolution, and I shall certainly not oppose its adoption.
That, in the opinion of this House, the present system of adjusting the burden of local and national taxation is obsolete and should be revised in such a way as to lay upon the Exchequer its fair share of the cost of national and semi-national services, while giving the spending authority the utmost inducement to economy coupled with the minimum of central control.
§ The remaining Orders were read, and postponed.