HC Deb 26 April 1928 vol 216 cc1145-61

Again considered in Committee.

[Mr. JAMES HOPE in the Chair.]

Question again proposed, That it is expedient to amend the Law relating to the National Debt, Customs, and Inland Revenue (including Excise), and to make further provision in connection with Finance.


Very little time will suffice to cover the remaining ground which I had in mind. The Committee will recall that we were arguing the position of the suggested block grants scheme to which the Chancellor of the Exchequer made reference in the Budget statement. I was pleading from these benches that any plan which, in fact, limited the contribution of the State to the local authorities, especially in the social services, would go far to undermine the very contribution that the Government intended to make to the locality. I was just at the point of trying to lay down conditions which should he observed if by any chance the Government persist in that proposal. We admit that the liability of the State should be known, and it may be that within limits in existing conditions there is a difficulty from year to year in ascertaining exactly the call upon the National Exchequer.


Hear, hear!


But we have also to recognise that the whole of that expenditure proceeds, or practically all of it, under Act of Parliament and that, in any case, it is subject to a great deal of centralised control. I believe that emerging from the Reports of the three bodies—of the Reports of two of them, and what might have been the Report of the third—certain quite business-like proposals might be suggested. First of all, the Government must aim at some kind of standard of efficiency in these services. In the second place, they must pursue, as I think, the system of larger areas, and, in the third place, on the basis of those larger areas, it is entirely in the public interest at the present time to work out units of cost. I quite recognise that these Commissions have not been particularly attracted to a unitary basis, but may I just explain simply and as clearly as possible what is involved. There are certain services at the present time in which the unit of cost may be per bed in hospitals or per head, where a system is worked out on a comparable basis covering certain local authorities or areas. That obtains to only a comparatively limited extent in the wide field of this social expenditure covered by the Exchequer contribution to the local authorities.

I have never been able to agree that you cannot develop the system beyond the limited point which has just been reached and I make that suggestion for these reasons, broadly, because we want to get the very best return for the money which is contributed; in the next place, because these wider areas will give you a basis of comparison, and, in the third place, that if you are going to fix by any chance the State contribution, the increased efficiency of a unit of cost method will so far relieve the load and the difficulty of the local authorities. We do not know until the Minister of Health has spoken whether a plan of that kind is in view. But, summarising the position, I say this, that we on this side of the House oppose any policy failing to deal with necessitous areas and any alteration in the system of the State contribution which penalises local authorities with this burden already round their necks, but that, subject to these two conditions, we, for our part, will support any scheme making for the efficiency of the contribution.

May I say one general word with regard to the Budget as a whole? It is plain from the facts before us, and including for the moment the self-supporting services, that our expenditure is still rather more than £800,000,000 per year. I am taking the old basis for the purpose of a comparison with preceding years, although I agree that the amended form which the Chancellor of the Exchequer has introduced is in every way a much more accurate presentation of the case. Many people believe that this is a very heavy burden for this country to carry, but, in all the circumstances of the case, I think we are equal to the task, and we gain nothing by undue exaggeration. Experts have stated that the total income of the British people to-day is about £4,000,000,000 per annum, and, everything considered, the prospects for our industries and commerce are perhaps rather better now than they have been for some years.

There is one consideration that I would press. Each year our Department of Overseas Trade is presenting us with a mass of material of the most practical kind, analysing our position in the markets of the world. It has directed attention to the stronger appeal which we can make to specific markets, notwithstanding all the tariff restrictions. If this is the plan of the Government, applied to the productive industries, it must be related to that material which that Department is constantly supplying. My chief regret, in existing conditions, is that there is not in the House of Commons, or in public debate in this country, a consistent effort to relate these contributions for the public good. If by any chance we improve that in the future, I am by no means pessimistic regarding the result; and this is all the more urgent to-day because of the very static character, to which the Chancellor of the Exchequer referred, of the problem of 1,000,000 people who are denied regular and remunerative employment, in our midst.

The MINISTER of HEALTH (Mr. Chamberlain)

I desire, first of all, to express to the right hon. Gentleman the Member for Central Edinburgh (Mr. W. Graham) my appreciation of his courtesy in somewhat compressing his remarks in order to enable me to reply, and I am sure hon. Members who heard him will share my regret that in any way his very interesting and thoughtful contribution to this Debate has been curtailed by circumstances over which we have had no control. I hope he may be given some further opportunity in our subsequent Debates to elaborate his suggestion. Listening as I have to the greater part of this Debate, I have conic to the conclusion that my right hon. Friend the Chancellor of the Exchequer has every reason to be gratified at the reception which has been given to his far-reaching and far-sighted proposals. Not only has the great majority of the speakers found something at least to approve in the Budget, but from many quarters have come the most wholehearted appreciation of the statesmanlike vision and courage which has been displayed in the whole conception. Although, of course, there have been criticisms from one quarter or another, what has struck me as singular in this Debate has been that almost every critic has directed his criticism to a different point, so that one who has to reply to the discussion finds it difficult, if not impossible, to select any feature of the Budget which has concentrated upon itself that volume of disapproval which generally emphasises a weakness in any Budget statement.

In the wonderful speech of the Chancellor of the Exchequer in which he painted so vividly a picture of the conditions with which we are faced and the proposals of the Government for dealing with them, even he could hardly be expected to convey to those who were beforehand unfamiliar with the scheme, all the details and all the possible implications and bearings of the proposal. Therefore, I am not surprised to find that there has been, even after three days' discussion, a certain amount of misunderstanding and misapprehension as to the whole scope and field of the proposals we are presenting to Parliament. Take, for example, the speech of the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George). He began by saying that this was a serious question which ought to be treated in a purely non-party spirit. Then he went on to say that having applied this judicial and impartial examination to the scheme, he discovered it to be a thoroughly vicious method, and proceeded to deal with it in what, I think, I must describe as a thoroughly vicious speech. So much so that I was rather left wondering what further he could have found to say if he had applied the ordinary methods of party controversy, instead of the strictly non-party spirit in which he approached it.

I make no complaint against the right hon. Gentleman. Indeed, I am grateful to him for his speech. After all, the Liberal party are entitled to be heard with some respect on this subject. They have instituted considerable investigations into the matter; they have even gone so far as to formulate a policy, and though their policy, to our ideas, may be sickled o'er with the pale yellow cast of thought; yet their investigations have fortified them with a fairly intimate appreciation of what are the intricacies and difficulties of the problem we have to face. They cannot expect us, however, to adopt their policy. The Chancellor of the Exchequer invited for this great national scheme the general cooperation of the Committee, of all parties in the House, but I do not think he extended his generosity so far as to commit him at once to throw his own scheme into the fire and take on someone else's, especially when, as appears to us, the scheme advocated by the Liberal party is open itself to some of the criticisms which have been levelled against ours, is one which, in many respects, will be difficult if not impossible to carry into operation and, lastly, and most important of all, would be quite ineffective to achieve the purpose we ourselves have in mind.

I shall recur to that scheme again in the course of my observations, but let me, first of all, remind the Committee of the manner in which the right hon. Member for Carnarvon Boroughs described the problem. He said it was three-fold. First, that of the depressed industries, secondly, the distressed areas, and, thirdly, the wear and tear on the roads occasioned by excessive motor traffic. That description of the problem is altogether inadequate to do any sort of justice to the great conception embodied in the scheme of the Chancellor of the Exchequer. The problem is very much larger than that outlined by the right hon. Member for Carnarvon Boroughs. What we have to consider is the condition of the country in all the years that have elapsed since the War. It is in a condition of protracted and constantly disappointed expectation. Again and again we have tried to make ourselves believe that at last the long anticipated boom was coming. Again and again we have had to admit that the signs which we believed we had seen had flickered away, and once more we were back again in the trough. No one has more often called attention to this fact than the right hon. Gentleman himself, and no one has taken a more gloomy view of the situation.

It is true that we have made some progress. All industries are not under a cloud, many of them are comparatively prosperous, but, taking the situation of the country as a whole, we have to confess that the recovery has been disappointingly small, that the progress has only been by fits and starts, and that we have constantly had to contemplate the stagnant pools of industry and areas which appear to be rapidly becoming totally derelict. The right hon. Member for 'Central Edinburgh has told us that at the present time the indications seem to be more favourable than perhaps they have been for some time. I think that is a correct appreciation of the present situation, and that seems to us to be just the moment when by some large gesture we should do something which will once more restore confidence and hope and vigour and courage to industry, something that may give just the stimulus which is necessary to give it a fresh start and bring back the fertilising stream of capital; something which will give the depressed industries a chance of obtaining something like stability and those which are a little more prosperous a chance of still further extending their operations. What we have in mind is not merely the nursing of sick industries, still lees of placing on prosperous industries the burden of maintaining those industries which are depressed. It is something bigger than that. It is to help all productive industries in the country, whether manufacturing or agricultural, by some rearrangement of the national burdens, which the right. hon. Member for Central Edinburgh might call a subsidy but which is really a rearrangement of the burdens so that they may be borne more easily and give relief just where these burdens press most heavily.

7.0 p.m.

The right hon. Member for Shettleston (Mr. Wheatley) yesterday made a speech which was of considerable interest, not merely because he stated again, as he or some of his particular associates have stated before, that he was no Free Trader and that he fully appreciated the desirability of keeping British trade for British workers, but for the further proposition which he advanced that all these schemes of ours for assisting industry would have but a transitory effect because, as he said, the greatest problem before us was to increase the purchasing power of the people. Surely, the purchasing power of the people is not to he measured by any amount of cash which is at the disposal of the people. In order to ascertain what the purchasing power of the people is, you must consider also what that cash will buy and if, by a system of increasing' its production and of reducing the costs upon industry, we can help industry to compete in the markets of the world, and we enable industry to lower its costs and to produce articles at cheaper prices, then surely we are thereby increasing the purchasing power of the people.

When he pointed, as he did, to the example of the United States and to the phenomenon which has been witnessed there of considerable numbers of people being thrown out of work on account of the more rapid increase in the means of production than in the purchasing power of the people, I might remind him, or any of those who are moved by that argument, that we are still a great way from the condition of prosperity in the United States which has brought about such a phenomenon as that. It is not much consolation to the man who is underfed to say, "We will give you nothing more to eat because somebody across the street has over-eaten himself." The working people in this country will be willing to run the risks of over-production in the distant future, if, in the meantime, they can see a movement which is going to bring steadier employment and higher wages to themselves.

The problem of the depressed industries, the heavy industries, is only part of a wider problem with which we are faced. It is true that they derive particular importance from the fact that they are our basic industries, that they in normal times give rise to larger numbers of employed persons than the younger industries which to-day seem to be supplanting them. That is, undoubtedly, a reason for giving special attention to their particular needs. What are the complaints of industry to-day and particularly of these depressed industries? They say they are weighed down by the burden of two things in particular. One is the burden of local rates, and the other is the burden of railway freights. We are dealing with both those points and, so far as the reduction in railway freights is concerned, I do not think there has been a single word of disapproval or objection to it in any speech that has been made, if I except, possibly, the last speech to which we listened and that of the right hon. Member for West Swansea (Mr. Runciman), who was unable to see how any advantage could accrue to these industries by reducing land freights, although he thought there was something to be said for a reduction in dock and harbour duties provided that the transshipment industry was not injured by a safeguarding duty on buttons.

The assistance to industry to which so much attention has naturally been given during the discussion is only half our plan. In addition to this, we have got in this scheme another great conception —the idea that we are going to make a radical alteration in the system which now regulates the relations between local and national expenditure. The Committee will understand that any such rearrangement must carry with it some rearrangement of the functions of local authorities, but those rearrangements will be in the direction contemplated by the right hon. Member for Central Edinburgh, and they will mean a wider spreading of charges over larger areas, and by that means we believe we shall be able to bring about a great leap in the efficiency of some of the most important of our social services.

I am not going to-night, in the comparatively short time at my disposal, to enter into any detailed description of the system, or want of system, under which the Exchequer contributions are made to local expenditure. They are a collection of survivals from the past, without order and without logic. The right hon. Member for Central Edinburgh has protested against any wholesale charge of extravagance against local authorities in connection with the great increase of local expenditure which has taken place since the War. I admit that it is easy to exaggerate the charges of that kind, and that much of that enormously increased expenditure is due to the improvement of conditions cast upon local authorities which have been largely imposed upon them from outside and, without any discussion of the merits of those proposals, it is quite true that it must not be laid entirely to their charge. But the system under which grants are given to local authorities upon a percentage basis carries with it certain obvious disadvantages. Whatever may be said to the contrary, I do not think it can be denied that, to a local authority, the fact that any expenditure upon which it embarks will be met by a contribution of 50 per cent. automatically derived from the Exchequer is an encouragement to that local authority to embark upon that expenditure, without perhaps that regard to its own resources which it would necessarily exercise if it had to find the full amount itself.

Further, any such percentage contribution by the Exchequer must mean necessarily a detailed and meticulous examination of the items of expenditure by the officials of the central authority and must, to that extent, mean a continuous interference with local autonomy. Lastly, and this is perhaps the most important of the three points 1 want to make, the expenditure of the local authority is the measure of relief which it gets from the central authority, and therefore those local authorities, which are the wealthiest and which can afford to spend money upon their local services, are the ones that get the most from the central authority, whereas the poorer authorities, which cannot afford to develop their services even perhaps to the minimum point of efficiency, get less, and not more, from the national resources. Those are very grave defects, and those are the defects which it is the purpose of our great scheme entirely to remove.

We are taking advantage of this scheme, under which, by reason of the fact that we arc going, to a large extent, to de-rate productive industry, the contribution of the Exchequer to the locality must be largely increased, to alter the method of allocation. We shall have, under our plan, to allot from the central Exchequer to each authority a sum which will take the form of a block grant payable at the same rate for a fixed number of years, the period suggested being five years. Part of that sum will be in lieu of the rates of which local authorities have been deprived; part of it will be in lieu of the percentage grants for health services which have been hitherto paid; part of it will take the place of the agricultural rates grant and part of it will supersede the old assigned revenues. Taking all those items together, we get a mass which we shall have to replace by a grant from the national Exchequer. What we are aiming at is that the distribution of that money shall not be in proportion to the expenditure of the local authority, but that it shall be in proportion to its needs. It shall be in proportion, first of all, to the population—for it is the population, in the first instance, that makes the need —and, secondly, it shall have some refer- once to the ability of the locality to pay, so that the poorer locality, by reason of its poverty, shall have something more than the richer locality which can better afford to provide for its own needs. That is the ultimate aim to which we are directing our energies.

The Committee will see that it is quite impossible at one step to jump from the present arrangement into a system of that kind. If you are going to take away from the local authority what may be in some instances a very considerable proportion of their revenue, and allot to them a compensatory grant from the Exchequer on these new principles, you might, if you applied it in toto at once, bring about a total disorganisation of the local authority's finance. Therefore, to begin with, in discussing with local authorities the basis upon which the first quinquennial grant is to be given, the first thing we have to take into consideration is the rateable value of this authority which has been lost, and how much of the existing rate the local authority will be deprived of by reason of the fact that industry is only to pay one quarter of what it paid before. Therefore, that must be the basis of the negotiations in the first instance, so far as the loss of rateable value is concerned. The local authority must be assured that it is not going to be the worse off by reason of any-loss of rating value brought. about by this scheme.

We are not contemplating merely a period of five years. We are contemplating the introduction of a permanent new system. We have to look, not merely at to-day, or even at five years hence; we have to look at, 10 years, 15 years, 50 years hence, and to consider, therefore, how this new principle can be adapted to the future as well as to the present. The further we get away from the starting point, the further we get away from the time when it is possible-to calculate what will be the difference between the old system of rating and the new, the more academic all those considerations will become, and it will be possible gradually to shift one proportion after another of the total grant from the first basis on which it is allocated, which has special reference to the amount of rateable value and rate loss, to the general overriding principle which, I have named, under which the needs of the locality will be the first consideration.

If I have made that clear, I think hon. Members will sec, what some of them perhaps have not seen before—and I include in that both the right hon. Member for Carnarvon Boroughs and the right hon. Member for Central Edinburgh—that any statement that in this scheme we have had no regard to the needs of the so-called necessitous areas, that there is no direct appeal to the necessitous areas, that necessitous areas are going to get no more than any other areas, is absolutely unfounded, because that is the essence of our scheme, that not only is industry going to get this direct relief of three-fourths of its rates, but that by the new arrangement of allocation of the Exchequer grant the money from the Exchequer is going to be directed to those very necessitous areas which have pleaded with us so long, and for which it has been found difficult before to find a remedy.

This is a solution of the necessitous areas problem which I myself have constantly advocated in this House. The right hon. Gentleman referred to the time when I came to him on a deputation. I did not know then, but I knew the moment I got into office, what the practical difficulties of finding a method of distributing this money were, and those difficulties were present to the mind of the hon. Member who was Parliamentary Secretary to the Ministry of Labour in the Labour Government. The hon. Member could not find a formula for the distribution, and why not? Because there was no uniformity of valuation throughout the country, and that much-abused Rating and Valuation Act of 1925, as I have stated to this House over and over again, was the first essential preliminary step to the possibility of finding a formula which would enable us to carry out a scheme which at last we are able to undertake to-day.

I want to address myself to one or two criticisms which were made by the Tight hon. Gentleman the Member for Carnarvon Boroughs. He spoke of the unfairness, as he said, to the other members of the community of a system under which you might get new factories springing up, throwing new burdens upon the community, but only contributing a quarter of what other people were contributing, and he said that three-quarters are going to be thrown on the rest of the community. Is it a fact that new factories always bring with them a troop of workpeople into the area into which they come? Is he not aware that you can find many cases where a factory is in one local authority's area and a population which works in that factory is in another local authority's area? How is this scheme going to remedy that? tinder a scheme which at every quinquennial valuation takes into account the population of the area, that area which has to carry the burden of that population, which has to supply its needs, will get the increased grant from the Exchequer under the formula, and the fact that it will provide at least a quarter of the rates in its own area may be taken, I think, to constitute at any rate a reasonable contribution to the direct services which are necessitated by the presence of the factory there.


I am sorry to interrupt, but this is very important. Does this mean that the Exchequer will contribute in respect to the new factory the three-fourths which is lost to that particular area?


No, but the right hon. Gentleman is picturing a sort of migration of the Children of Israel with every new factory that starts, whereas the fact is that, assuming even that it does employ the population in the area, it probably begins by employing only some people who are already there. It may no doubt in time attract a larger population, and in time that population will have children, who will require new schools to be built for them, but in the meantime the quinquennial period has elapsed, and there is a revaluation of the situation, under which all these inequalities will be redressed; and the right hon. Gentleman must not assume that the local authorities are going to begin their five years period with the very minimum amount which they can derive from their rates at the beginning of the period.

My right hon. Friend the Chancellor of the Exchequer mentioned that, included in the finance of the scheme, was a sum, which he had put at £3,000,000, which was to ease the way in the transition. The right hon. Gentleman said that that was grossly inadequate, but how does he know it is grossly inadequate? He apparently based that opinion upon some extraordinary misapprehension which led him to suppose that, because railway assessments had been reduced to an extent which would reduce the rates obtainable from railways by a sum of £2,000,000, that £2,000,000 out of the £3,000,000 would be absorbed for that purpose. But surely the right hon. Gentleman must see that he is confusing two entirely different things there. The question of the lowering or raising of the assessment at a recurring valuation has nothing to do with this scheme. If the assessments of railways had been lowered, as they no doubt will be lowered, on a. new valuation, the local authorities would have to bear the burden of that themselves in any case. It is not affected by our scheme, and as matter of fact the net result of a revaluation will not be a lowering, but a raising on the balance of assessments throughout the country.

This £3,000,000 which my right hon. Friend is setting aside is for a different purpose entirely. It is for the purpose, which I will come to in a moment, of enabling larger areas to be constituted, and it is for the purpose of assuring the local authorities that in the block grant which they are to receive there is a margin for the development of their services during the five years. I entirely agree with the right hon. Gentleman opposite that we must take care, while we discourage extravagance, at the same time not to curb the opportunity of local authorities at least to bring their services up to a minimum standard of efficiency. We have provided for that. As to whether the £3,000,000 is inadequate, I say that at this stage nobody can say whether it is adequate or inadequate. I could not say myself, although I have naturally, I think, better sources of information than has the right hon. Gentleman. I do not know whether it is enough or too much. All that. I know is that my right hon. Friend has told me he has put that sum aside, and that he hopes I shall not want the whole of it!

I must hurry through the rest of what I have to say, but I will add a word about the valuation ascertainment. I cannot help thinking that the right hon. Gentleman, in putting conundrums to us about the butcher, baker and candlestick-maker, was really descending to rather small trivialities. There are difficulties. I am not denying that for a moment. There is the question of the definition of a productive industry, which is one of very great difficulty, but surely he is not going to suggest that a huge, comprehensive, beneficial scheme of this kind is going to be held up by difficulties of that sort. We had exactly the same sort of difficulties put up to us over the question of the rating of machinery, where there was to be a distinction made between one kind of machinery and plant and another, but we got over them, and we can get over these, and, although I do not doubt that it will be o., question which will have to be carefully discussed and on which we shall be glad to have suggestions, on the other hand, I am quite convinced that it is not a problem which it is beyond the wit of man to solve.

The right hon. Gentleman made a more serious suggestion, which, though I am not easily surprised by anything which he says, I must say did a little shock me. He suggested that the fact that the Exchequer was going to pay three-quarters of the rates of productive industry would lead the assessment committees and quarter sessions to raise the assessments of the industrial concerns in order that they might draw to their districts a larger contribution from the Exchequer. I almost think the right hon. Gentleman must be basing that singular view on some local experience with which I am not familiar, but I cannot think that considerations of that kind would really influence such responsible bodies as assessment committees and still less quarter sessions. But I would say this to him further, that, of course, in a matter of this kind the Treasury must be protected. I am not suggesting that they must be protected against a wilful abuse of power, but there might easily be a mistake, which, if it were made, would cost the Exchequer money, and, therefore, of course, the revenue officer will have to have a part in these proceedings, and he will have to have a say and be entitled to protest, if he thinks the assessment of a factory is being put too high.

What are to be the results of these block grants in the larger areas? It will mean that there will be a greater incentive upon local authorities, a greater opportunity to develop their services, and I believe it will provide that check upon extravagance to which the right hon. Gentleman the Member for West Swansea encouraged me to devote my attention. Under this system the local authority will know that a fixed contribution is coming to it every year for a period of years. I hope that will result in their making their balance-sheets, not for one year, but for five years, and that they will draw up regular programmes of expenditure, and I am quite certain of this, that as any rise in expenditure will have to come out of the pockets of the local householders and shopkeepers, who will be responsible, that will be an even greater inducement to economising, to seeing that they get the best value for every penny that they spend, than any other system that could be devised.

I wish I had more time, but I should like to say this upon some concluding phrases in the speech of the right hon. Gentleman. He drew attention to the amount of the burden of rates upon the working people, and his own illustration was drawn from the case of men who are working short time. He pointed out that in their case the rates might mean a considerable proportion of their income. Does he not see that a system like his, which fritters away the resources at our disposal by spreading them out all over the community, which does not supply sufficient stimulus to industry and which gives merely trifling relief to the working man, cannot be half as good as a plan that is going to give more employment? That will make all the difference. I commend this scheme to the Committee, imperfectly outlined as it may have been, as one that is going to bring fresh life and hope into our industry, percolating through all our community and through every section of industry, and at the same time bringing about the long-needed and much desired reform of our local government, which will strengthen instead of weakening it, which will give it fresh initiative, and which will go down in history as one of the great landmarks in our legislation.

Question put, and agreed to.