HC Deb 24 February 1937 vol 320 cc2021-119

Order for Second Reading read.

The Minister of Health (Sir Kingsley Wood)

I beg to move, "That the Bill be now read a Second time."

This is the first time we have been enabled to consider the case of grants made under the Local Government Act of 1929. Many hon. Members whom I see before me will recall the introduction of the Bill by my right hon. Friend the Chancellor of the Exchequer, and the discussions arising on it at the end of 1928. It was at first a Measure not easily understood. We often wished in those days that we had a blackboard in the Chamber, on which to demonstrate to the House some of the calculations and formulae. There were, of course, natural doubts expressed, and on occasion there were predictions of a more or less pessimistic character as to what it all meant and what would be the result both to the local government system and its finances. But I think I can claim, I hope with the general acceptance of the House, that—though as in everything else improvements can be made from time to time as experience and trial warrant—the Act has proved to be a great and successful Measure of local government and of social reform, that it is generally accepted, and that no party in the State advocates its repeal to-day. For instance, in connection with our local government finance and its relationship with the Exchequer, no one would desire to revert to the old percentage system, which took little or no account of the relative wealth or poverty of different districts or of the differing needs of different districts.

The old system was indeed illogical and often unjust, and it too frequently meant that national contributions to local needs were given in the largest measure to those who had least need, while those who could not afford to maintain their own services got the smallest contribution from the national resources. It was to end all this that the block grant, with its famous and ingenious formula, was designed and adopted by Parliament. If sometimes calculations were difficult, its principles were plain. It took account of the principal factors which govern the need of a locality—population, rateable value per head, the number of children under five, indicative of relative wealth and poverty. They were used and are used to-day to weight the population, as it is called, and to increase it in proportion as the two factors were taken into account. To them two others were added, unemployment and the relation of the sparsity of the population in rural areas.

To avoid too sudden a change in local finances, certain guarantees were given, and the main distribution during the early grant periods was designed and is being made to-day partly on the loss of rates and grants, and partly on the basis of the formula. The Act in fact provided for a gradual transition from the old financial basis to the new, and it was not to be put completely into operation until nearly 20 years had elapsed since it was first introduced. These reforms were accompanied by others designed to secure a reorganisation and strengthening of the units of local government, while the important services of public assistance and highways were transferred to the larger authorities.

I think I can claim that as a consequence of these reforms local authorities have in the first place been emancipated from much unnecessary interference by the State Departments and have been given much greater financial interest and freedom in their administration. Certainly I think right hon. Gentlemen opposite will agree that the opportunity for stimulus and co-ordination by the central Department has in fact increased with the disappearance of the percentage grants; and certainly it will not be gainsaid that the block grant has increased and assured for the local authorities a considerable pool to provide for the expansion of their services. The original provision for this purpose was an additional sum of £5,000,000, and it was at the same time proposed by the Government and adopted by Parliament that as local services expanded the aggregate contribution to local services from the State should continue to grow in the same proportion. In 1933 a further sum was added. I remember that at that time anxieties were expressed as to whether the standards of our health services would be maintained under the new system, and again I think it will not be generally gainsaid that much has been achieved since 1929 in the direction of securing that the services of local authorities should reach a higher standard.

I will give one illustration only, though I could give many. There has, for instance, been a great development since that year in rural sewerage and water schemes, consequent upon the wider powers and financial contributions which were made available by the Act. It has, of course, been aided by the special rural water grant, but the total contribution made by rural district councils and county councils since 1934 has largely exceeded the Government grant itself. I was looking at the figures, so far as loans were concerned, and I see that the amount of loans sanctioned for rural works and sewage disposal has steadily grown from £292,000 in 1932–33 to £1,000,000 in 1935–36.

There were also many quite natural fears expressed in 1929 that the abandonment of the old system would retard the development of services and that local authorities would decline to find out of the rates the moneys required for the desirable expansion of those services. I remember particularly that grave fears were expressed concerning the maternity and child welfare services. In the last year of the percentage grant, 1929–30, the total expenditure on maternity and child welfare in England and Wales was £2,400,000. Excluding sums paid by the local authorities to voluntary agencies in place of Exchequer grants formerly paid, the expenditure has risen by no less than 25 per cent. in 1934–35. If you look at the comparable figure for the expansion of all services during this particular period, it has risen by no less than 9 per cent.

When considering the question of State assistance to the local authorities it is right that the House should mark, in the interest of local government itself, the extent to which the national Exchequer is contributing to local expenditure to-day. Already in a considerable number of areas the Exchequer meets between, 55 per cent. and 65 per cent. of the local expenditure. In seven administrative counties the proportion of expenditure for 1934–35 found from grants was between 65 per cent. and 70 per cent.; in Rutland is was 71 per cent.; in the Isle of Ely 72 per cent.; Montgomery 74 per cent.; and in Huntingdon 77 per cent. The proportion in county boroughs was generally less, though in some towns it was considerable. The proportion for the country as a whole was 44.6 per cent.

Again, most people w ill agree that a point can be reached when the proportion of expenditure made from sources other than local would much weaken if not destroy local government itself. Indeed, I think it is desirable, in the interest of our valued local democratic system, that the responsibility to the ratepayers by local authorities should be fully maintained; but it is obvious that Exchequer subsidies cannot ge beyond a certain limit without the imposition of some direct Exchequer control, and to exceed that limit would sap undoubtedly our local government institutions and in some areas might well end them altogether. It can be said with fairness to-day that we must certainly avoid such a disaster to our system of local administration. There have been many changes in our social and industrial position since my right hon. Friend the Chancellor of the Exchequer introduced his great Measure in 1928. There have been considerable movements of population, a decline in the birth rate, a quinquennial re-valuation, the revival of industry in many areas and a continuance of industrial depression in some others.

It was in such circumstances as these that for more than 12 months an intensive examination has been undertaken of all the financial issues connected with the distribution of the block grant on the formula basis. It has been carried out in accordance with the Statute, which laid down that that examination should be in consultation with the various associations of local authorities and the London County Council; and, the House will see, in page 2 of the White Paper, that in accordance with that: statutory provision, at the end of November, 1935, I saw the representatives of the County Councils' Association, the Association of Municipal Corporations, the Urban District Councils' Association, the Rural District Councils' Association, and, as regards London, the London County Council and the Metropolitan Boroughs Standing joint Committee. I should like to express, as I think I can in the name of the whole House, our thanks to these associations for their most patient endeavour and work for so long a period. I would call the attention of the House to paragraph 12 of the White Paper, where it is stated that the conclusions which the local authorities reach have been reached in a spirit of compromise and in the opinion of the conference are such as would produce a settlement of county and county borough apportionments which can reasonably be accepted. When I saw the conference for the first time at the end of November, 1935, I ventured to make a number of suggestions to them. I suggested that they should consider— How far has the distribution in the first and second grant periods accorded with the original intention of the Act? I suggested also that they should inquire— Does the experience so far gained suggest that the needs of the poorer areas and, in particular, the distressed areas are met under the present method of distribution to the extent of the original intention? There were a number of other minor questions which the House will see on page 3. It was in accordance with these suggestions that the local authorities approached this very difficult and important problem. They adopted a method which, I think, the House will generally approve. They decided to form a committee of financial advisers who were experienced and expert in work of this character, and they added to that committee special expert representatives of the necessitous areas in order that there should be no question that their needs were considered. In the result, a most complete and careful examination of this problem was made by the financial advisors, who ultimately reported to their main bodies, who, in turn, reported to me. I would point out that in any proposals that might be made by the financial advisers of the associations, apart from the merits of the block grant system which they had to consider, there were a number of new considerations which I must mention. There was, first, the suggestion that was made in the Debate in this House on 21st July, 1936, to merge in the block grant the total of the contributions paid by the local authorities under section 45 of the Unemployment Act, 1934. This, it was suggested, would be effected conveniently to all parties by a reduction in the general Exchequer contribution, and our discussions with the local authorities proceeded on the assumption that from the increase in the general Exchequer contribution for the third grant period there would be deducted these unemployment contributions amounting to £2,187,000, and that the individual contributions should be discontinued. That suggestion was accepted without any reservations on the part of the local authorities.

A question also arose from the decision of the Government that it was proposed to require no specific contributions from local authorities to future work on the transferred trunk roads, but that regard must be had to the transfer when the block grant was being considered. The discussions with the local authorities were, therefore, on the basis that from the beginning of the third fixed grant period, 1st April, 1937, when the transfer will take effect, a reduction would be made on this account in the General Exchequer Contribution equivalent to the normal proportion of grants attracted by the expenditure, namely, a sum of about £133,000, which represents approximately 23 per cent. of the transferred expenditure which is the appropriate block grant contribution. This decision was favourable to local authorities, as the expenditure on these roads has averaged £575,000 a year in recent years, and it must not be forgotten that counties are relieved of all financial responsibility for the heavy costs of future maintenance and improvement. My right hon. Friend the Chancellor of the Exchequer referred, on 30th November, 1936, to the possibility of abolishing the local taxation duty in respect of male servants' licences. It has been agreed with the local authorities that there would be an addition to the total block grant of a sum of £115,000 corresponding to the net loss to the local revenue.

When the local authorities and their financial advisers came to consider this question, these important matters had to be taken into account, and it was on this basis, and after long and close consultation and discussion with the authorities, that the proposals in this Bill were framed. The first main proposal of the Bill is to fix the amount of the annual general Exchequer contribution, or what is called the main block grant pool, for the third fixed grant period. Accordingly, provision is made that this annual contribution shall be £46,172,000. That figure is arrived at by the increase in the block grant justified by the provisions of Section 86 of the Local Government Act and adjusted by the three considerations I have mentioned, namely, the merging of the contributions under the Unemployment Act, the transfer of the trunk roads, and the male servants' licence duties. This triple adjustment has been rounded up in the Bill so that the net money addition for the third grant period is £2,250,000. The expenditure from which local authorities are relieved is £2,750,000, making a total of £5,000,000 as the measure of increased assistance to local authorities in the next grant period.

The second main purpose of the Bill is to be found in Clause 2, which is designed to improve the method of distributing the grants to local authorities so that the grants shall be allocated still further according to need, and so that the Special and necessitous areas shall obtain substantial assistance. An alteration in the formula is therefore suggested which strengthens the unemployment factor in particular, and also the sparsity factor, as explained in paragraphs 13 and 14 of the White Paper. The method recommended is, as regards the unemployment factor, to employ a multiple of to instead of, as the 1929 Act provided for the third grant period, a multiple of a little under six. By that means more weight is given to the unemployment factor and a superweight is given to those areas where the percentage of unemployed to the population is over 5, the national average being approximately 3.5. Then, partly to preserve the balance as between counties and county boroughs, and partly to assist the poorer counties, it is proposed to increase the weighting for sparsity. This is to be done partly by an alteration in the factor itself, and partly by applying it to the population weighted for children, rateable value, and unemployment, instead of population weighted for the first two only.

To anyone who desires to spend further time on this matter during the next weekend, I would commend the particulars which appear in Appendix III, which are most interesting. However we may regard that little excitement in a Government Paper, I think that a clear and simple test of its effect is to observe the tables which are produced in later Appendices. I ought to explain that they are estimated figures. They are based on data relating to 1935, whereas the actual calculations will be based on data relating mainly to 1936. These, I may say, are not yet available, but the results were, in fact, calculated on the assumption that the additional Exchequer money would be only £2,000,000, instead of £2,250,000 as provided in the Bill. I would say to hon. Members, and particularly to the representatives of constituencies which are affected, that there may be some slight differences in the shares of individual areas without affecting the total distribution of £2,250,000, but I think I can assure the House that the estimate, as a whole, is one which may be accepted as a reasonably accurate forecast of the final figures. The right hon. Gentleman opposite knows the care with which these matters are prepared by the Ministry of Health and I have no hesitation in making that statement to the House.

The results, and it is to the results, after all, that we have to look, are considerable. To Cumberland, Durham and Glamorgan there is the equivalent of a rate in the region of 2s; to Monmouthshire over 3s; to Gateshead 3s; and to Merthyr Tydfil, 5s. I would like to say a few words about some of the areas which appear in the table, because I think that in any consideration which the House may desire to give to the question of gain or loss in the third grant period, as set out in Appendix V, we must take into account the total assistance which counties and county boroughs are now receiving and the circumstances of the respective areas. To take what they are already getting, what they will get under these new proposals and what are the circumstances of the respective areas is to apply a fair and reasonable test, and it is the test which was applied by the local authorities in this respect.

It can thus be said that the necessitous areas which are shown as receiving all-in gains, are also generally now in receipt of grants which, expressed in terms of rate poundage, are certainly above the average. Cumberland, for instance, with an all-in gain of 2s. Is already in receipt of a grant which in the first year of the current grant period was equivalent to a rate of about 11s.8d.; Monmouth, with an all-in gain of 3s. 3d. has a present grant of 10s. 4d.;.Gateshead, with an all-in gain of 3s., has a present grant of 5s. 5d., and Liverpool, with an all-in gain of 1s. 6d., has a present grant of 3s. 6d. I visited Manchester yesterday, and I found that they were generally pleased with the results of these proposals. In Manchester the figures of children under five, low rate-able value and unemployment are below those for Liverpool and Manchester has an all-in gain of 5d. and is in receipt of a present grant of 2s. 6d. Then take the figures for Lancaster, another area in which the figures as regards children under five are below the average. There is an all-in gain of 2d., it is true, but the present grant is 4s. 7d. Take another cotton area, Blackburn, where there is an all-in gain of 8d., but it has a present grant of 3s. 10d.

As another test, let us examine the position as it affects industrial county boroughs. Nearly all of them have further assistance. Leeds gains 3½d., with a present grant of 3s. 2d.; Dewsbury 4d., with a present grant of 4s. 10d.; Blackburn, as I have already said, 8d., with a present grant of 3s. 10d.; Sheffield, a gain of 10d., with a present grant of 4s. 4d., and Cardiff a gain of 5d. with a present grant of 2S. 5d. I do not think that it can be said that any undue consideration has been given to residential or seaside county boroughs. Bournemouth gains 1d., and the present grant is 6d.; Croydon gains 2d., and the present grant is 1s. 2d., and Southport, which is so ably represented in this House, has a gain of 2d., and is in receipt of a grant of 10d.

A number of areas it is true are shown in the report as losing after taking account of all the changes. But I think it will be found that those are the areas which receive the guaranteed minimum, that is, those areas which receive the additional Exchequer grant and whose loss has already been reduced by the concessions contained in Clause 4 of the Bill. Among those areas is the county of Northampton, present grant 8s. 1d.; the East Riding of Yorkshire with a present grant of 9s. 3d.; Burton-upon-Trent with a present grant of 5s. 7d.; Halifax with a present grant of 4s. 7d., and West Ham with a grant of 6s. 3d. Reference has been made to the case of West Ham and think there we have a fair test of the formula which we are about to apply, and have applied in the past. There has been a substantial and progressive decline of population, and they get 1s. per head gain under the minimum grant provisions and benefit to the extent of £8,000 under the arrangements in Clause 4 of the Bill. I have a number of other instances, and if any hon. Member desires to know the particulars of any case, or to have it specially explained, I am sure that my hon. Friend the Parliamentary Secretary will be glad to do so.

I claim that on the basis of need—and that I particularly emphasise, because I think it is one of the wisest things we have done in regard to local government—it can fairly be said that not only is this method of distribution much fairer than the old percentage system, but, taking it on the whole, apart from cases here and there where people will say that they would like to have a bit more, which is only human nature—I say, taking it on the whole I can claim this afternoon, on behalf of the local authorities and the Ministry who have arrived at these conclusions, that the new adjustment is equitable and right. To repeat a phrase which was used by my right bon. Friend the Chancellor of the Exchequer when he introduced the original Measure, I claim that this proposal is putting new money into the right place.

Mr. MacLaren

Into the landlord's pocket.

Sir K. Wood

The hon. Gentleman ought to go to his own local authority and have a talk with them about it. The distribution of such a large amount as that contained in the General Exchequer grant and its distribution—as this mainly is—on a basis of need, is unprecedented in the history of this or any other country. Apart from the great help which it will bring to needy areas, I believe it will do much to strengthen our system of local government, and enable further provision to be made for necessary local services.

I would like now to say something about London, and I cannot speak of London to-day without referring to the great loss which London has just sustained by the untimely death of our colleague Sir Henry Jackson. He was a good friend to many of us, and was universally respected in this House. He did much for his country and particularly for London.

The method of grant distribution inside London is on a basis which takes account of the special local government conditions in the county, and this part of the investigation was the special province of the representatives of the London County Council and the Metropolitan Standing joint Committee. I am glad to say and it is a good sign for local administration in London, that they have reached agreement, and it is not always that the London County Council and the Metropolitan boroughs do agree. But they have reached agreement in this case, and, in effect, the scheme of distribution inside London which the Government have accepted will again afford greater assistance to the poorer Metropolitan boroughs, while, in case there is any feeling as far as the wealthier boroughs are concerned, I may say that they will not have to contribute more than the equivalent of a three-halfpenny rate towards the proposals in the Bill. One or two instances are given in the Memorandum from London, and I propose to give a few more. The chief gainers under the new scheme in London, giving the amount as the equivalent of a rate are: Battersea, 2½d.; Bermondsey, 1s. 1d.; Bethnal Green, 6½d.; Poplar, 10d.; Shoreditch, 6½d.; Southwark, 2d; Stepney, 4d.; and I rather fancy that Woolwich gains 2d.

Mr. MacLaren

What about Kensington?

Sir K. Wood

There is another matter to which I must refer. In the course of the investigation into the block grant a number of questions arising out of or closely connected with it had to be considered by the authorities concerned. They have examined those other questions and they have rendered great assistance not so much to the Government as to the country in doing so. I desire to make a brief reference to the amendment of the ratio contained in Clause 1 of the Bill. Hon. Members will recall that the Local Government Act provided that the proportion which the block grant was to bear to the total rate and grant borne expenditure was in effect to be not less than 23 per cent. Actually it was 23.17 per cent. To ensure the maintenance of the existing minimum proportion after allowing for the continuing effect of the adjustments in respect of contributions to unemployment assistance, transfer of trunk roads and the abolition of the male servants' licence duty, it is necessary to amend the provisions of Section 86 of the Act in this respect, and the minimum proportion will now become 22½ per cent.

I would also like to refer to the supplementary Exchequer grant to the losing areas. This is a difficult question. It is a question of the additional sums paid to losing county districts to bridge the transition from the old grant system to the new, and it has been represented to me that the annual reduction of one-fifteenth, provided for by the 1929 Act, in the amount added to the capitation grant might cause some hardship and difficulty. We have, therefore, provided in Clause 6 that if the council of a district satisfies the Minister of Health that there is a case of hardship or difficulty he may, by order, direct that an annual reduction of one-thirtieth shall be substituted for the one-fifteenth. The estimated cost to the Exchequer may be as much as £70,000 a year at the end of the third fixed grant period.

There is a further provision to be made that if the Minister is satisfied that local conditions are such that even a reduction of one-thirtieth would cause hardship, he may, after consultation with the county council, direct that an amount equivalent to the reduction of the one-thirtieth shall be set aside out of the county apportionment for the payment of the district. I may say, for the satisfaction of the areas concerned, that regard will, no doubt, be paid to such things as specially high rates of a district compared with its neighbours in the country, to whether the districts are or are not in the Special Areas, and to the amount of their existing rates and the amount of loss they sustain by the ordinary operation of the supplementary grants provision. These regulations, I may say, I will discuss with the local authorities, and also I will discuss individual cases with the county councils concerned.

There is another matter that I must mention, because I have been asked to do so, and that is the question of compensation to be paid in the third fixed grant period to rural district councils in respect of loss on account of special and parish rates. The present arrangement is that, while the loss was made good in full in the first and second grant periods, in the third grant period, which we are just approaching, 50 per cent. only is to be paid as part of the districts' grant, and the amount to be paid by the county councils is left to their discretion. There have been expressed to me several times quite natural apprehensions by the rural districts as to the possible loss, at one stroke, of anything up to 5o per cent, of their compensation, and I am, therefore, proposing—and I hope it will meet their case, as I believe it will—in Clause 5 of the Bill that while the county councils' maximum contribution shall not be limited to any stated sum, their minimum contribution shall continue at the present figure of 25 per cent.

Mr. Silverman

What was the loss to the rural district councils for which this compensation is proposed?

Sir K. Wood

The hon. Member will find it in Section 92 of the Act of 1929.

Mr. Silverman

Could the right hon. Gentleman not tell us himself?

Sir K. Wood

The hon. Member will find the facts in the White Paper, where they are all set out. I want to refer now to Section 89. There the revised formula raises the question of the method of dealing with those counties whose apportionment was insufficient to meet the payments which had to be made to their district councils. Under the existing law the deficiency is made good by the Exchequer, and this matter arises only in two cases—Middlesex and Surrey. Were no revision of the existing provisions made, the new formula will increase the liability to the Exchequer on behalf of the two counties, which, I would suggest to them, are relatively prosperous and which, unlike others, would, if no arrangement was made, be the subject of no grant reduction at all so far as this provision is concerned. I saw the representatives of the two counties concerned and discussed the matter with them, and following that discussion I have inserted in the Bill a suggestion that a contribution should be made by the counties equivalent to half the amount of the deficiency in the county apportionment, subject, however, to a maximum contribution equivalent to the product of a penny rate. I hope that Members of the House will think that a satisfactory arrangement. I know one person who will think it is, and that is the Chancellor of the Exchequer, because the annual charge under the proviso in Section 89, it is estimated, would amount in respect of these deficiency grants in the third fixed grant period to about £260,000, and under the new arrangement this charge will be approximately £160,000.

One further matter. It has been strongly represented to me by those representing the associations and the London County Council that some provision should be made to mitigate the effect of the fall in what we call weighted population by relieving the local authorities concerned of some portion of the fall in the standard sums which took place under the present law when weighted population fell. It is said that weighted population may fall in certain areas, and that they have not time to adjust themselves under the provisions of the formula to the new arrangement. I am, therefore, proposing, in Clause 4 of the Bill, that this should be mitigated by disregarding 2½ per cent. of the fail in weighted population in such cases. The additional cost to the Exchequer will be approximately ½150,000 a year in the third fixed grant period, and I may say that the proposal is in addition to the provision that, for the purposes of Section 90, the weighted population for the first fixed grant period will be re-calculated on the new formula.

The final thing—and I am glad the Opposition are following my remarks with such care, knowledge, and understanding—that the local authorities desired was further provision for a statutory investigation so far as these particular provisions and others were concerned, and it was generally considered advisable, I think, by all of them that in due course a further investigation should be made before the whole of the general Exchequer contribution is distributed on the basis of the formula for weighted population. In a comparatively short period—though I do not know how many of us will be alive then—the whole of this very large sum of money will be distributed in accordance with the formula, and the associations thought it advisable that the formula and methods of distribution within the counties should again be reviewed. Clause 8 accordingly provides that the Minister of Health shall, in consultation with the association of local authorities, cause such investigations to be made, and then report to Parliament. Such investigations may be made at such times as may be directed, but so that both investigations shall be made before the expiration of the fourth fixed grant period, which is, I may say, March, 1947. The date or dates of these further investigations will be matters for later determination in consultation with the repre- sentatives of the local authorities, but I think it not unlikely that the method of distribution of grant inside the counties might usefully be examined at the end of the third grant period, as no change is now being proposed, and by that time the effects of the extensive county revision will be better appreciated.

I sum up thus the ten main proposals of the new scheme. There is, first, an increase in the general Exchequer contribution to local authorities of £2,250,000 more than at present; second, a minimum proportion in the future of 22½ per cent.; third, a further relief to local authorities by wiping out expenditure amounting to £2,750,000; fourth, a modification of the formula so that grants shall be allocated still further with regard to need, with particular help to those areas which need help the most; fifth, a favourable basis for the local authorities of the calculation of "weighted populations" for the purpose of calculating the additional Exchequer grants; sixth, a mitigation of the effect of the fall in weighted population for the purpose of calculating the additional Exchequer grants, increasing the cost of these to the Exchequer by another £150,000; and the same, I may say, will be effected without reducing standard sums on account of the merging of the unemployment contributions—another £150,000 advantage to the local authorities; seventh, a revision of the provision in respect of the losses of special and parish rates so that county councils may be enabled to make further contributions; eighth, a further provision, partly at the cost of the Exchequer, to meet cases of difficulty among separately rated losing areas; ninth, provision for London so that further relief may be given to the poorer boroughs; and tenth, a complete investigation of the working of the new formula and of internal distribution in good time before the whole of the block grant is distributed on the basis of the formula alone.

I thank the House for the patience and consideration which they have given me, and I commend these proposals, representing, as they do, the result of much patient and laborious work on the part of the local authorities in collaboration with the Ministry of Health. I ask for their acceptance by Parliament, because I think they may well be regarded as still further strengthening our local govern- ment system, placing its financial relations with the Exchequer on an improved basis and certainly bringing substantial aid to those areas of the country whose needs are the greatest and whom we all desire to help.

5.0 p.m.

Mr. Arthur Greenwood

We have listened to the right hon. Gentleman with interest if not with complete understanding, and in saying that I am casting no reflection on this House, for I strongly suspect the Minister himself feels as we do. My mind, like that of the right hon. Gentleman, goes back to those Debates of 1928 and 1929 when the use of the blackboard was invoked, and I feel sure that had the right hon. Gentleman wished to introduce it into the Chamber you, Mr. Speaker, would not have stood in his way. We have had exhibits of one kind and another in this House at various times, but when the right hon. Gentleman and the Chancellor of the Exchequer, both of them equally intellectually befogged as to the formula, might have introduced a blackboard, neither of them had the courage to do so, and we have had no new light thrown upon the intricacies of the formula. What we have had from the right hon. Gentleman, who was heard with satisfaction during the whole of his speech, was a somewhat elaborate defence of his new block grant system, and a somewhat long historical record which enabled him to fill up a great deal of his time without coming to the heart of the problem.

I am prepared to admit, and, indeed, the facts are obvious from the White Paper, that the new additional money is going to bring relief to a good many local authorities, but I am not saying that the formula has ever worked with smoothness and with justice, nor, I imagine, will the revised formula work justly. The right hon. Gentleman preened himself on his agreement with the local authorities, and pointed out how these conclusions had been reached in a spirit of compromise. It is the kind of compromise which is reached when a man says "Stand and deliver—Your money or your life," and you compromise by giving up your money. Of course, local authorities will accept this arrangement. They will not refuse £2,250,000 of new money to get them out of their difficulties, but that is not to say that at heart they feel that they have been dealt with in a spirit of justice, and I think that as we go along that will become clear. I am trying to deal with the right hon. Gentleman as kindly as I can.

The right hon. Gentleman emphasised what was insisted upon in 1929 and before, that the formula is based on need, shall not weary the House with long references to the table at the end of the White Paper. The right hon. Gentleman referred to the statement of the Chancellor of the Exchequer about putting new money into the right places. I looked with some interest at two towns which appear next to each other, Barrow-in-Furness and Bath. Barrow-in-Furness gains the equivalent of 9d. in the pound on its rates—Barrow, a gloomy, broken town, with its rates now 13s. 3d. in the pound; not the rates that Barrow would like to levy, pinching its services because it cannot afford to keep them at full strength. The City of Bath gains the equivalent of 8d. in the pound and its rates are only 10s. in the pound. One could go on showing the disparities there are in the application of the formula, though more money is being pumped into the distressed areas under this new arrangement.

Mr. Maitland

Can the right hon. Gentleman say what the present grants for these two towns are?

Mr. Greenwood

That is quite irrelevant. The Minister has been trying to ride away on that point. He has told us that Sheffield has already had 4s. 4d., but that is not the point. The point is, What is the burden that is left? That is the theme with which I am dealing. It does not much matter to me if towns are given the equivalent of 10s. in the pound on their rates. If they are still struggling under a heavy burden which they cannot afford to bear justice is not being done.

Mr. Maitland

The right hon. Gentleman mentioned the rates in Bath and the rates in Barrow-in-Furness, but surely it is important to know what are the present grants to both those places if the House is to draw a proper comparison?

Mr. Greenwood

That is not really relevant to my point. My point is that Barrow is an industrial town which has suffered since the War; it was developed into a war centre and has suffered heavily from derating, which Bath has not. Its rates are 3s. 3d. in the pound higher than those of Bath, and a grateful State gives the two places much about the same amount of financial help on their rates. The right hon. Gentleman referred to Southport gaining to the extent of 2d. in the pound. Blackpool gains 3.1d.;its rates for the last 10 years have been 7s. 6d. Brighton gains rather over a penny in the pound; its rates last year were 8s. 8d. Eastbourne gains about 1d. in the pound; its rates last year were 7s. 6d. Let me turn to industrial towns; I will not take outside cases, but reasonable cases where the rates are not abnormally high. I find: Burnley, 12s. rate, gains 4d.; Derby, 14s. rate, loses ½d.; Dewsbury, 15s. rate, gets 4d.; Halifax, 15s. rate, loses 5d.—for the reason which the right hon. Gentleman explained, that they have been on the minimum.

Having pleasure resorts on the one hand and struggling industrial towns with a much higher rate in the pound on the other hand, if the new money is to be limited to £2,250,000 there is no reason why places like Eastbourne, Brighton and Blackpool should receive 1d. Their rates are not as high as those in the rest of the country, and in many cases fall below the general average, and yet money is being trickled out to towns like Eastbourne—a few thousands to Eastbourne, a few thousands to Brighton. They will feel no advantage from that insignificant help, but that amount of help given to a hard-pressed industrial district might have been of considerable value. The right hon. Gentleman told us that the equivalents of rate reliefs of 2s. and 3s., and up to 5s. in the pound in the case of Merthyr Tydvil, had been given. That is not a measure of the Government's generosity, but a measure of the poverty of those areas. Relief of 5s. in the pound to Merthyr looks a lot, but its rates last year were 28s. 5d. in the pound, and 5s. will not clothe its nakedness; 5s. is not going to do more than temporarily relieve a pain which will always be there; it does not remove it, it merely dulls the shock. It looks large, but the effect on Merthyr Tydvil will be insignificant. The point is that this Bill will do something to relieve the heavy gloom in many of these districts but will not remove it, and poverty will stalk gauntly through those areas during this period as it has done during the last period.

Mr. Gallacher

Oh, no, they will be making munitions.

Mr. Greenwood

The proposals of the right hon. Gentleman are open to other objections. While many county boroughs are being helped in the case of many municipal boroughs and urban district councils falling within county council areas this principle has worked most unfairly. The right hon. Gentleman is offering an investigation before 1947 and has some hopes that we may have it before 1942.

Mr. James Griffiths

It will be a costly matter, because we shall then be sitting on the other side of the House.

Mr. Greenwood

Are the urban district councils to continue under these injustices? The urban areas within counties get what is allocated to them on a population basis, no other factors being taken into consideration. If they are not taken into consideration for a large urban district, why should they be considered in the case of small county boroughs? It is not a question of the dignity of the local authority of whether it is an urban district, or an ordinary municipal borough or a county borough, but a question of the conditions in the area. The Urban District Councils' Association have pointed this out time and time again. They did so during the discussions on the Local Government Act, 1929, and quoted disparities between two urban districts in Monmouthshire. In Rhymney the rates were 27s. in the pound and in Usk only 12s. 2d. in the pound. In the West Riding of Yorkshire they quoted two cases, both in the same county area; in Wombwell the rates were 25s. 9d. and in the urban district of Scammonden, which is really rural, they were 8s. 2d. Such disparities ought to be faced, and with the present system of allocation through counties, based purely on population and having regard to no other factor at all, certain industrial towns which are hard-hit are not receiving a fair share of the money which is now being made available.

Then the right hon. Gentleman twittered about his £150,000 concessions regarding population. Certain areas are losing population and are thereby losing grant under the new arrangement, but their local authorities have still to maintain their roads, street lighting, sewers, schools and other social services, and just because of depopulation through migration, arising from unemployment, these areas are losing grant when, in fact, they ought not to lose at all, because so long as there is a population there these big services have to be maintained.

There is one question to which the right hon. Gentleman did not refer. Despite the new money which is to be provided for local authorities, many of those authorities are still suffering from the hardship of having their resources restricted through derating. Industrial districts, often the poorest districts, when faced with derating, have the fount of their resources restricted, and nothing that the right hon. Gentleman is prepared to do, with his limited vision of £2,250,000, will relieve those authorities of the burden imposed upon them by the right hon. Gentleman's friends, in consequence of the derating of industrial property. The Government are salving their consciences with an expenditure of 2,250,000, and they are not treating the problem with the gravity and the seriousness which it deserves. The only sign of intelligence which came from that side of the House during the right hon. Gentleman's speech was a reference to the abolition of the Male Servants Duty. Then hon. Members flickered into life momentarily. Apparently there is no recognition whatever of the big problems which this scheme is trying to hide from the public gaze.

I am wondering and waiting anxiously for a sight of the Government's Bill dealing with the depressed areas. I am wondering whether they will be as niggardly in their contribution to the solution of that problem as they are in their contribution to the solution of the problem of our hard—pressed local authorities. The right hon. Gentleman said with pride that local authorities have been emancipated —I think that was: he wonderful word he used-from Government interference. The Government are prepared to emancipate local authorities if they can get out of if by paying them less money. The real reason why we get rid of the percentage grant system and give this measure of freedom and emancipation to local authorities is to curtail the amount of money given by the Treasury to the assistance of local authorities. The right hon. Gentleman said that I should not disagree with the block grant system under the Local Government Act; let me say that I disagree with it as much as ever I did.

Sir K. Wood

Might I recall what the right hon. Gentleman himself said in a previous speech, on 18th March, 1930? He said that he was always in favour of the Act, and he added: It was an Act done by my predecessor with the general approval of public opinion in thin country.

Mr. Greenwood

If my recollection is right, I was referring on that occasion to the abolition of boards of guardians, which I have favoured ever since 1909. If the right hon. Gentleman will get the head office of the Conservative party to search their files I should be very delighted, because I cannot recollect any occasion on which I said that I favoured the block grant system.

Sir K. Wood

On another occasion, at Leeds in 1930, the right hon. Gentleman is reported to have said: In the Tong run he thought the Local Government Act would improve local government services. Another gem of the right hon. Gentleman, in London on 12th November, 1930, was: The figures now available showed that the Local Government Act had given substantial assistance to necessitous areas. Those are some of the commendations upon which I was relying.

Mr. Greenwood

I can say this: I never, on any single occasion, have said that I was in favour of the block grant system. I invite the file expert of the right hon. Gentleman's party to provide any such instance. I know that the quotations are provided for the right hon. Gentleman. I have never denied, and I have said so on the Floor of the House time and time again, that the Local Government Act has done something for the necessitous areas. There were large blocks of that Act which met with the approval of some of my hon. Friends. That is a different thing from saying that I approve the block grant system. I did not know that the right hon. Gentleman was going so much into the history of this matter. If he had introduced it before, in his speech, it might have been a little brighter.

The real trouble of the local authorities is the restriction of their resources. We have a saying on this side of the House that the curse of the poor is their poverty. The curse of the poor local authorities is their poverty. Their representative people are no less public-spirited than in the more prosperous places and their municipal services are not less efficient, but they have not the resources with which to develop their services. There is a serious dilemma in the position of those poorer local authorities. The poorer the local authority the heavier the rate burden for a given standard of service, but if you have a lower rateable value it means more in rates to raise £1,000 or £10,000 than if you have a high rate able value. It is precisely those poorer towns with a low rateable value in which the social services are most needed. Those social services are not needed in your Cheltenhams, your Baths or your Southports, to the same extent as they are in our mining and industrial towns. The poor local authority gets hit not merely by its poverty but by the strain which is put upon its resources because of the greater need in that area for social services than in other areas. They are now having to carry the burden of many of their own poor, and the poorest towns have more people to support.

I see in the Press this morning that a memorandum has been sent to the Prime Minister by the Children's Minimum Council, and that a copy has been sent to the Minister of Health. Either the Minister has not read it or it has made no impression on his mind. I suspect the latter. I will quote part of a summary of the memorandum because it seems to throw light on the problem of the poverty-stricken local authorities: Referring to a reply by Mr. Baldwin to the council last August that children could obtain free meals at school, if in need of them, and that there were various schemes for providing milk to mothers, the memorandum asks, 'How far is this true of the distressed areas?'. In 26 such urban areas only 2.17 per cent. of the children received free dinners for some period during the year. In 24 of these areas 12.29 per cent.—about one-eighth—of the children received free milk. Of 22 schools from various parts of the country only seven provided free solid meals. Only 531 children received free dinners and 780 free milk, while the children whose parents were unemployed totalled 2,393. It goes on to say: Where arrangements were made for free dinners the food provided was very poor in quality, and to explain that that was because of the poverty of the local authorities. Then there is this pathetic note: A note is made on one weekly menu deficient in protective foods, that eggs are added when they are cheap enough. The report goes on: Out of the 16 maternity and child welfare authorities of which the council had particulars for 1935, and where the employment rate was over 25 per cent. in September, 1935, six gave no free milk to children between three and five years old, and of these four gave no free milk between the ages of one and five, and one gave no free milk to expectant mothers. Under existing arrangements half of any additional expenditure on school feeding, and the whole cost of any extension of the provision of milk or other food to mothers and children under school age, must be met out of the rates. The greater the need for increased expenditure, the less able are the rates to bear it. While the provision of free milk, biscuits, and cod liver oil preparations meant an additional rate charge of 3½d. in the pound at Pontypridd, where no free dinners are provided, the yield from a penny rate in some of the more prosperous places would provide from five to 20 times the amount of food or milk per child as it would in the distressed areas. I think that is a tragic commentary on the situation in which the poor local authority finds itself. A policy of tinkering will do no more than bring a slight temporary relief. As I have said, it may do something to dull the pain, but it is not doing anything to deal with a situation which is becoming chronic. This is not a temporary phase in the history of these areas. Unless the areas are saved quickly, they are dying areas. Their condition is chronic. More heroic steps are needed than a Measure to give £2,250,000, which will be shared by Eastbourne, Bournemouth, Harrogate and Cheltenham—I am enumerating well-off areas—as well as by the other towns which are not getting sufficient to put them in a position equal to the better, circumstanced local authorities.

The problem, while it is in a sense a poverty problem as regards individuals, is from our point of view a problem of the poverty of local authorities as such, for they are staggering under burdens which it is beyond their financial strength to carry. The need to-day, in the new circumstances arising after the economic revolution through which we are passing, and in view of the creeping paralysis in local government life in many areas of this country, is for something more than a plaster of £2,250,000 for the next five years. The right hon. Gentleman has a good deal of time on his hands now. He has no housing legislation—he has settled that—and he does not feel any great urge to do anything about any other legislation at the moment; here is a great opportunity for him to take on the task of reviewing the functions and responsibilities of local authorities. He might do that instead of studying my speeches, for, although he would get a good deal of enlightenment from my speeches, I would much prefer that he should be engaged on a constructive task.

I should like him to review the condition of local authorities, to look at them in the light of modern conditions and circumstances, and to consider whether there are not certain services which ought now to be made national responsibilities, and whether the time is not ripe for regional responsibilities in the case of certain types of services. Secondly, he ought to review the whole basis of the financial relations between the State and the local authorities. He and his friends crippled the local authorities by derating, and provided them with no other source of income except that they have now to come cap in hand and accept something above the block grant, arriving at agreement through compromise.

There is a third question which seems to me to be even more important, and that is that there ought to be forged a new partnership between the State and the local authorities. The State ought to take a more active part in assisting local authorities to recovery. If you deprive them of their resources by derating, and if you provide thorn with no alternative source of income, at least you ought, by deliberate localisation of industry, by directing the channel of economic activities into those area, to do something to restore their prosperity. I do not believe that any measure of were rate relief is going to save the depressed areas and the hard-hit districts. That can only come if the State is courageous enough to take on industrial activities and in the national interest require them to go where labour and industrial resources are available That will give, not merely new life to these areas, but new hope and new possibilities.

Following on that point, I suggest that the nation, faced, as it is now, with a crushing expenditure upon armaments, cannot afford to allow the social capital which has been invested by our local authorities during the last three generations to be frittered away either by depopulation or by poverty. It is wrong to start building new towns, which need the investment of enormous sums of capital in schools, roads, houses, and institutions, while the hundreds of millions of pounds which have been invested in the well-established industrial areas are allowed to become demoralised. That is a waste which this country can ill afford. Moreover, the country cannot afford—I have dwelt on this question in the House already, in view of the Government's new physical fitness campaign—the country cannot afford to tolerate the deepening poverty in the distressed areas, because that deepening poverty will not only affect the physique of the people there, but it must in the long run affect their morale. There is nothing which hurts me more in some of the distressed areas than the hang-dog look of men who have lost all hope. If we lose the morale of large districts of our country, we are losing what is the nation's chief asset.

I would say finally, so far as the present Bill goes, for this relief much thanks, but, as I have tried to make clear to the House, it holds no solution of the great problem with which we are faced, it holds no solution of those problems with which local administrators are heroically struggling from day to day in the attempt to cope with questions which it is beyond their power to solve. If we get £2,250,000 it will be something, but when the next grant period comes round, unless constructive measures of a vigorous and far-reaching kind are taken in the meantime, we shall be left with the same problem that we have to-day, and some Minister of Health will come to this House and with pride in his voice will say, "I am going to give x millions to the poor "—but the poor will still remain.

5.38 p.m.

Mr. Kingsley Griffith

With a good deal that the right hon. Gentleman the Member for Wakefield (Mr. Greenwood) has said, I find myself in hearty agreement, particularly when he referred to the fact that the difference between the yields of a penny rate in different parts of the country is at the heart of the problem. I think it is. But I am going to confine myself to much narrower ground by dealing with what is actually in the Bill, with the actual proposals rather than with what is left out, and in particular I want to deal with the formula. It is quite like old times to be dealing with the dear old formula again. I cannot help remembering the days in 1928 when I sat here with the Minister of Labour by my side—or perhaps it would be more respectful to say that the Minister of Labour sat here with me by his side—and we expressed rather sulphurous views with regard to the Act of 1929, as it became in due course. I think we regarded it at the time as something ugly and venomous, but even then we thought it might have a precious jewel concealed somewhere in its head in the shape of this very formula.

I admit that it is not much to look at. If one turns to Appendix III, on page 20 of the report, one might say that it looks rather sinister. In appearance it might be the nightmare of some demented senior wrangler, or, in the words which were once used by Tim Healy with regard to a certain Irish Bill, it might have been conceived in Bedlam and drafted by Adam Smith. It really is not as bad as that when one comes to apply it. I have found that a great deal of the sting is taken out of it by getting rid of all the P's, and C's, and R's, and U's, and W's, and S's, and by substituting instead the actual figures, which can be got from the borough treasurer or, as I got them, from the Ministry of Health, for one's own constituency. If the actual figures are put in instead of the letters, the whole thing works out as sweetly and simply as a crossword puzzle in the "Times," and it is then extremely instructive.

I have, by the courtesy of the Ministry of Health, the working out of the formula for the county borough of Middlesbrough, which naturally interests me. I am not going through all the details, but the net result is that under the old formula our actual population of 140,000 was weighted up to 441,948, while under the new formula it is weighted up to 576,633. Therefore, under the old formula the ratio of weighted to unweighted population was 3.16, while under the new formula it is 4.12. That is a very considerable weighting, and I cannot help observing the remarkable fact that a borough which, when its needs are scientifically assessed, needs to be weighted up to that extraordinary extent, is nevertheless not permitted any of the advantages that go' to distressed areas or to Special Areas. That is a very strange state of things.

Of course, one has to remember, in dealing with the ratio of weighted to un-weighted population, that the value of weighting is always relative. There is only a certain limited amount of money to be divided, and your weighting may entitle you to a high proportion, but, if other people also are heavily weighted, then you lose something. For instance, even under the new system, provision is made, which I gladly welcome, for an additional weighting in respect of unemployment, but, of course, as soon as weighting begins to be given under S, for sparsity of population, that must inevitably mean, in certain counties, taking away something which they had been previously given by the weighting for unemployment. That cannot be avoided.

There is one thing which I think it is necessary to realise, and I was not sure that the right hon. Gentleman the Member for Wakefield realised it. He was continually giving these proposals credit for providing £2,250,000 of new money. They do not. They do not provide any new money, unless, indeed, the £150,000 is to be taken as new money, because, as I understand it—no doubt I shall be corrected if I am wrong—the £2,250,000 is a direct consequence of the provisions of the Act of 1929. It is money provided in order to maintain the statutory proportion, which was fixed in 1929, between the total grant and the total rate and grant-borne expenditure of the local authorities. That had to be done according w the Statute, and, as the total expenditure of the local authorities has been increasing in the past few years, owing to the increasing burdens which have been placed upon them, the fund as a whole has earned this addition. It would be very wrong and misleading if it went out from this Debate that the Government was generously putting its hand in its pocket, or rather, in the taxpayer's pocket, and providing out of its graciousness all this new money. That is really a deceptive way of putting it. Doubt- less there will be new money to go round, but this is a result of the original working out of the Act of 1929.

There is another thing which should be realised. The Minister has laid great stress on the agreement arrived at with the local authorities. Of course, they did agree, and we are doubtless grateful to them for doing so, but it is important to realise how far that agreement went and how far it did not go. I find that in the report of the representatives of the Association of Municipal Corporations to their Committee, dated 18th November, 1936, that they say quite clearly: Any arrangement of this kind is neither expressly nor by any implication to be regarded as a withdrawal of the claim made by the local authorities that the contributions from them towards the cost of the cases transferred to the Unemployment Board should not be collected, on the ground that the Government should hear the whole cost thereof. Therefore, the local authorities are still maintaining, as the great bulk of them always have maintained, that the whole cost of the able-bodied unemployed should be borne by the State, and they are not withdrawing from that position by any sort of promise or any agreement which they have made with regard to this Measure. It is most important that that should be realised, because that plea for the taking over of the whole burden and getting rid of the 60 per cent. will still be maintained in the future as it has been in the past. There are one or two mysterious things when one compares one town with another. I have found it interesting to compare Bournemouth with Birmingham. Bournemouth gains 1.1d. and Birmingham loses precisely the same amount. I am wondering whether there is some sinister political significance in this matter of robbing Neville to pay Henry. Does it mean that the centre of gravity of the Conservative party is moving even further to the right than we have so far supposed? These minor puzzles occur in the comparison of particular towns.

But, dealing with the Bill as a whole, and dealing particularly with the formula, which I have found the most interesting part of it—to local authorities the revision of the formula is the main part of the Bill—I have consulted three local authorities, but I must not say which because I have not authority to speak on their behalf. The general im- pression that they gave me unofficially was that this new arrangement might have been very much worse. They nearly always say the same thing. That is just about as near to wild enthusiasm as any local authority ever permits itself to come. The right hon. Gentleman, therefore, may be satisfied so far with the reception that his proposals have had. I welcome the opportunity of saying, since I was one of the principal critics—not the most important but occupying the greatest amount of time in my criticism—of the Act of 1929 that I still maintain my objections to the derating proposals but, with regard to the formula, if I have said anything to insult it I will take this opportunity of withdrawing. I think it has stood the test of time. It was a genuine effort to allocate money according to local needs on a scientific basis, and I recommend the example of the Ministry of Health in that matter to the Ministry of Labour, whose method is to draw slap-dash a line on the map and say that everything on one side is to receive certain advantages which are withheld from those on the other. Just as the formula was originally an honest effort to meet the situation, so I think this revision is another honest effort to meet the additional necessities which have come on since that time.

I am left with this reflection that, going on the basis of the new formula, it is obvious that a good many places have been bearing heavy burdens which, by the evidence of the new formula, they ought not to be bearing, for a considerable measure of time, and I wish it were possible to revise the formula more frequently than can be done under the 1929 Act or under this Bill. The time lag -nay result in local authorities being left with burdens, which ought to be removed and which, as soon as time for consideration is taken, are removed, which so many of them are not in a position to bear. Therefore, whilst supporting a great deal of what was said by the right hon. Gentleman the Member for Wakefield about the inadequacy of the Measure to meet a great many of the problems which it does not meet, and which it was not intended to meet, at the same time within its limited scope I give it a very hearty welcome.

5.50 p.m.

Mr. Maitland

I am glad of the opportunity of following the hon. Gentleman, because like him I well remember the Debates we had when the original Bill was introduced. I remember the objections that were then taken not only on the question of derating, but we also had from the right hon. Gentleman the Member for Wakefield (Mr Greenwood) on one occasion an attempt to explain this arithmetical formula. I am certain that, even after it has been in operation for seven or eight years, there is no one in the House who, with his hand on his heart, could say he understood it. But there is one thing that can be said with certainty. As the result of the experience that has been gained, this mysterious formula has proved able to do the work it was intended to do. When the original Bill was introduced, those in control of local government had certain fears on two points more than on any others. The first was this: Under the derating proposals it was obvious that they were going to lose very valuable hereditaments which were subject to local taxation. The first point that arose in their minds was how much the Government were going to give to make up for the loss that they would sustain. The second point, which was equally important to them, arose from the variety of interests in connection with the local authorities themselves. You have counties, county boroughs, non-county boroughs, urban and rural authorities.

The second point therefore on which people were exercised was as to how the amount the Government intended to pay would be distributed, and there were very genuine apprehensions as to the position in which local authorities would find themselves. The right hon. Gentleman the Member for Wakefield, who says he never explains and never withdraws, has repeated in effect to-day what he said seven years ago. Whether he withdraws or not, the facts are that his gloomy forecast as to what the formula would do has not been justified by experience. It has, in fact, done what is was intended to do. It may very well be that it has not done it to the same extent as we would like. I am authorised to speak to-day on behalf of the Association of Municipal Corporations and I am expressing their view. They appointed a body of financial experts under the chairmanship of a gentleman whose name is very well known to almost every Member of the House, Mr. Arthur Collins. They have been sitting for something like a year and the astonishing thing is that, after the closest examination, that committee finally decided that in the interests of those whom it was designed to help, that is where the need was greatest for assistance, they had to come back to the formula which has been in operation all these years.

Mr. Lawson

The hon. Member must be aware that the local authorities had to make a compromise on the matter, as the Minister said. The financial authorities had to tell the people in the distressed areas that no block grant would meet their needs.

Mr. Maitland

I will come to that in a moment. The point that I want to emphasise is that, when it came to a question of considering some other formula, the conference went back again to the old formula, saying that with certain variations it was the best way in which they could achieve the greatest help to local authorities, consistent, of course, with the point of view of other authorities which had to make some contribution. I hope hon. Members were not unduly perturbed when the right hon. Gentleman the Member for Wakefield referred to some of these figures. It is quite misleading to give figures of the kind that he gave, and to leave the House under the impression that that is all that has to be said about them. It is most important that in any consideration of these alterations there should be taken into account the present amount of assistance that is being given under the existing formula, and unless hon. Members get both figures they will have an entirely erroneous idea of the operation.

But I did not want to get involved in detailed questions. I rather wanted to say a few words with regard to the general purpose of the Bill. The local authorities are satisfied that the proposed Measure is fair to conflicting interests. It is true that in the early stages those representing the County Councils Association desired another method, but they withdrew their objections and have assented to this proposal. It is an amazing tribute to the good will that must have existed amongst the representatives of the authorities that, in a matter of such complexity and difficulty, it was possible to arive at a result generally satisfactory to all parties. The principle that assistance from the block grant should vary with the need for local government services in relation to ability to meet the cost is one which will appeal to hon. Members. They will recognise that it is a sound principle to apply with regard to the distribution of a block grant to local authorities. I hope when, on other occasions, they are referring to the means test in another sense, they will have in mind that the best test for an application in regard to an individual or an authority is the question of need.

There are two alterations in the Bill which I am sure will be accepted with appreciation by all sides of the House. The first is, that the General Exchequer Contribution is increased, and the hon. Member for West Middlesbrough (Mr. K. Griffith) may be satisfied, whether he will regard it as new money or not, that it is additional money. There will be placed at the disposal of the local authorities an additional £5,000,000 per annum during the next five years, and £2,250,000 per annum of it is additional money to be provided direct by the Treasury, and the balance is to be found by way of relieving authorities of giving assistance to the able-bodied unemployed, an adjustment in regard to the cost of trunk roads, and Male Servants Licence Duty. The right hon. Gentleman the Member for Wakefield was rather jocular about the way in which the suggestion of the Minister in regard to the abolition of the tax was received. This is the period of the year when all kinds of rumours are floating about with regard to increased taxation, and if any hon. Member were to ask the Chancellor of the Exchequer whether any particular tax would be reduced or removed, the right hon. Gentleman would say, "You must await my Budget statement." The House can be satisfied, in regard to this particular tax, that in the next Budget statement we shall have not its partial reduction, but the absolute abolition of it. I believe that that will be a very good thing—the second alteration gives greater benefits to poorer authorities.

These proposals have been subjected to the closest scrutiny on the part of the local authorities. They have had the most competent advice with regard to them, and, as far as they are concerned, they are satisfied that they represent a con- clusion which is fair to the local authorities themselves. I have been asked to make that statement to the House, and also this further statement, which I do with the greatest pleasure. They desire to express to the Minister and his Department their warm appreciation of the great assistance which has been rendered, and I am informed that if it had not been for the great patience and assistance given by the Minister and the Department during very long and protracted negotiations, it would have been extremely difficult, if not impossible, to arrive at such a satisfactory result.

6.3 p.m.

Mr. Gibbins

The block grant system was instituted to produce equity among local authorities. In Command Paper 3134, page 4, there is a statement by the Minister of Health that the relief of industry is a primary reason for undertaking a scheme of this magnitude. Everybody in the House knows that the provision of the £24,000,000 for de-rating introduced some intricacies into local government. After that the Minister thought of the block grant system. The Minister of Health should not forget that he has abolished the percentage grant. Anybody who listened to his speech to-day would have imagined that this block grant abolished all percentage grants, and that then by a system of weighting they were to deal with local authorities' funds on a perfect and equitable system. That is not true. The hon. Member for Faversham (Mr. Maitland) spoke about the proposal having the support of local authorities. My purpose in intervening in this Debate is to say that, if results have to be the test, then this scheme fails. In spite of Liverpool receiving an additional £428,000, the effect of the block grant and of the economic conditions from 1931 to 1935 has made it necessary for that city to raise its rates, and in some respects to retard its services, or put further burdens upon themselves for the developing of those services. From 1931 to 1934–35 the cost of our able-bodied relief, due in the main to the proposals of the Government, was an increase of over £700,000, and if you add to that the £250,000 due to de-rating, it makes a sum of £950,000, and all that we received in the block grant was £970,000. The result is, that we have practically nothing left with which to contribute to the development of the services exempted from the percentage grants. We have continually been crying out during the last four or five years because the costs were so tremendous.

I am speaking from experience, because during the four years of my enforced absence from this House I was a member of the Health Committee. Time after time when proposals for development were put forward, we had continually to be asking about the money, and we were told that it would come out of the block grant. We found that the imposition on the Poor Law and the unemployed who had no status in Health Insurance left us with practically nothing in the block grant with which to carry on these two services. This has meant, since 1931, an increase in the expenditure of Liverpool of £700,000 to be met out of the rates. I know that there are some other reasons, but does the Minister suggest that, if the percentage grants had been maintained and local authorities had been allowed to develop normally and naturally, they would have been receiving less than they received under the block grant? That can be ascertained from the amounts paid in the previous standard year. The block grant has failed to do good because it particularly omits two developing services, hospital services and child welfare and health services. Owing to the peculiar position of the City of Liverpool we have to build further out into the suburbs in order to house our people, and that means increased costs in roads and sewers, and, in the main, no percentage of the block grant has been allowed for these because of the tremendous charge for our able-bodied unemployed and those who are not insured for sickness. Last year we received an addition to the block grant of £770,000 from the Government, and I would be the last person in the world to deny any gratitude to them for that. But in spite of that, in our Estimates for next year we have to find over £400,000 for the able-bodied unemployed.

What about the proposed further burden that may come upon the City? The greatest evil of the block grants was that they were set for five years, and very little advance was made during those five years to meet increased expenditure. You cannot prevent the natural development of a city like Liverpool or a town like Middlesbrough. They are set again for five years, and the present standard of development must be the limit, unless we pay for it ourselves. The failure to take into account these two main services which are excluded from the percentage grants, has made a greater burden. What of the future? I understand that Liverpool is expected to find £400,000 as a minimum contribution for air raid precautions. Then what becomes of the £400,000 added relief which we are supposed to get? It appears that something is given by the Government in one hand and taken away by the other. Liverpool has juvenile centres and a tremendous amount of juvenile unemployment, and only this morning we received notice from the Town Clerk that we are expected to provide £400,000 as the initial cost for air raid precautions. The block grant has failed to a great extent to help cities like Liverpool, which has 28 per cent. of unemployment. The Government have left us with a burden of increased debt and with hardly any resources with which to extend our services. I only hope that the time is not far distant when the block grant will go and we shall get again percentage grants for genuine health work, and that we shall be better off in Liverpool.

6.13 p.m.

Mr. Wise

The hon. Member for West Toxteth (Mr. Gibbins) devoted practically the whole of his speech to an attack upon the system of block grants, and as the right hon. Gentleman the Member for Wakefield (Mr. Greenwood) devoted a good deal of his speech to the same subject, I should like to say something about this aspect of the question and the reasons why, in the opinion of many of us, this is the best possible system for administering grants to local authorities. With all due respect to the hon. Member, the percentage grant system cannot be sound. The percentage grant is one which is open to misuse by extravagant authorities.

Mr. Gibbins

Does the hon. Member say that, after the whole of the percentage grants of to-day have been dealt with, there is still more money to be paid out by the Minister in percentage grants? If he admits that, is he prepared to say that the whole of the percentage grants ought to go?

Mr. Wise

I do not think that that quite follows from my argument. I am not saying that there should not be percentage grants, but that percentage grants are open to misuse. In the past, when these percentage grants were made, they were in some cases misused, and there were cases where local authorities even had to be replaced by commissioners. Their percentage grants were something enormous because the improvements which they were undertaking were largely unnecessary. The block grant system is really the only possible means by which you can distribute money to local authorities. The only alternative is to have some absolutely arbitrary allotment of funds according to the will of the Minister, who would survey the various districts and say, for instance, "I think Liverpool ought to have a little extra this year, because I like its political views," or, "I think that Birmingham should have a bit less, because its political views are unsound." That arbitrary method of allocating funds cannot possibly be sound. Therefore, the block grant, system, which does take into account the real needs of the area—whether it entirely satisfies them or not is a matter of debate—is the better system. It is undoubtedly the most equitable method of settling what funds the local authority shall have.

In this Bill a step has been taken in the right direction, and we should be grateful for the advance which is taking place in giving relief for areas which so badly need it. There has been a measure of gratitude even in the criticism which has come from the other side of the House. It is very pleasant to think that that should be so, because these distressed areas and areas on the verge of distress have gone well beyond the ordinary scope of politics, and are not the proper playground for any party cry. I was inclined to agree with the right hon. Member for Wakefield when he said that the allotment of this relief might have given rather more to those in need of it and rather less to the richer areas. That is a matter for examination possibly in Committee, as to whether some alteration could not be made in the system of weighting, but it would be extremely difficult to set up any revision without careful inquiry. I would suggest to the Minister that there is a feeling that places like Bournemouth and Bath, although they have received less in the past than other areas, really do not need any assistance at the moment and could well bear the slightly extra charge, provided that the money so saved went to less happy areas. If some of the rich areas were a penny less well off some of the poorer areas might well be 6d. or 7d. less well off, because of the difference in the product of a penny rate.

We ought to look upon this Bill as the first step in a great programme which we all hope—some of us are confident—will tend to re-attract industry back to the areas which it has abandoned. Looked at in that light and not purely by itself, because there are other Measures coming along, which we must judge when we see them, I think it is a great assistance. I believe that ultimately we shall all of us come to the conclusion that the whole of poor relief will have to be made a national charge. That will undoubtedly produce a far greater effect than this Bill. In an area like Merthyr Tydvil, which wants to attract industry back to it, relief of 5s. in the pound, or rather more, because the figures have altered slightly since the schedule was produced, is, I hope, going to have a very considerable effect in the bringing back of industry. It is true that with the rates somewhere about 29s., 5s. does not sound an awful lot, but if a penny rate produces only £850 the assessments must be fairly low. When we take into account the three-fourths off for derating, I think it may have the effect of persuading industry to look to that area for new sites instead of going to some of our best agricultural land.

With regard to the rest of the speech of the right hon. Member for Wakefield, which strayed rather a long way from the Bill, I was in agreement with many of the things he said, but I will not detain the House by following him on a line which was rather remote from what we are discussing. The location of industry is an important matter and one on which there is growing agreement in all quarters of the House, possibly not as to the actual methods but as to the results which we wish to attain by persuading or encouraging industry to go to one part of the country or another. That, however, is not really germane to the Bill. The Bill is undoubtedly a step in the right direction and should be welcomed. I hope that hon. Members opposite will not divide against it as a protest against its inadequacy, but that they will be thankful for something at least which will assist the areas which many of them represent. I think they will realise that they cannot condemn the complete scheme for the assistance of the distressed areas after having seen only the first measures to be undertaken towards their salvation.

We are expecting the text of another Bill this week and we shall be able to see then what further steps are being taken. I hope that it will be possible in Committee on this Bill to persuade the Minister to make further concessions to the more distressed areas, but that is a matter which we can try only by experiment. Let us be content with the basic fact that £2,250,000 more are being provided for the assistance of the local authorities. The hon. Member for Middlesbrough, West (Mr. K. Griffith), said that it is not new money, for it would have had to be provided anyway. That is the equivalent of saying that when a hen has laid an egg it is not a new egg because everybody knows that the hen would have to lay it somehow.

Mr. K. Griffith

I was only saying that the hen at present sitting on the Front Bench was not the hen that laid the egg but that it was the present Chancellor of the Exchequer.

Mr. Wise

We will leave that to be judged, as to which can produce the largest amount of jubilation over the bantling when it arrives. The right hon. Member for Wakefield said that the Government could not salve their conscience with £2,250,000. That is the attitude of the mediaeval farmer trying to sell a farm for as big a sum as possible. Whatever sum the Government offered I am certain that those on the other side of the House would hold out for a little bit more. It is true that the Government cannot salve their conscience on the question of the distressed areas with £2,250,000. No government and no party could salve their conscience with £100,000,000. The conscience is salved not by the amount of money you spend but by the effectiveness of the measures you adopt for the regeneration of these areas. I believe that if we apply that test and if the remainder of the measures are as well directed as this one, even the right hon. Member for Wakefield will not unduly withhold his generous forgiveness.

6.25 p.m.

Mr. A. Jenkins

The hon. Member has spoken a good deal about conscience and has in some ways connected that with the distressed areas and the block grant system. It may be said that if the Government had any conscience at all about the distressed areas they would not have existed so long. They have existed for a very long time, and while we are expecting a new Bill this week it needs a great deal of optimism to believe that the Government will this time bring in a Measure that will effectively deal with the problem. On the subject of the Bill I want first of all to express my appreciation of the work which the finance officers have done in connection with this matter. I sat on a sub-committee of the County Councils Association, which was appointed in November, 1935, and we have been meeting occasionally ever since. All through that period the finance officers have been working and studying the finances to find out how the block grant might be varied in order to throw certain moneys over to the Special Areas. There is not sufficient money in the block grant to deal with the problem of the Special Areas, and it would be wise on the part of hon. Members to recognise that fact. In the report of the finance officers they make that point perfectly clear. In paragraph 25 they say: Reference may now be made to the first four questions asked by Sir Kingsley Wood as set out in paragraph 4. Grouping these four questions together, it is well to state at this stage in the report hat there is a general consensus of opinion that the formula does not distribute the pool in such a way as to meet the needs of the poor and distressed areas. On this point, the opinion has on many occasions been expressed, that whilst the revision of the formula should be to reduce inequities, any attempt to revise it to meet the full needs of the distressed areas is impracticable. This view still holds. At the same time, it is reasonable to expect that, as far as possible, some measure of financial amelioration should be accorded to these areas through the medium of the Block Grant system, consistent with the provision of a sufficient measure of financial justice to the other authorities. That statement indicates clearly that agreement had to be reached between the authorities. Nothing else could be done. The formula was based, as everybody knows, on the Act of 1929. The Bill was promoted perhaps for the purpose of getting a better distribution of Exchequer monies than existed at the time, but it also had other purposes in view. One of its main purposes was derating. It succeeded in carrying out a large amount of derating, but at the expense of a large number of authorities. I am afraid that some time or other those authorities will pay pretty heavily for that derating. In addition to that, the old percentage system of grants ended as far as certain services of the local authorities are concerned, and under that Measure the authorities have to meet the whole of the expenditure on any extension of their services for a period of years, usually about five years, before the revision. However, due to agreement now having been reached by local authorities, the formula is to be altered in two respects, and a certain amount of additional money will go to the poorer authorities. Like other hon. Members I welcome that proposal, but I want to say quite definitely that it does not. by any manner of means, solve the problem of the Special Areas. Reference has been made to Merthyr Tydvil with a rate of 29s. in the pound. They will get relief under this Measure of 5s. in the pound. How long will they be able under the present circumstances to maintain that rate? It is perfectly obvious that under the conditions which prevail in Merthyr Tydvil the 5s. relief will be wiped out in a year or two.

Mr. Wise

I do not think that is the case in Merthyr Tydvil, as the rate has been fairly static at 29s. in the pound for some years.

Mr. Jenkins

Anyone who has gone carefully into the case knows that that has been brought about by the fact that they have not carried out their services to the extent they should have been carried out. Merthyr Tydvil has a very heavy liability in respect of public assistance, but its public assistance rates are particularly low. They are certainly not adequate for the needs of the people, and as the pressure gets more acute so the services contract. It is not only in Merthyr Tydvil that this operates. It operates in all the Special Areas and in other districts as well. I welcome the new money which is coming to these areas under this Measure, but I want to make it perfectly clear that something more must be done for them.

I rose particularly to call attention to a liability which these areas are carrying and which is not provided for in the Measure. I refer to the Goschen loans, which were contracted years ago when the industrial depression first arose. It was an arrangement by which the Government facilitated the granting of loans to authorities for the purpose of carrying on unemployment relief works. The major portion of the Goschen loans was used in that way, and a substantial amount of loans was contracted by local authorities under that arrangement. I should like to point out that these Goschen loans relieved the Government in those days of the payment of unemployment benefit; national funds were helped as a consequence of the relief works being undertaken. It was thought that it would be possible to carry out relief works and that the period of depression would not last very long. The people were optimistic that things would soon improve and as a consequence substantial loans were contracted.

These areas have to bear the burden of these loans. They were contracted in the days of the old boards of guardians, but the Act of 1929 abolished boards of guardians and spread the area of public assistance over a wider field. The county was made the area, and with the spreading of the liability for public assistance over these wider areas they also became responsible for the repayment of principal and interest charges upon the Goschen loans. Let me give one particular case. There was the old Bedwellty Board of Guardians, an area in which the depression was earliest and most acute. It included Blaina. From 1921 onwards there was a considerable liability arising from public assistance and consequently these Goschen loans were contracted and relief works undertaken. But in 1929 the liability of the Bedwellty Board of Guardians in connection with these loans was spread over the county. There are other boards of guardians in the county which have also contracted Goschen loans. There was Newport, which, however, had paid off the whole of its liability. When the 1929 Act came in and the liability in respect of these Goschen loans was spread over the whole county every ratepayer in the county of Monmouthshire is now called upon to pay his share in respect of these loans. That amounts to the product of a 10d. rate in Monmouthshire. Originally it was more than that, but some relief was voted by the Government and it was reduced to a 9d. rate. Owing to the falling in rateable value it necessitates the imposition of a 10d. rate to meet that liability.

I believe there are about 12 local authorities in the whole of the country which have liabilities in respect of these Goschen loans, and the total amount is about £350,000 per annum. It has been paid every year for a period of seven or eight years, but through the operation of the formula about which we are speaking tonight that £350,000 is to rank for a grant from national funds. Every authority, including Bournemouth, is to have an advantage from national funds distributed under the formula. In this Measure we have a provision that the liabilities arising under the Unemployment Insurance Act are to be spread over the whole country. Surely there is an equally strong case for spreading the liability for these Goschen loans over the whole country. If that was done it would not mean more than a halfpenny rate anywhere in the country. National funds were relieved when the loans were contracted and local authorities' funds have benefited all the time the distressed areas have been making payments in respect of the Goschen loans. I rose particularly to make that point. I regret that it is not provided for in the Measure, and I hope very much that the Minister can give us an assurance that an attempt will be made to make provision for spreading the liability in respect of these Goschen loans over the whole country, thus transferring it from the Special Areas upon which it is weighing so heavily at the present time.

6.39 p.m.

Lord Eustace Percy

If I may say without impertinence, it is always refreshing to listen to the hon. Member for Pontypool (Mr. A. Jenkins), who always speaks with knowledge not only of local authority work in general, but with special knowledge of the administrative problems in the distressed areas. I largely agree with him on the subject of the Goschen loans. It seems to me that one way in which the National Government should help the specially depressed areas is by cleaning up the past. The Goschen loans are an excellent example of the millstones of the past which are hanging round the necks of authorities in these distressed areas. But it was not for that purpose that I rose. I wish to underline the conclusion which the hon. Member reached at the beginning of his speech, that not only no block grant but no conceivable formula can stretch wide enough to cover the difference between Merthyr Tydvil and Bournemouth—no formula which will take into account the general equities between local authorities, no automatic formula, can reach down to that depth. May I carry it a little further? Will not the House agree that a fortiori a percentage grant can never cover that difference? I was astonished to hear the right hon. Member for Wakefield (Mr. Greenwood) invoke the percentage grant and in the same breath talk about the thousands of pounds which will be given to Eastbourne and Bournemouth and other prosperous places. If there is one system which allots grants on the principle that "to him that hath shall be given" it is the percentage grant system and, therefore, it is no good looking to the percentage grant system as an alternative method which has not the evils of the block grant system.

Hon. Members opposite and especially the right hon. Member for Wakefield have urged the Ministry to overhaul the functions of local authorities, to consider which ought to be national and which should be regional. I support that plea. I think it is enormously important in the coming years that we should consider whether this automatic business, which has been going on for the last 15 years—that, whenever you find a problem, you unload it on the local authorities—can continue to work. I think we should consider whether a problem like town planning can be dealt with by local authorities. But even if you have a redistribution of functions it is prefectly clear that regionalism is useless in South Wales. You would merely be putting together into one pool a lot of individual miseries and making one large pool of it. Regionalism would not be very much good in Durham. As to the nationalisation of functions, surely it is true, with one single exception, Poor Law relief, that there is no function you can conceivably nationalise which would not benefit the richer authorities more than the poorer authorities, and, the nationalisation of Poor Law relief, which is still left to the public assistance authorities, is so eminently a matter of local touch and personal discretion that its nationalisation would be extremely difficult.

The right hon. Member for Wakefield also invoked the principle of not allowing social capital invested in the depressed areas to go to waste. I hope that that consideration will never influence our attitude towards the Special Areas. The number of human beings in those areas and the hardships involved by transferring those human beings to other areas is the consideration that we ought to take into account. But when we talk about social capital, let us remember two things. In the first place, the worst sin of the banks in this country since the War has been lending money on fixed capital, as if fixed capital in itself would produce anything or sell anything. Look at the fixed social capital in Merthyr Tydvil. Can you invite any business man to go to Merthyr Tydvil and put his workmen in the existing houses in all that area of Merthyr Tydvil that adjoins the site occupied by Messrs. Guest, Keen and Nettlefold's works? There is not a house in that area that ought not to be swept away, and it includes much of the most scandalous housing accommodation that exists in any part of this country. Most of the schools also, judged by modern standards, are out of date.

The truth, from the point of view of pure social capital, is that there is much more justification for replacing that capital elsewhere than replacing it, as you would have to replace it, on the spot. That is not the principle on which we should go in dealing with the Special Areas, but we should go on the principle of taking into full consideration the human problem of the number of people now concentrated in those areas and what would be involved in transferring them elsewhere. That, perhaps, is a digression. I come to the point to which I have been working.

Mr. Jenkins

The Noble Lord referred to social capital, and in particular to Merthyr Tydvil. I do not know whether he is aware of the fact that a large number of those houses were sold to the workpeople by Messrs. Guest, Keen and Nettlefold before their works were closed.

Lord E. Percy

I am afraid that only makes it worse. I come to my conclusion. As long as you are trying to devise a system which can be applied to the local authorities of this country as a whole with fair justice as between local authority and local authority, you can have no grant system and no general redistribution of functions between the local authorities and the central Government which will meet the needs of the poorer areas. What is the conclusion that is to be drawn from that? I will not go outside the limits of this Bill into questions of public administration in the Special Areas, but surely, if it be the case that no grant system can take care of the poorest areas, what conceivable justification is there for the principle, in the old Special Areas Act, that the Commissioner for the Special Areas must not aid by grants services already grant-aided by the Ministries in London? That is the dilemma which we who support the Government are in. If you say that the block grant system and the percentage grant system is not intended to, and cannot unfortunately, deal with the poorest areas, you cannot next day turn round and say, "In no case in any of these Special Areas will we make an additional grant to the services which are already aided there." Therfore, I hope the Government will no longer ask the House to support what is fundamentally so unreasonable a proposition.

The real question which arises, and with which this House is concerned, is whether we have not reached the point—the right hon. Gentleman the Member for Wakefield referred to a new technique of relations between the central and the local Governments—when local authorities should agree and admit that there must be a certain element of arbitrary action by the central Government in dealing with the peculiar needs of the poorest authorities and the economically worst hit areas. Hitherto local authorities have been like the nations at Paris M 1929, when they were drawing up the Covenant of the League of Nations, the smallest nation insisting on the sacred principle of the equality of States and not allowing a great Power to occupy a bigger place in the League than San Marino or the smallest State. So it has been with the local authorities in this country—you must have a system which recognises the equal rights of all local authorities; you must not do something for one authority that you do not do for another, unless you can give a good mathematical reason for your action. We must admit into the action of the Government—the House must admit and local authorities must admit—a certain arbitrary element, and, on the other hand, the Government must be able to show the House that when they are arbitrary, they are discriminatingly arbitrary. That is where the Special Areas system falls hopelessly between two stools. You draw an arbitrary boundary line and within that boundary line you are dealing with local authorities which cannot be distinguished from local authorities outside the boundary line.

I am afraid I have merely set the House a problem, but at least let us register in this Debate an advance on the Debates that have been held in this House on this subject ever since I have been here. Hitherto we have always had in every Debate on the subject of block grants or percentage grants, the problem of the distressed areas raised, and we have always had accusations and counter-accusations across the Floor of the House on the basis that somehow the general grant system should meet the problem of these particular areas. At least let us register an advance to-night, that we all agree that, while we may have our personal predilections between block grants and percentage grants, these grants can never solve this problem, that the problem has to be solved by quite different methods, and I think by methods which are inevitably arbitrary, with an arbitrariness which the House ought to allow the Government to assume.

6.53 p.m.

Mr. Munro

I agree with a great deal that was said by the noble Lord and the hon. Member for Pontypool (Mr. Jenkins). It is becoming obvious that by no system of block grants or percentage grants could the Special Areas problem be solved, and it is a good thing that that should have been said in this Debate. I will not pretend to follow the two hon. Members any further in their remarks, because I feel it would be dangerously near treading upon the Debate on the Bill about the Special Areas which is to come before us in a short time. Therefore, I will leave that point.

As I have always been an advocate of short speeches, I assure the Parliamentary Secretary that the depth of my welcome to this Bill is in inverse ratio to the brevity of the remarks that I propose to make. I would like to congratulate the Minister, the Parliamentary Secretary and the Department on the method by which they have tackled this very difficult, confusing and complex problem. I associate myself with the hon. Member for Faversham (Mr. Maitland) and the hon. Member for Pontypool in paying a very high tribute to the local authorities concerned and to their staffs, who have done, as was pointed out to us, 12 months' hard labour, or—should I say?—assiduous work, because "hard labour" might have a different connotation. They have worked, as I happen to know, in great earnestness in dealing with this most terrible problem. I was also very interested in the remarks of the hon. Member for West Middlesbrough (Mr. K. Griffith). I was very pleased to hear him explain what a simple thing the much-mentioned formula really is to a man with an acute brain. On behalf of the formula, I would very gladly accept his apology, if, as he said, he had said anything which might redound to its discredit. I, too, have studied the formula and the new additions and alterations which are embodied in the Schedule to the Bill. I would like to claim that I have a mind like that of the hon. Member for Middlesbrough, and I think, although I am now subject to no cross-examination, I understand the formula past, present, and possibly future; but at the same time, in a moment of temporary enthusiasm, when I said this to a friend who knew nothing about the subject, he looked for a moment at paragraph 5 of the Explanatory Memorandum, shuddered and turned it gently away.

It was a very difficult matter with which the experts had to deal, and in order to find any solution for the matter, they had to be very familiar with these very difficult subjects. I believe it was really due to the innate British good sense both of the Ministry and the local authorities; and the very fair and reasonable compromise which I consider to be embodied in this Bill over the block grant distribution is a perfect example of British good sense in such a difficult matter. I would like to draw the attention of the House particularly to Clause 6 of the Bill. I may say that I have had a telegraphic communication from the Barry Urban District Council, a model of efficient administration, asking me, not only on behalf of myself, but on behalf of them, to express appreciation of the help given to what were known as the "losing areas" under the 1929 Act. In a small way I had something to do with the so-called losing areas. They put their case, after a great deal of work, accurately and carefully before the Ministry of Health. Their case was viewed sympathetically, and as a result of that and other things, we now have Clause 6 in the Bill.

Section 1 of Clause 6 gives the Minister power, with the consent of the Treasury, to substitute for a one-fifteenth reduction of the capitation grants annually a one-thirtieth reduction. That is a very great relief to all those that were losing areas under the Act. But more than that was done, because when the case for the losing areas was examined by the experts, it became obvious that, although there was general hardship, there were also some particularly and outstandingly hard-hit areas concerned. It would have been impossible for all of them to have been dealt with alike in justice, and I consider that Sub-section (2) of Clause 6 is a good compromise settlement of a difficult subject. By that Sub-section power is given to the Minister, after consultation with the county councils, and if he is satisfied that special hardship and difficulty still exist after the relief given by Clause 1, to arrange for an amount equivalent to the deduction to be paid to the district from the county apportionment. I am not able to prejudge which of the losing areas will be able to satisfy the Minister on the particular circumstances, but I wish on behalf of the losing areas, and especially on behalf of my own constituency, to thank the Ministry for the careful scrutiny which they gave to this matter and the arrangements they have made in Clause 6. Generally speaking, I consider this Bill is a help and a step forward, and is based on a principle of trying to help where help is most needed and most quickly deserved.

7.2 p.m.

Mr. Parker

I wish to speak on behalf of some industrial areas that are not depressed. They are areas which have a considerable sense of grievance over this Bill. There are many developing industrial areas round London, and not all of them are rich. If they are urban districts or municipal corporations they have a sense of grievance, and I wish to make a suggestion by which this grievance may be removed. In the distribution of grants under the 1929 Act the total sum available is primarily divided between counties and county boroughs, in accordance with the weighted population formula designed to give larger grants per head to the poorer counties and county boroughs than are paid to the richer. Now a revision is proposed, and to a considerable extent that revision is an advantage. But it should be made in an effective way so as to meet as far as possible existing grievances. Within the various counties half the total sum payable to all counties is divided by the population of the counties. That works out at about 12s. 1d., and when the next alteration takes place in April it will be about 12s. 5d. The urban districts and non-county boroughs receive 12s. 1d.,and each rural district council receives one-fifth of this total. The county council applies the balance in reduction of its general expenditure. The complaint I want to make is that the county portion of the grant is distributed in accordance with rateable value, and that means that the richer areas get a greater proportion of the sum than the poorer areas. That is contrary to the object of this Bill. In the statement justifying the Act it was stated that all urban districts should receive the same sum per head. It is stated in paragraph 3 of the White Paper: the block grant should vary with the need for local government services in any area in relation to the ability of the area to meet the cost. The result of this position is that in the residential and some rural urban districts and non-county boroughs the grant of 12s. 1d. is far more than is adequate, but in the poorer areas the grant is not enough. Rich and poor areas are treated alike, and no alteration is made by the Government in the new proposals. In the County of London the various Metropolitan boroughs receive grants based on population weighted by reference to low rateable value and the number of children under five. Under the new provisions further weight is given by reference to the sum lost from derating; the poorer boroughs receive a larger grant per head than the richer boroughs. I do not want to suggest that a similar proposal should be carried through for areas outside London, such as Dagenham, Hornchurch, Romford and Barking, new industrial areas which come in my constituency. If the new proposals for the County of London were brought into effect there they would be ineffective, because in these new industrial areas when derating took place in 1929 there had been little industrial development and, therefore, you could not justly compensate for de-rating in those areas.

When the Minister asked various associations of local authorities to discuss this matter, the associations did not form the best possible groups of bodies to consider the working of the Local Government Act. There is in the Association of Urban District Councils and the Association of Municipal Corporations a mixture of small towns and large, wealthy boroughs and poor, and the result was that when they criticised the working of the block grant their criticisms largely cancelled one another out. In the reports issued by these bodies to the Minister there are a number of complaints but few constructive suggestions. If the Minister had asked various Special Areas and other local authorities that had particular grievances to get together and send criticisms in jointly to the Minister, he might have received some constructive suggestions. There is one suggestion put forward by the Association of Municipal Corporations in their report which I would like to put to the Minister, and ask him whether he could do anything to meet the point they make. In paragraph 33, Subsection 5, it is stated: If both urban and rural capitation grants are increased but still so as to preserve the ratio of five to one, the poor urbans and the poor rurals all gain appreciably, most of the richer rurals gain a little, and the richer urbans lose considerably. The greater the amount of the county apportionment left with the county the greater the help given to the rich county districts. If the total sum ascertained by the formula to be payable to each county were divided between the county districts in accordance with the unweighted population, the poorer area would get more. Why should not a provision to that effect be included in the Bill? It seems to me a simple measure for trying to meet the difficulty, it is not so drastic a method as that adopted in London, it is simple, and it is a great advance on the present system. Further, it is not open to the objection of any system of weighting for low rateable value. I would, therefore, like to ask the Minister seriously to consider the suggestion that has been put forward by the association and to see whether he could not incorporate it in the Bill. It would meet the grievance of the new developing industrial areas, many of which have few rich people in them, and which get few rates from industry. If this were done they would feel that their grievances had been met.

7.11 p.m.

Sir Richard Meller

I wish to approach this question from a rather different angle than that which other speakers have taken. When the 1929 Bill was going through the House, I endeavoured to persuade my constituents that the formula, though a fearful and wonderful thing, would work out well in the end. It is gratifying to-night to find that there is a general consensus of opinion on the working of the formula, and also to appreciate the fact that after the formula has been in operation for some time we find that there is little that should be done by way of improvement on it. It has enabled the Government to come forward with a proposal which, although not wholly relieving necessitous areas, will give some measure of relief. For that we are glad, on all sides of the House. The Minister in his opening speech referred to Clause 3, which affects only two counties, Middlesex and Surrey. The effect of that clause on the two counties is to lay on them a burden of £100,000 which they have not hitherto borne. Those hon. Members who were present during the Debates on the 1929 Act will remember that there was a proviso in Section 89 which was to give relief to any counties which, finding that the apportionment to which they were entitled was insufficient to meet the grants payable to the county authorities, were to receive from the Chancellor of the Exchequer an amount to make up that loss. Under Clause 3 of this Bill we are not in the happy position of having the deficiency made up, but only in part. The proviso in Section 89 of the 1929 Act has gone.

This has been a matter of compromise, as many of the other things have been. Surrey and Middlesex were not anxious to lose the relief, but the Minister by way of explanation—perhaps of excuse—for the action he has taken referred to these counties as relatively prosperous. That may be true, but, on the other hand, many obligations have been placed upon them. He also said that during the time the Act has been in operation there has been an expansion of services and considerable movement of the population. Although the Surrey County Council are not complaining of their treatment, I think it well to place on record what sort of expansion of services there has been, and what movement of population, which has largely affected this relatively prosperous county of Surrey. Since 1930 the population of the county has increased by 200,000 or 23 per cent. The rateable value has increased by 36 per cent. The expenditure on education has gone up by 69 per cent., and on public health and public assistance by 37 per cent.

I think it will be more effective if I give the nature of the work which has been carried out by the county, the cost during the past seven years, and the contemplated cost of what has been set in hand. For this movement of the population, very largely from London, we have had to provide 58 new elementary schools and eight new secondary schools costing £1,615,000. The expenditure on mental hospitals has been £300,000, and on public assistance institutions £390,000. The expenditure on these objects during the past seven years has been £2,305,000. That is not the end of it, because the population is still growing and the needs of the population are being met. We have before us a programme of expenditure on public institutions, mental institutions and hospitals of £2,500,000, and in education we have a programme of £802,000; so that the liability for the next two or three years amounts to nearly £3,500,000. We have had placed upon us by the movement of population an extension of services costing £2,300,000. I am not complaining of the action of the Minister, for Surrey is going to do its job. Indeed, it came forward with Middlesex and entered into the arrangement because it realised the difficulties not only of the Minister, but of the Chancellor of the Exchequer. I want it to be understood by the distressed areas that Surrey has not been unwilling to play her part. Surrey and Middlesex have their difficulties because of the great influx of population which has relieved London, and the increase in the case of Surrey of £40,4300 a year is a great burden having regard to the other liabilities it has taken upon itself.

7.18 p.m.

Mr. W. Joseph Stewart

As one who comes from a Special Area, I am rather concerned and disappointed at the speech of the right hon. Gentleman the Minister of Health. Durham County has been hard hit in the last few years through industrial depression. When we levied a penny rate in Durham in 1933, the proceeds were £17,562. In 1936, the proceeds were £12,724. This low product of a penny rate is felt very much in the county when it seeks to carry out the various social services for which it is responsible. Not many years ago the Board of Education sent inspectors to Durham, and they decided that in the interests of the children new schools should be built to replace those that had been long condemned. The inspectors condemned 44. They asked the local authority to submit their programme of what they were prepared to do. In the last few years Durham has levied a very heavy rate for the rebuilding of these schools and has embarked upon a heavy capital expenditure. It has spent about £750,000 in that direction during the last few years. In addition, owing to the rise in the school-leaving age, the county has had to build still more schools to make provision for the children who will remain at school for another year.

Our great difficulty in meeting our obligations in this direction is our low rateable value. If we levy a penny rate per unit of attendance in elementary schools, the proceeds are 1s. 8d. If Surrey levies a penny rate, the proceeds are 9s. 1d., while in Cheshire the proceeds are 5s. The education rate in Durham for elementary purposes is 5s.1½d In Cheshire it is 2S., and in Surrey is. 6½d. In Durham, therefore, owing to the low rateable value, rates must be levied at a high figure and the people are accordingly penalised. In addition, we have had to make provision for milk for the children attending elementary schools. During the last few years we have provided 2,043,000 milk meals a year to 25,00o children at an annual cost of about £30,000. It must be borne in mind that in Durham to-day we have 70,000 fewer men employed in mining than we had in 1924. Industries are in a bad way and rateable values are falling. In seeking to find work for our unemployed and to assist the county, the Government have transferred our young people to other counties. They have taken the youth, the energy, out of Durham and have left us with the aged and the infirm who will be a permanent charge on the local rates. That aspect of our problems has caused us a great amount of concern.

During 1936 the number of persons in receipt of transitional payment in Durham was 37,785 weekly, and the amount paid to them during the year was £2,581,000. The weekly payments of standard benefit numbered 14,910, with an annual expenditure of £839,133. The persons on public assistance numbered 67,900, the expenditure during the year being £1,128,894. During 1936 we thus paid in Durham for transitional payments, standard benefit and Poor Law relief £4,549,000. We hoped in Durham that when the revision of the block grant took place great consideration would be given to the county so as to help it to grapple with the serious rate burdens it has to meet year after year. When an investigator was sent into Durham County three or four years ago to find out the conditions that prevailed there, he suggested that, in order to give Durham the measure of relief that it ought to have as a Special Area, there ought to be an annual subsidy from the national Exchequer of about £700,000. Instead of that, it will have under the revised block grant £258,000, which is equal to a rate of 1s. 8d. When one takes into consideration the position of the rateable value in Durham, one is bound to come to the conclusion that the Government have not faced up to their responsibility so as to give the measure of relief to that county which it so richly deserves.

I would like to compare the rates of Durham County with those in other areas. The expenditure of the county council which falls upon the ratepayers is equal to a rate in the pound of 16s. 7¾d. The average rate in the pound for the whole of the counties of England and Wales is 8s. 3.7d. The public assistance rate is bearing very heavily upon Durham at present owing to the large number of unemployed. If Durham's poor rate could be reduced to the average of the country, which is 2S.11½d., that would bring a measure of relief to Durham of 6s. in the pound. We have asked the Govern- ment time and again, in anything which they might do with regard to the revision of the block grant, to take into consideration the excessive Poor Law rate in various counties of England and Wales and especially in a county such as Durham is at the present time. Unless something substantial can be done in the way of relief of the poor rate in Durham, I do not think that in the near future Durham can get anywhere nearly back to the degree of prosperity which it enjoyed a few years ago.

If we could get industries established there, perhaps our case as an industrial county would be met to an appreciable extent. Those who represent the northern area in this House have asked the Government, if relief cannot be given by reducing the rates, to use their best efforts to provide new industries which would find work for our people. Up to now, there has been no appreciable measure of relief in that direction and Durham county to-day has come to the conclusion that no one in Government circles seems to care whether that county is rehabilitated or not. If there is a Clause in the Bill which gives the Minister power to review the case of a particular district, where he thinks that hardship prevails—and I understand that there is such a Clause—I ask the Minister to focus his attention on Durham county and see, as far as possible, that more relief is given to that county than is suggested in the formula which we are discussing.

7.33 p.m.

Mr. Lennox-Boyd

I come from a prosperous county where the incidence of unemployment is very low and problems of rating are not as important as they are in the distressed areas. Coming from such a county, I was particularly interested in the speech of the hon. Member for Mitcham (Sir R. Meller) because he, too, comes from a prosperous county and from what he said, despite the fact that he sees certain flaws in these regulations, I realise that even those counties to which burdens have been added, or which have not materially benefited by the proposals, are prepared to welcome them if they bring practical relief to the distressed areas. A little unlimited liability would not do the comfortable people of England very much harm, and I am very glad to feel that in many districts, where problems of rating relief and unemployment are not severe, there is a growing recognition of our common citizenship.

The report draws attention to certain changes in general conditions which have made this alteration in the block grant essential, and I would refer particularly in this connection to the town of Merthyr, because I cannot believe that there is any other city or town in the United Kingdom which more closely answers the description of a town in need of practical help than that borough. The report refers to the alteration in rating which must follow on certain changes like continued depression and the movement of population. In regard to the latter, in the last 15 years, 10,000 people have left Merthyr and elaborate and expensive social services remain, which have to be paid for by those who have stayed behind. In regard to continuity of unemployment and depression, of the 19,000 insured workers in that town, 12,000 are out of work and they have 13,o00 dependants to maintain.

I welcome these proposals not in any sense as an adequate attempt to solve the problem of the depressed areas, but as an essential first step, and I am very glad that His Majesty's Government have brought in these excellently drafted proposals which will, I believe, confer a real benefit on those districts which need it most. A relief of 5s. in the pound, even though the rates of Merthyr will still remain at 24s. in the pound, is a very practical step forward, and I believe the attention of manufacturers should increasingly be drawn to the advantages which that town affords, especially now that rating relief has been conceded.

There are one or two other points with which I wish briefly to deal. I was very glad that the hon. Member for Pontypool (Mr. Jenkins) raised the question of the Goschen loans, and I was glad also that my Noble Friend the Member for Hastings (Lord E. Percy) associated his name with the plea that those loans should be abolished. They are a legacy from the past, and it is unfair that they should continue to depress the standard of living in towns like Merthyr to-day. Merthyr, through the merging of the unemployment contribution in the block grant, will get a saving of £8,000, but it has also a Goschen loan, I believe, of £7,000, and I see no reason why this should not be merged in the block grant in the same way as the payments under the Unemployment Assistance Act.

I hope that the Government are going to deal with the problem of the equalisation of the public assistance rates. I know that an immense number of practical difficulties lie ahead in that respect, but I cannot but feel that if the spirit is willing, those difficulties can be overcome. The Commissioner for the Special Areas in his Third Report was emphatic that something ought to be done on those lines. He knew it could not be achieved by any alteration in the block grant, and he asked for immediate emergency measures to deal with the problem. The rate for unemployment assistance in Merthyr will remain even after these proposals at 14s. 7d. in the pound. The Income Tax liability of the ordinary citizen is the same in whatever part of the country he lives, and I cannot see why the obligation to maintain a semi-national service like public assistance should vary according to the place of residence, and should be heaviest in the most depressed areas.

Lastly, I hope the Government have not lost sight of one handicap under which Merthyr continues to suffer, and that is the possession of a highly expensive water scheme. The Taf Fechan water scheme accounts to-day for a rate of 5s. in the pound. It was carried out at the most expensive period after the War, it was enlarged at the express direction of Parliament to meet other needs and it has been deprived of an order for 1,000,000 gallons of water daily owing to the withdrawal of the Guest Keen works to Cardiff. This gigantic undertaking, as I say, is now costing 5s. in the pound, while some 7,00o,000 to 9,000,000 gallons of water are daily going to waste. I hope that something can be done under the legislation which is shortly to follow to relieve the local authority from an excess burden of that kind. I do not wish to close on an ungenerous or carping note. This is a very important step forward, and all those who are concerned about the prosperity of South Wales and other industrial districts, will welcome it as a real beginning in the Government's policy of immediate practical help for the distressed areas.

7.40 p.m.

Mr. Storey

As the representative of a very distressed area, I welcome the speeches of my hon. Friend who has just spoken and of my hon. Friend the Member for Mitcham (Sir R. Meller). It is only by the readiness of the representatives of the rich and prosperous areas to fall in with these proposals, that we can hope to meet the problems of the distressed areas. There are good reasons why the necessitous areas should be helped at the expense of the more prosperous areas. Increase of population and decline in the number of children under five years have given greater value to the population factor in the formula and decreased the value of the weighting factors, and this has been to the advantage of the richer areas. The policy of transference has accentuated this tendency. Transference not only means loss of population and therefore less grant, but it increases the proportion of old, sick and very young to wage-earners in the distressed areas, while decreasing it in the more prosperous areas, thus upsetting the balance. Those areas with a large child population and a small wage-earning population have to bear a large share of the cost of the education and upbringing of the younger generation who are later transferred to more prosperous areas and, in effect, training allowances and transference have been a subsidy to the growing areas.

For those reasons, I welcome the decision to strengthen the existing factors for unemployment and sparsity in the formula. I think that will be fairer to the necessitous areas. The principle of the formula, that the relative need of each area should be measured by general characteristics which are not influenced by local administration, is, I think, fair and the results as set out in the Appendix are satisfactory. We have, of course, to remember that these figures are based on the estimates of 1935 and that the 1936 figures, with declining unemployment in some areas, may make considerable differences. That may seem fair but unfortunately some areas, though unemployment has fallen off, still bear a high cost of public assistance. Therefore, although I feel that the help under the revised formula and particularly the relief of not having to pay contributions under the Unemployment Insurance Act, is welcome, we cannot accept it as a final settlement of the cost of public assistance in the Special Areas. The cost of public assistance is higher in the Special Areas than it is in other areas, and even if the whole of the additional assistance which the Special Areas will receive under the Bill is set against it, the cost of public assistance in those areas will still be higher. That additional assistance cannot fairly be regarded as a set-off against the cost of public assistance in the Special Areas.

One of the reasons why more money was added by the Exchequer in 1928 when the scheme of block grants was started, was to enable local authorities to expand their services and so part of the extra money now going to the local authorities must be used to expand their services. Therefore, although the benefit of these proposals will be great, and although we in the Special Areas are thankful for them, I repeat that we cannot accept them as a final settlement of the cost of public assistance. Some day that cost must be spread over the whole country and that must be accompanied by an equalisation of the standard of relief. There is one consequence of the additional assistance which is being given to the local authorities from which I hope the Minister will not shrink. While we want a fair national contribution to the local services administered by the local authorities, and while we want as much freedom as possible, in that administration for the local authorities we must see that that administration justifies the assistance given to it. I have no intention of making any wholesale charge of extravagance against the local authorities—even those controlled by the Labour party do, I think, try to administer their affairs economically—but we cannot deny that some of them are so imbued with the theory of the bottomless purse and are so enthusiastic to do everything for everybody as early as possible, that they sometimes force the pace too fast and go beyond the capacity of the ratepayers. Therefore, I hope that the Minister will use those powers which he possesses, of sanction and of advice, to see that the ratepayer does, at any rate, get as much as is possible of the benefit of this additional assistance.

As a representative of one of the areas which will benefit the most, I want to thank the Government for this big measure of assistance. It will go a long way towards meeting our rating difficulties, but we must not forget that rating relief is not the solution of the problem of the Special Areas. There is only one solution for that problem, and that is the creation of new industries. Therefore, while I thank the Government for that assistance, I say, and I say confidently, that we expect the plans which they are producing this week will be energetic and definite and will give special aid towards bringing new industries to the Special Areas.

7.47 p.m.

Mr. Mainwaring

I regretted to be unable to listen to the Minister opening the Debate. I intervene at this hour merely to give expression to the peculiar situation of the area that I represent, in the hope that the Parliamentary Secretary will be good enough to listen to what I have to say and to convey to the Minister himself the import of the situation as I describe it. I fear that an impression may be created, in a Debate of this kind, that areas may be competing one with another in an effort to have each of them in turn described as worse than all the others. One of my hon. Friends described the conditions in a Durham county division, a very sad tale, and he was followed by the hon. Member for Mid-Bedford (Mr. Lennox-Boyd), who described the condition of the town of Merthyr Tydfil, a sadder case. I might even claim that in some respects the area which I represent, the Rhondda, is sadder still, but competitions of that kind lead nowhere. What we all strive to emphasise is that there is a special problem which the proposals now before the House do not meet.

Although it was said, back in the 1929 discussions, that the primary purpose of the Bill then before the House was to deal with the relief of industry, subject, however, to consideration being given to the distressed areas, I think an incontrovertible case has been made to-day that that consideration has been far from adequate, and I want to stress the necessity for still greater consideration for areas such as the one that I represent. Other hon. Members have been speaking of county areas. I am not speaking from a county standpoint at all, but from the standpoint of the redistributive process within a county, and within that system of redistribution Rhondda is unfortunately classified as a gaining area. To be thus classified mischievously hides the real conditions in the Rhondda. The industrial conditions which existed in our area before 1929 are responsible for our being placed in this category of a gaining area, and this applies not merely to Rhondda, but to the adjoining authority of Aberdare, much in the same manner.

It arose in this way. The depression in the mining industry, particularly in the county of Glamorgan, was largely, in the years up to 1929, centred in what was then known as the area of the Pontypridd Union of Guardians, including Rhondda and Aberdare urban areas. So great became the burden of distress in those areas, that the Pontypridd Board became, I believe I am correct in saying, the most heavily burdened union in the country, with a loan charge of over £1,000,000. When, therefore, the Act of 1929 became operative, quite naturally the areas in the Pontypridd Union benefited by the burden being spread over the county, but in consequence of the distribution of the grant and its redistribution within the county, these areas are now classified as gaining areas, which seems to hide the fact that even with the relief obtained under the 1929 Act, we are still more heavily burdened than are other areas which were not relieved on those lines. In fact, these areas are gaining areas because of the excessive poverty in which they had been plunged before that time, and that is why I emphasise the fact that we have received no adequate consideration up to now.

I will not burden the Members of this House with descriptions of the weight of our social services in general, but I want to refer to a few figures. At the beginning of the mining depression the population of the Rhondda was 162,000; to-day it is 132,000. A town as big as Jarrow has been lost from the Rhondda. [An HON. MEMBER: "No!"] In any case, 30,000 people have gone from the Rhondda, and the effect of that has to be considered. The rateable value of Rhondda in about 1921 or 1922 was £640,000; to-day it is £380,000. The rates levied in the Rhondda to-day amount to 24s. in the pound. Under de-rating we lost £120,000, but hon. Members will note that the fall in rateable value has been from £640,000 down to £380,000. We are, therefore, losing in rateable value at a very rapid rate, quite apart from de-rating. The rating of collieries, for example, alone, by themselves, in 1925 was £240,000 in the area of the Rhondda; in 1935 it was £24,000. The effect of those movements on the capitation grants received within the area is that in the first grant period the Rhondda received £96,000, the population at that time being 154,000, having fallen from 162,454. In the second grant period the population had dropped to 140,000, and the capitation grants had dropped to £85,000. At the present time the population is 132,000, and we are estimating that our grants will fall another £7,500, so that between the first grant period and the new grant period the Rhondda will lose in grants an amount equal to a is. 6d. rate within the area. I want that figure to be noted: The difference in the grants alone will make a difference of a 1s. 6d. rate in the area.

Another aspect of the Rhondda, which will enable Members to see what manner of community it is that is to be taxed in this way, is that, with a population of 132,000, unemployment benefit and unemployment assistance in Rhondda take £1,500,000 a year. In outside relief public assistance at the present time is being distributed at the rate of £264,000 a year, and if we add to those the cost of administration, institutional treatment, and so forth, public assistance institutions, and other forms in which some of the inhabitants draw upon public funds, it is safe to say that the Rhondda to-day constitutes a burden upon public funds in one form or another to the amount of £2,000,000 a year. That is the area, therefore, which is to be increasingly taxed in order to meet the burden of its own social services. The irony of the position is that the Rhondda, inside of the county of Glamorgan under the redistribution process, is regarded as a gaining area, and out of its grants from the county a sum of £20,000 a year is deducted in favour of the losing areas. That £20,000 will form another 1s. 6d. rate, so that, if we take the actual loss in the amounts of grants received in the Rhondda as between the first grant period and the new grant period about to come into operation, plus the deductions on account of losing areas, Rhondda actually will lose an equivalent of 3s. in rates, because by the misfortune prior to 1929 it is now deemed to be a gaining area.

My hon. Friend who dealt with the state of affairs within the county of Durham referred to the county as a whole as having some 37,000 unemployed.

Mr. David Adams

No, 67,000.

Mr. Mainwaring

Well, 67,000. Rhondda is not a very large place as a geographical area. It is a very small area, but Rhondda has 20,000 unemployed. The county educational rate in Durham is 5s.; the educational rate of Rhondda is 9s. 2d. Why? Because you are dealing with an unemployed, pauperised population. The rateable value in Rhondda and the proceeds of the rates are falling at an alarming rate. Every year there will be an increasing burden, and it is simply folly to consider that this Measure will, in any way, constitute a relief for Rhondda.

The county of Glamorgan, as a whole, it is proudly stated in the Memorandum, will have a relief of 2S. in the pound. Rhondda is already, between the first and the third grant periods, losing 3s. in the pound because of loss of population and because of its contribution to losing areas. Our loss in grants alone in the Rhondda accounts for an equivalent of is. 6d. in rates. The contribution to the losing area is another is. 6d. rate. Of what use is it to talk of the 2s. coming into the county of Glamorgan as in any way relieving the Rhondda as a special district within the county? The Rhondda constitutes one-third of the total burden of the county in respect of public assistance, but the Rhondda as a part of the county drawing from the county till Rhondda gets only one-seventh—it is one-third of the total burden but draws only one-seventh out of capitation grants, that leaves the Rhondda in a very difficult situation indeed. I want the Minister to give special attention to the condition of the Rhondda and, indeed, to every other area in similar circumstances. There really is a case for reconsideration. The circumstances of Rhondda, Merthyr, Durham, and it may be many more areas deserve further consideration from him to see whether it is possible to give them some measure of relief from the extremely heavy burdens which they are endeavouring to carry in these difficult times.

8.2 p.m.

Sir Francis Fremantle

I am certain that all hon. Members, from whatever part of the country they come, will have heard with great sympathy the speeches of the hon. Member for East Rhondda (Mr. Mainwaring) and others who have spoken on behalf of distressed areas. I should like to add my small tribute to those which have been paid from the more comfortable counties like Surrey and Bedfordshire. In the county of Hertfordshire we have warm hearts, and we feel that it is only right that we should give our tribute to these more distressed areas. At the same time I agree strongly with what was said by my Noble Friend the Member for Hastings (Lord E. Percy) that no possible distension of this formula will really cover the needs of the depressed areas, which will have to be dealt with by other means, apart from what is being done for them under this Bill. It may be difficult for those who come from the distressed areas to realise why those of us who live in the more comfortable areas are not contributing as much as we should naturally feel bound to do if we were face to face with the poverty of those areas; but we must all come back to the fact that so long as we recognise the rights of private property so long will it be difficult to insist on those who are in comfortable conditions contributing very largely to those in other areas. I agree that they ought to be relieved of a great deal of the money in their pockets, and, in fact, they are relieved of a great deal of it by the measures which have been introduced in the past half-century.

It was a move in the right direction. It is going on at a tremendous pace, and I should like those who come from the poorer areas to take note of the speed of the process and to recognise that it is going on quite as fast as is reasonable, having regard to the fact that until quite recently there were those who said definitely that under a democratic system everybody must look after his own affairs, that if people were fortunate enough to live in the more comfortable areas and to have inherited the results of thrift or to have got money by their own efforts, it was their business, and there was no reason why they should be compelled to contribute towards others. The education of the country to an acceptance of the principle of bearing one another's burdens is a process which has gone on rapidly in recent times, and is going on rapidly now, and to those of us who can look back over only 30 years of public life it is perfectly amazing to note the income which is now taken from those who have and is given to those who have not. I do not resent that fact in any way; the pace goes steadily on and rightly so in a democratic country.

From that point of view we may look back upon the passage of the Local Government Act of 1929 as being a tremendous step in advance. Up to that time measures for encouraging social services of one kind or another had been put forward with no very fixed principle as to the national contribution in each case; it depended on the persuasiveness of the Minister who brought forward the Measure or the backing he had from behind the scenes. But in 1929 the position was put on a definite footing. Then we had that wonderful formula which was devised so cleverly by the great men of the Civil Service, and which none except themselves really understands or can reasonably question in detail. It is a great thing to have a system like that which works mathematically and can be supplemented in one way or another. The present Bill deals with the formula and with provisions for amending it from time to time.

We have had seven years' experience of that system, and I should like to test the experience of those seven years in one phase of social service, maternity and child welfare. It will be recalled that all the extraordinarily kind-hearted and hardworking people who had worked the whole system of maternity and child welfare services long before local authorities or officialdom took them up—and have since continued, supplemented in some cases by local authorities—raised a tremendous agitation against the proposals in the Measure of 1929. My right hon. Friend will remember the interviews between him and the Chancellor of the Exchequer, then Minister of Health, and the deputations which were received. It was said that by doing away with the percentage grant we should be sterilising the whole movement, doing away with the incentive to progress, and that those areas which had advanced so rapidly under the encouragement of a 50 per cent. grant for every extra step forward would now realise they would get no advantage at all, that they would become subject to the formula, and that for the next five years, until the revision of the grants came under consideration, there would be stagnation. It was said there would be an incentive to them to stagnate; in short, that all the encourage- ment was being given to the lazy authorities and the lazy voluntary institutions.

Let us come to the actual test. We in the public health world like to test our ideas by actual facts and I think the facts in this case are significant. Take the figures for infant mortality, which are regarded as a good index of public health work. I will give the figures for the seven years before the 1929 Act came in, the figures for 1929 and the figures for 1935. In 1922 deaths per 1,000 births numbered 77, in the year 1929 they had come down to 74, and in the last seven years they were reduced to 57. There is a similar record of progress in each of the periods of the first year of life. Taking infants in the first three months of their lives the mortality was reduced from 47 per 1,000 in 1922 to 44 in 1929, and in the last seven years it fell to 39. There was no reduction in the figure for the second three months of infant life in the seven years before that Act came in, but in the last seven years the figure fell from 11 to 8. In the last half of the first year of the infant's life there was no reduction of mortality in the seven years before the Act came into operation, but in the last seven years a reduction from 19 to 10 deaths per 1,000. Take the case of infants in the first year, the second year, the third year, the fourth year and the fifth year of life. From 1922 there was very little improvement in mortality until the 1929 Act was passed, but since then the mortality among those in the second year of life has been reduced from 24 per 1,000 to 10 per 1,000; in the third year from 10 to 5 per 1,000; in the fourth year from 6 to 3 per 1,000; and in the fifth year from 4 to 3 per 1,000. That is a thermometer of public health.

The removing of the percentage grants and the providing of block grants, together with the other provisions made in the Act, many of which were almost mandatory to the local authorities in providing and preparing proper schemes for the carrying on of their infant mortality work, have certainly not led to any stagnation. On the contrary, they have coincided with, if they have not, as I believe, been largely responsible for, an absolute improvement all along the line. We can look forward to the next grant period in the same kind of way. I believe that this system of encouragement given by the grant, enables people to look ahead and to make their five-year plan, as is so popular nowadays.

I could turn, if I had time to do so, and deal with many of the criticisms of the Act of 1929 by showing what action was taken in order to make the infant welfare and local welfare provisions active and alive. I think there was considerable controversy at the time in regard to the problem of venereal disease, which was not treated on the same lines. Certainly there are sufficient indications of the fact that we are moving on. I believe that the help which has come to the poorer areas, and which is so essential for the health of the nation as a whole, must be continued and expanded. We in the more comfortable parts of England should be only too delighted to bear our share, if it were done on a proper principle, where all people share alike, according to their powers and according to their opportunities. I beg to congratulate the Minister on having brought in a very difficult and unpopular Bill, but which, nevertheless, is of very great value in promoting the public services and the public well-being.

8.17 p.m.

Mr. David Adams

Coming from a necessitous area I cannot do better than quote observations that were made by the representatives of the Association of Municipal Corporations, in a report which was presented to the Minister and which forms the basis for the White Paper. They said: We have used the block grant formula as much as we think it could reasonably be used in aid of the 'Special Areas.' We do not, however, pretend that these steps suffice to deal adequately with these cases. They have claims to consideration which lie beyond the scope of any block grant scheme. That view should be kept well in mind by the House, in case hon. Members think that some wonderful transformation has been brought about by the Measure which is now before us, whereas in reality it leaves the necessitous areas very much as they were. My hon. Friend from the county of Durham has explained the position in some detail. The House has been told that some £2,250,000 of new money will be provided. That, I take it, is merely due to the automatic revision under the Act, and that the new Exchequer grant to the local authorities is only some £28,000. The Government were bound to maintain a fixed proportion between their contribution and the total expenditure of the local authority. While the method of distribution used by the wealthier authorities has been altered by agreement to benefit the heavily-rated areas at the expense of the prosperous districts, it is from the local authorities that the new distribution to the poorer authorities takes place. It is not that the Treasury is supplying some additional new money. That point ought to be kept very closely before us when we are considering the position.

I feel that we cannot speak on this subject without paying a tribute to the Chancellor, the Author of that monumental work of 1929, the Local Government Act. I once took the advice of Mr. Bernard Shaw, that if you want to know anything about a subject you should lecture about it. I decided to lecture upon the 1929 Local Government Act, which I did, and I may say, as an illustration of the character of that work, that I spent a considerable portion of a fortnight's holiday in studying and mastering the intricacies of it. The Municipal Corporations Act, 1835, raised the status of local authorities and played a notable and enduring part in the history of the country, but the 1929 Act is an even greater Measure. A statement I heard, and know of no reason to dispute—but perhaps the Minister of Health will tell us—that the Chancellor of the Exchequer, in arranging this block grant formula, was able to summon up the shade of Euclid from his happy resting place, and I think he must have spent a considerable portion of time with that enemy of all schoolboys, old Euclid himself.

This Act achieved two aims: (1) the establishment of derating; (2) the breaking of the felicitous financial relationship between the central Exchequer and the local exchequer. Those two old firms were separated by the Act. Some local authorities found themselves better off under the derating scheme and some worse off. The richer of them could contemplate the future with satisfaction, but the poorer were restricted and restrained owing to the fixed amount of the block grant. It is not as though, during the progress of the respective periods between one valuation and another, an authority could have some automatic advance for an increase of expenditure. I should like the Parliamentary Secretary in his reply to clarify a position which has occurred in the North of England, that is, in the case of new industries which are entitled to derating, that the local authorities receive no automatic relief for having granted a derating of three-quarters of the rate upon new industries.

If a colliery is started in any area or works are erected which are entitled to derating, the local authorities are at a dead loss, under the 1929 Act. If I may mention a particular case in Newcastleon-Tyne, a large milling concern is working at the present time, but it has been decided to shut it down and to erect, in an adjoining part of Tyneside, a new concern costing £400,000. The Corporation of Newcastle state that they would lose some thousands of pounds per year in rates on this works, owing to the operation of the 1929 Act. That is an important matter, and ought either to be cleared up to the satisfaction of the authorities or the Act should be amended at the earliest date, to give relief.

Durham county has been mentioned. It would be interesting to give one or two figures relating to that county. The number of people in receipt of relief per 10,000 of the population is 213 in respect of all counties, but in Durham it is three times as great, 717, and in England and Wales only 301. The insured unemployed in December, 1936, in Durham was a percentage of 24.9, while over the whole of the country it was only 12.9. Those figures are illuminating as to the position in Durham at the present time. Parliament in 1933 recognised its responsibilities towards the Special Areas, and Durham in particular, by voting £440,000 as a special grant, of which Durham received about 20 per cent., or £94,000, and continued the same grant for 11 months of the ensuing year, it is but just and equitable that a similar grant should be made—a cash grant—to these authorities if we are to treat them, as they are entitled to be treated, on terms of parity with other authorities of the Kingdom, short of the unification of rating burdens throughout Great Britain.

The Minister might take note of the fact that in Durham a debt of £490,000, which still exists, was incurred by the late boards of guardians before their responsibilities were transferred to the county council. This was largely due to the national stoppage of 1926, and it entails on the county for the next nine years a burden of not less than £32,000 per annum. He has been, perhaps, a little thoughtless to-day in stating that he has an open mind with regard to the grievances of authorities like Durham. I can promise him that we will take full advantage of the opportunity to present Durham's case to him. Per head of the population, the amount of rateable value in County Durham is £3 11s., whereas the average for the rest of the country is £5 17s. If the rateable value of Durham were equal to that of the rest of the country, the whole of the current services of Durham to-day could be carried out at an economy of £251,000, or is. 1s.9½ in the pound on the rates. That is an illustration of the continual and successive day-to-day burdens upon this great county. We hear of the distresses of Wales, but there is no other county in the United Kingdom where the burdens of unemployment and distress are so great, and therefore we say that special measures are necessary.

In the meantime we suggest that the Minister should take into consideration the strengthening of the unemployment factor in the formula in relation to our low rateable value and the heavy burden which was bequeathed to Durham County from the other authorities under the Act of 1929. If he would further see whether it is possible to persuade the Cabinet to make a cash grant. Whilst the country as a whole is said to have regained about 90 per cent. of its initial prosperity Durham County remains in the same stagnant position in which it was 10 years ago.

8.32 p.m.

Mr. Simpson

I am sure the House was interested to learn from the hon. Member for St. Albans (Sir F. Fremantle) of the desirability of having warm hearts and of the necessity for sharing one an-other's burdens. At the moment there are not many hearts, warm or otherwise, on the benches opposite, but we shall probably agree, whatever we may think about these sentiments, that we need, in addition, wise heads and competent statesmanship if those very generous statements are to be translated into practical facts. I think it was Oliver Wendell Holmes who said that it did not matter so much where we stood at the moment as in what direction we were moving. Possibly the Government may take some comfort and encouragement from the fact that they are moving in the right direction. They have had a few compliments and some encouragement on that ground to-night, but I venture to say that, within the limits of the proposition which is now before us, they are moving to inevitable failure.

The Bill does not even satisfy the critics with regard to immediate anomalies and quite a number of difficulties that have already been dealt with in the Debate to-night, and no formula, however complicated or impressive it may appear, can possibly deal with the deeper causes that lie behind the necessity for this Bill. Piecemeal action and legislation under pressure are not likely to give the satisfactory results which the situation at the moment so much demands. The problems in the depressed areas arise from causes much deeper than anything that is dealt with in this proposal, and I venture to think that the remedy can only be found in a more comprehensive, indeed a co-operative, conception of social needs and organisation.

The right hon. Member for Hastings (Lord E. Percy) had in his mind, I think, his own particular suggestions in regard to planning and rationalisation. He does not entitle his proposals in the same, possibly offensive, way in which they might be designated from this side of the House, but was evidently thinking of the absolute necessity for more fundamental treatment than is given in this particular Bill. Indeed, short of some more fundamental effort at social equity and justice, we cannot hope to get any satisfaction from a proposal of this kind. The glaring disparities and injustices in local rating are only too well known, but their treatment has been too long delayed. When we note that public assistance in Barnsley, for instance, represents a rate of 5s. 5¾d.; Blackpool, 7½d.; Bournemouth, 11d.; Hull, 7s.; and Hastings, is. 8½.; it is all too obvious that this Measure is only trifling with the situation. The amendments that are made will have no appreciable result on those very obvious disparities.

What is worse, further injustices grow around existing injustices. The fact that industry is moving away from these areas that are so unfortunately placed is partly attributable to these difficulties in local rating. Industrialists are always complaining that their efforts are retarded and there is no chance of recovery locally because of the handicap under which they are labouring. Obviously, therefore, if there is to be any serious effort to repatriate people who have been removed from these districts, and to give industry a chance, if the industrialists themselves are going to help themselves and their own friends, they must seek some more radical measures than are offered in this Bill. What interested me, in particular, in listening to the Debate is the rather melancholy fact that it is a century and a quarter ago that a proposition was tabled in this House that there should be equality for the country in dealing with the needs of the people. In 1814 a Bill was tabled for making a more equal county rate for the County Palatine of Lancaster, and in the rather quaint language that the chronicler uses he gives his "reasons and remarks": The gentlemen who reside in the county and enjoy extensive premises should pay equally with those who are residents of the two large towns of Liverpool and Manchester. The Bill was withdrawn either on some informality or on the understanding that it was contemplated to take up the question in a more extended light to embrace the country at large. As long ago as that they had their special problem of poverty in Liverpool and Manchester, and they needed relief on a larger basis to give them a chance in dealing with their local obligations.

The hon. Member for Smethwick (Mr. Wise) said he was in favour of the nation shouldering the responsibility for its social burdens. Apparently he did not receive any substantial support from the benches opposite, but undoubtedly until that national obligation is shared, as it should be, we shall not give local authorities equity in the matter, or indeed, give industrialists in the Special Areas the chance that they ought to have. The situation, therefore, demands far more courageous and thoroughgoing action than the Government are, apparently, prepared to give it. It needs something more than can be compressed in any equation, however ingenious its mathematical qualities. The situation demands nothing short of justice in local rating immediately, and I hope the Government will give attention to that larger problem and do in this day of grace what was attempted a century and a quarter ago, but has been too long deferred in the hands of the people who occupy the benches opposite. I hope the Government will attempt something more radical and thoroughgoing than is envisaged in this Measure, and will do something to remove this injustice in dealing with local burdens and to translate into legislative effect the sentiments which have been implied on the benches opposite, but which are not adequately represented in this Measure.

8.41 p.m.

Mr. Price

I do not want to appear grudging in appreciation of what little is being done in this Measure towards assisting the distressed and Special Areas. There is no doubt that it is part of a move in the right direction but hon. Members on these benches have shown that the process of the dog eating its own tail is still going on and the distressed and Special Areas have still to bear the burden of keeping their own poor in far too large a measure. I have examined the figures in the White Paper and apparently the constituency that I represent will receive some benefit, although just how far it is difficult to see from the mathematical formula with which we are presented. The county of Gloucester will apparently get an advantage of about 6d. in the pound in regard to its rates, but just how far that will trickle down to the distressed part of the county it is difficult to say. Cheltenham does not figure in the list of the county boroughs. For aught we know, it may be getting a portion of this 6d. I really think that the industrial area of Gloucestershire is far more in need of that 6d., and a great deal more, than any of the other parts of the county which are doing relatively well. After all, the problem that we are faced with is how to deal with these areas where stagnation has set in.

The Forest of Dean is only a small industrial district, and perhaps poverty and distress is not quite so keen as it is in some parts of South Wales, but the prospects are far worse even than in South Wales, because our assets are wasting. The coalfield will probably not live for more than 15 years, or at the outside 20. All the time the local authorities are being burdened with past debts, and pressure is being put upon them by public opinion, quite rightly, to go on laying out money and improving the conditions. Only the other day I brought to the Minister of Health the case of Coleford, and the demand put upon the district council by the county of Gloucester for an improvement in the sewerage scheme, which is thoroughly unsatisfactory. The rates being what they are, and the district being up to its ears in debt, it cannot by itself get the work done. I approached the Minister with regard to the matter and he rightly said that he had not the funds at his disposal. I believed him. The obvious answer is that something very much more than a paltry 6d. will be needed to meet the difficulties of a place like Coleford. Here we have a district where the human assets also are wasting owing to the fact that the coalfield is not what it was. Over 7,000 men were employed until about 10 years ago, and now there are only a little over 4,000. Owing to the working out of the upper seams and the production of better machinery and improvements generally in working the lower seams there has been a drop of very nearly half of the number of people employed in that coalfield. But the assets are there in the form of schools and public works of all kinds, and they have to be kept going. The young people are gradually trickling away from the district, seeking work elsewhere. Here again is a waste in assets on the human side.

There is really only one way in which this matter can be dealt with, and that is in a much more radical treatment of the question of rates, much greater recognition of the need for the equalisation of the rates between the prosperous and the stagnant districts, and last, and, in my opinion, most important of all, an attempt to plan our industries for the future to bring, by hook or by crook, fresh industries into the stagnant areas. That really is at the root of it all. Some kind of planning of the movement of industry and the taking of powers by the Government, which they have not now, will in the long run, I believe, be the only way that this most serious problem can be settled. So far as the present Bill goes, it is a small measure of relief undoubtedly for these distressed districts, but one which, I am sure, will only whet the appetite for more.

8.48 p.m.

Mr. MacLaren

I have been very quiet all the afternoon, and I think that it is about time the House woke up. I have not intervened in this Debate because, frankly, if I may say so with due humility, 90 per cent. of what has been uttered here this afternoon has been vacuous nonsense. When this matter was first introduced in this House, I remember the present Chancellor of the Exchequer, who was then Minister of Health, giving the history of the rating law in this country. I would commend hon. Gentlemen opposite, when they read the OFFICIAL REPORT to-morrow to make up for their absence from the House to-night, to go back and read the opening passages of the illuminating speech delivered by the Chancellor of the Exchequer when Minister of Health at that time. He outlined the history and aim of the rating system in this country, and truly pointed out that the present rating law was established in 1601. Sometimes I have wished that that fact could be written large in this House of Commons when we were discussing local administration and its cost. That law has not been changed by as much as a comma since that period. It is all very well to say, "We have made amendments to it and changed it here and there," but the fact remains that we are still rated in this country according to the use that is made of a site. If you make good use of it, you are rated, if you make bad use of it, your rates are reduced, and if you make no use of it at all, you pay no rates. In other words, the rating law of this country is such that it penalises every man who begins to make use of the land.

I see that some hon. Gentlemen opposite seem to smile when I say that there has been no change in the law, and I should like the smilers to challenge what I am now going to say. Outside a lunatic asylum, I do not know of any better device to make it impossible to develop sites than the present rating system. The right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) on one occasion gave a parable which crystallises the whole operation of it. He said, speaking in Yorkshire: "For the moment I am a valuer going into the present rating system. I go outside of Leeds and I ask the owner of the moor, 'What are you doing with this land?' and he says, I shall hold it up until the people want a reservoir, and then I shall charge them £3,000 to £4,000 per acre.' I said, 'It is such men as you who make our country great. I will go and write it down in the rate books, and you will not be rated at all.'" The right hon. Gentleman the Member for Carnarvon Boroughs goes on. He says, "I am going down the street and somone tells me that Mr. So-and-so is improving his factory, putting up new and airy buildings at his works, with better ventilation and bringing them up to date. I, as the assessor under the law, go along to this man and say, 'Have you improved your factory?' and he says, 'Yes.' Have you improved it much since I called with regard to the previous assessment and valuation?' and he says, 'Yes '"—I observe that there is silence on the Liberal benches—" If that is so, I must increase your rates to £2,000 a year, and do not let me hear of you doing it again.'"

Sir K. Wood

Liberal taxes.

Mr. MacLaren

I do not think that it is any laughing matter. I do not see the joke. This is how it operates. The right hon. Gentleman goes on with his parable and says, "I am going down the street and someone says, 'Have you heard that Mr. Brown has put in a new bath?' I go to Mr. Brown and say, 'I hear that you have put in a new bath. How dare you? There will be another pound put on every tire you improve your house.'" He says, finally," I go down to the slum area and I say to myself as an assessor that there are no improvements in this district. I meet the owner of the slum and I say to him, 'Have you improved this area since I was here five years ago? ' He says, ' No, the disrepair and the dilapidations are worse than they were before.'" And says the assessor, "Give me your hand; well done thou good and faithful servant; go down to the rate office and tell them to reduce your assessment." Continuing, he said, "Do you think that I am caricaturing; that is the rating law of England," and it is the inclination to circumvent the economic consequences of that law that you have this farce here to-night.

The then Minister of Health, the present Chancellor of the Exchequer, stated in his speech when introducing the Bill that it was the present rating system that was making it impossible for in- dustrialists in this country to compete with foreign competitors, because every time that our industrialists improved their factories and were struggling to maintain markets against foreign competition they were met with a sudden increase in the local assessment and in local rates. I remember the right hon. Gentleman the Member for Epping (Mr. Churchill) making a peroration in one of his Budget speeches in which he pointed out that here at last would be the redemption of British industry because, he said, they were going to give relief to British industries by the derating process in order that they would be able to compete with foreign competitors engaged in the same industries.

In none of this sort of thing have you changed the economic results of the present rating system on the users of the land of this country. The Minister of Health—he is at liberty to rise and challenge what I am going to say—has struggled valiantly for years to try and rehouse the people of this country. What happens? If an acre of land is allowed to lie idle no rates are levied, but if 12 houses are erected on that land the assessor comes along, and promptly levies rates on each of those houses. That is how we are trying to help housing. Then they go to the Minister and say: "For heaven's sake, give us a subsidy for these houses," and one finds that the subsidy on the houses equals the rates which the local authority levies upon them. Under this Act not merely did they derate industrial hereditaments, but they derated what was called agricultural land. Why has not that been mentioned to-day? We find that our cities are bursting to get into the open spaces of the countryside, to get into the stretches of land round London, Glasgow and all the big centres of population. What do we find? We find this so-called agricultural land, paying not a penny to the rates of the country, held in the hands of speculators who are there to exploit the citizens if they try to get out into the open country. Can anyone deny that? The Minister of Health has not infrequently to check the local authorities because of the price asked for land, whether for housing, aerodromes or anything else. By derating agricultural land we gave an impetus to speculation in land values in this country that has never been equalled in our history.

To-night we are piously talking about weighted populations, and hon. Members have pleaded that subvention should be given to their districts. Not one word has been said in challenge of the iniquitous system that prevails. Landlordism, without being asked to pay one penny towards the rates of the country, is left to speculate, free of any surcharge on rising values. I notice that occupants of the Front Bench opposite are laughing. Is there any laughter in this? If Ministers were living in the midst of a city, in a slum, with hunger and privation at their door, with a desire that their children should see something of God's earth, the flowers and the beauties of nature, and they went to the local authority and asked to be put on the list so that they might get a corporation house, what would they think if they were told that the list of people waiting for houses was filled? They might ask the corporation why they were not getting on with their housing scheme, and the reply would be: "We cannot get the land because of the price." That is the work of the land speculators. Other little parasites come along when once the land monopoly gets going, and the prices of building materials and other necessary things go up, all combining to keep our people cooped up where they are.

Yet this afternoon not one word of challenge has been said against the rating system which encourages this state of affairs. We are told about the formula. When the Bill which introduced the formula was introduced I said, at the beginning of the Debate, that I should refuse to take any further part in it and that I would not table or support any Amendment to the Bill, because I looked upon it as one of the greatest pieces of nonsense ever put on the Statute Book. I also said at the time that if our Lord had gone into Jerusalem with such a formula and given it to the twelve Apostles, Christianity would never have been known in England. Whether it be in politics, philosophy, religion or anything else, the one cardinal characteristic of truth is simplicity. The greatest truths that man ever heard were spoken in the language of simplicity in the streets of Jerusalem. Simplicity and truth stand together, and whenever you get into complexity, beware, because there is falsity somewhere.

There is a formula. There is not a man in this House who does not feel a quaking when he comes to the formula. I do not blame the permanent officials for this. They are obliged to do it. Along come the Government. They do not wish to challenge vested interests but wish to circumvent the economic effects of the rating law, and they say: "We are getting into a mess; give us some kind of formula that we can work." That is what has happened. We get the weighted population. I wonder who is the Satanic genius who invents this nomenclature of "weighted population," "formula," "lower rateable value," and so on. In passing, may I give an example of what is happening? I see that Stoke-on-Trent is given a pretty low figure as to rateable value. It has "a low rateable value" under the present system where you rate people on their houses. Where you have a house in a slum, covered with vermin and out of repair, course it will have a low rateable value. In Stoke-on-Trent in the last fortnight or three weeks a piece of land, for which the owner, I think, paid a few hundred pounds, was sold for nearly £60,000. What about that for a rateable value? It has not been touched. That is not "a low rateable value." There are hon. Members here representing the distressed areas. I will undertake to go with any competent valuer to Durham, and we should find that the site values of Durham would pay for all the rates required in Durham, without one penny of subvention. Instead of that, hon. Members are here to-night begging and saying, "Give us a little more for the distreesed areas."

The formula has been in operation for a number of years. What has been the economic result? Has the rating burden as can be easily carried by industry? In 1913–14 the rates collected in England and Wales totaled about £73,000,000. To-day they are £160,000,000. Has the formula tended to stop the constant expansion of rates? Let the House remember, and more especially the workers, that not one penny can be accounted as credited to the ages bill until rent, rates and taxes have been met. Here we have these growing burdens making a constant inroad upon the workers' livelihood—the workers pay this burden of rates and nobody else—and we have an ever growing Budget of taxation. The Budget was £250,000,000 before the War. Look at it to-day. Add the expansion of the local rates burden. What a toll upon the produce of the worker before he can count a penny of wages.

This is a matter of great concern to those who come to this House as champions of the people. It is a matter of great concern that this constant inroad on the wages of the workers should be stopped. I should he out of order if I were to point to the real basis on which rates and taxes should be levied, but when I read such phrases as "weighted population" in this diabolical formula, and know that there are speculators who have made fortunes within the last 12 months in gambling in the site values of London, and around London where the new satellite towns are rising, I wonder if this House is blind to real facts of daily experience. I remember one site not very far from my own place in Wimbledon Park where a few years ago I saw crows nesting. To-day that land has jumped up to £2,000 and £3,000 per acre, and there are farmers beyond Morden who have retired for life, having received capital sums running to £30,000 and £40,000 for their land. Those site values will not contribute a single penny under this formula.

I am not asking that you shall tax the working man's tea, sugar and tobacco and other necessaries of life through the most abominable system of indirect taxation, and hand him back some of it as a relief of the local rate pressure. I am challenging this iniquitous system of protecting these vested interests, who have thrown off their obligations to pay rates and taxes while this Parliament has gone on imposing these burdens indirectly on the food and necessaries of the people and rates on the houses of e workers. You cannot reform that by any device or formula. Get on with your formula. As old Carlyle said, you cannot circumvent truth by any device. If you are going to run the State on a system which is pointing to the road to bankruptcy, then be frank and admit honestly that bankruptcy is inevitable.

Taxes are increasing here as in every other civilised country; rates are rising, and here we have this hollow farce of amending the formula. The Govern- ment are not saying that they have found something radically wrong in the system of rating but that there is something not quite proper in the formula. Your formula will only lead you to another formula, and in three or four years' time your rates will be infinitely higher than they are now. If you do not change the burden from the backs of the people I know of no force more potent in making democracy recoil against the so-called Constitution of the State than when it is ground down by rates and taxes.

9.9 p.m.

Mr. Lawson

I listened with interest to the Minister of Health's attempt, apparently to his own satisfaction, to explain the formula in the Bill. I share the anger of the hon. Member for Burslem (Mr. MacLaren) about this formula business, but it seemed a matter of amusement to the right hon. Gentleman. There is the well-known trick of the Indian fakir who pulls down a rope from nowhere and then climbs up it. I understand that no one has yet seen the trick done, but I said to one of my hon. Friends that I had seen the rope trick done this afternoon. I do not think the right hon. Gentleman felt that he had explained the Bill and particularly the formula. Its condemnation is that nobody seems to understand it. The local authorities certainly do not understand it, and the Minister was careful to cling to his brief and read it out word for word rather than go into a detailed explanation. One of the best proofs of this mysterious method is that local authorities had to get financial experts to confirm the Ministry of Health's experts in deciding what everybody was to get, and that when it was put down some authorities had scarcely finished their congratulations to themselves before they realised that what they were supposed to get from the White Paper was not to be given to them at all.

Why have the Government introduced this Bill, of such vital importance to the distressed areas, before they have introduced the Bill dealing with the Special Areas so that we could know exactly what they are doing? When the Act of 1929 was being discussed it was said that the real need was to deal with necessitous areas, as they were then known. All the arguments of the Chancellor of the Exchequer, who was then Minister of Health, went to prove that the Bill was to im- prove the lot of the necessitous areas. The Act has done nothing of the kind. One of my hon. Friends called the Measure a monumental one; there has been certainly a monumental catastrophe in some of the areas with which the Act of 1929 was supposed to deal. Who will deny that the Special Areas are not worse off to-day than they were then? The Government said that if the heavy industries were derated they would have a chance to compete. In my own area and in South Wales they took three-quarters of the rates off the coal owners and promptly gave the relief away to the foreigner. As a matter of fact, experience has shown that the whole weight has come down upon areas, where the houses are very poor and where the ratepayers really ought not to be paying rates for the shameful places in which they are living.

Let me give the House an example. In the case of houses of three rooms and less, the average is about 15 per cent. of the rateable value in England and Wales. In Durham, houses of three rooms and less represent 43 per cent. In the case of houses of six rooms and more, the average in England and Wales is 33 per cent., whereas in Durham it is 9 per cent. While I do not envy my hon. Friends who live in county boroughs in the advantages they gain, I hope they will really get those advantages, because I can assure them that there is at least one county borough which will not get what it expects to get. The county boroughs, in the great industrial areas, have at least the advantage of getting the large business concerns which do not come to the great coal and steel areas, which are administrative counties.

The point I want to make is that, as far as the Chancellor of the Exchequer and the Minister of Health at that time were concerned, there was a definite connection between this matter and the depressed or Special Areas. Why have we not before us the Bill dealing with the Special Areas? The action of the Government in introducing this Bill before we have knowledge of what is to be done for the Special Areas in the Bill which is to be submitted is a deliberate deception. Why, when there are only a few days, before we shall have the Special Areas Bill, have the Government brought forward this Bill, which is vital to the Special Areas, without our knowing what is the Government's policy regarding the Special Areas? I suggest that a piece of very clever work is going on. The right hon. Gentleman the Minister of Health is not in on the deal as far as the Special Areas Bill is concerned, but he is a member of the Cabinet, and I dare say he knows a good deal about the matter.

If we are to have this formula, why is nothing given for the youngsters who have gone from the Special Areas? That matter has not been taken into consideration. In the Special Areas when the mothers give birth to the children, there have to be nurses, the local authority, or someone else, has to supply the houses, schools have to be built, the children have to be educated, they have to be given all the necessary services until they are citizens; and then, when they are citizens who may be useful to us in the Special Areas, they leave those areas. The House will be surprised to learn that, according to the Commissioner, there have gone from the Special Areas during the last 12 years no fewer than 610,000 young men and women and boys and girls, and that during the last year, 40,000 have left.

Sir K. Wood

The hon. Member encouraged them to do so when he was at the Ministry of Labour.

Mr. Lawson

I have never been against transference, nor have the parents, for the simple reason that the parents have had no other alternative. I am pointing out to the right hon. Gentleman that if that is the only policy which the Government have, as apparently it is, at least there ought to be some financial compensation to the areas that lose citizens in this way. There is nothing in this wonderful formula to meet that problem.

Mr. Wise

There is certain provision made for the transferred population, because the transference of those young adolescents and adults to other areas automatically raises the proportion of children under five of the total population. The formula does take account of their case to a certain extent.

Mr. Lawson

I think that is rather too fine. The Parliamentary Secretary is very clever at explanations of this sort, but I should be very interested if he could prove to the House that these areas will get some compensation for this loss of citizens.

There is another factor to which I would like to draw attention. According to the calculation, Durham is to have an advantage of 1s. 9d. in the rates. I have a statement from the chairman of the finance committee of Durham saying that they are not getting anything of the sort and that they have already been informed by the Ministry of Health that the advantage they will get is reduced to 1s. 7d. I should be very much obliged if I could have some explanation of that. I assure the right hon. Gentleman that that is the position, and I am raising the question because some of the other areas will probably be in the same position as Durham. The statement from the chairman of the finance committee reads: Since the White Paper was issued, a communication has been received from the Minister of Health stating that unemployment figures for 1936 are now available and show a marked improvement in the position of the North-Eastern areas, and on the basis of the average unemployment figures for the three years 1934, 1935 and 1936 which must be taken for the purpose of determining the county apportionment for the Third Fixed Grant Period, the apportionment for Durham County will suffer a reduction of £23,000. Consequently, instead of getting £258,000, they will get £235,000. I understand that the reduction of rates also affects areas other than Durham. I would like to have some explanation of this matter from the Parliamentary Secretary. I understand that instead of paying the unemployment grant, it has now to be deducted from the block grant, so that instead of being paid, it is deducted from the General Exchequer Grant. I am told that in Cumberland the local authority's unemployment contribution was £10,649. In actual fact it is going to work out at a loss on the changed method of £12,500. In Durham, the local authority's contribution was £62,000, but under the present method of arrangement there is going to be an actual loss of £26,000. I find that Glamorgan is likely to lose £69,000, and Monmouth nearly £24,000. These are figures which have been given me, and it would be interesting if the Parliamentary Secretary would explain how it is that, apparently, the local authorities are going to be worse off under the new method than when they actually paid the grant.

I wish to emphasise once more that this Bill has a vital relation to the Special Areas Bill, and we ought to have had both in our hands together, to see what the Government's policy is with respect to the Special Areas. Maybe the Government can take some credit to themselves for some little financial advantage that will go to some of these areas. They are in a position where they grasp at just as much as they can get in order to meet their immediate needs. But this does not touch the edge of the needs of these areas, and I trust that the Government are not misled by some of the sentiments which have been expressed during the Debate to-day. There have been eight years during which the distressed areas have gone from bad to worse, years when not only has there been great suffering, but great services have fallen into arrears. I can say that with some knowledge of some sides of the life of my own county. The Commissioner offers about 85 per cent. for a great hospital which is badly needed in the county, but when they discover that it takes, I think, about £50,000 a year for maintenance, then the county is appalled in face of the decreasing rateable value and the lamentable position in which they find themselves.

Therefore, I say that while this formula business may continue to bluff the people outside, it is no solution in actual practice of the rating system and of the needs of the distressed areas. I hope that the Parliamentary Secretary will be in a position to tell us the reason for the changes which I have pointed out, and that the Government do not take this as any serious contribution to the financial position in which the Special Areas find themselves, which appeared rather to amulie the Minister of Health. I felt that while he was entitled to some humour in appearing to explain what he did not explain, we were entitled to a little more balanced dealing with a subject which had such a great effect on the distressed areas. I was not inclined to laugh and chuckle as much as the right hon. Gentleman, however estimable he may be as a Minister.

9.31 p.m.

The Parliamentary Secretary to the Ministry of Health (Mr. R. S. Hudson)

We have listened to-day to a very interesting Debate, and, considering its extreme complexity, the speeches which hon. Members have made have shown commendable knowledge of the subject. Perhaps it would be for the convenience of the House if I followed the order of the various speakers and tried to provide an answer to some of the questions which they have put. The hon. Member for Chester-le-Street (Mr. Lawson) asked me one or two questions, and I will do my best before I sit down to give him an explanation. I might perhaps start with the speech of the right hon. Gentleman the Member for Wakefield (Mr. Greenwood). I should, perhaps, preface my remarks by reminding the House of what my right hon. Friend said in his speech at the opening, namely, that one of the main reasons for introducing derating was to give industry and agriculture what we believed to be a relief to which they were fully entitled. Industry and agriculture for generations in this country have been paying a share for services from which they did not derive a corresponding benefit, and, therefore, the Derating Act was introduced essentially as an act of justice for industry and agriculture. It is necessary to bear that in mind when one comes to consider what the effect of the Act was on the finances of local authorities. The right hon. Gentleman said that in his opinion it was wrong that Bath should receive a relief of a penny or two in rates in view of the fact that Barrow got no greater relief. He said also that a percentage grant system was superior to the present formula system.

Let us look at the real position of Bath and Barrow. It is important not merely to look at what additional relief Bath and Barrow will get, but at the total relief they get from the Exchequer. It so happens that Bath and Barrow have populations of within a few thousands of each other—the population of the one is 68,000 and of the other 65,000—and therefore, as far as population is concerned, they are much on a par. Anyone who has any knowledge of the country would agree that Bath is more prosperous than Barrow and would, therefore, expect that in any fair system of Exchequer grants Barrow ought to get more than Bath. In fact, Barrow does get more than Bath. Barrow gets twice as much as Bath. Barrow gets something like 23s. per head of its population. Bath gets only 11s. As showing the real advantage to Barrow of this scheme, I would remind hon. Members that before derating the rates in Barrow were 15s. 3d. The rates to-day are 13s. 3d. The average rate for all the county boroughs of England is 13s. 4d. Therefore, very largely as the result of the additional help given by the Exchequer, Barrow, although it has its difficulties, has actually a rate lower than the average for all the county boroughs.

Let us look at the right hon. Gentleman's percentage grants argument. One of the main reasons, as my right ton. Friend said, why we abandoned the percentage grant system was that it gave far more to the rich areas that could afford to spend money than to the poorer areas that could not afford to spend money. The proof of it lies in the cases of Barrow and Bath. Bath is a rich town and can afford to spend money, and it would get a high percentage grant. Barrow cannot afford to spend as much and, therefore, would get a lower percentage grant, which is exactly the opposite to what the right hon. Gentleman wants. He went on to say he thought that seaside resorts ought not to get any additional advantage at all, and he thought that everything ought to go to the industrial areas. Again, we want to see what actually is being paid by the Exchequer to seaside resorts and compare it with what is being paid to the industrial towns.

I will quote one or two of the towns that the right hon. Gentleman mentioned. He talked about Bournemouth. That town gets a grant from the Exchequer equivalent to 6d. in the pound, and under the new formula it will get an additional 1d. The total, therefore, will represent only 7d. in the pound. In the case of Burnley, the Exchequer assistance will represent 48d. in the pound. For Eastbourne the Exchequer assistance will represent 8d. only, while for Dewsbury it will represent 59d., although in both cases the estimated increase under the revised formula is comparatively small. Those figures show that we are, under this formua, distributing money very largely in proportion to the needs of the various areas.

Mr. E. Dunn

May I ask the Minister to deal with the case of Barnsley?

Mr. Hudson

I do not know whether I have the figures, but I will try to get them. If we take the amounts of money distributed by the Exchequer and not merely the rate in the pound, we get an even more striking picture. The amount of Exchequer assistance to Bournemouth represents 94d. per head of the population. The amount of assistance to Sunderland represents 463d. For Southport the amount is 122d.; and for Merthyr Tydfil 558d. It is very difficult in face of figures like that to suggest that we are not distributing the money in proportion to need. If we take some of the counties, we also find striking results. The hon. Member for Mitcham (Sir R. Metter) spoke about Surrey. The assistance by the Government to Surrey will represent 136d. per head of the population. The assistance to Cumberland 582d. per head. It is very difficult in face of figures like those to suggest that we are not distributing money in accordance with need. The right hon. Gentleman went on to say that, in his opinion, the right system was that poor towns with low rateable value where social services were most needed ought to be given the greatest amount of help. That is precisely what the formula does. It is because we recognise that the poorer towns with low rateable value require more services and are less able to pay for them by themselves that we devised this formula, which provides weighting for the poorer towns with lower rateable value and higher unemployment.

As I have pointed out, the formula does, in fact, distribute the grant in accordance with what the right hon. Gentleman believes is the right way to do it. He then went on to repeat an accusation which has often been made, and was indeed made when the Bill for the Act of 1929 was going through the House, that the social services would tend to be starved because the local authorities would not have any money to pay for progressive extensions The figures which were given by my right hon. Friend in answer to a question in the House the other day about the maternity services, for example, completely disprove the statement. Take the case of South Wales. Glamorgan in 1930 spent £102,000 on maternity services, and that had risen by 1934–35 to £131,000. Rhondda spent £14,000 in 1930, and £22,000 in 1934–35. Merthyr Tydfil spent £4,900, and that rose to £5,700. There is no evidence of starvation there. The right hon. Gentleman went on to talk about school meals and said there were certain local authorities which were not providing an adequate number of meals to an adequate percentage of children. The answer is that they could have done it if they had wanted to. Whatever may have been the position in the past, they will certainly have no excuse for not doing it now under the new increased grants that they will get. The hon. Member for West Middlesbrough (Mr. K. Griffith) said that when he first looked at the Act of 1929 he thought it was ugly and venomous, but he had come to the conclusion that the formula had worked very well and had stood the test of time.

Mr. K. Griffith

My apology was only to the formula, and not to the rest of the Act.

Mr. Hudson

No doubt the hon. Member's change of mind about the formula may have something to do with the fact that for 1928–29, before the formula came into operation, the rates of Middlesbrough were 19s. 2d. in the pound, and that, as a result very largely of the operation of the formula, the rates are now down to 14s. The town stands to get still further reductions under the revised formula. No doubt that may have something to do with the hon. Member's change of mind. The same thing applies to another Member of the Liberal party—I do not know whether he is still a Member—the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George). He went up and down the country in 1929 saying he would have nothing to do with the Bill, that it was thoroughly bad, and that the formula would provide increased allowances for brewers who did not need them, but not for areas of the country which did need them. I am sorry there is no member of the family present to-night, but it is an interesting fact that the constituency of the hon. Lady the Member for Anglesey (Miss Lloyd George) stands to gain 2s. 6d. under the new formula, and that of the hon. and gallant Member for Pembroke (Major Lloyd George) stands to gain no less than 3s.

The hon. Member for West Toxteth (Mr. Gibbins) said that during the time he had been out of the House he had been a member of the Liverpool City Council. He will forgive me for saying that the information which he collected during that period does not bear out our information. He said that the Liverpool City Council had been seriously hampered in increasing its services by the fact that it was no longer under the percentage grant system and that its Poor Law expenditure had risen. He seemed to think that if the old system of percentage grants had been in operation, the Exchequer would have contributed to the Poor Law expenditure.

The fact of the matter is that Poor Law expenditure never attracted a percentage grant, and therefore, even under the old system, Liverpool would still have had to bear the increased charge for Poor Law. Indeed, the Government, under the new legislation which has been put in force lately, relieved Liverpool of 40 per cent. of its expenditure on the able-bodied poor. He then said that Liverpool had gained nothing but had rather lost as a result of derating, and that Liverpool no longer had the same resources as it had in the past when rating was in full operation. What are the facts? Liverpool lost actually in rates and grants, as a result of derating, £801,000 a year. They are getting under the old formula no less than £998,000 a year and on top of that, under the formula which we are discussing, they will get further assistance of £428,000.

Mr. Gibbins

I am sure the Minister does not want to misquote me. What I suggested was that in the four years before 1931, mainly due to Government policy, the cost for able-bodied unemployed was £700,000 and that £250,000 was added, and that because of the de-rating the whole of the £950,000 had to be spent before you could touch the services which had been excluded from the grant.

Mr. Hudson

The hon. Member was endeavouring to explain that this was a bad system and that the old system was better under which the local authority received full rates from industry and agriculture instead of receiving a grant from the Government based on the formula. I am showing that under the old system, if it had survived, Liverpool would have had to pay the same amount under the Poor Law as it did pay but it would have been £190,000 a year worse off than it has been during each of the last four years.

Mr. Gibbins


Mr. Hudson

I assure the hon. Member that my figures are correct.

Mr. Gibbins

I have some figures here too.

Mr. Hudson

Then the hon. Member for Romford (Mr. Parker) suggested that a different factor would have been preferable and would have given better results in his area. I dare say that a different factor would give better results in certain areas, but no doubt the hon. Member has read the White Paper, from which he will see that innumerable factors were discussed and examined in the course of the investigation of the last 12 months. My right hon. Friend as Minister of Health obviously was mainly concerned, and indeed was bound, to have regard to a formula which would produce the best results over the country as a whole. As the report shows, although individual alterations in individual factors might produce different results in particular places, the local authorities as a whole came to the conclusion that the formula which we are discussing was the best for the country as a whole. I need not go through the various factors which were considered. The question of children, the question of declining population, the question of rateable value, the question of the number of people over 60, were all examined meticulously and all rejected in turn, as not producing any better results than the formula which is now under consideration.

The hon. Member for Houghton-leSpring (Mr. W. Joseph Stewart) said Durham had spent a great deal of money recently on building schools, but that does not seem to be an argument against the formula. The hon. Member no doubt is aware that the question of building schools is already dealt with under a percentage grant, and the fact that he does not like any percentage grant seems to be an argument in favour of rather than against the formula. He then said that Durham had lost heavily by reductions in rateable value. That is true, but Durham gained more than she lost. Durham lost by derating and the discontinuance of certain grants £1,346,000; but under the block grant Durham gets £1,557,000, and under the revised formula Durham will receive, it is estimated, further assistance of £258,000 a year. No one can argue that Durham does not come off better under the formula than under the old system.

The hon. Member for Rhondda East (Mr. Mainwaring) argued that Rhondda had been losing rateable value rapidly, apart from derating. Surely that, again, is an argument in favour of the formula. If Rhondda had been losing rateable value rapidly, apart from derating, it means that, as the formula was settled and a basic year was taken before Rhondda had lost rateable value, Rhondda really gained in the process because it had, during all those years when its rateable value was falling, been receiving grants based on the days when its rateable value was higher. Therefore, Rhondda has really gained and not lost.

Mr. Mainwaring

I argued neither for nor against the formula in principle. What I asked the hon. Gentleman and the Minister to consider was whether the conditions in Rhondda did not merit greater consideration than they have given to Rhondda.

Mr. Hudson

That is a different argument. My answer to it is that the present results are bound to be a compromise and they represent the best compromise that the local authorities, who considered all the circumstances, with the advantage of independent financial advisers and representatives from the distressed areas, have been able to reach. One or two hon. Members suggested that the formula was really incomprehensible, and I think it was the hon. Member for Burslem (Mr. MacLaren) who suggested that one of its demerits was its lack of simplicity. Perhaps for the benefit of hon. Members I should read out some figures showing the actual effect of the formula rather than the algebraic symbols in which it appears in the White Paper. I take, first, the weight given for unemployment. When the percentage of unemployment is 2, the old weighting factor resulted in a weighting of 2.9; under the new factor the weighting becomes 5. I give these figures to show what a great improvement the modified formula is over the old as far as concerns getting money into the areas where it is needed owing to heavy unemployment. Where the percentage of unemployment is 5, the old weighting would have been 20, but the new will be 35. Where the percentage of unemployment is 10, the old weighting would have been 49, and the new will be 110.

Another way of showing the effects would be to take two county boroughs, Bournemouth and Blackburn, which both happen to have exactly the same population, namely, 118,200. Bournemouth has a rateable value of £15 per head of the population, which is above the average of £10, and will therefore get no weighting for rateable value. Its unemployment percentage is 1.5, and so it will get a negligible weighting for unemployment. Blackburn starts off with the same population but has a rateable value of £6 per head of the population, which is less than the average of £10, and it therefore gains 46,000 population as a weighting for low rateable value. The percentage of unemployment is 7.5, which is 6 more than the basic 1½ and it therefore gains 113,000 for unemployment weighting. It gains a further unemployment weighting owing to the fact that its unemployment, being 7.5, is not only above the 1½ but is also above the 5, and it gains 24,000 superweighting for that. The final result is a weighted population of 324,000, compared with the original 118,000. I think this will perhaps be more clear in the OFFICIAL REPORT tomorrow.

Mr. Ede

That is a very high compliment to the reporters.

Mr. Hudson

It is a high compliment to the clarity of my voice. Now I come to the hon. Member for Chester-le-Street, who started by saying that nobody understands the formula. I think that after my lucid explanation, he would not perhaps stand by that observation. He said that the Bill had a vital connection with the Special Areas. The Bill really has a vital connection with Section Ho of the Act of 1929, because it is as a result of that Section that these changes are being made, and the investigation was made as a result of that Section and not because of any connection with the Special Areas. This Bill would have had to have been introduced before 31st March in any case, in order to give legislative sanction to the proposals before the next quinquennium.

The hon. Member went on to ask if I could explain how it was that Durham lost as a result of being excused its contribution in respect of unemployment, and he also pointed out that Glamorgan lost too. The answer is that the new formula was devised after these losses had been ascertained and having them in view, and the new formula is devised so as to put the bulk of the new money into the distressed areas. It is quite true that under the first calculation Durham loses as a result of being excused its unemployment contribution, but it more than makes up the loss as a result of the new factors in the revised formula. The revised formula was, after all, devised when it was already known that the local authorities were going to be excused payment of unemployment contributions and also after it was known that they were going to get their £115,000 loss on account of the discontinuance of the Male Servants Licence Duty, made good.

Mr. Lawson

Does the hon. Gentleman say that my figures were not correct?

Mr. Hudson

No, but the figures that the hon. Gentleman gave to-night as being the result of the excusal of unemployment contributions have only a theoretic value, because the figure that really matters is the grant that Durham is going to get, and Durham's grant is going to be very much more than the loss that it will suffer. The hon. Member ended by saying that the Bill really gave little financial advantage. But that little financial advantage represents to Durham £258,000 a year.

There is one final word that I would say. Several hon. Members have suggested that more money ought still to be granted to the distressed and necessitous areas. My right hon. Friend earlier to-day gave some striking examples of the extent to which, in certain areas, the Exchequer already pays the vast bulk of local authorities expenditure, and he said, quite rightly, I think, that there must be a limit to which you can go and that if you go much farther, you must start some different system of control over expenditure.

Mr. Lawson

Do I take it then that this is the full extent to which the Government will recognise the financial responsibilties of the Special Areas?

Mr. Hudson

No, Sir, not a bit. The hon. Member must not say that. I am dealing with the general principle and saying that, in spite of the great increases in the Exchequer grants which we are dealing with to-day, some hon. Members have said that this is not enough and that we ought to go farther still. I agree with what my Noble Friend the right hon. Member for Hastings (Lord E. Percy) said, that you may well get into the position where, if you are going to ask for very much larger Exchequer grants for individual areas, you will have to face some new system of control, and no one would dislike that more than hon. Members opposite, so that there is a grave danger in pushing this demand for more and more money. I have some interesting figures here showing the extent to which the Exchequer is already paying the vast bulk, in many cases, of local authorities' expenditure, though I will not trouble the House with them now, but it has really got to the stage when we have very likely to call a definite halt.

I think I have dealt with 'the bulk of the questions put to me and the points raised in the Debate, and I can only end by repeating what my right hon. Friend said, that this new formula represents 12 months' hard work on the part of local authorities, on the part of their independent financial advisers, and on the part of the staff of the Ministry of Health, that the local authorities have accepted it as a fair compromise, and that they have said that they could not find another formula that would substantially improve the distribution of grants; and I would remind the House that the effect of this formula is to distribute 50 per cent. of the additional money among the necessitous areas.

Mr. David Adams

During my speech I asked whether, in the event of new industries being started in an area and having the benefit of derating, there would be compensation to the local authorities for the loss of those rates. That point has not been answered.

Mr. Hudson

I am sorry I forgot to deal with a question put to me by the hon. Member for Nelson and Colne (Mr. Silverman). As I understood it, it was an inquiry about the special rates in certain parishes. He wanted to know what had caused special rates to be levied in certain of the parishes where we were making arrangements to provide for 75 per cent. instead of 50 per cent. of the loss. The special rates in rural districts are leviable under the Public Health Act of 1875 and are chargeable in particular parishes which are served by public health works, principally sewerage and sewage disposal works, water supply and scavenging arrangements.

10.6 p.m.

Mr. Dunn

I am sure that every hon. Member will be very much clearer in his mind as to the interpretation of the formula after the several hours Debate we have had to-day. I think we shall be as clear as I was last Sunday morning. While I was reading the formula I turned to my little girl and said, "Margaret, can you tell me the chemical formula for whisky?" She immediately said, "Yes Daddy." I said, "What is it?" and' she said, "O.L.IC2" I think that aptly describes the formula as we have listened to it to-day. I have risen to put three questions to the Minister or to the Parliamentary Secretary. On two or three occasions I tried to get into the Debate before the Parliamentary Secretary replied. In his opening statement the Minister informed the House that the figures which he gave as published in the White Paper and in the Bill itself must be taken by the House as being merely an estimate. I am glad that the Minister nods approval, showing that I have got him right on that point. In that case, why did the Parliamentary Secretary speak with such great certainty when dealing with the figures in winding up the Debate?

My second point is this: I was a member of a local authority when the White Paper of 1928 was issued, and at that time I expressed very grave doubt as to the accuracy of the figures then published. Is there a Minister or a Member of the Opposition who would say, in 1937, that the figures of 1928 formed any safe guide for the local authorities after 1929–30, when the Local Government Act of 1929 came into force? I have in mind one authority which, it was stated in the White Paper, would be a gaining authority to the extent of is. 6d. in the pound I regret to say that instead of being a, gaining authority it has been a losing authority to the extent of is. 6d. in the pound from the time when that Act came into force. To me it is significant that the Minister, in opening this Debate, should safeguard himself by warning the House, so that later, when these figures do not work out, he may be able to say, "I gave the figures merely as an estimate." I take that to be the interpretation which the Minister places upon these figures. If that is a true deduction, there is no reliance to be placed on these figures. No authority in the country can count on them as showing what it will get.

Sir K. Wood

I would point out that the figures have been carefully checked in consultation with the local authorities and financial advisers, and I think the hon. Member ought to accept my statement, which I made with due responsibility, that I do think they give a fair estimate of what we hope will be possible.

Mr. Dunn

In view of the fact that the figures of 1928 did not work out, and that many authorities have been losing authorities instead of gaining authorities—having that as our experience, and in view of the statement the Minister made, I think we are entitled to draw the deduction that these figures cannot be relied on. I understood the Minister to say in opening the Debate that if two neighbouring authorities found themselves in difficulties with regard to any uniform rate measured across the authorities, there was a right of appeal to the Minister.

Sir K. Wood

I do not want to keep interrupting the hon. Member, but I should like him to look at my observations in the OFFICIAL REPORT in the morning. He will find that my statement was confined to the particular matter with which I was dealing at that time. So far as that is concerned it is true. I should like him to read the statement which, of course, was made after careful preparation.

Mr. Dunn

It will be interesting to read the Minister's statement. I am sure on. Members will read it with a good deal of interest, for this reason. Some of us have in mind local authorities who, under the formula now existing, find that their rates have increased until they are not 13s. 3d., the average, but 15s. 6d. in the pound, plus water, and are even pound for pound, whilst a neighbouring area is not only gaining but pays no general rate at all. Moreover, there are adjoining authorities, one with rates which are pound for pound while the other is able to build council offices out of the profits they are making on the formula grants. That is a point upon which we are entitled to ask the Minister how such a thing may be corrected.

There is a third point. I understood the Parliamentary Secretary to say that the average rate in the boroughs of this country came to 13s. 3d. in the pound. I wondered whether he could say what the average rate in the pound is for the urban authorities. Those authorities are feeling the effect of the operation of the block grant, but not in a way that they understood it would be when the Bill was passing through the House in 1928–29. The people who are entitled to protection in any revision of the block grant are those who live in the small cottage houses of this country, and who have, in the main, to bear the burden of the rates. I would be pleased if the Minister could reply to my first, second and third questions.

Sir K. Wood

Perhaps the hon. Member will allow me to send him the information asked for in his third question, as to rates in the urban areas. On his first question, I believe it to be a fact that the block grant results, which will be found exactly defined in the report, show, as I said in my speech to-day, an estimated gain of £2,250,000. There is some hope that the results may be even better than are stated in the White Paper. So far as the hon. Member's second question is concerned, as to the operation of the Act in the past, it might take a very long while to justify the statements that were made in the original White Paper, but I think, in the years immediately following, the results that were formulated came pretty well into operation. The hon. Member will recollect that adverse conditions of unemployment then followed. I am sorry to have had to reply to the hon. Gentleman so frequently to-night, but I am glad to be able to enlighten him further as to the position.

10.18 p.m.

Mr. Silverman

It is impossible to allow to pass unchallenged the Parliamentary Secretary's invitation to the House to believe that the operation of the block grant has been more, or at any rate not less, advantageous than the previous system. I understood that his argument was an endeavour to prove the advantages of the present arrangement by pointing to the fact that Middlesbrough, Anglesey, and, I think, Durham, rates had been reduced. If, on that argument, the House is to infer that the system has been advantageous to those places, why does the Minister at the same time invite us to believe that there is an advantage to Liverpool, whose rates have increased from 13s. 10d. in 1931 to 16s. 7d. or 16s. 8d. in 1936? The truth of the matter is that, in those four or five years, Liverpool's unemployment has more than doubled. In the first eight months of 1935 it was 93,000, whereas in the whole of 1931 it was 42,000 or 43,000. It seems rather as though the Parliamentary Secretary was attempting to have it both ways. I do not want to pursue the point, but only to persuade him to reconsider it when he is directing his attention again to Liverpool, and not to allow himself to be persuaded that this new arrangement has been advantageous to Liverpool. It has been anything but advantageous, and even the very large readjustment that Liverpool will get under this rearrangement of the block grant will go only a very small way towards redressing that problem.

Mr. David Adams

May I have an answer to my question?

Sir K. Wood

I will send the hon. Member a communication.

Bill committed to a Committee of the Whole House for Monday next.—[Captain Margesson.]