LOCAL GOVERNMENT (FINANCIAL PROVISIONS) BILL

HC Deb 30 November 1945 vol 416 cc1785-835

Order for Second Reading read.

11.22 a.m.

The Minister of Health (Mr. Aneurin Bevan)

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

If I may borrow a metaphor from the subject which has just been under discussion, I would ask the House now to plunge into the somewhat tangled undergrowth of local government finance. The Bill to which I am asking the House to give a Second Reading this morning is, I am afraid, one of those complicated Measures which will be clear only to Members of the House who have been for some years members of local authorities. However, I will do my best to make clear what the Bill proposes to do, and if I fail to make it clear I hope, at least, that that failure will be clear before I sit down.

The Local Government Act, 1929 established a new system of grant for local authorities, and this was amended by the Local Government (Financial Provisions) Act, 1937. Members who were acquainted with the difficulties of local authorities before 1929 will appreciate the necessity for the new grant. The distressed areas, in particular, threw into relief the backwardness of local government financing. As a consequence of the continuation of large-scale unemployment in many parts of the country, the finances of the local authorities in those areas broke down, and it was necessary for the Government of the day, I am afraid very reluctantly, to come to the assistance of those local authorities, by means of unconventional forms of financing.

One of the troubles which faced the Government of the day was how to distinguish the various factors responsible for the disabilities under which the poorer local authorities laboured. It was very difficult to take a low rateable value per head of the population alone, because that might be due to the fact that assessments were not uniform throughout the country. It was not possible to take exclusively the rates in the £because this would express not only the financial disabilities of the local authorities but the ambitions of the local authorities in spending their own money, so that it was necessary to devise a formula by which Government assistance could be funneled into areas needing it by some objective and dispassionate principle which would take account of the disabilities under which some local authorities laboured as against others.

In consequence of that, a formula was devised which weighted the distribution, by reference first of all to the proportion of children under five, then the rateable value per head, the percentage of unemployment and the population per mile of road. I am bound to confess here that in the devising of this formula the experts showed very great ingenuity, and indeed in many ways it marked a revolution in local government finance. It was unfortunately associated with another principle, that of derating, which brought it into some discredit, but nevertheless, as a means of distributing Exchequer assistance to local authorities in proportion as disabilities fell upon them, the block grant formula which was originally devised was indeed an ingenuous instrument.

Although local authorities who have suffered disabilities have received more assistance under the block grant formula than they might otherwise have done, it is true to say that today the block grant formula needs to be revised. I have been discussing this with representatives of local authority associations, and a review is about to be undertaken of the basis of the block grant formula, so that the Measure which the House is asked to consider this morning is by way of being an interim Measure. I hope, therefore, that in those circumstances the House will give us the Bill without undue difficulty.

May I say a further word on the general aspect of the matter? It may be held by hon. Members in all parts of the House that a revision of the block grant formula alone will not be sufficient, that it is also necessary to undertake a more fundamental examination of the basis of local government finance. There is considerable merit in that. I myself, speaking at the moment not authoritatively, but, as it were, thinking on my feet, take the view that there are grave defects at the present time in the whole system of rating. These will probably have to be considered, but I must ask the House to reflect upon whether this is the right moment for doing so. At this particular moment the special need is to examine the block grant formula itself with a view to trying to ensure an even greater bias in favour of poorer local authorities than exists at the moment.

We ought to postpone examination of more fundamental aspects of local government finance until a later date, because as hon. Members will have learned from various pronouncements the Government will be introducing, in the course of the next few years, and even earlier than that in some cases, a number of Measures which will rearrange the functions of local authorities in some respects. For example, very shortly when the new national insurance Measures, which are now being framed, come into operation, the poor law burden will be taken away from the local authorities. This will make an alteration of something in the nature of £30 million. At the same time, there are other measures which are under consideration, and so I seriously suggest to hon. Members that although there is great substance in the demand for a thorough going overhaul of the sources of local government revenue, we ought to wait to see what will be the effect upon local government functions and upon the relationship between local and other instruments of government before we undertake that review. It would obviously be a very foolish thing indeed to have a Commission of Inquiry, if that were the instrument devised, examining this whole matter pari passu with a review of local government functions and work. I suggest the House might be content with the promise I now make that the block grant formula will be investigated with a view to trying to secure an even better weighting in favour of poorer local authorities than exists at the present time.

The House will probably know that the Act under which the block grant is distributed arranged for quinquennial revisions of the block grant. The last quinquennial period expired in 1942, but it was agreed between the Government of the day and the local authorities, that it would be undesirable, in view of the disturbance caused by war, to undertake a new block grant review at that time; indeed, I think it is true to say that the conditions are also too disturbed at the moment to consider the amount of money that ought to be distributed under a new block grant for five years, and so this is in the nature of an interim payment. If the block grant were distributed to the local authorities normally, and the war had not occurred, local authorities would be receiving during this quinquennium an addition of£7 million a year, £35 million in all.

Mr. Cove (Aberavon)

They have lost it.

Mr. Bevan

They have not lost it at all. It was to be £35 million in all, £7 million a year, but of course the House knows very well that the local authorities, like other agencies of Government, apart from the War Departments had to desist from spending on a normal basis. They were not expected to give the same services, and, indeed, they did not give the same services. As a consequence, the rates of local authorities have remained constant throughout the war and, in some instances, they have dropped. They have, in many instances, repaid loans and accumulated balances, and, therefore, it would be a grotesque over-statement of the position to say that the failure to pay the whole £35 million has been unjust to the local authorities.

Mr. Alpass (Thornbury)

Although the local authorities have not spent up to their normal standards during the war, because they have not been able to, I think the Minister will agree that there is a very large amount of arrears to be overtaken.

Mr. Bevan

The hon. Member anticipates what I am going to say. It is true, but account, nevertheless, must be taken of the fact that the local authorities have not been called upon to spend as much money as they otherwise would and, therefore, in not being given the whole of the arrears, it cannot be argued that they have not been fairly treated, and I know that most of the local authorities know that they are not being unfairly treated.

However, it is necessary that some payment be made and, therefore, the Government have decided to pay £10 million and £11 million instead of the £35 million, Which the local authorities claim they would be entitled to if the whole of the arrears were paid. That £10 million and £11 million in the remaining two years provides for the additional expenditure of £21 million which will fall on local authorities in the attempt to make up arrears. Then there is the third year which would eat into the next quinquennial period; for that year there is to be a payment of£12 million so that, in point of fact, we are proposing to pay £10 million, £11 million and £12 million in addition to the old block grant. This will be a very valuable assistance to local authorities and I know, and I think hon. Members also know, that the local authorities appreciate this. It must not be thought, and I am quite certain hon. Members familiar with the subject do not think, that the block grant is the only way in which the local authorities are assisted from the Exchequer. The block grant is an addition to the special grants given for special services, and it might interest the House if I read out certain figures so that they might see what the values of the various forms of assistance are.

For the year ended 31st March, 1941, the total expenditure of local authorities on revenue account, that is excluding capital transactions, was £641 million and of this £161 million was spent on trading services, for example, gas, electricity and tramways. The balance of the expenditure, namely, £480 million, was met from the following sources: Fees, rents, recoupments, etc. £65.7 million; profits from trading services £1.3 million; specific grants for elementary education £36.4 million; for higher education £10.7 million; for police £18.7 million; for housing £15.6 million; for roads £5.8 million; for miscellaneous services £4.5 million; civil defence grants £84.4 million; block grant £47 million; local taxation licence duties and Tithe Act grant £2 million; total £292.1 million. The amount falling on the rates was£187.9 million. It will be observed that the block grant contribution is a substantial addition to already very substantial grants made by the Exchequer in respect of special services. It seems to me, therefore, that the provision which is being made under this interim payment is one which ought to commend itself to the House. I daresay there are hon. Members who will suggest that the amount of Exchequer grant ought to be even greater than this, but I would remind them that what we must take into account here is not merely the total amount of payment the Exchequer makes to local authorities but the neces- sity of seeing to it that the payment which is made actually goes to those authorities really in need of it. There are some local authorities who obviously do not require very much, if any, additional Exchequer assistance and, therefore, I would point out to hon. Members that, unless some new method of weighting can be discovered, an addition to the global figure would not result in the relief they desire, and what we should aim at is not so much to press on the Exchequer to provide an addition to the total sum but to devise some way by which the burdens of maintaining local government services are spread more equitably over the country.

Mr. Lipson (Cheltenham)

Could the Minister not do both? If the Minister provided a bigger global sum there would be more for the needy local authorities.

Mr. Bevan

No, there would be more for the less needy local authorities, and I hate making the fat fatter in order to make the lean just a little less lean.

I come now to a very difficult subject, and that is as to the way in which the new block grant will be made up. I am bound to say that one of the reasons to consider—and I think the right hon. and learned Gentleman the Member for North Croydon (Mr. Willink) who preceded me in this post will agree with me —I am bound to say that if for no other reason than to reduce the complexities of the Ministry of Health it is necessary to get these finances into a more intelligible position than at the present time. It, indeed, requires a senior wrangler to understand how it is that this grant is distributed. Roughly, with my usual recklessness, I will essay it. Roughly, the procedure is that the local authorities are expected to provide a notional sum equal to the amount of the additional block grant. That is to say, we put £10,000,000 in from the Exchequer and the local authorities are supposed to pay in a sum of an equal amount.

Mr. Alpass

Additional expenditure?

Mr. Bevan

No, I said a notional sum. In other words, you take the figure you first thought of. The amount of £10,000,000 is obtained by levying an eightpenny rate, or, to put it differently, an eightpenny rate over the whole country will yield roughly £10,000,000, it will in fact realise about £9,300,000. We have, therefore, the sum of about £20,000,000 in the pool. It is distributed to the local authorities in accordance with their need and in proportion to their expenditure, and the position is that the local authorities who are better off have less money from the pool because the yield of an eightpenny rate, which is deducted, is greater in their case.

The following county boroughs all contribute about the same amount to the pool, and perhaps it is best to look at the result rather than the devious means by which the result is reached: Bath, £20,600; East Ham, £20,400; Ipswich, £19,900; Oldham, £20,800; that is because in those cases the rate product reaches about the same figure. But, because their expenditures differ, because they put into the pool in accordance with their means and get out of the pool in accordance with their need, Bath gets £29,500, East Ham £63,800, Ipswich £46,300 and Oldham £54,300. The resulting effect is that the rates are relieved to the extent of Bath 3½d.; East Ham 1s. 4d.; Ipswich 10½d. and Oldham 1s. 0½d. It would be possible, of course, to take example after example, all over the country. I think if hon. Members will look at the financial memorandum, they will sec that Bournemouth gets the advantage of a ½d. rate, and Merthyr Tydfil I believe a rate of 2s. 9d. So that the differences between these ranges of rate relief illustrate the way in which the new grant distribution will work out so as to pump money where the money is most needed. As I said earlier, I am not suggesting for one single moment that the money will yet be pumped out altogether in accordance with need; in other words, at the end of it local authorities are not left in a condition of equality, and that is the situation at which we must aim.

Then there is the second part of the complicated formula, and that is the distribution of the new grant between the counties and the rural authorities. It is not necessary—indeed I will not weary the House by reading out large numbers of figures—

Mr. Willink (Croydon, North)

On a point of clarification, when the right hon. Gentleman said "rural authorities," I think he probably intended to say "minor authorities."

Mr. Bevan

Minor authorities. I should have said county districts. That is the proper technical term. I wish, as far as possible, to use particular illustrations in order that the situation may be appreciated. Recently, of course, rural authorities have had additional obligations imposed upon them. They are going to have more relief. Instead of having one fifth of the capitation given to the other district authorities, we are giving them one third, to enable them to carry out some of the duties which have recently been imposed upon them by the legislation for which the right hon. Gentleman is responsible—for sewerage, water and that sort of thing. In the case of London there is, of course, a very different situation. The London County Council and the metropolitan boroughs will arrange a scheme of their own, which I shall authorise, and as a result of which the poorer metropolitan boroughs will have a higher share of the new grant.

I hope the chief lineaments of the scheme have been made clear. I believe the proposals of the Government have met with substantial agreement among the local authorities. They have not indicated any opposition, and indeed I do not anticipate any. As I said earlier, there are grave difficulties in these financial arrangements; nevertheless, I believe that when one considers this new grant in addition to the other reliefs that the Government have given to local authorities, these proposals should commend themselves to the House. But I must add one modification. There are some local authorities who, as a consequence of enemy action, have suffered a grave reduction in their rateable values. It is not possible to provide for those authorities and for those areas by means of a principle which has general application. It is, therefore, necessary that their case should be treated empirically. Therefore, I should be prepared to consider representations from those affected authorities, with a view to giving additional assistance for the loss of rateable value through enemy action. It is not possible to include those proposals in the Bill, because each case will have to be treated on its merits. Nevertheless, the Government do recognise that there are special circumstances which must be provided for, and I am prepared to consider them. Therefore, I hope that the House will be good enough to give the Bill its Second Reading.

11.50 a.m.

Mr. Willink (Croydon, North)

This Bill, the Second Reading of which the right hon. Gentleman has moved, is a complete example of continuity of policy between this Government and the last. Last night we had some little difference of opinion as to legislation emerging from the Ministry of Health, but, so far as my hon. Friends and myself are concerned, there will be no opposition to the Second Reading of this Bill. The matter has been under consideration, as I know, for many months now, and indeed at was on 15th February, in the course of a Debate on the White Paper for which the Coalition Government were responsible, on local government reform, that I had the honour to make a careful statement on this subject to the House.

On that occasion, having regard to the fact that, as the last Chancellor of the Exchequer had promised, there would be a bias in favour of the poorer local authorities an any revision of the block grant formula, I added the announcement that with regard to a supplementary sum which already was contemplated as being the right method of dealing with the early postwar period, here also there would be a definite weighing in favour of the poorer authorities. Indeed, before I left the Ministry of Health, the formula with regard to taking the supplementary grant, adding the notional rate and then taking away the actual rate, had already been devised by those, some of whom, I think, almost qualify for the title which the right hon. Gentleman used, of "senior wrangler." I would like to express my appreciation of the extreme lucidity of the Explanatory and Financial Memorandum on this complicated matter. Would that all legislation was so clearly and briefly explained! Although the matter is complicated, I do not think that anyone who really applies himself to the explanation of Clause 2 would, after a little work, find it unintelligible.

There can be no doubt whatever that with the many very large fields of uncertainty—education, the social insurance scheme, the removal of the burden of public assistance, and there are many other facets of the matter, including such improvements in the situation as may result from the work of the Local Govern- ment Boundary Commission—it is clearly right to deal with this matter at the moment on an interim basis. While I agree, as we must all agree, that there are points in the relationship between our local and national systems of finance that cause great concern—I do not believe that there is in England and Wales a situation so serious as that which exists in Scotland in connexion with onerous rates—I accept the view of the Government that this is not the moment at which to embark on a wholesale and systematic investigation. The Bill, of course, was not as yet in draft, and indeed, when I left the Ministry, I was not aware of the length of the period for which this interim grant was to be given. We had got as far as the principle and the formula, and had a pretty clear idea of what should be the amount for the first year. It would be too much to hope that in a question of this kind there would be complete agreement between the local authority associations and the Minister of Health. However, the impression I have got from what contacts I have been able to make is that the local authority associations on this occasion, at any rate, are not feeling sore. They feel that there has been a genuine attempt, both by the last Government and by this, to help them.

I do not know whether it would be possible for the Parliamentary Secretary, if he is going to reply, to throw some general light on the provision in Clause 4 of the Bill, that in the case of a non-county borough or urban district, what I might call the capitation grant amounts to 24d., 27d. and 30d. in the three years, whereas in the case of the rural districts those sums are 8d., 9d. and 10d. Of course, we know that there is a very substantial difference, but if any information could be given in broad terms which would satisfy the House that that very wide difference in the proportion of three to one was just to the rural authorities, I think it would be of assistance to the House and of interest to the public outside. I think this formula, which is in the form which was contemplated by myself and which I do not think has been amended in any way, is a most ingenious method of giving the bias in favour of the poorer authorities in this interim period which we wish to give, and I am prepared to do all in my power to assist the Bill to pass into law.

11.52 a.m.

Mr. Royle (Salford, West)

It has taken me some time to catch your eye, Mr. Speaker, and I find the ordeal is none the less because of the fact that I have waited to seek an opportunity to address this the finest debating assembly in the world, even though it has been suggested during the past few days that it is no longer the finest club in Europe. Therefore, I hope I may have the traditional indulgence and kindness which are always extended to a maiden speaker.

I rise to support the Bill, and to welcome it as a step forward in the right direction. I want to speak in a very general sense, and ultimately very largely from the point of view of Clause 2. I can claim some experience of local government, and I feel that the Measure will give tremendous satisfaction to those who are engaged in that work—not only to the professional administrators but to those who are representatives of the electors on our local government bodies, particularly in the industrial areas. This is a splendid step forward towards a better and more equitable system of rating. I have the honour of, and a deep responsibility in, representing the Western Division of Salford, the city across the Irwell from Manchester. In the old days, Manchester used to be known as near Salford, but I am afraid that that position is now reversed.

In order to create the background of what I want to say, I would like to bring down the provisions of this Bill to the personnel of our towns and cities, and describe my Division. It is contained in four square miles, and within those four square miles live more than 60,000 people. It is the Division which is depicted in the book, the play and the film, "Love on the Dole." Very few hon. Members must be without knowledge of that Division, with its mean streets into which the sun rarely penetrates, and sordid rows of back to back houses. Before the war, poverty and unemployment were rife. I know that the war has raised the incomes of many of my people—I should say the people in my constituency—but the war has not raised the standard of their living conditions. In three wards out of six, there is not one open space for playing grounds. I wish my Division were an isolated instance, but the House knows that in Lancashire, South Wales, the North-East, the Black Country, London and Scotland such conditions abound.

What is their rating position? I will use an illustration, taken from the rating period 1943–44. While I am familiar with the position in the Division which I represent, I am not equally familiar with changes that may have taken place in other Divisions. The rates in Salford in that period were 17s. 6d. in the £ while in the nearest county area which could be described as suburb of Salford the rates were 10s. 6d. I might take, as another illustration, the Lancashire town of Wigan, which had a rate in 1943–44, of 15s., while the nearest seaside resort, Southport, had a rate of 8s. 6d. In the final analysis, who pays the rates? It is the tenant in the ordinary cottage property of our towns, the tenant of the small shop and the owner-occupier of the artisan house. Their rates are included in their rents. In actual fact, there are very few large ratepayers in these days. The position is that the lowest rate group of the population are compelled, because they cannot afford otherwise, to live in the town, while the higher-rated groups are those who can live in the country suburbs or at the seaside. The lower-wage groups with their homes in industrial towns subsidise the higher-wage groups who can live in the more salubrious districts. The higher rates are brought about by heavy public assistance, education, greater wear and tear of roads, etc., as well as greater necessity for health and sanitary services. So, in effect, the poor keep the poor. Even those who draw relief from public assistance offices help to pay for the relief in the rates which they pay as part of their rents. In addition, they pay for those who get their livings in towns of high rates and live in the places of low rates.

This is where Clause 2 of the Bill comes in. As I see it, this is a step towards the equalisation of rates. It is an old story. I remember when, as a comparatively young member of a local council, I moved a notice of motion for the equalisation of rates, 16 years ago. Some adjustment is long overdue. The Clause seeks to help the higher-rated authority from the increased block grant obtained from the new grant of the Government, plus the contributions from all authorities. I cannot see any objection to that. It looks perfectly fair to me and the principle seems to be absolutely right. My only complaint is that it does not go far enough at this stage. I hope that the time is not far distant when there will be a real evening-up of the rates of our various authorities so that no-one shall have to suffer in payment as well as in living conditions.

I would have desired at this stage of this Parliament to see the repeal of the Rating and Valuation Act, 1928. Since that year, big industrial undertakings have to a large degree been exempt from the payment of rates. That Act was brought in ostensibly to assist industry to provide employment and to compete in our export markets We all know how those aims succeeded as a result of that Act. Unemployment was rarely less than 2,000,000 for 10 years afterwards, and our export trade declined. What that Act actually provided was a dole for large industry. What has happened is that the people whom I have described this morning, my constituents who sent me here, have for 17 years subsidised breweries, tobacco factories and the like, by increased rate payments. I do expect therefore that, ere long, the Government will repeal that Act and go a step towards relieving the burdens of householders, small shop-keepers and others in industrial areas. I feel that what I have said this morning has been of a very general character. It was a great joy to hear the Bill presented in the way it was presented. I am happy that the right hon. and learned Gentleman opposite has seen his way to indicate that there will be no opposition to the Bill. I feel that we are taking a splendid step towards the relief of the anxieties of the areas which I have described.

12.8 p.m.

Sir Harold Webbe (Westminster, Abbey)

I would join in the congratulations which have been offered to the Minister by my right hon. and learned Friend the Member for North Croydon (Mr. Willink), on the clarity not only of the Explanatory Memorandum, but of the speech which the Minister made. To explain the block grant formula would indeed require a senior wrangler. I can only claim to be a much inferior type of wrangler. One point on which I would like an assurance is in regard to the position of London. I fully appreciate that it would not be possible in the Bill to pro- vide details of the manner in which that portion of the new grant which is to be given to the London area should be distributed among the borough authorities within that area. The scheme is to be made by the Minister after consultation with the County Council, the Court of Common Council of the City of London, and such Committee or other body as the Minister regards as representative of the whole of the borough councils. I must be right in assuming, I think, that the: Minister has in mind the Standing Joint Committee which, so far as I know, is the only existing committee which properly represents the views of the borough councils.

One thing I would like to see now, although I must admit there is a difficulty, is some opportunity for this House to review, or approve, the scheme which the Minister will prepare for the distribution in London. I do not know whether it would be possible to do that by providing that the scheme should be laid on the Table of the House in the way that Ministerial Orders are laid, but it is desirable that the House should have an opportunity to vet the details of the arrangements made for London as it has to vet proposals for other parts of the country. For the rest, I welcome the Bill. I am sure that the Government are right in saying that it is not time yet to attempt to revise the whole basis of local authority finance and the contribution of the Exchequer to those authorities.

I am reminded, and I regret very much, that I have forgotten to offer congratulations to the hon. Member for West Salford (Mr. Royle) who has just addressed the House. Though belated, my congratulations are none the less sincere. The hon. Member spoke not only fluently and with deep sincerity, but obviously with great knowledge of the subject, gained in what I still believe, although perhaps I am prejudiced, is the best possible school for Membership in this House, service with a local authority. We shall always welcome contributions from an hon. Member who knows his subject fn the way that the hon. Member obviously does, and I hope that he will contribute very much to our Debates on these highly technical matters with which he is so familiar. I am happy to pay the customary, and on this occasion entirely sincere, compliment to the hon. Member, as the customs of the House demand.

I am sure that the Minister appreciates that the time is really overdue and, but for the war, would almost certainly have arrived, for a fundamental reconsideration of the whole basis of rating and its relation to taxation. We must go down to fundamental changes. The years since the block grant formula was first devised have altered the relative importance of the factors which determine the allocation of the ordinary block grant. The whole basis of the block grant and the method of distributing it will have to be reconsidered de novo. It is obvious that no formula can ever work with justice if it is based on a pool derived from a uniform rate in the £ unless some better provision than at present exists can be made for securing some equality or uniformity of assessment. Surely it is obvious that the work of the local authorities today is much more the administration of national rather than local services, and that the relation between the contribution of the taxpayer and the contribution of the local ratepayer must be examined anew.

This principle, as an interim measure, of granting a global sum from the Exchequer and distributing it according to need, is an indication of the direction in which the ultimate review of the relations between the Exchequer and the local authorities must take. It is clear, with the local authorities called upon every day to administer more of the national services, that the contribution of the Exchequer must be increased and that distribution must be according to the needs and the actual operations of local authorities. The time will come for that reconsideration, but, as the Minister has said, it is not now. This interim Measure, which I am sure will be welcomed by local authorities, is an indication that the Government appreciate that fact, and so, may I say in parenthesis, will the bombed areas. It will be welcomed as an indication that this House, whatever our party differences, is united in appreciation of the valuable and the vital services of the local authorities, and in readiness to see that the heavy burdens placed upon them can be carried without undue hardship to the citizens.

12.15 p.m.

Mr. Pargiter (Spelthorne)

I am sorry that I shall strike a rather discordant note in the very happy band, but my study of the figures causes me to be a bit critical. I welcome the very clear exposition of the Bill which the Minister gave, and I have not much to quarrel with in that, but when it comes to the basis of distribution, I feel that this has not been correct for very many years. In the first place, in the original block grant there was an allowance in lieu of loss of rates and there was the addition of the new figure. I believe the total was intended to provide just over 23 per cent of the total expenditure of rates and grant-borne expenditure, and the intention was to endeavour, by the addition of new moneys, to keep to that figure. Hon. Members must recollect the weighting factors that were used at that time. It must be appreciated that there was a very heavy weight in favour of unemployment, but now the areas which formerly suffered very badly from unemployment are, fortunately, no longer in the position which they were. The sparsity calculation was made on the already weighted population figure and gave a much higher percentage than was justified. These are factors which ought to be taken into consideration at this stage.

The factor which appears to loom most in the minds of hon. Members in the calculation whether a district is rich or poor is the amount of rates paid in the £. In my view that has never been a satisfactory feature. I live in Middlesex, and in matters of this kind the Middlesex authorities were always mugs. They forced up rateable values in Middlesex until those values were far higher than they were in any other county in the country, but because their rates in the £ are low, not only is the contribution to Middlesex nil, but Middlesex is required to make a contribution towards the Exchequer grant, simply because of the inequalities of the rating system and because they had been silly enough—I speak as a member of the county valuation committee—to push up their assessments. That is something which will need to be taken into consideration at some time.

I would like briefly to deal with the effects of this situation, and in passing, I would remind hon. Members that it was recognised by the Minister, as far back as August, 1941, that the conditions of the block grant no longer applied. I will use some of the Department's figures to illustrate the effects of the present system. I find that Merthyr Tydfil has a rateable value per head of the population of £3 4s. 6d. I suggest that a comparison of some property in Merthyr Tydfil, as against some property in Tottenham, which is in the County of Middlesex, would show that the rateable value in Middlesex is very nearly three times as high, for comparable property, as in Merthyr Tydfil. Tottenham has a rate in the pound of 15s. and Merthyr Tydfil a rate of £1 9s. 0d. The rates per head of the population in Tottenham are £4 13s. 5d. and in Merthyr Tydfil £4 13s. 6d. I venture to suggest that at the present time there is very little more poverty in Merthyr Tydfil than there is in Tottenham. In West Ham the rateable value per head of the population is £4 11s. 8d., a low figure that is not very much more than that of Merthyr Tydfil. I find that in West Ham the rates per head of the population are £4 14s. 3d., a very comparable figure. But Merthyr Tydfil is to get the equivalent of a rate of 2s. 9d., whereas West Ham is to get the equivalent of a rate of 1s. 9d. I would say that if there is to be any weighing at all, it ought indeed to be in favour of West Ham, which has suffered all the difficulties of the blitz. As soon as we begin to examine the figures, we see what a mess there is on the question of grant policy in regard to local finance. The policy of successive Ministers has been to blackmail one section against another, gaining areas against losing areas, and to play them off until they were not speaking with a united voice. We are now in an interim period and not much is being said—

Mr. Bevan

Surely the reason is that the local authorities are not speaking with a uniform voice in rating.

Mr. Pargiter

There is lack of uniformity in rating, and I say that that lack of uniformity has not been taken into consideration at any time in the calculations of the block grant.

Mr. Lipson (Cheltenham)

Has the hon. Gentleman the figures of what Merthyr Tydfil and West Ham would receive in cash from this addition? That is what really matters.

Mr. Pargiter

I will give the hon. Member the rateable value of the two places, and he can work it out himself. The rateable value of Merthyr is £229,2I6, and the population is 72,108. In West Ham the population is 294,278, and the rateable value is £1,289,974. I have given the rates per head of the population, and they show the unfairness of the method of the block grant in the past. The block grant has not provided sufficient new money to meet the proper demands which ought to have been met by the Treasury in their contribution, particularly in counties which have forced up their assessments.

Sir H. Webbe

The hon. Member compared two authorities having approximately the same rate contribution per head of the population. He said that in one case the authority would get, out of the new grant, the equivalent of a 2s. 9d. rate and in the other case the equivalent of a 1s. 9d. rate. Doing the arithmetic in my head, my feeling is that the 1s. 9d. rate in one case will produce a little more than the 2s. 9d. rate in the other case; certainly, it will not produce considerably less.

Mr. Pargiter

It certainly will not have the effect of giving comparable values, because the values are incomparable to begin with. In the case of Tottenham after allowing for the per capita grant which will be paid, Tottenham will get a contribution equal to a 7d. rate. The palliative given by this Bill will be welcomed by the authorities, but there is something else that has to be done. The blitzed areas have received a sum of approximately £15,000,000, but I suggest that that £15,000,000 ought not properly to have been included in the contribution of the whole of the local authorities. The amount paid to the blitzed areas ought to have been a direct contribution from the Exchequer. I do not think it is fair to take it from other local authority areas in order to distribute it in this way. We shall not be able to do away with the unfairness that exists until an alteration is made in the whole system. The basis of the inequalities is not being altered. If the system were anything like fair, there would be no need for further weighting, and if there were need for further weighing, the weighting ought to be done on a different basis.

I want finally to support the remarks that have been made about de-rating, which is one of the difficulties with which we have been contending for a long time. The local authorities have suffered pro- lific losses since the standard year, because the standard year was fixed when industry was at a low ebb. Prosperous new industries have been established, which have had relief from rates to the extent of 75 per cent., quite unnecessarily, and this has placed a constantly increasing burden on the ordinary occupiers of rateable premises. This factor must at some stage or another be finally dealt with. Either industry should pay rates, or it should not pay rates; there is no case for making industry pay part rates. If industry is not to pay rates, the Government should make some other provision for giving the local authorities a proportion of what the Government takes out of industry in taxes. I ask that these matters should receive very urgent consideration.

I have not dealt with this matter in the same general way as some other hon. Members. I am anxious that we should get down to the practical effects. I am aware that this is a very much drier subject than the Debate on whisky that took place last night, as is evident from the attendance of hon. Members. As far as the present situation is concerned, this Measure is perhaps as much as could be expected from the Minister in this interim period. I am glad to have had this opportunity of showing some of the difficulties of the block grant formula, its inequalities, and the urgent necessity for a reform in local government finance.

12.28 p.m.

Lieut.-Colonel Mackeson (Hythe)

The anxiety with which I viewed this question was largely allayed by the right hon. Gentleman the Minister of Health in the concluding remarks of his speech, when he made it clear that he regarded the Defence Areas as a different subject. I represent Hythe and Folkestone, and I do not think I need say more than that those two boroughs are in "Hell-fire Corner," that the Battle of Britain was fought over them, that 75 per cent. of the V-1's passed over my constituency, and that at one time the population of the constituency went down to 20 per cent. of its pre-war figure. As long as the Government realise that the credit balances. which these local authorities once had have gone, and that the moratorium has to be faced at an early date, we in those sorely stricken districts agree to the Bill, but I ask the Minister to give an assurance that at a reasonably early date a Member of the Government will come down to my constituency. Since the present Government have been in power, we have not had the privilege of seeing one of its representatives, and we would like to discuss with a Member of the Government our very serious troubles, which are extremely complex, before any steps are taken.

12.30 p.m.

Mr. Douglas (Battersea, North)

My right hon. Friend may feel happy in the fact that there is no serious opposition in the House to the proposals which he has brought forward. The originating reason for them was the decision, in 1941, to suspend the recalculation of the block grant, which should have operated in 1942, and that decision was taken by the Ministry of Health, with the assent of the local authorities, in view of the difficulties and the strain under which both parties to the transaction were labouring. Now we see, in the time which lies in front of us, that it is impossible at this moment to settle upon more permanent means of dealing with this problem. Many changes are bound to take place in local government, and in the relations between local government and the State, in the next few years. I am sure my right hon. Friend was wise in introducing a Measure to last merely for three years. At the same time, it provides a means of distributing the grant between the local authorities which is probably the best that can be devised in the circumstances.

This matter has been a subject of discussion between the Minister and the local authorities, and they pointed out to him —what we now know—that, if the block grant had been recalculated in 1942, there would have been an increase of £7,000,000 a year in the amount which local authorities would have received. The Minister, in fact, instead of giving five times £7,000,000 or £35,000,000, is giving in respect of that period a sum of £21,000,000, the remaining £12,000,000 for the third year relates to a period in which there should have been yet another block grant calculation, but nobody can possibly tell now what would have been the result of that. I do not say that the local authorities got all that they asked for, but the Minister, at any rate, increased the amount beyond that which was originally contemplated in the time when the right hon. and learned Gentleman the Member for North Croydon (Mr. Willink) held that office.

I do not want to discuss the question of the amount. In all these things there has to be a compromise of some sort, but I would like to say a word or two about the general problem of which it is part. Criticism has been made this morning by a number of hon. Members of the operation of the block grant formula, and it has become increasingly clear, as the years have gone by, that it produced very serious anomalies in certain cases and that it deserves complete reconstruction. It is true, as the hon. Member for Spelthorne (Mr. Pargiter) said, that rateable values are not uniform throughout the country. In some cases they are relatively much lower than in others, and calculations which are made upon the assumption that rateable values represent the same thing in one area as in another are bound to be incorrect. The block grant formula failed to take account—and no system has yet been devised which does take account—of one of the most essential facts of all, and that is, what does it cost to carry out a particular service in a particular locality?

There ought to be devised—and as local authority accounting becomes more perfected it should not be too difficult to devise—a system of costing which would show what are standard and reasonable costs for performing many different kinds of service, and regard should be had to that in the distribution of money which is provided by the taxpayers generally, so that no authority should be encouraged to indulge in lavish expenditure by reason thereby of obtaining a larger share out of the block grant. I consider that that principle is extremely important and that it would be to the advantage of everybody systematically to pursue the scientific examination of the principle. However, even on that basis, we shall not achieve perfection. It must always be remembered that no system of government grants can cure the fundamental difficulties which at present exist in our system of local rating. Government grants can only palliate the ill results which flow from a method of local taxation which imposes the burden in an extremely unfair fashion as between one citizen and another, which particularly penalises those who are worse off because they naturally tend to pay a larger proportion of their incomes in house rent than those who are more well-to-do.

Therefore, the existing system of local rating, instead of being progressive, as is the aim in most systems of taxation, is actually regressive and collects a larger proportion of their incomes from the poorer citizens than from the richer citizens. But that is not the only fault which lies in it. There is also the economic effect of making housing accommodation dear, discouraging the building of houses and so accentuating the trouble from which we have been suffering for many years past of inferior living accommodation for our people, and that problem has now become of far greater urgency than ever before because of the cessation of building for six years and the destruction which has taken place during the war.

I cannot see any permanent and satisfactory solution of the problem of better houses for the people, at rents which they can reasonably afford to pay, unless this burden is removed from the provision of housing accommodation. Therefore, I hope that, in due course, the Minister will, as I think he indicated in his speech, give consideration to these wider problems which affect local government so much, and which are so important for its proper functioning in the future. Meanwhile, I am sure that the House will be happy to let him have the Second Reading of this interim Measure.

12.38 p.m.

Mr. Bowen (Cardigan)

As one who is not a Senior Wrangler and has not any experience of local government, I hope that the right hon. Gentleman the Minister will not think it presumptuous of me to intervene in this Debate. In so far as the right hon. Gentleman has made declarations of policy and has indicated that it is the intention of His Majesty's Government to carry out a review of the block grant formula, and to overhaul all the relationships between local government and central government, I welcome his observations. I would respectfully suggest that some of the descriptions of this Bill have been unduly extravagant, particularly on the question of how it is going to affect the financial position of sparsely populated rural agricultural areas.

I would like to examine the specific effect of this Bill upon the financial position of those areas. We have chosen in this country to organise our social services through the medium of local authorities. I, for one, think that that is a politically wise measure, but it has undoubtedly created a paradoxical position from the financial angle. Local authorities have to bear the burden of providing the minimum standard of social amenities —the poorer the authority, the greater the burden. The greatest burden has to be borne by those authorities least able to bear it. The rural areas, and in particular the rural areas that I have in mind, the sparsely populated rural agricultural areas, such as Merioneth, Cardiganshire, Breconshire, Radnorshire and Montgomery, have at present very high rates. Contrary to what the right hon. Gentleman has said with regard to the rest of the country, the rates of these counties increased considerably during the war. In my own constituency, the rates are a1 present 21s. 6d. in the £. Such constituencies have little or no prospect of an increase in their rate income. The present income from the rates is not sufficient to maintain a proper standard of social amenities in those constituencies at the moment.

The financial provisions of the Bill will do no more, at the most, than meet the added cost of existing social amenities in those districts. It is idle to talk about those districts being able to carry out any schemes of reconstruction or improvement in their social standards. Local authorities, however anxious they are to carry out improvements, are helpless, and this Bill leaves them helpless. I do not wish to impart any feeling into a matter of this kind, any more than is usual on the subject of rating, but I wish to press this point. I do so not from the point of view of embarrassment caused to local authorities, not primarily from the point of view of the ratepayers, but from the point of view of the people, and particularly the children, of those rural areas. They are not getting the social amenities which they deserve and which their representatives desire to give them. It is having a remarkable effect on those areas. I received yesterday the figures of the number of children in the schools in my own constituency. In a very large number of those schools the number of children has been halved in the last ten years; in some cases the number is only a quarter of what it was over 20 years ago. The contributory causes are various, but at least one of them—and an important one—is the fact that the local authorities, are not able, owing to their financial position, to provide a reasonable standard of social amenities. I would like to examine the provisions of this Bill in detail in so far as they relate to these districts. We are told—

Mr. Bevan

I think the hon. Member will agree that the urban populations of Wales, as well as the rural populations, suffered from the same causes. The urban schools have been as much denuded as the rural schools, and, as a general rule, for the same reason.

Mr. Bowen

In advancing this argument, I am not trying to draw any distinction between urban and rural areas. All I wish to point out is that, in rural areas, the problem is a desperate one. The Financial Memorandum to the Bill points out that a district like Bournemouth is to receive only a halfpenny relief under this Bill, as compared with Carmarthen, which will get 2s. 1d. Why give any share of this £10,000,000 to areas in the position of Bournemouth? The effect of this provision is to reduce the rates of Bournemouth from 9s. to 8s. 11½d. The effect in my own constituency will be to reduce the rate from 21s. 6d. to something like 20s. I suggest that, if this Bill really intends to break down the heavy rating of poorer areas, the halfpenny which Bournemouth gets is a matter of little financial concern to that area. The product of a halfpenny rate in Bournemouth, would mean a great deal to sparsely populated rural areas in Wales, and, indeed, in the whole country. I suggest that, if the right hon. Gentleman desires to increase the bias in favour of the poorer areas, he can do it very much easier, and I suggest to him that he should strike a mean and draw a line between those authorities which are really in need of additional assistance now, and those which are not. Say, for example, that he drew the line at 12s. or 13s., and, with the addition of money derived by drawing that line, he formed a supplementation fund for poorer areas distributed on the same formula as that in Clause 2. I suggest that, if something like that were done, this Bill would have a greater title and qualification to be described as being heavily weighted in favour of the poorer areas.

There are other features of this Bill. Even the selection of the year 1942 works to the detriment of rural areas. In that year, authorities generally had expenditure on civil defence. The rural authorities' expenditure on that service was not as great as that of others, and I suggest that it would have been fairer to local authorities if the basis had been on the expenditure of the five principal services. This Bill, even as a temporary Measure, attempts to alleviate the present problem, but it does not go anything as like as far as it should, and, while welcoming the Minister's assurances of the desire of the Government to overhaul the relationship between local government and the central Government, I say that this review should have taken place in 1942. I hope that this Bill does not mean that that review is now to be postponed until 1948. hope that, not only will the right hon. Gentleman, at a later stage, attempt to increase the bias in favour of the local authorities, but that he will also see to it that this general overhaul of the financial relationship between local authorities and the central Government is undertaken without delay.

12.52 p.m.

Mr. A. Edward Davies (Burslem)

I rise to welcome the Bill, but not because I believe that it will solve all our difficulties. It has been made quite clear from these benches and from the other side, that the problem which confronts us is profound and will require not a sticking plaster, but a major surgical operation. From my experience as a Member of a local authority, I have come to the view that the obligations placed upon the poorer local authorities in respect of matters like education and social welfare are, indeed, almost too great for them, and, while all of us want to give the children the best education possible, we cannot see how the implications of the 1944 Education Act can possibly work out with the success which we all desire, unless financial help is forthcoming to a considerably greater degree than hitherto.

In saying that, I recognise that some improvement has been given to the poorer areas in respect of their educational expenditure. But the point I wish to make is that the old anomalies are continuing. The old difficulties and the old inequities as between a rich borough and a poor borough are continuing, though mitigated to some extent, and I sincerely fear that, unless some new ventures are devised which can help forward local authorities, who are no less ambitious than those of rich areas to meet this new cost, many of the schemes will fail to be realised. Nobody knows better, I imagine, than the hon. Gentleman who is to reply to this Debate the case I am putting in this respect. Why should a boy or girl in a poorer area, because of the inability of that area to raise a sum equal to that of a richer area, have less money spent upon their education? In my view, education is a matter which should not, perhaps, be the sole responsibility of the central Government, but inasmuch as we desire to give our children, wheresoever they are born, as far as possible, equality of opportunity, while I recognise that equality in the mere spending of money does not guarantee that end, yet other things being equal, it does make the chances better for the boys and girls in the less prosperous areas.

One of the major difficulties with which we are confronted as poor authorities, is the obligation arising from the charge of social welfare. In my own area of Stoke-on-Trent, I find that this is an onerous item of expenditure, when we have to consider a local rate of 19s. 6d. in the £, and, while we hope that, in the new security legislation, some easement may be given in respect of this obligation upon local authorities, I submit that responsibility for domiciliary relief is not a matter which should be most heavily weighted upon the poorer authorities. Here, I submit, is a case for national pooled responsibility. The 1929 Local Government Act abolished the boards of guardians and made the local authorities responsible for relief, but, unfortunately, it loft the poorer authorities, who had the maximum difficulty in this respect, with the burden of finding much of the money. So that we find, as is well known to hon. Members of this House, that the more prosperous areas, if I may use a vulgarism, "got away with it." They had not got this day to day expenditure, which formed an almost crippling burden for the years between the wars in the poorer areas, and we suggest that there should be something in the nature of a national board of guardians, that responsibility for this charge should be made applicable to the whole country and the charge, in that sense, evened out.

This Bill is a distant relation of the Local Government Act of 1929. There was a great deal of controversy and a great deal of opposition to that Measure. I remember a gentleman, who was well known to the party of which I have the honour to be a Member, describing it as having been "born in sin and conceived in iniquity." He also said it was "The offspring of a demoralised and reckless father and a reluctant mother." Another hon. Gentleman opposing the Measure said that if it was intended to be a benefit, then he submitted that it was nothing but a fraud and an imposition.

I do not propose to weary the House with a great deal of detail regarding that Measure, but we have to take account of the great change which it caused in respect of the relations between local authorities and the National Exchequer. It gave total exemption from rates to agricultural land and buildings, it reduced to a quarter the net annual value of industrial hereditaments and afforded some relief to freight transport hereditaments. It was criticised on the ground that it offered a form of subsidy to industry. As the Minister said this morning, it arose out of the unemployment situation, and in my view it has failed in its operation to achieve the purposes for which it was intended. It has been said that during the war local rates have not gone up very much, and I think we can accept that, but by 1938 and 1939 the very things which the Local Government Act, 1929, sought to correct were as bad as ever. We had the same inequality, the same distress, and the same difficulty in meeting rising expenditure.

I gather from the Debate this morning that on all sides of the House there is general agreement that the time is rapidly coming when there should be a complete overhaul of local government finance; indeed, we could not brook delay any longer had we not in the seats of power a progressive Government who, under their proposed legislation, are to give us, I imagine, a new health. service which, I hope, will have the effect of relieving local authorities of some of their liabilities. We are also hoping that under the social security Measures relief will be given. This interim period is possibly not the most suitable time for a complete reorganisation of our local government finance, but I feel that we shall have to keep our eyes very closely upon this problem, because otherwise, in my view, much of the reconstruction work which we are hoping the local authorities will help forward in respect of housing and education will suffer. I am profoundly interested in education, and I am disturbed about the prospect, under the present set up, of local authorities being able to carry out town planning schemes and so on. Unless they are given a measure of real assistance I fear that many of the schemes will not be realised.

Here we have a Measure which seems to recognise the difficulties of the local authorities, and although, as I have said, it is only a limited measure of help which we are receiving, it does indicate that the Government are aware of the special difficulties of what I describe as the necessitous areas. This ingenious device of giving us £10,000,000 and raising a sum equivalent to an 8d. rate on each of the local authorities and then redistributing the income commends itself to me. In my own area, which is very poor, the net product of a penny rate would be about £5,000, but in other areas it is very much more, so that under a scheme of this sort we shall receive material assistance. Therefore, I am sure that the constituents whom I have the honour to represent will be grateful for what it is proposed to do in this Bill, and I welcome it for the reasons I have given.

1.6 p.m.

Mr. Medland (Plymouth, Drake)

I am very conscious of the fact that to choose a Bill such as this for a maiden speech is rather a hazardous undertaking, but I am comforted by the knowledge that for the first time in all the 25 years during which I have been associated with local government work we have a Measure which brings some real relief to local authorities instead of adding to their burdens. One of the processes which has been going on between the two wars, and inevitably since the war, has been the transfer of many details of government from Whitehall to the local authorities, and those transfers have been accompanied by an inadequate amount of money to meet the additional responsibilities. This morning we have some real comfort in the announcement by the Minister, which I received with great pleasure, that during the next two years he proposes to re-arrange the functions of the local authorities by various Acts of Parliament and to reorientate their relationship with this House. It has been the complaint of local authorities for many years that the ratepayer has been bearing undue burdens of expenditure, arising from work imposed upon them by decisions of the Government, and that these ought to have fallen upon the shoulders of the taxpayers.

There has been brought before us this morning a most interesting method of equalising among the various local government areas the amount which we ought to have received between the wars. As one of my hon. Friends has pointed out, although it will have the effect of giving towns which we call poor areas more money than richer areas such as are represented by the hon. Member for Cheltenham (Mr. Lipson) and the right hon. Member for Bournemouth (Mr. Bracken), it does give these richer areas some relief. I have been wondering how the equalisation can be applied in face of the different valuations and assessments which exist. The city which I represent, had not misfortunes fallen upon us during the war, would have been regarded as a rich area, because we had increased our assessments and valuations to the maximum amount, so that a penny rate on those higher assessments yielded the same amount as a 3d. rate on lower assessments in other districts. This is one of the inequalities in local government which has to be faced. Under normal circumstances my city would have received under this scheme a grant equivalent to a 3d. rate, but' misfortune fell upon us from the heavens, and practically the whole centre of the city was wiped out. Some 97 per cent. of the shopping area was wiped out, between 4,000 and 5,000 houses were totally destroyed, and business men of every kind, accountants, lawyers and so on, have had to move into houses because their offices were destroyed. In addition, 23 schools were wiped out and numerous public buildings have gone. As a result of all this, this scheme brings us benefit equivalent only to a 6d. rate.

I want to speak this morning on behalf of the bombed cities. They are the new distressed areas. Frankly, they cannot pay their way. They have had to have considerable grants from the Treasury in order to meet their liabilities, and it was with great satisfaction that we heard the Minister announce, in reply to a Question, that the liabilities which have been forced upon them as a result of enemy action are now to be taken over by the Government. We still await one more contribution, and I would ask the Parliamentary Secretary whether he could give us any assurances on this matter. One of the things we had to do as a result of being devastated by the war was to accept conditions from the Ministry of Health as to our financial arrangements. In nearly every case the Ministry insisted that we should have overdrafts at the bank, in other words, get into debt. In my own city the overdraft stands at the present time at a figure of £100,000, and I would ask the Parliamentary Secretary whether he is in a position to announce whether any relief can be granted to us in that respect. If that is so, then again we shall be greatly indebted to this Government and to this Ministry for the attitude they are adopting towards bombed cities.

The other point I would like to mention is that a curious effect of the method of this equalisation has been that the year 1942–43 has been taken as the basis. The blitz took place in 1941, and in 1942 many of the towns had not recovered. As a matter of fact, in my own city the whole of the offices went, and the whole of the records went, so that in 1942 we were able to collect only three-quarters of the rents, and we collected five-fourths of the rents in the subsequent year, 1943–44. So that under equalisation we are extremely unfortunate because we were not able to collect the rates for that year. I am hoping that the declaration with which the Minister wound up his speech—when he admitted that even this scheme would not meet the position of the bombed and devastated cities such as Plymouth and Hull and Portsmouth, etc., means that he will give special consideration and provide special moneys because, quite frankly, these cities will not be able to pay their way for some considerable time and, at the same time, to maintain the social services which it is necessary for them, with their populations, to do in this year of grace 1945.

1.18 p.m.

Mr. Lipson (Cheltenham)

It is always a pleasure and privilege to be able to congratulate an hon. Member on a successful maiden speech, but on this occasion my pleasure is the greater because the hon. Member for the Drake. Division of Plymouth (Mr. Medland) was during the war Deputy Commissioner for Civil Defence for Gloucestershire and, as such, bore a great responsibility for the safety of the constituency which I have the honour to represent in this House. He was as able and equal to that responsibility as he has shown himself to the ordeal which he has had to face today. He speaks on local government matters with many years of experience, and he has made a very valuable contribution to the Debate. The House has listened to him with pleasure today and will listen to him with equal pleasure on other occasions.

I suppose it was inevitable that this Bill should receive a better welcome than it deserves. Naturally, supporters of the Government cannot be too critical of a Measure proposed by a Minister of Health from whom they expect so much. We were told, too, by the right hon. Gentleman who spoke on behalf of the Opposition that this was an example of continuity of policy which meant, in effect, that if he had been the Minister of Health and the Opposition had been the Government, this is the kind of Bill he would have introduced. Therefore, he could not be too critical of the Bill. The right hon. Gentleman made an interesting speech in introducing this Bill, but I think he would have made a much more interesting one if he had not been sitting on the Government benches, but in the place that we have associated with him for so long in previous Parliaments. How he would have denounced this Bill as tinkering with the problem. Nobody knows better than the right hon. Gentleman, the Minister of Health, how serious really is the position of local government finances in so many parts of the country, and he introduces' what he calls an "interim" Measure

. This Bill, let me say quite frankly, is not at all the kind of Bill that local government finance needs if it is to overcome the difficulties with which it has to deal. He told us this was an interim Measure, but he did not say how long that interim is to last, and my quarrel with the statement he made was that he refused even to state when the examination of the problem of local government finance is to begin. I ask the Parliamentary Secretary who is to reply, if he will say when this inquiry will begin. I cannot agree that the time is not ripe now for commencing an inquiry into the problem. The main facts are there. this Bill proposes to give, by way of an increased block grant, another £21 million. Every speaker in the Debate has agreed that the conditions under which the block grant was intended to operate originally no longer obtain, that it is quite out of date, and, therefore, another £21 million grant, based on conditions that no longer exist, is not really a very helpful contribution towards the problem.

The best that local authorities can say of this Bill is that they must be thankful, some of them, for small mercies, but I would ask the Parliamentary Secretary whether that is all they can hope for from a Labour Government. The Government should realise that they will have to depend very largely on local authorities for the carrying out of the administration and the fulfilment of the Measures which they introduce into this House, and unless they give them the financial resources which will enable them to meet the obligations which this House has already laid upon them and which impending legislation will lay upon them it will be impossible for them to do what is expected of them. There is the Education Act. How is it possible, under the present system of local government finance for many local authorities to carry that out? There is the housing problem. In the areas where the housing problem is most urgent it will be impossible for the local authorities to provide the finance for the houses required. The local authorities have been deprived of £35 million. The proposal now is to give them £21 million back and to say they must congratulate themselves on getting £21 million because during the war they were not able to spend all the money they would otherwise have done. But the Government should realise that this is simply deferred expenditure. The work will have to be carried out. It will also cost more to do this work in the years that lie ahead than it would have done if it had been carried out earlier under normal conditions because the cost of everything has gone up considerably.

There is something the Government might do to ease the situation if they are willing. They should say when this inquiry will begin, and give an assurance that it will begin soon, so that the local authorities may have some hope that the present unsatisfactory state of things may come to an early end. Derating ought to go at once. Legislation should be introduced to that effect. I include the derating of agricultural land because that affects the rating position of many local authorities as well as industrial hereditaments. Derating was devised for a condition of things that no longer obtains. Industry has been prosperous during the war and is still prosperous, and that is true also of agriculture, and if it is the Government's policy to see that industry continues prosperous, and that agriculture remains prosperous, it ought not to be necessary for industry in general and agriculture in particular to be subsidised at the expense of the ratepayers. Therefore I would ask if we can have some assurance that, even if the whole problem of local government finance cannot be dealt with in the near future, at least early action will be taken to abolish derating. That would really give a measure of assistance to local government finance which would be of substance and value, and in doing this the Government would have the support of the representative bodies of local government who are opposed to the continuance of derating.

There is another thing which the Government ought to do. Attention has quite properly been drawn to the fact that there is need for equal valuation up and down the country. The Minister announced this week in answer to a question that he was not proposing to have made now the revaluation which is overdue. He ought to reconsider that decision because it is a very important matter. It is not fair to say that the rates of Bournemouth and Cheltenham are so much and elsewhere twice as much, and, therefore, ratepayers are so much better off in Cheltenham and Bournemouth. First find out what rent has to be paid for a house in Cheltenham or Bournemouth. One has to pay more rates and rent in Cheltenham and Bournemouth than in some other towns because they have really tackled their assessments properly and other places have not done so. Also I would like to see the whole rating system investigated for another reason. Anybody who is concerned with the future of this country and, indeed, of the whole British Commonwealth of Nations, realises that one of the most urgent problems is that of population. How unfair the rating system is to the married man with children. A bachelor or couple without children can manage with a flat or small house, but the man with a large family has to have a bigger house and, therefore, has to pay more rates. That is quite unfair and inexcusable. That is an additional reason why, from the point of view of statesmanship, the Government should give early consideration to the revision of this out-of-date system of rating.

The Government would be living in a fools' paradise if they thought that the eulogies expressed by so many hon. Members on this Measure are at all justified, if they were lulled by the exaggerated compliments which have been paid to this Measure into thinking that this is really a serious contribution towards easing the burdens on local government finance. What they ought to do, in the face of the great purpose which they have in mind—the construction of a better order of society and of a greater equality of opportunity throughout the country—is to see that local authorities, who are the instruments which must play so big a part to bring this about, are given the means by which they can be equal to their responsibilities.

1.30 p.m.

Mr. Eric Fletcher (Islington, East)

I rather hesitate to detain the House in this Debate because this matter has been so amply canvassed on both sides. I only do so because I want to add my voice to those which have urged upon the Government the necessity of an early review of this subject and the whole relationship between national and local taxation. This Bill, as an interim Measure, is a good one. An interim Measure is necessary in the circumstances of today and the details and provisions of this Bill go, I think, as far as the Government can be expected to go at the present time. But I was disappointed, as other hon. Members have been, at the failure of the Minister to hold out any prospect of an early overhaul of the whole system. The problem of the proper distribution as between national taxation and local funds, and the correction of inequalities between one district and another, has been a major problem for many years past. It is as acute today as it was when a Royal Commission reported on it in 1896. Indeed, since that time, the position has become much worse. One realises that it may be tempting for the Minister to say that during the next two or three years the functions of local authorities are going to be changed, that there is to be a Boundary Commission and that one does not know what the immediate future will hold; but the functions of local authorities are always changing, and if this overhaul is postponed on that ground it will never be dealt with.

I am not going into the details, which many hon: Members have indicated, of how inequalities and injustices result in one local government area as compared with another. There is, from the speeches that have been made, abundant evidence of the disquiet and unrest that exist. I would, therefore, urge the Government to take in hand this problem, either by the appointment of a Royal Commission or otherwise, at an early date. It is essential for the fulfilment of the important wide-sweeping tasks of social reform to which this Government is committed, and for which purpose it has been elected, that this problem of the relationship between the Exchequer and the local government authorities should be taken in hand without delay. The local government franchise is now almost equated to the national franchise. National taxation, as evidenced by a series of Finance Bills, is the subject matter of constant revision in order to provide that the burdens of taxation shall fall progressively as and where those burdens can best be met.

There has been no corresponding inquiry for many years past into the relative capacity of ratepayers, either between one locality and another, or between one class of resident and another in the same locality. The last occasion on which this matter was dealt with was under the Local Government Act, 1929, which instituted derating, and, as compensation for derating, introduced this very complicated block grant. I would ask the Minister whether there is any justification for the derating of industrial hereditaments to continue. I doubt whether there ever was any justification for it. Is it still necessary that this derating of industrial hereditaments should operate for the benefit of trade and industry? Is it consistent with the Government's policy of full employment? I would ask with regard to the block grants, which were introduced at the same time: Have they fulfilled their purpose? Have they ironed out the inequalities between one district and another, and have they fulfilled the function which they were deemed to fulfil? If not, then both matters are due for an immediate review.

I would repeat, now that the Minister has returned, what I was saying a moment ago, that, in my view, it is no good the Government postponing this question until some years hence, on the plea that the functions of local authorities are about to undergo certain changes. They are always undergoing changes. I would join the representations made by other hon. Members that this matter should be authoritatively reviewed at an early date. Such review should have regard to the entirely changed nature of the services which local authorities are now administering. The day is long past when local authorities were primarily Poor Law authorities, and when they were chiefly concerned with matters of purely local concern, on which they had a legitimate choice of how much money should be raised, and how and where it should be spent. Local authorities have become and to an increasing degree are becoming the agents and handmaidens of the State for carrying out national policies of social reform of one kind and another.

The State now lays down the minimum standards to be observed by local authorities in social service—in education, in housing, on highways, in matters of health, and, possibly, in matters of fire brigade regulation and so forth. To an increasing degree the tendency is for the State to lay down the standards which local authorities shall apply in carrying out their social duties. To that extent, therefore, the margin within which local authorities are free to exercise their own discretion about expenditure is reduced. For that reason the need is greater for the State in the future to adopt a more generous attitude towards the finances of local authorities than it has done in the past, in order to secure that these burdens, which are national and not local, are distributed as equally as possible ever all sections of the community. The block grant system can never be made more than approximation of that ideal of equality. It is very cumbersome; it results in a great deal of accountancy and book-keeping, particularly when combined with all the other specific ad hoc grants and it involves a degree of detailed book-keeping and accountancy between various Government Departments and all local authorities which would be unnecessary if the whole subject were overhauled, rationalised, modernised, and simplified. Therefore, I would urge the Minister not to postpone this matter to some distant future, but to apply the same vigour and energy in dealing with it as the Government are applying to all the other matters of social reform to which they are turning their hands.

1.40 p.m.

Mr. Howard (Westminster, St. George's)

In venturing to address this House for the first time, may I pray a measure of that tolerance and sympathy, which have been so generously extended to others who have been in a similar plight? I would ask for a rather special measure of tolerance, because I think it will be accepted, on both sides of the House, that the details of this Measure are of extreme complexity. I would ask for a special measure of sympathy because I cannot claim to be a Senior Wrangler, and I am not even an experienced wrangler.

On the general question of local authorities' finances, there are two points which I would like to make. The first is that this is admittedly an interim scheme. We can argue for days and weeks as to the various methods of adjusting the calculations. All I want to say is that I hope that the particular method, which has been adopted at this moment for this purpose, will not necessarily be regarded as a precedent for the general review or the larger scheme. It will be a valuable guide, but if we were to be told that this particular method had more or less been decided upon by the Government as that which they would wish to adopt when they enter into a larger review, then I would be extremely dissatisfied.

The second point is that when it comes to the larger review, I hope we shall all address our minds to one main purpose —that so far as possible the local authorities shall be put into a position where they will have resources at their com- mand which will make them self-supporting. Difficulties and quite unnecessary problems arise because local authorities have to compete one against another in drawing money from a reluctant Treasury, and this is most undesirable in every way. Circumstances entirely beyond our control have gradually caused this to develop. I hope that we will have one point firmly in mind—the desirability of placing each one of the local authorities, so far as possible, in control of resources which will render them largely self-supporting. I appreciate that this is an ideal; which it will be very difficult to reach, but if we do not have an ideal in front of us, we certainly shall not get that measure of improvement in the financial structure of local government, as a whole, which we desire.

After these general observations, may I turn straight back to the Bill, and come to one practical point upon which I am afraid I am still not quite clear as to what the effect of the Bill will be. For the purpose of calculating this supplemental grant there are three main stages. Firstly, the revenue has to be considered; secondly, expenditure is taken into account, and thirdly, the population of the different local authorities is taken into account. The exact way in which they are dealt with does not matter. The first stage is the revenue, and that is arrived at by considering the product of a "rate levied." Most of us who have had any experience of local government, if we had been asked what was meant by the term "product of a penny in the £" would have felt that we could have given a perfectly clear answer. If we had then been asked what the product of an 8d. rate was we would have said it was eight times the product of a penny rate. Then, perhaps, we had not learned the arts of Parliamentary draftsmanship. If hon. Members will turn to the definition in Clause 8 of "the produce of a rate of 8d. in the £," and first explain it to themselves and then explain it to me, they will perform a task which no one yet has been able to do. That may be my stupidity; it may, on the other hand, be the complexity of the language, but in support of my own stupidity I must say that I raised this point with the treasurer of a not unimportant local authority who admitted to me that the definition was capable of more than one interpretation, and that for the purposes of making his calculations he had assumed that it probably meant something which had previously been in operation. There are two previous practices, either of which may be adopted, and this new definition opens up the possibility of yet a third.

I hope that the hon. Gentleman who replies will do his best, first to state what is the intention of this Clause, and then to give some indication that, if necessary, words will be introduced at a later stage to make that intention clear. The word used in the main clause is "levied." But in Clause 8 (b) we find it stated:

for the purposes of the preceding paragraph the produce of a rate or rates made for any rating area …. —we come to the word "made" after the word "levied"— shall be deemed to be the amount actually realised during that year by the collection of rates in that area. May I put it like this? Everyone will know that the income side of a local authority's accounts at the end of the year could be put in a very simple form, in this way: First there would be the amount collected which had been outstanding from previous periods; then there would be the amount actually collected for that particular year; and there would be another figure to carry forward which would show the amount still outstanding. Under this definition each of these three amounts may have to be brought into consideration, but it is not possible to interpret which of the three. The effect of this is of great importance, particularly having regard to the years which are adopted for computation purposes, those years when local authorities were suffering from the worst effects of enemy action.

If I may quote one series of figures— and I know the House dislikes figures as much as I do—it will give an indication of the importance of this definition. In one borough, of which I know, the average amount which had to be carried forward varied between £35,000 and £40,000 in the years before the war. As a result of the effects of enemy action these amounts went up, first tenfold and then up to 30 times more than the pre-war figure, so that at one period in 1942 there was outstanding over £1,000,000 —through no fault on the part of the local authority in failure to collect, through no unwillingness of the ratepayer to pay, because as soon as conditions improved payments were made very rapidly. Therefore, as this definition affects the fundamental calculation Clause on which the whole of these grants are based, I suggest, with great diffidence, that it is a matter of some substance and that the exact intention of the Bill should be made clear, and made clear as soon as possible.

The second point I had intended to raise, which I need not labour now, was that of London. I had intended to express very natural disappointment that London had, for practical purposes, been left out of the Bill, and was to be the subject of a scheme which was to be made by the Minister. But the Minister, in his announcement today said that "the L.C.C. and the Metropolitan Boroughs would arrange a scheme of their own," to which I think he added the words "which I shall authorise." If that is the way in which he intends to implement the provision in this Bill, that he will, in fact, leave it to the local authorities in the County Council area to make their own scheme, and then, if there is nothing completely wrong, he will authorise that scheme, I have obviously no objection to that. Had it not been for that I would certainly have pressed that whatever scheme was made by the Minister should be open to discussion, and, if necessary, amendment.

There is only one further point. I did rather wonder at the actual words used as regards consultation, that the Minister after consultation … with any association or committee which appears to him to be representative of metropolitan borough councils. I think I know the reason for that, but it seems a little undesirable to introduce words which require him to consult but allow him complete discretion in deciding what particular bodies are representative for this purpose. If, as he has already announced, he will in fact allow the boroughs and the county council to settle their own scheme, it does not become a point of substance, but one body has been mentioned, the Metropolitan Boroughs Standing Joint Committee, which I venture to suggest, with great diffidence, would not be suitable for this purpose. I know what magnificent work that body has done, and how it has grown in prestige and importance, very largely due to the chairmanship and leadership it has had from the hon. Gentleman the Parliamentary Secretary who is to reply to this Debate. But that Committee came into being in order that the boroughs might discuss matters of joint and common interest, and it has achieved that purpose very successfully.

However, when we come to the question of how much money each particular local authority has to get from someone else, I am afraid that is a very particular interest, and not exactly a common interest. It is one which will have to be settled having regard to the physical and industrial characteristics of the locality, and not the political characteristics. For the purposes of deciding how, in London, the money will best be divided, London will not have to be considered as poor or rich areas. The important points will be the nature of the needs of the particular areas. The areas which serve the London docks obviously have special characteristics which are quite different from the areas which are largely dormatory boroughs. The central areas have different problems from some of the boroughs South of the river. I will not go into detail. My point is that it is highly desirable that each one of the boroughs should have an opportunity of being consulted. If that is done, I am certain that they will bring out a scheme by themselves, and once that has been done it can go forward as an agreed scheme, which will make the ultimate working of it much more satisfactory.

I apologise if, in rising in this House for the first time, I have had to speak on a rather dull and technical subject. I am most grateful for the patience with which I have been heard. It appears there is a tradition in this House that a maiden speaker should, somehow or other, try to drag in a suitable quotation. I have never quite appreciated the purpose of this tradition, but its value is of course obvious, because the thoughts of others, and the phrases which they used to express those thoughts, are obviously far wiser and far more felicitously put than anything we beginners can hope to achieve. Therefore, there is an obvious value in trying to introduce some sort of quotation. I would accordingly finish with this observation. In other spheres and at another time the hon. Gentleman who is to reply to this Debate, my right hon. and learned Friend the Member for North Croydon (Mr. Willink) and I, were all three together museum pieces. We used to sit round a table together and try to do what we could to thrash out problems of some importance to Greater London. In those days I learned to admire the way in which the hon. Member could help in problems of this sort. He dealt with them directly, sometimes somewhat forcibly, but always in a practical, and always in a helpful manner. If he will accept my assurance that the points which I have tried to make have been put forward in that spirit, and if, in his reply, he can deal with them in that way, then to come, at last, to my quotation, I would say in the words of the Psalmist: My delight will be in his statutes

1.58 p.m.

Mr. Sparks (Acton)

It falls to my lot to congratulate the hon. Gentleman the Member for St. George's, Westminster (Mr. Howard) upon his maiden speech today. I do so with some trepidation because I have myself only just emerged from my maiden speech stage. This is my second attempt to address this House, which very often is much more difficult than on the first occasion. I feel that the hon. Gentleman deserves the congratulation of the House for the courage with which he has embarked on a contribution upon a subject which is very difficult and complicated for those of us who have some little knowledge of it. I am quite sure that the way in which he has made his points in the House today has commended him to all of us, and we shall look toward in the future to many similar contributions from him upon this most complicated question and others as well.

I do not intend to detain the House for long in putting one or two points which I wish to make on the Second Reading of this Bill. I felt impelled to rise because the borough which I represent here is vitally interested in this Bill and all its consequences. I listened to what my right hon. Friend the Minister of Health had to say in moving the Second Reading, and I was very glad he took the line that this Bill was but an interim Measure, and that he intended, as soon as may be possible, to deal in a comprehensive way with a review of the whole basis of local taxation, because the basis of our local Government finance is most complicated and difficult, and I congratulate him on the way in which he explained the many points in connection with this Bill.

I am interested in this Bill and the principle which is bound up in it, to the extent that the borough which I represent is affected very considerably by the derating operations of the Local Government Act, 1929. I wish to say a few words about that and its effect upon my own constituency. In the first place, when the Act became law, it caused a loss of rateable value to the local authorities to the extent of £39,928,000, which was equivalent to 11.64 Per cent. loss in their rateable value. That was distributed throughout the country upon a most uneven basis. For instance the loss of rateable value in Surrey was £117,408, which was a percentage loss of 1.35, but in Glamorgan, which was one of the depressed areas, the loss of rateable value was £1,264,704, the equivalent of 31.12 per cent. of the rateable value of that county area, and the loss of rateable value as the result of the derating provisions of the 1929 Act has been most pronounced in the distressed areas, which were primarily expected to benefit as the result of derating.

We all know that derating subsequently contributed very little to industrial recovery, and all the claims advanced for derating for the benefit of industry at the time the Bill was made law in 1929 have proved with the passing of time to be nebulous. Therefore, the time has arrived when this House and my right hon. Friend will have to give very serious consideration to the complications and disturbances which the derating provisions of the Local Government Act, 1929, have created. It has to some extent upset the whole basis of local government taxation. It has created absurd anomalies as between one local authority and another, and I am not sure that the mere repeal of that legislation will straighten out this tangle. I believe it will be necessary for the House to give consideration to some wider scheme for the whole of our existing local taxation, and endeavour to bring forward a scheme on a basis that will be fair as between one local authority and another and fair as between one type of ratepayer and another type of ratepayer.

I wish to give the House a brief picture of the effect of derating legislation in Acton borough. I represent a fairly highly industrialised suburban borough of London. We are very detrimentally affected by the result of the derating legislation. Putting it as simply as I can, in 1929 when the Local Government Act was passed, and derating became effective, Acton had 255 factories which were derated. We were given an Exchequer block grant of £68,413, which was intended to be compensation to the Acton Borough Council for its losses under these derating provisions. Now that has gradually reduced, from 1930, down to the present time, to £58,092. In other words, we have lost by reduction of the block grant from 1929 to the present current year, £73,924. But that is not the whole story. In addition to the reduction of the block grant, which was intended to make good to us our losses on derating, we have had 151 factories come into existence since 1929, and, in the case of these 151factories, they, like the factors which existed before 1929, pay only 25 per cent. of the general rate. When you have 151 new factories established in a fairly small borough like Acton, the mere fact of their establishment creates a considerable financial burden on the local authority. We have to provide roads and sewers and lighting and a host of local government services for the benefit of these new industries and the rate which they pay by no means compensates the local authority for the increased expenditure which it has had to incur to service these 151new factories. For that we get no compensation whatsoever from the block grant, or any other source.

We consider it most unfair that the local authority should have placed upon it that responsible burden of servicing new industries when those new industries are not contributing a fair proportion to the rates in the borough. In the current year, as a result of the derating provisions of the Local Government Act, 1929, our local authority suffers a loss of £121,212. That, together with the reduction of the block grant of £10,319, means that in the current year the local authority at Acton suffers a loss of rate revenue of £131531 and that amount is equivalent to 3s. 2d. in the £ on the rates and our householders and shopkeepers are having to pay an additional 3s. 2d. in the £ in order to make good the losses to our town caused by derating provisions. But that is not the whole story. Since the operation of the derating reduction, the borough has lost altogether in rate revenue £761,715 and that is a very considerable sum of money for a local authority to lose as a result of these derating provisions.

Therefore, I felt that it was my duty to my constituency and to our ratepayers, that these facts should be given publicity and that the House should be informed of our circumstances because, as time progresses, this burden upon our borough from derating legislation will increase, and not grow less. I welcome what the Minister said when he moved the Second Reading, that this Bill was intended to be an interim Measure and that he proposed, at an early date, to provide ways and means of reviewing and reconsidering the whole basis of local government finance and local taxation. I ask him to bear in mind the needs of constituencies and local authority areas that are badly hit by derating legislation. Although they may acept it and may have offered no objection to the Second Reading of this Bill and the principles within it, I want to make clear that we at Acton are disappointed, because I understand that the Minister does not intend to take into consideration the derating losses imposed upon local authorities in considering the allocation of this interim grant for a period of three years. I am sure that we will accept this Bill on his assurance that he is not unmindful of the difficulties that face a good many local authorities which are fairly industrialised, and we shall welcome and look forward in the future to his further interest in this problem, in order that he may give us in our locality a fairer basis of taxation whereby every ratepayer and everyone in that borough contributes an equal and a fair share of the expenditure necessary for the work and the duties of the local authority.

2.12 p.m.

The Parliamentary Secretary to the Ministry of Health (Mr. Key)

I would like first of all to congratulate two of my old Civil Defence colleagues, the hon. Member for the Drake Division of Plymouth (Mr. Medland) and the hon. Member for the St. George's Division of Westminster (Mr. Howard) on the maiden speeches which they have made in this Debate, and to say how happy I am to find myself again a colleague of both of them in circumstances different from those in which we served together before. I shall have something to say later with regard to some of the points that the hon. Member for the St. George's Division of Westminster raised in his speech.

As I see it the only criticism that has really been made of this Bill today has been that it does not do what it never set out to do. It does not deal with the whole problem of local government finance. That problem, in my humble opinion, is one which cannot be adequately and properly dealt with at this time of real transition. We are now in a period of serious development and reallocation of services so far as local government is concerned, and it would be entirely the wrong time to try to deal with the whole problem of the financial relationships between local and central services. Neither does it set out to deal with that old, complicated formula for the distribution of the block grant. That we know to be a really important and necessary thing. It has been made necessary by the redistribution of population that has taken place during the war years, which has affected the factors of that formula in so far as they dealt, for instance, with the number of children under five or the number of people per mile of road in a particular area. That formula has also been affected as a result of the distribution of industry, the development and redistribution of which has affected the other factor in the formula of the rateable value per head.

My right hon. Friend said in his opening speech that he was going to take on the duty of seeing that some re-examination of that formula should take place, and some modification made, in order to get a better distribution of the block grant more in keeping with modern conditions than under the old 1929 scheme. I have been asked, for instance, by the hon. Member for Cheltenham (Mr. Lipson) how long the interim period will be before that can be dealt with. Frankly, I think this Bill carries on its face an answer to that question, because it is designed merely to deal with the problem up to 1st April, 1948, and before that time this problem must be examined and the proposals to deal with it must be put before this House. There has been some question whether or not the amount of money that is here involved is fair and just to meet even the problem with which the Bill sets out to deal. It sets out to deal with the problem that arose as a result of the failure to deal with the block grant in the period beginning in 1942. That was postponed by agreement between the Central Government and the local authorities, and what we are now here setting out to do is to make up to the local authorities the losses that they had sustained because the block grant was not modified according to the conditions then prevailing. As my right hon. Friend has said, in the five years of that fixed grant period—1942–1947—on the strict calculations that would have been made under the old block grant formula, the local authorities lost, on the average, £7,000,000 a year, or £35,000,000 in total.

Calculations as to the effect in the next grant period, of which 1947–48 would be the opening, give a suggestion that the loss for that year would be roughly £10,000,000, so that there would be a loss in total to the local authorities of something like £45,000,000 in the six years which are being covered in the proposal. I want to point out; however, first, that during the war, the local authorities have been granted £15,000,000 in order to help those in the more particularly blitzed areas, and recently my right hon. Friend has said that despite the fact that £15,000,000 was merely an interest-free advance, of which at least 25 per cent, would be asked back from the local authorities, nothing is to be asked back at all, and, therefore, the £15,000,000 is a grant to the local authorities. That leaves us with a balance of £30,000,000 to be met in respect of monies lost by the local authorities, and we are proposing in three years to give not £30,000,000 but £33,000,000—£10,000,000, £11,000,000 and £12,000,000—in the next succeeding three years. I claim, therefore, that we are meeting whatever demands the local authorities might have upon us because of the losses due to the failure to deal with the fixed block grant period beginning in 1942.

When we come to the question of the distribution of this money amongst the local authorities, it could have been distributed under the old block grant formula, but we felt that that would not meet the modern conditions. It could have been distributed on the basis of their average annual expenditure, but we felt that that would not give any measure of their real need, and so there was devised the method of saying that we will add to the £10,000,000 in the first year the product of an 8d. rate, and then distribute it, which has the effect of distributing the money much more in accordance with the need than would otherwise have been done. It brings about a certain amount of equalisation or rates. One thing seems to have been overlooked, however, in the discussion this morning, and that is that we are not satisfied to do that merely on that basis in the first year, because in the second year when the amount goes up to £11,000,000, we get a distribution of the product of a 9d. rate, bringing about still further equalization, and in the third year, when the grant is £12,000,000, the distribution of the product of a 10d. rate to bring about a still further equalisation.

The distribution of this money is to be based, as has been pointed out, upon the expenditure which local authorities have incurred in 1942–43. It was pointed out by one hon. Member that his local authority had spent relatively less in 1942–43, but what they then saved they had spent in 1943–44. I want to point out to him that the second year, 1943–44 is to be used as the basis of distribution, so that if they lost anything in the first year his local authority will have it made up to them in the second year. In the third year, the expenditure of 1944–45 is to be the basis of distribution.

Another point was raised with regard to the distribution among the county districts of the county apportionment. The first apportionment of this money is to be made among the counties and the county boroughs. What is allocated to the county borough remains with the county borough, of course, because the county borough is an all-purpose authority for local government. The county apportionment is to be distributed between the county and the county districts because the functions of local government are distributed between them. In the distribution among county authorities and county district authorities, the block grant method at the present moment really results in county districts which are urban getting five times as much as those which are rural. The present distribution is 12s. 1d. per head for the urban and 2s. 5d. per head for the rural areas. We felt that that proportion of five to one was not fair under modern conditions, in which the rural authorities are called upon to bear greater local government responsibilities. Therefore, in the method of distribution that is suggested they are to get not five to one, but three to one, as the proportion between urban and rural authorities. We feel that that will do a good thing for the rural authorities.

Another point raised was a sort of implication—I do not know that it was a definite statement—by my hon. Friend the Member for Spelthorne (Mr. Pargiter) that one county council, Middlesex or somewhere or another, had been badly used and seemed to be getting nothing out of this job at all. I make this definite and positive statement, that every local authority gains something out of the distribution of this £10,000,000 and that the Middlesex County Council actually gets the equivalent of a 5½d. rate as a result of the distribution. We have taken nothing from the local authorities in this matter. The trick, if you will, of saying, "Take an 8d. rate" and so on, is merely a way of getting the distribution of the £10,000,000. We take nothing from them, because in the calculation we put 8d. in and take 8d. out. Therefore, they get, as a net result, the part that comes to them from the distribution of the £10,000,000.

Mr. Pargiter

That is inclusive of the amount to be distributed under the capitation grant?

Mr. Key

Certainly, it is inclusive. It gives the county apportionment and from it the county districts have to take their part. The hon. Member for the St. George's Division raised the problem of the definition of "the product of a 1d. rate."I know it looks formidable, and to a great number of people it may not be understandable. I am not pretending that if I had read it myself, without being given the benefit of official information as to what was really meant, I could have appreciated it. In reality it means that what is being brought into the calculation is the actual cash result, so far as local authorities are concerned, of the 1d. rate in the particular period dealt with. That was the basis also of grants for Civil Defence, in which we were interested. The same method was adopted then. It is the method which was accepted by local authorities as being the best for their purposes.

There is one other question which was raised by the same hon. Member with regard to the distribution of the block grant among authorities in the London area. It is said in the Bill that it will be by a scheme to be approved by the Minister. I want to point out that that is the method adopted in London because of the peculiarities of London local government. It was adopted for the block grant arranged in the Act of 1929, and it has been adopted with regard to other distributions, such as for Civil Defence purposes, and it was acceptable to those local authorities. As to the authorities which are to consider this distribution, I must put in a plea for that body with which I have been associated so long, the Metropolitan Boroughs Standing Joint Committee. No other body can speak on behalf of the Metropolitan boroughs. It spoke for them right through the 1929 negotiations about the block grant, and it did the job in the distribution of Civil Defence finance. It has done the job, at any rate it has very nearly completed the job, so far as the Bill is concerned with regard to the distribution of this money among local authorities.

For the benefit of some of our Members I may say that here again, as in the other distributions, we find that the poorer areas get the benefit, as they should. For instance, on the calculation which has so far been made, although I do not say that the calculation is definitely complete, Poplar, which is possibly the poorest borough, would get the equivalent of a rate of 1s. 7½d. while the City, which suffered very badly during the war and whose rateable income has been very considerably reduced, gets the equivalent of a 5d. rate as a result of the distribution. Those are the main points—they are not all—which have been raised in this discussion. As one who has served for a very long time in London local government and who has worked in the poorest areas, I admit that there is much that ought to be done in real reorganisation of local government finance, but I say definitely that the proposals of the Bill are not only welcomed by local authorities but they will confer a considerable benefit upon them, and particularly upon those who suffered most during the war.

2.30 p.m.

Mr. Ivor Owen Thomas (The Wrekin)

I want to put a question to the Minister regarding Clause 4 of the Bill. The distribution appears to be based on the population figures for 1936. There has been a substantial transfer of population since then, particularly in cases where there have been large factories erected in rural areas. I have in mind particularly the rural district council of Wellington, in Shropshire, where the population has increased by many thousands. Would it be possible and advisable to make such variations as would be adequate to take into account the changed circumstances where the population has been substantially increased since 1936?

Mr. Key

The difficulty is that even up to the present moment the population has not by any means been stabilised, since there are people still coming back after being evacuated, and so on. The figures that have been taken are the figures in the formula for the distribution of the block grant, i.e., 1935–36.

Mr. Ivor Owen Thomas

I would emphasise that it is not merely a temporary change of population, but a permanent addition centering round the building of new estates.

Mr. Key

I would point out also that in some of the poorer areas which suffered very badly, if one took the existing population as the basis for the block grant, in six months or 12 months' time the population might be nearly double what it is now. At the present moment, the population in the area which I represent is only one-third of what it was normally. Those people will come back, and if services are to be provided for them, they should get their share not on the basis of the population as it happens to be at present, but on the basis of the normal population for whom the services should be provided.

Question put, and agreed to.

Bill accordingly read a Second time.

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