LOCAL GOVERNMENT (FINANCIAL PROVISIONS) (SCOTLAND) BILL

HC Deb 25 November 1953 vol 521 cc362-416

Order for Second Reading read.

3.42 p.m.

The Secretary of State for Scotland (Mr. James Stuart)

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

I may fairly claim that the Bill is the most complicated Measure which I have yet had to contemplate. What I must endeavour to do as simply as I can, and this is not an easy task, is to explain the main alterations which the Bill proposes to make in the present equalisation grant arrangements.

As the House is aware, the present arrangements were made by Part II of the Local Government Act, 1948. This Act put an end to the old block grant system and substituted for it a system of equalisation grants, that is to say, a system under which the rating resources of local authorities which fall below a certain average, measured in terms of rateable value per head of weighted population, are made up to that average. In Scotland, under the 1948 Act we have been receiving 25 per cent. in addition to the average for England and Wales, but this 25 per cent. was strongly contested at the time, and since then both my predecessor in office and I have been pressed to have it reviewed.

After consideration and discussion with the local authority associations, I agreed in March, 1952, that an investigation should be carried out. A committee was set up consisting of representatives of the three main associations and of my own Department, and was asked to give priority to the question whether the 25 per cent. addition to the England and Wales average was fair to Scotland and was adequate. The Committee submitted an interim Report in January, 1953, and advanced strong arguments that the 25 per cent. is not adequate; but it was unable, owing to the lack of uniformity of valuation in England and Wales, to propose any precise measure of the difference between the levels of value in the two countries.

It therefore proposed that, pending revaluation in England and Wales, the Scottish grant should be reckoned as the Goschen equivalent of the English and Welsh grant, that is to say, eleven-eightieths of the England and Wales total. I should also mention that the fact that the committee under Lord Sorn had been set up to investigate the system of rating and valuation in Scotland, naturally influenced the committee, which came to the conclusion that some interim adjustment was best at this time. The local authority associations unanimously supported this view, and I announced in this House last July that the Government accepted it.

Therefore, Clause 1 of the Bill proposes that from 16th May last the total equalisation grant payable to Scottish local authorities shall be eleven-eightieths of the English grant. This will mean a benefit to local authorities in Scotland of approximately £2 million in the year, or a little above that figure; or to put it in other words, it is an increase of approximately one-third in the present total grant. I hope that this interim adjustment, which is acceptable to local authorities, will commend itself to this House also.

The Committee next considered how the grant should be distributed. The final Report was presented to this House on 11th November of this year. After discussion with local authorities the Government decided to carry out the recommendations of the investigation committee, with one important modification to which I will refer later. I believe that the decision is acceptable to the County Councils Association and to the Convention of Royal Burghs, but not to the counties of cities.

Before dealing with the changes that the Committee proposed, I should perhaps refer briefly to the present method of distribution of grants. First of all, the amount of grant is calculated for each city and large burgh, and for each county inclusive of the small burghs in the county, so as to produce the same amount of revenue as the area would have had if its rateable value per head of the weighted population had been equal to the national average. The county grant having been determined, a capitation grant is then paid out of it, or out of the rates if there is no grant or not sufficient grant. It is paid to the town council of each small burgh and to each county council for the benefit of the landward area.

This capitation grant is arrived at by multiplying a fixed sum by the population of the area concerned. For the landward areas, this fixed sum is two-thirds of that for the burghs. The Committee decided not to recommend any change in the basic principles of the equalisation grant. For the Committee's reasons for this advice, I would refer hon. Members to page 10, paragraph 26, of its Report.

The Committee then proceeded to deal with the method of distributing these increased grants, which naturally affect many authorities and mostly for the better. As regards the others, the authorities which would not gain, we shall propose certain safeguards to which I will refer shortly. Before dealing with these changes, I must deal with one or two other somewhat complicated points. One result of using the Goschen formula is that we must fix a new standard up to which the rating resources of Scottish authorities are brought by equalisation grants. This is dealt with in subsections (2) and (4) of Clause 4 of the Bill. I admit that it is a complicated matter, but I am assured that it is capable of being carried out.

Mr. James Mclnnes (Glasgow, Central)

By whom?

Mr. Stuart

I do not necessarily undertake to carry out the calculations myself, if the hon. Gentleman will excuse me.

This new standard, or "constant factor" as it is called in the Bill, must be of an amount to ensure that the total grant is actually expended.

Of the other main changes proposed by the Committee, the most important is the proposal that capitation grants should be discontinued, and that, instead, the grants should be calculated separately for each burgh, large or small, and for each land ward area by reference to its own resources and to the amount for which the council concerned would have to rate.

This change will operate as from 16th May, 1954, and is dealt with in Clauses 3 and 5 of the Bill. The Committee felt, and I think rightly, that if the principle of equalisation grant is accepted, it is logical and fair that its amount be related to the commitments of each rating area. and not determined, as at present, partly by reference to such circumstances and partly, in the counties and small burghs, by reference to an amount per head which takes no account of local needs.

In conjunction with this, the Committee further proposed that where expenditure has to be shared among authorities, that is to say, between the landward area and the burghs in a county, the allocation should be made, not as at present on the basis of actual rateable value, but on the basis of actual rateable value plus the notional rateable value, if any, credited to the area for the purpose of calculating the equalisation grant.

The reason for using this standard rateable value is that the grant is really the rates payable on the credited rateable value, and it is logical, and I think fair, that if the State is, in effect, a ratepayer, the value on which it pays rates should be taken into account like other rateable value, when expenditure is being apportioned. In the same way, it is proposed to take account of this credited rateable value in sharing out the payments made to local authorities in lieu of rates by the British Transport Commission and by the Electricity Authorities. Effect is given to these proposals in Clauses 10 and 11 of the Bill. Similarly, though it is not dealt with in the Bill, the rate deduction made in calculating the education grant will be calculated on the actual rateable value plus credited value, if any, of the area concerned.

These new provisions cannot, of course, come into full effect until the next local authority financial year, because the requisitions for the current year have already been made on the old basis. Transitional arrangements for the current year are therefore necessary, and these are dealt with in Clause 2. Broadly, the proposal for 1953–54 is to calculate grant on the new basis for each large burgh and for each county, including the small burghs, and then to share out the county grant between the landward areas and the small burghs in proportion to their expenditure.

There are two other changes to which I wish to refer. First, Clause 4 (3) proposes an amendment of the formula for calculating weighted population so as to take account of the additional burdens placed on areas with expanding populations, that is to say, new mining areas.

If hon. Members will turn to the examples given, they will see that they refer to areas such as Clackmannan and Midlothian.

Secondly, in working out the equalisation grant, we propose to take for all local authority houses a notional rent equal to the average rent of such houses for the country as a whole. At present, the grant varies with the rent which any local authority chooses to fix for its houses; but under Clause 4 (1) of the Bill an authority is free to fix the rent it thinks right in the knowledge that the grant will be unaffected.

Further, under Clauses 8 and 9 we propose, as recommended by the Committee, that each district council should receive a share of the county's grant proportionate to its expenditure. At present these district councils receive no direct grant, and it seems not unreasonable that they should. These changes, of course, affect the rates of many authorities, and I would call the attention of hon. Members to the illustrations given in the White Paper of the effects upon local authority rates.

As a result of the proposals, there will generally be a substantial gain for the country, but there are, I admit, some areas where there would be a loss unless special provisions are made. The investigating Committee recommended that in the current year any such loss should be made up in full and in future years to the extent that it exceeded the produce of a rate of 1s. in the £. But the Bill proposes to modify the Committee's recommendation, and we think it reasonable that, until we have experience of the new system, local authorities should be safeguarded against loss.

Clause 6 of the Bill provides for this by transitional grants to compensate local authorities for any loss. These transitional grants should not greatly exceed £200,000 in a year, and will be the first charge on the total Scottish grant of some £8 million. Even at the risk of repetition, I think that I must make it clear that these arrangements are definitely of a transitional character. There are some, I know, who hold that the system of equalisation grant is unsound, but to those critics I would say that they should study the Committee's Report and realise the difficulties of achieving agreement on an alternative system to this.

I suggest to the House that it would be better to stick to the present transitional arrangement pending two things—the revaluation of property in England, which is bound to affect the whole method of calculating grant, and, most important, the receipt of the Report of the Committee at present sitting under the chairmanship of Lord Sorn which is inquiring into the whole system of rating and valuation in Scotland. I think it would be most unwise to make any radical change in the system until we have a chance of studying that Report.

Therefore, we agree with the investigating Committee that the right course is to proceed on the lines which it advocated and which are in the Bill, but to regard the changes as interim, to watch carefully how they work, and to review them at the latest after receiving and considering the Report of the Sorn Committee. It will be noted that Clause 12 (2) of the Bill makes provision for review at any time, and not, as under the 1948 Act, after a five-year period.

Therefore, I can commend the Bill to the House, as, I repeat, an interim Measure, providing Scotland with an immediate and substantial gain, and as one which, while maintaining the principle of equalisation grants, provides a more logical and equitable method of distribution. I commend it also on the ground that no local authority will suffer, which is some comfort at least to those who do not actually gain, while the rest will gain. We will re-examine its working, in the light of experience, with local authorities, whenever that is felt to be desirable.

Finally, I should like to take this opportunity of saying how greatly indebted I am to the local authority associations for their friendly co-operation in carrying out this review, and to the local government officers who served on the investigating Committee. It was, I fear, a laborious task, certainly a highly complicated one, and it was carried through efficiently and impartially. All concerned displayed a sense of realism and a genuine desire to reach a fair settlement. I hope the House will permit me—and I believe that the Committee would agree with me—to take this opportunity of also expressing my thanks, and I think theirs, to the chairman for the admirable way in which he carried through this very difficult task.

4.2 p.m.

Mr. Thomas Fraser (Hamilton)

The Secretary of State has said that this is a complicated Bill. It is a most complicated Bill. He helped a little, I think, in assisting us to understand the Bill, though at one point I thought he made things a little more complicated. At the beginning of his speech he said that, under the 1948 Act, the provision for Exchequer equalisation grants was that, in Scotland, we would have a 25 per cent. grant in addition to that received by England and Wales. I know that he knows that is not so, but that is what he said.

Might I make clear, however, that we on this side of the House who had the honour of introducing the Bill that became the 1948 Act do not claim any responsibility for the parentage of the 25 per cent. In Scotland, it has been assumed for a very long time indeed—I do not know for how long—that our average rateable value was 25 per cent. above the average rateable value in England and Wales. That assumption has been made in many statutes over the years, and was continued in 1948.

Mr. Stuart

I should have said, of course, receiving the English average plus 25 per cent. If I left out the word "average" I must have departed inadvertently from the gospel according to St. Andrew's House.

Mr. Fraser

I am sure we are all grateful to the right hon. Gentleman.

It is quite obvious that no Scottish Member would dare to say that he opposes the Bill, which gives to Scotland an additional £2 million to aid the local authorities in the services they have to provide. As the Secretary of State has said, the provisions of the Bill are accepted by the local authority associations. Might I say, however, that if, as experience has shown, the average rateable value in Scotland is more than the 25 per cent. that has always been accepted, and that this old notion of ours is no longer acceptable, it is equally true to say that very many of us consider the Goschen formula to be a rather outmoded means of measuring the assistance to be given to Scottish Local authorities. It is not a very original idea, and I want to make one criticism of it. The Goschen formula is not in any way related to the principle of Exchequer equalisation grants, which is that the central Government should give financial assistance to local authorities in accordance with the needs of those local authorities. They should help the local authorities as a ratepayer, to enable them to provide the local services for which they are responsible. If one accepts that principle, one cannot accept the Goschen formula as a long-term policy, and I think all of us will pay heed to the Secretary of State's promise that this, in fact, is an interim arrangement.

Might I give one further reason why, in this matter, the Goschen formula is not a long-term solution to the problem in Scotland? In Scotland we have areas which must inevitably attract a more generous grant from central funds, as a ratepayer, than any other part of the United Kingdom. One thinks of the whole of the Highlands and Islands—which have been treated generously, and rightly so, under the 1948 Act—where the rateable value per head of population has always been, and still is, deplorably low. The rateable value per head of population in that part of Scotland reduces very considerably the average rateable value per head of population in Scotland.

To give an example, we have 24,000 or 25,000 crofters in the Highlands. Those crofters in the main—I do not say all—pay their local rates, if they pay any at all, on the basis of the rateable value of the land that they hold as a croft. The land is very often got at an annual rental of 20s. a year. That is the rateable value—£1 a year. The improvements on the land, which include the crofter's house and any steadings or outbuildings he has, are not taken into account at all. There is no additional rateable value for improvements, so the total rateable value on which the crofter pays his rates is the 20s.

The crofter, however, enjoys the advantages of agricultural derating, so he is relieved of about 87½ per cent. of that £1. That means that, of that £1, his rating obligation to the local authority is 2s. 6d. a year. One can see that in such an area the responsibility of the central Government to contribute to local resources is greater than it can possibly be in any other part of the country. If we were to accept the Goschen formula, as a long-term solution, we should be accepting the inevitability of that part of Scotland outwith the Highlands being held to be responsible for aiding the Highland local authorities, instead of making that a responsibility of the nation as a whole.

In July, in the Scottish Grand Committee, I ventured to suggest that it was a mistake to give the investigation to a committee of finance officers. With the greatest respect, I submit that the result of their investigations proves my contention. None of us is ungrateful to the officers for the work that they have done. We are sure that they worked hard and long and gave of their best in seeking a solution to the problem. The fact remains that they ought not to have been given the job to do.

If the investigation had been made by a committee of public persons of standing, such as the Secretary of State normally appoints to committees, we should have had quite a different report, and the Secretary of State this afternoon would not have had to give effect to their recommendations by a Bill which he said was the most complicated he had ever had to contemplate. It is a complicated Measure because it contains a set of proposals worked out by finance officers, proposals that cannot be understood by any member of a local authority, by any hon. Member of this House, nor, I suggest, by the Secretary of State for Scotland—nor even, I should think, by a great many finance officers.

Sir William Darling (Edinburgh, South)

I do not want the House to be misled. I think that I am right in saying that over one-third of the officers were town clerks and not finance officers, and that another one-third were officers from St. Andrew's House and elsewhere.

Mr. Fraser

I have the Report here and I think I am right in saying that a great many were finance officers. There were town clerks, county treasurers and the like and city chamberlains from the four cities, but in the main these people were finance officers. In any case, in proof of what I have been saying, I challenge the Secretary of State for Scotland or the Joint Under-Secretary to stand at the Dispatch Box and, without reading, tell us what calculations the Secretary of State will employ to determine the "constant factor" which is set out in Clause 4 (4) of this Bill and, in consequence, the standard rateable value. The Bill makes it clear that the constant factor will be something that will be varied from year to year.

Previously, in the 1948 Act, the formula was written into the statute, but now it is a secret formula and it really ought not to be necessary to have a secret formula for the allocation of public money. The investigating Committee and the White Paper both propose that in place of the additional 25 per cent. to the standard rateable value in England and Wales there should be substituted such notional figure as will absorb the total of eleven-eightieths. Is it plain that for the current year it works out at any percentage? If so, what is that percentage? No document has so far told us what it is, and the Secretary of State has not told us today.

The Joint Under-Secretary of State for Scotland (Commander T. D. Galbraith)

What does the hon. Member mean by percentage?

Mr. Fraser

I do not think that I have got it wrong. I think that Hansard will show that I did not get it wrong. Both the White Paper and the Report of the investigating Committee proposed that, in place of the addition of 25per cent. to the standard rateable value in England and Wales to get the average in Scotland, there should be substituted a notional figure to absorb the total of the eleven-eightieths—the Goschen formula, or the extra money. I say that we have had no documents giving us the notional figure. What is the new percentage? The Secretary of State has not told us this afternoon.

Early in his speech the Secretary of State called attention to Clause 4 (2) and Clause 4 (4). These are just beyond understanding and I was not surprised, though I was a little disappointed, that the right hon. Gentleman did not seek to give us some explanation of them in his speech. The White Paper gives the impression that all the gains to local authorities are the direct consequence of the adoption of the Goschen formula.

I believe that I am not wrong in saying that the speech of the Secretary of State further buttressed that impression, but surely some of the increases or some of the rate reliefs flow from the adjustments proposed under Clause 10. It is the discontinuation of the capitation grants and the employment of the new formula as a balancing factor for educational grants and for the disbursement of moneys in lieu of rates on certain nationalised properties. Some of the rate reliefs flow from those adjustments.

Those that do flow from those adjustments, of course, do not come out of the £2 million at all. That ought to be clearly understood, because some authorities in Scotland, and many Members of Parliament, have assumed that if any authority is to receive relief under this Bill that authority will be receiving some part of the £2 million. But if I have read the Bill aright, that is not necessarily so. Some of them would have received the rate relief from adjustments provided in Clauses 10 and 11 even if there had not been an additional penny of Exchequer grants.

The Secretary of State has told us, and we have read it in the Report, that many small authorities who would suffer in consequence of discontinuation of capitation grants and the adoption of the new formula in Clause 10 have to be protected as the first charge on new money. I believe that to be wrong. It is the one departure from the investigating Committee's Report. The Secretary of State says that only £200,000 is involved. He may be right, because he has the facts and figures at his disposal. I have checked over the White Paper and have calculated that some 90 local authorities would be protected against an increase in rates by assistance out of the new money. Indeed, the protecting of the local authorities is, by the final words of Clause 4 of the Bill, the first charge on the new money.

That seems to me to be quite wrong. There is no principle in the decision at all, and it is a great pity that the Secretary of State has made the provision. If he wishes to protect these authorities who would suffer the increase in rates under the changes proposed in Clauses 10 and 11, it seems to me that the right thing for him to do is to find money from other sources rather than take it from the local authorities who stand to benefit from Exchequer equalisation grants. That is a matter which we shall no doubt examine further in Committee, and a matter upon which my hon. Friend the Member for Glasgow, Central (Mr. Mclnnes) will have something more to say.

Commander Galbraith

So that I may understand the hon. Gentleman, it is his suggestion that "some other source" might be an additional sum from the Treasury?

Mr. Fraser

Yes, that is what I had in mind. I think that it would be far better. If the Secretary of State wishes to protect these people from loss, I do not think that in equity he should take the money from the people who are entitled, by reference to their rateable value, to enjoy Exchequerequalisation grants. I said in the Scottish Committee in July that, in my view, rateable value was not the best yardstick to measure need. I said at the time that I was not sure that I was speaking for all my hon. and right hon. Friends, but I think that now I am speaking for them. I should like to repeat what I then said. We accept the responsibility for introducing it in the 1948 Bill and it has served many authorities in Scotland well. The Investigating Committee said that they could see no good reason for departing from using this yardstick, but I feel confirmed in my belief that that yardstick is faulty.

I get confirmation even in the Bill, where the Secretary of State proposes to adopt a notional rateable value for local authority houses as determined by him, instead of the actual rateable value, as a measure of rateable value and thereby as a measure of need in the area of any local authority. I merely say, in passing, that I welcome this step towards my point of view. I believe that we all welcome the proposal to apportion a calculated share of equalisation grants to small burghs and district councils. We must all regret, however, that at the present time we can have only temporary arrangements to help local authorities in their financial difficulties.

We must allow the Bill a Second Reading without challenge in the Lobby. I cannot, however, make any such promise about the Committee stage. There are details which will have to be closely examined, and many explanations will be sought. It is impossible, however, so to amend the Bill as to provide a long-term solution of the problem of the relationship between the Exchequer and local government in connection with the provision of moneys for local services. Many problems will remain, none more obvious than that which arises from the continuation of derating as introduced in 1929.

A promise was made in the White Paper of 1928 that the loss of income from derating would be balanced by compensating Exchequer grants. We must try to fulfil the promise which was made then. Many changes have occurred since then, but local authorities are still aggrieved that they are not being given compensation from Exchequer funds for loss of income from derating. We must either repeal the 1929 provisions or find additional money from the central Government to assist local authorities in carrying through their work.

I need comment no further upon the Bill at the moment. We shall give it a Second Reading today, but we shall examine it very closely on the Committee stage.

4.21 p.m.

Mr. Walter Elliot (Glasgow, Kelvingrove)

The one thing with which we shall all be agreed is that this is an exceedingly complicated Measure. Reference has been made to Clause 4 (1), which reads: The adjusted rateable value of a county, of the landward area of a county or of a burgh for any year, for the purposes of this Act, is the amount which would be the rateable value of that county, area or burgh for that year if in the valuation roll in force therefor on the first day of that year every local authority house were entered at a rateable value of such amount as the Secretary of State may determine to be the average rateable value for the year preceding that year of all local authority houses in Scotland. This is optimistically referred to in the margin as: Meaning of 'adjusted rateable value' and 'standard rateable value'. In those circumstances, it is natural that many references will have to be made to the gospel according to St. Andrew. But we must try to apply our minds to the meaning of what is being done here in general.

The first thing for the House to grasp is that a grossly bad and foolish Act was placed upon the Statute Book in 1948, and this is a belated attempt to remedy some of the growing evils and scandals which arose under it. Nobody can deny that. This difficulty is not confined to Scotland. The incapacity and incompetence of those bringing forward that Measure was so great that they placed upon the Statute Book a law which is breaking down as badly in England as in Scotland, except that as the whole country of England has its good areas as well as its bad areas, the sharp differentiation which we can see becoming evident at the Border has not yet penetrated into actual legislation in England.

Mr. A. Woodburn (Clackmannan and East Stirlingshire)

I suppose the right hon. Member for Kelvingrove (Mr. Elliot) is still suffering a little from the smarting he had when the previous Measure was going through the House and he could not get his own way. He has made some very extravagant statements about the Measure not working, but has he read the Report on the operation of Exchequer equalisation grants in Scotland, and does he refute what it says about the benefits? Is he prepared to go to the Highlands of Scotland and say that the Measure has not benefited them?

Mr. Elliot

I shall make my speech in my own way, and I shall deal with all those points. According to the statements in the White Paper, but for this Bill the provisions of the previous Measure would have overtaxed all local authorities this year to the extent of over £2 million sterling. There is also back money for five years, under which Scotland has been smarting—to use the right hon. Gentleman's own expression.

Mr. Fraser

Two million pounds each year?

Mr. Elliot

The evil has been growing. The hon. Gentleman must not attempt to put words into my mouth. I say that the lag began five years ago and it has now reached the point where Scotland, but for the legislation of this Government, would suffer a loss of £2 million sterling this year.

The right hon. Member for East Stirlingshire (Mr. Woodburn) asked if I would go to the Highlands of Scotland and speak about the evils of the previous Measure. I certainly would go there, and I should speak about some of the examples mentioned in the White Paper. Under the provisions of the right hon. Gentleman's Act, Caithness, by the figures given in the White Paper, would be overtaxed to an extent of 3s. in the £. They will now be relieved from that. It is the agreed statement of all the local authorities in Scotland that they are being overtaxed, and these figures can be quoted for many of the Highland areas. The right hon. Gentleman the Member for East Stirlingshire cannot escape from the fact that this Bill is being brought in to remedy a scandalous bad piece of legislation placed upon the Statute Book by his Government.

Mr. Woodburn

The right hon. Gentleman is building his case on the fact that he objected to the 25 per cent. When the previous Measure was going through the House, it was explained that the 25 per cent. was an inheritance from Tory Governments of previous times, which had accepted that as the standard relationship between Scotland and England. There was no evidence at the time to show that it was wrong, so it was left, and a promise was given that when revaluation took place in England, and the matter was investigated, this question would be reviewed. Until that information was available, we were compelled to accept what had been laid down in previous Tory Acts of Parliament.

Mr. Elliot

I admire the way in which the right hon. Gentleman leads with his chin on every possible occasion. If he had read the debates in the Scottish Grand Committee, he would have seen a statement by his hon. Friend the Member for Hamilton (Mr. T. Fraser) on 7th July, 1953, to this effect: I do not think that 25 per cent. was far out "—[Official Report, Scottish Grand Committee, 7th July, 1953; c. 148.] He was not basing his argument upon the opinions of past Tory Governments, but upon the evidence available to him at that time, and that was in 1953.

Commander Galbraith

Is it not a fact that the right hon. Gentleman who was then Secretary of State for Scotland actually said that we should accept the 25 per cent. …as being reasonably accurate and fair to Scotland."—[OFFICIAL REPORT, Scottish Grand Committee, 10th December, 1947; c. 2230.]

Mr. Speaker

This debate is becoming a little irregular. Hon. Members should be allowed to make their speeches with as little intervention as possible. That is the old custom and the best one. I am far from forbidding an occasional interjection, but this debate is really becoming a conversation.

Mr. Elliot

I am always most willing to give way—all the more so as we are discussing two of the subjects which are dearest and nearest to the hearts of Scotsmen, namely, local government and money. It is almost impossible for us to contain ourselves when these subjects are being considered. If I do not give way subsequently, I hope that hon. Members will not attribute it to any discourtesy on my part; it will be merely my humble desire to fulfil your Ruling, Mr. Speaker, as far as possible.

Nobody can deny that under the previous Measure the disproportion of taxation in Scotland was growing to a point where repealing legislation had become necessary. That is what this Bill states in the opening paragraphs of the Explanatory Memorandum; it says: Clause 1 provides for the discontinuance of the Exchequer Grants payable under the 1948 Act and for the payment instead,… of certain other sums. Our difficulty is that we are now trying to deal with a piece of bad legislation by an amending Measure, and that leads to a great deal of complication and difficulty.

I say that this complicated Bill arises out of a bad piece of legislation, that this bad piece of legislation has overtaxed Scotland to a considerable degree, that all credit is due to the Secretary of State for Scotland who has succeeded in arresting that. But he has not succeeded in getting the back money. This heavy burden, unjustly extracted from Scotland, still remains on our shoulders. All we can hope is that in future some of these gross mistakes will be set right by the Bill at present before the House.

My right hon. Friend said, rightly, that the local authorities have on the whole agreed. But I think he said himself that the counties of cities are by no means happy about the position as it stands at present under this Bill. After all, the counties of cities do include a very considerable proportion of the population of Scotland. It is true that they are to a certain slight extent relieved by this Measure, but I still think that, in view of the burdens which the counties of cities carry, a further share of these moneys might reasonably have been given to them.

I think that we under-estimate the extent to which burdens from the rest of Scotland pour into the great cities. Take one single example. In Glasgow we have built, as hon. Members know, something of the order of 30,000 houses. When we started that building we had a waiting list of 70,000. Now we have a waiting list of 120,000 or thereabouts. We have added two people to the waiting list for every single person we have taken off by building a new house. [Interruption.] I have not before me the whole of the gospel according to St. Andrew.

Mr. John Wheatley (Edinburgh, East)

We are talking about building.

Mr. Elliot

The difficulty of the great cities is that in some ways they underwrite the whole economy of Scotland. People pour into the great cities from many areas, sometimes looking for employment, sometimes they are older people coming to the end of their days. It is not quite true to say that we can judge the burden on the great cities solely by the accepted standards of the whole country. I think that a certain amount of consideration should be given, and can be given readily, to what I call the residual problems which press more heavily on the cities than they do on the rest of the country.

I do not wish to stress that. I did say, when this sum was first announced in the Scottish Grand Committee, that I thought it was a pity that it should be too quickly allotted according to existing formulae, and that some might well be allocated, in respect of the more clamant problems of housing, which includes overcrowding. This in Glasgow is of an altogether different order to that in some of the country areas which may do well—I do not complain of it—from the proposals in this Bill.

The very complicated details of the Bill will, I think, require to be elucidated further in Committee. I do not think that we shall get very much closer to them on Second Reading, which is, after all, the time at which no one can consider the great problems and the general principles.

I say that the whole difficulty arises from the optimistic belief, apparently of Government Departments as a whole and certainly of the Minister of the day in 1948 that a revaluation in England of every house from end to end of that country would be speedily carried out and would be smoothly translated into legislative and financial provisions. It was not the sort of expectation that anyone with practical experience could really justify. Now in page 3 of the Committee's interim Report it says: Pending revaluation in England and Wales, however, the Committee do not consider it possible to arrive at a precise arithmetical measure of the difference in the levels of the rateable value of the two countries"— the inference being that revaluation in England and Wales will soon be carried out and that then it will be possible to arrive at a precise arithmetical measure of the difference in the levels of the rateable value in the two countries.

It will be years and years before that is carried out, and further years before it is translated into actual financial provisions. I do not understand the optimism with which this problem has been approached either in the back-rooms of the Departments or by the Government which introduced the Act of 1948.

Mr. T. Fraser

And by the present Government.

Mr. Elliot

The present Government have brought in an admittedly interim Bill. The French have a proverb, "Riendure comme le provisoire," and lest my French accent is not very good I would say, translating, there is nothing that lasts like the provisional. One of the dangers that I see in this Bill is that it is still rather closely connected with revaluation in England, and I fear that. I think that, if it is to be closely connected, there should be a time-limit in this Bill of, say, a five-year period. I am certain that by the end of that time-limit we should still find we were a long way off having a complete new Act, a complete revaluation, translated into the sections of a statute, of the properties in England from the Border to Land's End.

Mr. Fraser

Has not the Minister of Housing and Local Government said that this revaluation would be completed by 1956? That seems to me to be three years hence.

Mr. Elliot

I am talking not only of the revaluation. I am talking of translating that revaluation into the Clauses of a Bill and into financial provisions. Once the revaluation has been done, it will still be necessary to translate that, and I should not be at all surprised if even the Minister of Housing and Local Government, great though his knowledge is, were a little over-optimistic on this point. I still say that the difficulty of hanging our Scottish Measure on English valuation is the difficulty of carrying through the English valuation which will recur and come back again to succeeding Ministers and even to succeeding Governments, and we must face that.

The question whether the rateable value is the proper yardstick was raised by the hon. Member for Hamilton. It may not be, but it is at any rate in Scotland, a straightforward figure which can be understood. I personally prefer a much greater use of the formula containing such factors as the number of young children, the mileage of roads and so on. I think that in many ways brought components into the argument that were much more useful and in some ways much more definitely ascertainable than this rather fluid figure of rateable value. The City Assessor in Glasgow has just revalued all the departmental stores; a very great alteration has taken place there. The number of young children under five is on the contrary a fairly well-known figure and a fairly constant figure, and similarly the number of miles of major or even minor roads is also a figure which can be easily measured, and about which there is no dispute. I am not at all sure that the departure from the old 1929 formula was in itself an advantage.

In present conditions local government everywhere is suffering the most fearful strain and is being very badly distorted. It will probably be necessary to carry through further valuations and, maybe, further reforms in local government, but we cannot believe that while year by year the whole of the rate figures are constantly subject to these earthquake changes. I throw out for the consideration of the House the suggestion that for five years we should pay the present rate levels in Scotland, meanwhile discussing the wider questions of local government which will have to be tackled and solved if local government is to continue to exist. I do no more than throw out the suggestion. The Second Reading is an occasion when questions going outside the narrow ambit of the Bill may be considered.

This is a temporary Measure, and it is inevitably complex. It will undoubted here and there be unsatisfactory, and in certain quarters it will lead to a sense of injustice being felt, such as is felt today in the counties of cities. I am sure that we must give the Bill a Second reading, and we must compliment the Secretary of State upon the success of his action in remedying the mistakes and omissions of his predecessor. But we cannot be at all satisfied with the position as it stands. Nor can we be satisfied with the position as it will be when the Sorn Committee reports. The Sorn Committee's Report will not be Ten Commandments coming down from Sinai and receiving the universal acceptance of all who see them. We have had such reports before and we have not always greeted them with the universal acceptance necessary to get Measures through a difficult and stubborn House of Commons and, in spite of what the best we say about it, a very argumentative Scottish Grand Committee.

We need to be thinking now of the steps which we shall take when the Sorn Committee's Report is received. We must consider our steps against the background that at present local government is suffering very heavily indeed. Local government in both Scotland and England is undergoing strains which it was never built to carry. Unless we can do something to remedy this, the whole great structure of local government, of which we are proud in both Scotland and England, will be damaged, maybe irreparably. It may well be turned into an annex of the central Government or a mere set of rubber stamps getting money and Measures from the State, putting the two together in an office and passing the result out to the rest of the world as local government, when it is nothing of the sort.

This is by no means an unimportant Measure. I hope that it will lead to our considering very thoroughly the wider problems involved, of which the Bill and the 1948 Act are mere symptoms. The deep-seated malaise of local government, if not still undiagnosed, is still un- remedied. It will remain unremedied even after the Bill reaches the Statute Book, which I hope it will do very shortly.

4.44 p.m.

Mr. James Carmichael (Glasgow, Bridgeton)

I am rather diffident about participating in the debate. The first three speakers have all had close association with St. Andrew's House. Two of them were former tenants of it, and the Secretary of State still occupies it; and each of them said that this was a very complicated Measure. Thus, the diffidence of a back-bencher can be appreciated.

I do not propose to argue about the 1948 Act. The fact that we shall agree to the Second Reading of this Bill indicates that certain shortcomings have been found in the 1948 Act. We all appreciate that local government in Scotland is in a very difficult financial situation. In the Scottish Grand Committee, during the summer, I said that I regarded local government as one of the most powerful influences in democracy.

In connection with the Bill we have to bear in mind that the amount of money to be granted will not give substantial gains as the Secretary of State suggested. There are about 87 authorities in Scotland who will not get a penny in the way of grant. I exclude Glasgow from my calculations, for Glasgow will get a rebate of about 2d. However, if we examine the Bill we discover that Glasgow does not get it from the £2 million; Glasgow gets it because Clauses 10 and 12 alter the 1948 Act.

There is something seriously wrong about this. How can there be a substantial gain to Scotland when 87 authorities will get nothing? That fact is admitted in the Bill. It is a very unsatisfactory Bill if it needs a provision like Clause 6, which clearly indicates that, in the event of any local authority having a loss, arrangements will be made from the Exchequer to cover the loss. This is evidence that the people who framed the Bill saw its shortcomings.

We regard the Bill as an interim Measure. It is interim because we are awaiting the Sorn Committee report and also the revaluation in England. If the Sorn Committee is to do its work properly and we are always to be tied to England, it indicates that the Committee will remain in session until England has been revalued. The stress in the White Paper is on revaluation in England, and perhaps the Joint Undersecretary of State, who has some association with accountancy and is better able than I am to handle figures, will tell us whether he expects the Sorn Committee to remain in session until it has examined the revaluation in England.

I should like to have seen it suggested in the Bill that we should not work on the formula of eleven-eightieths, which is based on the English practice. We all recognise that it is not a good yardstick. The point was made in a general way by the right hon. Member for Kelvin-grove (Mr. Elliot) when he suggested the basis might be population. I feel we might have regard to the population of the cities and the counties. We might also have considered the problem of derating which is a very important point. It might have been possible to evolve a formula operating on the basis of both population and derating.

In that sense, the highly populated boroughs, which are undergoing a tremendous strain at the moment, might have some easement. We can understand that the people running local government in the City of Glasgow are somewhat disturbed when they find that the City of Birmingham gets £1 million out of equalisation grant and the City of Glasgow gets nothing.

As a matter of fact, according to the figures for the last financial year, Wales got almost double what Scotland got. I am not arguing that we should readjust our finances so as to take something off the City of Birmingham. Neither am I suggesting that Wales is getting too much. My own view is that the financial commitments of the Government through the Exchequer grants with the rapid development of local government are not big enough to meet the responsibilities of local government.

I want to make this particular point. Is it not possible for local government grants in Scotland to be allocated purely on a national basis and to be the responsibility of the people of Scotland? I do not know why we should always be brought in behind the formula adopted in the English Measures. I think that it is possible, recognising the responsibility of local government in Scotland, to devise ways and means of giving Exchequer grants without taking into account any other part of the country.

Commander Galbraith

Surely the hon. Gentleman will agree that the formula is contained in a Scottish Bill. The financial formula is devised by the Scottish Ministries and put in a Scottish Bill.

Mr. Carmichael

Yes, but the point which has already been made this afternoon is that it is based on English calculation and, in my view, there is no reason why we should not examine the structure of local government in Scotland and its financial responsibilities exclusive of any other part of the country. I say the same about England and about Wales. It should be possible for any Government to measure the responsibilities of authority in Scotland, England and Wales separately and to make their financial allocations according to their needs. We do this in other directions.

We are the heaviest hit area in respect of unemployment of any part of Britain. Even in the hour of prosperity, the West of Scotland always has the difficult problem of unemployment, which exceeds that in any other part of the country. Similarly, with the housing problem. Our housing problem, particularly in the West of Scotland, will be a serious burden on local authorities for many years. That should be taken into account quite separately from measuring up to the standards in England.

There is one further observation which I should like to make and I hope that someone associated with the recommendations of the Sorn Committee will take note of it. Whatever policy is finally evolved and whatever the method of measuring Exchequer grants to local authorities I hope that it will be done in such a form that it will be possible for people to understand it. I think it is shocking that we have men in public life today adopting a Bill—even the Minister himself—who, if they were thoroughly cross-examined on it, would have the greatest difficulty in explaining the Clauses detail by detail.

There is something wrong with the way of government if people cannot understand a Bill. The Secretary of State for Scotland is a most tolerant, kindly man, who never "loses his wool," but if he had not taken great care in the preparation of his speech and if he had lost a sheet of foolscap when going to the Dispatch Box, I think he would have been in a serious mess this afternoon. Yes, there is something seriously wrong in the State of Denmark or in the state of St. Andrew's House.

I plead that when we are bringing forward Measures associated with local government, and particularly with rating, they should be so framed that even Members of Parliament who claim to be some authority on the ways of Government, can understand them. If we cannot do that we can readily understand the inability of people to harness themselves actively and objectively to the machinery of democratic government. In my view, one of the reasons why there has been a very serious decline in interest in local government work is because of the complicated Measures brought forward from time to time.

I back this Bill, but with a whole lot of reservations. If this is the Bill which is to supersede the 1948 Act, I am not very enamoured of the proposition after the boosting which it got from the right hon. Member for Kelvingrove.

4.57 p.m.

Sir William Darling (Edinburgh, South)

I find myself in very full sympathy with the hon. Member for Bridge-ton (Mr. Carmichael) in what he has said. This is a very complicated Measure. Local government in relation to Parliament always has been complicated, and I think it is fair to say that the 1947 Act, for which the hon. Member for Bridgeton had at least some responsibility as an ardent supporter of it, was also a piece of complicated legislation. I remember the debate in the Scottish Grand Committee on that Bill, and I remember the part which hon. Gentlemen took in it. The hon. Gentleman's hon. Friends, if not he himself, commended it. I did not. I said at that time that the Bill was impossible and likely to lead to disaster when it came to be applied.

My experience of this affair was that we were led by the number of observations made by the then Secretary of State for Scotland. For example, when speaking about the 25 per cent., he said then that 25 per cent. was reasonably accurate and fair to Scotland. He said that on 10th December, 1947, and in case he felt that I had not been fully convinced, he went on to say that the Committee should accept the decision of the Government. The former Secretary of State also said that the acceptance of the England and Wales standard plus 25 per cent. was best for Scotland.

The hon. Member for Bridgeton did support him, but the hon. Member for Ayrshire, Central (Mr. Manuel), always a powerful ally in any hard fought field, came forward and told the Secretary of State at that time that he was quite satisfied that the grant proposed by the Secretary of State was reasonable. Here we are this afternoon with a Tory Government seeking to amend a Measure which, from the very outset, was condemned by many local authorities in Scotland and certainly by many Tories.

Mr. A. C. Manuel (Central Ayrshire)

The quotation which the hon. Gentleman gave as emanating from me arises, I take it, from the 1948 Act. The Central Ayrshire constituency was not created then, and I certainly was not here.

Sir W. Darling

I think it was the Member for South Ayrshire (Mr. Emrys Hughes). If the hon. Member for Central Ayrshire thought that I was addressing myself to him he must have felt carried away with ecstasy. I had no such intention. I was indicating that the then Secretary of State for Scotland, the right hon. Gentleman the Member for East Stirlingshire (Mr. Woodburn) had the support of his hon. Friend the Member for South Ayrshire.

When we hear the hon. Member for Bridgeton and his hon. Friend the Member for Hamilton (Mr. T. Fraser) decrying this Bill—and no doubt it has its intricacies and anomalies—I have little sympathy with them, because they are the guilty men. They are the men who imposed this piece of legislation upon our unhappy country. They need not pretend it was wanted, because local authorities at that time, again referring to the 25 per cent. grant, said that this equalisation was open to criticism; and even allowing for a considerable margin of error, which certainly is not all on one side, the 25 per cent. addition was quite inadequate, even in 1946.

The hon. Gentleman and his hon. Friends forgot the warning they had received, and not from ignorant Tories who knew nothing about local government in the sense that Glasgow knows about it. They had no time to listen. They were carried away by this kind of free for all which gave nothing to Glasgow, nothing to Edinburgh, nothing to Aberdeen and nothing to Dundee; which created the preposterous anomaly referred to by the hon. Member for Bridgeton, in that a place like Birmingham, with a similar population to Glasgow and with an abounding and expanding prosperity, was getting thousands of pounds while Glasgow was getting nothing.

That was the Act which right hon. and hon. Gentlemen opposite fastened upon the Scottish public, and it has been left for my right hon. Friend—I admit it is a difficult and disagreeable job—to come forward with what is admittedly a complicated remedying Measure to put right the foolishness, the anomalies and the absurdities of the Act which right hon. and hon. Gentlemen opposite forced upon us.

Mr. T. Fraser

I wonder whether the hon. Member can explain how, in this Bill, the Government can put right the anomalies to which he has just called attention. He will be aware that Birmingham will continue to get nearly £1½ million by the Exchequer equalisation grant, and that Glasgow will continue to get absolutely nothing.

Sir W. Darling

I am aware of that. This Bill is only a remedying Bill to deal with some of the anomalies. The hon. Gentleman will hear from Edinburgh and Glasgow a justification of what I am pointing out, that the Act emanating from his brain and from the brains of his right hon. and hon. Friends is, as the hon. Member for Bridgeton pointed out. riddled with anomalies and absurdities; and that, so far as Scotland is concerned has been the insecure foundation on which we have to build in trying to remedy some of the anomalies.

We are trying to get over the fundamental difficulties imposed upon us in Scotland by the right hon. Gentleman and his Friends. I find myself very much in agreement with what the hon. Member for Bridgeton has said. He said that we began this experiment, this investigation, which led to the 1947 Act on the basis of what was the English system. Looking at the English system we found the Minister of Health engaged in a valuation which, he said, could be carried out in 18 months. The advisers of the then Secretary of State for Scotland said, "Scotland has come behind England very often. This is not a bad thing to do. We in the Socialist Party do not believe in Home Rule for Scotland very much, and if the English Minister of Health says it can be done in 18 months we will have an interim Measure to carry on."

That is what I and the hon. Member for Bridgeton object to equally, the acceptance of the promise, or hope, or suggestion, or anticipation, of the English Minister of Health, that he would have a basic valuation for us in about 18 months' time. They accepted that advice in good faith and, as an interim Measure for Scotland, they produced an Act which is full of anomalies.

The English Minister of Health let us down. It reminds me of the second phase of the March retreat in 1918. I was standing on a ridge outside Albert with the 9th Scottish division and I was talking to a medical officer. On the right was an English division, I think it was the 21st. The line was going back. The whole British Army was in full, but fighting retreat.

I said to my friend, this medical officer in the Scottish division, "What do you think is happening on the right?" He said, "Look at it. I fear our English allies have let us down again." In this instance the then Secretary of State for Scotland, backed by the hon. Member for Bridgeton and others, found that his faith in the ability of the English Minister of Health to arrange a valuation in about 18 months was not justified—our English allies had let us down again.

We had hoped that we had got from them a formula on which we could base an improvement. It did not happen. For five long years we have stumbled along and now there comes along a proposal that there may be this grant from central public funds. I agree that it is a very complicated Measure, but it follows a very bad Act, which, I repeat, was objected to at the time and which has many anomalies apart from those mentioned. It made too much of the needs criterion which I do not think so important. As my right hon. Friend said, it did not take into account a certain number of difficulties from which large communities suffer.

It must be said that after all this was not a politician's plan. Politicians have their limitations and stupidities. But this was a plan sold to us by the bureaucratic planners. Simple men like the hon. Member for Bridgeton and myself could never have thought of such a plan. Neither he nor I would dare to go to a municipal meeting and try to explain it, even if we were able to understand it.

Let us not be too unhappy about this Bill. It is one of those things which came from what the Secretary of State for Scotland referred to as the "temple of St. Andrews" or the "kirk of St. Andrews"—I am not sure which. It was a plan pushed on us by the Civil Service bureaucrats, and they have not done too well. They have had too many successes not to meet an occasional set-back and this plan was extremely badly done.

Whether we should indict the Minister of Health in England or the Department of Health in Scotland I do not know, but the whole House agrees that this matter should be remedied. But do not let us forget that the people who accepted the wrong advice, or the misleading advice, in the first instance were those hon. Gentlemen, now so smug and self-complacent, who are sitting on the benches opposite. If my right hon. Friend has made a mistake or a blunder by this Bill and if, when it becomes an Act, it is no more fortunate than the Act which preceded it, he may salve his conscience by asserting that it was not he who took the first step along that foolish road.

I would put forward my own history—not a very authentic one—of this long and difficult business. These Exchequer equalisation grants have been on the go since 1948, but I would point out that when they were first put into operation some right hon. and hon. Gentlemen opposite took the advice of the English Minister of Health. They took the hospitals from the local authorities. The Socialists believe in principle no matter how absurd and foolish the practice may be. They took from the local authorities their hospitals and—what was not such a rich and a ripe plum—the Public Assistance administration.

But more than that, because from some authorities they took away their transport, their gas and their electricity, these were very valuable parts of local government administration. They enabled local authorities to reduce what I think are called general overheads, the administrative expenses of the local authority under five or six headings instead of one or two. So, when this particular Act was brought forward, it had first dismembered local authorities in a very serious direction. They were bleeding from almost every pore. There was immense dissatisfaction.

I know Glasgow Socialists who were shocked and horrified when they learned that the application of the theories which they had been preaching for 30 years really meant that the Glasgow hospitals, Glasgow trams, Glasgow gas and Glasgow electricity had to go from the control of the local authority. Many Glasgow Socialists never recovered from the blow. They still call themselves Socialists, but that is all that is left, for they are now only that in name.

Mr. McInnes

Is the hon. Member aware that on not one single occasion did Glasgow Socialists protest about the Public Assistance and health services being taken over from the local authority?

Sir W. Darling

That would surprise me, 'but I accept it that they were glad to get rid of the care of the poor of Glasgow. They did not protest, but they said, "The care of the poor of Glasgow is no longer ours. Let us give it to Mr. George Buchanan."

Mr. Carmichael

On a point of order. Surely the discussion of the Assistance Board is not relevant to this Bill. I know, Mr. Deputy-Speaker, that you have a discretion on the Second Reading in allowing a line of argument to be developed, but when hon. Members refer to Public Assistance in Glasgow as it was 10 years ago surely we are getting very far from the Bill.

Mr. Deputy-Speaker (Mr. Hopkin Morris)

I understood that the hon. Member's argument was directed towards tracing the history of this matter.

Sir W. Darling

I am very glad, Mr. Deputy-Speaker, to have your support and also that of the hon. Member for Glasgow, Central (Mr. McInnes). He is a little nettled at the point which I have raised, which is a very relevant one.

In spite of the discomfort of the hon. Member for Bridgeton, I am willing to accept that Glasgow, which produced James Maxton and others whose names I cannot mention because they are hon. Members, never protested that the care of her poor, who are always with us, was taken away by the cold, clammy hand of the National Assistance Board. I am surprised, but I am willing to accept it and glad to have it on record.

Mr. Deputy-Speaker

The hon. Member is now straying a little wide.

Sir W. Darling

My general argument is made, and that is that in 1947, when the Act which is the forerunner of the Bill which we are discussing today, was applied by the then Socialist Government to local authorities, and which, as I suggest, dismembered them, it meant that they lost control of Public Assistance, of their civic transport, of their civic gas service, of their civic electricity service and of their municipal hospitals. And what I am arguing is that it was at that moment that a further brutal blow was delivered upon the City of Glasgow and certainly upon the City of Edinburgh.

I am referring to the Exchequer equalisation grants under which some bodies got more than they expected and some got less than they deserved. I happen to be the Member for Edinburgh, South and I want to refer to the particular position of the capital city. Although many of the local authorities got much that they did not expect under the 1947 Act, some got nothing. Edinburgh got nothing. In fact, it was worse than that, because Edinburgh lost £232,000 of its annual income, and is still losing a sum relatively in that neighbourhood.

I note that the hon. Member for Glasgow, Central has written down the figure probably to improve it by thinking of a number, doubling it and adding the first number of which he thought. But I will give him the details of the formula by which Edinburgh has been—and I do not think it is an exaggeration to say this—defrauded of £232,000 under the previous Act and is continuing to be defrauded under this Bill.

The formula was calculated on the loss of the block grant, the loss of savings in the transferred services and the education grant. Edinburgh, Perth, Inverness, and the county for Peebles were, under the previous Act, literally minus authorities, but the pill was sweetened by a transitional grant which was to be £357,000. That formula was based on the £232,000 I have referred to, plus 4⅘ of the rate, which is to say, £125,000. This grant was for five years, it diminishes by one-fifth each year and it finishes this year.

Under the Act of 1947 and under this Bill when it becomes an Act, Edinburgh this year will be under the permanent loss of £232,000. It is a very important matter because this new Bill is going to lay a second foundation and leave the other as if it were unrecorded, forgotten history.

Mr. Mclnnes

How can the hon. Member expect us to accept those figures in any degree of confidence when he makes the reckless assertion that Edinburgh and Glasgow have lost their transport undertakings? The actual position is that Edinburgh and Glasgow still run their own transport.

Sir W. Darling

The hon. Member is at least six or seven sentences behind. I thought he would have taken me up on that point earlier. It is the case that the central administration of many of these municipal services—I did not specifically say which local authority—has been denuded, and the local authorities are now left with a loss of revenue when meeting their overhead, administrative costs. While the hon. Member makes the point about Glasgow which he is entitled to make, he will not, I am sure, refuse to accept my general argument that the City of Edinburgh on the basis of the 1947 Act has been permanently deprived of this sum of money. Nothing that was done in that Act and nothing in this Bill is calculated to put that right.

Under the new plan which is envisaged in the Bill £2 million is to be made available from the central Government. I do not like the phrase "central Government," and I should perhaps say that this sum of money is being made available from the taxpayer—he is the central government—to the ratepayer. It is approximately eleven-eightieths of the aggregate grant of England and Wales, and I think this is admirable. The Secretary of State is entitled to praise for this achievement but it means very little in the City of Edinburgh. I will go further and say that, looking the gift horse in the mouth, if we are justifiably entitled to £2 million for this year, it is a shortfall of what we should have had last year.

I would suggest to the Secretary of State that while he has been bold and successful in securing this £2 million, he might enter a claim with some degree of justification for five years, because, during the time while the former English Minister of Health and his successor have been proving their incompetence to find in a reasonable time, a financial basis for valuation, which they have promised us. England has been dilly-dallying but we have been waiting. It is only in the fifth or sixth year that we get the £2 million.

I put it to my right hon. Friend that he should put forward a claim not for one year but for four or five years. Under those circumstances he would have a sum of money which he would be entitled to say was a fair allocation for Scotland in all the circumstances. I feel that while something must be said in praise of the Secretary of State for Scotland for procuring this £2 million, there is something else which should be added, and that is that the local authorities, which are outside the wide, general scope of these advantages, should be considered in some special fashion.

There is a great deal of natural sympathy for local authorities which have a small rating area where the penny in the pound return is negligible. I have more sympathy, however, for the four large capital cities, particularly Glasgow and Edinburgh, which have their own peculiar responsibilities. The old formula based upon unemployment, young children, mileage of roads, and so forth, should be modified because a new problem has emerged, that of the ageing population. An increasing feature of every local authority budget will be the provision of homes and hostels for old folk. This work has not been taken over by the National Health Service but left solely to the local authorities.

We all know that it is often to the large towns that folk tend to retire. The son or daughter of the person who has worked his life out in one of the small burghs has probably gone to Glasgow or Edinburgh, Aberdeen or Dundee to secure work. When he retires, the father does not remain in Linlithgow or Cupar, as in my view he should, but goes to a big town and there makes a demand first on the housing reserves and secondly, possibly, on the provision of accommodation for old folk. I suggest that there is a case. If, as I hope, there is to be a fund of more than £2 million—a multiple of £2 million either by three, four or five—and if that fund comes into the hands of the Secretary of State, I hope that my right hon. Friend will consider the claims of the large authorities who have these special responsibilities.

If it happened that every local authority in England had something from an Exchequer grant except London, there would not be these empty benches this afternoon if that subject was being discussed. Yet that is what has happened in Scotland. The two great cities who carry the main burden of the production of wealth in the country are practically being left out of this arrangement. No special consideration is being given to them. They are supposed to be big enough to stand on their own. Yet, after all, they are capital cities.

The example of Birmingham has been given and London might well be instanced in comparison with the City of Edinburgh. When tragedy falls across our island the City of Edinburgh supports the Lord Mayor's Fund and readily gives what it can. When the great Festival of Britain was held in London the City of Edinburgh made a marked contribution. When, however, something reciprocal is required, this capital city is ignored altogether as if it were not. It has to arrange its own exhibitions, its own festivals, and if there are any grants to be given, they have to be given to other authorities.

It is a proper thing to try to raise those who have fallen and to assist those in difficulty, but it is an unwise policy which ignores the needs of the capital of a country. That capital is under great disadvantage in this Bill. It is not only under great disadvantage, but it is being ignored to an extent which is offensive to Scottish public opinion which I, as the hon. Member for Edinburgh, South, choose to voice this afternoon in this House.

5.23 p.m.

Mr. David J. Pryde (Midlothian and Peebles)

I regret that I cannot follow the hon. Gentleman the Member for Edinburgh, South (Sir W. Darling) in his attack on the English, much as I should like to do so. The hon. Gentleman has a very short memory because his goes back only to 1948 and does not, apparently, go so far back as that of his right hon. Friend the Member for Glasgow, Kelvingrove (Mr. Elliot), who told us that Scotland had been losing a great deal of money in recent years. I suggest that if Scotland has been losing money, she did not lose it through the effects of the 1948 Act but through that Section of Part II of the 1929 Local Government (Scotland) Act dealing with derating, which struck a mortal blow to local government in that country.

I am not blinded or hypnotised by the £2 million which Scotland is to get out of this Bill, because I am apprehensive of the Bill. It is ghostlike and weird in its construction. It reminds me of a thriller I read once called "The Ghost of Guy Thyrle," which was a forerunner of "The Invisible Man." The Secretary of State certainly has my sympathy. I listened carefully to his attempts to elucidate this Measure, and when the right hon. Gentleman told us that certain mining areas would benefit by it, the hon. Gentleman the Member for Edinburgh, South, told us that it was an amending Bill which would correct some of the doubts of the 1948 Act.

In my mind's eye I compared the effects of the two. I found that the 1948 Act steadied local government in Scotland and came to its rescue for the time being. At that time I pointed out, as I have consistently pointed out since 1945, that the entire structure and basis of Scottish rating must come under review. I doubt whether the present arrangements will bring any benefit because, as we have been told here today, we have had samples of that committee under that person before, and the local government bodies in Scotland did not benefit.

We have heard a great deal about north of the Caledonian Canal. I suggest that south of a line drawn from the Forth to the Clyde we find a state similar to that in the north, and I challenge the right hon. and gallant Gentleman who will wind up the debate for the Government to tell me what benefit will accrue from this Bill to the small burghs in the south of Scotland, especially in Dumfriesshire, in Kirkcudbright and also in East Fife. Where is there a greater mining town than Dalkeith, lying in the centre of the Midlothian coalfield, with a record in housing and low rents second to none in Scotland?

Sir W. Darling

High rates.

Mr. Pryde

If the hon. Gentleman looks at the rates in Dalkeith he will find that they compare favourably with many of the burghs in Scotland.

Sir W. Darling

Not with Edinburgh.

Mr. Pryde

But Dalkeith gives greater service to its citizens than does Edinburgh.

The hon. Member for Edinburgh, South went to great lengths in trying to elaborate the case for the Bill, but he said something in agreement with his right hon. Friend the Member for Kelvingrove—he had his doubts about this Bill. My hon. Friend the Member for Hamilton (Mr. T. Fraser) propounded exactly what was wrong. What is wrong is simply that the local authorities in Scotland will never know exactly where they are because any grants that come to them from this House are based on an algebraic proposition: something has to be equal to something else and things that are equal to the same thing are equal to one another.

We must get down to basing Scottish taxation and rating on a more solid foundation. All the talk about waiting for the revaluation in England and Wales is so much moonshine, because there is a revaluation taking place in Scotland today. We are the only country in the world where property appreciates in value. In England the capitalist writes off something for depreciation each year, but in Scotland every year a house stands we add something to its value until it is falling down, and even then we want something for the site value.

I therefore suggest that the Government withdraw this Bill because it is a bad Bill. If my hon. Friends on this side of the House would take my advice, they would press for the withdrawal of the Bill because, otherwise, in years to come the people who come after us will blame us for coming here and passing a bad Bill.

5.30 p.m.

Mr. A. C. Manuel (Central Ayrshire)

We should first recognise that the Government are not claiming that this Bill is other than a sop to tide over what has become a particularly bad period in Scottish local authority finances. Therefore, this is entirely an interim Measure. Although we have heard today about the problems which the 1948 Act has brought in its train, we should recognise that that Act did a great deal of good. In many instances, it stopped the rot and enabled work to be done in various areas which otherwise would not have been done.

The 1948 Act tried to help the weaker and poorer areas which had been hard hit for a long time. When I hear hon. Members opposite criticise that Act, I like to remind them that there was a lengthy period after the passing of the Local Government (Scotland) Act, 1929, during which very little was done to help Scottish local authorities who were complaining bitterly from the commencement of that Act.

As a local government member for a lengthy period, I was certainly aware that local authority officials and members in Scotland felt that the 1929 Act had worked very badly from the point of view of future solvency in Scottish local authority circles. Under that Act, derating took large slices off the valuation in our industrial towns where industry was derated by as much as 75 per cent.; and in our rural areas there was an even larger commitment in respect of agricultural holdings.

The main provision on which the local authorities depended was that an Exchequer grant would be made to the local authorities to make up for that derating which took place under that Act. The complaint of the local authorities was that while this provision was maintained in the first year, it has steadily been whittled away, and that burden which was previously carried on a larger rate application field is now being carried on a narrower one, and this led to the necessity for the Labour Government to do something about it in 1948.

The adoption of the Goschen formula of eleven-eightieths in this Bill will certainly not solve the problem. We in local authority circles have never accepted that the Goschen formula was the best means of deciding what the Exchequer grant should be. Although that formula has been adopted in this case. I think Clause 6 of this Bill shows that the formula has not succeeded in accomplishing what the Government required.

Clause 6 says: Where the council of a county or the town council of a burgh are, under the provisions of this section, to be regarded as having incurred in consequence of the passing of this Act a loss in respect of the year 1953–54 or any subsequent year, there shall be paid to the council of the county or the town council of the burgh, out of the amount available by virtue of section one of this Act for the payment of Exchequer Grants in respect of the year in question, an Exchequer Grant (in this Act referred to as an "Exchequer Transitional Grant") in respect of the loss. In other words, Clause 6 says that if we do not include that Clause, certain local authorities are going to lose under this formula. But surely the formula is not doing what it set out to do.

Commander Galbraith

Surely that has got nothing to do with the Goschen formula, which is giving us another £2 million to distribute.

Mr. Manuel

What I am saying is that the Goschen formula has not been accepted by Scottish local authorities as the best means of deciding what grant they should get from central funds. I was then passing from that and saying that the system which had been adopted under the disbursement formula has not accomplished what the Government wanted it to do, or they would not have needed to bring in Clause 6.

The Clause is merely a means of protection for the Government in order to avoid an outburst of feeling and indignation among a large number of Scottish local authorities who would have lost under this Bill but for the inclusion of the Clause. That in itself is a bad thing. Why are we having this situation in Scotland whereby, although we are getting an extra £2 million and although we have had a fairly large amount of money under the 1948 Act and the Goschen formula. Scotland as such is not receiving the financial benefit that it should have?

Commander Galbraith

The answer must be well known. It is because we are following the principles of the equalisation grant.

Mr. Manuel

If the right hon. and gallant Gentleman will allow me to develop my point, I think my case will reveal itself.

The benefit under the 1948 Act would be much more apparent to Scottish local authorities if we had not in Scotland problems which are peculiar to Scotland and in particular to the Highlands. The Highlands, because of their low rate able value and their peculiar domestic problems, are receiving so much help from the Exchequer equalisation grant that they are taking too large a proportion. There ought to be a greater share of the grant going to the other local authorities in the industrial and more populous areas in Scotland.

I am sorry that the hon. Member for Orkney and Shetland (Mr. Grimond) is not here. When we consider that out of the total rate levied in Orkney for local authority work 70 per cent. of the outlay is met by the Exchequer Equalisation grant, hon. Members will appreciate the problem I am trying to pose. If we took the same percentage for Glasgow it would be nil, and in Ayrshire and most of the local authority areas in the industrial part of Scotland we would get the same result.

If there is to be a real chance of success, the Government ought to devise help for the crofter counties in the Highlands generally in the ratio of the needs of those counties. But that ought not to be made from the same central fund as that upon which other local authorities in Scotland depend. If the grant was not drawn upon to the extent that it is now drawn upon for the peculiar domestic problems of the Highlands, there would be more for disbursement in the Southern counties.

There ought to be a different way of meeting these peculiar problems of the Highlands than the way in which they are presently being met. When we are trying to get a cure we ought to be considering just what are the problems which local authorities face in Scotland. While we see that Highland local authorities have domestic problems we have also to recognise that authorities in more populous areas have also pressing problems because they are industrial and a greater proportion of the population live in their areas.

Attention should be paid to the amount of housing which a local authority must provide in the future when we are deciding the ratio of help they should get from the central source. Possibly the incidence of tuberculosis ought to be considered, the number of old people, the number of homes that will need to be built and things of that character in which the work of local authorities is restricted because they are not given enough help from central sources.

The matter we are talking about today is a serious one and of great consequence to Scotland. Those of us who are concerned about it and have some knowledge of local authority problems and the headaches which members of local authorities have in meeting the commitments which ratepayers ask of them must recognise that local authorities have more to do than ever. From 1929 there has been a curbing of local authorities influence and a greater dependence on the centre by reason of rateable value being filched from them. They are not getting what they should get in rates. Local authorities feel that they can only accomplish their job in their own areas if attention is paid by the Government of the day to the nature of their problems and if there is an adequate disbursement of the equalisation grant or whatever the central grant may be in relation to the problems of the respective authoritiesin Scotland.

5.44 p.m.

Commander C. E. M. Donaldson (Roxburgh and Selkirk)

We have had a short debate which has been peculiarly characterised by the fact that acceptance of the Bill and the financial benefit which will accrue to Scotland under the Bill seems to be so grudgingly given. I wish to illustrate my point by the fact that many hon. Members have criticised the Bill and the benefits to be received under it. I am not here to argue the merits of Glasgow and Edinburgh, and places referred to by the hon. Member for Central Ayrshire (Mr. Manuel).

It will be recalled by hon. Members that my constituency in the south-east of Scotland was used for illustration in the White Paper. I can say with truth that in Roxburgh and Selkirk there will be pleasurable acceptance of this Bill and the financial benefits which will acrue from it. Perhaps it does not give everything hoped for, but in large measure there will be appreciation of the Bill and the fact that it is a step in the right direction, which Scottish Members on both sides of the House will admit.

The future will depend to some extent on the application of this Measure and of the Reports in relation to other subjects. The hon. Member for Midlothian and Peebles (Mr. Pryde) referred to the subject of rating values and derating. We all know that that is a very intricate problem, but we are not so concerned with the intricacies of the problem as with acceptance or refusal of this Bill. I am certain that Scottish Members will be indeed ungrateful and unappreciative of a vast step forward for Scotland if we cavil too much at the terms of the Bill. I think we should accept it—certainly with justifiable reservations in some cases—as something which, in broad terms, is good for Scotland. Therefore, I commend and support the Bill.

5.46 p.m.

Mr. James McInnes (Glasgow, Central)

We can all agree that this short debate has revealed that whilst we welcome and gladly accept the additional £2 million provided for in the Bill, nevertheless dissatisfaction has been expressed with the method of allocation. That has been expressed from both sides of the House and I think I should be justified in saying that that expression is the echo of dissatisfaction among local authorities now that they realise and appreciate all the implications of the Bill.

I know that it could be argued that it is only natural that those who get nothing, or those who get very little, under these proposals should be dissatisfied, but it would be correct to say that it was the dissatisfaction among local authorities which culminated in the present review. Indeed, the Secretary of State said so this afternoon. I must confess that the fact that we are getting an additional £2 million for Scotland does not prevent me from harbouring a feeling that it will take far more than £2 million to avoid the almost inevitable breakdown of the financial structure of Scottish local government.

I know that there were weaknesses add defects in the 1948 Act, but I rather thought the right hon. Member for Kelvingrove (Mr. Elliot) gave a bad example when he referred to the position in the Highlands and quoted the County of Caithness. In fact, in 1952–53 Caithness received 56 per cent. of its net expenditure through equalisation grants, and I could quote another seven or eight Scottish counties which received over 50 per cent. of their net expenditure through these grants.

I well understand why the right hon. Gentleman advances alternative proposals, but he suggested that it might be worthwhile to consider going no further and that local authorities' rates should be pegged for five years. Does he mean that the rates should be pegged at their present level for five years and that any amount in excess of the present-day figure would be payable by the Government? What has the right hon. Gentleman in mind?

Mr. Elliot

It is rash for the hon. Member—my hon. Friend, if I may call him so—to ask me to start another speech, after I have just finished one. Naturally I should have tobe guided by the Sorn Report. The problems in that Report will be very great indeed, and I should need to take my proposals in connection with that Report.

Mr. McInnes

Ithought that the right hon. Gentleman would put forward a progressive proposal, but I visualise now what he has in mind. He anticipates that there will be a complete re-orientation of Scottish rating following the Sorn Report: that owners' rates will almost certainly be pegged or stabilised, and that the rating revenue of local authorities, from that source will, as a result, be infinitely less. The burden will have to fall on the owner-occupiers of other property. As a result, the figure of rating will be at a comparatively high level, and the proposal is that when it is pegged at that figure the national Exchequer shall not be asked to make any great or valuable contribution.

Mr. Elliot

The hon. Member is going too far if he tries to read all that into my remarks.

Mr. Mclnnes

It is intelligent anticipation nevertheless.

Mr. Manuel

We will see how the right hon. Gentleman goes when we come to the Bill on housing.

Mr. Mclnnes

In certain respects the right hon. Gentleman justifiably attacked the 1948 Act. I confess that it contains many weaknesses and defects, but if the right hon. Gentleman was dealing in a broad way with the serious financial position of Scottish local government he should have recalled the Act which was passed by his own party when in Government and which has imposed a tremendous strain on Scottish local government. I refer to the derating Act of 1929. Indeed, I believe that the right hon. Gentleman was one of its best advocates. In the city of Glasgow, in which the right hon. Gentleman has the honour to represent a constituency, he would save the ratepayers no less than:1s. 8d. in the pound in rates if the local authority were to be compensated in respect of derating.

One or two observations made by the hon. Member for Edinburgh, South (Sir W. Darling) rather shook me. He referred to what he described as "this very bad Act of 1948"and went on to indicate that it was left to his right hon. Friend the Secretary of State to remedy the grave injustices of that Act. The hon. Member indicated that Birmingham, a city of unbounding prosperity, was receiving £1,300,000 each year in respect of equalisation grants, and that cities in Scotland—Aberdeen, Dundee, Edinburgh and Glasgow, for example—were receiving not a penny. I ask the Joint Undersecretary whether it is not a fact that there is nothing in this proposal that will bridge the gulf between the £1,300,000 which Birmingham is receiving and the nothing that Glasgow and Edinburgh are receiving.

There has been comment regarding the addition of 25 per cent. to the English rateable value for the purpose of calculating the grant to Scottish local authorities. My hon. Friend the Member for Hamilton (Mr. T. Fraser) indicated that 25 per cent. was the generally accepted figure that was used for other purposes in determining grants made during the same period to Scottish local authorities. One must also remember that at the time of the 1948 Act the Government were engaged in the process of relieving Scottish local authorities of millions of pounds of rating liabilities when they relieved them of the responsibility for public assistance and part of the health services.

The 1948 Act was based on a wrong calculation or formula. I am satisfied that it was not produced by any local authority or any association of local authorities, nor by any Minister. Like the hon. Member for Edinburgh, South, I feel that the calculation of the formula was produced by the Department. That is my opinion of the present Bill and it was my opinion of the 1948 Measure. I would go further and suggest that the formula in this Bill is far more intricate, more complex and more ambiguous than anything in the 1948 Act.

Sir W. Darling

I said that this was not a politicians' formula but was the product of the experts. I must not be thought to attack the experts for this reason, because the politicians could think of nothing. Something had to be put forward for our acceptance.

Mr. McInnes

I do not attack the Civil Service or any particular Department for that production. I merely indicated that it is, obviously, produced by them.

We have talked about the intricacies and complexity of the Act, and the right hon. Member for Kelvingrove referred to Clause 4. In subsection (3) we find: In this section the expression 'the weighted population' means—

1. (a) in relation to a large burgh, the population thereof plus the number of children under fifteen years of age therein;
2. (b) in relation to a county, the population thereof plus—
   1. (i) the number of children under fifteen years of age therein, and
   2. (ii) twice the number of persons by which the increase of the population of the county during the period of five years immediately preceding the year in question exceeds one twentieth of the population of the county in the first year of the period of five years aforesaid, and
   3. (iii) in the case of a county the population whereof divided by the road mileage thereof is less than seventy, one third of the additional population needed in order that the population thereof divided by the road mileage thereof should be seventy;…"

I hope that it is the intention of the right hon. and gallant Gentleman the Joint Under-Secretary of State clearly to define that Clause for our benefit. I should also like him to define the meaning of the phrase: …the constant factor determined for that year by the Secretary of State… which appears in Clause 4 (2). What is this mysterious ingredient called the "constant factor"? Are right hon. Gentlemen opposite sure that it is not the forgotten factor? As my right hon. Friend the Member for Central Ayrshire said, it might be the landlord—or it might be the constant nymph.

I pay my tribute to the Committee for the way they handled their task. The formula they produced seems to have worked out something like this: they said to themselves, "We have an additional sum of £2 million more available for allocation, so we shall apply the Goschen equivalent of eleven-eightieths of the equalisation grant payable to local authorities in England and Wales." But fundamentally that is entirely wrong. It is contrary to the spirit of equalisation. The idea of equalisation was to distribute grants on the basis of need and not of population.

As I understand the 1948 Act, it was designed to assist by Exchequer grants those local authorities which would be unable to provide or maintain their local services without undue strain on their own local resources. I think that the hon. Member for Edinburgh, South will agree with me that the Goschen formula is a mystical form of calculation. If we are talking in terms of eleven-eightieths, I could argue that Scotland receives far more than its share of the Goschen formula when we consider matters like unemployment, infantile mortality, tuberculosis, overcrowding and the whole degree of social poverty in Scotland as a whole when compared with England and Wales. One could continue. All the indices are a great deal higher than those in England and Wales.

Let us see what happens when we apply the Goschen formula and the formula laid down in Clause 4. I take the town of Kirkcaldy, where the rates are 16s. 8d. It gets equalisation grants equivalent to 2s. 5d. per £ in the rate. Under the Bill, Kirkcaldy's rates will be reduced from 16s. 8d. to 15s. 1d. and it will get another 1s. 7d. per £ of relief, so Kirkcaldy will get about £33,000. The rates at Greenock are 18s. 11d., and the equalisation grant is 2s. Id. Under the Bill, Greenock's rates come down to 17s. 5d. The local authority is given an additional relief, therefore, of 1s. 6d. per £. So Greenock gets approximately £51,000.

I take the great City of Glasgow which houses almost a quarter of Scotland's population. Glasgow does not get one penny of the £2 million; yet Glasgow is perhaps the most heavily-rated industrial city in Great Britain. Glasgow has a rate burden of £11 8s. per head of the population. It gets a benefit of 2d. in the £ in rate, but how and by what mystical means was that achieved under the Bill? It is from the formula that has now been applied in respect of education grants.

By taking the standard rateable value where it is higher than the actual rateable value, Glasgow gets £160,000. But we do not leave it there. We apply the same formula in respect of Part V of the 1948 Act to local authorities which receive payments in lieu of rates in respect of railway and electricity undertakings. Under the provisions of that part of the Act, Glasgow loses £40,000. So, while Glasgow gets nothing out of the £2 million, it gets £160,000 out of the new formula under education and loses £40,000 under the new formula covering rates for nationalised undertakings.

It is abundantly clear to me, despite the complexities and intricacies of the Bill, that the Committee has amended the basis of the education grant so that some local authorities will get more at the expense of other local authorities. They have amended Part V of the Act so that the local authority which at present receives equalisation grant will get greater payments from the railway and electricity undertakings than it has had before. But the local authority which gets no equalisation grant will get less payment from the nationalised industries. That is how it appears to work out.

Under Part V the local authorities will get less from the pool—that is, the block rating grant payable by the railways and electricity undertakings. Then to cover up the position, and so that it would appear to every local authority in Scotland that the idea is that no local authority shouldbe penalised, the Government bring in this transitional Clause which provides that, although there are nearly 90 local authorities which get nothing under the Bill, they are safeguarded and they have the first claim on the £2 million additional which is available. Did the Secretary of State give the House the correct information when he indicated that the first claim on the £2 million amounted only to something like £200,000? After all, there are something like 90 local authorities involved.

Mr. Stuart

As far as I am aware, that calculation is as correct as we are able to make it at present. I was under the impression that the number of local authorities to whom the hon. Member had referred and who would get nothing was 76 and not90, but that is only a figure out of my head and I am not absolutely certain about it.

Mr. McInnes

That is the procedure as laid down in the Bill for the calculations and formulae under the various Clauses, and it amounts simply to this: that such local authorities as Edinburgh, Glasgow, Aberdeen, Dundee and several others which have no equalisation grants are now being offered, by devious means, a miserable penny or twopence in order to appease any wrath which might develop. That is the economics of Tweedledum and Tweedledee.

May I ask the Joint Under-Secretary of State, who is to reply, one or two questions? May I ask him why consideration was not given by the Committee to the proposition of introducing a formula on the basis of the rating burden per head of population? Secondly, why did not the Committee tackle this question, as the hon. Member for Edinburgh, South said, without any reference of any kind to English rating? Thirdly, why was there not a proposal that some weighting should be introduced to help those areas where the cost of housing is excessive? Surely the right hon. and gallant Gentleman is aware that some local authorities have a rate burden in respect of housing today which is 1,000 per cent. more than their burden in 1939. It was entirely wrong of the Committee merely to indicate in respect of housing that it appreciated the situation and that it should be watched and considered at the next investigation. When is the next investigation to take place? Is it to be when we get the Sorn Committee's Report or have we to wait until the revaluation which has to take place in England and Wales? Or when will it be?

Dr. H. Morgan (Warrington)

Domes day.

Mr. Mclnnes

I think I am justified in asking when the next investigation is to take place, because it is vital to the interests of Scotland.

Commander Galbraith

My right hon. Friend has answered that question. It is laid down in the Bill that such an investigation can take place at any time, whenever the situation warrants it.

Mr. McInnes

I agree, but I am not being kidded by that. I want something more concrete. Obviously the right hon. Gentleman can do it at any time, but he will not do it until there are some new circumstances on which to act. They may arise from the Sorn Committee Report or from representations in respect of the revaluation in England and Wales.

Commander Galbraith

The hon. Member will grant that there is an improvement. Whereas we have to wait for a period of five years under the existing legislation, we shall be able to make the investigation in future whenever we feel that the situation warrants it.

Mr. Mclnnes

Yes, there is an improvement in some respects but there is a definite worsening in other respects. That is why I say the whole of this Bill is the economics of Tweedledum and Tweedledee. It is no use kidding ourselves; we have improvements but in other respects we have a definite worsening of the position.

Why I ask when the investigation is to take place is because Birmingham and other English cities have been getting millions and millions of pounds of equalisation grants while the large cities in Scotland have not been getting a single penny. Has that to continue for another two or three or four or five years? The longer the next investigation is delayed, the longer will Birmingham continue to receive this money.

It is in the light of all those circumstances that, while we welcome the additional £2 million, we must tell the right hon. Gentleman that the method of allocation of the £2 million does not merit the approbation of those on this side of the House.

6.16 p.m.

The Joint Under-Secretary of State for Scotland (Commander T. D. Galbraith)

We have had a very amiable debate and one which has produced a lot of points which we can consider before we reach the Committee stage. It seems to me that two general criticisms have been levelled against the Government's proposals. The first is on the method of distribution, about which the hon. Member for Glasgow, Central (Mr. Mclnnes) has just spoken with such feeling, and the other is on the amount of money which we have to distribute by way of equalisation grants.

I suggest to the House that those who are criticising the distribution proposed in the Bill of the £8 million which is available are criticising not this Bill but the fundamental principles of equalisation grants as laid down in the Act of 1948. The hon. Member for Glasgow, Central spent most of the time in his speech criticisng that Measure and not criticising this Bill.

After looking at the matter pretty carefully, it seems to me that the principle on which the equalisation grant is distributed is probably more just and fairer than that of any other system which has so far been devised. This Bill merely carries the principle further, and it is therefore even fairer than that which was provided in the 1948 Act.

The hon. Member for Glasgow, Central and other hon. Members have alluded to the great financial burden which is placed on certain of our local authorities as a result of their housing programmes. I acknowledge that at once and it may well be that the day will come when some additional weighting will have to be introduced into the method of distributing equalisation grants in respect of that housing burden. The House surely realises—I am sure it does—that the principle is simply that the State should assist to a greater extent those local authorities whose rateable value falls short of a minimum standard. That is the whole purpose of it; it is intended to assist the weak and the poor and not the strong and the rich. I have always assumed that that was a principle generally accepted in the House.

What was the alternative put forward during the debate? The only real alternative put forward is that the sum available, or at least part of it, should be distributed on the basis of population. I quite well realise that that might enhance the prestige of some of those who represent the great areas which at the moment are getting no assistance under the Bill or from equalisation grants. It would no doubt be of assistance to some hon. Members, myself included, when we are next under the necessity of seeking the franchise of the electors. From that point of view, I should welcome it very much indeed, but I submit that, on all other counts, such a method of distribution would be very unfair and therefore undesirable in the interests of the country as a whole.

The object of the Bill is to even up much further the rating resources of our local authorities, and I can think of no fairer means of doing it than by the measures proposed in this Bill. If, however, when we come to the Committee stage, other methods of distribution are put forward, I give the assurance to the House that my right hon. Friend will examine them with an open mindand with the utmost sympathy.

Running through a number of the speeches today, there has been a comparison of the position as between Birmingham and Glasgow, and I have been asked time and again during the debate why Birmingham should receive £1 million or £1½ million while Glasgow got nothing. I submit that that is a matter which is outside the purview of any discussion on this Bill, in view of the fact that we are now getting eleven-eightieths of the total equalisation grant payable in England and Wales. Surely it is no concern of ours how England and Wales should distribute their equalisation grant.

If the operation of the equalisation grant principle results in money being paid to Birmingham, even though, in our opinion, that is done to the detriment of other authorities, that is no affair of ours and is not our business. Our business is simply to distribute the sum allocated to Scotland in such a manner as we consider just and fair, which, in my opinion, is just what this Bill does.

Mr. Woodburn

By implication, the right hon. and gallant Gentleman acknowledges that there seems to be an anomaly, and there is no question that that anomaly is disturbing the minds of people in Edinburgh and Glasgow. Having discovered there is an anomaly, would he not like to offer the House some explanation of the anomaly?

Commander Galbraith

The explanation simply arises out of the whole principle of the equalisation grant. We are now distributing in Scotland on the principles of the equalisation grant the money which has been allotted to Scotland for that purpose, and which has been welcomed time and again during the debate. In England and Wales, the money is distributed on the English basis, which was the basis that we had previously, and which we did not like at all.

Mr. T. Fraser

Are we not all responsible, as Members of Parliament, for the public money that we give either to Glasgow or Birmingham, and under whatever Act of Parliament it may be given?

Commander Galbraith

That may be perfectly correct, and the hon. Gentleman may be quite right, but that is not what we are discussing this afternoon. What we are discussing is the Second Reading of this Bill.

The other pint on which there was general criticism was the amount of money we had received, and I would remind the House in that connection that the matter was very carefully and seriously considered by the expert investigating Committee set up by my right hon. Friend to examine the operation of the equalisation grant in Scotland. That Committee was composed of the most eminent authorities on local government finance, valuation and rating in our country, and it included persons nominated by the three local authority associations and officers of the Scottish Home Department, and among its members were the city chamberlains of four cities, the town clerks of small and large burghs and the county clerks of counties. We could not, in fact, have formed a more representative or more highly-qualified body to consider this very intricate matter.

Now, in its examination the Committee obtained evidence which tended to show that the percentage increase necessary to raise rateable value on the English basis to rateable value on the Scottish basis should not have been 25 per cent. but something considerably higher. That evidence, however, the Committee did not find itself able to regard as providing the best comparison between the English and Scottish levels, and the Committee gave detailed reasons why it could not accept it. In that regard, I would refer hon. Members to paragraph 7 of the Committee's interim Report.

The Committee came to the conclusion that 25 per cent. was too low, but it was unable to suggest any reasonable alternative other than the Goschen formula, and I would say to the House that, where experts such as these who formed that Committee, after factual and objective study, came to that conclusion and advised that the Goschen formula should be adopted, we would be somewhat rash to turn down that advice unless we had at least some other reasonable alternative to offer.

Of course, as I am sure the House will agree, it is a human failing that, when we receive something we like, we always want some more of it, and I fear that that is what has come up time and again in this debate. I feel very strongly that, rather than criticising, hon. Members ought to be congratulating my right hon. Friend, than whom none is more active in the interests of Scotland, on his success in convincing the Chancellor of the Exchequer that the existing formula was not working out fairly as far as Scotland was concerned, and on obtaining from him an additional £2 million, which, let me say, was given with good grace and which will very greatly help our local authorities whose money resources are below the standard and whose need is great.

A great deal has been said today on the great complexity of this Bill, and I would agree. To endeavour to read the Bill, with all its references and cross-references from one Clause to another, and, indeed, to previous Acts of Parliament, is a most bewildering undertaking, and I wonder whether I might venture to try to put to the House in my own way how the provisions of this Bill will work out in practice. When I put it to myself that way, I find that I understand it, although it may be that hon. Members will not understand it. However, perhaps they will allow me to try.

In doing that, we have to start off from the existing position under the existing law, under which we in Scotland receive grants under the formula of rateable valueper head of weighted population for England and Wales, plus 25 per cent. Having applied that formula in Scotland, we are in the position of rendering an account to the Exchequer, and requesting payment. The change that has come about is simply that we do not now present an account, but we are given a sum of money which we have to assimilate under the Bill.

I have been asked a number of times during the debate what on earth is this so-called "constant factor." It so happens that there is no known method of arriving in one operation at a figure which will assimilate the whole of the money which we are given to distribute under the equalisation grant. What we have to do is to proceed by a system of trial and error. We take one figure, and, if we find out that all the sum available is not taken up, we take another, and if we find that takes up too much, we have to go on until we gradually reach the figure where the whole of the grant is taken up.

Having found that figure, we then ascertain the weighted population of Scotland, and we divide the constant factor, as it is called—which is really a notional rateable value—by the weighted population of Scotland and we arrive at the figure of the standard rateable value per head of the weighted population.

To put it into figures, the notional rateable value, or constant factor, is £55,890,000-odd, and the weighted population is 6,494,000 and some odd units. The standard rateable value per head of the weighted population is £8.606 and some more decimal points. Having ascertained what the standard rateable value per head of weighted population is, we can then find the standard rateable value for any local authority whatsoever merely by multiplying the weighted population of that local authority by the standard rateable value per head of the weighted population.

As an illustration, let me give the figures for Peterhead. The weighted population amounts to 16,927. Multiplying that figure by £8.606, we arrive at a standard rateable value for that burgh of £145,678. That gives us the standard rateable value. We pay Exchequer equalisation grant to all those burghs whose rateable value as adjusted, as laid down in the Act, is below the standard. Those which are above the standard naturally get nothing. The gap between the rateable value of the burgh and the standard rateable value is the credited rateable value on which the Exchequer pays rates.

I hope that I have succeeded in explaining some parts of the Bill. That is how the matter works out in practice. Now I am prepared to answer some of the questions which were put to me.

The hon. Member for Hamilton (Mr. T. Fraser) said that the impression given by the White Paper and by my right hon. Friend was that the effect on the rates was entirely the result of the new grant. In that connection I would refer him to paragraph 11 of the White Paper, where he will see that that is not the case. Another question or suggestion that he put to me was that compensation should be paid for derating losses. That point was frequently put. Let me remind the House of what actually happens. Under the Local Government Act, 1929, the block grant was introduced and included estimated losses on rates due to derating. That system remained in force until the coming into operation of the Local Government Act, 1948.

Mr. L. M. Lever (Manchester, Ardwick)

And unemployment.

Commander Galbraith

I am not going into all the factors but am merely dealing with one matter on which a question was addressed to me. I hope that hon. Gentlemen will not expect me to stand at the Box and say what all the factors are, and that my explanation satisfies them that I know what the constant factor means.

I was asked by the hon. Member for Bridgeton (Mr. Carmichael) to indicate whether I expected that the Sorn Committee would remain in being until revaluation was made. I should say that the answer was "Certainly not." He asked whether eleven-eightieths was a good yardstick. Up to the present I do not think we can say that it is bad, because it has given us another £2 million. He asked whether housing should be taken into account. I have already answered that point when I intimated that at some future date it might not be unreasonable to introduce weighting for housing into the calculation.

I was rather shocked and surprised that my hon. Friend the Member for Edinburgh, South (Sir W. Darling)—and incidentally other hon. Members when making their speeches—seemed to put the blame upon the Scottish Office for certain things that happened. Any blame, as the House knows, does not attach to the Department but to my right hon. Friend and those who sit with him on the Government Front Bench.

Sir W. Darling

I only suggested that the formula which he admitted was complicated, was unworkable. I was not suggesting that that was due to my right hon. Friend or to my right hon. and gallant Friend, but to people who, to the best of their ability, did the best they could for their masters.

Commander Galbraith

I am very glad that the hon. Gentleman has said that, because he has removed from my mind the suggestion that he was attributing blame to the officers of the Department in St. Andrew's House. The hon. Member for Midlothian and Peebles (Mr. Pryde) asked that the Government should withdraw the Bill. I do not think the hon. Gentleman had better go back to Scotland and to his own constituency and say that he has invited the Government to withdraw a Bill which gives to Scotland another £2 million to meet the expenditure of the local authorities.

Mr. Pryde

If the right hon. and gallant Gentleman will guarantee that Midlothian and Peebles will get something substantial out of the Bill, as has been enunciated, I shall be very pleased. If the right hon. and gallant Gentleman will turn to the White Paper he will find that Peebles, the town with the highest rateable value per head of the population, is getting a penny in the £, and that the town of Dalkeith, with its fine record in housing and low rents, gets nothing. We must take the Government's assurances that they are going to act in a corrective and amending fashion with some degree of circumspection.

Commander Galbraith

The hon. Gentleman knows that a penny is better than nothing. He also knows that the purpose of the Bill is not to assist local authorities whose rateable value is already above the standard. He will have observed in the Bill provisions for weighting which make allowance for a change in population, and they may well apply in his own constituency.

I have answered to the best of my ability many of the questions which were put to me, and I now ask the House to give the Bill a Second Reading.

Question put, and agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee.