HC Deb 16 March 1956 vol 550 cc687-784

Order for Second Reading read.

11.6 a.m.

Mr. J. A. Sparks (Acton):

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

This Bill proposes to repeal the de-rating provisions of the Local Government Act, 1929, and of the equivalent Scottish Act, so far as they relate to industry and freight transport. Scotland is, therefore, as much involved in the Bill as are England and Wales.

My case, however, will be based almost exclusively upon the problem in England and Wales. There are two sets of figures, as we know, and I would take up an inordinate amount of time if I attempted to cover Scotland as well. I shall leave Members who sit for Scottish constituencies to put the case for Scotland. That will be better than if I, an Englishman, attempted to do so.

The Act of 1929 was a major Measure of reorganisation of local government. We are concerned this morning with Section 68, and with Section 45 of the Scottish Act. As I have said, they provided for the derating of industry and freight transport. Agriculture is excluded from the provisions of the Bill and we shall, therefore, not consider that aspect of the matter this morning.

The Act of 1929 effected a major diversion of local sources of revenue away from local authorities. The result of this has been that the remaining ratepayers, mostly householders and shopkeepers, have had to shoulder a very much higher proportion of the rate burden than they can be justly expected to do. There is very considerable support for the Bill among local authorities, who have almost despaired of this House ever putting right the iniquities of the 1929 Act. They are very interested in the fate of the Bill and hope that we shall give it a Second Reading, and that it will become an Act of Parliament.

It is important that I should, as well as I can, give the House a picture of the background against which the derating provisions of the 1929 Act were conceived and later approved by this House. I do not think I can do that better than by giving the House three short quotations which will convey in better words than are at my command an idea of the state of the country at that time and of the reasons why the derating provisions were put forward.

In his Budget statement in 1928 the then Chancellor of the Exchequer, the right hon. Gentleman the Member for Woodford (Sir W. Churchill), said this about the problem before us: We have, however, to face the fact that unemployment remains obstinately chronic around the dismal figure of 1,000,000, and that all those basic interests which used to be the glory of this island, which must always constitute an essential element in the life of every nation, and which are vital to our export trade—all those industries are at the present time in serious eclipse."—[OFFICIAL REPORT, 24th April, 1928; Vol. 216, c. 844.] Cmd. Paper 3134 of June, 1928, which outlined the proposals for local government reform, said in its opening paragraph: As the result of a careful review of the difficulties of productive industry the Government have, as Local Authorities are aware, come to the conclusion that the basis of rating of agricultural, industrial and transport properties needs to be revised; and they have adopted a plan which they believe will not only place the rating of these properties on a more rational basis, but will, more than any other political action which could be taken, contribute to the revival of agriculture and the basic industries. Paragraph 3 concluded: Obviously, if Local Authorities are to suffer so serious a loss of rating some alternative source of revenue must be provided… Then, finally, Mr. Chamberlain, then Minister of Health, who moved the Second Reading of the Measure on 26th November, 1928, said this: At a stroke, £24,000,000 a year is to be lifted from the back of industry. It is safe to say that not less than three-quarters of that huge sum will go to those industries which are most depressed, which used to give the greatest employment, and which to-day are lying derelict and almost helpless."—[OFFICIAL REPORT, 26th November, 1928; Vol. 223, c. 88.] We are entitled to ask: did the Act achieve its purpose in so far as industry was concerned? The answer to that question is most definitely, no.

In January, 1929, the number of registered unemployed was 1,446,000, equal to 12.2 per cent. of the employed workers. In 1932, it rose to 2,855,000, or 22.2 per cent. of the workers employed. In 1938, the figure dropped to 1,818,000, which was 13.2 per cent. of the employed population. These figures do not include the Poor Law figures. Quite a number of unemployed people in later years were put off the register and had to register with the Poor Law authorities.

What was the position relating to exports? The products and manufactures of the United Kingdom exported in 1929, the year of the Act, were worth £729 million. In 1938, nine years later, their value fell to £471 million. Therefore, industrial derating failed in its purpose. We did not have to wait until 1956 to prove that was so.

Mr. Peter Smithers (Winchester)

Is the hon. Gentleman contending that industrial derating was a principle, let alone the main factor, in that situation?

Mr. Sparks

I am not trying to infer that the export trade of the country fell because industry was derated, but the object of derating industry was to increase our exports and to increase employment, which, in fact, it did not do.

Let us consider what are the services for which the community is responsible, and which are essential to industry and of which industry makes use. Industry enjoys the protection of the police for its property. The fire service of the country is at the disposal of all industrial establishments, not only to fight fires, but to prevent the possibility of fires. The community has to place roads at the disposal of industry to provide access to and egress from industrial establishments, and the roads have to be maintained at considerable cost year by year, the cost falling mostly upon the ratepayers.

Local authorities have to provide a system for collecting the refuse from industrial establishments. The community provides a very costly system for conveying from industrial establishments sewage effluents. We can imagine the plight of industrial establishments if they had not access to the sewers to carry the effluents from them. That provision is very costly. Streets have to be lit.

The educational system of the country provides substantial benefit to industry. If we did not educate our children in the rules of the "three Rs"—writing, reading and arithmetic—what kind of working population should we have in our industries today? With an illiterate population, it is very doubtful whether the country would ever have achieved anything like the industrial influence it enjoys at the present time, but the education of young men and women for their future work in industry is a service which costs a considerable sum of money to provide.

Of course, the provision of technical education, too, provides a very important supply to industry of skilled technicians, and of others who are responsible for management. There is a grave shortage of technicians at the present time, as we all know. Without the facilities provided by our technical colleges and our educational service, there is no doubt that industry would be in a very bad way.

There is, moreover the expenditure of local authorities on public health. If there were no public health institutions and we had in this country, as there are in many backward countries, epidemics from time to time, plagues sweeping throughout the land, one could imagine the considerable absenteeism that would result in industrial establishments—if we did not have and maintain a public health system to control epidemics and disease and to maintain the standard of public health.

Then there is the expenditure upon the housing provided by local authorities. Industry is really the cause of placing upon local authorities the responsibility of providing housing. I know that private enterprise does so to some extent, but in built-up areas, where there are difficulties about land, and so on, and where industry is concentrated, only the local authority is able to provide housing accommodation for those workers who seek employment in the area.

If industry enjoys the services provided by the community, we are entitled to ask what industry pays for them. In 1953–54 the total rate fund expenditure of local authorities was £979 million, and that expenditure includes all the services I have outlined as being used by industry. Derating industry provided only £13½million in rates. In other words, it contributed 1.38 per cent. of the rate fund expenditure of local authorities in 1953–4, and that was just enough to pay the charge on the rates for the fire service, and no more. Industry, therefore, enjoyed all the other services I have mentioned free and without any contribution to the rates.

If we take this a step further and take only the rate-borne expenditure of local authorities, that is, the actual charge to the ratepayers for the services provided by the local authority, it will be found that in 1953–54 the ratepayers contributed £378 million towards that expenditure. Derated industry contributed £13½ million, which was only 3.6 per cent. of the rate-borne expenditure in that year. Therefore, we are entitled to ask today: are rates a burden on industry or is industry a burden on the rates? We have come to the conclusion long since that industry is a burden on the rates rather than vice versa.

We must also consider the liability inherited by the community from our industrial system. We have not yet by a long way repaired the ravages of the Industrial Revolution. The slums of our cities are still there. There is an immense cost to local authorities and to ratepayers throughout the country on rehousing and slum clearance and redevelopment. schemes all arising in the main from the conditions created by the Industrial Revolution. These problems are left to the community to solve.

I want to refer, in this connection, to the distressed areas. Between the two wars we had many distressed areas and in many of them we had what were known as the Special Areas, that is, areas where distress was abnormal. I should like to give the House a short quotation from the Report of the Commissioner for the Special Areas, dated 30th September, 1937, which gives a very clear picture of the liabilities which the community has inherited from industry. The Commissioner said: I well remember the depressing effects that the great slag heaps and the ruins of dismal factories had upon me on my first visit…I am now asked to clear up, on behalf of the Government, these unsightly ruins of concerns that in former days no doubt paid their shareholders handsome dividends. I have visited areas of desolation still bearing traces of the earlier industrial activities belonging to industries still powerful and prosperous, business reasons alone having induced them to vacate the sites. The problem of restoration needs to to be dealt with more systematically and on a comprehensive scale …A firm which deserts an old industrial site is frequently bankrupt and cannot itself clear the site before it leaves, but I trust that a repetition of such tragic relics may be avoided, either by a system of compulsory insurance or by putting responsibility for clearance on the industry as a whole. I agree that a great deal has been done since that Report was issued to try to recover some of these industrial ruins and to improve the situation in the distressed areas, but a great deal still remains to be done, and it involves a very considerable cost on local authorities and ratepayers in those areas to retrieve the situation.

I pass to the financing of local authorities and shall try to show as well as I can its bearing upon derating losses. It is well-known that the costs which local authorities will have to meet have grown very rapidly in recent years. The increasing burden on local authorities can well be understood from these figures. In 1930–31, the first year after the derating Act, the average rate poundage levied throughout the country, that is, England and Wales—I shall not entrench on Scotland—was 11s. 8d. In 1955–56, the average rate poundage was 22s. 11d. Therefore, the rate poundage has nearly doubled.

If we consider the expenditure of local authorities from another point of view, that is, the amount of expenditure borne by grants from the Government and by the ratepayers, we find that the grant-borne and rate-borne expenditure of local authorities in 1929–30 was £262 million. In 1938–39, before the beginning of the Second World War, it was £332 million. In 1953–54, it was £792 million. The significance of these figures is that for the nine years prior to 1939 the expenditure of local authorities increased by 27 per cent. but in the 15 years since 1939 expenditure has increased by 139 per cent.

It is true to say, therefore, that the expenditure of local authorities, particularly in the post-war years, has been and is now continuing to increase at an alarming rate. If we measure this increased expenditure in another way it will be found that compared with 1938–39 levels, the grant-borne expenditure of local authorities increased in 1953–54 by 195 per cent., and the rate-borne expenditure by 97 per cent. Included in the increase in rate-borne expenditure are these significant figures. The expenditure on education was up 164 per cent.; on police, 163 per cent.; on the fire service, 370 per cent.; on public lighting, 97 per cent. All those are important services which industry uses.

Let us now consider what is the loss to local authorities in England and Wales by the derating of industry. When we consider that, we shall find that in the year 1930–31 the loss of rateable value to local authorities was £20 million. In 1954–55 it was £40 million but in the new valuation lists, details of which were available in the Vote Office yesterday afternoon at 4.30, the loss on rateable value to local authorities has increased to £108 million. In the year 1954–55, the loss on rateable value to local authorities from industrial derating was 11.3 per cent. of the total rateable value. On the new valuation list, the loss has increased to 17.38 per cent. of the total rateable value.

Now, let us consider what this would produce by way of rate income, on the assumption that industrial derating is repealed. If we take the year 1954–55 the loss of rateable value was 11.3 per cent. of the total rateable value. That represents a rate income of about £44 million. If industrial derating had been repealed in the year 1954–55 local authorities would have enjoyed an increased income of approximately £44 million, and obviously that would have been available to reduce the rate demand on all other ratepayers including householders and shopkeepers.

It is not easy to get the figure for the new valuation list because the details upon which a correct estimate can be obtained are not yet forthcoming, but we can estimate the figure. Here let me say that the expenditure of local authorities in the year 1956–57 will be much higher than it was in 1954–55, so that my figure is rather an under-estimate than an over-estimate. If we take the rate income for the year 1954–55 and take 17.38 per cent. of what that income would be—the latter, of course, being the loss of rate value to local authorities in 1956–57—it gives an approximate figure of £68 million which would be lost to local authorities in rate income. As I have said, that is an underestimate and the loss will be found to be much higher. These figures are significant because they show the extent to which industry is being subsidised by other ratepayers, largely by householders and shopkeepers.

In passing, I want to refer to the effects of industrial derating upon my own county and my own constituency. In 1929, the county of Middlesex lost about 1.75 per cent. of its rateable value, but on the new valuation list the county loses £6,624,000 of its rateable value, or, in other words, 16¼ per cent. of its rateable value is lost through industrial derating. This means in effect, that the county loses in rate income approximately £2,392,000. In my constituency, Acton, in 1956–57, which is the year of the new valuation list, we shall lose in rateable value £770,781, or 49 per cent. of the total rateable value of the borough. The loss of rate income is £419,448 and that loss costs the rate of Acton a sum of 2s. 10d. in the £. In effect, it means that the ratepayers of my constituency are subsidising industry there to the extent of about £419,000 in the 1956–57 municipal year.

There is one other aspect of this problem to which I must refer, and which portrays the inequities which exist in our present rating system. The Act of 1929 contracted seriously the basis of local taxation. In other words, it placed upon the shoulders of other ratepayers burdens which ought to have been placed on the shoulders of industry, and, therefore, restricted the resources of local authorities in meeting their growing expenditure.

In Command Paper 3134 of 1928, to which reference has been made already, it is said: The most important effect of the derating proposals on the position of the Local Authority is, clearly, the narrowing of the basis of taxation available to that Authority, which necessarily involves a greater or less impairment of the capacity to meet the considerable fluctuations in certain classes of expenditure inevitable from time to time. I will emphasise that by giving one or two examples.

If we take the year 1930–31, and consider the percentage of the rateable value which industrial hereditaments contributed to the rate, we shall find that before derating they contributed 1003 per cent. of the rateable value of local authorities in England and Wales. After derating it fell to 3.41 per cent. Freight transport contributed before derating 4.25 per cent., and after derating 1.14 per cent. Dwelling houses and other hereditaments before derating contributed 82.12 per cent. of the rateable value of local authorities in England and Wales, but after derating this increased to 94.21 per cent. of the rateable value. These proportions, with a certain amount of fluctuation, have existed to the present time. The variations have not been at all great.

When local authorities lost substantial rate income in 1929, the Government took steps to compensate them. The amount that the Government put aside to meet the loss on industrial derating, including freight, was £20 million, and that figure was included in the Exchequer block grants. It is significant that local authorities have received no consideration whatsoever for the loss of rate income in respect of factories constructed after 1929 which have enjoyed industrial de-rating and have paid only 25 per cent. of their rate assessment.

Also, the £20 million was not to last for ever. It was to be brought to an end within 15 years. There were to be three quinquennial periods during which this element in the Exchequer block grant would drop from £20 million to nothing. In fact, it dropped to nothing in 1948. In that year the Exchequer block grant was replaced by the Exchequer equalisation grant, and the formula upon which that is based does not in any shape or form take into consideration the losses to local authorities from industrial de-rating. Another factor is that many of the authorities which are the worst hit by industrial derating get no Exchequer equalisation grant. They have lost what little benefit they had from the Exchequer block grant and have now to bear the loss completely.

I want to give the House some idea of the effects of the repeal of industrial derating upon Government grants and the Treasury. These figures have been difficult to obtain, and they have involved a very considerable amount of research. They have been provided by the Society of County Treasurers in a document, issued by the County Councils' Association, which gives a picture of the effect of repeal on the basis of the year 1951–52. I should have liked more up to date figures, but they are unobtainable at present. My figures indicate the general effect, which is as true in principle today as in respect of 1951–52. For the purpose of these calculations, we must include agriculture with industry in order to get the correct balance and proportion.

If, in 1951–52, derating of industry had been brought to an end, industry would have contributed an additional rate in-some of £29.9 million in England and Wales and agriculture would have contributed £8.2 million on the assumption that the pre-1929 position prevailed and agriculture was paying only 25 per cent. of the assessment. Thus, the additional rate income enjoyed by local authorities in England and Wales in 1951–52 would have been, in round figures, £38 million.

We must offset against that figure reduced Government grants. The Exchequer equalisation grant is based on the average rateable value per head of population in a given area. If derating was abolished, that average would rise, and it would mean that fewer local authorities would receive the benefit of the grant. In the year 1951–52, the grant would have fallen from £53.8 million to £46.6 million, a reduction of £7.2 million. The education grant would also have been affected because the formula provides that there shall be deducted from the grant a product of a 2s. 6d. rate, and that product would obviously increase if industrial and agricultural derating were repealed. That would have meant a reduction in the education grant of £5.4 million. Thus, the total reduction in Government grants would have been £12.6 million. When we offset that against the increased rate income of £38 million, we find that local authorities would have enjoyed about £24.4 million increase in rate income, after allowing for Crown property adjustments.

What is the effect of repeal upon industry? After allowing for reduction in tax liability if industry was fully rated—the amount would be offset against tax and it would mean that industry would pay slightly less in taxation—the balance which industry would have needed to find in 1951–52 was £15 million. As I shall show, that is a very insignificant figure compared with the colossal profits that industries are making at present.

What would be the effect on the Treasury? It would lose £18.6 million in tax revenue, this being because industry and agriculture would be paying £38 million more in rates, which would reduce their profits, but it would gain £13.7 million by way of reduced Exchequer equalisation and education grants and reductions on Crown property. Therefore, the net cost to the Treasury in the year 1951–52 would have been £4.9 million.

For that loss to the Treasury, local authority would have gained a rate income of £24.4 million. That would have affected the rate poundages of all authorities. I do not propose to give figures, because they are available in other documents. No local authority could suffer a reduction and some local authorities would not gain very much, but the overwhelming majority would gain the equivalent of a reduction of from 1s. 1d. to 3s. in the rate poundage.

Dr. Barnett Stross (Stoke-on-Trent, Central)

Am I right in assuming that the benefit of the equalisation grant differs widely with different local authorities and that while some local authorities have had what they consider to be a fairly good bargain from the equalisation grant, others have had nothing? Would it not, therefore, be true that a local authority like my own, in Stoke-on-Trent, which has lost £300,000 and has had equalisation grant of nearly £1 million, might not benefit appreciably from any change?

Mr. Charles Pannell (Leeds, West)

Before my hon. Friend replies to that question, perhaps he will say, at the same time, that Stoke-on-Trent has enjoyed that benefit in advance of the complete reassessment of property and has prob ably got an unmerited bounty, which was not conferred on Leeds?

Mr. Sparks

My hon. Friend the Member for Stoke-on-Trent, Central (Dr. Stross) rather indicates that Stoke was very much under-assessed in valuation for rating purposes. Now, with the coming into operation of the new valuation lists, Stoke has been caught up.

Lieut.-Colonel Marcus Lipton (Brixton)

Justice is done.

Mr. Sparks

It will be put right at last.

I must leave my hon. Friends to reply in greater detail to my hon. Friend the Member for Stoke-on-Trent, Central than I have time to do. For my purpose, the equalisation grant is based on the average rateable value per head of weighted population throughout England and Wales. Those authorities which are below the average get the benefit of Exchequer equalisation grant; those above it get nothing.

The last part of my submission is that the case for industrial derating no longer exists. We all recognise that the conditions of 1929 no longer exist in industry.

Lieut.-Colonel Lipton

They may come back, though.

Mr. Sparks

Industry today is being subsidised by the ratepayers. We believe that if industry is to be subsidised, it is far better that it should be subsidised by the State and not by householders and other ratepayers. Industry can well afford to pay its full share of the rate burden, for in 1938 the gross trading profits of companies and public corporations operating in the United Kingdom were £700 million. In 1954, the figure had gone up to £2,892 million. If we take the 1938 figure as 100, the figure for profits in 1954 was 413.

The figure I have given includes all concerns whether they enjoy the benefit of derating or not. I have, however, tried to extract the figure for industries and concerns which directly receive the benefit of industrial derating, and it is not far from correct. It relates to the gross true income assessed for tax from trading profits of manufacturing and other industries enjoying derating. In 1939–40 their profits were £429 million, and in 1953–54—I cannot get later figures; they would be much higher—the profits had gone up to £1,562 million. If, therefore, we take the 1939–40 profits as 100, the 1953–54 figure is 364.

From that figure of trading profits, I am sure nobody in the House would suggest that if industry in England and Wales was called upon to contribute an additional £40 million in rates, making allowance for reduction of tax on this figure, it would be a burden upon industry.

Major Sir Frank Markham (Buckingham)

Did the hon, Member say just now that it was nearer £70 million than £40 million?

Mr. Sparks

No, I did not mention £70 million. It might be confusing because I have had to use different years to get my figures and it is difficult to follow when they change.

The up to date figures are not available in all cases, but in 1953–54, if derating had been repealed, the industries which had been derated would have contributed an additional rate income of £40 million. Offsetting against this the reduction of tax, which some people estimate at 50 per cent. there remains a balance of approximately £20 million for the year which industry would need to provide in increased rates.

I must leave other hon. Members to deal with the objection that these proposals would mean an increase in the cost of articles produced by industry. Such a claim is fantastic. It amounts to nothing worth talking about—merely a few pence in some cases and a shilling or two in other cases on articles of very high cost.

Had industrial derating been repealed in the year 1953–54, industry would have paid £40 million more in rates than before. This would represent only 5½ per cent. of the total rate fund expenditure of local authorities in that year and only 14 per cent. of the total rate levied in that year. It cannot be said that in asking industry to pay 14 per cent. of the rate levied or 5½ per cent. of the rate fund expenditure, the proportions are excessive.

Mr. Graham Page (Crosby)

The figure of £40 million is rather important. Is there not an increase of £108 million in the rateable value, as shown in the White Paper published yesterday? Could the hon. Member join this with his £40 million increase in rate payments?

Mr. Sparks

I wish I could do that, but it is quite impossible.

Mr. C. Pannell

The hon. Member opposite would not understand.

Mr. Sparks

I doubt whether the hon. Member himself could give the figures, because the new valuation list is not in force until 1st April. Its consequences, therefore, are at the moment unknown, except that we know from the White Paper published yesterday afternoon that the loss of rateable value is approximately £108 million. We cannot as yet assess the consequences which flow from that, because the figures are not yet available.

Let me sum up by saying that industrial derating has failed in its purpose and that the conditions of 1929 no longer exist. Industry can well afford to pay its full share of the rate burden. Householders and shopkeepers are heavily subsidising prosperous industries and there is no new source of revenue available to local authorities to meet the growing expenditure arising from extended services and increased costs.

The proposers of the reasoned Amendment for the rejection of the Bill are exaggerating the effect of the repeal of industrial derating upon the forthcoming review of local authority finances. They may well feel that if we repeal industrial derating now ahead of the review, considerable difficulties would be caused; but it is nothing of the kind. In fact, repeal would very considerably ease the problem of review, because de-rating is one of the major obstacles which must be overcome. To wait for the review would merely postpone the evil day. If the Minister took the opportunity offered by my Bill he could at once remove from his path one of the greatest obstacles which will face him when he undertakes a review of local government finance.

It may appear to some hon. Members, who, perhaps, have not had as much experience of local government as some of the rest of us, that this is a major proposal which must be left to the Government, but there are no major complications whatever. There is no administrative problem. The consequences which flow from repeal automatically adjust themselves. The greatest headache that the Minister is likely to have will come from the new rating and valuation list. That is where his problems will originate.

If he can clear out of his way this question of derating he will considerably simplify his problems and will clear the ground so that he can arrive at fruitful conclusions. If hon. and right hon. Gentlemen opposite think that this is far too major a change to be effected by a Private Member's Bill, I should like to say that I should be quite satisfied to allow the Government to take over the Bill if they are in favour of repeal. If they feel that it is not opportune to introduce repeal immediately then, if the Bill is given a Second Reading, I am sure that in Committee my hon. Friends would agree to insert a Clause to provide for an appointed day.

We could give the Minister discretion to name the appointed day, which might be next year or even later. We could give him wide powers, although I realise that if he did not exercise them the Bill would come to nothing. However, if the Minister accepts the principle, we can amend the Bill in Committee so that it will coincide with whatever other changes the Minister thinks necessary in connection with his review of local government finance. In the meantime, he will have cleared from his path a major obstacle, and that will be all to the good.

I am sorry that I have taken so much of the time of the House. I appreciate that, to some extent, local government finance is rather a complex problem. I have taken my time to explain the position. I have endeavoured to explain as simply as I can some of the issues involved. I do not think that much will be found wrong with the assumptions and deductions I have made. They are not far short of being reasonably true evaluations.

I hope that the House will take this opportunity to get rid of what is today a monstrous iniquity upon shopkeepers and householders who have to subsidise prosperous industries which can well afford to pay their full share of the rate burden. That proportion is very moderate compared with the total expenditure of local authorities.

12.5 p.m.

Mr. Frederic Harris (Croydon, North-West)

I beg to second the Motion.

First I wish to make the point that industrial derating is definitely no party issue. As a Conservative Member, I was very happy indeed to add my name in support of the Bill and to have the opportunity to second the Motion. The House is indebted to the hon. Member for Acton (Mr. Sparks) for the detailed way in which he has presented his arguments in support of the Bill. One realises that it must have taken a great deal of work to obtain all the information which he has been able to submit for our benefit.

Whatever may be the outcome, the House is also indebted to the hon. Member for the opportunity to discuss this difficult subject, upon which many of us have very strong feelings. I feel very strongly indeed about this matter. I have had those feelings for many years—not only for the eight years during which I have been privileged to be a Member of the House of Commons, but also before that, when I served on the Surrey County Council and the Croydon Borough Council. I just do not agree with industrial derating under present-day conditions.

I have been fortunate to succeed in the Ballot for Private Members' Bills on two occasions, once when the Socialist Government were in power, and once since the Conservative Government have been in power. On each occasion I considered putting forward a Bill similar to this, but in the usual inquiries which one makes on these occasions, I found that the Government of the day felt that the time was inopportune; and as I was most anxious to get a Measure of my own on the Statute Book I, not unnaturally, turned to something which appeared likely to be more successful. On the first occasion I did not succeed, but on the next occasion I was successful.

Just over a year ago I was fortunate enough to have the opportunity to initiate a debate on the Adjournment at the time when the small traders, quite rightly to my mind, and encouraged by me in my own constituency, were agitating on questions of policy in connection with the proposed increased assessments. At that time I agreed not to discuss that subject because the Minister was about to make a statement upon it, as he did subsequently. Many hon. Members will recall that he promised that there would be full reconsideration of the position if it was found that the new assessments placed an unfair and disproportionate burden on the shoulders of the small trader.

I am most happy to be able to join in supporting the hon. Member for Acton today. When I last spoke on the subject of industrial derating I suggested that if the Government of the day would not agree to its complete cancellation they might agree at least to reduce the concession to industry, and that instead of allowing, say, 75 per cent. they might cut it to 50 per cent. I took that view because I thought that any step in the right direction would be helpful.

Whatever might happen today, whether or not it is found that derating can be cancelled or amended, I feel that sooner or later the question will have to be tackled. There is a definite and clear issue, which is whether or not industrial derating is justifiable or fair in modern conditions. It is well known that it is my contention that derating of industrial property is both outdated and outmoded.

The hon. Member for Acton has explained in detail exactly how derating came to be introduced. I maintain that conditions which were applicable in 1929 can no longer be applied today. That is the crux of the whole matter. I understand, too, that derating is a matter about which most local authorities feel very strongly at the present time. The Association of Municipal Corporations and other local authority associations have from time to time made representations to the Government, pressing for a repeal of the derating provisions which came into force in 1930–26 years ago—but so far without success.

Whatever the justification for industrial derating as far back as 1930, I maintain that there is no possible justification under present-day conditions. If the Government are unable to abolish derating, then, in my opinion, they should make up from the Exchequer the resultant deficiencies in revenues of local authorities.

The loss, through derating, to my own town of Croydon is on nothing like the same scale as that to some industrial towns, such as those referred to by the hon. Member for Stoke-on-Trent, Central (Dr. Stross), but it is nevertheless considerable, as I shall indicate in a few minutes. Although some compensation was originally given to local authorities based on 1928–29, most local authorities today are getting very little, if any, actual compensation, owing to the revolutionary changes which have taken place since 1930, including changes in the relationship between central and local Government and various alterations made in the Exchequer grant system.

I have with me a complete history of derating and its effect on local government finance, with particular detailed references to the application of the block grant to which the hon. Member referred, but I am sure that this information is well known to the Minister and Government Department concerned. Therefore, I will spare the House any history of the matter because I do not think that there is any point in elaborating the very detailed information which the hon. Member has already put before the House and which is generally known by all hon. Members at present in the Chamber, the majority of whom have very considerable knowledge of this rather complex subject.

It is, however, important to emphasise the point that up to 1948 the local authorities were compensated by means of block grant for the total losses in 1928–29 through derating. I understand that those losses—slightly different from the figure quoted by the hon. Gentleman—were about £22¼ million in 1929. However, with the rise in the level of local rates and rents of factories and the industrial development which has since taken place, the true loss is very much greater today. It was estimated in 1952 that that figure had risen to about £60 million, and it is, of course, much higher now. It will be considerably more when the new valuation list comes into effect on 1st April, about which we have not yet exact information.

Following the block grant, the 1948 Act introduced the equalisation grant. That was a Socialist Act, the history of which is known to all hon. Members. Unfortunately, this hit my own town of Croydon. Those authorities with rateable value per head of population above the national average—of which Croydon is one, unfortunately from this point of view, but not generally, of course—have now lost any contribution towards their losses through derating which they may have had prior to 1948. Therefore, I would sum up the effect of derating on the finances of local authorities in the following way.

First, the 1928–29 loss from derating was recouped by local authorities in block grant until 1948. Secondly, the increased derating losses over the 1928–29 level have never been recouped by any local authority. Thirdly, since 1948 only those local authorities which receive Exchequer equalisation grant can be said to be still receiving any compensation at all for their 1928–29 derating losses. Fourthly, local authorities, such as Croydon, which receive no equalisation grant, are receiving no compensation for any of their loss through derating.

May I briefly give to the House the effect of industrial derating in Croydon? In accordance with information given to me by the borough treasurer, in 1929 Croydon lost rates, through derating, of £16,562. By the beginning of 1955 that figure had already risen to £170,756 and on the new valuations I understand that it will have risen to £250,000. At an approximate guess, I would say that the cancellation of derating in Croydon would reduce Croydon's rates, on present expenditure, by between 1s. and 1s. 2d. in the £, and by so doing would be fairer to all the ratepayers in Croydon, particularly the hard-hit small traders, with whose cause I feel very strongly in sympathy indeed.

I think that most hon. Members will have received a circular, perhaps many, on this subject over the last twelve or fifteen months from the National Association of Cycle Traders, who passed a resolution the other day which is typically and I think accurately representative of the true position of many traders. The resolution said: This executive, representing cycle retail traders throughout the country, having considered their protests on the revaluation for rating of shop property and being of the opinion that this revaluation unfairly discriminates against a section of the community. most strenuously oppose the principle that a minority should be singled out to bear an increased local taxation, and urges Parlia ment, in the interests of equity and fair play, to amend this Act in such a way that the burden of increase be equitably spread. I think that their case, which is typical of that of other small traders in many towns, is a very fair and proper one. It is almost impossible for an hon. Member, on a platform in his own constituency, to defend industrial derating for a large firm in his town when a small trader down the road is having a hard job to make ends meet and is expecting to have to pay a considerable increase in his rates.

I know that many hon. Members want to speak on this subject. Therefore, I will conclude by expressing the view that there is an overwhelming case for the cancellation of industrial derating. I believe that many individual Members on both sides of the House will fully agree with my view. I am sure that the majority of the House sympathises with this view—I should not be surprised if the Government did—but we never seem able to make any real progress towards this end. No doubt we shall be told that, on the reconstruction and reorganisation of local government finance, this matter may be taken into account. [HON. MEMBERS: "Will be."] Perhaps I expressed myself in the wrong way. I meant that this will be taken into account, but we may not be able to get an assurance from the Government that the de-rating of industry, as such, will be altered from its present 75 per cent. concession—[HON. MEMBERS: "It will be."] I hope that it will; that either there will be a step in the right direction by the complete cancellation of industrial derating or that there will be certain reductions in the concession.

Undoubtedly, under the new valuations the burden of rates rests most unfairly on the small trader, but it rests very unfairly on householders too. They, for the moment, are also living in a "fool's paradise" inasmuch as their valuations are held back to the 1939 figure. If industrial derating continues, the next assessments will put them into a far greater difficulty, and then we shall all be in greater trouble. Taking as an example my own town of Croydon, which I know intimately, one realises that large industrial houses are not actually having to pay anything extra in cash in rates at all, even after the new assessments and the announced rate poundage. Small traders are having to pay, in some cases, two and three times as much. Even members of my own staff in Croydon are having to pay a considerable increase on rates on their own houses. It does not seem to be common sense at all, and it is most unfair.

The proposals which the hon. Member for Acton is making will help in some fair measure to alleviate and readjust the unfair burden which we all know exists. If industrial rating is not abolished now, it can only be a matter of time before some Government will have to face the position; therefore, what we are advocating today is what the Government of tomorrow must inevitably be prepared to do.

12.22 p.m.

Mr. John Hay (Henley)

I beg to move, to leave out from "That" to the end of the Question and to add instead thereof: This House declines to give a Second Reading to a Bill dealing with industrial rating in advance of the Government's review of local authorities' finances. The whole House will wish to congratulate the hon. Member for Acton (Mr. Sparks) upon a very good speech this morning, and upon his pertinacity in pursuing this issue of industrial derating. I remember the hon. Gentleman speaking—not at quite the same length as this morning, but for nearly as long—during the debates which we had on the Valuation for Rating Bill in 1953. It was nearly as good a speech then. I think that the major criticism which any of us would desire to make of the hon. Gentleman today is that he ran very close to having the unique distinction of being the only hon. Member to talk out his own Private Member's Bill.

In presenting his case, I suggest that perhaps the hon. Gentleman rather oversimplified some of the aspects of the problem facing us. It is understandable that he should wish to put his side of this matter. The purpose of the Amendment would be to postpone any legislative action by Parliament until the review of local authorities' structure and finance, on which the Government are at present engaged, has been completed.

Mr. Norman Dodds (Erith and Crayford)

Has the hon. Gentleman any information about when that will be, because it would be useful?

Mr. Hay

I hope that hon. Members will allow me to put the point of view of my hon. Friends and myself.

As my hon. Friend the Member for Croydon, North-West (Mr. F. Harris) said, this is by no means a party issue in the usual sense of the term. There are many hon. Members on this side of the House—I am sure that speeches will be made which will make it clear—who feel as does the hon. Member for Acton. I wish, however, to put the case for some delay in legislation. This is an extremely complicated and very difficult matter; it is not simple. The hon. Member for Acton, when presenting facts and figures this morning, himself confessed that it was extremely hard to get out all the figures that one would want. I shall refer to that aspect again in a moment.

I do not for one moment suggest we should say that this is an issue which must never be faced. I say it is an issue which, sooner or later, will have to be faced, but it is not the sort of issue with which we can deal quickly in a Private Member's Bill.

Mr. Leslie Hale (Oldham, West)

the hon. Gentleman give way?

Mr. Hay

No, I am not prepared to give way—

Mr. Hale

The hon. Gentleman has said that he is not prepared to give way, but this is most important. He is asking the House to defer consideration of a Measure which is of great importance, and we think that we should make some inquiry about how much deferment is asked for. When is this decision to be made? It is relevant that the House should know. Revaluation is proceeding; valuations are proceeding and reconsideration of grants is proceeding. How long is this deferment to be? Shall we get a statement or are we to have the same sort of position as arose over Cyprus?

Mr. Hay

I know that the hon. Member for Oldham, West (Mr. Hale) seldom looks at the Order Paper, but he might look at the terms of the Amendment which I am moving and which, for greater clarity, I will read: That this House declines to give a Second Reading to a Bill dealing with industrial rating in advance of the Government's review of local authorities' finances.

Mr. Arthur Skeffington (Hayes and Harlington)

But how long will that be?

Mr. Hay

I will come to that point—although I am no crystal gazer—when I conclude my remarks. I hope that I shall be able to put the point of view held by myself and my hon. Friends without too much wrecking interruption because—[HON. MEMBERS: "Wrecking?"]—on this particular issue we are all in the presence of something about which many hon. Members on both sides of the House hold the same view. It is really a question of timing, and I wish to put the reasons why I believe that the immediate moment is not the time to do what the Bill asks us to do.

In his review of the history of derating, the hon. Member for Acton did the House a considerable service, but I should like to mention one or two other aspects of the historic background. I do not think that one can face the issue of whether or not derating should be abolished at this moment or even later, without considering fully what is that background. I must mention agricultural derating in passing, although the Bill does not deal with it. That has a long and respectable pedigree. It dates back to the Public Health Act, 1875, whereas industrial de-rating dates back not only to the 1929 Act but to the 1925 Rating and Valuation Act, under which an Order was made giving 100 per cent. exemption for what was known as process plant.

There were a number of reasons historically why the derating provisions of the Local Government Act, 1929, were enacted, and the hon. Member mentioned one, that is to say, the depression then coming on the country. I think it fair to remind the House that it was not the only reason, and that there are one or two others to remember in dealing with this question. It was stated by the Government of the day, and approved by Parliament, that derating under the 1929 Act was intended to be a permanent measure of local government reform. It was no quick first-aid for industry. It followed a review of the same character and the same type as that on which the Government are engaged today—a comprehensive review of local authority functions and finances. Secondly, it was intended to be a process lasting over a long period. As the hon. Member said, the provisions for derating were to be counterbalanced by extra payments to local authorities, partly by way of compensation for loss of their rateable value and partly for their needs: that was the block grant to which the hon. Gentleman referred.

There was a third object, which I think is worth remembering, namely, that the Government of the day felt it necessary to give long-term assistance to producers of all kinds, to industrial producers and to agricultural producers. The effect of rates upon industry was summed up by my right hon. Friend the Member for Woodford (Sir W. Churchill), whose absence from this debate today I am sure we regret, in the following passage in his Budget speech. I think it is worth noting My right hon. Friend said: The burden of rates on industry is cumulative. Coal (rated) is converted into coke (rated), and used with iron ore (rated) and limestone (rated) to make pig iron (rated), and this, with more coal (rated) and other rated products, is used to make steel (rated) again.…Upon this darkening scene another set of evils arrive. All these commodities that I have mentioned need to be transported, usually by rail or water, and at each stage more rate burden is added.…Thus, at every stage in the progress of basic products, till they finally reach the ship for export, or reach the home consumer, the rates add to the price irregularly, unequally and injuriously."—[OFFICIAL REPORT, 24th April, 1928; Vol. 216, c. 846–7.] My right hon. Friend went on to say—and I will not quote him at greater length—that this was a situation with which the Government intended to deal permanently.

Mr. C. Pannell

When the hon. Gentleman has finished his quotation about the interesting peregrination of pig iron and that sort of thing, perhaps he will trace the effect of derating on breweries.

Mr. Hay

I think I will leave that to, my right hon. Friend the Member for Woodford, in another equally pregnant passage when one day he returns to this subject.

Mr. Hale

Will the hon. Gentleman give way for a moment?

Mr. Hay

No, I have given way many times already.

Mr. Hale

This is a quite serious point that I should like to put to the hon. Gentleman. Surely the effect on the housewife is also cumulative. When I pay my £100 rates, which I at present pay on my home in a year, I am also using coal which is rated, coke which is rated, gas which is rated, electricity which is rated, and I am eating food which is rated.

Mr. Hay

I quite agree, but the point that my right hon. Friend was making in his Budget speech in 1928 was, of course, that this big operation to create, as he called it, "a mass of manoeuvre" of some £20 million to £30 million a year, was intended as a relief to producers. The hon. Gentleman was quite right, but I am merely putting forward the reason why this major reform, which it is now sought to abolish, was first introduced.

The hon. Member for Acton did not mention, of course, many of the arguments often used against the repeal of industrial derating. Let me say at once that these are views strongly held in many quarters. I, personally, do not hold that they are conclusive, nor do I entirely agree with them, but I think that if the House is to approach the question whether derating should be abolished here and now or not, it must consider, not only the arguments against derating, but also those in favour of its retention. Therefore, I will act for a moment as advocate to put forward the points of view of those who think that derating should stay.

First, there is the question of the effect on prices. The hon. Member for Acton rather minimised that aspect, and said that some of his hon. Friends, if they caught your eye, Mr. Speaker, would develop it at length. But it must be borne in mind that if we are going to do something which will by ever so small an amount increase the productive costs of industry, we must realise what the effect on prices will be, and that effect must, if possible, be gauged.

We do not know, and cannot know, at the moment what the effect of rerating upon the costs of industry will be, and this is a moment when not only the cost of living in this country is high, when every effort is being made to restrain it and to bring it down, but also when we are faced in the export field with increasing competition in regard to prices. Therefore, I suggest that that point should be borne in mind.

Secondly, there is the effect on the Exchequer equalisation grants and on the education main grant. The hon. Member for Acton referred to this indirectly, but I do not think that he was really able to put before the House—and I do not blame him for that—the final results of the abolition of derating upon the Exchequer equalisation grant of all the local authorities in the country, for the reason that it is only now that we have got anywhere near the provision of the figures upon which such an estimation can be made.

The hon. Gentleman was in difficulties, and we should all be in difficulties if we tried to sit down here and now and decide what would be the immediate effect of re-rating upon the Exchequer equalisation grant of all the local authorities. We know, however, that under the revaluation which has been proceeding, many local authorities have found that they have lost their Exchequer equalisation grant. Birmingham is an example: it says that it has lost £1½ million. That is a point which would have to be noted and considered extremely carefully. Before we rush into the abolition of de-rating, we should weigh the result in terms of the finance available to local authorities through the Exchequer equalisation grant.

Dr. Horace King (Southampton, Itchen)

The hon. Gentleman says truly that nobody can calculate accurately the exact effect on the Exchequer equalisation grant until all the figures are worked out. But we have a pattern worked out for every local authority in the country, for 1951–52, of what the net result to every local authority would be, including the variation in the Exchequer equalisation grant. That shows that every local authority would stand to gain from this step. All that is difficult at the moment is to work out how much each authority would gain this year, but most local authorities know that approximately.

Mr. Hay

That may well be so, but the problem which I wish to put is that until this revaluation has been fully completed and the results fully measured, we shall run into the sort of problem which arose when the hon. Gentleman was interrupted by his hon. Friend the Member for Stoke-on-Trent, Central (Dr. Stross). People will not know, until all the results are in, exactly what the final effect is to be. That is the reason, not for doing nothing, but only for doing nothing at this moment. That is my point.

Mr. Sparks


Mr. Hay

I am sorry, but I cannot give way to the hon. Gentleman.

Mr. Speaker

This hon. Member has been very much interrupted. The House is sitting as the House of Commons—we are not in Committee—and we should proceed with the debate by successive speeches.

Mr. Hay

I wish to say something else about the equalisation grant. That grant comes from the Treasury and is fed by taxation. The taxation is already borne to a heavy extent by industry. Industry may not pay a great deal in rates, but it pays very heavily in taxation, and by a roundabout route the local authorities get a pretty large whack of the Exchequer equalisation grant, which is fed largely from industry itself. That point, again, has to be borne in mind.

Another matter which has not been discussed today, but which should be because many hon. Members are concerned with it, is what the effect would be upon the Development Areas if re-rating were introduced. We all know—and the hon. Member for Acton mentioned this—that between the wars there were a number of Special Areas which are now called Development Areas. The Board of Trade pursues a Development Area policy of steering trades and industries into these particularly difficult places. One of the things one inevitably finds in a Development Area is that the rate poundage is high.

It follows, therefore, that there is a positive advantage to an industry to go to such an area if it has the benefit of derating. If the benefit of derating is removed, then the high rate poundage may act as a disincentive and operate against the Government's Development Area policy. That, again, is a factor to be taken into account. I am not saying that any of these arguments are completely conclusive, but we should weigh all these things and consider them carefully.

Now I wish to say a word or two about some more domestic matters. Up to the present these arguments against derating have all been based on national matters. The hon. Gentleman said that at the moment industry was very prosperous, was making large profits and could well stand the extra burden of re-rating. My own conclusion and feeling about this is that the ability of industry to pay at any given moment should not be conclusive in this particular set of circumstances. I believe that if we are to have a proper rating system for industry, it should be developed more along the lines of the "profits basis." with which hon. Members with experience in rating matters are familiar, and which was until very recently used in connection with all the great nationalised industries as a means of assessing their ability to pay.

I think the basis upon which rates should be levied on industry should be the direct value of the services which it receives and are rendered by the local authority. Education and housing have been mentioned by the hon. Member for Acton. I do not think that one can claim that either of these two services is conclusive. Of course, any individual industry will benefit if its workpeople are well educated and properly trained in technical schools, but so does the whole country. Similarly, houses are provided, perhaps by the local authority, which itself receives a certain amount of rate revenue from the rating of those houses, which houses—and the families occupying them—would not be there if it were not for industry. There, again, is a reason why we should pause before rushing forward with a Bill of this kind.

There is one other matter which I should mention in passing, concerning the effect upon agriculture. The Bill does not deal with agriculture, but I do not think that, if we passed a Bill of this sort, we should be able to allow agriculture exemption indefinitely. The party opposite, if I may say so with respect, seems to me to be in two minds at the moment whether or not agriculture should be rerated. I wish it would make up its mind, because those of us who represent rural constituencies would like to know. Whether they can do that or not, whether we have to introduce a measure of re-rating or whether it falls to a subsequent Government to do it, I do not think we could possibly expect industry to stand still over the re-imposition of full rating without claiming with some force that agriculture should also be re-rated, and the consequence of that to our countryside and our farms would be very serious.

Mr. A. Woodburn (Clackmannan and East Stirlingshire)

Is the hon. Gentleman aware that the Government have introduced a Bill for Scotland to derate completely agricultural land and completely rate agricultural houses—the houses in which the farmers live? Perhaps if the hon. Gentleman consults his hon. Friends, he will find out something about what their policy is.

Mr. Hay

I think the right hon. Member for East Stirlingshire (Mr. Woodburn), with his long experience of Scottish affairs, would be the first person to complain if I tried to intervene in matters north of the Border. Although my ancestors came from Fifeshire, I think it is always wise to leave the Scots to discuss their own affairs.

Those are some of the main arguments in favour of the retention of derating. I do not regard all of them—together or individually—as conclusive, and my own mind is very much open upon this point. Of one thing I am absolutely certain, and it is that all the arguments—pro and con—must be examined with care before legislation is passed by the House. They have to be measured against the background, particularly of the local authority structure, because still going on and still unresolved is this great argument in the local authority field—whether or not we should have a multi-purpose authority or the two-tier type of authority, or some other form of local government. Until that issue has been resolved, I think it is hopeless to try to tackle the question of derating.

The hon. Member for Acton suggested that derating stood in the Minister's path as some kind of obstacle which this Bill could remove, thus making matters much easier for him. Personally, I do not agree. This matter of derating and local authority finance is a very tangled skein. It is a sort of Gordian knot, and I do not think we can cut that sort of Gordian knot by a Private Member's Bill, or that, in view of the review announced by the Government, such a Bill should he allowed to proceed without prior action by Parliament.

Here, I would make reference to something which was said by my hon. Friend the Member for Croydon, North-West, who reminded the House of what the Government have said about the matter, because they have made it perfectly clear that derating, as a subject, is not ruled out by this review of local authority finance. Indeed, the latest occasion was only yesterday, and since HANSARD has not been in the hands of hon. Members for very long, perhaps I may, with the permission of the House, quote the Written Answer which the Minister gave yesterday to my hon. Friend the Member for Crosby (Mr. Page).

What my right hon. Friend said, in answer to a Question whether the revaluation figures had now been published, was this: Furthermore, as has been announced, the Government are at present reviewing the problem of local authority finance in all its aspects. This is the most comprehensive review of its kind since 1929, and will include an examination of the system of derating. This will involve much detailed study and important decisions of policy; and, when the appropriate stage is reached, it will entail consultation with the representatives of the local authorities. Until this whole review is complete, it will not be possible to arrive at a final appreciation of the future incidence of the rate burden."—[OFFICIAL REPORT, 15th March, 1956; Vol. 550, c. 72.] There, I think, is the answer to the Bill. This matter has to be discussed with the local authority associations when the Government themselves have come to a conclusion on what ought to be done. I suggest that it would be complicating the issue quite unnecessarily to give a Second Reading to the Bill at the moment.

An entirely new factor has been injected into the situation since the hon. Member for Acton won his place in the Ballot and set this Bill down for Second Reading today—the publication only yesterday afternoon when, if I may say so without giving offence, comparatively few hon. Members were in the House, of a White Paper giving, not the final, but the preliminary results of the revaluation—because even today we do not know what the final results of the revaluation are, and we shall have to wait some time to get them. That indicates that, until we are in possession of all the facts and figures, it would be turning this House and Parliament into a mockery to proceed with a Bill of this character. I think that all these matters have to be considered and carefully weighed.

I would urge the hon. Member for Acton, in all seriousness, that, when we have had—as we shall have—an interesting and useful debate during the rest of the day upon this important matter, from which my hon. Friend the Parliamentary Secretary and his right hon. Friend can pick up, I have no doubt, a great deal of useful advice and help, the hon. Gentleman should withdraw the Bill. If he does not do so, I am afraid that my hon. Friends and myself will be obliged to press the Amendment to a Division, but I hope that wiser counsels will prevail.

12.48 p.m.

Mr. Graeme Finlay (Epping)

I beg to second the Amendment.

As Edmund Burke said, To tax and to please, no more to love and to be wise, is not given to men. I dare say that that statement applies equally to local taxation as it does to anything in the nature of general taxation, and I think that this is a subject which hon. Gentlemen opposite would do well to approach with caution, I should almost say gingerly. This subject has a very long history indeed, starting with the derating of ecclesiastical and charitable institutions away back in the 1830s.

I am not the only one who has expressed this view, because there is higher authority in the ranks of hon. and right hon. Gentlemen opposite about this. Speaking of derating, the right hon. Member for Ebbw Vale (Mr. Bevan) said, in his picturesque way, in 1949: It is too difficult to put the eggs back into the shells now."—[OFFICIAL REPORT, 2nd November, 1949; Vol. 469, c. 509.] In 1953, the right hon. Member for Bishop Auckland (Mr. Dalton), in the course of a debate, said that no fewer than 159 of his colleagues had subscribed their names to a Motion on the Order Paper in favour of what the hon. Member for Acton (Mr. Sparks) is now supporting, and were like rabbits caught in a trap in the moonlight. He went on to give a number of reasons—some of which have been touched upon by my hon. Friend— why we should approach this subject with caution.

First, he said that if we re-rated we might allow unemployment to arise in Development Areas. This was spoken of by my hon. Friend. Secondly, he said that some local authorities would lose more on the swings in the shape of lost Exchequer equalisation grant than they gained on the roundabouts of re-rating. Thirdly, he said—and here he was dealing with agriculture, which is outside the scope of our discussions today, but in respect of which hon. Members opposite are not clear in their minds—that if we re-rated agriculture the first thing that would happen would be that agricultural interests would come forward and ask for an increase in the guaranteed price at the next Annual Review. The effect would be that there would be a commensurate rise in the cost of living. That shows that there have been some second thoughts among the friends of hon. Members who are now coming forward in support of the Bill today.

I always like to look at these matters in the light of broader objectives. Re-rating is only one manner of many by which this problem can be tackled. What we must really consider is whether it is the best way of infusing health into the organs of local government today. If it is not, we should discard it. Although I have not reached a final opinion I believe that, prima facie, it is the simplest and probably the best way of dealing with the problem. But I am not absolutely sure, and I cannot be absolutely sure because I have not yet had access to the fullest information on the matter.

If we are to change the structure of local government we ought to make a really good job of it and not tackle just one facet of the problem. I do not believe that we can achieve anything satisfactory unless we have access to the whole picture. It is against that background that I consider this comparatively narrow Bill. What is the kind of local government that we desire? Do we wish it to be dominated from the centre, or do we think that we should have a local government organisation in which the words "local" and "government" are underlined and given some power? I favour the latter view.

The reality of the situation is that local government electors do not care; they are apathetic. In many cases, too, representatives of local government are frustrated; they have the illusion of power but not its reality, because they are not allowed sufficient discretion in financial matters. That means that there is a shortage of talented people coming forward to do the job of governing local areas. There is too much central control in financial matters, and that leads to an unhealthy degree of reliance upon the apron strings of Whitehall. That is my opinion, anyway.

Only the other day a county councillor told me that he had gone to a meeting of a local government committee dealing with the local fire brigade, and that after several hours' deliberation the only thing that they had been able to decide decisively was the type and style of the jumper which should be worn by the men in that fire brigade. That is the kind of thing which leads to frustration on the part of intelligent local government representatives, and does not really serve national purposes. We should approach this general problem with a broad philosophy of devolution, because. in the long run, that will be the best way to achieve a healthy local government structure. We must recast the financial arrangements upon that footing.

Now I turn to the history of the matter. which was dealt with at some length by the hon. Member for Acton. I recollect that in 1929 Sir Kingsley Wood thought that the great local government reorganisation which took place in that year was to be a permanent settlement, and he devised the 1929 block grant to replace all previous forms of compensation for derating. The important thing about the block grant—in which it differed from the Exchequer equalisation grant—was that local authorities could use it according to their discretion. There are far too many strings attached to the equalisation grant today, and that has been responsible for continued frustration on the part of local government representatives.

The next great landmark in local government financial reorganisation took place in 1948, when the block grant was replaced by the Exchequer equalisation grant. But there were some other most significant changes in the structure of the administration, which were not touched upon by the hon. Member for Acton when he dealt with his very involved set of figures. First, there was a change in social services. The National Health Service had been set up by the Act of 1946. All the Poor Law responsibilities which had been cast upon local authorities in 1929 were put upon the National Assistance Board, so, in 1948, local authorities were relieved of about £63 million worth of financial responsibility. That is a significant factor.

When we take into account the way in which the Exchequer equalisation grant was then issued to local authorities, we find that the amount which went to local authorities in 1948 was more than that which went to them before by way of block grant. The net gain was about £4 million per annum. The hon. Member for Acton touched upon the question of compensation. If, in 1948, as a result of the changes which then took place, £4 million extra went to local authorities, it is true to say that, in substance, compensation for derating was continuing in 1948, and in the years which followed. I concede that, at the same time, the grant system may have resulted in some local authorities ceasing to receive grant notwithstanding the fact that they suffered loss due to derating—but that occurred only in special cases.

We must consider whether industrial re-rating will serve the best purposes of the nation, and whether it will provide better local government. The hon. Member for Acton dealt at some length with its effects upon industry. I think it would be fair to represent his view as being that industry is paying too little; its gross profits have greatly incresed; it is deriving more assistance from local government, and it really is not paying its way. That seems to summarise the hon. Member's angle upon the matter. My hon. Friend the Member for Henley (Mr. Hay), however, has drawn to the attention of the House the speech made by my right hon. Friend the Member for Woodford (Sir W. Churchill) in 1928, upon the subject of rates and their effect of increasing the prices of a commodity at all stages of production, in relation to the steelmaking process—going right through from coal to iron ore, coke, limestone, pig iron, and, eventually, to steel.

That is a consideration which we just cannot cast aside in a cavalier manner by saying that only a few pence or shillings will be added to the price of the article. It is a matter which must give us serious thought in the present situation. It is true that industry is comparatively thriving today, as compared with 1929. There is higher production, higher employment, and higher wages and profits. But prices were stable in 1929, although unemployment was high. Hardly any hon. Member has touched upon the fact that this year, 1956, we have a balance of payments crisis, and we must be very careful before saddling our export industries with an extra burden. We cannot embark lightly upon such a course as this, if an extra penny or shilling will prevent a commodity from being able to compete in world export markets.

What benefit does industry derive from rates? It is quite true, as the hon. Member for Acton said, that it may derive considerable benefit from police protection of its property, and to some extent it receives benefit from sanitary arrangements, under the Public Health Acts. No doubt it takes its share of those services. No doubt industry takes more than its share of the use of the roads, but there is provision in the law for the local authority to turn to the industry concerned and get back something from it in return for the damage it does.

The hon. Member for Acton referred to things like sanitation and said that industry in many cases took its share in that direction and did not pay for it, but that can be covered, and is in fact covered, by contracts made between the local authorities and the industries concerned.

Mr. Sparks

I really meant sewage effluent which passes through the sewers of the local authority and not the collection of refuse.

Mr. Finlay

I was saying that contracts can be made, and, in fact, are made, between the local authority and the industries concerned to recover, in respect of services of that kind. [HON. MEMBERS: "No."] We are at issue, then.

How far does industry derive benefit from the education services which local authorities provide? Certainly not a direct benefit. Industry does not get much out of the public library and the parks, and I think they cannot get much out of the cemeteries, either. It is, therefore, not true to say that they derive complete benefit from the whole range of local government services. In fact, when we think about it, there are certain aspects of our system of rating industrial hereditaments which are not satisfactory.

Valuations are based upon size, but there is no definite relationship between the profitability of a concern and the dimensions within which it is operating. There might be a small office which is really a diamond broker's, carrying on a very profitable business. There might be a fashionable milliner's shop, small in dimensions but extremely profitable. Let us contrast them with the larger premises of garages and warehouses, which may be undoubtedly a good deal less profitable. All is not necessarily well with the basis on which we approach industrial re-rating. A dwelling is valued according to its 1939 rental because that probably bears some relationship to the earning capacity of the person living in it. Otherwise, he would not have gone to live in it.

I come to the new valuations and their effect upon the Exchequer equalisation grant. At the moment, eight county boroughs and two county councils have ceased to qualify for Exchequer equalisation grant because the new valuations have brought them above the national average while, conversely, six county councils are to receive it for the first time. We know what has happened to Birmingham and Liverpool; they have changed places, because of the valuations which are now corning in.

It does not follow in the least that re-rating will result in increased finances for local authorities, as we gathered earlier in the interchanges between the hon. Member for Leeds, West (Mr. C. Pannell) and the hon. Member for Stoke-on-Trent. Central (Dr. Stross). It remains to be seen whether local authorities will get increased finance from re-rating, and until we have this information we cannot make up our minds completely on that matter.

I have said enough about this subject, but I would like to add a word or two of sympathy with the traders. They are in an isolated position today. Agriculture is wholly derated, and industry is 75 per cent. Berated. Dwellings are only now coming up to the 1939 value. Nationalised industries and public utilities are on a special basis. Shop and office premises are on an island, and the tide has gone out, as far as they are concerned. They are the only sections of our national property facing the realities of rating liability, although they and their occupiers do a useful service in looking after the requirements of the individual consumer.

The problems of shopkeepers may be alleviated under the proposals of the Bill. Recent figures about the distribution of rateable values among the main classes of hereditament show that in relation to shop properties, which stood at 10.74 per cent of the total in the old lists, have gone up, in the new lists, to 14.29 per cent., which is a percentage increase of 33.1 per cent. Perhaps that is not so spectacular as was at one time feared. Nevertheless, the small man may find the additional rate burdens he has to bear unsupportable although his more prosperous confrere may be able to write off these extra liabilities against his taxes to the extent of 45 per cent, to 65 per cent.

I would tender my respectful congratulations to the hon. Member for Acton. His industry in preparing his speech was monumental. He has given us a chance of ventilating a most important aspect, albeit only one aspect, of the problems of local government finance and structure. I would draw the attention of the House to a passage in which the right hon. Member for Bishop Auckland referred to this matter, because it contains a great amount of sense and some humour. He said: Quite certainly, it could be assumed that the local authorities would lose from the Treasury almost as much as, and perhaps more than, they would get in additional resources through re-rating the derated hereditaments. That is my plain reading of a practical political issue. Therefore, I move to this point. Let us keep an open mind on this question of derating and re-rating and not plunge either for or against it, until we see the complete picture of what might be proposed in this connection, or alternatively, if it is really desired to argue strongly in favour of re-rating the derated, let it be made quite clear that those who advocate that—at any rate, those on this side of the House—are advocating it on the basis that the grants from the Treasury to the local authorities are not reduced. Otherwise, we may be caught in a trap, like the rabbit that did not see quite where it was going in the political moonlight."—[OFFICIAL REPORT, 21st May, 1953; Vol. 515, c. 2370.] There are not many rabbits around today. I urge hon. Gentlemen not to cast themselves among them today.

1.8 p.m.

Dr. Horace King (Southampton, lichen)

I, too, join in the congratulation which has been offered to my hon. Friend the Member for Acton (Mr. Sparks) upon choosing this vital subject for his Bill and for the extremely lucid way in which he has presented it to the House. If I may say so, the two hon. Gentlemen on the Government benches, the hon. Member for Henley (Mr. Hay) and the hon. Member for Epping (Mr. Finlay), have also ably moved and seconded the Amendment. I hope to deal with a number of the points that they have presented.

I would say, in passing, to the hon. Member for Henley that if we are to wait to solve the problem of derating until we solve all the complex questions connected with local government finance and local government structure, we shall wait a very long time indeed. The proposals of the Bill can be carried out very simply. The assessments are there and it is as easy to impose a charge of 100 per cent. on the assessments now as it was for the Government of the day in 1929 to reduce the payment on those assessments to one quarter.

I listened with interest to the hon. Member for Epping. He was obviously troubled in mind and was three-quarters of the way over to the case which we are putting for the Bill. If he is worried about the local authorities' over-increasing dependence on the central authority, may I remind him that one of the powerful arguments in favour of the Bill is that it provides local authorities with a new and local source of income and meets some of the steadily increasing rate burden without increasing dependence on the central authority? This may allay much of the anxiety revealed in his speech.

I would here deal with what, I think, the hon. Gentleman thought was the trouble between my hon. Friend the Member for Stoke-on-Trent, Central (Dr. Stross) and my hon. Friend the Member for Acton (Mr. Sparks). All that my hon. Friend who intervened was concerned about was the mathematical detailed incidence of the Bill. As we were able to point out to him privately during the debate, taking the figures for the year 1951–52, it is true that Stoke-on-Trent would have lost some £87,000 of its Exchequer equalisation grant, but it would have gained in rateable value about £300,000 from industrial hereditaments; and it was estimated by the Association of County Treasurers that Stoke-on-Trent would have benefited by the provisions of the Bill, if they had been applied in the year 1951–52, by 2s. 1d. rate relief.

Dr. Stress

To get the facts right and up to date, may I add that under the new valuation, of course, we should gain £900,000 a year as a result of derating, which is about the same as the equalisation grant we have been enjoying in the past?

Dr. King

So there is no real disagreement between Stoke-on-Trent and Acton; and I understand that hon. Members and the local authority of Stoke-on-Trent are wholeheartedly in support of the Bill.

It was late in 1928 and early in 1929 when the right hon. Gentleman the Member for Woodford (Sir W. Churchill) was in one of his most colourful but least fruitful—indeed, one of his most disastrous—periods of office, when he was Chancellor of the Exchequer, that the scheme of industrial derating was fastened on the country. It is often defended—indeed, it was for a time after the war by some of my right hon. Friends, one of whom has been quoted today—as a useful device to help industry to keep down prices. Some people looking back now on the past defend the introduction of industrial derating in 1929 as a useful shot in the arm for British industry, which was in a parlous position at the time.

I would remind the House that even when it was introduced in the critical days of 1929 the Labour Party was opposed to it. Moreover, the Labour Party has now moved solidly back to the position that it took in 1929, and in the process, I think, it has carried my right hon. Friend the Member for Ebbw Vale (Mr. Bevan) and my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) with it. It was Sidney Webb, to whom Britain owes socially a greater debt than Britain has ever yet realised, who called it "a free gift" without conditions to industrialists, a "subsidy" to industrialists, and said: The subsidy will be payable in equal sums for premises of the same rateable value within the same rating area whatever the amount of commodities produced, whatever their aggregate value, whatever the efficiency of the establishment, and whatever the number of persons now or hereafter employed…On the other hand, the amount of the subsidy will vary, for establishments of the same efficiency, in one and the same industry, employing equal numbers of workers, occupying premises assessed at equal sums, and producing the same value of product and identical profits, according as they happen to be situated in different rating areas…this gift is going to bring rain from the Chancellor of the Exchequer's heaven to fall alike on the just and the unjust…"—[OFFICIAL REPORT, 28th November, 1928; Vol. 223, c. 445.] I believe that that case still stands, as it has stood during the thirty years this privilege to industry has lasted. Industry, as distinct from commerce, has for thirty years been spared three-quarters of what I regard as its legitimate rate expenditure. The annual amount that industry escaped at the beginning of the period was some £20 million. By 1951 to 1952 it was over £30 million. With the rapid upsurge of rate expenditure it must be now considerably nearer £40 million—possibly more than that.

This rate relief is in discriminatory. That, indeed, was the heart of Sidney Webb's charge against it. There is no question of its going to the industries which are most needed in solving the balance of payments problem. The brewers, for example, have always done very well out of this concession. In the first year, they got £400,000 in rate relief, and that sum must have steadily increased until now it must be nearly £1 million a year in rate relief. So that, in all, the brewers have recouped themselves to the extent of between £10 million and £15 million out of industrial derating. Turning up the Official Report of the debate, I was interested to find that my predecessor here in the representation of Southampton, the late Lord Apsley, welcomed this gift of £400,000 to the brewers, despite the burden it placed on the local authority.

Pulling industry out of the source of local rate income was such a savage blow to our industrial towns that if it had not been for the Exchequer equalisation grants introduced by my right hon. Friend the Member for Ebbw Vale the position of the industrial areas would have been absolutely untenable today, but the Exchequer equalisation grant, while it has achieved a tremendous amount in bringing relief to distressed local authorities, has never done more than rough justice. It is a crude measure. Its formula applied one year gave Birmingham nearly £1¼ million and Liverpool nothing. Applied this year under the new assessments it takes away that £1¼ million from Birmingham but gives Liverpool approximately £1¼ million.

Surely that is a chance distribution of benefit. Incidentally, the same Exchequer equalisation grant has since the war consistently distributed considerable largesse to the Hampshire County Council, of which I am a member, and yet has made no contribution at all to the blitzed cities of Hampshire, Portsmouth and Southampton. But without the advent of the Exchequer equalisation grant the financial position of the industrial areas would have been grave beyond description, particularly those with tremendous concentrations of industry.

If it is argued that industrial derating was necessary and right when industry faced a slump, I would say that those conditions have long since gone, and that now industry—and, in view of the references to it in today's debate, I would say, to some extent agriculture also—has no need of this protective device, a device which year by year is growing more burdensome to those parts of the community, the domestic consumers on the one hand and the business and commercial group on the other, who bear the rate burden which ought to be carried by industry.

Support for re-rating has grown steadily since the war. I think the most remarkable fact about this controversy is that the County Councils' Association is unanimously in support of the Bill. Nobody would call the County Councils' Association a Labour body. County councils are, in most parts of the country, the last strongholds of Toryism. Despite that fact the County Councils' Association from time to time shows a breadth of vision, a national appreciation of local government problems and a sense of fairness that do credit to the best Conservatives in solidly Conservative county councils.

On 28th July, 1954, the Executive Committee of the County Councils' Association considered a report from the Society of County Treasurers, a report which, two years before, it had asked the Society to prepare. The Association passed a resolution in favour of the abolition of derating for industry, in favour of the abolition of derating for freight, and in favour of the re-rating of agriculture to the extent of 25 per cent. That is the view of the County Councils' Association and since then it has urged the Government to bring in legislation to that effect.

I should like to give the House a few simple facts. The rate burden in 1951–52 was divided as follows, and I give only the parts which concern the present debate: industry, £11 million or 3.5 per cent., commerce, £65 million or 20 per cent., domestic, £192 million or 59.4 per cent. Under the new assessment the incidence of the burden has shifted, and shifted grievously, to the detriment of commerce.

I cannot give the national figure, but I am a member of the Finance Committee of the Hampshire County Council and recently we have been looking at our annual estimates. In Hampshire—and it is by no means a commercial authority, it is an agricultural, rural authority—the rate burden on commerce and business has been moved by the new assessment from 10 per cent. to 18 per cent. of the load.

If that is at all true nationally, it suggests that the share which commerce and business, shopkeepers and offices will carry of the rate burden nationally is nearly doubling under the new assessments. Even if industrial assessments have gone up pro rata with commercial and business assessments—and I doubt that—the share of the rate burden borne by industry can only have risen from 3.5 per cent. to probably 5 per cent. I should imagine that it has not risen to more than that. The percentage which industry carries of the rate burden is a figure between 3½ per cent. and 5 per cent., whereas the burden borne by commerce, business and shopkeepers and the like is much nearer 30 per cent. today.

It is no wonder that shopkeepers, business men and commercial men in Southampton, where commerce is half the life-blood, as industry is the other half, are really feeling not only the indignation which everybody feels at an increase in assessment or rates, but a sense of injustice, in that they are carrying more of the burden of the rates than they ought to be carrying.

In 1938–39, the rate burden carried by industry was about £5 million and profits at that time were £510 million. Indeed, one of the weaknesses of industrial derating is that whatever rates industry pays have no relation to profits. In 1951–52 industries paid rates of £10½ million. Their rates had gone up by 110 per cent., but profits had risen from £510 million to nearly £2,000 million. The actual figure was £1,992,000, a rise of 291 per cent.

Therefore, whereas their rate burden had risen by just over 100 per cent., their profits, even in 1951–52, had risen by 300 per cent. Since then—and the facts are so patent that I cannot be charged with making a party point—the increase in profits since 1951–52 has been astronomical, but the burden of rates on industry, affected by 75 per cent. exemption and unrelated to profits, has risen only slightly.

I think, and I believe that those on the other side of the House who support the Bill also think, that industrial profits can and ought to bear their share of the rates. If we had abolished derating for 1951–52, the proportions would have been this way. Instead of the figures I gave, industry would have carried £41 million, or 12 per cent. of the rate burden, commerce £60 million or 18 per cent., domestic £176 million or 52½ per cent. of the rate burden. Any fair-minded man must agree that is a much more equitable distribution of the rate burden, with industry and commerce bearing something like an equal share. He must also agree that the second pattern is much more equitable as between industry, commerce and the domestic householder than is the first one.

It has been rightly said today that re-rating would bring complications and that, with an increased source of rate revenue, local authorities would lose some of the grants in which the product of a 1d. rate plays a part. I digress for a moment to say that there was something in what my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) said when he suggested that we ought to secure at the same time as the abolition of derating some stepping up of grants, but that is something which we might argue separately.

In 1951–52, the Exchequer equalisation grant, if industrial derating had been abolished, would have dropped by about £7 million, but that would not have hurt local authorities at all as they would all have been more than compensated by their rate revenue from re-rated industrial hereditaments. It would have meant that some industrial areas would have lost their Exchequer equalisation grant or part of it. It would have meant that some authorities who receive no grant now would have got some. But I believe that on the whole the redistribution of the benefits of the Exchequer equalisation grant, whatever changes were made, would have been a little nearer to equity as between local authorities, because the main benefit of industrial derating obviously goes to those areas whose local rate poverty is the direct result of the process of industrial derating.

It is obvious that the education grant would be down, under the Ministry of Education 1s. 7d. formula. It would have been down in 1951–52 by about £5 million, but obviously local authorities can face the loss of that £5 million with equanimity, for they are to be recouped, as has been shown in this debate, to the extent of six times that amount, by £30 million. Moreover, there is no reason why the grant formula of the education grant should remain sacrosanct and should not be varied.

But the State would not gain the £12 million which it would knock off the local authorities in the two main grants, the Exchequer equalisation grant and education grant, because industry could offset its increased rates against Income Tax. Again, in the year to which the Society of County Treasurers' report referred, 1951–52, while industry would have paid about £40 million more in rates, about £15 million would have been offset for Income Tax, and the Treasury would have been poorer by that amount.

Roughly speaking, the gain to the Treasury in its reduction of grants to local authority is cancelled by the loss to the Treasury of Income Tax from industry. What would remain, again giving figures for 1951–52, would be a sheer extra rate income to local authorities of about £25 million. That would have been the price which industry would have had to pay for the abolition of de-rating.

I suggest to the hon. Member for Epping (Mr. Finlay) that here is a way of providing local authorities with something which they desperately need, new local income, at a time when the fear of everybody who loves local government, who cherishes local government, is that the more we get from the central authority the more local government loses its own local quality and independence. I believe that what we are suggesting is good not only for local government, but that it is more equitable and just than the system which obtains at present.

Let us now turn to the main burden of the case presented by the hon. Gentleman the Member for Henley, who asked: what about the new burden on industry, will it send prices sky high? At least on these benches we believe not. Often on the benches opposite there is a feeling that profits are sacrosanct, that any new charge on an industry must automatically be passed to the consumer. I want to show the House that by dipping into some of the profits being made we could carry the burden without passing it to the consumer.

This suggestion is not purely in the air. The hon. Member for Henley said we ought to have some facts. I understand that a survey was undertaken by Manchester University in 1927. Among the questions discussed was the percentage of the cost of an article due to the rates. The survey worked out how much of the selling price of an article was due to the rates which the industry had to pay. It was found that before derating the burden of rates on the price of an article ranged from .17 per cent. to 1.36 per cent.; in other words, for an article priced at £100 the average part due to rates was 14s., and 'after derating the similar percentages ranged from .2 per cent. to .93 per cent., or an average of just under .5 per cent. So the part of the price of the £100 article which was due to the difference between full rating and derating worked out at 4s.

The survey also showed that while that was the average position, in industries which were modernising themselves—and the process was just beginning and has been very much accentuated since the war with ever increasing production—the effect on the price of the amount paid by the industry in rates became smaller and smaller.

Again I quote from the survey, in respect of a £200 car in 1927. It may arouse feelings of nostalgia in the minds of everyone here to recall that there was a time when a motor car cost £200. That car would have cost only 6s. 7d. more if it had carried the full burden of rates and this tiny amount in post-war conditions of inflation and high profits becomes so infinitesimal that the report of the Association of County Treasurers for 1954 suggests, and we declare, that industry ought to be able to carry it without passing it on to the consumer.

I quote from the report of the Association of County Treasurers: Today, with inflated prices and increased production, the relationship between rates and prices must be even less significant. Another set of figures shows that all local authorities would gain from re-rating. This is the one occasion in which Municipal Corporations and District Councils and County Councils can see eye to eye. In 1951 to 1952, nineteen of them would have gained from 11d. to 1s. in their rate, fifty would have gained from Is. 1d. to 2s. in their rate, seventy-four would have gained from 2s. 1d. to 3s. in their rate, and two of them would have gained the equivalent of between 3s. 1d. and 4s. in their rate.

As the hon. Member for Henley rightly pointed out, against this we would have to offset the loss from central Government grants. That loss would be heaviest for those at present gaining most relief, so it would iron out the pattern I have given. Therefore, the authorities differing so widely at each end would be more closely grouped, and there would be many more authorities getting 2s. or 1s. 6d.

Applied to my own county, in 1951 Hampshire's rate was 18s. 1½d. It could have been 16s. 10d. if industrial re-rating and agricultural re-rating of 25 per cent. had been imposed. Southampton's rate was 19s. 11d. It could have been 18s. 8d. Portsmouth's rate was 19s. 10d. It could have been 17s. 6d. Bournemouth's rate was 13s. 6d. It could have been 13s. 5d. I call the attention of the House to the singular justice of the figures, namely, that the one authority which would benefit only slightly from industrial re-rating is prosperous Bournemouth, already a lowly-rated authority.

The hon. Member for Henley said that we have not figures for today. I have endeavoured to get from my own authority and from Southampton what the picture would be today. Southampton's rate for 1955–56 would have been ls. 6½d. in the £ lower if derating had been abolished last year, and the rates would have received some extra £140,000 from industry, and that much less from the shopkeepers and householders and office owners of Southampton. That is for the year 1955–56. For the year 1956–57, which we are coming into, the rate is 14s. 5d. With the abolition of derating it could have been 12s. 3d. Even if we exclude the docks from the full re-rating, Southampton's new rate could have been down by 1s., at 13s. 5d. instead of 14s. 5d.

I would hope that the chambers of commerce, for example, in Southampton, would translate what this means to the hard-working members of the commercial side of British life who, in their own way, give equal service to those on the industrial side. The cutting of a 1s. rate on the savage new assessment would have been a great boon to British commerce and British business.

I have not such a clear picture of Hampshire because it would have gained on re-rating, but would have lost some of the Exchequer equalisation grant. But re-rating in Hampshire would have increased its rateable value by £1½ million. It would have increased the product of the Id. rate by £5,600, and it would have reduced the rate for the year we are now entering by a sum which I estimate at between Is. and 1s. 3d. in the £. Again, I would ask the Hampshire shopkeepers, and also the shopkeepers of the county council areas of the country, to translate that kind of reduction into their own rate demand note which they are now getting under the new assessments.

The late Jack Jones was a grand, picturesque and forthright Labour Mem- ber of this House in the early days of the Labour Party here. I shall end by quoting what he said in 1928 about industrial derating because, strangely enough, it is applicable word by word to the position as we find it today. Mr. Jones was speaking about the London that he loved and the riverside of West Ham. He said: Right along the riverside there, all the firms are doing fairly well. Some of them are doing exceptionally well. One paid a dividend this year of 35 per cent. He did not know what dividends would be paid this year ! That is nothing to grumble about, is it? Although, however, they are doing fairly well, all of them are going to have 75 per cent. of their rates knocked off. But what is going to happen to the small shopkeeper in the back street?…He will have to pay the full rates, and no relief will come his way; and so will the ordinary workman.…What is the good of telling these people that the factories are going to have 75 per cent. of their rates knocked off, when a man who works in the docks or gets a precarious living by keeping a small shop in a back street has to pay up to 1s. 6d. extra in rent in order to make up the deficiency?"—[OFFICIAL REPORT, 28th November, 1928; Vol. 223, c. 520–1.] It is in that spirit that my hon. Friend the Member for Acton has approached the problem, and it is in that spirit that I ask the Minister to accept the Bill and give it his support.

1.41 p.m.

Sir Austin Hudson (Lewisham, North)

First, I should like to add a word of appreciation to what has been said about the hon. Member for Acton (Mr. Sparks) for choosing a subject of such interest to the whole House. I would also compliment him upon his fortune in the timing of the Second Reading. He could not have known when he put his name down for the Ballot, that we should have had the White Paper with the rating figures, and that the topic would be so live.

I was eager to speak because I must be one of the few Members of Parliament who were in this House in 1928 and 1929 when we were passing the de-rating Bill. I think that you yourself, Mr. Deputy-Speaker, were here, representing Ayr and Bute, as you do now, but there are not now a great number of hon. Members who were in the House at that time. It shows that I must be getting very old.

I would rather have spoken—I will show why—on a Motion than on a Bill. I am very doubtful whether, in this matter, a Private Member's Bill, as the hon. Member for Itchen (Dr. King) said, is a very simple matter. I think that changing derating of 75 per cent. to full rating is a very complicated matter. I am a little apprehensive that the Bill, if the House were to pass it now and it became law in a very few months' time, might do serious harm. I hope to show why.

We have seen something of the reassessment. It is obvious to all hon. Members that the Government will have to look at the whole question of rating. A promise to that effect was given by the Minister, and I imagine that we shall hear more from the Parliamentary Secretary. I have not had time to analyse the figures very carefully, but I gather that dwelling-houses will pay 17½ per cent. less than previously, shops and commercial premises will pay about 33 per cent. more, and the rates of industrial premises previously derated by 75 per cent. will rise by about 50 per cent. The sum in the last case is very small, and it is difficult to find out exactly what it will be.

The Government should examine the figures in relation to the proposal in the Bill to re-rate industry. It appears—this was said by the hon. Member for Itchen—that shops and commercial premises—what I would call "offices" are being rather heavily hit. It may be that I am a little biased because my constituency is a residential one and not a heavily industrial one. At all events, the matter should be looked into.

We have heard a certain amount about why the derating of industry was originally carried out. I would remind those who say that it is a very simple matter to restore the position that it took eighteen months to carry through de-rating originally. My right hon. Friend the Member for Woodford (Sir W. Churchill) was Chancellor of the Exchequer in 1928, and he brought in his Budget in April that year, Incidentally, it was a Budget of such length that we had to adjourn for tea in the middle of it. The Budget was concerned not with the actual derating but with finding all the money for the block grant to replace the lost rates. In June, 1928, the House was carrying through the Rating and Valuation (Apportionment) Act, and in November, we had the Local Government Act, which I believe was put through by Mr. Neville Chamberlain.

The first effects of these measures were shown in October, 1929. With great political sagacity, my party went to the country when all the demands for increased rates were being delivered to householders. Perhaps as a result of that, or maybe because of other misdeeds, we were not so successful as we might otherwise have been, although I just managed to get back to the House.

My object in giving these details has been to show that the process took a long time in those days. I do not think I need say anything about the block grant, which was ultimately replaced by the Exchequer equalisation grant.

Mr. Hale

Did the hon. Gentleman say that the rate assessments were going out when his party went to the country in October, 1929? Did they not go in May?

Sir A. Hudson

The assessments were certainly going out at the time of the Election. I remember it well because many of us were rather annoyed about it. I do not think it was an awfully clever thing to do. Perhaps I ought not to say that, but as it was such a long time ago I hope I shall be forgiven for doing so.

It has been said that the derating of industry was meant to be permanent and that it was carried out, at a time of heavy unemployment, primarily to help the distressed areas where it was difficult to get new industries established owing to the heavy rates. It is difficult nowadays to put one's mind back to the mentality of people at that time. All parties in those years had been faced with the terrible haunting problem of unemployment, and they were very anxious to get new industries established in the areas where there was great unemployment. Unfortunately, those were the areas where the rates were heaviest. That was one reason why industry was not anxious to go to them.

I think I might also say, without offence now, that those areas very often had Labour councils. Labour councils were a comparative novelty in those days. Industries felt that if they established themselves in those places they might somehow be penalised by those councils acting in a way detrimental to industry. The years have rolled on, and now one has not often to ask oneself whether a certain council is Labour or Conservative, because both sides nowadays—it was probably nearly always the case then also—act in a manner which is in the best interests of the community. Nevertheless, in those days there was a suspicion that it would not be wise to establish one's industry in a distressed area, first, because of the heavy rates, and, secondly—this was not nearly so important as the other point—because it was felt that industry might not get a square deal from the local authority. Therefore, those areas were derated, and new industry moved in, and they have been there ever since.

When the Bill was being introduced Sir Kingsley Wood, who was then Parliamentary Secretary to the Ministry of Health, said that it was not a scheme of giving a dole, but a permanent scheme of rating reform."—[OFFICIAL REPORT, 28th November, 1928; Vol. 223, c. 548.] He said that because he wanted industries to go to those areas. Had they thought that, having established themselves there, they would immediately be re-rated, they would not have gone.

I do not agree that nothing should be done about this issue or that re-rating should be necessarily at 100 per cent. I hope that the Government will undertake to review the whole matter. I should like them to consider substituting for 75 per cent. a lower figure—perhaps 50 or 25 per cent. It might be found, when the question is examined, that if some of the industries which, because of derating, have established themselves in Special Areas were now suddenly to be made to pay the full rate, they would be very adversely affected.

I had intended to speak about the Exchequer equalisation grant and its effect on a number of areas, but the subject has been fully discussed. It does not necessarily follow that if industry is re-rated, the full benefit would go to the local authority, because its share of Exchequer equalisation grant might be taken away. There is one reason why I cannot support the Bill as it stands. We have to be careful about putting the full burden of rates back on to industry in a very short time. On Wednesday we are to have a debate on employment. I am thinking particularly of the difficulties of the motor car, radio and other industries. If within a few months we were to put this fairly heavy additional burden upon them, it might prove to be the straw which would break the camel's back. We must, if we can, ease the burden. I want industry to be re-rated in some way, but I feel that if the Bill were to go through and become law this summer, it might do harm in places like Birmingham, which at the moment are experiencing difficulties for a variety of reasons.

I hope that the hon. Member for Acton will not press his Bill to a Division. It might be that we can get an undertaking from the Government that the question of re-rating will be seriously considered and, if possible, action taken when the result of the survey of local government finance is announced. I do not know where I got the information, but I thought somebody had told me, possibly in HANSARD or somewhere else, that it would probably take place this year, in the autumn or winter. I understand that it is well on its way and will not take too long.

Mr. Albert Evans (Islington, South-West)

Does the hon. Member put any time limit upon the Government's dealing with this matter? Would he say that it should be dealt with during the present Parliament or is he leaving the matter indefinite as to time?

Sir A. Hudson

From discussions and Questions, I believe the Government to be of the opinion that this is an important subject. It has to be discussed in connection with the current reassessment, and I gather that the Government would be prepared to act. I cannot, of course, tie their hands. I am very much in favour of something being done in this way but I am not certain that I can go the whole way with the hon. Member for Acton. In 1928–29 it took us eighteen months or longer to derate industry. I hope that during the present year we shall have another scheme for re-rating industry, and I can only hope that it will not take as long as derating did in those days.

1.56 p.m.

Mr. E. G. Willis (Edinburgh, East)

The Bill applies to Scotland as well as to England and Wales, but, so far, we have heard nothing about Scotland.

Mr. Hale

Or anywhere north of the Thames.

Mr. Willis

I should, therefore, like to say a few words about the position in Scotland, although I will endeavour not to be as detailed as some of the other speeches have been.

Scotland has the same problems of local government finance as exist south of the Border, the most acute of them being the ever-increasing rate poundage. Attention is drawn to this in the Report by the Sorn Committee, which points out that the average poundage in Scotland has increased from 13s. 5d. in 1949–50 to 18s. 11d. in 1953–54 and that the receipts from local government rating have increased, in round figures, from £30 million to £48 million during the same period.

As that process continues, it gives rise to the second acute problem of the very narrow basis of local government finance. The Sorn Committee draw attention to this also in paragraph 14 of its Report. Parliament is at present engaged in reducing the basis of local taxation still further in Scotland, so the matter becomes exceedingly important. This is not the time to discuss how best to widen the basis of local government taxation but we can, and ought to, discuss the other problems, which arise under the Bill, of how we can alleviate the position of local authorities who are faced with the problem of ever-increasing rate poundages. This can be done without any great fundamental change through the machinery of the Bill.

I have made inquiries concerning Scotland as a whole and I find that while we do not have the same detailed information as the County Councils' Association in England has provided—and I am sorry about that—industry in Scotland is derated to the extent of approximately £6 million, which leaves it rated on a rateable value of approximately £2 million. This means that of a total local government expenditure of £57 million, industry contributes only £2 million. Nobody would suggest that a contribution of £2 million by industry in Scotland towards local government finance accords with the present-day position of industry. It means that every man, woman and child in Scotland is subsidising industry to the tune of £1 per head per year. Is industry in need of a subsidy of this kind today? It might have been when derating was introduced, but it certainly is not today.

Glasgow, the largest city in Scotland, loses a rateable value of £1,221,000 as a result of derating. With rates at 21s. 4d. Glasgow loses the equivalent of 1s. 9d. or 1s. 10d. in rate poundage. It must be remembered that Glasgow has never yet been entitled to anything by way of Exchequer equalisation grant to compensate for that substantial loss. In Glasgow, a city usually considered to be highly industrialised, industry contributes 3.5 per cent. of the local finance. The position is fantastic. Most of the problems of Glasgow have arisen because of the presence of industry and most of the heavy expenditure incurred by the corporation has been the result of industrial operations in the area, yet industry contributes 3.5 per cent. Incidentally, that is roughly the average contribution of industry in the whole of Scotland.

Edinburgh is not an industrial city and it loses a rateable value of £349,000 which, in terms of rate poundage. is equivalent to 8d. in the £. In Edinburgh, industry contributes £75,000 towards a total expenditure by the local authority of £3,630,000–2 per cent. In the Sorn Report, examples are given from the county areas. From it we find that in the landward areas of Ayrshire, the county of my hon. Friend the Member for Kilmarnock (Mr. Ross), they lose £199,000 of rateable value which, with a county rate of 18s. in the £, is a substantial sum. The County of Inverness loses £180,000 of rateable value. One would hardly have thought that in that county the figure would be so large. In fact, Inverness loses more than half its rateable value because of industrial derating.

Surely nobody could justify this position. It is obvious to anyone who studies the matter that substantial benefits could accrue to local authorities by the abolition of industrial derating. One must ask whether re-rating is just and what would be the burden on industry. Can industry bear it? I should have thought that the answer was almost self-evident, with ever-increasing industrial profits, with the boom on the Stock Exchange last year and with full employment. Even in Scotland, while we still have a high unemployment figure compared with the rest of the country, industry is profitable. Therefore, I should have thought that industry should bear the burden.

In the Report on Industry and Trade in 1927 the Balfour Committee estimated that rates represented a burden of.55 per cent. of production costs. It is usually reckoned that that has been considerably lessened by virtue of the fact that local rates have not increased so much as the prices of a large number of other factors which enter into the cost of production. It appears to support what was said by my hon. Friend the Member for Itchen (Dr. King) about the degree to which this would increase prices. It would be infinitesimal. It does not appear to be a burden that industry could not afford to bear.

Industry could afford to pay the extra money. In fact, most of the people to whom I have talked in Scotland, no matter of what political complexion, appear to have come to the same conclusion that industry ought to make this contribution towards the rates. In Edinburgh, I find that quite good Conservatives take that view.

My hon. Friend the Member for Acton (Mr. Sparks) pointed out that industry uses local authority services—the police, the fire service, roads and sanitation—considerably. That is self-evident, but there seems to be a query whether industry benefits from the education service. I should have thought that industry benefited enormously from a good system of education. Certainly, now that we must embark upon an immense technical education programme which will place great burdens on local authorities, and now that we have to make additional provision for further education because only one-tenth of the people in Scotland who are entitled to it are able to take advantage of the privilege, this increased expenditure will be almost entirely to the benefit of industry.

The various cultural activities, dancing, and so on, are being cut out and we are concentrating on technical education. I do not at the moment quarrel with that, but if it is so, the benefit accrues almost entirely to industry. The same remarks apply to housing. The two items which form the largest part of any local authority's expenses are housing and education. Housing as to be provided for industry's workers. This is a problem in the constituency of the hon. and gallant Member for Roxburgh, Selkirk and Peebles (Commander Donaldson).

Industries are clamouring for houses. They are busy and prosperous and they could be even busier if the local authority would build the houses and if it were possible to persuade people to go there to work. If the local authority builds houses it increases its costs. Why should not industry pay its rightful share of those costs?

The Amendment suggests that we should not do anything: … in advance of the Government's review of local authorities' finances. It appears, however, that that review will take a very long time. I have noticed that the Minister of Housing and Local Government is becoming increasingly cautious. About a year ago he told us that an inquiry was being held and that we should soon hear something about it. A few weeks ago he became rather more cautious and said that it was a big matter. In the OFFICIAL REPORT yesterday there is the statement: This will involve much detailed study and important decisions of policy; and when the appropriate stage is reached, it will entail consultation with the representatives of local authorities."—[OFFICIAL REPORT, 15th March, 1956; Vol. 550, c. 72.] That is a very cautious statement. It seems to me that all this will take two or three years.

If so, surely it is wrong to refuse to give the local authorities some assistance in solving the first problem I mentioned—that of ever-increasing rate poundages—while we are waiting to solve the whole problem. It is like saying to a man who is sick in bed, "We cannot give you anything to alleviate your pain until the experts have decided what you are suffering from."

Mr. Anthony Kershaw (Stroud)

That is often true.

Mr. Willis

It may be, but I should have thought that we ought to do something to alleviate the pain. We might give him nothing and he might die. If hon. Gentlemen opposite want the local authorities to die, well and good. If they want the local authorities to reach the position in which they cannot face their responsibilities, well and good. I do not. I am anxious that something should be done at once. All the complications we have heard about have been considered by responsible persons and bodies, and most of the difficulties are known. I think that they are simply excuses for delay.

I am convinced that if the Government wanted to do this—and most local authorities want it to be done—it could be done. It would certainly give the local authorities in Scotland a very much needed relief.

2.10 p.m.

Mr. David Price (Eastleigh)

I should like to join with other hon. Members in congratulating the hon. Gentleman the Member for Acton (Mr. Sparks) and also my hon. Friend the Member for Croydon, North-West (Mr. F. Harris), who, after his persistent efforts on this matter, has seen a Bill introduced in another Member's name. I think that hon. Members on both sides of the House would wish to couple the name of my hon. Friend the Member for Croydon, North-West, with that of the hon. Member for Acton, and that the latter would be happy to concede that credit to my hon. Friend.

I find myself in a fairly easy position with regard to this Bill because I am heavily committed in favour of the principle already. I committed myself in circumstances that may not be regarded as in the strictest accord with Parliamentary procedure, in that I had to answer a question on the "Any Questions" programme of the B.B.C. as to my attitude on industrial de-rating. When one has only fifteen seconds in which to make up one's mind on a matter of policy, one may make it up wrongly and have to live with it ever afterwards. The more that I have been living with it, the more am I certain that in this matter I was right.

I think that those of us who feel that the present system of 75 per cent. derating on industry and freight transport—the latter has not been mentioned so far in this debate—and who wish to see it put on a different basis, have at least one difficult argument to overcome. I believe that we can overcome it, but I do not think that it is one which can be ignored.

When industrial derating was introduced in 1929 it was perfectly dear that it was considered as part of a wider operation which included the reform of local government finance, and as a permanent scheme. I would refer the right hon. and hon. Members to some of the remarks made by Mr. Neville Chamberlain when moving the Second Reading of the Bill. He said: I think it will be seen that they— referring to the derating proposals— do not constitute a charitable donation to some needy relative who has seen better days and that they are not to be taken as a bribe to the ratepayers to accept reforms which otherwise might be unpalatable. They are a long-delayed act of justice, based upon equity and independent entirely of the prosperity or otherwise of one industry or one class or another. They constitute a reform which has become absolutely necessary, if local government in that democratic shape in which we have known it, and of which we are so proud, is to survive at all."—[OFFICIAL, REPORT, 26th November, 1928; Vol. 223, c. 87–8.] That, I believe, is the case that we who support industrial derating have to answer. I do not think that it is any good ignoring the fact that it was introduced as a major measure of reform. For the very reason that our constitution is a moving and not a written one, Mr. Neville Chamberlain's arguments are easier to counter. I believe that conditions have so changed that we are perfectly right to consider a major reform in this matter.

I think that if one reads through the report of the Second Reading debate in 1929, and particularly when one comes to the Committee stage, one will see that much of the support for this alleged major act of reform arose out of the difficulty in which industry found itself. I would draw the attention of hon. Members to the fact that Amendments were moved to this particular Clause with the aim of excluding certain industries because it was alleged that they were prosperous. I think that hon. Members may be interested to know that it included the brewing, distilling and tobacco industries, and that the Amendment to exclude them had the support of an hon. Member for the Gainsborough division who very recently left this House for another place. There was also a most curious Amendment put down by Mr. Ernest Brown, in the name of the Liberal Party, which proposed to put industrial rating, or rather derating, on a differential basis whereby firms which managed to pay less than 5 per cent. dividend would get 75 per cent. relief, those paying between 5 to 10 per cent. dividend would claim 50 per cent. relief and those with dividends above 10 per cent. would have only 25 per cent. relief.

It was interesting that that particular Amendment did not commend itself to the House. So little did it commend itself that the Liberal Party failed to produce enough Tellers, and therefore it was never pressed to a Division. I mention that Amendment because I think that, from one or two remarks which have been made today, there has been a suggestion that industries which are less prosperous than others should pay less rates.

I would argue very strongly that we should either have a flat industrial derating system or that we should re-rate on a flat basis. I am in favour of a flat basis. To distinguish between the fortunes of certain industries seems to me to put a complete premium on inefficiency, I think that our fiscal system at present is sufficiently jacked up in favour of inefficiency and against firms doing well, and that we do not want to put a further premium on inefficiency through our rating system as well.

I believe that the case which was originally made out in 1929 for this major change can no longer be made. I say to hon. Members on this side of the House that I think that there are many sound arguments in favour of a change. I believe in putting the true cost where it belongs. I believe that the rate burden on industry should be—

Sir Ian Horobin (Oldham, East)

Would my hon. Friend carry that argument so far as to press for the re-rating of agriculture?

Mr. Price

I am glad that my hon. Friend has raised that point. The arguments there are, I think, more marginal in so far as we pay a heavy subsidy to agriculture. I know that farmers do not like it to be called a subsidy and that they say that it is a form of protection.

Mr. C. Pannell

Will the hon. Gentleman say that if we have derating of agriculture at this stage it will be reflected in the Price Review which has provoked so much dissatisfaction from the farmers against the Government at the moment? Will he leave it alone?

Sir I. Horobin

Is not that still further "jacking up" inefficiency?

Mr. Price

I do not want to widen the scope of the debate by discussion on the efficiency or inefficiency of agriculture. We all have our own ideas of how we can make agriculture more efficient. Whether these ideas agree with the farming programme and policies of our parties is another matter. I believe that industry ought to pay its true share.

A second point which has not been mentioned is that the move under the 1948 Act from valuation being done by local authorities to valuation being done by the Inland Revenue has put the rating valuation system on a national basis. Therefore the charges which have sometimes been made in the past, that certain rating authorities are particularly lenient and others particularly severe on local industry, according to their relations, are no longer valid.

Therefore, industry need not feel that it is likely to be milched by the local authorities because it does not represent as many votes as do shopkeepers or householders. I think that the case for industrial re-rating has been strengthened by the reassessment of commercial premises. I cannot understand why hon. Gentlemen who are now speaking so strongly in favour of re-rating did not manage to get something inserted into the 1948 Act. I do not want to go into history but I think that the arguments deployed by the right hon. Member for Bishop Auckland (Mr. Dalton) were supremely unconvincing.

Reference has been made to the most extremely unfair burden which industrial derating places on local authorities with a heavy concentration of industry. In the Borough of Eastleigh, an industrial non-county borough in an agricultural area, were we to re-rate industry it would mean that, whereas at the moment industry pays about one-sixteenth of the total burden of the rates, its share would move up to one-quarter. In that respect I draw particular attention to the re-rating of transport. I feel that there can be no justification for not including transport with industry, as indeed the Bill does. In a small town like my own, the fact that it is made very much less attractive to live in by the smoke of the old-fashioned steam engines quartered there, is part of the cost which must be paid by local ratepayers.

One of the most convincing arguments—and again one which will appeal to the more conservative-minded among us—is that re-rating will give to the local authorities some control over their revenue, which will be a good thing. It is a good thing in principle. During the debates on the Housing Subsidies Bill I argued in favour of trying to get the true cost borne where it arises. I believe that the re-rating of industry is a natural corollary of the Housing Subsidies Bill. It is also a natural corollary of the changes which my right hon. Friend the Chancellor of the Exchequer has made in the financing of local government. The principle of re-rating follows as a natural consequence of it, and should be supported on those grounds if on no other.

I wish to take up the point made about industry's share of local services. I do not think that we shall get anywhere by arguing exactly how much of the sewer is used by a local cotton mill and how much by a shop. That is a very unproductive argument. The particular case quoted of a diamond merchant who has a little shop and a very big turnover—

Mr. C. Pannell

The hon. Gentleman is on a good point regarding sewers because as a matter of fact in Burton-on-Trent the sewage rate is the highest in the country and is caused by the effect of beer on the drains. Of course, the brewery firms are Berated, because they are a productive industry. Burton-on-Trent has been kicking up quite a row about that for a long time.

Mr. Price

I do not quite understand the point of that intervention. I do not intend to follow it up, except to say, as I think was said by my hon. Friend the Member for Epping (Mr. Finlay), that usually heavy industrial users have their own agreement—

Mr. Pannell

Not about sewage.

Mr. D. Price

Yes, about sewage. I have had experience of that, and so, I think, has my hon. Friend the Member for Henley (Mr. Hay). They come to some special agreement when they put a particularly heavy burden on the sewerage capacity of a town.

The argument I am trying to deploy is that we shall not get anywhere by trying to split up the rate charges. I am not convinced by the argument that industries should pay only for the services which they actually receive. If that argument is used, I would argue that, as I am a bachelor and have no young children, I should not pay anything towards the cost of education; or, if I did not like the band which plays in the park—indeed, if I did not like parks generally—then I should not have to contribute towards those amenities. If that became a principle, we should arrive at a situation where we all had private contracts with the authorities about what we would or would not pay. Indeed, we should carry it further and have private contracts with the State—I will contribute towards the Embassy in Washington but I will not contribute towards the Embassy in Moscow, because I do not like the Russians. Really, we should arrive at a farcical situation were we to carry that argument to its logical conclusion.

I feel that the general arguments in favour of industrial re-rating are overwhelming. I recognise that there are certain difficulties. I wish to point out one particularly flagrant anomaly, so that it may be dealt with by my hon. Friend the Parliamentary Secretary to the Ministry of Housing and Local Government when he intervenes in this debate. It is the position which arises whereby a shop run by the Electricity Authority or some other nationalised industry secures the benefit of industrial derating, while a private trader on the same basis on the other side of the road has to pay full commercial rates. That seems to me to be very unfair.

As to whether we should give this Bill a Second Reading, I shall be guided by the remarks of my hon. Friend the Parliamentary Secretary. I am sure that he can report progress regarding his Departmental Committee. If we feel that the Committee will soon be giving birth—after a fairly lengthy period of gestation—and that the child is likely to grow into healthy financial reform in local government, there will, I think, be a number of us who will not wish to see this Bill pressed. On the other hand, if we are to have arguments deployed similar to those previously deployed by the right hon. Member for Bishop Auckland, I think that we shall come with more enthusiasm to join the hon. Member for Acton in supporting his Bill.

2.25 p.m.

Mr. Leslie Hale (Oldham, West)

The hon. Member for Acton (Mr. Sparks), who introduced the Bill, has been accorded some measure of felicitation, and rightly so, on the monumental endeavours and researches which he has made. I am left with a period of eight minutes in which to put the whole case for Lancashire, Yorkshire and the Midland counties. I would merely add that if I come again to the House on a Friday, and the promoter of a Bill takes an hour to move the Second Reading of his Bill and leaves me just time to catch the 12.24 train to Derby, I shall catch it.

I shall have to confine most of what I have to say to the town of Oldham and to ask the Parliamentary Secretary to the Ministry of Housing and Local Government to try to say something to local authorities about the fantastic position they are in in this uncertain and difficult situation.

Oldham will benefit substantially from the 1948 Act. No one knows who will benefit in the future. My hon. Friend the Member for lichen (Dr. King), was right in saying that this was a haphazard Measure the provisions of which alighted on one and not on the other, though no one quite knew why. The figures varied from year to year. Under the new system of revaluation the burden has gone from £750,000 to £1,250,000. The rates have been brought down from 25s. in the £ to 19s. and that allows for an increase in expenditure of nearly £100,000 due to what for some curious reason are known as the Butler anti-inflationary measures. That is the problem which we face in Oldham.

I must deal with the lack of housing in Oldham as briefly, speedily and comprehensively as I can. Oldham is a town of about 40,000 houses. Under the scheme put up by the former Minister, under the recent slum clearance and housing proposals there were 11,000 houses ripe for demolition—11,000 substandard houses. The chairman of the housing committee tells me that our new surveyor makes that figure 14,000, one in three of all the houses in Oldham. When we tackled the housing problem we tried to deal, first, with such matters as pail closets and sanitary conveniences, but the figures went into 10,000 and more, and we still have thousands of back-to-back houses in Oldham.

We are not building any new houses now because we cannot afford to, with the rate at 25s. in the £. For the young couples who wish to get married, the only hope of a house is through leavings and movings which take place among council house tenants. Last year, there were 178, so there is a chance of 178 houses in Oldham being available for letting to people suffering from lack of housing accommodation, to newly married couples, and so on. That is the measure of the problem, and 14,000 houses are due for demolition. But in what time?

It does not need comprehensive figures to show that every year, of course, the position is getting worse. We are spending a rate of 25s. in the £, or 19s. with this newly reflected figure. We are facing the possibility which must be faced that the balancing figure under the 1948 Act, because of the new rateable value, may alter in balance as between that and other authorities. Every year we are getting into a worse position.

I have never dissented from the proposition that slum clearance is the best line to take, and that a town with a problem of the magnitude which confronts Oldham may best spend its money by trying to do what the right hon. Gentleman suggested that he intended to do when he introduced his Bill—to reconstruct such houses as could be reconstructed and occasionally to try to knock two back-to-back houses into one, and to pull down only the worst buildings and try to put something in their place. It is terrible that we should be forced to do that. The hon. Gentleman opposite, who knows all these facts, knows quite well that we really need a comprehensive town-planning Measure. Of course, it is impossible. It is utterly impossible on any financial basis.

In these circumstances, can we afford to neglect any source of revenue? In these circumstances, we face the position that if we take the increase of last year, Oldham's rates would, without the balancing grants of 1948, have been 30s. in the £. The figures now supplied to me by the Town Clerk of Oldham—and I am talking only about Oldham, and not about the other part of the constituency which I represent—show that about 25 per cent. of the revenue of the town would come if this Measure were passed.

On every single subject, the argument is always put forward that the time is not opportune. It is always true. It is always reasonably true to say that any really comprehensive Measure is open to the objection that we do not know all the facts, that we are never sure what the result will be, and that if a little more is given to one town it will mean taking a little away from another.

When I was trying, in 1946–47, to get the boundaries of Oldham widened in order to take in the great new area which we needed for our housing scheme, my right hon. Friend the Member for Ebbw Vale (Mr. Bevan) said, "Take in the bits you need, but wait because we are to consider the whole question of local government." People have been going to consider that question since 1888, and they will go on considering it.

Everyone knows that the whole question of local government is a matter which will only be dealt with by this House giving assent to the findings of a committee. It raises so many questions about village pumps and involves so many battles for prestige that it is an arduous problem. But can we afford to hold back this reform?

If we lose, as we may do, under some operations of this obscure position, the balancing grants of the 1948 Act, our rates would go back to 25s. in the £ on this newly inflated figure of £1 million. Speaking to the Minister with absolute seriousness, and being anxious not to over-paint the picture, may I say that the position is that year by year we shall get worse. With every effort that we make, year by year we are not replacing anything like the number of houses that become uninhabitable. Every year the position has got worse.

It would be true to say that more house building in Oldham has taken place in the last twelve or thirteen years than ever before, but the position is no better. We have still 1,500 houses classified as not fit to accommodate more than three people under the overcrowding Regulations, and 2,000 back-to-back houses. That really is a problem which no local authority can undertake and face in its present financial circumstances.

It appears to me that the passing of this Measure is the one single act that this House could now do to give the necessary immediate relief to local authorities which are being compelled to assume burdens which they cannot bear. That is why I support this Measure today.

One general word, in conclusion. The whole of the financial structure of local authorities is fantastic. The whole method about which we have been complaining for thirty years of putting all the burden on posterity is ignoble and unsound. On every building which we put up now we postpone the repayments for sixty years. I used to be very facetious about the wonderful story of Oldham's baths, in 1850. An interest rate of 6 per cent. was paid to investors for 100 years. After paying the interest for all that time, Oldham decided to pay off the loan. That, almost, is what we are doing on every house. We spend ten times as much on interest as on bricks.

There are always negative virtues in vices. The increase in interest rate which has recently taken place, regrettable and deplorable as it is, at least puts that thing in perspective. We are now paying three times as much in current income as in debt redemption. If this Bill were passed, it would be possible to try to reduce this wasteful burden of interest rates.

I ask the Minister to deal with and to give some information to local authorities on this matter. We have submitted our schemes and given the facts as far as we know them, but local authorities are still in a deplorable situation. They want to know what is the Government's policy in the matter, how they can carry out the burdens placed upon them and carry out the sort of operations which, in the twentieth century, they ought to be able to finance and bear.

2.36 p.m.

The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. J. Enoch Powell)

I should like to begin by congratulating the hon. Member for Acton (Mr. Sparks) upon having found this opportunity to ventilate a very important subject, and I should like to thank him for his conciliatory gesture in offering to make the Government a present of the Bill, and even to support the insertion in it of a provision which would enable its implementation to be indefinitely delayed.

Mr. Sparks

May I say that, on that point, I rely upon the Minister's good faith?

Mr. Powell

On the face of it, this is a very simple Bill. It is the sort of Bill which, I think, most hon. Members have always had the ambition to introduce and to carry through—a one-Clause Bill, if not a one-line Bill. But its simplicity is delusive.

Derating is a problem almost as old as rating itself. As many hon. Members have reminded the House, it was already old in 1929, at the date of the Act which this Bill seeks to amend. When the Agricultural Rates Act, 1896, was introduced into this House, the then President of the Board of Agriculture who introduced it was already able to look back over a long period of various measures of derating, some of them more than half a century old.

A feature of the derating measure of 1896 has accompanied every measure of derating ever since. That was the arrangement made in it for compensatory Exchequer grants. As a consequence of that, the question of derating has always since then been intimately bound up with the financial relations between the Exchequer and the local authorities. That Act was intended to be a temporary one, but, as the French proverb says, nothing is so permanent as what is provisional. It was continued until 1923 when the relief to agriculture was further increased with, may I again emphasise, further compensatory Exchequer grants. The relief was increased even further two years later, in 1925.

Therefore, when the 1929 Local Government Act and the Agricultural Rates Act of the same year were passed, and when the major reorganisation of local government finance took place, it was not so much a new and revolutionary measure as a further step in a long series and a further modification in the financial relations between taxpayer and ratepayer which had already been profoundly influenced and modified by the operation of derating over many years.

In the many debates which have taken place on the subject of derating, all the familiar interpretations of rating principles have been deployed over and over again, and it is no criticism that we have necessarily heard them again in today's debate. There is the argument, on the one side, that as rating is a means of assessing ability to pay—of distributing a burden in accordance with the yardstick of ability to pay—its essence is equality of treatment, and that the same yardstick ought to be applied in the same way to all those from whom payments are required. Then, the argument deployed on the other side is that the benefit which is derived from the services maintained out of the rates is very different for different classes of ratepayers. That argument has been thrown backwards and forwards today, and I suppose it received its most vigorous denunciation from my hon. Friend the Member for Eastleigh (Mr. D. Price).

Then there was the argument which my right hon. Friend the Member for Woodford (Sir W. Churchill) deployed with such force in the debates of 1928 and 1929—that there is a difference between taxing a factor of production like industrial premises and taxing and levying rates upon ratepayers on a yardstick related to the annual value of their premises—that the annual value of the premises means something different for the domestic ratepayer from what it means for the industrial ratepayer, and that for the latter it is a tax upon the means of production, and not a tax upon income.

Mr. Thomas Fraser (Hamilton)

The former is not a tax upon income, either.

Mr. Powell

Of course it is a tax upon income. The ratepayer pays his rates out of his income but pays them in proportion to the annual value of his property.

Mr. Fraser

But they are not in any way related to income.

Mr. Powell

No, but they are paid out of income, whereas industrial rates are paid on a factor of production and not on the profits of the undertaking.

Finally, there has been the argument, to which considerable interest attaches, that if we derate a category of ratepayer substantially or entirely, we tend to remove concern in local government and in the policies of local authorities from the purview of what may be a very important sector of the local community. All these arguments, which have been deployed one way or another in every discussion of the principles of rates and derating, have been going on for sixty years or more; but we are discussing the matter today against the more immediate background of the 1929 Act.

The 1929 Act used the withdrawal of industrial and agricultural rateable value from local authorities as a pivot on which to turn to a new financial relationship between the Exchequer and the local authorities. As has several times been brought out in this debate, Parliament, in passing that Act, treated derating as henceforth to be a permanent feature in the rating system of this country. That is implicit in the whole structure of the 1929 Act, whereby the compensatory finance provided by the Exchequer was to be redistributed in successive phases—in five fixed grant periods, as they were called.

In the first of these periods, most of it—three-quarters of the lost rate income and of the lost grant income from the grants which were withdrawn—was to go to the authorities which had actually lost it. In the next two periods, only half was to be so distributed, in the fourth a quarter and in the fifth, when the shock had by then been insensibly diminished, the new basis of distribution on a complicated formula of weighted population was to apply to the whole of the free Exchequer money paid by the Exchequer to local authorities.

I must make a slight correction. It was in the first two grant periods that 75 per cent, was distributed to the authorities which had lost both grant and rateable value.

The first two periods together ran from 1930 to 1937. The third period, in which a half-and-half position had been reached, was to have run from 1937 to 1942; but in 1942 we were concerned with other matters than a formula for the distribution of Exchequer money, and accordingly, by a series of interim Measures, the third period formula was carried forward until the time of the 1948 Act, so that by 1948 local authorities which had lost grants and rateable value were still being compensated as to 50 per cent. for that loss, at any rate, on a historical basis—the 1929 basis—by the distribution of Government block grants.

Then came the Act of 1948, introduced by the right hon. Member for Ebbw Vale (Mr. Bevan), when he abandoned entirely the connection of the Exchequer grant with derating. It was as though the right hon. Gentleman had decided to cut out the remainder of the transitional period which had been provided in 1929 and go right to the goal. The 1948 Act, therefore, virtually accepted derating as a permanent feature, now finally achieved, of the rating system, and it proceeded to distribute free Exchequer money—I am using the word free in the merely technical sense of not being devoted to or earmarked for any specific service—on a formula which was designed to bring the effective financial resources of all authorities up to a national average.

Here, I would pause to emphasise the fact that, by the settlement of 1948, industrial and agricultural derating was accepted as part of the basis of the rating system, and an entirely new system of distributing Exchequer money was superimposed upon that rating system. The transition was neatly and skilfully facilitated. It was accomplished without any individual local authority suffering immediate loss, by the fortunate fact that large slabs of local government financial obligations were at the same time being taken over by the central authority.

Mr. C. Pannell

To complete the picture, which has been mentioned many times in the debate, will not the hon. Gentleman agree that during the same period local authorities lost trading services which had given them substantial grants in aid?

Mr. Powell

Yes, indeed.

Nor, of course, am I making it a charge against the right hon. Gentleman who framed the 1948 Act that the changed financial relations between the central and local authorities were carried through with the facilitation afforded by other changes which were taking place at the same time; but that simultaneity and coincidence did have the effect of masking for the time being from the local authorities the fact that there had been abandoned any attempt any longer to compensate individual local authorities for the loss of rateable value by derating. It was not until 1953 that the Labour Party, in "Challenge to Britain," decided that derating was an undesirable feature of our rating system and that it ought to be removed.

Mr. A. E. Hunter (Feltham)

Will the hon. Member bear in mind that many individual Labour Members wanted de-rating long before 1953?

Mr. Powell

Yes, of course. An hon. Member mentioned industrial derating. In "Challenge to Britain" the Labour Party was bolder than the hon. Member for Acton has been on this occasion. It did not limit its policy to industrial de-rating, but included agricultural derating, as well.

Mr. Sparks

Since the hon. Member has referred to a political party, will he confirm that the Conservative Central Office has issued a document in favour of my Bill?

Mr. Powell

I should be most interested to see that document.

Mr. Lindgren

We have a copy here.

Mr. William Ross (Kilmarnock)

He wrote it, perhaps.

Mr. Powell

I did not write it—nor is it issued by the Conservative Central Office.

Section 14 of the Local Government Act, 1948, provided that, in the first year after the new valuation lists come into force—which we now know is the financial year 1956–57—the Minister should undertake, with the local authority associations, a review of the working of the relations between the Exchequer and local authorities laid down in Part I of that Act.

A statutory obligation is, therefore, placed upon the Government to review, in that narrower sense, the relationship between Central Government and local authority finance. As was announced as long ago as June, 1955, the Government decided to make that a comprehensive review, and specifically stated—and this has been frequently repeated—that the whole question of derating, without any exclusion or limitation, would form part of the subject of that review.

I feel that it might be useful to the House—in case there is any doubt as to how intimately derating is intertwined in its consequences with every other aspect of local government finance and of the relations between Central Government and local authorities—if at this point I analysed very briefly some of the theoretical consequences which might flow from re-rating, if such a measure were decided upon in whole or in part. I think that it would be useful if some of these consequences were thought about, and that it would help to put the matter into perspective.

Re-rating would mean that, in rates and taxes taken together, industry would be paying proportionately more and the rest of the community less. But, as there would be a reduction in industry's tax liability, it would also mean that the proportion of the tax burden paid by industry would fall and the proportion of that burden paid by the rest of the community would rise.

In the case of local authorities, several hon. Members—the hon. Member for Acton pointed it out very clearly—have recognised that an automatic consequence of re-rating would be a reduction in the equalisation grant and also in the education grant.

Mr. Herbert Butler (Hackney, Central)

Can the hon. Gentleman amplify that point? How would this alteration in the equalisation grant affect London?

Mr. W. R. Williams (Manchester, Openshaw)

How will it affect Manchester?

Mr. Powell

Obviously, where there is no equalisation grant there can be no reduction in it. I am talking about local authorities as a whole, as did the hon. Member for Acton. At the moment, I am discussing the matter upon exactly the same plane and the same presumptions as he did. Taking local authorities as a whole, there would be a substantial automatic reduction in those two major Exchequer grants. But the House should look a little further into the matter. Several hon. Members, including my hon. Friend the Member for Eastleigh (Mr. D. Price) said that one argument in favour of re-rating was that it would give local authorities more control over the money which they spend.

Mr. Lindgren

It would give them more money of their own.

Mr. Powell

Yes. The House will perceive what will be the consequence of that. If that is to be the result of re-rating—if it is not to be merely a question of a higher proportion of total local government expenditure being provided by central Government grants and a lower proportion by rates—there might well be involved a further adjustment—other than the automatic one about which I have been speaking—as between the Exchequer and the rates in order to achieve the result so much desired by hon. Members, namely, that a greater proportion of what local authorities spend is raised by them in the form of rates.

Mr. C. Pannell

Even if the hon. Member's point is borne out, and even if we carry it to what is probably an absurd conclusion, the position remains exactly the same. Does not he think that there is a case for local authorities being allowed to raise money locally rather than for them to be grant-aided and become increasingly dependent upon the central Exchequer?

Mr. Powell

I am not raising this point as an argument against re-rating; am merely inviting the House to follow the matter to its conclusion. [HON. MEMBERS: "We know all these things."] I thought perhaps that not all hon. Members would be equally familiar with all these points. That was all I had in mind.

If the result which the hon. Member for Leeds, West (Mr. C. Pannell) has just outlined is to be attained, it would mean a further adjustment as between Exchequer money and rate-raised money, of which the consequence would be not only that more would be found in rates and less in taxes for the expenditure of local authorities; not only that a greater proportion of the rate burden would be borne by industry and a less proportion by other classes of ratepayer; but also, quite possibly, that no class of ratepayer would pay a less amount of rates than at present. That logical consequence of derating, from the point of view which many hon. Members have advocated, deserves to be borne in mind.

It is possible to exaggerate how profound might be the redistribution of various shares of the rate burden. In making rough calculations to discover the extra taxable capacity provided by re-rating one multiplies the present industrial rateable value by four. But that is a fallacy; for the annual value of property upon which four times as much is payable in rates than at present is not as much as four times the present annual value.

Mr. Sparks

There is not much in it.

Mr. Powell

None of us knows how much there is in it until the valuers have got at it. At any rate, let us fix this point, that the net gain in rateable value would not be four times the present rateable value of derated industry.

Suppose for a moment, however, that it were. Let me ignore that factor, which might be a little more considerable than the hon. Member for Acton thinks. The effect on other classes of ratepayer would be a reduction of approximately one-sixth of their share of the rate burden. I am not suggesting that one-sixth is not a consideration; but that kind of rough calculation may have the value of putting into proportion the kind of magnitudes with which we are operating in considering the question of re-rating.

I have one last point on these theoretical consequences of a measure of re-rating, so far as the total amounts found in rates, etc., is concerned.

Mr. Arthur Moyle (Oldbury and Halesowen)

My local authority tells me that the practical consequence of re-rating would be a benefit to it of £220,000 a year, less equalisation grant.

Mr. Powell

Many assumptions have to be made in arriving at these calculations, and I do not know what particular assumptions the hon. Member's town clerk made. I would be very happy to examine with him the figures in detail.

While the shift which would result in the combined rates and taxes paid by industry on the one hand, and by the rest of the community on the other, might be small, the shift in rates paid by different sections of industry might be very considerable, because the proportion which rates bear to costs of production varies enormously with different types of business. While we are talking about the shift of burdens between different classes of the community and of ratepayers, we ought not to leave out of account the possible importance of the shift of burden as between different industries.

I hope that what I have said will have shown the House how interwoven re-rating is with the whole structure of local government finance and the relations with it of the Exchequer. Let me give one example of the sort of inextricable connection I mean. I wonder whether the hon. Member for Acton has realised what he is actually doing by re-rating freight transport hereditaments in the Bill. My hon. Friend the Member for Eastleigh thought that it had something to do with the marshalling yards at Eastleigh. But the rates for the marshalling yards at Eastleigh, as for all freight transport hereditaments which form part of the British Transport Commission's undertaking, are paid in the form of a pool payment under the 1948 Act.

All that would be re-rated by this Bill are those fragments of freight transport undertakings which are not in the ownership of the British Transport Commission, and the hon. Member will see that a new anomaly is thus immediately created.

Mr. Sparks

It strengthens our case.

Mr. Powell

It strengthens my case for saying that we should not do anything about re-rating until we can go further into the relationship between central and local finance. As has been stated many times by my right hon. Friend, we are undertaking a re-negotiation of this pool payment, consequent upon revaluation. It would be absurd to take this step of re-rating freight transport in advance of a conclusion on the pool payment. Nor can we deal with the pool payment for transport without also dealing with the pool payments, which are in many tespects of a parallel nature, for gas and electricity hereditaments.

Then there is the relationship, which has been pointed out, of re-rating with the future of equalisation grant and of education grant. There is the relationship, to which I have drawn attention, to Exchequer grant in general. Finally, there is the effect on industry and inside industry. These are matters which cannot be separated from a decision upon re-rating, and that is the reason why my right hon. Friend, in the statement which he made in a Written Answer yesterday, emphasised—I apologise for reading the words again—how derating was involved in that Government review. He said: The Government are at present reviewing the problem of local authority finance in all its aspects. This is the most comprehensive review of its kind since 1929, and will include an examination of the system of de-rating. … Until this whole review is complete, it will not be possible to arrive at a final appreciation of the future incidence of the rate burden."—[OFFICIAL REPORT, 15th March, 1956; Vol. 550, c. 72.] Many hon. Members have said that the local authorities and the local authorities' associations support the Bill. It is common knowledge that they support re-rating, and, after all, this is a re-rating Bill. But local authorities are also interested in these other matters. They are interested, for example, in the future of the equalisation grants. I wonder if they will take this view? I wonder if local authorities would not wish to have a chance to express an opinion at the appropriate time on the Government's proposals for local government finance as a whole, without having their hand forced and the position prejudiced by a Bill of this kind passed by this House, now while this review is in progress, and in progress in connection with a statutory obligation on the Minister to review the equalisation grants.

I feel, therefore, that this inter-relation of re-rating with every other question of local government finance, the statutory duty on the Government to review the equalisation grants, and the fact that this review of a most embracing character is in progress, more than justify the Amendment of my hon. Friends, and I hope that the House will support it.

Mr. A. Fenner Brockway (Eton and Slough)

In view of the statements which are being made in the country now by supporters of the Government in favour of reducing derating to 50 per cent. but extending it to the business office premises of the concerns, can the hon. Member give us an assurance that that is not in his proposals?

Mr. Powell

No aspect of derating is excluded from consideration in this review.

3.7 p.m.

Mr. G. R. Mitchison (Kettering)

The Parliamentary Secretary is indeed thinking of lofty things, like a notorious predecessor of his. He started with history, went on with a little philosophy, proceeded to the vague ground of applied mathematics required for the Exchequer equalisation grants, and ended with some highly opportunist politics. Before the hon. Gentleman came to the Treasury Bench he had a simpler method. He used, in debate, to get up waving a publication of the Fabian Society and quote out of it what, he said, the Socialists themselves had said. Every publication of the Fabian Society explains clearly at the beginning that it is a purely individual publication, but that did not deter the hon. Gentleman.

Nor shall I be deterred from referring to what appears to be a precisely similar form of publication issued by the Conservative Publications Centre—

Mr. Hay

Conservative Political Centre.

Mr. Mitchison

Yes, Conservative Political Centre. Is that part of its work, or is it the Conservative Central Office which does the work? I do not know.

However, here is this publication, and it sets out from the Conservative point of view—it makes that quite clear—written by two people with great local government experience—that, too, is made perfectly clear—the reason for de-rating industry as short a time ago as May last year. One of their reasons, which I commend to the hon. Gentleman's attention, is that at present it is an injustice; and another reason is that it is a hidden subsidy. That, too, is perfectly true.

Sir A. Hudson

I think the hon. and learned Gentleman said "derating." He should have said "re-rating."

Mr. Mitchison

If I said "derating" I am sorry. I should have said "re-rating." I am much obliged to the hon. Gentleman. One often makes a slip of the tongue. What I am talking about is the re-rating of industry to the full, instead of the 25 per cent. at which it is rated at present.

I say that it is an injustice, and I should have thought that everyone who did not start by looking at the history of it would have admitted at once that it was an obvious injustice. The fact is that at present shops, for instance, are rated to the full and are rated on terms which, in their operation, are rather more severe, perhaps for good reasons, than those applied to private houses.

Industry is at present paying only one-quarter of its assessed value. The net result is that in an industrial country like this, the contribution of industry at present, on the newest figures, is about 6 per cent. of the rates of the country. We do not require a very elaborate calculation to see that that kind of thing cannot, on the face of it, be right, if, and I repeat if, the test is to be that industry ought to make a fair contribution to local services.

I agree with several of my hon. Friends and with the hon. Member for Eastleigh (Mr. D. Price) that we certainly cannot take as the basis of contribution to the local authority the extent of the services rendered. I would say, equally, that we cannot attempt to say that industry has nothing to do with education and housing because it is not directly concerned with them. In the history of the country, education actually derives from the needs of industry. That was the original start of anything like education at the beginning of the nineteenth century. Housing, in the same manner, is very closely and obviously connected in an industrial country like ours with the need to house workers.

Once we take that position, it is patently absurd that in an industrial country of this size roughly 6 per cent. of the total rate contribution should come from industry. All that we are asking for today will amount to a little more than a quarter of the total rates of the country. The sum is about £40 million a year. I am not going back on the detailed figures which were so ably and clearly presented by my hon. Friend the Member for Acton (Mr. Sparks), whom I would heartily congratulate not only on having brought the Bill forward but on the excellent and thorough speech which he made in moving its Second Reading. The figures show, however, that if industry paid in full it would still be paying only about one quarter of the rates of the country.

I should like to give another figure to the House. Since the present Government have been in office, the increase in the rate interest on local authority borrowings, taking the average amount of borrowing which is done each year, has amounted to about £10 million a year. Therefore, we have to consider from the local authorities' point of view their considerable and acute difficulties at this time, of which that is one. There is the further difficulty, which is obvious to everybody, that at the moment local authorities do not know where they are from the point of view of expenditure and, more than ever, they do not know where they are from the point of view of Government policy on housing and a variety of other matters.

No treasurer of a local authority at present can give anything like a clear and certain forecast of what the position will be, and his uncertainty relates to Government policy, Government grants and Government measures generally. In these circumstances, we are asking the House in this instance to remedy what appears to be, and I believe to be, an injustice, and, at the same time, to give the local authorities something more of what somebody neatly called "their own money," that is to say, not grant money.

What is the objection to it? The hon. Gentleman weaved such a web of subtleties about this matter that I thought he would never get his feet out of them, now or ever. If a thing is wrong, as this is wrong; if all the local authorities want it, as naturally and obviously they do want it, what is the objection to doing it now, and how will it prejudice the thorough review of local authority financial structure which is no doubt going on at the moment, and the end of which the hon. Gentleman was totally unable to predict to the House?

We do not know when it is to happen. We were all waiting for the hon. Gentleman to say, but not a word emerged and, frankly, though I was waiting for it, I did not expect that it would. Is it quite right to keep something going meanwhile simply on the theory that we cannot deal with it by itself? I listened to the reasons, and the inextricable connection, as the hon. Gentleman called it, seemed to me not to be inextricable at all. First, he said that we must deal with gas and electricity rating at the same time. I do not see why. I cannot see any connection. This seems to me a perfectly simple thing to deal with separately.

Then it was said that this would cause a shift between one industry and another. What that comes to is that some industry at present, on an entirely haphazard basis, is getting a hidden subsidy which it really ought not to get. The best argument for having this sort of thing put right is that we then know where we are. If we want to subsidise an industry; if, in the national interest or in some local interest, perhaps of employment, it is right to do it, then do it openly and out of public funds, and do not put it on to the backs of the local authorities, and do not do it in a hidden and indiscriminate way which deprives any help we are going to give of any sensible purpose.

Mr. Lindgren

That takes it out of the rates.

Mr. Mitchison

Exactly, as my hon. Friend says, that takes it out of the rates. Now I shall deal with the broader objections that have been put. It has been said that this is tied up with the Exchequer grants. Why? No doubt historically, when industry was partially derated, the Exchequer block grant was brought in as compensation, but the Minister, and some of his hon. Friends—and I think all my hon. Friends—have made it clear that such connection as there was between the one thing and the other was intended to disappear bit by bit. In fact, it disappeared completely in 1948 when the Exchequer equalisation grants were brought in.

If we look at those grants now, they seem to me to have nothing whatever to do with the question we are considering today. Of course, there will be some effect on them and there will be some effect on taxes. I agree with that, but they are not meeting the position as between one local authority and another or, for that matter, as between one industry and another.

Now let us look at the net effect. Today, we are asked to believe that if we put this burden, which is of the order of £40 million, on industry, it must have the effect of hurting the local authorities. We are asked to believe that it will mean that, one way or another, they or somebody else will be worse off. Let us see what will happen. The people who, at present, have to bear an unfair share of the rates because industry is not fully rated are the house dwellers, those who own shops, and the large class of miscellaneous ratepayers who, incidentally, are larger even than the shops or industry and have not been mentioned today. These people are having to pay an unfair share.

Of course, it is not only that the shopkeeper nowadays has his own grouse as regards the year of assessment and so on. It is also that he knows perfectly well that it is absurd that a shop should continue to pay the full amount while a factory next door does not. Look at the instance taken today about the difference between a small factory and a large factory. The instance related to a diamond merchant. He is not a factory; he is a shop, and he would have to pay his rates. That shows the extreme fineness of the line between the two.

It is said that our proposal will put costs on industry and, therefore, on consumer goods; but does anybody suppose that rating on other property does not have its effect on goods, too? Take something produced in a factory which passes through various hands—those of the wholesaler and the retailer—and is ultimately sold to the public. Of course, the rates are part of the charges which apply in one form or another to the article. Incidentally, distribution costs, including transport costs, are in very many cases far higher than the actual costs of manufacture.

I will not go into all that today, but, really, the idea that this change will make any substantial difference to the costs of anything, either for consumption in this country or for shipment abroad, seems to me to be absolutely absurd the moment one begins to go into the figures. That deals with one argument which has been put against the proposal. Meanwhile, the shopkeeper and the man in the house go on paying more than their fair share.

It will be said to some of us, "You have taken some time to make up your minds about it." I see the force of that; but I should like to point out that de-rating was brought about in 1929 when industry was in a desperate plight and that the Tory Party before the war could have put it right but did not do so. I appreciate the reasons for that. The position just before the war probably meant that it was a very difficult time for doing anything of the sort. So for that matter was the position directly after the war. It took us—it was bound to do so—a good many years to recover.

The difficulty about the matter has been far more a question of timing than a question of principle, but who can say that the time has not now come? Not only can industry more than afford it at present, but we are all being told by right hon. and hon. Gentlemen opposite that too much is being spent and that industry is having too good a time, at any rate, in internal trade.

We are in inflationary conditions at present, and it is in inflationary conditions, with very large and rising profits in industry, that we are asked to continue a special exemption given to industry when it was in desperate straits. We are asked to continue something which is unfair to other ratepayers. We are asked to postpone our proposal for some indefinite period until the structure and finance of local government can be considered. We are asked to postpone it pending a reference of all that to consultation with the local authorities.

Here is something which was, on the face of it, introduced for a special purpose, one which no longer exists, and it constitutes at the moment an obvious injustice which nobody can possibly defend if they look at it in the abstract. Its removal can do no harm whatever to any person in the country, and it would help local authorities whose finances at the moment, largely as a consequence of Government policy and measures, are in a desperate and uncertain state.

We ought not to hesitate any longer about it. Why not have a little courage and do what even every hon. Member opposite who has spoken has, in one form or another, admitted to be right, and that is, remove derating now? Do not let us wait until the Parliamentary Secretary and his right hon. Friend have made up their minds which foot to put first, when to put it and how, and have consulted enough people about it.

There is a General Election coming along—[Laughter]—oh, yes, there is; they always come in this country—and I do not know whether this sop for the shopkeepers will be kept till just before the Election. The hon. Gentleman must appreciate that we are suspicious about that kind of thing. We are suspicious too—I make no bones about it—of a party which appears determined to consider special concessions to industry when we do not know from what sources the political funds of that party come. I hope we will have the courage, and I hope hon. Gentlemen opposite will have the courage, to right an injustice now and not postpone it on the type of shuffling excuse that we heard from the Parliamentary Secretary just now.

3.26 p.m.

Mr. Geoffrey Rippon (Norwich, South)

We all pay tribute to the hon. Member for Acton (Mr. Sparks) for the valuable service which he has rendered to the House by providing the opportunity for this further discussion of industrial re-rating. I have read and studied carefully his speech in Committee on the Rating and Valuation (Miscellaneous Provisions) Act, 1955; and I listened carefully and with admiration to what he said today. I have the feeling that many of the arguments and statistics which he puts forward are beginning to have more and more historical rather than current interest. Indeed, all the arguments that we have heard today in favour of re-rating have been heard many times before.

I can understand the embarrassment of the right hon. Member for Kettering (Mr. Mitchison) and the necessity he felt for explaining the failure of the Labour Government to put these matters right when they were pressed to do so in 1948. We have heard the quotations which have been given from the speeches of the right hon. Member for Bishop Auckland (Mr. Dalton) and the right hon. Member for Ebbw 'Vale (Mr. Bevan), and I do not want to go into all that. Its relevance is that it is not possible to be quite so dogmatic about this matter as the right hon. Member for Kettering was in the closing passages of his speech.

Mr. Mitchison

May I assure the hon. Member that no one has been so misguided as to make me a Privy Councillor?

Mr. Rippon

I cannot be responsible for the errors of the other side. I should, of course, have referred to the hon. Member as the hon. and learned Member for Kettering, and I apologise.

The arguments for re-rating have fallen broadly into the familiar categories that the 1929 Act did not achieve its purpose, that industry can afford to pay and that industry ought to pay. So far as the historical aspect is concerned, I would only say that I think there is a tendency to under-estimate the contributions which derating made to the relief particularly of marginal firms before the war. Even today, as my hon. Friend the Member for Henley (Mr. Hay) said, many Development Areas might well be at a disadvantage in attracting new industries if derating was abolished.

It is necessary to consider the effect of re-rating on particular industries against the background of the necessity to keep British industry fully competitive. I agree wholeheartedly with what my hon. Friend the Member for Eastleigh (Mr. D. Price) said about the undesirability of adding differential rates to differential rents, but it may well be, as my hon. Friend the Member for Croydon, North-West (Mr. F. Harris) said, that the real answer, against the background of the economic situation, would be to re-rate industry only to a certain extent—say, 50 per cent.—as that there would be the acceptance of the principle of a flat rate if that were done.

The argument that industry ought to pay more has also been dealt with by my hon. Friend the Member for Eastleigh and, to some extent, by the hon. and learned Member for Kettering, but it has been dealt with by no one better than the hon. Member for Wellingborough (Mr. Lindgren) who, in an article in the Municipal Journal, on 20th March, 1953, said: It is arguable that industry receives considerable benefit, in particular from local authority expenditure on education. But surely the basis of rating should be the direct value of services rendered, and Exchequer grants take account of the apportionment which a central authority thinks fair to carry nationally and locally. I should have thought that that was a fair statement of the position.

Mr. W. R. Williams

Did my hon. Friend say how that would apply to. Manchester?

Mr. Rippon

I am afraid that I cannot deal with Manchester.

The position generally over the whole country, as I think one hon. Member suggested was the case in Scotland, is that industry represents profitable rateable value and that there is an incentive even today for local authorities to take overspill population provided that industry goes with it. That is, I think, a recognition of the fact that most local authorities would take the view that industrial rateable value is profitable rateable value.

Probably more attention ought to be paid to the argument that the local authorities are no longer receiving compensation for the loss of industrial rateable value, but here again I share some of the sentiments expressed by the hon. and learned Member for Kettering. When one goes into the history of the block grant and of the Exchequer equalisation grant and the formulas on which they were based, one can get into difficult waters. I should not like to follow my hon. Friend the Parliamentary Secretary into the detailed explanation of the way in which they do work or in which they ought to work. When these matters are discussed, I fell rather like the man who on a dark night lost his way and got out of his car to examine a signpost. When he climbed up he found that the not very helpful explanation was "Wet paint."

A great many of the arguments we have heard relating to the calculation of the Exchequer equalisation grant are arguments, not for the re-rating of industry, but for the alteration of the basis upon which the Exchequer equalisation grant is calculated. The question of the Exchequer equalisation grant is not, as the hon. and learned Member suggests, irrelevant, because the effect of derating it is still an element in the computation of the grant, even if only in the sense that a county or county borough which, by reason of derating or other means, has a rateable value per head of the population below the national average, has its financial resources brought up to that average.

Undoubtedly many local authorities which are now drawing high grants—both the Exchequer equalisation grant and the education main grant—would ultimately find those grants decreased if re-rating was brought into effect. The difficulty of determining how that factor will operate between one area and another has been illustrated by the occasions on which hon. Members opposite have jumped up today to ask questions about Manchester, Stoke-on-Trent, Leeds or whatever authority about which they are concerned.

The hon. and learned Member for Kettering himself said that no borough treasurer can give any certain forecast of the effect of re-rating on the Exchequer equalisation grant or the education main grant. In those circumstances it may be thought that that is a further reason for a postponement of this matter. I would say that it is absolutely essential that we consider the merits or demerits of derating in the context of the new revaluation, in which we have a situation—not in which, as the hon. and learned Member would suggest, industry receives some special attention which nobody else gets—in which every class of property except one—that of shops, offices and commercial premises generally—is in a privileged position.

We have heard a good deal today of the history of derating. It goes back a very long way, as my hon. Friend the Member for Epping (Mr. Finlay) suggested. There is the Scientific Societies Act, 1843, which still plays an important part in our system. Agriculture has been progressively de-rated from 1896 onwards, and is now wholly derated. Industry was derated in 1929, and there are the nationalised industries, as the Parliamentary Secretary has already indicated, which are now paying a contribution in lieu of rates according to a mysterious formula which is, no doubt, calculated by the Chinese mathematicians who, the hon. and learned Member for Kettering once said, are kept in the Ministry.

Then we have put dwelling-houses in a privileged position for the first time, and they are derated to the extent that their assessments are to be based on 1939 values. We have added the exemptions in the Rating and Valuation (Miscellaneous Provisions) Act, 1955, and we also have to face a situation in which Crown property still has to be revalued. That is a matter of increasing significance, from more than one point of view, because it is a curious fact that, even under the old list, the rateable value of property owned by the Crown is five times as great as it was in 1930.

Therefore, I would say that the rating system as a whole must be examined in order to ensure equitable distribution of the burden of local expenditure as between all those different sections of the community. The change in the incidence of the rate burden between one class of property and another over the country as a whole has been shown in the White Paper presented yesterday. That shows—and it is a matter, I think, of some significance in relation to our discussion this afternoon—that there has already been a considerable shift in the incidence of the rate burden as between industry and dwelling-houses.

It shows also, as the hon. Member for Henley (Mr. Hay) has pointed out, that it is only preliminary information which we have before us at present and more detailed figures will have to be published later. Against that background, it does not seem to be good enough for the hon. Member for Acton to say, "We can have a shot at assessing the effect of the new valuation." It does not seem to me that "having a shot" at assessing the effect of re-valuation forms a good basis for legislation.

I have not been able to study very carefully—and no doubt other hon. Members are in a similar position—the detailed statistics for the various authorities as set out in the White Paper. It has already been shown from preliminary surveys that there is a wide variation in the effect of this revaluation, not only as between one county or county borough and another, but as between one rating authority and another, and between the treatment of individual hereditaments in an area.

I have tried to assess the possible effect of re-rating on my own constituency. In Norwich there is a loss of rateable value through derating of £202,000. That means that this year the actual rate levy is 18s. 6d. in the £, and if industry had been fully rated it could have been 16s. 6d. That is taking no account of the ultimate effect of the equalisation grant or of the education main grant. In fact, Norwich is not particularly affected at the moment by the Exchequer equalisation grant, which only amounts to £11,000 this year, but to other authorities that is a particularly important factor.

Mr. Mitchison

Do not these changes show one thing—that the Exchequer equalisation grant, which depended in part on rateable value—mainly on that—was an exceedingly uncertain instrument in the past? It helped in one place and did not help in another when really both places needed it.

Mr. Rippon

I could not agree more. Ever since the Local Government Act, 1948, I and many others have been confident that it was a major blunder to introduce Exchequer equalisation grants based on the test of rateable value per head of population when we had no uniformity of valuation and I have no doubt that the whole basis of the Exchequer equalisation grant as introduced by the Labour Government greatly aggravated the position of local government finances generally.

Mr. Mitchison

If the hon. Gentleman says that, he must at least agree that the 1948 Act provided for uniformity of assessment for the first time.

Mr. Rippon

It provided for that, but whether it has achieved it is something which we still have to examine. When people try to determine the effect of re-rating in their own constituencies they take account of two figures, the loss of rateable value, and, if industry was re-rated, what the new product of a penny rate would do to reduce the rate poundage. I would say that not only has account to be taken of the effect on Government grants, but also of the effect upon industry within a particular area.

The effect in Norwich of levying a rate of 16s. 6d. as against 18s. 6d., with industry paying in full, is that the annual total which industry would pay would be £165,000 more than at present, with a corresponding reduction in the burden on other classes of ratepayers. Superficially, that is a good point to make. Indeed, I would say that it is a point which must be considered seriously, but we ought also to look at the other side of the picture. This year, as a result of the revaluation, industry in Norwich will, in any event, be paying £21,000 more than last year. That is an increase in the contribution of industry of 45 per cent., which broadly corresponds with the figures for the country as a whole, as shown in the White Paper.

The industrial contribution rises from £47,000 to £68,000, and that is a considerable alteration in the incidence of the rate burden. Secondly, one must bear in mind that the detriment will be concentrated on a few industries, but the benefit. such as it is, after making allowances for grants, will be spread over many.

Thirdly, I think one has to consider seriously the effect of re-rating on small firms, firms with small profit margins. That could be very great. The same arguments which have been advanced by hon. Members on both sides of the House in relation to the burden upon small shopkeepers apply with equal force to the burden of rates on small industrial firms. I do not see why one should argue that it is right to relieve one overburdened section of the ratepayers by passing the liability on to another overburdened section.

I am sure that the real matter that we are discussing this afternoon, and the real worry of local authorities—it has been referred to in one speech after another—is that the resources of local authorities, their own sources of revenue, do not represent a sufficient proportion of their income. The hon. Member for Acton referred to that, and it is something which has been constantly referred to throughout the debate. The truth is that, in spite of rising rate poundages and a rise in the rates per head of population, local authorities are increasingly dependent on central grants of one kind and another. I agree with what has been said this afternoon about the necessity for redressing what is admitted to be an unhealthy situation.

There are many ways in which that situation could be righted. It could be righted by providing local authorities with additional sources of revenue, of which re-rating could form a part. But there are other aspects of local taxation which also have to be considered. There is the possibility, which I think should be followed up, of providing a new basis of assessing the equalisation grant in a manner more akin to that which obtained under the block grant, and representing a higher proportion than at present of the total Government contribution to local auhorities, because it is a grant made without strings attached.

Those, broadly speaking, are the reasons for the Amendment which we have moved today. We take the view that the issues of local expenditure and taxation, valuation, rating, distribution of grants and the financial relations between central and local government are matters which can only be considered as part of a single comprehensive review.

I believe, as the Minister himself said, on 30th June this year, that the various elements in local Government finance are essentially inter-related, the one dependent on the other, and that it is not a good thing to settle one element in isolation from the rest. I share the view—and again I quote—of the hon. Member for Wellingborough, expressed in his article in the Municipal Journal to which I referred. It says: Those who advocate a reimposition on industry of a rate levy based on full rateable value are taking the easy way out to secure an increased rate income. Surely this is just tinkering with the problem? What is wanted today is not a return to pre-1929, but a complete reform of the structure of local government and its finance.

3.46 p.m.

Mr. W. E. Wheeldon (Birmingham, Small Heath)

The reply that has been given by the Parliamentary Secretary today is not a surprising one as far as hon. Members on this side of the House are concerned. We regret it, and that regret, I am quite certain, will be shared by the great majority of local authorities in this country, whatever their political colour.

The Minister has shown no appreciation at all of the strong feelings held at the present time by local authorities. He has not attempted to challenge the validity of the contentions made from this side of the House. He gave us a long historical survey which was most interesting, but which did not, of course, add much to the problem that we are now discussing. Indeed, he appeared to make it so difficult that I began to wonder just how we had carried on the system prior to 1929 when we had full rating.

The Minister appeared to give support to the 1929 contention that derating was to be a permanent measure. That point was certainly made by the hon. Member for Henley (Mr. Hay), when moving the Amendment. If derating is to be a permanent measure, why are we waiting for the review? Surely, it would be far better to tell local authorities here and now that derating is to be permanent and that the review—

Mr. Powell

Will the hon. Gentleman permit me? I did not accept that point of view. I said that it was implicit in the structure of the 1929 Act.

Mr. Wheeldon

I am much obliged for that statement, but the hon. Member for Henley made it perfectly clear that he was supporting the idea that derating was to be a permanent measure.

Mr. Hay

May I interrupt the hon. Gentleman?

Mr. Wheeldon

I am sorry that I cannot give way to the hon. Gentleman, but the time which I expected to have has already been cut into quite considerably, and there are a number of points that I wish to make before 4 o'clock.

The Parliamentary Secretary also referred to the effect on prices. On that point, it appears to me that the hon. Gentleman is in complete opposition to the views of his own colleagues because, in a reply in this House on 28th July last year, the Financial Secretary to the Treasury pointed to the serious effect of derating on the revenue of the Exchequer. But if the additional charge for full re-rating is to fall on prices, then profits, broadly speaking, will remain the same, and the Exchequer tax receipts will remain the same. Hon. Members opposite cannot have it both ways; they must take their choice.

I should like to emphasise that, right from the very beginning, from the Second Reading of the 1929 derating Bill, this party officially expressed its opposition, in a reasoned Amendment, and that the reasons that were given on that occasion still hold good today. The opposition expressed by the Labour Party in 1928 and 1929 was taken up almost immediately by the local authorities and over the years, irrespective of their political colour, they have continued in the main to oppose derating. My own authority, in the City of Birmingham, despite an overwhelming Tory majority, 20 years ago came down in favour of re-rating, and, subsequently, many resolutions have been passed by the city council on that subject.

I want to make a point by way of illustration from Birmingham, and I do so not only because I think it is better to quote actual examples, but also because Birmingham is the largest county borough in this country and is the county borough which has the largest derating losses. Arguments have been advanced as to the burden to be placed on industry. May I give two or three figures relating to Birmingham? In the case of Imperial Chemical Industries, which is a tremendous concern, so far as £93,000 worth of rateable value is concerned, it pays not a penny piece of rates. The General Electric Company has £90,000 worth of rateable value entirely free of rates, the Austin Motor Company has £141,000 of rateable value entirely free of rates, and in the case of the Dunlop Rubber Company the rate-free figure is over £100,000. It is ridiculous in my contention to assert that industry cannot afford to pay its full share of the rates.

I am a politician; we are all politicians here, but there was an opinion expressed recently by Mr. Ronald Bird, the Deputy Editor of the Economist, and it occurred to me, while listening to the speeches of hon. Members opposite, that here was an opinion which was worth while quoting and which, perhaps, they would respect more than an opinion expressed by some politicians on this side of the House. In relation to re-rating of industry, Mr. Bird said that the additional burden to be placed on industry would be a mere fleabite. Those were his words—"a mere fleabite"—and he added that, in terms of current production and in terms of the present prosperity of industry, it was quite irrevelant to the whole position.

In the coming financial year, in Birmingham, we are levying a rate of 18s. 6d. in the £, but if we had full rating that 18s. 6d. could be reduced by no less than 3s. 7d. As a result of revaluation, the position is getting worse, and in the current year the derating loss in Birmingham is approximately equivalent to 12 per cent. of our rateable value, and next year it will be over 17½ per cent. The gap between the full rate and the reduced rate is getting wider and wider, and Birmingham next year will lose rateable value to the extent of over £3,800,000, which is the cost of derating in a single year.

We have been losing very heavily ever since 1929, and, even taking the equalisa tion grant into account and every penny piece of compensation from the block grant, we have, in the intervening years, lost the sum of approximately £20 million. I have no need to emphasise to the Parliamentary Secretary how much we could have done in the building of houses and the clearing of slums, even without his subsidies, if we had had that sum.

It means that in the next financial year the citizens of Birmingham will be compelled to pay 48 per cent. more in rates than in the current year. That is a tremendous increase. I am not suggesting that it is all due to derating. The Government have made other contributions towards that increase. Interest charges, Purchase Tax, and so on, have accounted very heavily indeed towards the increase. The position in Birmingham is very serious. Essential services like education and health are being kept upon the same level, with no opportunity for development, and other services, such as libraries and children's services, have been heavily retrenched; so much so that the Finance Committee of Birmingham City Council has made a special point about it and has told the public how much retrenchment there will have to be. Of course, there will be other liabilities to follow for all authorities during the ensuing year, one of which will be the award which will inevitably be made by the Burnham Committee on behalf of the teachers.

The point made by the Parliamentary Secretary about the need for a comprehensive review has been repeated time and time again. The need of local authorities is not merely for a reconstruction of local government finance; it is for additional finance, here and now.

We do not want merely a redistribution of existing moneys and existing grants in aid; we want something here and now, and we say that the question of a review is irrelevant unless the Government are prepared to abolish rates as the basis of local government finance. If they are not, it is a straightforward issue of justice. Give us full rating and then allow us to build, on top of that, our financial structure of local government.

Whatever may be the ultimate pattern of Government grants in aid, it is my contention that the centrepiece must be the local authorities' entitlement to full rating of its industrial hereditaments. That is something which local authorities will always claim, something which it is right and proper for them to claim. They should have it by right, and not through the medium of a formula, based upon a means test. It is not a matter of bargaining, but a matter of justice. Tory as well as Labour councils believe it, and business men have given us support time after time for the idea of re-rating.

We cannot expect ratepayers in Birmingham and other cities to regard the rating system as just, so long as there are prosperous concerns, as there are today, paying only one-quarter of their full rates, whereas shopkeepers and householders are paying full rates. I hope that the House will support the Second Reading of the Bill.

Mr. Sparks

rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

The House divided: Ayes 105, Noes 84.

Division No. 123.] AYES [3.59 p.m.
Albu, A. H. Chetwynd, G. R. Gordon Walker, Rt. Hon. P. C.
Allen, Arthur (Bosworth) Collick, P. H. (Birkenhead) Griffiths, Rt. Hon. James (Llanelly)
Bellenger, Rt. Hon. F. J. Collins, V.J. (Shoreditch & Finsbury) Hale, Leslie
Benn, Hn. Wedgwood (Bristol, S.E.) Corbet, Mrs. Freda Hall, Rt. Hn. Glenvil (Colne Valley)
Beswick, F. Daines, P. Harris, Frederic (Croydon, N.W.)
Bevan, Rt. Hon. A. (Ebbw Vale) Davies, Rt.Hon. Clement (Montgomery) Hastings, S.
Bottomley, Rt. Hon. A. G. Davies, Ernest (Enfield, E.) Henderson, Rt. Hn. A. (Rwly Regis)
Bowden, H. W. (Leicester, S.W.) Davies, Harold (Leek) Herbison, Miss M.
Bowen, E. R. (Cardigan) Deer, G. Hobson, C. R.
Bowles, F. C. Dodds, N. N. Holman, P.
Boyd, T. C. Ede, Rt. Hon. J. C. Houghton, Douglas
Brockway, A. F. Edwards, Robert (Bilston) Hughes, Emrys (S. Ayrshire)
Broughton, Dr. A. D. D. Evans, Albert (Islington, S.W.) Hughes, Hector (Aberdeen, N.)
Brown, Rt. Hon. George (Belper) Finch, H. J. Hunter, A. E.
Burton, Miss F. E. Fletcher, Eric Hynd, H. (Accrington)
Butler, Herbert (Hackney, C.) Fraser, Thomas (Hamilton) Isaacs, Rt. Hon. G. A.
Butler, Mrs. Joyce (Wood Green) Gaitskell, Rt. Hon. H. T. N. Janner, B.
Callaghan, L. J. Gibson, C. W. Jay, Rt. Hon. D. P. T.
Jeger, George (Goole) Oram, A. E. Sorensen, R. W.
Jeger, Mrs. Lena (Holbn & St. Pnos, S.) Orbach, M. Stewart, Michael (Fulham)
Jenkins, Robert (Dulwich) Owen, W. J. Strauss, Rt. Hon. George (Vauxhall)
Jenkins, Roy (Stechford) Padley, W. E. Stross, Dr. Barnett (Stoke-on-Trent, C.)
Johnson, James (Rugby) Pannell, Charles (Leeds, W.) Summerskill, Rt. Hon. E.
Key, Rt. Hon. C. W Pargiter, G. A. Sylvester, G. O.
King, Dr. H. M. Parker, J. Ungoed-Thomas, Sir Lynn
Ledger, R. J, Parkin, B. T. Weitzman, D.
Lee, Miss Jennie (Cannock) Redhead, Edward Charles Wells, Percy (Faversham)
Lindgren, G. S. Reeves, J. Wells, William (Walsall, N.)
Lipton, Lt.-Col. M. Robens, Rt. Hon. A. Wheeldon, W. E.
MacColl, J. E. Robinson, Kenneth (St. Pancras, N.) Williams, W. R. (Openshaw)
McKay, John (Wallsend) Rogers, George (Kensington, N.) Williams, W. T. (Barons Court)
McLeavy, Frank Ross, William Woodburn, Rt. Hon. A.
MacPherson, Malcolm (Stirling) Shurmer, P. L. E. Yates, V. (Ladywood)
Mellish, R. J. Silverman, Julius (Aston)
Mitchison, G. R. Simmons, C. J. (Brierley Hill) TELLERS FOR THE AYES:
Moyle, A. Skeffington, A. M. Mr. Sparks and Mr. Willis.
Amory, Rt. Hn. Heathcoat (Tiverton) Grimston, Sir Robert (Westbury) Pitman, I. J.
Armstrong, C. W. Harrison, Col. J. H. (Eye) Pitt, Miss E. M.
Ashton, H. Harvey, Ian (Harrow, E.) Pott, H. P.
Baldwin, A. E. Heald, Rt. Hon. Sir Lionel Powell, J. Enoch
Barber, Anthony Heath, Rt. Hon. E. R. G. Price, David (Eastleigh)
Barter, John Hill, John (S. Norfolk) Raikes, Sir Victor
Baxter, Sir Beverley Hornsby-Smith, Miss M. P. Redmayne, M.
Bell, Philip (Bolton, E.) Hudson, Sir Austin (Lewisham, N.) Renton, D. L. M.
Body, R. F. Hughes, Hallet, Vice-Admiral J. Rippon, A. G. F.
Boyd-Carpenter, Rt. Hon. J. A. Hulbert, Sir Norman Robinson, Sir Roland (Blackpool, S.)
Brooke, Rt. Hon. Henry Hyde, Montgomery Russell, R. S.
Burden, F. F. A. Johnson, Eric (Blackley) Sandys, Rt. Hon. D.
Butler, Rt. Hn. R. A.(Saffron Walden) Kaberry, D. Simon, J. E. S. (Middlesbrough, W.)
Campbell, Sir David Kershaw, J. A. Smithers, Peter (Winchester)
Channon, H. Leather, E. H. C. Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)
Chichester-Clark, R. Lennox-Boyd, Rt. Hon. A. T. Stevens, Geoffrey
Crosthwaite-Eyre, Col. O. E. Lloyd, Rt. Hon. Selwyn (Wirral) Steward, Sir William (Woolwich, W.)
Crowder, Sir John (Finchley) Lucas, Sir Jocelyn (Portsmouth, S.) Stewart, Henderson (Fife, E.)
D'Avigdor-Goldsmid, Sir Henry Lucas-Tooth, Sir Hugh Stuart, Rt. Hon. James (Moray)
Deedes, W. F. Macdonald, Sir Peter Summers, G. S. (Aylesbury)
Doughty, C. J. A. Maclay, Rt. Hon. John Thompson, Lt.-Cdr. R. (Croydon, S.)
Eden, Rt. Hn. Sir A.(Warwick & L'm'tn) Macmillan, Rt. Hn. Harold (Bromley) Thorneycroft, Rt. Hon. P.
Emmet, Hon. Mrs. Evelyn Markham, Major Sir Frank Vane, W. M. F.
Finlay, Graeme Mathew, R. Walker-Smith, D. C.
Fisher, Nigel Monckton, Rt. Hon. Sir Walter Whitelaw, W. S. I. (Penrith & Border)
Fraser, Hon. Hugh (Stone) Noble, Comdr. A. H. P. Wills, G. (Bridgwater)
Freeth, D. K. Nugent, G. R. H.
Godber, J. B. Page, R. G. TELLERS FOR THE NOES
Gough, G. F. H. Partridge, E. Mr. Hay and Sir Ian Horobin.
Green, A.

Question put accordingly, That the words proposed to be left out stand part of the Question:—

The House divided: Ayes 104, Noes 83.

Division No. 124.] AYES [4.7 p.m.
Albu, A. H. Deer, G. Janner, B.
Allen, Arthur (Bosworth) Dodds, N. N. Jay, Rt. Hon. D. P. T.
Bellenger, Rt. Hon. F. J. Ede, Rt. Hon. J. C. Jeger, George (Goole)
Benn, Hn. Wedgwood (Bristol, S.E.) Edwards, Robert (Bilston) Jeger, Mrs. Lena (Holbn & St. Pncs, S.)
Beswick, F. Evans, Albert (Islington, S.W.) Jenkins, Robert (Dulwich)
Bevan, Rt. Hon. A. (Ebbw Vale) Finch, H. J. Jenkins, Roy (Stechford)
Bottomley, Rt. Hon. A. G. Fletcher, Eric Johnson, James (Rugby)
Bowden, H. W. (Leicester, S.W.) Fraser, Thomas (Hamilton) Key, Rt. Hon. C. W.
Bowen, E. R. (Cardigan) Gaitskell, Rt. Hon. H. T. N. King, Dr. H. M.
Bowles, F. G. Gibson, C. W. Ledger, R. J.
Boyd, T. C. Gordon Walker, Rt. Hon. P. C. Lee, Miss Jennie (Cannock)
Brockway, A. F. Griffiths, Rt. Hon. James (Llanelly) Lindgren, G. S.
Broughton, Dr. A. D. D. Hale, Leslie Lipton, Lt.-Col. M.
Brown, Rt. Hon. George (Belper) Hall, Rt. Hn. Glenvil (Colne Valley) MacColl, J. E.
Burton, Miss F. E. Harris, Frederic (Croydon, N.W.) McLeavy, Frank
Butler, Herbert (Hackney, C.) Hastings, S. MacPherson, Malcolm (Stirling)
Butler, Mrs. Joyce (Wood Green) Henderson, Rt. Hn. A. (Rwly Regis) Mellish, R. J.
Callaghan, L. J. Herbison, Miss M. Mitchison, G. R.
Chetwynd, C. R. Hobson, C. R. Moyle, A.
Collick, P. H. (Birkenhead) Holman, P. Oram, A. E.
Collins, V. J. (Shoreditch & Finsbury) Houghton, Douglas Orbach, M.
Corbet, Mrs. Freda Hughes, Emrys (S. Ayrshire) Owen, W. J.
Daines, P. Hughes, Hector (Aberdeen, N.) Padley, W. E.
Davies, Rt. Hn. Clement (Montgomery) Hunter, A. E. Pannell, Charles (Leeds, W.)
Davies, Ernest (Enfield, E.) Hynd, H. (Accrington) Pargiter, G. A.
Davies, Harold (Leek) Isaacs, Rt. Hon. C. A. Parker, J.
Parkin, B. T. Skeffington, A. M. Wells, William (Walsall, N.)
Redhead, Edward Charles Sorensen, R. W. Wheeldon, W. E.
Reeves, J. Stewart, Michael (Fulham) Williams, W. R. (Openshaw)
Robens, Rt. Hon. A. Strauss, Rt. Hon. George (Vauxhall) Williams, W. T. (Barons Court)
Robinson, Kenneth (St. Pancras, N.) Stross, Dr. Barnett (Stoke-on-Trent, C.) Woodburn, Rt. Hon. A.
Rogers, George (Kensington, N.) Summerskill, Rt. Hon. E. Yates, V. (Ladywood)
Ross, William Sylvester, G. O.
Shurmer, P. L. E. Ungoed-Thomas, Sir Lynn TELLERS FOR THE AYES:
Silverman, Julius (Acton) Weitzman, D. Mr. Sparks and Mr. Willis.
Simmons, C. J, (Brierley Hill) Wells, Percy (Faversham)
Amory, Rt. Hn. Heathcoat (Tiverton) Green, A. Pitman, I. J.
Armstrong, C. W. Grimston, Sir Robert (Westbury) Pitt, Miss E. M.
Ashton, H. Harrison, Col. J. H. (Eye) Pott, H. P.
Baldwin, A. E. Harvey, Ian (Harrow, E.) Powell, J. Enoch
Barber, Anthony Heald, Rt. Hon. Sir Lionel Raikes, Sir Victor
Barter, John Heath, Rt. Hon. E. R. G. Redmayne, M.
Baxter, Sir Beverley Hill, John (S. Norfolk) Renton, D. L. M.
Bell, Philip (Bolton, E.) Hornsby-Smith, Miss M. P. Rippon, A. G. F.
Body, R. F. Hudson, Sir Austin (Lewisham, N.) Robinson, Sir Roland (Blackpool, S.)
Boyd-Carpenter, Rt. Hon. J. A. Hughes Hallett, Vice-Admiral J. Russell, R. S.
Brooke, Rt. Hon. Henry Hulbert, Sir Norman Sandys, Rt. Hon. D.
Burden, F. F. A. Kaberry, D. Simon, J. E. S. (Middlesbrough, W.)
Butler, Rt. Hn. R. A.(Saffron Walden) Kershaw, J. A. Smithers, Peter (Winchester)
Campbell, Sir David Leather, E. H. C. Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)
Channon, H. Lennox-Boyd, Rt. Hon. A. T. Stevens, Geoffrey
Chichester-Clark, R. Lloyd, Rt. Hon. Selwyn (Wirral) Steward, Sir William (Woolwich, W.)
Crosthwaite-Eyre, Col. O. E. Lucas, Sir Jocelyn (Portsmouth, S.) Stewart, Henderson (Fife, E.)
Crowder, Sir John (Finchley) Lucas-Tooth, Sir Hugh Stuart, Rt. Hon. James (Moray)
D'Avigdor-Goldsmid, Sir Henry Macdonald, Sir Peter Summers, G. S. (Aylesbury)
Deedes, W. F. Maclay, Rt. Hon. John Thompson, Lt.-Cdr. R. (Croydon, S.)
Doughty, C. J. A. Macmillan, Rt. Hn. Harold (Bromley) Thorneycroft, Rt. Hon. P.
Eden, Rt. Hn. SirA. (Warwick & L'm'tn) Markham, Major Sir Frank Vane, W. M. F.
Emmet, Hon. Mrs. Evelyn Mathew, R. Walker-Smith, D. C.
Finlay, Graeme Monckton, Rt. Hon. Sir Walter Whitelaw, W.S.I.(Penrith & Border)
Fisher, Nigel Nicolson, N. (B'n'm'th, E. & Chr'ch) Wills, G. (Bridgwater)
Fraser, Hon. Hugh (Stone) Noble, Comdr. A. H. P.
Freeth, D. K. Nugent, G. R. H. TELLERS FOR THE NOES:
Godber, J. B. Page, R. G. Mr. Hay and Sir Ian Horobin.
Gough, C. F. H. Partridge, E.

Question put and agreed to.

Bill accordingly read a Second time.

Mr. Hugh Gaitskell (Leeds, South)

On a point of order, Mr. Speaker. I rise to ask the Leader of the House what are the intentions of the Government on the Industrial Rating Bill?

Mr. Speaker

If the right hon. Gentleman will wait until we get to the Adjournment, that will be in order.