HC Deb 12 February 1957 vol 564 cc1077-85

The following Questions stood upon the Order Paper:


asked the Minister of Housing and Local Government whether the Government have now completed their review of local authority finances; and if he is now able to make a statement.


asked the Minister of Housing and Local Government whether the Government have yet completed its review of local government finance; and whether he will make a statement.


asked the Minister of Housing and Local Government if he will make a statement concerning the reform of local government finance.


asked the Minister of Housing and Local Government how soon he anticipates completing his review of the finances of local government and if he will make a statement.

The Minister of Housing and Local Government and Minister for Welsh Affairs (Mr. Henry Brooke)

With permission, I will answer Questions Nos. 67. 69. 70 and 73.

The Government have completed their review of local government finance; and my right hon. Friend the Secretary of State for Scotland and I are now ready to enter into discussions with the representatives of local authorities. In making this announcement of the broad conclusions which we propose to put before the local authorities I am, at the request of the Secretary of State, referring to Scotland as well as England and Wales.

The Government's proposals for the reorganisation of local government in England and Wales, which I hope will be discussed by the House as soon as possible, are designed to strengthen the local government system. In doing this it is essential to improve the financial relationship between the central Government anti local authorities. The ratio between Exchequer grants to local authorities and their revenue from local rates, which thirty years ago was 1 to 2, is now 6 to 5. Not only has this remarkable shift reduced the financial independence of local authorities and their degree of direct responsibility to their own ratepayers; in addition, much of this Exchequer aid is on a percentage basis towards the expenditure incurred on specific services. Percentage grants, whatever their merits, carry two disadvantages. First, there may be danger of an excessive degree of detailed central supervision over the spending of the money. Secondly, there is no certainty from year to year what the Exchequer may be called upon to contribute.

I am sure that the greater the independence of local authorities in the raising and the spending of their money, the better for the good health of local government. The Government, after a thorough investigation, do not think it practicable to devise a satisfactory new source of local revenue. Nor do they believe it right to earmark for the direct benefit of local authorities any tax that is now levied nationally. Rates are in this country a well-established instrument of local taxation. There are still some difficulties to be overcome in the rate system, but it provides a sound basis for local finance, and no better system of local taxation has been propounded.

In 1929, when unemployment was widespread, it was decided, in the light of economic conditions as they then were, to derate industry and freight transport from 100 per cent, to 25 per cent. of net annual value. Against the radically different economic background of the present day the Government have thoroughly re-examined this matter, taking into account all the arguments in both directions, and have decided that it is now right to raise the rate contribution of industry and freight transport from 25 per cent. to 50 per cent. In addition, further changes will be made in the system of pool payments to local authorities by the nationalised industries, including the direct rating of electricity properties and the separate assessment of electricity and gas showrooms used as shops, so that all payments now included in the pool are taken into account as rates in Scotland, the necessity for changes on these lines will not arise during the period up to 1961 for which the existing valuations are frozen.

At the same time, the Government intend a major recasting of the financial relationship between the Exchequer and local authorities. This will entail a radical revision of the structure of Exchequer grants, as well as some reduction of the grants to take account of the new rate income. With a few exceptions, where technical considerations make it not possible or desirable, specific grants will be replaced by a general grant of an amount fixed in advance for a short period of years, though not necessarily at the same level for each year of the period. This general grant will be distributed to all county and county borough councils in England and Wales, and to county and town councils in Scotland, by reference to objective factors (mainly of weighted population) which are readily ascertainable and afford a fair and reasonable measure of the relative needs of each authority.

With this change, local authorities will acquire a great increase of responsibility in determining the money to be spent on the various services, in accordance with local needs. Local government will become more truly local. Our aim is to foster and stimulate a vigorous and independent local government, and to give members of councils a greater incentive to take a lively interest in their local expenditure by placing much more of it under their own control. Under the proposals the Government have in mind, the amount of general grant-in-aid, not tied in any way to individual services, will, at present levels of expenditure, rise from less than one-sixth to close on two-thirds of the total Exchequer grants to local authorities.

It is also proposed to revise the system of equalisation grants, on the basis of recommendations made in 1953, including the payment of grants direct to county district councils. In Scotland, the arrangements for equalisation grants were amended by the Act of 1954 and also by last year's Act, which provides that a further review must be held before 1963.

My right hon. Friends the Secretary of State for Scotland and the Minister of Transport and Civil Aviation intend also to review the present system of highway grants.

As far as practicable, it is the Government's intention to bring all these changes into operation on a single date. Some transitional grant arrangements for a period thereafter will naturally be needed.

These proposals will be discussed with other organisations affected by them, in addition to the discussions to be held with representatives of local authorities. The intention of the Government is to introduce legislation as soon as practicable when these necessary discussions have been completed.

Mr. Mitchison

Would the right hon. Gentleman confirm that this is the statement of the Government's local government finance policy that his predecessor promised by the end of last year after a discussion with the local authorities? Is the right hon. Gentleman aware that on this side of the House we regard half the hog, with reference to the rerating of industry, as a very poor, unworkable animal and that we think that the only right course is to rerate industry in full?

While welcoming the right hon. Gentleman's recognition of the fact that these proposals must be fully debated by the House, may I ask him whether he will lay a White Paper setting them out in much more detail than he has been able to do today? Is the right hon. Gentleman aware that there are dangerous implications in the large block grant system, particularly in relation to education, health and welfare, so far as they are a matter of concern for local authorities—that is Part III of the Act in substance—and, of course, the housing subsidies in relation to slum clearance, new towns and overspill, that is to say, so far as they are at present given?

Will the right hon. Gentleman, in the White Paper, if he cannot do it today, give us details showing how he arrives at the new figure of two-thirds, that is to say, what it is that is to be left out and whether it is two-thirds of the total grant or two-thirds of that part of the total grant which is not Exchequer equalisation grant? I think that the right hon. Gentleman sees the point I have in mind.

Mr. Brooke

I will do my best to answer that series of questions.

This is the statement which my right hon. Friend promised to make. It seemed to me more courteous to the House to make the announcement to the House in advance of discussing it with the local authorities. At the same time, I am exceedingly anxious that there shall be full discussions with the local authorities. and if the hon. and learned Gentleman presses me to crystallise the Government's precise proposals at all points before I meet them, the local authorities may well regard those consultations as being of negligible value. I wish to act fairly towards both Parliament and the local authorities.

Mr. Cooper

Would it not be better from the point of view of these discussions if the House could have the earliest opportunity of debating my right hon. Friend's statement, that is, before the discussions take place? Are we to understand that my right hon. Friend intends to introduce legislation during this Session of Parliament?

Mr. Brooke

The question of a debate does not lie in my hands. At the beginning of my statement I said that the White Paper on local government reorganisation, which has been in the hands of hon. Members for quite a long time, has not yet been debated. I hope that it will be debated by the House as soon as possible. The date when we can introduce any legislation depends upon the progress we can make in these consultations, with which I am anxious to press forward.

Mr. Mitchison

While recognising what the right hon. Gentleman has said about his consultations with local authorities, may I ask whether he appreciates that he has given some specific figures about the effect of his proposals—I quoted one to him If these are to be debated, he must tell the House more than he has been able, or we should expect, in a statement of this kind. Therefore, there must be a White Paper. Will the right hon. Gentleman please meet what is a perfectly reasonable request in this matter and give us information so that we may debate his proposals properly?

Mr. Brooke

I will certainly consider what the hon. and learned Member has said. The House will recollect that on frequent occasions matters of considerable magnitude have been the subject of confidential consultations between the Minister in charge—one of my predecessors—and local authority associations before anything has been said to the House. On this occasion the matters were of such importance that I thought I ought to make a statement in broad terms to the House at the outset.

Mr. Mitchison

With respect to the right hon. Gentleman, we have had a White Paper on the areas and status of local authorities and there is precious little in it. There is a great deal in these proposals, and it is not fair to the House, or to the Opposition, to ask us to debate this statement without giving us the necessary information and details in the form of a White Paper. Will the right hon. Gentleman please undertake to produce a White Paper?

Mr. Brooke

I am grateful to the hon. and learned Member for saying that there is a great deal in these proposals. Before he asked his last question I had already said that I would consider his proposal.

Commander Maitland

Will my right hon. Friend say whether his remarks refer to other types of local government, such as river boards, which also raise their finances by grant and by levying rates, or whether those are taken into the general survey which he is proposing?

Mr. Brooke

It is not suggested that we should bring into the general grant specific grants available only to small groups of local authorities. My statement refers only to local authority activities.

Mr. Woodburn

Is the right hon. Gentleman aware that his statement will cause considerable alarm by its vagueness? Since he is speaking on behalf of the Secretary of State for Scotland, may I ask whether we are to assume that an attempt will be made to assimilate local government in Scotland with local government in England? Is there to be any interference with the system of local government which has so far existed in Scotland? If a Bill is to be introduced, will there be one Bill for the United Kingdom to bring about this assimilation?

If the Government have that in mind, will the right hon. Gentleman recall the confusion arising from the introduction of a single Rent Bill? If such legislation be introduced, there should be separate Bills to deal with the separate subjects. Is the right hon. Gentleman further aware that his statement appears to contain a great threat to lower the standard of contributions from the Government to local authorities? Are we to understand that that is the intention of the Government?

The Secretary of State for Scotland (Mr. John Maclay)

There has, of course, been the closest consultation throughout between myself and my right hon. Friend on all matters contained in this statement which affect Scotland. There is no intention of assimilating Scottish local government with English local government. I do not think that I need say more than that. The idea has never been mentioned or thought of.

The question whether there shall be one Bill will have to be carefully considered. I am aware of all the issues involved in that decision, and I can assure the right hon. Gentleman that I shall carefully consider whether it is in the interests of everyone that there should be one Bill or a separate Bill to deal with Scotland.

I do not think that the right hon. Gentleman should draw the conclusion from the statement that he implied in his third question.

Mr. Woodburn

Will there be any interference with the Goschen formula?

Mr. Maclay

I can see no possible reason why the Goschen formula should be affected.

Mr. Ramsdell

Is my right hon. Friend aware that among the local authorities most affected by the new rating legislation there are a number who will receive no benefit from the rerating of industry. Will he bear their claims in mind?

Mr. Brooke

I shall seek to bear everything in mind. I am sure that we should press on as rapidly as possible with the Rating and Valuation Bill in order to remedy the clear injustice existing at present to certain classes of ratepayers.

Mr. Glenvil Hall

When these discussions with the local authorities take place, will it be open to them to press for re-rating at 100 per cent. or have the Government entirely closed their mind to that?

Mr. Brooke

My experience of consultations with local authority associations, in which previously I have generally been on the other side of the table, is that the local authorities press for all kinds of things.

Mr. F. Harris

Would my right hon. Friend be prepared to make adjustments for the rerating of industry by way of Amendment to the present Rating and Valuation Bill?

Mr. Brooke

It would be quite impossible to make so large a change by means of the present Bill—[HON. MEMBERS: "Why?"]—find time for consultation with all those concerned, and take the necessary legislative action, in time to give local authorities a firm basis for their 1957–58 budgets which they are drawing up at this very moment.

Mr. E. Fletcher

Is the right hon. Gentleman aware that, in so far as the professed object of his statement is to strengthen the independence and financial position of local authorities, he is taking a course which has been repeatedly pressed upon him for many years from this side of the House of Commons? Is he aware, also, that as far as one can judge from his statement the measures announced will be totally inadequate unless there is complete rerating of industry up to 100 per cent.?

Mr. Brooke

I am grateful for the hon. Member's support for the general purpose of these proposals. I am not quite sure whether he appreciates how enormous would be the jolt to the whole financial system of the local authorities if what the hon. Gentleman advocates, the immediate rerating of industry at 100 per cent., were given effect to.

Major Legge-Bourke

With reference to the intention to increase autonomy in connection with grants for county district councils, may I ask my right hon. Friend for an assurance that, in the use of the word "industry" in the rerating of industry, agriculture is not included?

Mr. Brooke

These proposals do not extend to agriculture.

Mr. Wade

Could not the Minister arrange for this increase in the rate contribution of industry to coincide with the provisions in the Rating and Valuation Bill? If Clause 1 could be introduced speedily, this change in the rate burden could be introduced with equal speed.

Mr. Brooke

I did examine that matter, and I explained on Second Reading of the Rating and Valuation Bill that it would not be possible.

Mr. Monslow

Is not the purpose of the Government's proposals to reduce taxation for the Government by transferring the burden to local authorities?

Mr. Brooke

The purpose, as I sought to explain, was to give local authorities greater financial independence. They will gain an additional source of rate revenue. It is important that the claims of both taxpayers and ratepayers should be taken into account in that event because, as I explained, the contribution of the taxpayers to local expenditure is at present higher than that of the ratepayers.