LOCAL GOVERNMENT GENERAL GRANT (ENGLAND AND WALES)

HC Deb 08 December 1960 vol 631 cc1455-507

3.52 p.m.

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

I beg to move, That the General Grant Order, 1960, dated 25th November 1960, a copy of which was laid before this House on 30th November, be approved. It may be convenient to the House, Mr. Speaker, if with this Motion we discussed the next one on the Order Paper: That the Grants and Rates (Transitional Adjustments) Regulations, 1960, dated 25th November 1960, a copy of which was laid before this House on 30th November, be approved.

Mr. Speaker

If the House so pleases, yes.

Mr. Brooke

This is the second General Grant Order to be made under the Local Government Act, 1958. It is unavoidable that an Order like this looks rather technical, more congenial to maths, students than arts students, if I may put it that way.

The Order has two main purposes. The first is to prescribe the aggregate amount of the general grants for England and Wales for the next two years, and the second is to determine the way in which the total amount is to be divided among county councils and county borough councils.

If hon. Members read the White Paper which accompanies the Order, they will find there all the background figures and explanations. I understand that the figures embodied in the Order and Regulations have the assent of the Association of Municipal Corporations, the County Councils Association, and the London County Council, who have been consulted. The aggregate amounts of the general grants proposed are £454 million for the year 1961–62, and £472 million for the subsequent year, 1962–63.

The new procedure provides us with a far better forward view of what is proposed for the services in question during the two-year period of the grant than the old system of percentage grants ever did or could. We can now see in advance the development that is planned and the cost that it will entail.

On these services we envisage an expenditure next year of more than £818 million and, in 1962–63, of more than £851 million. The figure of £818 million is an increase of £48 million over the corresponding estimate of the current year and £851 million for 1962–63 is an increase of no less than £81 million over that figure. In other terms, expressed as a percentage, next year's estimate is an increase of 6.3 per cent. over the current year and that for 1962–63 an increase of 10.6 per cent. The grants to local authorities increase accordingly. The grant of £454 million proposed for next year is an increase of £25 million on the current year and the figure of £472 million is the grant for 1962–63.

The House will observe that those are very large figures. They allow for increases in pay and prices since the last estimate was prepared and also for the extra cost which is involved in the development of the services. In paragraphs 14 to 27 of the White Paper, which is available in the Vote Office, hon. Members will see an account of the expected development.

All the services entail extra expenditure in this way. In the years since the war, it is education which has been developing very fast indeed, and that continues, but in this forthcoming period it is interesting to see that the cost of the local health services may be growing proportionately even faster, because they have not only their normal development, but also the stimulus of the Mental Health Act, which Parliament recently passed.

In arriving at these estimates of expenditure, the same procedure has been followed on this occasion as, the House will remember, was followed at the time of the first General Grant Order; that is to say, first, local authorities were invited by the Departments responsible for the various services which are involved to submit the detailed estimates for the two years ahead. I am sure that all my colleagues in the Government who are concerned would wish to join with me in expressing our thanks to the local authorities for their very responsible and thorough approach to this task, and for the speedy way in which they carried it out.

The estimates sent in by the local authorities were then examined by the Departments concerned and it was seldom necessary to question any individual estimated item. But in some instances the individual estimates added up to totals which seemed a bit beyond the bounds of probable spending. The next stage lay in informal discussion of the totals with representatives of the Association of Municipal Corporations, the County Councils Association and the London County Council. Where there were any grounds for regarding the local authorities' estimates in the aggregate as excessive—and by "excessive" I mean over-optimism as to what they could do in the time—the Department concerned made a reasoned proposal for some adjustment of the amount.

That proposal by the Department was discussed and sometimes itself became modified in the light of discussion with the associations. At the same time, adjustments were also made for increases in pay and prices and other costs which had occurred or had been settled since the date at which the individual estimates of local authorities had been made. That date was 30th June of this year. In every case the local authorities' own estimate of the effect of these increases was accepted.

By this process, general agreement was reached that the estimates of expenditure relevant to the general grant should be settled at £818.19 million and £851.15 million for the two years respectively. The final stage preceding the fixing of the aggregate amount of the grants was the more formal statutory consultation which I held personally with members of the Association of Municipal Corporations, the County Councils Association, and the London County Council.

I ought, perhaps, to put in here a reference to the limitation imposed by the 1958 Act itself on the relevance of future increases in levels of prices, costs and remuneration. As the Report explains, in paragraph 9, these increases can only be taken into account if they are foreseeable and measurable. But there is provision enabling an increase to be made in the grant if an unforeseen increase in these items occurs during the grant period, and, as the House will remember, that provision was, in fact, invoked about this time last year.

Before leaving the general grant figures I would like to make the point that, in relation to the agreed estimates of future expenditure, the grant is rather more than would have been payable to local authorities if the old percentage grants had continued to operate.

In our discussions on the Rating and Valuation Bill last week the hon. Member for Fulham (Mr. M. Stewart) alleged that the scheme of general grant, together with the provisions of that Bill, were: part of a strategy, which goes on all the time, a shift of the total cost of maintaining a civilised society away from taxes and towards rates …"—[OFFICIAL REPORT, 30th November, 1960; Vol. 631, c. 512.] Within a week this Order has disproved that allegation entirely. The total amounts of the general grants represent well over half of the relevant expenditure of the local authorities, in the same way as, in the whole field of local government, taxes bear more than half of the net cost of local services.

Before the war, the position was reversed. Rates then bore about 58 per cent. of the net cost and taxes only 42 per cent. A major switch has taken place. It has taken place in spite of the central Government having assumed responsibility for services which were previously paid for out of the local rates, for example, the hospitals, the public assistance service as it used to be called, and so on.

I would like to add that during the financial year 1959–60—that was the first year of general grants—the Government paid over to local authorities 90 per cent. of the general grant for that year, leaving the remaining 10 per cent. for subsequent payment. During the current year 1960–61, which is the second year of general grants, the Government are paying 91¼ per cent. of the general grant for the year together with the balance outstanding from the previous year. It is proposed to pay 92½ per cent. of the general grant in 1961–62, and 93¾ per cent. in 1962–63, in each case together with the balance from the previous year.

In this way we take another step towards the position where 100 per cent. of the general grant will be paid during the financial year to which the grant relates. This is a new advantage that accrues from the general grant system to the local authorities, an advantage which would never have been practicable under the old percentage grants.

I would like now to turn to the changes that are made in the formula for distributing the grant between all the counties and county boroughs. This formula has been reviewed in the light of representations made by individual local authorities and accepted by the local authority associations and the Government. It is obviously impossible to devise a distribution formula which will completely satisfy all local authorities. The aggregate amount of the grant is fixed and, therefore, one authority's gain can only be at the expense of another.

A change in the formula which seems equitable to one body of authorities may, therefore, seem quite inequitable to others. This is, incidentally, particularly the case with what is known as the rate product deduction. The rate product deduction, as hon. Members will recollect, was a feature of the old education grant formula for many years. It was included in the general grant mainly with the object of avoiding too serious a change in the pattern of grants under the new system.

There have been several representations from local authorities to the effect that this factor is unnecessary now because the rate-deficiency grant plays a part in equalising rates. Against this, other local authorities point out that a considerable number of authorities, so-called the richer authorities, are not affected at all by the rate-deficiency grant, and that these authorities would be the greatest beneficiaries if the rate product deduction were abolished. As I said, the rate product deduction was a feature of the old education grant where it co-existed with the former Exchequer equalisation grants. The Order which I am asking the House to approve proposes a modest reduction of the rate deduction factor from 9d. to 8d.

The supplementary grant for declining population has been increased. It has been increased by reducing from 5 per cent. to 1 per cent., measured over a period of twenty years, the percentage of decline that is needed to qualify. I think that this goes some way to meet representations from local authorities that falling populations, and, more particularly, falls in the number of school children, mean losses of grant which cannot be matched by reduction in expenditure on their services. It is not easy to match falls in child population by an immediate reduction in the number of schools, or, for that matter, in the number of teachers required by the remaining children. Most of these claims have been made by areas where the population is going down owing to overspill schemes. More local authorities qualify for the grant as a result of the change in the formula, and the total amount of the supplementary grant in respect of this factor is increased by over £1 million.

The third change is an increase in the amount per head for young children and old people. In some areas where the proportions of young children or old people are higher than the average—I might say that it is not usual for both to be higher than average in the same area—it has been represented that more grant should be allowed to meet the extra cost of providing them with health and welfare services. I think that it is obvious that there is a greater call on these services from the young and the old, and an investigation of costs that has been made indicates that an increase in the weighting for the supplementary grant would be justified.

The present increase allocates an additional £½ million or so to this grant, for the benefit of both classes of population, the young and the old. Each of these changes, we think, is justified on its merits. There may be a case for more substantial changes when the effects of revaluation are known—that is, of course, for the grant period which will begin in April, 1963—but we are not dealing with that now. For the time being it would, in the Government's view, be difficult to justify any changes which would radically alter the pattern of distribution.

Now I come to the Grants and Rates (Transitional Adjustments) Regulations, which also require the affirmative Resolution of the House. The principles of transitional adjustments are set out in Section 15 of the 1958 Act. They provide for contributions to those local authorities which are estimated to lose from the financial provisions of that Act. These contributions are raised by levies on the authorities which gain, and they are in proportion to what local authorities gain. The gains and losses are estimated by comparing the rates required to be levied in 1957–58 with those that would have been required in that year had the financial provisions of the 1958 Act been then in force. The general effect of the Act was that about two-thirds of all local authorities were estimated to gain by the changes it made.

Section 15 provided for full reimbursement to the losing authorities, in 1959–60, of the estimated losses, and reimbursement of 90 per cent. of the losses in 1960–61. It also provided that compensation to losers could be extended to later years by regulations. These are those Regulations. They provide for 80 per cent. of the estimated losses to be made good in 1961–62, and 70 per cent. in 1962–63, so that they embody no new principle; they simply continue the process which the Act laid down for the first two years.

About 50 of the losing authorities have represented to us that compensation ought to be maintained at the 1960–61 level of 90 per cent. until there is an opportunity for a full review of the adjustments when the effects of the 1963 revaluation are known. It is entirely understandable that the losing authorities would like to retain these contributions for as long as possible, and at their present level, but, equally, there are the interests of the gaining authorities to consider, and they are in the majority. With the support of the associations of local authorities the Government have reached the conclusion that it would be reasonable towards both groups to reduce the contributions progressively in the next two years and then to review the adjustments before revaluation takes effect in 1963, as the losing authorities have suggested.

I do not think that any other issues of general importance are raised by these Regulations, but there is one rather technical point which I should perhaps mention, for the record. Hon. Members may wish to know why a new notional general grant has been prescribed for 1957–58—the basic year from which gains and loses are calculated. The new figure, which is £6 million lower than the old, takes account of the latest information about specific grants payable for that year, and the distribution formula has been modified accordingly. The notional grant is relevant to the calculation of gains and losses only for the purpose of the transitional scheme; neither it nor anything else in the Regulations affects in any way the amount of the total charge on the Exchequer.

The general grant, which evoked so much criticism before anybody had any experience of it, has been working for two years, and all the evidence indicates that it is working well. I so clearly remember the allegations that the general grant was certain to be used as a means of making wholesale cuts in Exchequer assistance to local authorities, and allegations that the proper development of education and the other services was going to be hamstrung by the change. The people who were unwise enough to believe all that look very foolish now.

There is an interesting point here, in that the general grant for 1959–60—the first year of all—which was £402 million, was based on an expected expenditure level of £723½ million. From the latest figures it looks as though expenditure in that year amounted not to £723½ million, but to about £707½ million, which is £16 million lower. On the evidence of these figures the local authorities, in the first year of the general grant, received £8 million or £9 million more than they would have had from the Exchequer if the old percentage grants had continued.

We do not yet know how all the figures for the current year—the second year of the general grant; 1960–61—will work out. The estimates of expenditure on which the general grant for 1960–61 was based allow for an increase of nearly 9 per cent. over 1959–60. The 1961–62 and 1962–63 figures are equally fair. Among local authorities I find that the criticism of the principle of general grant has largely vanished, and hon. Members who speak of the evils of the grant, as one did last week—

Mr. Speaker

Order. I am in some difficulty about this. As at present advised, I believe that a discussion of the virtues or vices of the principle of general grant would be out of order in this debate.

Mr. Michael Stewart (Fulham)

Since the right hon. Gentleman has already made one or two remarks of that kind, shall I be in order in commenting on those remarks, Mr. Speaker?

Mr. Speaker

No. I think that the vice is mine. I should have pounced earlier upon the right hon. Gentleman. I have had to do it now to stop those things happening which the hon. Member is proposing.

Mr. Brooke

If my behaviour has been in any way vicious I should like to acquire virtue in your eyes, Mr. Speaker, and sit down now.

4.18 p.m.

Mr. Michael Stewart (Fulham)

These Statutory Instruments were laid before the House on 30th November. That was eight days ago. The very first point that I want to make is that there ought to be a longer period between the publication of these Statutory Instruments and the debating of them by Parliament. They have a very wide scope. The matters with which they are concerned are of great importance to people in all parts of the United Kingdom. This situation, whereby they are made known to Parliament and the country on Wednesday of one week and are debated on Thursday of the following week, has some defects.

First, it does not give hon. Members sufficient opportunity to consult their local authorities as to the effects of the proposals and, secondly, it does not give time for the publication of informed comment on these very technical matters. The Government ought to aim at an interval of at least a fortnight between the publication of this Orders and Regulations and Parliament debating them. I trust that that will be remembered in future years.

That consideration seems all the more necessary with regard to Statutory Instruments of this kind which, before they can be understood have, so to speak, to be translated into ordinary English. That remark applies particularly to the Grants and Rates (Transitional Adjustments) Regulations, which are made by virtue of Section 15 (2) of the Local Government Act, 1958. That subsection says: For the purposes of this section the loss or gain accruing to a rating authority as aforesaid shall be ascertained in accordance with regulations made by the Minister, and such regulations shall provide that it shall be ascertained, on such assumptions as may be specified in the regulations, by reference to the rate required to be levied for the year 1957–58, to the rate which would have been required to be levied for that year if the foregoing provisions of this Part of this Act (other than section eight thereof) had been in force for that year, and to the product for the area of the rating authority of a rate of one penny in the pound for that year, estimated as if the said provisions had been in force for that year, but with any exceptions or modifications specified in the regulations. The draftsman has, happily, ended with a rhyming couplet that draws attention to the fact that it is the end of the sentence—a fact which would not have otherwise been apparent to the hasty reader. That is the dictionary which anyone trying to translate the transitional adjustments Regulations has to use, and that is merely the first step in considering the impact of these Instruments. I trust, therefore, that the Minister will bear in mind in future years the need for a longer period between publication and debate.

I do not think that the Minister dealt with the fact that these transitional adjustment Regulations will go on being made for such years as the Minister himself may specify. They are not meant to be a permanent feature of the general grant. I do not think that the right hon. Gentleman gave any forecast about how much longer he expects to be making such Regulations. Perhaps we shall hear that at the end of the debate. This is only the second General Grant Order. When the Local Government Act was introduced, it was envisaged that General Grant Orders would be made for periods of two or more years, two to be the minimum, except the two specifically prescribed as the period for the first Order. There has so far been no attempt to make one for any longer period than two years, and even in the currency of the first Order it was found necessary to introduce an increase Order.

That is interesting, because it throws light on a comment made at the time of the passing of the Local Government Act. We were told that these general grant provisions would enable the central Government to know for longer in advance with what expenditure they were being saddled. I merely remark that they have not done so yet. This is only the second one. The first one failed to do so because an increase Order proved necessary during the currency of the period. It is very likely, for reasons I will mention later, that the same thing will happen during this period. We must conclude, therefore, that that particular virtue claimed for the Local Government Act, 1958, has not been secured in the event.

The Minister mentioned—I will just touch on this point—that some people who had suggested that this method of financing local government would result in restriction had, as he put it, been proved foolish. I wonder to whom the right hon. Gentleman was referring. The most prominent of the persons who said that the general grant would result in restriction was the present Minister of Health, who claimed for the Local Government Act, 1958, that it was part of the Government's policy for reduction of expenditure. I wonder whether the Minister has told his colleague how foolish he looks. I do not think that he has, because, for reasons which I shall show, I think it is having, and was intended to have, the effect the Minister of Health then ascribed to it.

I want to look now at the process by which the total grant and the distribution are arrived at. The Minister gave a description of that process, but there are certain comments which I think it necessary to make. The procedure is as follows. First, the local authorities put up to the Ministry estimates of their expenditure on the relevant services for the next two years. The local authorities put up the estimates, and the Ministry cuts them down—that is the second stage in the process. In this instance, the Ministry cut them down for the first year period from £834 million to £818 million, and for the second year from £870 million to £851 million. We ought to know a little more about this process of Ministerial cutting down.

We are told, in paragraph 6 of the White Paper, that the proposals put up by the local authorities are examined closely in the Departments. I take it that means the Departments of central Government. As I read that phrase, I wondered how much detail they went into. I got the impression from what the Minister said that they go into a good deal of detail. He said it was not, as a rule, found necessary to question particular items. That suggests that the examination in the Departments is an examination item by item of every project of expenditure in every one of the relevant services. I should like to ask, what has become of the greater freedom for local authorities and the less necessity for them to answer detailed questions which was claimed as one of the benefits to accrue from the Local Government Act, 1958?

It is clear from this procedure that local authorities are subjected to very close and detailed scrutiny by the central Government, not only on their estimated total expenditure on the services but on each particular project. The Minister said that in the course of these discussions there might be a reasoned proposal for adjustment. Does that mean, for example, that a particular Department, say the Ministry of Health, says to a particular local authority, "We see that your estimates are based on the assumption that you will carry out certain projects in the field of mental health in the next two years. We do not think that you will, or we think that you ought to postpone them until another year"? Is that what a reasoned proposal for adjustment means? If so, we cannot conclude that local authorities enjoy a greater freedom from central Government control, or that there is less time spent in argument between central Government and local authority than there was under the previous system.

Those are the first two stages: the local authority puts up the estimates, the Ministry cuts them down. The third stage is that the total figure of grant, which has been arrived at as the result of Ministerial cutting down, is distributed to the local authorities on a formula partly laid down in the Act and partly subject to variation by Ministerial Regulations. The Minister said, if I remember rightly, that this distribution had received the assent of the local authority associations. But I think that the House should realise—it is a fact by no means immediately apparent from reading the papers—that the distribution of the general grant set out in tables at the end of the White Paper is described as a provisional distribution of general grant. It is not necessarily what the authorities are actually to get.

Let us see how it works out in certain cases. One authority which was brought to my notice was told, under the provisions of the General Grant Order, the one made in 1958, that its provisional share for the year 1959–60 would be a little over £1 million. It was told that, of course, when the general grant was made at the end of 1958. On the basis of that information, in the following spring the local authority determined its rate for the year 1959–60. But by the end of 1959, the Ministry having revised the estimate, the local authority found it would get about £52,000 less than the £1 million provisional estimate. So a local authority is given only a provisional estimate of what it will get It has to fix its rate on the basis of this provisional estimate, but the House should not assume that those estimates are the sums of money that each local authority will, in fact, receive. Some local authorities may be more fortunate and some may be less fortunate.

I suggest that the next time a general grant is put before the House we should have, for the previous years, tables showing both what the provisional distribution was and what, in the event, the local authorities actually got. I do not think that we quite realise how slow-moving a procedure this is. It is two years since we debated the last General Grant Order, but it was only in the spring of this year that the first financial year governed by that General Grant Order was concluded, so we are not yet in a position properly to judge what has been the effect on each particular authority of the General Grant Order made two years ago.

Under this procedure the House is not in so good a position for judging the financial relationship between central and local government as it was under the procedure which existed before the passing of the Local Government Act, 1958. I take up, therefore, the phrase the Minister used when he said that under this procedure we could get a better view of what was to happen to local government services. In view of the discrepancies which can occur between the provisional estimates of each authority's share of grant and what they actually get, I doubt very much whether local authorities or the House can get so clear a view, either of what is happening or what will happen.

I mentioned three steps in the process. The estimates are put up, they are cut down, and the total grant is distributed by a formula. The fourth step is that the local authority then gets its grant in instalments during the year, and this, together with the money it raises in rates, it can proceed to spend on the services. It is important to notice that, although the local authority puts up certain estimates for any particular services as a basis for the calculation of grant, once the grant is being distributed the local authority is not under any bond actually to spend on the services the amount that it puts in the estimate. That means that if we look at page 10 of this White Paper, under "Estimates of Expenditure", we cannot conclude from that that these are the amounts that local authorities will spend.

What will happen as between one local authority and another? The estimates which all local authorities put up are invariably cut down before the total of the grant is secured. That means that any local authority which, in the two-year period, spends what it originally estimated will have an extra burden on its rates. It estimates that it will spend £X over a given two years. That amount is cut down before the total grant is calculated. Total grant, therefore, and its share of the grant, are based on the assumption that it will spend only £X minus £Y during those years. If it does, in fact, spend £X, the difference has to fall entirely on the rates. If, during the two-year period, it proves both reasonable and possible for a local authority to spend more than its original estimates, all that extra has to fall entirely on the rates.

Conversely, take the case of a local authority that takes a meaner view of its duties to the public and which is always ready to seek any excuse for cutting down its services. It has got a grant on the assumption that it will spend a given amount on its services. It manages to spend less, but the advantage of that will go entirely to the local rates. There is, therefore, throughout the whole working of this system a prize for local authorities which skimp the public services and a special difficulty for local authorities which take a generous view of their duties. That general criticism of the whole system remains.

I want to say a word or two about block and percentage grants. When we speak of a percentage grant we have to remember that the exact figure per cent. can be varied. If anyone were to say, "I prefer a percentage grant system," that does not necessarily mean that he is wedded for all time to the particular percentages that were in force before the 1958 Act was passed. We on this side of the House have frequently expressed the view that the actual percentage found by central government under the percentage grant system ought to be increased. It is not an answer to say that the block grant gives more than the old percentages would have given. No doubt that is because the old percentages were inadequate percentages. As a contribution to the argument in principle between block grant and percentage grant, that has no validity.

I have described the process; let us see how it has worked out on this occasion. If we take the first two steps, the putting up of the estimates and the cutting of them down by the Ministry, what has been the effect over the years of the operation of those steps? I think that it can be described as follows. Take the first year in which this came into operation, the financial year 1959–60. The amount of grant then—I give this to the Minister—was 11 per cent. higher than that given by the percentage grant system in the previous year. We can say there was an 11 per cent. increase of grant for the relevant services as between 1958–59 and 1959–60.

It sounded very generous. It was, of course, one way of making the thing attractive to local authorities that in the first year in which it was introduced there should be an exceptional increase in grant of 11 per cent. In the next year the increase of grant over the previous year fell to 6.7 per cent. In the next year, 1961–62, it will be an increase of only 6 per cent. and in the year after that there will be an increase of only 4 per cent.

We are dealing all the time with services which in a civilised society must expand. The need for educational expansion is beyond dispute. The propriety of a society which is getting wealthier expanding its services for the mentally sick is not in dispute. The need for the fuller use of powers of town and country planning and a rise in expenditure on that service is not in dispute Yet, in dealing with all these expanding services where the total amount of money spent ought quite properly to be expected to rise year after year, the rate of increase under successive general grants is being gradually taken off. The grant made for 1958 and operating for 1959–60 was exceptionally large.

I should remind the House that it was the one made in the year preceding the General Election and that things have never been quite so good for local authorities since. We also notice that over the three years from the year ending 1960 to the year ending 1963 the total increase in the amount of money which local authorities have wanted to spend has been 23 per cent. What they wanted to spend in 1963 was 23 per cent. more than what they wanted to spend in 1960. The grant, however, will have risen by only 17½ per cent. in those three years.

If the Minister calculates for each successive year that this has been in operation the proportion which the grants bear to the estimated expenditure of the local authorities, he will find that that proportion has been falling as the years go by. That is why I have said and now repeat that we are here faced with a strategy that shifts gradually but unmistakably the burden of the services away from the central Exchequer and towards the local rates. I am aware that there was a big advance when this scheme was first introduced, but since then the movement has been entirely in the other direction.

It is important to remember this when the Minister quotes figures of absolute increases in the grant year after year. Of course, the total of the grant increases year after year. There are more people in the country, and we are supposed to be living in a society which is getting wealthier every year, but these figures of absolute increases tell us very little. We have to see them in relation to the growth of population and the total size of the national income, and compare the size of the grant with the size of the total expenditure that local authorities expect they will be carrying out.

Another thing which the Minister pointed out—and I thought that he took some pride to himself in this—was that local authorities in one year estimated that they were to spend £723 million, but, in fact, spent only £707 million. It is a stock defence of the size of the grant to argue that the local authorities take too optimistic a view of what they can spend, and that, in fact, their own estimates are not such as would warrant a bigger grant.

Mr. Mark Woodnutt (Isle of Wight)

Would not the hon. Gentleman agree that there is a great tendency, when estimating and putting in a forecast on which the grant will be based, to overestimate rather than underestimate? In view of that fact, it is to be expected that the actual figures to be worked out will be lower than those submitted in the estimates.

Mr. Stewart

I do not dispute that, but the question I ask is why is it that local authority estimates are not greater than they are. I think that if we ask that question, we shall get some interesting answers.

There are five factors affecting and limiting what local authorities either can or want to do, as against what they really need to do. The first is one that I have often mentioned in the House—the burden on local authorities of interest rates. For example, if we look at the local government financial statistics, and 1958–59 is the last year mentioned in them, and if we compare that year with the year immediately before it, we shall see that in that period the total expenditure of local authorities went up by a little over 6 per cent., but that their expenditure on loan charges went up by 10 per cent.

That is one factor which is checking and discouraging local authorities in the expansion of services—this realisation that an increasing proportion of every £1 they spend goes not on providing the services, but simply on paying interest on the money borrowed. The Minister and the Government, by their interest rates policy, have created a situation which discourages local authorities, and the effect of that discouragement in their estimates is often used by the Minister as a reason to justify the limited size of the general grant.

We notice that particularly in the service of planning. For example, again the local government financial statistics show that as between the year ended 1958 and the year ended 1959, loan charges on the service of town and country planning went up by as much as one-third during that single year, and loan charges in that service account for about three-eighths of the whole of the money spent on it. It is not surprising to find therefore, that we are told, in paragraph 27 of the White Paper, that expenditure on town and country planning has been less than expected, and that we find, on page 10, that it is anticipated that in 1962–63 only about £2 million will be spent on that service. The Barbican Development Scheme, in the City of London, will cost £15 million, and this figure therefore indicates at what a very slow rate this very necessary service is progressing.

I have mentioned this first factor of interest rates. Secondly, there is the effect on authorities of the high cost of land. Many of them are being induced to postpone or forgo services which they would like to carry out wherever those services require the purchase of land, because of the prohibitively high prices to which land in some parts of the country has risen.

A third factor which may come into play during the period of this general grant is labour costs. Quite recently, wage claims have been made which may face the local authorities with an expenditure of about £13 million. I am sure that the Minister is aware of that, and I trust that we shall hear, at the end of the debate, that the Government will keep an eye on this problem and will be prepared, if necessary, to introduce an increase Order to deal with that factor, or indeed any other unexpected cause of increased expenditure.

A fourth factor limiting local authority estimates is expenditure which they have outside the field of the services covered by the block grant. Take, for instance, the recent statement about an increase in police pay. That will involve some increased rate expenditure. Although that is not a block grant service, money has to be found out of the rates, and that will limit what the local authorities feel they can spend on the other services.

Fifthly, and perhaps in the long run the most serious factor limiting local government expenditure, is the acute shortage of expert workers in so many fields. Very often, a local authority's decision to spend only a certain amount on the service of town and country planning is determined by the limited availability of the services of skilled planning officers and architects. What an authority can do in its health service may be limited by a shortage of midwives. What it can do in its education service may be limited by a shortage of teachers. It is not sufficient, therefore, for the Minister to say that, after all, the local authorities asked only for so much, or that the local authorities in previous years were unable to spend what they had estimated.

If that happens, the Minister ought not to regard it as a triumph, because it does not represent a real economy—that is, doing the same amount of work with less money—but reflects a failure to do the work because there were not sufficient skilled people there to do it. That is not, or should not be, an occasion for triumph by the Minister. It should be an occasion for regret. I had hoped that he would have touched on this point in his speech, for this is seriously affecting local government as a whole.

The Minister ought not to regard himself so much as the person who checks local authority expenditure, but as the person who helps and leads local authorities in the carrying out of necessary and humane social services, and I therefore hope that the Government will address their mind to this problem of the shortage of skilled workers in local government services of all kinds.

I want to say a word on the distribution formula, and the only point on which I wish to touch is the alteration that has been made with regard to declining populations. We on this side of the House were comforted a little by the fact that the alteration had been made. It goes to show that the things which we say on this side are not entirely without result, even when we are dealing with the right hon. gentleman the Minister of Housing and Local Government. My hon. Friend the Member for East Ham, South (Mr. Oram), other hon. Members and myself, whose local authorities were affected by or who were concerned with the question in general, have raised this point of the unfairness of the general grant, particularly to local authorities with declining populations, and it is some comfort to observe that the Minister has gone some way in the direction in which we asked him to go.

I ask him, however, to consider this situation: the supplementary grant to declining populations is calculated with reference to the decline over the last twenty years. It used to be twenty-one years and it is now twenty. Does that give sufficient help to local authorities who have suffered a very sharp decline in population quite recently? Ought one not to look at what has happened to populations over a much shorter period, say over the last five years, than over the last twenty years? I have a list of authorities here in which there have been marked declines in population in the two years between 1957 and 1959. In Smethwick, there was a population drop of 2.6 per cent. in those two years; in Derby 2.9 per cent.; in East Ham and Wolverhampton, 2.5 per cent.; and in Leicester, 2 per cent. Those are declines in population between 1957 and 1959.

It is also noticeable that when a decline of population occurs it is accompanied by a very marked decline in the number of school children, so that at times the local authorities will get a bit more because of this concession which the Minister has made over the declining population grant and, on the other hand, will lose because of the decline in the number of school children. What it receives under the rate deficiency grant will also be adversely affected. I therefore think that the Minister should look into the question yet again. He may find that it is not only regulations but part of the wording of the Act which need to be altered.

What is significant about the distribution formula is the way in which it enables the Minister to control the destinies of particular local authorities. By an alteration of a single paragraph in one of these Orders or Regulations he can make differences of £10,000, £20,000 or £30,000 to the grants of particular authorities. At the end of the day local authorities have not much more freedom from control by the central Government. This is another way in which more power is placed in the Minister—his power to regulate the distribution formula.

May I comment briefly on the effects on certain services? I will say nothing about education, despite my former associations with it and present affection for it, because that will be dealt with by my hon. Friend the Member for Sunderland, North (Mr. Willey), who is to conclude the debate from this side of the House. I notice that under paragraph 18 any expenditure arising from the implementation of any part of the Anderson Report will be dealt with separately, although I am not clear how and by what machinery, and I hope that we shall be told.

I will also comment on planning. I remarked earlier how specially hit that service is by the burden of interest rates and the cost of land. The Minister should remember that there is a great need for certain local authorities, in particular, to plan city centres, but that it is a very expensive process and that it is doubtful whether the estimated expenditure on planning mentioned in the White Paper measures up to the amount of work which needs to be done in that respect.

Thirdly, I want to mention mental health, which is referred to in paragraphs 21 and 22 of the White Paper. There are very great differences indeed between one local authority and another in the way in which they carry out their responsibilities, either under previous legislation or under the recent Mental Health Act. Some of them have been extremely go-ahead and have been pioneers, but others lag far behind. The Minister ought to keep a special eye on the subject to see that laggard authorities are brought nearer to the level of their more public-spirited colleagues. In particular, the White Paper mentions the need for an increase in the number of training centres provided both for children and for adults and in the residential accommodation provided for patients who may need residential care.

May I comment on these training centres? A little while ago, through the courtesy of the Society for Mentally Handicapped Children, I saw a film, which the Minister may have seen, entitled "There was a Door", which described what can be done to help those who are very seriously mentally afflicted and stressed the great importance, in particular, of industrial training centres for the older mental patients.

More and more we are coming to the conclusion that, as far as humanly possible, the mentally afflicted should live in the community and not out of it. One special reason for that is that at present the more serious forms of mental affliction appear to be incurable, but that, after all, was held of many diseases in the past which are now curable. We do not know what future science may offer in that respect. If, in general, the seriously mentally handicapped live away from the community, there will not be the same spur to try to find cures for serious mental disorders as there will be if they live in the community and the community is kept aware of the problem. When I saw that film and made a further study of the matter, I was amazed by what can be done for those who at first seemed to be doomed to a life of complete seclusion and uselessness.

It is very important that this work should be carried on and expanded, and I hope that the Minister will not allow ideas about the independence of local government to be interpreted to mean that if a local authority chooses to neglect its duty in this matter and save on the rates, he will allow it to get away with such a policy.

When these subjects are debated we need rather fuller information and a rather longer time between the publication of the Order and our debate on it. Despite the figures of absolute increase of money which the Minister quotes, we ought to realise the quietly restrictive nature of this policy on the independence of local authorities and on their power to expand their services. The Minister himself drew attention to that not long ago when we discussed the Rating and Valuation Bill, for he pointed out that under that Bill the rateable values of local authorities would be increased and that he would have to take that into account when the next general grant was considered, as he put it, to redress the balance between central and local expenditure. That phrase suggests that in his opinion the central Government are bearing too much and that he wants to push more of the burden still on to local expenditure. I must tell him that we on this side of the House do not accept that.

Whatever criticism we may have of the Order and Regulations, we cannot vote against them because we all want the local authorities to have the money. There is a difficulty about the procedure of the House in the twentieth century. Historically, the procedure of the House was designed to prevent the Crown from spending money on purposes which, to the country at large, seemed unwise or unnecessary. All that has changed. Instead of an irresponsible Sovereign we have an elected Government, and what we want is procedure to make sure that enough is spent on purposes which the nation believes to be wise and necessary.

But all our procedure is devised, as in this debate, to trying to restrict expenditure. We have to recognise today that it may sometimes be necessary to say to central Governments and local governments, "You ought to spend rather more". It is because the general grant procedure does not fully realise that necessity that we continue to register our protest against this way of handling our local finances.

5.0 p.m.

Mr. Frederic Harris (Croydon, North-West)

I wish to take a little further what the hon. Member for Fulham (Mr. M. Stewart) said in regard to the effect of the general grant on the local ratepayer. I agree with the hon. Gentleman that the increased costs of the services covered in the General Grant Order will, in due course, automatically impose a greater percentage burden upon the local ratepayer. In my view, this is a very disturbing feature.

In my borough council, county council and Parliamentary work, I have always been keenly interested in local authority finance. I have very decided views about it, some of which are known to the House. This debate on these two years of general or block grant for 1961–62 and 1962–63 gives me an opportunity to refer specifically to the effects on my own very important local authority, particularly in regard to the domestic ratepayer and the additional burden that is eventually going to fall on his shoulders.

As my right hon. Friend himself said, this General Grant Order appears to follow the pattern of the operation of the present General Grant Order of 1959–60 and 1960–61. I cannot see that there are any new principles involved, although, as my right hon. Friend explained to the House this afternoon, the formula of distribution of the global sum is slightly amended.

The estimates of expenditure by local authorities on services formerly aided by these specific grants were £833 million for 1961–62 and £869 million for 1962–63. But my right hon. Friend himself has fixed the assumed expenditure at the lower figures—as has already been quoted—of £818 million for 1961–62 and £851 million for 1962–63. After reading carefully the White Paper, I cannot see what my right hon. Friend's reasons are for these actual reductions.

I assume that as the actual expenditure for 1959–60 was some £707 million, which was less than the revised estimate of £723 million, this in itself might have had a bearing on my right hon. Friend's assumed reductions in the Order which we are debating this afternoon. With the 1959–60 actual expenditure underestimated by some £16 million, the Minister has now automatically assumed a further reduction of £15 million on 1961–62 and £18 million on 1962–63. Of course, these are only assumptions, and, as the hon. Member for Fulham has pointed out, these assumptions could be wide of their mark and we may subsequently be faced with considerable variations.

I decided to bring these figures down to the effect which they would have on my own borough of Croydon. I asked the borough treasurer what Croydon's grant was in 1960–61. I understand that it was £2,121,219. I gather it is estimated that for 1961–62 the grant is going to be increased by some £97,000 to £2,228,806. Croydon's total expenditure under the heading of these services for 1960–61 was £4,107,000 and for 1961–62 it is expected to be £4,442,000, which is an increase of £335,000, or 8.2 per cent., in the one year over the other.

Under this Order it would appear that Croydon will only get an extra £98,000 towards the increased cost for these services of £335,000. Therefore, Croydon will be compelled to find the difference of some £237,000, which is over 70 per cent. of the difference, from its ratepayers. If we assume that a 1d. rate in Croydon produces £20,500, this will mean asking the Croydon ratepayer for an extra 11½d. in the pound. I consider that a very considerable additional burden for the Croydon ratepayer to have to bear.

The estimated increase in Croydon's expenditure for these services in the one year over the other is 8.2 per cent. That actually falls very closely into line with the average expected throughout the country of 8.3 per cent. Therefore, Croydon is not doing anything wrong in its average estimated expenditure. My right hon. Friend has assumed an increase of only 6.3 per cent. and the general grant will be increased by only 5.8 per cent., and Croydon's share of that is as low as 4.6 per cent.

This does not appear to me to be very satisfactory at all from the point of view of the Croydon ratepayer. The greatest burden of the required extra finance will undoubtedly fall on the shoulders of the domestic ratepayer who at the moment has to find 54 per cent. of Croydon's total rate bill, and that is against a figure mentioned by the Minister the other day of 47½ per cent. national average.

Under the new Rating and Valuation Bill, which we discussed a week ago, the Croydon domestic ratepayer may well eventually have to find as much as 62 per cent. of the total bill. The unfortunate reason why Croydon's percentage increase in the grant is less than the general percentage is due entirely to the operation of the distribution formula. Of course, as we know, it was devised to allocate the global sum on a basis of needs and resources of the sharing authorities.

A considerable time ago I spoke in the House on this very point. I then envisaged that Croydon would come out badly on the change-over. Unhappily, this forecast appears to be correct, because Croydon loses out on the school children factor of the supplementary grant. The figure of Croydon's school children per thousand of the population is below the national average, and the rate product per head of the population is above the national average.

I asked the borough treasurer what increase there would have been in Croydon's grant under the old percentage system. I am advised that against this new increased expenditure of some £335,000, under the old Order Croydon would have received £180,000 of that amount—nearly 54 per cent. of it. But under the present Order Croydon will only get £98,000 of it, which is short of 30 per cent., and it will lose some £82,000, which represents 4d. on the rates.

I also remember forecasting this sad fact during the change-over of the grant system. The results are not really unexpected, as the Government's policy laid down in the original White Paper, and on which the new grant scheme was based in July 1957, foreshadowed a reduction in the proportion of local grant Government expenditure to be borne through the grants. That in turn means that the proportion of expenditure to be borne by the ratepayers will be higher.

What is the Government's intention with regard to the future of these general grants? I was virtually the only Conservative M.P. for years who advocated the abolition of industrial derating. In 1956 I seconded a Private Bill to try to achieve this. I listened to the Minister's opening speech on the Rating and Valuation Bill on 30th November. He made specific references to the general grants. He foresaw that through them local authorities might be deprived of some of their derating benefit. Industrial derating in Croydon costs the authority £328,000, which is a 1s. 2d. rate. I am most anxious that there should be no further curtailment of general grants because of the abolition of industrial derating. This is a vitally important issue.

Mr. Deputy-Speaker (Sir Gordon Touche)

We cannot discuss the Rating and Valuation Bill in this debate.

Mr. Harris

I am not doing that, Sir Gordon. I am only following the pattern of the Minister and the hon. Member for Fulham, who referred to these very facts. It is obvious that one must be concerned about whether the present grant allocations under the Order will be maintained. I had hoped that I could have continued to discuss that for a few minutes.

Mr. Deputy-Speaker

No. That has been referred to, but we obviously cannot discuss it in any detail.

Mr. Harris

I will try not to, Sir Gordon. I am just making the general observation that I am very concerned about the effect of future general grants upon Croydon ratepayers.

As the hon. Member for Fulham said, local authority expenditures under the headings in the Order are constantly rising. We are developing additional services. There are improvements all the time in the existing services enumerated. There are to be salary and wage increases and, although it is not covered in the Order, the hon. Member for Fulham referred to the fact that there will be the extra cost of the police to be borne very shortly, with which I am in full agreement.

If the Royal Commission's Report on Greater London is brought into being—and I trust it will not be, for it will indeed be a bad day for Croydon—then it will also cost the Croydon ratepayers more. If, in addition, the general grants are curtailed even further, as they have been in this case to Croydon's detriment, what will be the lot of the ratepayers? They have enough to find at present.

I hope that the Minister when he replies will give some kind of assurance that future general grants will not be curtailed because of the abolition of industrial derating. The Conservative Party has constantly urged people to buy their own homes. It has also concentrated specially on persuading young people to invest for the future in their homes. What we do under these general grants, particularly in the years ahead, will have a great bearing upon whether we can legitimately continue to encourage them to do this, bearing in mind the rate expenditure they will have to meet. I wish a formula could be found to ease their lot.

I need hardly remind the Minister that the services mentioned in the Order—education, local health and welfare, child care, road safety, planning, fire services, and even school crossing patrols—will constantly cost more. No one will dispute this. What possible comfort can the Government offer to present and future ratepayers, particularly those in Croydon? Can the Government, with the aid of these general grants, forecast any kind of rate stability? This seems almost impossible.

One thing that certainly shakes the public out of its general apathy towards local authority work is the constant increase in rate demands. If nothing else can be done to help to stabilise rates, I suggest that we need greater flexibility in these future general grants. I appeal to the Government to think, not only of today or even in terms of 1961–62 or 1962–63, but to endeavour to look further ahead and tell us where we the ratepapers are really heading.

5.16 p.m.

Mrs. Joyce Butler (Wood Green)

I echo the hope expressed by the hon. Member for Croydon, North-West (Mr. F. Harris) that the Minister will not in future years curtail the general grant. The hon. Gentleman will forgive me if I do not follow him any further on that point, because this debate on general grants is limited in its scope and yet covers a very wide field. That makes it extremely difficult to speak without getting out of order and still make the points which are necessary to be made in relation to the general grant order which is before us today.

I thank the Minister for his praise of local authorities in preparing their estimates on which the general grant has been based. I do not know whether he appreciates that, in addition to his own difficulties in dealing with these estimates at the Ministry, local authorities had very great difficulty in preparing their estimates for the Minister by 15th August this year. Normally they would not have been preparing their own estimates until the end of this year or the beginning of next year.

The Parliamentary Secretary to the Ministry of Housing and Local Government (Sir Keith Joseph)

I hope the hon. Member for Fulham (Mr. M. Stewart) will note that, because he was understandably complaining about the short notice we were able to give in our turn.

Mrs. Butler

This is another point. Local authorities have co-operated tinder considerable difficulty, and I was pleased that the Minister acknowledged that. The General Grant Order has now been published, and the point my hon. Friend was making was that we have been given little time to weigh up its effects. I think that is very important and does not really alter the point I have made.

I want to confine myself almost entirely to paragraph 27 of the White Paper, which deals with the development of planning. This is a very special problem under the general grant procedure. I quote what the Minister says in that paragraph: The expenditure is incurred mainly in the acquisition, clearing and preliminary development of areas of bad layout or obsolete development which are being cleared and redeveloped by the local authorities and of land needed to provide more public open space. It consists mainly of loan charges on capital expenditure, whether incurred currently or in earlier years, after allowance has been made for the value of the land on which redevelopment has been completed. There was steady progress during the first general grant period, though less than expected. … It then goes on to talk about provision being made for increases in future schemes.

A point that is very relevant to this discussion is why redevelopment was less than expected in the first grant period. The Minister will no doubt know more of the reasons for that than a back bencher can possibly know. There is no doubt as to the need. As my hon. Friend the Member for Fulham (Mr. M. Stewart) said, we are all agreed that the redevelopment of blighted areas is a prime necessity at present. It is one of the things on which town planners, architects, social workers and very many other experts are agreed. It has been said that today we are having to pay the social cost of the industrial revolution by having to redevelop blighted areas.

The need being so great, it is very difficult to understand why progress has been so slow. I am quite certain in my own mind that one of the reasons is the difficulty of the financial side of redevelopment. It has already been said that redevelopment involves very high costs, very largely due, among other things, to the increased cost of land. But, in addition to that increased cost, there are difficulties in the general grant arrangements—and it is to those that I want particularly to refer—and difficulties arising from uncertainty about any other form of financial help for local authorities that want to engage in redevelopment.

The Minister will know that the financial arrangements for redevelopment are extremely complex. It would be safe to say that in an area like Middlesex, with which I am most familiar—but this is probably true over a large part of southern England—the increase in the cost of housing land has been about 300 per cent. as between 1958 and 1960. That is a very large increase to a local authority considering redevelopment. Although I am referring to housing land, and it is always maintained that housing costs must cover themselves, local authorities will hesitate very considerably before undertaking redevelopment when faced with such increased land costs.

The county boroughs have a proportion of the general grant for planning purposes. They can use that as they wish. If they wish to undertake central redevelopment they can use the grant for that purpose. The county districts cannot do that. That is an important point, because it should not be supposed that redevelopment of blighted areas is necessary only in the large cities that are county boroughs. There are a great many districts—non-county boroughs—not only in Middlesex but in Lancashire and the North, and in southern England—where redevelopment is vitally necessary.

The authorities concerned have no means of ensuring that they have a proportion of the general grant to help them in their redevelopment. The general grant goes to the county authority, not to the non-county authorities that are actually carrying out the redevelopment—except by grace of the county authority. There is no mechanism or formula or means of ensuring that they get the amount of the general grant that the Minister says he has set aside for this essential development and which goes to the county boroughs and counties for that purpose. These are very important matters, because we cannot afford to allow local authorities to let up in the essential task of redevelopment.

Another factor is the uncertainty of getting other grants. For many authorities the expensive site subsidy that the Minister can make to local authorities that are building on very expensive sites is again an uncertain grant. The ceiling of that subsidy is in a state of fluidity, if I can put it that way, and many authorities have no idea what that ceiling will be. It is asking a very great deal of a local authority, uncertain of getting any help from the general grant paid to the county authority, uncertain of the ceiling of the expensive-site subsidy, and faced with increased land costs and all its other difficulties, to expect it to say, "We will undertake a scheme of comprehensive redevelopment which will cost a very great deal and will extend over a period of years."

I know that representations have been made to the Minister on that matter, and I ask him to consider some of the consequences. One, I have already indicated—local authorities just will not redevelop their obsolete areas. They will feel that they cannot possibly do it, so they will not do a job that someone has to tackle if the areas are not to degenerate very quickly and so become slum-clearance problems.

The other alternative is that local authorities will proceed with redevelopment but, instead of building the houses that they otherwise would have built, they will see how they can bring in more commercial development to help meet the high cost of the scheme. If that were extended on any scale at all it would make nonsense of our ideas of planning. The Minister has only to visualise a ring of, say, the boroughs of Middlesex, where they have worn-out mixed areas in which they have planned a certain amount of open space, some allotments, houses, and just a few shops to serve the area. If they are to change their schemes—put in a large amount of commercial development, perhaps, cutting out the open spaces and cutting down the houses—it will make nonsense of any peal planning in those areas.

There will be a temptation to many authorities to do that when they redevelop, in order to try to cover the cost of their schemes. If they do so, there will be an increase of employment in some areas where the Minister and many of us are very anxious to reduce employment because, if we increase commerce instead of housing, we do just that.

More important than all this is the effect that it will have on the overall supply of building land for houses. We are being told on all sides, particularly by private developers, that there is a shortage of building land for houses. It is then said, "There is no shortage—look at the worn-out areas of our towns and cities. We can there build—and build, perhaps, at higher densities."

Those areas are there to be developed, but the commercial developers, in the main, are not interested in those areas because a sufficient profit cannot be made out of them. They cannot see themselves getting an economic return from housing redevelopment. The local authorities are the people who must do that and, if they do not, we put terrific pressure on virgin building land and on green belts, whilst these areas which obviously should be used for housing are being allowed to run down and are not being redeveloped as they should.

I have spoken at some length about one particular aspect of the general grant because the Minister indicates in paragraph 27 of the White Paper that he is priming the pump. He says that he has made a substantial increase in provision for public open spaces and also for redevelopment schemes. If he is priming the pump, he should make quite sure that he primes the right pump. From the point of view of the non-county boroughs, to put money into the funds of county authorities with no kind of assurance that it will come to the non-county boroughs for redevelopment is really not a satisfactory way of handling the matter at all.

From the county angle, the county in its planning expenditure covers such important things as the acquisition of non-conforming industries. To take my own county again, Middlesex County Council is planning to spend £500,000, I think, this year on the acquisition of non-conforming industries and to increase it to £700,000 next year. This is very important, and I do not believe that any non-county borough in Middlesex would grudge that money being spent. Indeed, they would like a great deal more to be spent on the acquisition of non-conforming industries. But the more Middlesex spends on that, the less it will have available to pass on to the non-county boroughs in Middlesex and the county districts which want to undertake redevelopment.

This is the vicious circle in which planning finance is at the moment. I hope the Minister will look at the matter very carefully, not riding away from the problem by saying that he will increase the amount allocated to town and country planning. It may help some authorities, the county boroughs, but it will not help the county districts unless he can find some means of ensuring that they do receive a proportion of it without detriment to county planning needs.

The Minister will remember that the old formula, from which he departed when he introduced the general grant, of paying local authorities 50 per cent. of their loss on their planning account for redevelopment of blighted areas was a very simple and straightforward one and, when they planned redevelopment, they knew that they would have that, and, therefore, they were able to look ahead over a period of years and bring in redevelopment schemes which they had some hope of bringing to fruition. Today, local authorities face all the difficulties I have mentioned and, moreover, they face the possibility of starting on a scheme which may be intended to cover 20 years and then wondering whether, at the and of five years, let us say, they will be able to continue the scheme to the very end because costs are rising, the difficulties are so burdensome and the uncertainty is so great.

I ask the Minister to consider whether, since he pays housing subsidies direct to local housing authorities, he might in the case of redevelopment find a means of ensuring that local authorities do receive a planning grant direct so that it goes to both counties and non-county boroughs in accordance with the planning work which they are doing.

That is all I have to say. I have limited my remarks to one aspect of the problem, but it is an aspect which very often tends to be overlooked in the debates. Moreover, it is something which, I think, will become of increasing importance. I ask the Minister to examine the points I have made. If he cannot answer today and offer a means of meeting the problem, I hope he will discuss the matter again with the local authority associations and the people most concerned with a view to finding a way out of the difficulty.

5.34 p.m.

Mr. Mark Woodnutt (Isle of Wight)

For a minute or two I wish to follow the hon. Member for Fulham (Mr. M. Stewart) and my hon. Friend the Member for Croydon, North-West (Mr. F. Harris) in their expression of concern lest it be the Minister's intention to manipulate the general grant and shift the burden of local authority expenditure from the taxpayer to the ratepayer. I share that concern, although I confess that I can see no evidence from his record that that is my right hon. Friend's intention. Should it be his intention, I must warn him that I would be one of those on these benches who would resist any action of that sort, because I think that the burden on the ratepayer is already heavy enough.

I have risen to criticise the General Grant Order before us today, but in so doing I wish to make it quite clear that I am not against the general grant in principle. The Minister has told us that in the aggregate authorities will receive as great a percentage under this general grant as they did hitherto under the percentage grant. I wish merely to protest against the adverse effect it has on some authorities, including my own county of the Isle of Wight. I realise that the Isle of Wight is one of a small minority affected in this way, but for that very reason I feel that something should have been done to give relief.

A week ago last Sunday, the Leader of the Opposition and his hon. Friend the Member for Southampton, Itchen (Dr. King) visited my constituency on one of their Marathon tours and stayed long enough for the hon. Member for Itchen to inform my constituents that I had denounced the block grant in the House—meaning, of course, the general grant—and had then voted for it. I wish again to make the matter quite clear. I am not against the principle of the grant. I wish to quote from HANSARD of 25th February this year, where I am reported as having said in that debate: I am satisfied that for the country as a whole the general grant system is preferable to the old system of percentage grants It has the merit of enabling the Minister to budget for a fixed amount of expenditure, and it should stop any tendency on the part of local authorities"—[OFFICIAL REPORT, 25th February, 1960; Vol. 618, c. 611.]

Mr. Deputy-Speaker (Sir Gordon Touche)

I must remind the hon. Member of the Ruling given by Mr. Speaker.

Mr. Woodnutt

I am sorry, Mr. Deputy-Speaker, but I am leading into the subject of this General Grant Order as I wish to take this opportunity to correct a misstatement made by the Leader of the Opposition and his hon. Friend in my constituency which received massive publicity.

Mr. Deputy-Speaker

Those circumstances do not make it in order.

Mr. Woodnutt

I beg your pardon, Mr. Deputy-Speaker. I am not very well versed in the procedure of the House since I have not been here very long. I shall abide by your Ruling.

Although the grant is sound for the country as a whole, it has an adverse effect on some authorities. The system as a whole is good. It enables each authority to know precisely to what figure it must budget.

When we consider local authorities with declining populations, to which reference has already been made by the hon. Member for Fulham, we do not have to look far to realise that they are adversely affected compared with other authorities. During the debate last February, I suggested to my right hon. Friend that he should introduce a new factor into the formula in order to give extra money to authorities with a slightly declining population. I am very pleased to see that he has done that, but the outcome is a little ironic. I was one of the people to press for this change, and my local authority, through its local authority association, pressed for it; but unfortunately, my local authority does not benefit one iota from the adjustment which my right hon. Friend has made in paragraph 9. The reason is that my right hon. Friend relates the decline in population of 1 per cent. to the year 1940, twenty years ago.

The Isle of Wight had a smaller population in 1940 than in 1960. Although our population is declining year by year—the reduction was 510 last year—we do not get any benefit from this extra provision which the Minister has included in the Order. Why has he chosen twenty years? Why not five, ten or thirty years? The year 1940, when we were right at the beginning of the war and circumstances were exceptional, does not seem to be a good year to take as a basis. I suggest that my right hon. Friend would be much wiser to compare the population year by year from the date when he first introduced the general grant.

I want to look a little more closely at the effect a declining population has on some authorities. The population of England and Wales, as a whole has been steadily rising since the end of the First World War. In only two years was there a decrease—1941 and 1951. The increase in England and Wales, between 1958 and 1959 was no less than 277,000. That is an increase of over .6 per cent. I do not know the figures for 1959 to 1960 because they have not yet been published, but I would think that, on the average of the past few years, we can safely assume that the population of England and Wales is still steadily increasing by .5 per cent. per annum.

We in the Isle of Wight are suffering from a steadily declining population. Other local authorities are affected in the same way. The drop from 1959 to 1960 was .5 per cent., the same percentage by which the population of the rest of the nation in aggregate increased. Not only does an authority in the position of the Isle of Wight receive grant on a smaller number of people than the previous year, but it does not receive the normal increase which most authorities receive based on their increased population. No doubt it could be argued that when there are less people there are less services and facilities to provide and, therefore, the costs are less. But that is not so.

The fall in expenditure in any concern, whether it is a business or local authority, is not related to the fall in population. There are items which accountants call fixed overheads which already apply. As my right hon. Friend said in opening the debate, if there is a small drop in population we cannot shut down a school or an old people's home. We cannot discharge any staff. The same staff is required to run the old people's home and the schools. Although we have a decline in population, we certainly do not have a reduction in expenditure. It is unreasonable not to make an allowance for that fact. If an authority has a slightly declining population and each year the amount of the grant in aggregate is fixed, it must mean that the authorities with the declining populations will, year by year, receive a smaller proportion of the total amount of money available.

I have worked out the figures for the Isle of Wight. Whereas the percentage grant for the rest of the country expressed as a percentage to relevant expenditure is 55.5 per cent., for the Isle of Wight it is as low as 48.26 per cent. That is a very wide difference, and, as things are and as year succeeds year, it will get progressively larger. It must be borne in mind that authorities with declining populations do not get the normal increase in the product of a 1d. rate which can be expected in other authorities. They therefore lose both ways.

In my authority we are doing the best we can to increase our population. We have one of the highest birth rates in the country and one of the lowest death rates, but the trouble is that there are not enough opportunities for our young people and they leave the island. We have even agreed with the Home Office that we should have yet a third prison, in Newport. I am told that the prison population counts in calculating the general grant.

Finally, I plead with my right hon. Friend to look at the matter again. As the chairman of the finance committee in the Isle of Wight, I feel so strongly about the matter that I should not have supported the Government this evening had there been a Division. I am most disappointed that nothing has been done about this matter. I suggest to my right hon. Friend that, as an alternative to adjusting the general grant for declining population over the last three years, he might work out each year the figures as presented today and then, wherever a local authority has a grant which is less as a percentage to its total expenditure than the average for the country, it should be made up to that average. That would go a long way towards helping authorities which are so adversely affected by this formula.

5.47 p.m.

Mr. Frederick Willey (Sunderland, North)

I am afraid that I cannot oblige the hon. Member for the Isle of Wight (Mr. Woodnutt) by provoking a Division so that he can declare his neutrality. I do not intend to speak long in view of the admirably lucid speech of my hon. Friend the Member for Fulham (Mr. M. Stewart). I immediately call in aid hon. Members' indulgence, because this is the first time that I have spoken from this Box on this subject. I do this earnestly because I do not claim to be in any way adept in mathematics.

I wish immediately to reinforce the two complaints which my hon. Friend made, because they have affected the course of the debate. It is particularly unfortunate that the debate has taken place so soon after the laying of the Order. This is a matter on which we ought properly to have been able to seek the advice of local authorities and their associations. I say this with great respect, Mr. Deputy-Speaker, but another difficulty is that there has been uncertainty about the form which the debate should take. I will not endeavour to deal with the transitional Regulations.

I turn to Section 15 of the Local Government Act, 1958, but I can claim to have read it only a few times and I apologise to the House for not having noticed that it ended with a rhyming couplet. This is obviously a complicated and difficult matter with which to deal.

On the major Order, we have before us a White Paper to which I will make reference. Some hon. Members have been in doubt about how far they might refer to the White Paper in developing points on the Order itself. I hope that this is a matter which will receive the attention of the Government. This is an occasion on which there should be a full debate on the position of local authorities and the central Government.

I do not mind the White Paper. It is what is known in the advertising world as a "puff". It does not give us very much information. In so far as it does give information, it puts us on inquiry for further information. Two particular respects in which the White Paper is lacking information are the points which my hon. Friend the Member for Fulham developed in the further point he made about the Order. There is a reference to the discussions between the local authorities and the central Government. In the sixth paragraph, we are told that the estimates of local authorities have been examined closely in the several Departments". We should like to know more about the procedure of examination and about the explanation of the over-estimate or under-spending in the previous year.

This is a disturbing matter. I am concerned not so much in mathematics as in the content of the services. If it was estimated that desirable work should be undertaken and it has net been undertaken, the Minister should not be smug and complacent about it.

When we come to the present estimates which we are now considering, one of the difficulties is that the right hon. Gentleman did not explain how the revision of estimates was arrived at. I am rather suspicious about this. I may be wrong—I am simply hazarding a guess in the absence of information—but on the face of it, it looks as though the Minister was in a position to say that the overall estimates were over-estimates on the previous occasion and they are being made realistic by being written down by a similar amount. That would make something undesirable doubly undesirable.

We are concerned here with services which both sides of the House would want to encourage. Having heard this brief discussion on these Statutory Instruments, it seems to me that one of the disadvantages of this procedure is that we get a static conception of the social services as they are provided by the local authorities. This particularly concerns the Parliamentary Secretary to the Ministry of Education, because it affects education. The under-spending I have mentioned in fact was largely in the hon. Gentleman's Department.

Last week, I had the pleasure of hearing the hon. Gentleman replying to a fierce bipartisan attack upon him by hon. Members who represented Cornish constituencies. My impression was that the hon. Gentleman was devoted to the language of priorities. He would have encouraged the late Aneurin Bevan. The flaw, however—and this seems to me to be the flaw in our approach to these Statutory Instruments—was that the hon. Gentleman was not so concerned with the overriding priority which expenditure on education should have in the country as a whole.

After hearing the Minister of Housing and Local Government, there seems to be an absorbing interest, which we welcome—I have no doubt of the right hon. Gentleman's impartiality—of striking the right priorities within a particular service, but we are not conscious of the overriding priority which a service should have in the national resources. That is what disturbs me in a debate like this.

I should have expected a more ambitious approach rather than the approach we have had so far, that we have a rate of growth and that because we have a rate of growth, it must be satisfactory. I assure the right hon. Gentleman that I have no intention of criticising the Government solely on the ground that they are cutting expenditure. My criticism is that they are not increasing these expenditures sufficiently. This is brought out by the White Paper, which is a "puff" for the Order. The Parliamentary Secretary to the Ministry of Education will agree with the reference here to "increased expenditure in all parts of the service" and to "continued progress in providing new schools".

I have already entered the rider about not being a good mathematician. I enter the further rider that I am breaking new ground, However, I think I can see the wood; I may be absorbed in the trees later. If we look to educational building, because these priorities have exercised themselves within an inadequate overriding priority, it seems to me that the achievements of the Ministry of Education in the field of further education have led to a slowing down in the rate of providing new places in schools.

I am concerned about the rate of growth. What, therefore, concerns me is that we have a number of priorities. They are absolute priorities. These ought to flower in their own virtue. They ought not to be affected because they are too closely contained. That is my argument against the present formula. It might not be an argument for reducing expenditure, but it is a procedure which, obviously, is readily susceptible to containment within present expenditures.

I do not intend to run through the various developments in education referred to in the White Paper, but the same point could be made on the various matters that we are considering. In the same paragraph, for instance, there is a reference to the education of sub-normal children. My hon. Friend the Member for Fulham made a dramatic reference to this problem. I give credit to the Government that they have increased the work we are doing. What disturbs me is the number of sub-normal children who are still awaiting places in special schools. The number is almost as large as it was before. It has, indeed, been reduced, but it has not been dramatically reduced.

I am concerned about the problem that remains. I am not exaggerating this as being a simple problem. Once we go into priorities, we are concerned with difficult problems, but I should like attention to be concentrated the whole time on, for instance, not the advance that has been made, but, at the end of the day, the inadequacy of that advance because there are still far too many subnormal children who are not being properly looked after. That is my broad feeling about this approach. To put it simply, it seems that the Government claim that we have a Welfare State with which we can be absolutely satisfied. I think that we have a Welfare State which is inadequate even in comparison with many other comparable countries.

If we turn from that broad question to the rate of growth—it is significant that we do not get this in the White Paper—we do not get the criterion of growth or the factors which put that growth in its proper perspective. We are dealing with developments in education. The Minister of Education talks about having won the battle of the "bulge" and now fighting the battle for quality. When we have these figures for increased expenditure on education, however, we are not told how they are related to the increased school population. This is relevant if we are discussing quality.

Again, we have not had the approach that my hon. Friend touched upon. To be fair, it is true that the right hon. Gentleman mentioned this as a generalisation, but if we are concerned with the rate of growth we are also concerned with how far the apparent rate of growth is a false rate of growth because of increased costs. My hon. Friend the Member for Wood Green (Mrs. Butler) raised this point particularly in connection with town planning. I should have thought, on the face of it, that we have little more here than the same static conception of these services. The Minister is taking pride in this day and age that he is not cutting the social services, and no more than that. Even if we are to take an unambitious view, I should have liked to have a relationship established between the percentage of resources that we are devoting to education and other services with the growth of the gross national product or to use the jargon—the G.N.P.

At this late stage in the debate I do not want to broaden it unduly, but we have had a discussion on these Orders and all that the right hon. Gentleman can say is that things are not as bad as some people have prophesied that they would be. This is not a very enlightened view for a right hon. Gentleman in his position. I should like to feel that there was a drive from the central Government to see that we provide for the educational and other services as adequately as we can and that we feel through the whole length of these services dissatisfaction with their broad inadequacy. When we are living in a world which is changing rapidly we have to keep pace with it. This is what the right hon. Gentleman has not done and this is what is disappointing about the Government's approach.

The right hon. Gentleman, for all I know, may be facing real difficulties. I have touched upon under-spending. It may be that we have a shortage of trained professional personnel to carry on the job. If we have, the Parliamentary Secretary to the Ministry of Education has a bigger task still. Two illustrations come to my mind. A good deal of attention has been paid recently to the machine-tool industry. This is very much the responsibility of the Parliamentary Secretary to the Ministry of Education. At the Geneva talks on nuclear disarmament we had to send outside the United Kingdom for experts to advise us. These are very serious but very simple illustrations which unfortunately could be repeated a hundredfold.

It is for this reason that in education we must get rid of the complacency behind which the Government hide. We want services which are not only as good as the people warrant but as the circumstances demand.

6.5 p.m.

The Parliamentary Secretary to the Ministry of Housing and Local Government (Sir Keith Joseph)

I doubt whether the House ought to give a person at the Despatch Box for such a short time so many points to answer. I face the House with a large number of notes about the queries raised and I shall do my best to deal with them. Perhaps it would be helpful if I dealt first with the general question, and then went on to comments and criticisms of the general grant, then to comments on the transitional arrangements, then to the distribution formula—and it is that formula which several hon. Members have attacked in connection with their own constituencies—and finally returned to the general theme.

First, the hon. Member for Fulham (Mr. M. Stewart), I think very legitimately, complained that the House had been given rather short commons on the amount of time available in which to analyse these very difficult and esoteric matters. The House will realise that we have been in difficulty. As the hon. Lady the Member for Wood Green (Mrs. Butler) explained, the local authorities have been extremely co-operative in preparing estimates ahead so early in the year at my right hon. Friend's request, and they have to report back to their elected members after their own experts on the Working Party have analysed all the figures that have to be sifted. Nevertheless, my right hon. Friend accepts that the House needs as much time as can be arranged to study these technical matters and we shall do all we can to allow a longer time in future.

The hon. Member for Fulham went on to dispute my right hon. Friend's claim that general grant, as opposed to specific grant, enables the country to see more clearly and further ahead. He prayed in aid the fact that we were forced last year to come and ask for an increase in the general grant. I am sure that the hon. Member will agree that he would have had far more reason to complain if we had not come back for more. The amount of increase represented only 2 per cent. to 3 per cent. of the relevant expenditure, and I think that it is true that the present planned, realistic forecast of expenditure, and of grant towards that expenditure, brings into control all these massive expenses of the local authorities much more cogently than ever before.

I feel that the hon. Member for Fulham, in a speech that was full of meat, made one cardinal error throughout and I shall return to this several times. He spoke as if the rate services could be considered and talked about in total isolation. But, as we all know, although we cannot discuss these implications today, rate services are only part of the total general picture in which enter equally strongly the rates themselves, taxes, national resources in terms of skilled and unskilled human beings, and all the resources that go to make production and services possible. That would be the major criticism that I have to make of the hon. Member's speech and I should like to come back to it as we go through the rest of the debate.

My hon. Friend the Member for Croydon, North-West (Mr. F. Harris) asked whether the Government could declare loud and clear the future of rates, the future facing the ratepayer, and the future of the general grant. I really think that he is asking me to be far more far-sighted than any human being can be expected to be. Who can predict the precise level of taxes, of the balance of payments and of the productivity of our national resources? All I can tell my hon. Friend is that the Government are determined that the local authorities shall be given the means to conduct independent and vigorous services for their communities backed by substantial help from the taxpayer. I am sorry that I cannot say more. I am sure that on reflection my hon. Friends would agree it would be more than a human being could do.

Mr. F. Harris

My hon. Friend can predict that rates will constantly go up, but there is always the possibility of taxes going down.

Sir K. Joseph

I am not prepared to say that rates will constantly go up. In the debate on the Rating and Valuation Bill I went so far as to say that in the immediate future, with the education and health services dramatically expanding, it is probable that rates will go up, but that is in the immediate future. In the more distant future there are all sorts of other facts to be taken into account, and I hope to deal with some of them. There is, for example, the improvement in the management and efficiency of local authorities which is already well under way.

The hon. Member for Fulham said that the local authorities make their proposals for what they want to spend and then the Ministry cuts them down. I want to analyse that statement. What happens is that local authorities are invited freely to forecast what they want and intend to do over the next grant period. These forecasts are examined critically and constructively by the Departments concerned in order to see, and only in order to see, that the resources to carry out these programmes can realistically be depended upon.

It would be folly if the Government were to permit more to be undertaken in theory than could possibly be carried out without the grossest sort of inflation. As a result of this examination, a reduction is arrived at. If possible, that reduction should be agreed. On this occasion it was an agreed reduction—a reduction agreed with the local authority associations as representing a realistic assessment of the overestimate made by way of optimism or by way of an understandable lack of knowledge of all the national figures by the individual local authorities.

Mr. M. Stewart

The hon. Gentleman says that it was an agreed reduction. What would have happened if the local authorities had not agreed to it?

Sir K. Joseph

This is a process of mutual persuasion. We are dealing not with a decision of the Government—

Mr. Stewart

The hon. Member is evading the issue.

Sir K. Joseph

I am not. We are dealing with the assessment of what resources will be available. One side has to succeed in persuading the other on what is largely an objective matter. I am not evading the point. I will return to it in a moment.

This process need not necessarily lead to a reduction. It is conceivable that local authorities could have underestimated the resources available. On this occasion they overestimated by a sum which they later agreed was equivalent to £21 million for the next grant year and £23 million for the second grant year. Then my right hon. Friend added a certain amount of money in order to cover the foreseeable and measurable increase in cost which had already become apparent since 30th June, 1960, when the local authorities had prepared their programmes. That add-back was roughly £6 million for each of the two grant years.

The hon. Gentleman also asked whether we would have to return to the House for an increase Order for the new grant period, as we did in the last. I cannot predict that, but the Government will watch any relevant burdens that fall upon local authorities—burdens that were not predictable or measurable on 30th November last, and, if it becomes necessary, will return to the House for an increase Order.

The hon. Gentleman went on, rather ungraciously, I thought, to complain that a conclusive grant paid to any local authority differs from the estimated grant. It must do. This is a very slow and complex operation. As he will realise, a local authority needs to know, from early in the grant period, approximately the scale of grant it can expect from the taxpayer in order to assess its own programme and rates.

The grant system is based on detailed statistics of population, of school children, and all the other factors—only roads remain tolerably constant in length—that are actually available at the time of calculation. The grant itself, when it comes finally to be adjusted, takes account of the actual statistics during the relevant year for the grant. So there has to be an adjustment. But my right hon. Friend will gladly consider the suggestion made by the hon. Member, though I think it might complicate matters, of publishing a comparison, so that the House can see this adjustment between the estimated grant and the actual grant.

The hon. Lady the Member for Wood Green made two main points, with one of which I cannot deal. She said, rightly, that district councils are not entitled to receive direct any general grant on planning grounds, but they can receive a discretionary contribution from county councils. This would need legislation to alter. I cannot give any other answer than that today.

She went on to suggest that the Government were discouraging planning. The fact that approved planning expenditure—the figures are on pages 7 and 8 of the White Paper—is developing and going up more than three times before the end of the new grant period, should be sufficient indication that this is not so. What both she and the hon. Member for Fulham did not, perhaps, sufficiently take into account, was that the figures on page 10 of the White Paper are largely accounted for by interest payments. One would have to capitalise that figure to arrive at total expenditure on planning purposes.

Mrs. Butler

The hon. Gentleman will appreciate that the local authorities estimate for next year of the amount they will spend is £2 million less than they spent in the current year. That figure is from the White Paper on Public Investment. It would seem, therefore, that they are to spend less. I was assuming that the Government's addition was in order to try to encourage them to do more rather than an earnest that they would do more.

Sir K. Joseph

We must be careful not to confuse the service of capital with capital payments. I suspect that the hon. Lady is confusing the two. There is no desire by the Government to discourage these planning activities, and the figures in the White Paper have been agreed with the local authority associations.

The hon. Member for Fulham claimed that local authority expenditure had increased by 23 per cent. between 1959 and 1963, whereas the general grant had limped behind and was only increasing by 17½ per cent.

Mr. M. Stewart

I said, desired expenditure.

Sir K. Joseph

I agree. Desired expenditure, he said, had increased by 23 per cent. while the general grant was increasing by only 17½ per cent. But he is not comparing like with like. His figure of 23 per cent. is the result of comparing the near actual expenditure of local authorities in 1959–60 with estimated expenditure for 1962–63. The jump from estimate to estimate—from desired expenditure to desired expenditure—from 1959 to 1962, was 17½ per cent., which is the same as the jump in the general grant. His point, though an excellent try, was not quite successful.

The hon. Member said that local authorities are under no bond whatsoever to spend what is in their estimates. That may be so. It is true that they are under no contract to the Government to spend the precise figures in their estimates, but they realise that their future figures are not likely to be treated with the credit they receive now if they continually and substantially fail to attempt to carry out the development represented by the estimates they give to my right hon. Friend.

The hon. Member went on to say that the procedure we are discussing gives a prize to an economising or, as he said, skimping local authority, and puts the burden on the vigorous one. That is not complimentary to local authorities. They operate under the sanction of public opinion. Ratepayers are users of services as well as payers of rates, and the purpose of this procedure is that, though the adequate operation of these services is the Government's declared policy, the initiative for the exact performance of that policy should be left to local authorities, with the pressure available from the Minister if it should be necessary to supplement the sanction of the elector.

The hon. Member for Fulham seems constantly to forget that both sides of the House are fervent in their pursuit of the independence of local authorities. He seems also to forget that taxpayers need to be safeguarded as much as ratepayers are, and that the House has to pay heed to them as well. He also forgets that the general grant paid to local authorities is not directly related to their own expenditure. It follows from the present arrangement that wise and efficient administration can often show a saving and that by this arrangement that saving is left with the ratepayer.

The rather grudging acceptance by the hon. Member for Sunderland, North (Mr. Willey) of the continually rising trend in general grant and local authority expenditure saves me from making that point again. But, as the hon. Member for Fulham criticised the rising trend of expenditure, because, he said, in the second grant year the proportionate rise would not be as much as in the first grant year, I must remind him that we are helping local authorities to do what they want to do and are only correcting their optimism where it departs from probability.

In a very effective sentence, the hon. Member for Fulham said that we should not take credit for the failure of local authorities to do the work because there were no skilled people to carry it out. He called upon my right hon. Friend to regret such inability by local authorities to carry out work because there were not the people available to do it, but he forgot that Ministers do not operate in vacuums. My right hon. Friend has to accept that his own interests and the interests of local authorities are neither unique nor paramount.

We are privileged to live in a fully employed economy and it is true that more skill is needed, but more skill must always be needed for a progressing and expanding economy. It is true, as the hon. Member for Sunderland, North observed, that my hon. Friend the Parliamentary Secretary to the Ministry of Education is sitting here because of the passionate concern of the Minister of Education in educational services provided by local authorities. It is because of that very need for more skill, so as to enable the whole country to get more wealth, that this part of the General Grant Order is made. I am sure that my right hon. Friend would like there to be more skilled people so that more work could be undertaken, but the bulk of the money which we are today debating will go to increase the number of skilled and educated people.

The hon. Member for Fulham went on to criticise the Government's interest rate policy. The general grant takes account of any relevant expenditure in interest payments, whether increased or decreased. I do not wish to shirk the issue and I hope that the House will not shirk the issue, but if it is national policy to avoid inflation, as it must be, and if it is national policy to avoid overloading the economy, as it must be, then local authorities cannot opt out. The interest rate, which is meant to avoid inflation, must bite on them as it bites on all. That seems to be another major factor of which the hon. Member for Fulham did not take account.

He and the hon. Lady the Member for Wood Green, in their comments on the planning elements in the general grant, spoke as if city centre redevelopment should depend upon some contribution from the taxpayer. I have already commented on the fact that the planning element is largely made up of the service of capital, but I remind them that, in answer to a Question only a few weeks ago, I said that my right hon. Friend was considering whether local authorities needed to be enabled to capitalise or defer interest expenditure on central area redevelopment which should, by hypothesis, be profitable development, and to see whether more help should be given to them by that means.

The House has rightly shown considerable interest in the health part of this general grant, and my hon. Friend the Parliamentary Secretary to the Ministry of Health has been listening to the debate throughout. I think that it is known to hon. Members that my right hon. Friend the Minister of Health has, from the first day he took up his office, declared his bias in favour, within the National Health Service, of developing the services appropriate to the treatment of mental illness. He has declared that not once, but many times. It is not therefore surprising that I am able to tell the House that no reduction whatever has been made in local authorities' desired development of mental health services. The only limitation so far as we are aware is strictly that of the people and skills available.

In the same way, I am able to answer a question about the education of the handicapped. My hon. Friend the Parliamentary Secretary to the Ministry of Education tells me that there is an increase of no less than 20 per cent. in money terms, which nowadays is in real terms, of planned expenditure for 1962–63 as compared with that for 1959–60.

The hon. Member for Sunderland, North asked whether all these figures could be expressed as a fraction of the gross national product. He will remember that Mr. Abel Smith and Professor Titmuss took two years to work out that sum for the National Health Service, and the hon. Member has asked me to do it for all these different parts of local authority expenditure. I think that his point was valid, but I doubt if that work could be done reliably in addition to all the other labour which has to be undertaken.

I think that I have answered all the main criticisms, comments and suggestions about the general grant itself, and I now want to deal with the transitional arrangements. I was asked what the Government intended to do about transitional arrangements. All I can say in answer is that my right hon. Friend has agreed with the local authority associations that the whole situation of the transitional arrangements shall be reviewed when we know much more about the results of the rating revaluation and rerating which is to occur in 1962–63.

My hon. Friend the Member for the Isle of Wight (Mr. Woodnutt) and my hon. Friend the Member for Croydon, North-West made some understandable constituency comments in connection with the distribution formula. All those hon. Members who have spoken have agreed in welcoming the slight adjustments which my right hon. Friend has made in favour of areas with declining populations and in favour of areas with more than the average number of children and elderly people.

I was asked by my hon. Friend the Member for the Isle of Wight why the distribution formula depended on a period of twenty years. He asked why it should not be ton or thirty years. The fact is that this is an optimum decided by all the local authority interests concerned as represented on the Working Party, and it was laid down in 1958 that there should be just the one period and we cannot choose differing periods under the present legislation. All the differing interests on the Local Authority Working Party chose the period of twenty years as the highest common factor for all the interests concerned.

Mr. Woodnutt

Will my hon. Friend not agree that a local authority might have had a declining population over the past ten years, whereas twenty years ago its population might well have been much less than it is today, and that such a situation might create hardship?

Sir K. Joseph

I apologise for not being able to answer that question shortly, and I hope that I shall be excused if I have to answer at some length, because these problems are very difficult. They were fully discussed by the Working Party. The Isle of Wight appears to fall between two stools.

If it does not have an expanding population, it does not get the benefit of the larger number of heads on which to receive grant. If it does not have a declining population, it does not get the solace available under the distribution formula for a declining population. A static population can benefit only from a small part of the distribution formula. I will not give a quick answer to what my hon. Friend has said, but my right hon. Friend will consider his argument, although his own solution is not practicable.

The hon. Member for Fulham quoted five authorities which had had substantial declines of population over the last few years and asked whether they would be helped by the twenty-year qualification. Of these five, four already qualify under present arrangements for the declining population element.

My hon. Friend the Member for Croydon, North-West raised some difficult constituency matters. It is true that Croydon's population and school children are not increasing by as much as the average, and it follows that its share of the grant must inevitably be smaller, but it may be some consolation to my hon. Friend to know that, in fact, Croydon is benefiting from the financial changes made by the 1958 Act and is probably the equivalent of a 3d. rate more than it would have had under the old system of grant.

I apologise for having taken so long. I want to make only a couple of final points of general interest. We have spent most of today discussing expenditure and it is fair to the local authorities to say that they are doing all they can to get more value for money by using modern management technique. Many local authorities are using machine accounting. In fact, I believe that mechanical accounting is becoming almost normal among local authorities. Many local authorities are following those pioneers who engaged organisation and methods experts, or employed them themselves. Many local authorities are using techniques of work measurement and method study. Many local authorities are studying with benefit the statistics produced by the Institute of Municipal Treasurers and Accountants. These are all encouraging trends, particularly when we are dealing with such large sums.

We are entering the second period of the new general grant, with higher grants in real terms in each year. To ease the change from the old specific grant system we have transitional arrangements, compensating the minority of losers by a levy from the gainers, but on a diminishing scale. We still retain, but further diminish, the old rate product deduction factor, which stems from education. The distribution formula seeks to do justice to all the authorities involved. Superimposed on all this is the system of rate deficiency grants whereby the Exchequer stands in for the notional absent ratepayer in local authorities below average 1d. rate product in relation to population. As a result of all this, the taxpayer is contributing over half of all net rate expenditure.

This whole elaborate system, which seeks to serve the interests simultaneously of taxpayer and ratepayer—who are generally the same person paying from the same pocket but with slightly more local interest in the case of the ratepayer—faces the unpredictable implications of the major changes in rating by 1963. This is not the time, therefore, to adjust the distribution formula more than marginally. We have made such adjustments to help particularly areas of declining population and areas where there are more than average elderly and young.

The general grant is serving its purpose. Local authority associations are not questioning the estimates of relevant expenditure, which allow realistically for considerable planned development in line with Government policy. The taxpayer is bearing his part while local authorities are left, as is proper for healthy and responsible organisations, to serve their public independently, with vigour and with due attention to value for money.

Question put and agreed to.

Resolved, That the General Grant Order, 1960, dated 25th November, 1960, a copy of which was laid before this House on 30th November, be approved.

Grants and Rates (Transitional Adjustments) Regulations, 1960, dated 25th November, 1960 [copy laid before the House, 30th November], approved.—[Mr. Brooke.]