LOCAL GOVERNMENT (GENERAL GRANT)

HC Deb 19 December 1962 vol 669 cc1277-376

3.55 p.m.

The Minister of Housing and Local Government and Minister for Welsh Affairs (Sir Keith Joseph)

I beg to move, That the General Grant Order 1962, dated 27th November 1962, a copy of which was laid before this House on 29th November, be approved. It may be convenient to the House, Mr. Speaker, if, with this Motion, we also discussed the next two Motions on the Order Paper: That the General Grant (Increase) (No. 3) Order 1962, dated 27th November 1962, a copy of which was laid before this House on 29th November, be approved. That the Grants and Rates (Transitional Adjustments) Regulations 1962, dated 27th November 1962, a copy of which was laid before this House on 29th November, be approved.

Mr. Speaker

If that is the wish of the House, it is convenient from my point of view.

Sir K. Joseph

I beg to move, also, the second Order and the Regulations.

Mr. Speaker

Perhaps I misled the Minister. He cannot move more than one Order at once, but the three can be discussed together.

Sir K. Joseph

I am most grateful, Mr. Speaker.

This is the third General Grant Order to be made under the Local Government Act, 1958. The Order, I fear, looks very technical, and this can scarcely be avoided. It has two main purposes: first, to prescribe the aggregate amount to be distributed by way of general grants in England and Wales for the years 1963–64 and 1964–65; and, secondly, to determine how this total amount shall be distributed among the county councils and the county borough councils.

Accompanying the Order is a Report, House of Commons Paper 21, in which hon. Members will find the background figures and explanation. Appendix A to the Report, on page 9, gives details of the expenditure that is expected to be incurred in the general grant services in the next two years.

To arrive at these estimates, the same procedure is being followed on this occasion as in the preparations for the previous two general grant periods. First, the Departments responsible for the various services invited the local authorities to submit detailed estimates of their expenditure for the two years in question. The authorities responded with the care and thoroughness to which the Departments have by now become accustomed, and I should like, on behalf of all my colleagues, to pay tribute to the precision and responsible approach which all the local authorities concerned have shown in what is by no means an easy task.

The estimates prepared by the local authorities were then examined by the Departments concerned. There were very few items submitted by the local authorities Which any Department thought fit to question, but in some cases the aggregate of the individual estimates submitted by the local authorities appeared to be a little beyond the likelihood of their ability to spend that money in the time. The examination of these estimates was followed by informal discussions between the Department and the representatives of the County Councils Association, the Association of Municipal Corporations, and the L.C.C.

Where the total estimates appeared to the Department to be perhaps over-optimistic, the Department concerned made a proposal. These proposals were discussed and in some cases were modified. At the same time, adjustments were made for increases in the cost of services, either due to wage increases or materials increases, which had taken place, or were about to take place, since the date on which the estimates had been prepared—30th June, 1962.

The outcome of these discussions was general agreement on the estimates of expenditure as shown in Appendix A to the Report, and I wish to draw the attention of hon. Members to these figures. namely, an expenditure of £1,034–34 million for the next year, 1963–64, and of £1,083.45 million for the succeeding financial year. Hon. Members will be able to see from the tables in Appendix A the striking increases in expenditure by local authorities on general grant services from 1961–;62 and 1962–63, and from next year to the year afterwards

Hon. Members will notice that expenditure in respect of accommodation for the aged and infirm under the National Assistance Act, 1948, appears here for the first time. There are blanks against the current year and previous years, and a large figure of £27–71 million for next year and an even larger one for the year after. This service has been within the ambit of the general grant from the outset, but because the old specific grant was a unit grant per place, the general grant had been fixed rather with an eye on the replacement of the specific grant than by reference to expenditure on the services.

The inclusion of this expenditure as relevant expenditure, that is, expenditure taken into account when arriving at the total of general grant, represents the first step towards integrating it fully with expenditure on other general grant services for the purpose of calculating the aggregate of general grant.

The aggregate amounts prescribed in the Order—and here I lead the attention of the House back to the Order itself where, in paragraph 3, the total of general grant is set out—represent the sums necessary to maintain the Exchequer contribution towards the estimated relevant expenditure for the two years concerned at the level already established.

I should now like to read the figures which are before hon. Members, namely, that general grants in the year 1963–64 should be at the level of £562 million and for the year 1964–65, £589 million. These represent respectively £43 million and £27 million increases on the previous years.

Mr. John M. Temple (City of Chester)

Can my right hon. Friend confirm that the exact relativities as between rates and grants have been maintained in these new proposals?

Sir K. Joseph

I can confirm that the proportion of total estimated relevant expenditure found by way of general grant by the taxpayer is precisely the same, at 56.5 per cent.

I turn to the question of the total assistance made available to local authorities by the taxpayer through grants of all types. As hon. Members will be aware, it has been expected that the revaluation now pending will increase the aggregate of rate deficiency grants by about 20 per cent., or about £25 million. This increase will be automatic. It will be a windfall, the result simply of changes in the relation between the resources of different authorities.

The Government have here two responsibilities to reconcile. On the one hand, they have their responsibilities, very clearly established and accepted, to the ratepayer, to help the ratepayer bear the cost of rate-borne services, and, on the other, they have their responsibility to the taxpayer. Bearing in mind their responsibilities to the taxpayer, the Government can see nothing in present circumstances to warrant an increase of this order, that is, about £25 million, in total Exchequer assistance to local authorities. Their preliminary view was that it would be reasonable to offset at any rate part of this increase in rate deficiency grants by reduction in general grants.

The local authority associations directly concerned, however, and the L.C.C., represented very strongly during the statutory consultations that it would be quite wrong of the Government to reduce general grant on account of an increase in rate deficiency grants. Those local authority associations which were concerned, and the L.C.C., did not accept that there was a case for any reduction, but said that if the Government felt it necessary to control the total of Exchequer assistance, the only proper course was to take steps to amend the rate deficiency grant system. This is what the Government have now decided to do. The aggregate of the general grants has been fixed on the same basis as last time, and legislation will be introduced as soon as possible to set some limit to Exchequer liability for rate deficiency grants.

Mr. G. A. Pargiter (Southall)

Will the right hon. Gentleman explain the meaning of the words "as soon as possible", as that will obviously be considerably important to local authorities?

Sir K. Joseph

I can go only so far as to say that details will be worked out in full consultation with the local authorities concerned, and that the grants for 1963–64, that is, for next year, will not be affected in any way, that is to say, the rate deficiency grants for the coming financial year will reflect the windfall increase arising from the revaluation.

Lord Balniel (Hertford)

My right hon. Friend's statement has come as quite a surprise, of course. Can he say why it is being made only now, when the effect of revaluation must have been known for some considerable time? Why was it not announced in the Queen's Speech? My right hon. Friend said that the local authority associations directly concerned had been consulted, but the local authority association most directly concerned by the rate deficiency grant is the Rural District Councils Association, and that has certainly not been consulted. Which local authority associations have been consulted?

Sir K. Joseph

My noble Friend has asked two very cogent questions. The arrival of the statutory consultations to define general grant comes at the end of a long process, and it is only at the end of that process that the Government are able to foresee what sort of expenditure they are called upon to undertake. It was not possible in the nature of things, organised financially as this country is to meet certain payments in the financial year, to have had consultations earlier. Thus, we were not faced with the apparent conflict between the interests of the taxpayer and the ratepayer before these statutory consultations were upon us.

My noble Friend asked why I was making the announcement now. I think that the House would prefer me to make the announcement now, in all frankness and candour, rather than wait and suddenly say that the Government are just about to embark on consultations and shortly to introduce legislation. I am telling the House of the Government's intention at the first possible opportunity, and I think that the House prefers it that way.

My noble Friend went on to ask why the Rural District Councils Association —and, indeed, the Urban District Councils Association—had not been consulted. The local authorities primarily concerned in general grants are the county councils and the county borough councils and the L.C.C. Therefore, it is their associations which are consulted, and statutorily consulted, for general grant purposes. The intention to look at the rate deficiency grant system arose, as it were, as a by-product of those consultations with the authorities primarily concerned with general grant.

It would not be practical politics to invite the authorities which receive rate deficiency grants, those represented by the R.D.C.A. and the U.D.C.A., to sit in at all general grant consultations, since they are not involved; but they will be involved in the consultations when we discuss rate deficiency grant amendments.

Before I come to what is logically the next part of my speech, the House may like to know that in all these calculations for general grant the Department has been using a computer for the first time. There are certain teething troubles in all organisations making use of a computer for the first time, and I gather that during one of the trial runs the Scilly Isles were discovered to be within the Metropolitan Police district, all by faulty punching of a particular hole. However, I am assured by experts that checks and counter-checks have been introduced and that the system is now working as infallibly as humanly-devised systems can be made to work.

I come now to the formula for the distribution of the grant moneys. As the House is aware, the 1958 Act prescribes the general framework within which the aggregate amount of the general grant for any year is to be distributed, and it is left to the General Grant Orders themselves to prescribe the weight which is to be given to each of the various factors in the grant framework. The weighting has been reviewed in the light of representations by local authorities, but, as embodied in this Order, it is accepted by all local authority associations.

In any matter of this sort it is impossible to satisfy every local authority. We are dealing with the sharing out of a fixed sum and, naturally, any move to satisfy one local authority, in the nature of things, can only be at the expense of the views and needs of other local authorities with conflicting interests. I assure the House that the weightings in this Order have met with the approval of the local authority associations.

Only two changes in substance have been made. One is the reduction in the rate product deduction factor. I am sorry to have to use these technical terms, but this rate product deduction factor was a feature of the former main education grant. It was carried over on a lower level into the general grant system so that the impact of the change from the main education grant to general grant should be cushioned to some extent. The factor at that stage was 9d. for the first grant period. It was reduced to 8d. for the second grant period. The deduction is in effect an equalising factor Whereby authorities with a rate product above the national average make a contribution to those authorities with a rate product below the national average.

A number of authorities have argued that a resources grant of this sort is really out of place in a needs grant such as the general grant. These local authorities say that it duplicates the part played by rate deficiency grants. The Department sympathises with this view. We feel that, the cushioning effect of the rate product deduction factor having achieved its main purpose, we should work towards its elimination.

Taking into account the effects of revaluation and rerating that lie before us, it is estimated that the 1963–64 equivalent of the current 8d. rate product deduction factor would be 2½., but instead of writing 2½d. into the General Grant Order, and thus continuing at the same level of rate product deduction factor as now, the House will see that on the last page of the Order we are introducing a rate product deduction factor not of 2½d., but of 2d. for each of the next two years, thus making a further small reduction in this factor.

The second change which has been made is to reduce from 20 years to 10 years the period for measuring decline in population, and I know that my hon. Friend the Member for the Isle of Wight (Mr. Woodnutt) was urging this on my right hon. Friend as much as two or three years ago. The justification for this change is that short-term decine in population gives a local authority less chance to adjust its services than a decline spread over a greater number of years. There have been consequential changes in the percentage decline taken as the qualifying factor, and of the multiplier to be applied to the excess percentage to secure that roughly the same proportion of the general grant is distributed through this factor. For the rest, the weightings have been adjusted only to the extent necessary to secure the distribution of the larger amounts available for general grant over the next few years.

The House will wish to know that many of the changes suggested by local authorities in the factors to be taken into account in arriving at the distribution of general grant would not have been practicable to introduce without a change in legislation. After studying the results of a review of these suggestions by a working party of officials in consultation with the local authority associations and the L.C.C., I thought that the right thing was to say that there should be no further substantial changes in these factors in the general grant as now introduced for the next two years, but that next year there should be a full-scale inquiry by the Department and the local authority associations into the whole framework of the formula covering general grant.

This will give the opportunity for considering what changes experience so far shows to be desirable. In general, however, the Government believe that local authorities share their view that the system of general grant is working well. Certainly, we regard it as a permanent feature of the financial relationship between the central Government and local government.

I come to the General Grant (Increase) (No. 3) Order 1962. This is accompanied by House of Commons Paper No. 22, which is a Report on this Order for this year. This Order was also laid three weeks ago together with its accompanying Report. The first Increase Order for the current grant period affected the grant for 1961–62 only. The second Increase Order, approved by the House last June, applied to both years of the grant period, that is, the last financial year, and this year, and it made provision for increases in the aggregate amount of the general grant, partly on account of increases in costs, prices and remuneration, but mainly, under provisions made in the Education Act 1962, on account of the changes made by that Act in the arrangements for awards for students.

Certain increases could not at that time be taken into account. These further increases relate only to 1962–63, and details are shown in the Report. The estimates of these additional costs have been agreed with the County Councils Association, the A.M.C., and the L.C.C., and they are for the most part these bodies' own estimates. Agreement has also been reached on the amount of the increased aggregrate of the grants for the year. The net effect is that the estimated additional costs in 1962–63, amounting to £7.88 million have produced an increase of £5 million in grant. The Order consequentially adjusts some of the weightings fixed by the General Grant (Increase) (No. 2) Order, 1962, so as to distribute the additional grant moneys.

Finally, I come to the Grants and Rates (Transitional Adjustments) Regulations 1962. The sole purpose of the Regulations is to continue the scheme made under Section 15 of the Local Government Act, 1958 for another two years, and to make further reductions in the contribution receivable by local authorities which are estimated to lose from the financial changes made when the specific grant system was changed to the general grant system.

This transitional scheme was again designed to cushion the process of change, and local authorities who lost as a result of the change were to have their losses made good in full in 1959–60, and as to 90 per cent. in 1960–61, by contributions from the gaining authorities in proportion to their respective gains.

Regulations made under this section in 1960 extended the scheme to last year and this year with 80 per cent. and 70 per cent. of the losses to be made good by gaining authorities. These gains and losses are steadily becoming less realistic as the base year grows further away. Changes that have been made, or are about to be made, like rerating of industry and commerce, and revaluation, make the calculations even more remote from the purpose from which they originally date.

Some authorities have suggested that the scheme should not be extended beyond the end of the present year, but after consulting the local authority associations I came to the view that this would make too sudden, too abrupt, a change in the resources of some local authorities, and I propose, therefore, as in these Regulations, to continue the scheme for a further two years, but at a rate of contribution fairly sharply reduced, namely, to 50 per cent. for next year, and 25 per cent. for 1964–65.

I can understand that the authorities who originally lost by the change should regret this tapering off, but I am sure that they will understand that the authorities which stood to gain by the change are, naturally, anxious to enjoy the full fruits of the changeover of the system. I hope that the House will agree that the arrangements described in the Regulations are a fair and reasonable compromise between both points of view.

I hope that I have explained the general purposes of these two Orders and these Regulations adequately for the House to be able to debate them.

4.20 p.m.

Mr. James MacColl (Widnes)

Hon. Members on both sides of the House will want to thank the right hon. Gentleman for the clarity and care with which he has endeavoured to explain to us the great complexities of the two Orders and the Regulations—the transitional arrangements, the additions to the current grant, proposals for the future grant—and will greet with somewhat less enthusiasm his glancing blow at the rate deficiency grant, which I shall say something about later.

It staggered me to hear that the Government, who always held out the rate deficiency grant as being the great coping stone of their grant system—the most flexible and sensitive of all their system of grants—should decide that this should be the one that has to take the rap, in this rather complicated situation, which I do not pretend to understand, concerning the relationship of valuation to general grant, and so on.

I want to make one OT two points about the information that we have been given. Each year we have some criticisms to make about the lack of information in the memorandum on the grants. I wonder whether the right hon. Gentleman appreciates that this is the only opportunity that the House has to make a comprehensive examination of the whole grant system in relation to local authorities. It is a very complicated system. The right hon. Gentleman confessed that he had a calculating machine. All I have is a slide rule, and I so lack confidence in using it that I have to work out everything by long division and then, so lacking in confidence am I still, that I have to ask my hon. Friend the Member for Fulham (Mr. M. Stewart) also to work out the sum by long division. The right hon. Gentleman will appreciate that that creates considerable difficulties. He ought to help us by giving us rather more information.

I will give him one or two illustrations. In the first of the General Grant Orders —the one for 1958—we were given a table of the percentages which grant bore to expenditure. We have never had that table since. In answer to the hon. Member for the City of Chester (Mr. Temple) the right hon. Gentleman waved a long sheet of paper, presumably the product of his calculating machine, and said that the percentage had not changed. Why could not we have been given that table in the detailed document, so that we could compare the figures? I would be very happy to hand my long division sums to the Minister for checking, because I do not agree with what he has said. I am not suggesting that he has misled us—it may be that somebody has calculated upon different figures, or has made a mistake —but my impression is that in the first year the proportion was 56.5; in the second year it was 55.4—that is, this year—and for the years 1963–64 and 1964–65 I make the proportions 54.4 and 54.5 respectively.

Sir K. Joseph

I am very much in sympathy with the hon. Member's request for further information, and I will try to see that it is satisfied in future. What I should have explained is that we have to take into account various costs transferred from local authorities to the Central Government before being able to compare the accrued figures of grant with the relevant expenditure. There are also such things as the fall-in from the rerating of industry from 75 per cent. to 100 per cent. I shall listen with interest to further suggestions which the hon. Member makes with regard to information.

Mr. MacColl

The right hon. Gentleman gives me rather more confidence in my long division sums and my slide rule than he does in the merits of his case. I do not think that he is entitled to say that the accrued figures are misleading, and that he will, therefore, "cook" the percentage to make it look better. The House should judge, and it should be given the necessary information upon which it can judge whether or not the right adjustments have been made. We want to know the proportions of local expenditure being borne by the Government and by local authorities respectively.

The calculating machine also seems to have gone a little wrong in connection with another aspect of the matter. If the right hon. Gentleman would refer to the detailed analysis he will see that the County of Norfolk has a basic grant of £3 million, and has varied loadings, none of which is over £1 million. Yet, it ends up with £50 million as the provisional amount of its general grant. That must be very provisional. I suspect that at that moment the calculating machinery got rather hysterical.

Sir K. Joseph

It is the one misprint. We have been in touch with the Norfolk authority and have told it not to count on the figures in this table. I apologise for the misprint.

Mr. MacColl

I am glad, once again, that I was right. It might have been helpful if the right hon. Gentleman had told us about that misprint.

The other point in respect of which he could have given more information was the adjustment made in the Id. rate deduction factor. As I understand the principle, only two things are involved. First, there is an automatic adjustment of the ld. rate deduction to account for the new valuation. The 1d. rate will be much larger next year than this year. Therefore, to obtain art equivalent amount we must alter the deduction factor. Secondly, a policy decision has been taken that absolute and not relative adjustments should be made. That is something that we should think about, because the effect is to give a preference in general grant to the authorities with the higher rateable values.

In other words, the authorities with the higher ld. rate product will benefit most by the adjustment. We were given details of the amount which each authority is to get by way of grant, but it is very difficult to compare the figures for next year with those for last year, given in the previous general grant information, because we do not know individual local authority expenditures.

It would be helpful if, in respect of each local authority receiving grants, we knew on what expenditure the grant was based. It is difficult to know which authorities are benefiting and which are losing after the adjustments have been made. It is, therefore, difficult for us to make up our minds whether or not this is a wise procedure.

I do not need to tell the Minister that it is not enough for him to tell us that he is consulting the local authority associations, because, respected as they are, they cannot abrogate the responsibility of this House in connection with financial matters. We also know that the local authority associations are not monolithic bodies; they embrace many conflicting interests, and there are sometimes disagreements and even tensions among them. It does not follow that all authorities are looked after with comparable adequacy by the machinery of consultation. It would, therefore, be helpful to know what is happening in respect of each authority.

The right hon. Gentleman might care to check my calculations, which show that according to the recent Ministry of Housing statement on rateable values, published only recently, the product of 1d. rate is £3 million at the moment. The product of ld. rate next year will be about £7½ million. I have worked backwards from the figures given in this document to reach that figure. Therefore, an 8d. deduction, which is what we have been having, would come to £24 million. To get a £24 million deduction on the new ld. rate product under the new valuation would come to 3.2d. But the actual reduction is 2d. The difference between 2d. and 3.2d. gives the figure for the policy deduction.

Sir K. Joseph

The equivalent of 8d. after revaluation and rerating will be 2½d. What the hon. Member has laboriously and very diligently arrived at as 3.2d. should be 2.5d., and it is the change from 2.5d. to 2d. which is the policy change.

Mr. MacColl

I hope that the right hon. Gentleman is right this time. I am not prepared to argue his figures. I have done the best I can with the information which we have, but it is a pity that we are not given rather more information.

I want to look at the changes which are being made in the estimates of expenditure. Again, one comes across the extraordinary ambiguities of the right hon. Gentleman's moods. At times he appears to be economy mad and at times he is glorying in the increases which are taking place in local government expenditure. It is difficult to assess what the position will be. In his famous Circular 65/62 on the new valuation lists he says, in paragraph 3: Expenditure which would have been regarded as excessive but for revaluation cannot be justified by the fact that revaluation has taken place. If all the right hon. Gentleman was doing When he made that remark was to tell local authorities that what mattered was the total burden on the ratepayer and not changes in the rate poundage, I do not think that he need have gone to all that trouble to tell them. I think that it reveals the remoteness of the right hon. Gentleman and his advisers from what goes on in local authorities. I am coming into my twenty-ninth year as a member of a finance committee, and I can say that we know that. Every local authority which I have ever had anything to do with knows only too well the awful question of how they have to face their ratepayers and the country with enormous increases in the amount which they must collect from rates in the face of demands for standards of expenditure and of services which they have very little discretion to vary. The last thing that local authorities are likely to do is to be extravagant because they suddenly find that rateable values in their areas have gone up as a result of the new assessment.

That is the right hon. Gentleman in his Scrooge-like mood. But last week, at Question Time, the right hon. Gentleman was in his more ebullient and extravagant mood. He said: My colleagues on the Front Bench are continually explaining to the House, and are impressing upon local authorities, the expansion which the country desires in its educational and social services."—[OFFICIAL REPORT, 13th December, 1962; Vol. 669, c. 563.] If the local authorities are to be put under such pressure to extend the social services, they hardly need, at the same time, to be told that they have to conduct their affairs with due economy, because they will get extremely confused about the advice which they are given. My complaint is that although the right hon. Gentleman makes these statements about increases in expenditure, I wonder how far the has taken adequately into account the results of his own policy and of what ought to be happening in local government expenditure. In paragraph 12 of the Report he says: The provision made in the general grant takes full account of the likelihood of further development of the services. But take, for example, the question, which has been raised year after year, of lack of an adequate planning grant. If local authorities are to be encouraged to develop comprehensive replanning of their towns, the formula has very little to do with it. The question whether an authority launches a planning development scheme is not affected by the number of people there are aged 65 or the number of children of school age, or the total population. It is very much a question of chance whether one's plans mature at the right time and one's opportunities arise. The incidence of the general grant, therefore, will in no sense provide an adequate cushion for that kind of expenditure. What will be the position of local authorities who want to go in for development schemes of that sort? How will they be helped?

In paragraph 20 of his Report, dealing with the children's services, the right hon. Gentleman says: Provision has been made for expansion of the staff training programme and for an increase in the number of children expected to come into care. But in another place the Government have presented a Bill, the Children and Young Persons Bill which—I must not anticipate it, as it has not reached us, but it is common knowledge from what has been said in the Press about it—imposes in Clause 1 a duty on local authorities to make available advice, guidance and assistance to diminish the need of children to be received into care.

In other words, the efforts of local authorities are to be concentrated on developing a new service designed to provide a comprehensive provision for families and to keep people out of care, not to put them into care. What allowance is made in the general grant for work in that field? The Government have some idea what it will cost, but there is no evidence in the Report that they are taking that into consideration. They are talking only in terms of those children who come into care.

Another factor which needs always to be borne in mind is that we are dealing only with relevant expenditure. People talk in a rather light-hearted way about the sufficiency of the general grant in coping with relevant expenditure, but local authorities, particularly district authorities, have a great deal of irrelevant—if that is the right word—expenditure with which they have to deal. They are the main authorities which are concerned with expenditure which does not rank for grant.

I take one illustration—and perhaps the right hon. Gentleman can help me here—the salaries of public health inspectors. How far are they liable for grant? I am not talking about the personal health services, which are relevant expenditure, but about environmental health service expenditure which, as far as I know, is not.

New legislation has recently been introduced to deal with houses under multiple occupation. These houses are not spread evenly over the country, nor is the problem linked particularly with any level of population. The local authorities which have to deal with the problem are involved in a campaign, if they can, to employ more public health inspectors, to have inspections of streets and to have enforcement procedure, which will be a complicated and expensive job to do. This is something they are doing as a result of legislation which we have passed on the advice of the Government.

Mrs. Harriet Slater (Stoke-on-Trent, North)

Is my hon. Friend not aware that local authorities are unable to embark on this work in respect of multi-occupied property? That is because they have not enough inspectors and because of the cost which would result if they did so. Local authorities are desperate about this problem. How far will that be affected?

Mr. MacColl

One thing they might do to get more public health inspectors would be to increase the salaries offered to public health inspectors, either by up-grading them for this type of work or, in some other way, enable more to be paid than the general level of public health inspectors. If they did that, as my hon. Friend the Member for Stoke-on-Trent, North (Mrs. Slater) rightly suggested, they would not be able to shoulder the financial burden because, I understand, they would not get any grant for doing so. To get a comprehensive view of the position, one needs to look at these outside demands on local authorities' resources and not to be too satisfied with the treatment given to relevant expenditure.

Looking at the relevant expenditure, as I make it out the increase next year will be about £98 million and the increase in the grant is to be about £43 million, leaving a net burden to fall upon the rate fund of about £55 million. At current rateable values that is about 1s. 6d. on the rates. Therefore, it seems, in spite of the right hon. Gentleman's circular, that it is deceiving the rate- payers to suggest to them that unless local authorities are imprudent and extravagant they will not be faced with increased demands next year when the new valuation comes into force. That is a little disingenuous, because everyone knows that as a result of expenditure which has already been approved there will be an increase of about is. 6d. on current rateable values in the demand, on average, on local authorities.

If I remember rightly, when we last considered the general grant the right hon. Gentleman was Parliamentary Secretary. He made a remark then which he did not repeat this time. That was understandable. He said: We are privileged to live in a fully employed economy."—[OFFICIAL REPOWER, 8th December, 1960; Vol. 631, c. 1503.] He was suggesting that there is a limit to be placed on local authority expenditure because of the demands for the material resources of the community. Now, unhappily, we are not in that position any longer. We are not living in a fully employed economy.

This is the time when local authority expenditure ought to be encouraged to expand. If we are to make up some of the leeway caused because we have had to put off doing things as a result of full employment and the difficulty of getting available resources, now is the time to be increasing local government activities. It is always the irony of local government work that in times of prosperity we are always told we must not do the work because it would cause inflation by increasing the demand for resources, but in times of deflation, or in times of—what is the opposite of prosperity?

Mr. Michael Stewart (Fulham)

Adversity.

Mr. MacColl

That is not the word I want—in times of slump we have to economise to save the ratepayers.

The wretched local authority never gets an opportunity of doing the things which need to be done. Things like building a new library or making road improvements are held up through lack of financial facilities. The right hon. Gentleman ought now to be giving a big lead, particularly in areas of heavy unemployment, to see that local authorities are given adequate assistance by grant to do this kind of work.

When I quoted the 1s. 6d. in the £ I thought that would be the point at which the right hon. Gentleman would pop up and say "rate deficiency grant" because in a great many cases that would act as a softener for the poor authorities. Little did I know that, so far from doing that he would announce that he is making a cut in rate deficiency grants.

Sir K. Joseph

The hon. Member invites me to intervene. I stress that nothing that is proposed will make any difference to rate deficiency grants during the coming financial year. It will rise by about £25 million.

Mr. MacColl

We are dealing with two years. Does the right hon. Gentleman mean the current year?

Sir K. Joseph

1963–64.

Mr. MacColl

Everything I say applies to 1964–65 and the effect is precisely the same. What the right hon. Gentleman said staggered me. If one thinks of what he said, one sees that it was that rate deficiency has the unique character that it is paid to district councils. General grant is paid to county boroughs and counties. The right hon. Gentleman said that he consulted the local authority associations which represent the county councils and county boroughs and they said, "You should not consider a reduction in general grant. You must do it by decreasing the rate deficiency grant, the grant levels."

Mr. Pargiter

I am sure that my hon. Friend would not wish to be under a misapprehension. The local authority associations have not said anything of the kind. All that the local authority associations have said is that if the Government want to look at the rate deficiency grant they must look at it and that they cannot use the rate deficiency grant for that purpose. In fact, we are on record in precisely the opposite sense of a reduction of any rate deficiency grant.

Sir K. Joseph

The hon. Member for Widnes (Mr. MacColl) should know that the grant goes to county and county borough councils as well as to district councils.

Mr. MacColl

Now the right hon. Gentleman is getting me in bad with my hon. Friend the Member for Southall (Mr. Pargiter) because I merely summarised what the Minister said. He quite definitely told us—it is on record—that he had consulted with the local autnority associations and that they had said that it would be quite wrong to reduce the general grant and therefore, he should reduce the deficiency grant. We have the good fortune of having a representative of the County Councils' Association in the House. It is wonderful what we can produce when we have a difficult problem. I am grateful to my hon. Friend the Member for Southall for scuttling the argument of the Minister.

Sir K. Joseph

The hon. Member is being unfair. I said—and he will find it in HANSARD—that the local authority associations did not accept that the Government had to do this, but they said, "If you have to, the only thing to look at is the rate deficiency grant and not the general grant". They did not accept our argument wholeheartedly in any way at all.

Mr. MacColl

I am glad to hear that. No doubt it will make our position easier when the legislation comes forward. We are always told that these things are tied up with the associations and that there is little for us to do. At least we know now that this is not agreed and the right hon. Gentleman agrees on the vital importance of consulting the other associations. It is true that the rate deficiency grant Boas against the precept, but the important thing is that it should be said that this is the only grant available for this expenditure which is not subject to general grant. It is the catch-all which meets the difficulty of getting public health inspectors, and so on.

This is an extraordinary decision to take. It has only just been sprung on us and we have not had time to reflect. My immediate reaction is one of surprise and a great deal of alarm at what the right hon. Gentleman has told us.

This is another in a series of debates on local Government finance which has revealed the complete mess into which local authority finance and grants are getting. Everyone seems agreed on that. At the time of the last General Election the Labour Party manifesto included proposals that a Labour Government, if elected, would carry out an inquiry into the whole system of local government finance. This was ridiculed by some people on the grounds that the Labour Party was unable to make up its mind and was sitting on the fence. But it must be remembered that an opposition party has difficulty in coming to a decision without the help of the evidence and the vast resources which are available to a Government.

We had a debate on the incidence of rates, particularly with reference to old people. The present Minister of Public Building and Works made a speech which chilled everyone who heard it. It was one of the most unhelpful, unsympathetic and rigid speeches which we had heard from the Ministry. That speech was made, not on an Opposition Motion, but in a debate on a Motion moved by an hon. Member on the back benches opposite. There are also two early day Motions on the Order Paper, one in the name of the hon. Member for Brentford and Chiswick (Mr. D. Smith) which calls attention to the distribution of rate burden and says that the time has come for a full inquiry into possible new methods of raising revenue for local government services. A number of Conservative back benchers have put their names to that Motion.

I am sorry to note that the hon. Member for the City of Chester (Mr. Temple) has lost heart. He has illuminated our debates by having taken part in interesting discussions on methods of improving facilities for raising local authority expenditure. But now the hon. Gentleman appears to have given up all hope and considers that the only thing to do is to hand over, lock, stock and barrel, to the central Government. I sympathise with that view—

Mr. Temple

Read the Motion.

Mr. MacColl

The Motion states: That this House, approving the Government's policy of expanding the social, public and educational services, in which programme the local authorities have an important role, but having regard to the fact that the share of the financial burden falling upon all categories of ratepayers is absorbing an ever increasing proportion of the national wealth, urges Her Majesty's Government to assume additional financial responsibility for certain local authority services which are now more national than local in character; and, whilst reaffirming its confidence in the rating system, urges Her Majesty's Government to set up a Central Advisory Rating Committee through which the technical aspects of this system would be kept under constant review. I take it that that means that the hon. Gentleman wishes to hand over some of the main social services to the financial control of the central Government.

Mr. Temple

It is financial responsibility, not administrative responsibility.

Mr. MacColl

The hon. Gentleman has been around long enough to know that if the central Government pays the piper they call the tune.

If the hon. Member for the City of Chester really thinks that this is the way to do it, he may be right. I do not want to be dogmatic about it. We who know something about local government are agreed on the vital need for an inquiry and a dispassionate examination of the problems without prejudice. The only people who sit rigidly on the fence and refuse to consider shifting their position are the Government, and they have been deserted by their back bench supporters. The Labour Party took this attitude at the time of the last election. The only people who will not shift at all are the Government.

The more one takes part in the sort of debate we are having this afternoon and the more one wrestles with all these extraordinarily complex decimal points and calculating machines, weights of population and the rest of it, the more one realises that unless care is taken, the real and human problem of how to aid the local councillor to discharge his responsibilities to the electorate will be forgotten. We shall find that we are playing with the machinery of arithmetic rather than attempting to tackle the job.

People who are trying to do the job recognise the vital need for sudh an inquiry as I have referred to. To have another revised rate deficiency grant is another attempt to tackle the problem piecemeal. Let us have a comprehensive review of local government finance, alternative sources of revenue and an examination of the system of grant. That would be a constructive way in which to attempt to tackle the job. But we must get on with it quickly, otherwise the problems will grow.

4.55 p.m.

Lord Balniel (Hertford)

I wish to echo the words of the hon. Member for Widnes (Mr. MacColl) and thank my right hon. Friend for a most lucid and thorough explanation of what is an extremely complex and difficult Order. I extend a fairly general welcome to the Order. It seems to go some way to disprove the fears of those who originally opposed the introduction of the general grant, but I feel bound to express a sense of concern about several aspects of the proposals of my right hon. Friend.

First, I am concerned about the method which my right hon. Friend is choosing for altering the system of Exchequer assistance to local authorities and about the lack of proper consultation. I wish to go further. I feel bound to express concern about the substance and principle of what my right hon. Friend is doing in amending the system of rate deficiency grant and I wish to express tentative concern about the impact which it will have on various sections of the community.

Regarding the method by which my right hon. Friend has introduced his proposals, he was kind enough to explain, when I asked him, the reason why this proposal is being made now and why such a proposal was not included in the Gracious Speech. The effect of revaluation, at least in general terms, has been known for a long time. From the response to a Question asked many months ago by my hon. Friend the Member for the City of Chester (Mr. Temple), one could gauge the effect of revaluation, namely, that it would increase the burden borne by the rate deficiency grant. As long ago as March of this year, in a White Paper, Cmd. 1663, it was pointed out that the total share of the rate burden borne by the rate deficiency grant would increase by 20.5 per cent.

Today, my right hon. Friend has confirmed that the total aggregate increase of the rate deficiency grant will be in the nature of 20 per cent., amounting in total value to £25 million. I therefore feel obliged to repeat my question, because if this general picture was known as long ago as March of this year, I do not understand why it was decided not to include a reference to prospective legislation in the Gracious Speech. It would be interesting to know what has happened since the time of the Gracious Speech which has caused my right hon. Friend to request the leave of the House to introduce legislation on this subject.

My right hon. Friend said today that he has been in consultation with the local authority associations which are directly concerned in the operation of this Order and that that included the County Councils Association. He told us that he originally suggested that it would be right in the circumstances to reduce the general grant, that, very naturally, the local authorities protested vigorously, and that—I paraphrase what I understood to be my right hon. Friend's words—the local authority association concerned said that, if the Government felt it necessary to restrict the total of Exchequer assistance, the proper course woud be not to restrict the general grant, but to amend the rate deficiency grant.

The association did not call for a reduction in the rate deficiency grant. It said that, if my right hon. Friend had to reduce Exchequer assistance, it should be done, not through the general grant, but by amendment of the rate deficiency grant.

My right hon. Friend did not then consult the local authority associations which are directly concerned in the level of the rate deficiency grant. He was apparently convinced by the arguments of the local authority association with which he had had consultation. He changed his mind and he abandoned his original idea of reducing the general grant. He has decided to cut the rate deficiency grant.

I am in some difficulty, because it is true that my right hon. Friend's Department wrote to the Rural District Councils Association, of which I have the honour to be President. As the letter is confidential, I cannot disclose its contents, but I do not think that my right hon. Friend will feel that I am breaching his confidence when I say that the date of the letter was 28th November and an answer was requested by not later than 4th December, giving the association three working days, in which to reply.

This is an association which includes every rural district council spread over the length and breadth of the country. I do not consider that this in any way amounts to consultation. I feel bound to say to my right hon. Friend that I think his failure to do this so far—I feel sure that he will at the earliest opportunity seek the opportunity of consultation—has caused a considerable sense of grievance.

I think that I should, with the permission of the House, quote a part of the letter addressed by the Rural District Councils Association to my right hon. Friend's Department.

Mr. MacColl

I am with the noble Lord in what he is saying. I do not want to embarrass him, but is it fair to quote only part of the letter? I do not want him to start on it and then get into a wrangle about whether the whole letter should he laid on the Table.

Lord Balniel

I had intended to quote only part of the letter. The other parts of the letter, although they are related to this subject, are not directly relevant to the point which I wish to make. If it is the wish of the House I shall have no hesitation in quoting the letter in full, although I do not wish to take up too much time. The section of the letter reads as follows: The Association are most concerned at the Government's intention to limit the Exchequer's liability for rate-deficiency grants. It is noted that the proposal has been brought forward in this form because a suggestion that the aggregate of general grants should be reduced was resisted by the Associations representing counties and county boroughs and by the London County Council. The authorities with the greatest interest in rate deficiency grants are the second tier authorities and particularly rural district councils, nine out of ten of which are in receipt of rate deficiency grants, and the Association feels strongly that they should have been consulted on a proposal of such direct concern to them and that the consultations should not have been confined to associations less concerned over rate deficiency grants. The letter ends with this sentence: The Association are strongly opposed to the proposal. I turn now to the substance, and obviously the more important part, of my right hon. Friend's proposal. I was slightly surprised at his choice of words when he described the increased rateable value as a windfall. Surely this is not the case. This is the rightful value of properties of which local authorities have been deprived for many years because of the failure of Government after Government to bring the valuation up to current day values.

Sir K. Joseph

I used the word "windfall" to describe the increase in rate deficiency grant which flows from the differential between the average ld. rate product per head of population before and after revaluation. This was what I described as a windfall and not the increased rateable value itself.

Lord Balniel

I am most grateful to my right hon. Friend and I am glad to learn that our minds are running along similar lines. The rate deficiency grant is intended in principle to strengthen the resources of the poorest local authorities and bring them up to the level of the average. This was the concept, and it certainly has the support of hon. Members on these benches. I believe that it is a concept which is generally agreed on as being desirable on both sides of the House.

The revaluation has resulted in the average having risen. Therefore, more money is required to bring the poorer authorities up to the average. My right hon. Friend is now, to put it bluntly, trying to avoid paying his rates. If the parlance of the racecourse is applicable, my right hon. Friend is welching on his responsibilities. What he is proposing to do is to avoid paying his rate burden by limiting his responsibility by means of legislation.

I quite understand the reasons why my right hon. Friend proposes to do this or, I assume, why the Treasury proposes to do this. However, he is by so doing striking at the very heart, the core and the purpose of the rate deficiency grant. It is ceasing to be a deficiency grant designed to bring the poorest local authorities up to the average, and by limiting his responsibility my right hon. Friend is turning it into a percentage grant.

A percentage grant which has once been changed by the Government can be changed at any time by any future Government to suit their own convenience, instead of being determined by purely objective criteria. Not only does it mean that in this instance local government is losing a certain amount of money to which it can reasonably be considered to be entitled. It means, also, that local government is becoming more dependent upon the whim of Whitehall and less independent than it was in the past. Local authorities with below average resources will be left to continue with below average resources. By leaving the poorest authorities still below the average we shall depart a very long way indeed from the original concept of a rate deficiency grant.

I want to quote one sentence from the White Paper on Local Government Finance, Cmnd. 209, dated July, 1957. On page 13, this sentence appears: The effect will be that in all cases grant assistance will be up to the average for the whole country but no more. My right hon. Friend's proposal means that all local authorities with less than the average rate product will be left below the average.

I would also like to quote some of the remarks made by my right hon. Friend the Home Secretary, who at the time was Minister of Housing and Local Government, in Standing Committee D, on 20th December, 1960. He said: The whole idea of the rate deficiency grant, which is a variation of the Exchequer Equalisation Grant, is that it is something to prop up the rate resources of local authorities which might otherwise be at a disadvantage. My right hon. Friend is now proposing to leave those local authorities at a disadvantage. The then Home Secretary continued: The whole plan of the Exchequer Equalisation Grant and the rate deficiency grant which took its place is that by means of grant we assist those local authorities who otherwise would be left with what I might broadly describe as less than their fair share of rateable value". [OFFICIAL REPORT, Standing Committee D, 20th December, 1960; c. 117.] My right hon. Friend is now proposing to leave some local authorities with less than their fair share of the rateable value.

I urge my right hon. Friend to turn his attention to another aspect of his proposal. One of the results of revaluation has been that the householder in this country is expected to pay a smaller proportion of the total rate burden than he has done in the past. The householder's share of the total rate burden is expected to fall by about 1 per cent. I think that it is possible—and this is no more than speculation on my part—that if the rate deficiency grant is substantially reduced the burden which will fall on house- holders, far from falling, is liable to be increased. Perhaps, when my right hon. Friend is considering the details of legislation, he will bear this aspect in mind.

Mr. Mark Woodnutt (Isle of Wight)

Would my noble Friend make it clear that although the total share of the rate burden in the domestic sector will drop by 1 per cent., that is an average figure and there will be big variations between one part of the country and another?

Lord Balniel

I am grateful to my hon. Friend for raising that point, because it is certainly true. It is worth remembering, also, that the Minister has power to protect the interests of householders should they be too adversely affected.

I conclude by repeating that I have a sense of concern both about the lack of consultation and about the substance and principle of my right hon. Friend's recommendation. I hope that he will be prepared to look carefully at this matter again before introducing legislation on the subject.

5.13 p.m.

Mr. G. A. Pargiter (Southall)

I listened with considerable interest to the Minister's exposition of the general grant position and, by and large, I agreed with what he had to say. However, I did not agree with his remarks in their entirety. For example, if one looks back over the general grant procedure and studies the matter up to the time of arriving at the relevant expenditure, one finds that there have been certain legislative changes. Indeed, in the first grant period there was generous acceptance of the local authorities' estimates. They had been put in in perfectly good faith, but, due to directives from various Government Departments to dampen down expenditure, the final amount of expenditure did not reach what had been estimated.

Government representatives, when dealing with the next grant period, were inclined to be a little less generous and looked much more closely at the figures to be sure that the local authorities presented figures which would stand up to the test of time. This resulted in the expenditure of local authorities being very much closer to their estimates. It must be remembered that once the grant was fixed—apart from whatever amount any additional grant might bring in—if the local authorities spent too much they lost, but if they spent too little they might have gained.

The tendency is for local authorities no longer to gain, and were it not for the fact that some of the additional grant orders were available they would certainly have been considerably out of pocket as the result of the calculations which have been made and accepted. I make these remarks to show that the general tendency of the Treasury and other Government Departments has been generous in acceptance of the principles but that that generosity has tightened up afterwards; and this is reflected in the figures.

On the welfare side, especially with regard to the care of the aged, this should be brought into the general grant calculations instead of being left as a specific calculation. It should be made clear that this in itself does not bring more money to the local authorities for the care of the aged. It certainly does not give them the amount of money they should have. It is one of those things which got missed out at the time of fixing the percentage grant, so that local authorities were left to carry a larger share of the burden. I am, of course, referring to a burden which is of a general character so that the Exchequer should carry a substantial part of it.

I hope it is the Government's intention that this sort of thing should not continue to count as relevant expenditure but that some of it will rank for even 100 per cent. grant. And while much of the argument has been about certain services being taken over by the central Government, on the welfare side the largest proportion is being taken over by the local authorities—and the central Government are being relieved of this expenditure. This particularly applies to the semi-chronic sick for whom the local authorities must make expensive provision; and we must not forget that many of these people formerly came within the hospital services. I would like to be told that the future tendency will be for the Exchequer to accept a greater share of what is becoming an increasing national burden, especially because people are now living to a greater age. The burden of caring for the elderly should be carried more by the Exchequer, and I hope that the Government will accept their fair share of the responsibility in this respect.

On the general question of the relationship of the general grant with the deficiency grant, it should be made perfectly clear that, regarding the negotiations which were concerned with the relevant expenditure on which the general grant was based, the figures had been agreed, the whole case for general grant had been agreed, and it was at that stage that there was no question of introducing anything to do with the deficiency grant. It was at a later stage —as I say, after the figures had been agreed—that the Government said, in effect, "The local authorities will gain to the extent of £25 million. We do not think this is fair and we propose to adjust the general grant to the extent of about £15 million."

Obviously the rate deficiency grant has nothing to do with the general grant and we shall be in a difficult position once we agree that the two can in any way be combined. We must watch this matter carefully because two principles are involved. There is the principle of the contribution which the State makes to the lowly-rated areas, and the general principle of the amount which the Exchequer should properly contribute to the service in general. Those two principles must be kept separate.

When this matter was raised in negotiation, the local authority associations said, "These are two entirely separate factors, and we are not prepared to agree that because something has happened to the rate deficiency grant you can do something with the general grant. Each must stand or fall by itself." That is as far as the local authorities went, and there is no question of our having said that the Exchequer ought to do something about the deficiency grant. We said that the two issues cannot be confused. That view was accepted by the Minister, and it has been generally agreed.

The fact that the Minister now chooses to announce that he means to do something about the deficiency grant should not influence the outlook on general grant. I shall always be concerned to keep these two factors separate and to do all I can to make sure—and this is important—that nothing is done to whittle down the percentage of Exchequer contribution on relevant expenditure to the services in general. In fact, as the costs increase, and as Acts of Parliament multiply local authority responsibilities, I am not sure that the percentage should not be increased rather than decreased.

The principle of the rate deficiency grant was enshrined in the 1948 Act, and it has been accepted ever since by successive Governments. The amount of money has never been in question, but this is where we come up against certain matters in regard to the Treasury, Governments and so on. If the amount of money which the Government have provided for any particular service conflicts with the principle already established in legislation subsequent to 1948 and accepted by the House in general, an attempt is always made to tinker with the principle.

That is the objection here. We object to any tinkering with the principle that the State has a duty to perform in the working of the rating system. It is because of the way the system works that Governments have regarded themselves as having a particular responsibility to the lowly-rated areas. The fact that revaluation has shown much wider discrepancies between the highly-rated and lowly-rated areas merely shows that the Government have been getting away with it over a large number of years and have not been meeting their proper share of expenditure on rate deficiency in relation to the more lowly-rated authorities.

Rather than the Government talking about a windfall of £25 million, they should recalculate the figures and say, "We have been robbing you over the years and we will pay it back". That, of course, would be too much to expect of any Government once they have got away with the swag, but we certainly feel that they should think very carefully before interfering with this principle of Government responsibility to areas whose resources are such as not to permit them, without an unbearable rate burden, to give the same social services as can be provided in the more prosperous areas.

The rate deficiency grant is more a matter of principle than of money. The principle is that those who live in poorer areas, rateably, are entitled to the same social services as people who live in the more prosperous areas. That has never been gainsaid. The country is in danger of becoming two nations, with its northern and southern parts showing relative wealth and poverty; but in principle we are one nation, and in principle all our citizens are entitled to receive the same social services. It has been accepted that if the giving of those social services would put an undue burden on the lowly-rated authorities, the Government have a special responsibility towards those authorities.

I must warn the Minister that in this matter there will be no division of opinion between the associations of the rural district councils, the urban district councils and the county councils—and I think that I can here include the A.M.C. also. We shall strongly oppose any alteration in the principle, which must be in the mind of the Government if they intend to make any alteration in the amount payable in rate deficiency grant. I think it fair to give that warning so as to remove any impression that we are prepared to dicker on the question as between rate deficiency grant and general grant. The two grants should be kept separate.

The Government should look rather at some of the new services coming into local government administration, such as the increasing part that local authorities have to play in regard to the mental health services, and their increasing responsibility for the care of the aged. All this certainly means that the poorer areas must receive their fair share and proper support from the Exchequer.

5.27 p.m.

Mr. John M. Temple (City of Chester)

I should like to add my thanks to those already expressed to my right hon. Friend for such an excellent explanation of this particularly complex General Grant Order. I am glad that we are discussing it before Christmas rather than on Boxing Day, because one really needs a built-in calculator working to perfection to do any justice at all to this extraordinarily complex subject. I would reinforce the plea made by the hon. Member for Widnes (Mr. MacColl) for more information, and I am glad that my right hon. Friend was able to confirm that, in general terms, the relativities within the Order have been maintained.

The hon. Member for Widnes rather suggested that the Government had not been encouraging increased expenditure by local authorities, but when I spoke on this difficult subject less than a month ago in a discussion on public investment in Britain, I drew attention to the fact that the public investment sector which was increasing most rapidly in Britain was that being taken care of by the local authorities. I therefore think that the Government can fairly claim that they are encouraging local authorities to spend more, particularly in those areas that are at present suffering from a degree of unemployment.

It might be thought from my opening remarks that my speech would be all sweetness and harmony, but I warned my hon. Friend the Financial Secretary to the Treasury that I should have something to say about his Department, and I think that my criticisms will be more directed at the Treasury than at my right hon. Friend the Minister of Housing and Local Government.

I want, first, to speak on the General Grant Order, and then I shall have to refer to Ale rate deficiency grant because, although that grant is not part of this debate, it has been introduced by the Minister which means that it is open for discussion in the House.

It is perfectly true to say that discussions on the General Grant Order have been taking place in the normal manner between the associations mostly concerned with it. Frankly I have thought for a long time that the Association of Municipal Corporations, of which I have the honour to be a vice-president, has been rather too unconcerned about a rate burden that is increasing all the time. I read with interest the policy statement issued by the general purposes committee of that association—which, I would remind the Government, has not yet been adopted by the A.M.C. as its policy statement—but I thought that it was far too complacent about the increases in the rate burden which we have seen in recent years.

I said that I found this debate surprisingly harmonious, and I am going to examine just where the Treasury comes into this matter and also what the effect of the increases in general grant will be upon ratepayers. As in the debate on public investment, we are dealing with exceptionally large figures. As far as possible, I am not going to deal with percentages in the course of my speech but with actual figures. Percentages certainly have to be brought in, but we are now considering a figure within the General Grant Order of something over £1,000 million for 1963–64.

This is the first time that this General Grant Order in toto has gone over £1,000 million. It is approaching the cost of the whole defence burden of the country, so that it is a very significant figure. But that is not the whole of local authority expenditure by any means. I would remind the House that the General Grant Order forecast for 1962–63 was fixed in 1960 at a figure of £851 million, but it has been revised and revised and has crept up to £930 million, an increase of some 10 per cent., as the years have gone by until we got the final determination.

On top of that final determination, for the year 1963–64 a further increase of just on £100 million is contemplated, a further increase of 10 per cent. Originally, when the 1962–63 estimate was brought before the House it was an increase of 6 per cent. on the preceding year. Now we are talking, for the year which is going to succeed this, of an increase of 10 per cent. Therefore, if an increase of 6 per cent. grew by about 100 per cent., in other words, 6 per cent. became 12 per cent., what is 10 per cent. going to become when finally the revised figures for 1963–64 are agreed?

I am extremely concerned about the rate of growth of local authority expenditure and I shall have a word to say about Treasury responsibility in the matter. Speaking in the debate on public expenditure, it was easy to work out that the forecast of increased expenditure in real terms was 15 per cent. per annum. If we are dealing with cumulative increases of anything like 10 per cent. to 15 per cent., it is clear that public expenditure in this sector is going to double in well under ten years. It is just as well for everyone to be cognisant of just what we are contemplating when we are discussing these extremely vital figures within this General Grant Order.

I now come to where the Treasury stands in all this. As I have said, I warned the Treasury Minister that was going to speak about the Treasury. We hear that the grants are becoming larger. Of course, at Christmas time we might expect that. The other day I picked up the Liverpool Post for the 30th November, which said: Liverpool's share of general grant goes up by more than £1 million. An innocent reader would think that the Treasury was handing out more money. It is, but what the Liverpool Post did not say was that the ratepayers will have to find approximately the same amount.

I happen each day to walk down Whitehall, and for a long time it puzzled me why the Treasury buildings were being built within the existing walls. Quite suddenly it came to me. There must be something significant about keeping those old existing walls of the Treasury. I believe that enchained within them are the ghosts of all the ex-Permanent Secretaries of the Treasury, and the Treasury could not afford to sweep away those walls because the ghosts might have escaped and the mystique which is within all those ghosts would have been lost to the Treasury. That mystique is to give something away with one hand and to pull it back with the other. Now I am going to explain how this mystique, this sleight of hand, has been operated in respect of the general grant by the Treasury.

The General Grant Order, as I have said, envisages a total increase in expenditure of £100 million, and here I am going to quote from pages 4 and 5 of my right hon. Friend's statement to which he has referred today, namely, the Explanatory Memorandum of the General Grant Order. Paragraph 7, on page 4, is headed: The effect of increased remuneration, etc.", and it says: These increases include several salary and wage awards. Paragraph 12, which is headed "Development of the services", says: The following notes draw attention to some of the principal features. Paragraph 13, headed "Development in education", says: In education, expenditure will increase throughout the service. This reflects both the capital cost of providing new schools, etc.", and goes on: The former is included mainly by way of interest and capital repayments on loans raised to meet capital expenditure. The significant part about these two quotations is that they draw attention to the fact that the bulk of the increase of £100 million is for the provision of additional salaries and additional loan charges. I would point out that the Treasury has a vested interest in those increases, because I think it would be fair to say that, taking an average, the Treasury gets back in Income Tax on the increases in salaries something of the order of 5s. or 6s. in the £. On interest charges, again, the Treasury gets back Income Tax at the standard rate on those increases.

Taking the standard rate of Income Tax at 7s. 9d. in the £, I have made an estimate of what the Treasury will get out of these increases. Of course, I recognise that the whole £100 million will not be in respect of salaries and loan charges. But if my calculations are broadly correct, the Treasury is going to get back 5s. in the £ on £100 million. The Treasury—again I am using a broad division of the figures—is going to supply in the form of grants £50 million out of a total of £100 million but is going to get back £25 million out of that £50 million. Therefore, for the Treasury this is not a bad bargain at all. Superficially, it gives out £50 million and gets back £25 million. I shall return again to this figure of £25 million when I speak about the deficiency grant.

Where do the ratepayers come into this matter? I am afraid that there are no gimmicks to help for them. They cannot get it back as Income Tax. As the hon. Member for Widnes knows, I am not a supporter of a local income tax, but the local ratepayers have to meet in full their share of the expenditure within the General Grant Order.

Mr. MacColl

That is the individual ratepayer. Would not industrial rating be set off against the tax?

Mr. Temple

That is possibly true. I agree with the hon. Gentleman on that point.

I would quote here from Circular 65/62 put out by my right hon. Friend's Department comparatively recently entitled "Rate Poundage". It says: Revaluation strengthens the basis of local authority finance … but it does not add to the number of ratepayers. So here we have the truth. I do not think, on the figures which I have given, namely, the increases which are percentagewise larger than those forecast by the hon. Member for Widnes, that we can do other than expect very significant rises in rate poundage over the coming years.

Only this week, my right hon. Friend's Department published Rates and Rateable Values, which is a most useful publication. I want to point out what the increase in rateable values has been over the last year. It has been 2.3 per cent. That actually is more or less in line with the figures of the last few years. The increase per annum has been of the order of 2 per cent. When one is considering average increases in expenditure of 10 per cent. or more as against an increase in rateable value of 2 per cent., the only result can be that rate pound-ages must rise. I do not know how my right hon. Friend the Chancellor of the Exchequer would feel if Income Tax were to go up cumulatively by 10 per cent. per annum, if the standard rate, which is now 7s. 9d., became 8s. 6d., and so on. He would have amazingly large deputations calling at the Treasury more or less immediately. But this is a very similar state of affairs to the state of affairs which we are now contemplating through the operation of this Order on the rate poundages of this country.

In the Motion to which the hon. Member for Widnes referred, which stands in my name, I did not actually call for an adjustment in relativities. But I would now call for an adjustment in relativities as between the share borne by the Treasury and the share borne by the ratepayers. I would also call for that transference of certain parts of the services, or of certain services, from the point of view of financial responsibility, from local government to the central government. I certainly stand by everything that I put in that Motion.

Until a day or so ago I had not thought that I would have had to refer to the subject of rate deficiency grant and I am very glad that my noble Friend the Member for Hertford (Lord Balniel) has spoken up on behalf of the Rural District Councils Association. I have the honour to be a vice-president of that association, and my noble Friend and I last week received a deputation from it expressing its great concern and alarm at the proposals of the Government which were at that time known to it. They are now known to the House. What is proposed is, in the view of the Rural District Councils Association—and I agree—nothing less than an attack on the principle of the rate deficiency grant. I shall have to examine the legislation when it is brought forward, but there seems to be a prima facie case for expecting such an attack, on the basis of my right hon. Friend's statement this afternoon.

I do not want to take up the time of the House unnecessarily, but I feel I must quote from a speech by my right hon. Friend the Home Secretary when he was Minister of Housing and Local Government, speaking in Standing Committee D on 20th December, 1960 on the Rating and Valuation Bill. My right hon. Friend was present with the Parliamentary Secretary, and I served on that Standing Committee. My noble Friend has already quoted from that debate and I should like to add to that quotation. My right hon. Friend the then Minister of Housing and Local Government defined his concept of the rate deficiency grant and said: The whole plan of the Exchequer equalisation grant and the rate deficiency grant which took its place is that by means of grant we assist those local authorities who otherwise would be left with what I might broadly describe as less than their fair share of rateable value. He then continued: We must continue to refund it in that light."—[OFFICIAL REPORT, Standing Committee D, 20th December, 1960; c. 117.] Those last words were omitted when my noble Friend read the quotation. The Government have clearly defined their concept of the rate deficiency grant. These words We must continue to refund it in that light I find immensely significant.

As the matter has been brought up by my right hon. Friend, I think it is necessary for me to examine what may be proposed, with regard to this rate deficiency grant. As I see it, the grant is quite clearly based. It is based on an average which is clearly defined. One cannot mess about with an average. An average is an average. It has an exactitude; 90 per cent. of an average is not an average; 110 per cent. of an average is not an average. An average is a finite figure which we can all understand.

This rate deficiency grant, which succeeded the Exchequer equalisation grant, was brought in for this very special purpose of helping the needy authorities to come up to that average. I think everybody in the House is clear as to exactly what is meant. It is clear to me that my right hon. Friend's proposals may well breach this principle. Certainly, as my noble Friend pointed out, this matter very definitely affects the rural district councils. Nine out of ten rural district councils are in receipt of this grant. Perhaps I need hardly say that I am speaking from a national not a local point of view here as the Chester Rural District Council, whose area I have the honour to represent, is not in receipt of rate deficiency grant. But I think it is very significant that 33 per cent. of the total expenditure of rural district councils in England and Wales is represented by rate deficiency grant. So that to those local authorities it is a very significant figure indeed.

Again, within the general grant there is no allowance for sparsity, and sparsity is allowed for in rate deficiency grant. Sparsity is certainly an important factor to the rural districts of England and Wales. I do not want to cross swords with the hon. Member for Southall (Mr. Pargiter), but I would point out that the upper tier authorities are in receipt of only 18 per cent. of their relative expenditure through rate deficiency grant, whereas the rural district councils are in receipt of almost double that figure.

Here, perhaps, I ought to trace the history of this matter. My noble Friend referred to Cmnd. 1663 entitled "Revaluation for Rates". In that White Paper, rather strangely, an additional column appeared this year—an additional sector of ratepayers. It was described as the rate deficiency grant. I am not exactly a purist in finance, but I like to be able to compare like with like. Therefore, as soon as that White Paper appeared, I asked a Question of the then Minister of Housing and Local Government on 2nd April. I asked what would be the position assuming rate deficiency grant was not incorporated in that set of figures. Exactly as I expected, if that series of figures had been presented in the normal form the effect on all other sectors of ratepayers would have been adverse because the rate deficiency grant was forecast as going up very significantly.

My point is that in March of this year the quantum of the rate deficiency grant and the effect of the rate deficiency grant were known. Nine months went by, and I think everyone who studies this matter closely was working on the figures in the White Paper. Certainly I was. The working party on rate deficiency grant, which has recently produced its report, had no inkling 'that there was going to be any alteration in the formula. Then something appears to have happened. There was a meeting between the Government and certain local authority associations. My right hon. Friend has made clear that the Government wanted to alter the general grant. But in the course of these negotiations or consultations—call them what you like—a decision was arrived at under which the general grant formula was not altered, but a declaration was made by the Government at that time that they would require to look at the rate deficiency grant.

Looking at the rate deficiency grant means decreasing the rate deficiency grant. As I see it, a package deal was done. Unfortunately, the parties to that package deal were not the parties who were going to be most vitally affected. The Rural District Councils Association and the second tier authorities, which are those authorities mainly interested in the rate deficiency grant, were not invited to these discussions. I know that my right hon. Friend can rightly say that statutorily they need not have been invited to a discussion on general grant, but nevertheless, as at this juncture it became clear that there was an interdependence or interconnection between these grants, I should have thought it would have been fair and reasonable to call in the second tier authorities and explain what was going to happen at that time, rather than sending them a letter presenting them more or less with a fait accompli albeit inviting them now to some future conference more or less to agree a variation of a principle. I can tell my right hon. Friend that the Rural District Councils Association is extraordinarily upset about this matter.

I wish to give one example of the effect which a possible alteration in the rate deciency grant may have. This is with respect to an agreement reached comparatively recently regarding rural water supplies and sewerage schemes. These constitute a very big factor in the expenditure of rural councils. This new scheme of assistance was agreed to in the full knowledge that the rate deficiency grant was going to continue in the form which we have known it over a long period of years. I happened to get some figures applying to the Chester Rural District Council the other day concerning the cost of these sewerage schemes. I was surprised. I was given figures varying between £280 and £400 per connection to individual dwellings. That was not including the cost of the sewerage works. I would say to my right hon. Friend that these figures are very significant and that these schemes were agreed to on the basis of the existing rate deficiency grant.

To sum up that part of my speech regarding the rate deficiency grant, I say quite honestly that I do not suspect my right hon. Friend the Minister of Housing and Local Government in this matter, but I do suspect the hand of the Treasury. When the deputation called to see me and my noble Friend last week, its representatives said, in effect, "There is always the vacant chair at the table when they were taking part in discussions on this type of matter. Nobody occupies that chair, but you can feel the hand of the Treasury on that chair". It is the unseen hand which seems to direct these negotiations. I suggest that my right hon. Friend should tell the Treasury, on the basis of my argument in the earlier part of my speech, that it is already getting back, by this sleight of hand, some £25 million, which is exactly the figure involved in the proposed increase in rate deficiency grant.

I am providing gratuitously a magnificent argument to support my right hon. Friend when he wages his battle with the Treasury, as I hope he will. I hope that he will not pull his punches. I am sorry that the Treasury Minister whom I invited to hear my speech has not been present, but I sincerely trust that the Government will have second thoughts before introducing legislation which will widen the gap between the wealthier authorities and those less fortunately placed.

5.53 p.m.

Mr. Mark Woodnutt (Isle of Wight)

I wish to add my congratulations to those of my hon. Friends and hon. Members opposite to my right hon. Friend for the very clear way in which he has explained this most complicated matter to us. I must, however, share the alarm that has been expressed when he announced that he had to legislate to adjust for this extra £25 million rate deficiency grant.

Every hon. Member who has spoken this afternoon has gone into this at great length, and I shall not burden the House by repeating all that has already been said, except to say that I agree in the main with my hon. Friend the Member for Hertford (Lord Balniel). However, I do not share the surprise that other hon. Members have expressed at hearing this announcement, because some three weeks ago I wrote to my hon. Friend the Parliamentary Secretary when I heard that the rate deficiency grant was to be increased by some £25 million and I asked if he would give me an assurance that the Government would not make any adjustment either on the general grant or on the rate deficiency grant. He wrote back saying that this Order was to be before the House before Christmas and that it would not be proper for him to comment on it at this point, which gave me a clear indication that we were to expect legislation.

It is wrong to describe this as a windfall. It is merely righting an anomaly, and I would, without labouring this too much, like to mention that the average percentage increase in rateable value throughout the country is 243.3 per cent. and in my own constituency of the Isle of Wight, which will now receive a rate deficiency grant, it is only 207.9 per cent., which proves that all those authorities that are now within the range to receive a rate deficiency grant hitherto had been over valued and it is only right to equalise them. They should now receive in full the rate deficiency grant to which they are entitled.

I should like to refer briefly to the weighting factor as it affects the declining population. My right hon. Friend has already mentioned that I pressed his predecessor about two years ago to change the weighting factor because it was quite unreasonable that the decrease in population should be calculated from the year 1940, which was the beginning of the war and when population bare absolutely no relation to the population of today. It was quite unfair, and I am most grateful to my right hon. Friend for changing this factor so that it applies over ten years. In my own constituency, which has this very grave problem of a declining population, it has made the difference of one and two-thirds of a 1d. rate, which is quite considerable. I am grateful to my right hon. Friend, but having said that I must now say that I do not think that ten years is any more logical a choice than 20 years.

I said when discussing this in December, 1960, in this House that it was just as arbitrary to take ten, twenty or thirty years. What we must do is calculate the decrease from year to year. When we started the general grant, we started a completely new method of assessing the manner in which local authority grant should be calculated and at least we should relate it to the time that period commenced. From year to year there is usually throughout the country an increasing population. These authorities which have either a static population or where it is declining are adversely affected every year because they are getting a smaller proportion of the aggregate. They are getting a smaller proportion of a figure that is predetermined before the formula is applied. I think that my right hon. Friend should look at this again—although I am very grateful for what he has done—and consider giving a weighting factor for not just a declining population from year to year but for a population which remains static or where the increase does not reach the national average.

I am pleased to see that from paragraph 28 and from the statement made by my right hon. Friend today he is to consider changes in the statutory struc- ture of the general grant in 1963. In this connection, I should like to mention to him in particular the low density factor. I apologise to the House for putting an entirely constituency point, but it is the only opportunity that I have of making it. My county council submitted to his working party on the rate deficiency grant this year a memorandum which proves that because of its insularity and because of the severance of the Isle of Wight from the mainland of England the cost of living there was 4½ per cent higher than in other parts of the country. The Committee has recognised the prima facie case and given a whole chapter to it, Chapter 4, page 10, and brought this point to my right hon. Friend's notice in order that it may be further considered.

I understand that, with regard to the Scilly Islands, when this factor is considered the sea lanes are added to the road mileage in order to calculate the sparsity factor. I would suggest that as the Isle of Wight is separated from the mainland by five miles of sea the same should apply there. Although this will need legislation, I hope that my right hon. Friend will do that. I do not particularly wish to wait for two years, which is how long I shall have to wait if it is to be considered by my right hon. Friend's committee, so I suggest that a very simple amendment of Section 146 of the Local Government Act, 1948, where an exception is made in the case of the Isles of Scilly, could be introduced in a very short Bill to add the words "and the Isle of Wight".

I was speaking of paragraph 28 and the consideration the Minister will give to the general grant formula. Will my right hon. Friend consider also the methods which are used at present to calculate the total population? I am thinking particularly of those authorities which have prisons in their area. There again, I am on what is, in the main, a constituency point, and I apologise once more to the House. In the Isle of Wight we have, unfortunately, two prisons—we are to have a third in a year or so—and an approved school. Per 1,000 of population we have more prisoners than any other local authority. When the population figures are calculated each year, those residents of prisons who have taken up residence within the past six months are ignored. I maintain that as our prisons are always full, whether the residents have been there for six months or fourteen years does not make one iota of difference because the local services have to be provided for the full prison population.

When we suddenly find that in one year 400 of the prisoners in one area have been there for, perhaps, only six months because there hats been a reshuffle and one reduces by £8 per head the grant, a very big difference is made to a county like mine where the product of a Id. rate is only £6,000. It is obviously quite wrong to calculate the figure in this way. I urge my right hon. Friend either to change the method of assessing population at a given date or to arrange with his right hon. Friend the Home Secretary that all our "lags" in the Isle of Wight be long-term ones.

My right hon. Friend has said that when he is reconsidering the grant formula and the statutory changes he may wish to make in its structure he will consult the local authority associations. There are many of us in the House who pay a good deal of attention to these matters who also would wish to have an opportunity to discuss the subject with him. I hope that he will give us that opportunity.

6.3 p.m.

Mr. Dudley Smith (Brentford and Chiswick)

One possible answer to my hon. Friend the Member for the Isle of Wight (Mr. Woodnutt) would be to accord self-government to the Isle of Wight. I believe that some people there would like that.

I join with hon. Members in thanking the Minister for his very lucid explanation of a highly technical and difficult mathematical problem. I am far more enlightened now than I was when I came in earlier this afternoon. I am grateful, too, to the hon. Member for Widnes (Mr. MacColl) for drawing attention to the Motion on the Order Paper in the names of my hen. Friend the Member for Leeds, North-West (Sir D. Kaberry) and myself on the distribution of the rate burden and also the Motion in the name of my hon. Friend the Member for the City of Chester (Mr. Temple), with whom I largely agree on so many matters in this connection.

My right hon. Friend reminded us that there is a striking increase of expenditure on the general grant services, and he spoke of possible changes in the general grant formula next year. I am sure that he will always bear in mind that local authority spending will go on increasing, for there is constant expansion of local authority services. We are having to cape with various demands; wage increases far all local authority employees, the upgrading of the higher grades of local government officers, and so forth.

In my view, there is a very good case for a revision all the way round of the rating structure, and I believe that the education burden must be considered in this context. I call in aid the House of Commons Paper No. 21, to which my right hon. Friend referred, which says in paragraph 13: In education, expenditure will increase throughout the service. This reflects both the capital cost of providing new schools, further education establishments, training colleges for teachers, youth clubs, etc., and also the current cost of running the expanded service. In my view, the education service takes a disproportionate part of the cost of all local government services. There is a good case for at least some of it being transferred to the national Exchequer. This would relieve both the general grant and the lot of many ratepayers. I shall not go deeply into that matter now, Mr. Deputy-Speaker, because I am sure that you would rule me out of order if I did, but I hope very much that we shall have an opportunity to debate it in the fairly near future because there are many vital points which should be considered. I maintain that local control of education could still be well maintained if the whole of the education service were financed centrally, or if a greater part were financed by the national Exchequer than is at present the position.

With further demands on the general grant and the continual increase in local authority spending, there is a very good case for a full overhaul of the rating system and for a general inquiry into the financing of local government. As the hon. Member for Widnes said in his speech, with which I agreed to a very large extent, we must never forget the human element in rating when we are discussing these very complex mathematical factors. I think that the general grant is, for the most part, fair in the way it is worked out and apportioned, but the rate cost is not fair, I suggest, from the point of view of the ordinary ratepayer. No account is taken of ability to pay as is done with Income Tax.

In welcoming the Orders and giving them my full support, I conclude by saying, that one day a change in our whole rating system must come about. I believe that it will come, and the sooner it comes the better.

6.7 p.m.

Mr. Michael Stewart (Fulham)

The hon. Member for Brentford and Chiswick (Mr. D. Smith) has not quite understood the point of the reference made to his Motion by my hon. Friend the Member for Widnes (Mr. MacColl). My hon. Friend was drawing attention to the fact that the hon. Gentleman and his hon. Friends who signed that Motion appear now to have reached a point in their thinking about local government finance which was reached by us on this side of the House about three years ago and put before the electorate at the last General Election. However, we are happy that they have now reached that point, although there has been a certain time-lag.

Mr. D. Smith

I assure the hon. Gentleman that I have been making this point both since I have been a Member of the House for the past three years and before that, while I was a political candidate.

Mr. Woodnutt

I am obliged to the hon. Gentleman for giving way to me, too. I was about to make precisely the same point.

Mr. Stewart

I am sure that the two hon. Gentlemen will agree that it is a thousand pities that the Labour Party did not win the last election because, had it done so, we should have had the inquiry which they want. Perhaps, when they stand at the next election, they will do so under different colours.

If there is to be a delay of three years between the time when back benchers on this side reach a certain conclusion and the time when it strikes hon. Members opposite, how much longer must we wait before the idea penetrates the brain of the Government?

Mr. Woodnutt

The difficulty about our fighting an election under different colours is that, if the government of the country were left to right hon. and hon. Members opposite, we should have no money at all to make increases or, if there were a little money, it would be worth far less than it is now.

Mr. Stewart

History does not bear the hon. Gentleman out on that point. The value of money now is by no means what it was when his Government took office. That is why we have General Grant (Increase) Orders in every period of general grant.

I suggest that the hon. Member for Brentford and Chiswick was not at all in danger of going out of order when he referred to the possibility of shifting the cost of education either partly or wholly from local to central Government finance. That question is closely related to the question whether we finance education by a general grant or by a percentage grant. As the hon. Gentleman realises, the danger if one makes education a service financed wholly by the Exchequer is that one loses local control of it.

I think that that danger is quite serious if we deliberately take one service, education, out of the whole range of services financed partly from local sources and partly from central sources and say of that service that in future it is to be financed wholly from the centre. It would appear that we were clearly discriminating between that service and others, and it would be very difficult for local authorities thereafter to maintain their independence in the knowledge that the central Government were wholly paying the piper.

Mr. D. Smith

Surely it is a special case, because, at the moment, in the case of many local authorities it takes at least half and, in some cases, two-thirds of the local rate revenue.

Mr. Stewart

I agree that it is a considerable burden, but it does not alter my point that, if we treat these services separately and finance them from the centre, it is a clear indication that we accept the idea of the transfer of control as well.

Surely the real problem in education is how to ensure that enough money is provided for it and that there is some degree of local independence about it, provided that good minimum standards are maintained. We also want to ensure that local authorities which want to use that independence wisely and progressively and go, perhaps, a bit ahead of their neighbours in education can do so without an intolerable burden being placed on the rates. We want enough money for education, a degree of local independence and not too great a burden on the rates. This is why I am sure the hon. Gentleman was in order in raising the matter, as I hope I am.

If we want this result, one of the best ways to achieve it is to have a percentage grant and not a block grant.

Mr. Deputy-Speaker (Sir Robert Grimston)

Order. The hon. Gentleman is now getting on to the fringe of order. We cannot discuss the principle of a percentage grant or a general grant on these Orders. We must confine our discussion to the amount being brought into the general grant by the Regulations.

Mr. Stewart

I am obliged, Mr. Deputy-Speaker. I was merely proposing to take up the point made, without criticism from the Chair, by the hon. Member for Hertford (Lord Balniel), who said that the fears of those who dislike the general grant have been proved false. I merely wished to point out that our fears in this respect have not been proved false and that it has been found difficult to meet the desiderata for education that I outlined under a general grant system. However, I will not pursue that point further.

There is another aspect of the general grant which was raised by my hon. Friend the Member for Widnes and to which the Minister replied to some extent in an intervention in my hon. Friend's speech, but it was not a full or satisfactory reply. The point at issue was this. As we look at successive General Grant Orders over the years, is it or is it not true that the proportion of the expense of the whole range of services which is borne by the central Government is decreasing? Is the general grant working, through the successive Orders, in a way which causes the Treasury to bear a smaller percentage and the local authorities a greater percentage of the total cost of the services?

My hon. Friend the Member for Widnes, fortified by his long division and mine, irrefutably proved, I think, that, if we take what the Minister called the crude figures, there is no doubt that the percentage met by the central Government this year is less than last year, a conclusion which should alarm the hon. Member for Brentford and Chiswick and those who have signed the Motion to which he referred.

The Minister's reply to that was that we must not rely simply on the crude figures, but bear in mind that, out of the total amount of expenditure which the crude figures represent, some is met by the central Government in ways other than by the general grant. I think that that was the point.

Sir K. Joseph

What I tried to indicate, admittedly in an abbrievated way because my hon. Friend the Joint Parliamentary Secretary will expand on the point, was that between two grant periods it sometimes happens that a service which was paid for by the local authorities is transferred to the central Government and that extra rate resources become available to local authorities, and some share of them is fairly due to the taxpayer through the central Government. These two trends have to be taken into account before measuring the share of rate-borne services borne by the taxpayer.

Mr. Stewart

I am obliged to the Minister for that explanation. I think that it can be put fairly and in general terms by saying that there are factors other than the crude figures which must be taken into account. The Minister referred to one of them as "fall-out". I am not sure which one it was and I will not pursue that at this juncture.

Surely the point is that if the right hon. Gentleman invalidates calculations based on the crude figures in that manner by saying that other factors are to be taken into account, he must demonstrate that between the last general grant and this those factors which could work either way have in fact worked in a way favourable to local authorities. The right hon. Gentleman did not do that in his speech, and the information on which we could have formed an opinion is not made available to us in the Report on the General Grant Order. That was what my hon. Friend the Member for Widnes particularly made a matter of complaint.

In other words, we are provided with incomplete figures. When we draw reasonable and intelligent deductions from them, the Minister produces from his sleeve other considerations which he had not previously laid before the House. If the right hon. Gentleman were not the character that we all know him to be, some very harsh comments would be made on that procedure. Seriously, it is something that the Government should consider before we next debate this matter.

That has been one source of disquiet throughout this rather sober debate. Another source of disquiet has been that local authorities are being increasingly required to perform a widening range of services, and from time to time, as my hon. Friend the Member for Widnes said, the Ministry, in its more expansive moments, urges local authorities to go ahead on this, that and the other. I think particularly of schemes of comprehensive development. If they do that, there is at present no specific grant for town planning purposes which could help them.

Without raising the general question of whether a general grant or a specific grant is best, I think that I shall be in order if I suggest to the Government that if they are really keen on local authorities getting on with comprehensive development they should again ask the question: is it desirable to keep planning as one of the items of relevant expenditure within the general grant, or should we go back to the idea of having a specific grant at any rate for that service?

I realise that the Government would be reluctant to do that, partly because of their characteristic obstinacy and partly because if they did it and found that there was a very powerful case for a specific planning grant they would find that by the same logic there was a very good case for a specific grant far nearly all the other services covered in the relevant expenditure, and the whole case for the general grant would break down. I hope that they will not be deterred by that and will consider what case there is for a specific grant for planning purposes.

The third cause of disquiet, developed most impressively by a number of hon. Members opposite, as well as by my hon. Friends, concerned the Government's intentions towards rate deficiency grants. I know few subjects on which it is more difficult to collect together the whole truth and to keep it in one's head for more than a quarter of an hour than the exact structure of figures which determines rate deficiency grants, but I think that it is clear from what the Minister said and from the comments that have been made that the Government's mind is moving in a direction which will be hostile to those local authorities which are less fortunate. If that is so, it will be deplorable when it is added to the other fact that local authorities are being asked to carry out a wider range of services.

We expect local authorities to do many more things than they did a generation ago, and rightly so. Moreover, we get impatient today more quickly with glaring local variations between services than we used to do, and we are right to get impatient. The House has already manifested its impatience, for example, about variations in grants for students between one local authority and another. It is significant that that has been put right because students and their parents are a fairly vocal, articulate and influential section of the community. There are other cases where variations in the service rendered from one local authority to another are equally undesirable, but the people affected are not quite as articulate or influential.

If we want good services and if we do not want unjustifiable variations in standard from one local authority to another, we certainly do not want a system of local government finance which makes it difficult for the authorities who have less rateable value and are generally less fortunate. Therefore, any trend of Government thought which is menacing to the less fortunate authorities concerning rate deficiency grant is very much to be deplored.

All through this quite sober debate, we have been able to discern a number of causes of disquiet about the working of local government finance, which support the case which we put forward from these benches some time ago and on which we are now able to welcome support from some of the benches opposite for a far more thorough-going inquiry into what is needed in local government finance than has so far been held.

6.22 p.m.

The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. F. V. Corfield)

The main complaint from the hon. Member for Widnes (Mr. MacColl) and the hon. Member for Fulham (Mr. M. Stewart) was a desire for more information. We will certainly consider this request again to see what can usefully be done. It is, however, my experience that more information on this subject does not necessarily clear the brain. As the hon. Member for Fulham has said, it is one of those matters on which, a quarter of an hour later, one is not certain that figures which earlier seemed clear make sense. I hope that the hon. Member will bear this in mind when I try to explain the rather difficult calculations which give rise to the result that the figures represent a steady percentage of 56.5 borne by the Exchequer in calculating the grant in relation to the relevant expenditure.

The difficulty arises from the fact that one has to make certain deductions before applying the 56.5 per cent. First, it will be remembered that after the last revaluation there was a sudden increase, due to the partial revaluation of industry, of something like £30 million in the rates, of which the Exchequer drew back £20 million, leaving a net increase for the local authorities of £10 million. Against that was set certain losses resulting from the transfer from the Exchequer Equalisation Grant to the present deficiency grant, which amounted to £11¾ million, and there was the abolition of some small grants totalling over £1 million.

The net result of that was that the actual amount withdrawn by the Treasury was £6¾ million. This has to be deducted from all these figures before the sum comes right. What is done the other way round is that the total is added up, the £6¾ million is deducted and it is then multiplied by the agreed percentage figure. This is the first sum which the hon. Member for Widnes must do on his slide rule to get a comparable result.

The second problem arises, as my right hon. Friend the Minister said, from the fact that the costs of colleges of advanced technology were removed from the local authorities in 1962–63, so that in those years a further deduction has to be made on similar lines before the overall percentage figure is applied to give the total of the general grant.

Finally, this year the figure for expenditure on welfare accommodation comes into a smiliar category. It is put down as expenditure, but it has not, up to date, been taken into account in calculating the overall basic grant. That figure, therefore, has to be taken off, the percentage figure is applied and the figure for welfare accommodation is then added back. I assure hon. Members that as a result of these somewhat curious calculations, the percentage figures read as follows: for 1959–60, 56.5 1960–61, 56.6, and thereafter in succeeding years, 56.5. I hope that I have at least assured the hon. Member for Widnes that the percentage is not falling, even if I have not made it any clearer how the sum is arrived at.

Mr. Temple

My hon. Friend has made great play with the fact that the percentage has kept extraordinarily close to 56.5. Would he like to justify the sanctity of this relativity as between the grants and rates?

Mr. Corfield

I should hate to try to justify the sanctity of any of these figures—I find them most confusing—but I am sure that my hon. Friend knows that the result arises from the proportions which existed under the specific grants. It alters from time to time because of the sort of factors that I have mentioned which must be added in or taken out, as the case may be, but the proportions go back to the specific grants before the 1958 Act.

The hon. Member for Widnes questioned the rate product deduction factor and the alterations that have been made. The authority for this factor is contained in the Act. The simplest way of looking at it is to regard it as a levy of 8d. in the £ in the present year, which after revaluation will be 2d. The actual figure should be 2½.-plus—it is a little more than 2.5d.—to make it equivalent to 8d. in the present situation.

The proceeds of this rate levy are, in effect, added to the aggregate amount provided by the Exchequer and then the whole is distributed according to the ordinary general grant distribution formula. In broad terms, the practical effect is that it is an equalising factor, but it dates back to the old specific education grant. As time goes on, it becomes less and less allied to any reality and, as my right hon. Friend said, it was with the mutual agreement of the local authority associations that it was reduced this year in the way that it has been.

Mr. MacColl

My hon. Friend the Member for Southall (Mr. Pargiter) said—and it was not denied—that this agreement was reached before any indication was given of intended alteration in the rate deficiency grant which has a resources factor in it. Therefore, is it not a little unfair to say that the local authority associations accepted the removal of the resources weighting in the general grant, because they did not at that time know that the rate deficiency grant on which they were to some extent relying would be altered at a subsequent date?

Mr. Corfield

I take the hon. Gentleman's point, but, as I understand it, I do not think that the County Councils Association has attempted to link these two together. This is a factor which is under some criticism purely in its own right, so to speak, and I do not think there is any question of the association wishing to alter its opinion, whatever may happen on the rate deficiency grant.

Mr. MacColl

There is no evidence about that. I do not think the hon. Gentleman ought to say that. Already I have got into trouble by accepting what the right hon. Gentleman said about the County Councils Association and my hon. Friend rebuked me for doing it. The hon. Gentleman should not, if he is going into discussions with the local authority associations, say that they are going to agree to something when they have not been consulted.

Mr. Corfield

It was the specific wish of the County Councils Association, at any rate, particularly as the hon. Gentleman the Member for Southall (Mr. Pargiter) interpreted it, that these two grants should be kept specifically separate. This is, of course, a matter which relates solely to general grant, and I think this is really the way in which we must regard it.

The next matter to which the hon. Gentleman the Member for Widnes referred was the changes made in the estimates by local authorities and submitted to various Government Departments before arriving at the actual figures accepted for grant. I hope I have got him right on that. These negotiations go on very largely on the basis of what appears to be the likely expenditure. We have found in the past that many of the local authority expenditure estimates have been inflated, and in the first two periods it was found, by and large, that these amounts, even the estimated amounts as reduced in consultation with the Government, were not in fact reached. It may well happen that the reverse occurs in the future, and if that is the case, then, of course, there will be evidence for saying that we have been unduly pessimistic, but it has not happened up to date.

Then the hon. Gentleman raised a question which might arise under the Children's Bill which is in another place. I understand that in that Bill the provision is made for any of the expenditure to which he referred to qualify for the general grant. My right hon. Friend will certainly consider the hon. Gentleman's remarks when the OFFICIAL REPORT is available and when we come to debate that Bill in this House, but I am sure that the hon. Gentleman will appreciate that it would be quite impossible now for local authorities to estimate the sort of expenditure to which they may be liable as a result of the provisions of that Bill. It would be unfair to ask them, but it is quite clearly the Government's intention that if this expenditure is in any way substantial the opportunity will be given to make the necessary adjustment. As the hon. Gentleman knows, we have, during both the previous grant periods, had one or more increase orders, and, with increases in salaries and other costs, this is quite likely to happen again, and that would be the vehicle by which any adjustments necessary under the new Bill could be made.

My hon. Friend the Member for the City of Chester (Mr. Temple), as well as the hon. Gentleman the Member for Widnes, referred to the question of the rate deficiency grant, as indeed did most other Members, and I would readily accept the interpretation of what went on in regard to the local authority associations put forward by the hon. Member for Southall. The only thing I want to say about this at this stage is, to remind the House that there is no question of inflicting a loss on local authorities. What is likely to happen as a result of the revaluation is that the average, so to speak, will move up the table of local authorities so that certain local authorities which are average or just above average in the product of a penny rate per head will go below the average and therefore will qualify for deficiency grant, but there is no question of any money to which they are now entitled being denied them. It is merely a question that the arithmetical result of the revaluation will put more local authorities in the qualifying bracket.

I would explain to my noble Friend the Member for Hertford (Lord Balniel) that this matter only arose when it did because this £25 million extra came under discussion in relation to general grant, as has been explained, and consequently the district councils associations were not present. The whole problem of this extra £25 million which is likely to become due arose solely under the mechanism of the deficiency grant, and does not in any way arise under the general grant, although it was proposed at one time, as my right hon. Friend explained, to adjust the figure between ratepayer and taxpayer, using general grant as the vehicle instead of proposing legislation to alter the basis of the deficiency grant.

My hon. Friend the Member for the City of Chester addressed a good deal of his remarks to the Treasury, but although he criticised, I think, the use of the A.M.C. report on the ground that it had not been adopted, nevertheless I believe that the facts are still relevant. At present the figures show that rates are still a lower proportion of national personal expenditure than before the war and that the rates paid per household in real terms are also lower than before the war.

These are figures which, I think, are important. I am not going to suggest that this will carry on for ever and that the time will not come when the ratepayer's share of the burden of local authority services may well become intolerable, and it is, no doubt, right to look ahead, as my right hon. Friend did. But if we take the facts as they are at the moment I would suggest that the average rate at which local authority expenditure has been growing is nearer to 6 to 7 per cent. than to the 10 per cent. per annum that he quoted.

I do not want to argue with him over the figures, but even accepting the 7 per cent., my right hon. Friend of course did not intend that as a result of his circular the local authorities would not have to allow for natural annual growth. What he was anxious to avoid was the temptation, which was, I am afraid, not entirely resisted at the last revaluation, to take the opportunity to build up reserves out of proportion to the actual growth in local authority expenditure.

I think my hon. Friend the Member for the City of Chester said he thought that the rate deficiency grant is something in the neighbourhood of one-third of expenditure which would otherwise fall on the rates. The figure I took down was 33.3 per cent. but the figure overall is 12½ per cent. No doubt, my hon. Friend made a slip of the tongue.

Mr. Temple

If my hon. Friend wants the exact figure it is 32.5 per cent., but I used 33 per cent. to get a round figure. That is the total expenditure. That figure was given to me by the Rural District Councils Association in respect of rural districts in England and Wales—

Mr. Corfield

Only rural districts?

Mr. Temple

Only.

Mr. Corfield

I am obliged to my hon. Friend. The overall figure, as I say, is 12½ per cent.

I hope I have explained to my noble Friend the Member for Hertford that there was no question of initiating discussions on the deficiency grant in the absence of the representatives of the Urban and Rural District Councils Associations. It was at one time thought that it would be appropriate to tackle this through the general grant when it came up in this particular form.

The hon. Member for Widnes and the hon. Member for Fulham referred on more than one occasion to the suggestion for a review of local authority finance. I put it to them that in so far as that review would be directed at the sources of local government finance within the actual control of local government it seems to me to be clear, and I have been a critic of the rating system in the past, that a very great number of people—eminent people—have given a very great deal of time to looking at the problem and have not been able to produce a really suitable alternative. On this sector of the problem, we must face up to the fact that promises of further inquiries are likely to hold out wholly false hopes of producing anything either new or more satisfactory than the system that we have at the moment.

Both the hon. Member for Fulham and the hon. Member for Widnes referred to planning. It is perfectly true that in trying to estimate the expenditure in future years under the general head of planning we meet very substantial difficulties. The differences between the estimates of local authorities and the actual figures are substantial. In many cases we found that individual local authorities were clearly being overoptimistic and were expecting to spend under schemes which we knew were still on the drawing board or in other cases in a fairly early stage. The real answer to the hon. Gentlemen is that under this head we simply have not yet the experience to know whether the system is going to be satisfactory or not. The indications so far are that our estimates have been sufficiently accurate for this to work out as we obtain more experience.

I would certainly disagree with hon. Gentlemen opposite with regard to the general desirability of substituting a specific grant. Hon. Members have accused the Treasury of a certain lack of lavishness. I think the one certain thing about a specific grant is that it would make it in the Treasury's interest for the minimum amount of work to be done. The general grant does, at least, avoid that with regard to any particular function. I suggest that in so far as the criticisms of the Treasury by hon. Members opposite have been valid, hon. Members would be providing it with a weapon which they hardly believe it requires.

Lord Balniel

I am sorry to interrupt my hon. Friend, but the argument applies completely to a turning of the rate deficiency grant into a percentage grant, because local authorities are much more subject to the control of the Government once the grant depends upon a percentage instead of upon the objective criteria as at the moment.

Mr. Corfield

There is no question of my being in a position to say what method is contemplated in the legislation to which reference has been made, but what is quite clear is that it always has been so far a matter for legislation, which requires other legislation to alter it. Therefore, even if one adopted what I think is in my noble Friend's mind—90 per cent. of existing average, or something of that sort—in order to alter that it would be necessary to have further legislation. That is the safeguard. As has been admitted, this is a very complex subject. A great many questions have been addressed to me, and I hope I have clarified the minds of hon. Members on some of them.

I would remind my hon. Friend the Member for the Isle of Wight (Mr. Woodnutt) that most of the proposals that he put forward would require legislation, but they certainly will be looked at by the working party. With regard to the actual period for population weighting, whether it is ten years or twenty years I would remind him that we have to rely on figures from the Registrar-General, and it is, therefore, essential to have a period for which it is possible to make a reasonable estimate about the actual change. But that does not make ten years itself sacrosanct, and we will certainly look at the point.

Mr. Temple

Before my hon. Friend sits down, will he give an undertaking to convey to the Treasury Ministers, who regrettably have not been present, my criticisms of the Treasury?

Mr. Corfield

Yes, Sir. I am sure that my hon. Friend the Financial Secretary will read the speech by my hon. Friend the Member for the City of Chester with as much interest as I shall remind myself of it tomorrow.

Question put and agreed to.

Resolved, That the General Grant Order 1962, dated 27th November, 1962, a copy of which was laid before this House on 29th November, be approved.

General Grant (Increase) (No. 3) Order 1962 dated 27th November, 1962, [copy laid before the House 29th November] approved.—[Sir K. Joseph.]

Grants and Rates (Transitional Adjustments) Regulations 1962, dated 27th November, 1962, [copy laid before the House 29th November], approved.—[Sir K. Joseph.]

6.47 p.m.

The Secretary of State for Scotland (Mr. Michael Noble)

I beg to move, That the General Grant (Scotland) Order 1962, a copy of which was laid before this House on 6th December, be approved. It may be for the convenience of the House, Mr. Speaker, to discuss at the same time the next Motion: That the General Grant (Increase) (Scotland) (No. 2) Order 1962, a copy of which was laid before this House on 6th December, be approved.

Mr. Speaker

Yes, if that is the general wish.

Mr. Noble

Perhaps I could deal with the increase Order for 1962–63 first and subsequently with the Order for 1963–64 and 1964–65—the third grant period. The increase Order for the year 1962–63 is the second such Order to augment the level of grant for that year which was initially determined in the General Grant (Scotland) Order, 1960. Hon. Members will recall that the first increase Order, debated on 16th April this year, was in two parts: it both added to the amount of general grant because of rises in costs, etc., and, at the same time, subtracted from it because of the transfer of responsibility to the central Government for the administration of students' bursaries. The net result of this two-way adjustment was an increase in grant, which was fully debated at the time.

This second increase Order, which deals with a comparatively modest sum, takes account of the increases in the level of costs, prices and remuneration which were not foreseen when the first increase Order was presented to the House. The effects of these increases on the level of expenditure to be incurred by local authorities on the services within the ambit of general grant have been discussed with the Scottish local authority associations, and there was, I am glad to say, no difficulty in arriving at agreement over both the addition which should be made to local relevant expenditure for 1962–63 and the additional amount of grant itself.

The main items justifying an increase will be seen from paragraph 4 of the Report on the second increase Order. These are pay awards for nursing and allied staff in the employ of local authorities, mental health workers, administrative, professional, technical and clerical staffs, and part-time further education teachers. The total of additional relevant expenditure, as agreed with the local authority associations, amounted to £705,000, which I have rounded up to £710,000. In consequence of this rise in relevant expenditure it is proposed, in the second increase Order, to bring up the amount of general grant from the present total of £61.50 million to £61.94 million.

As there was no dispute with the local authority associations over any aspect of this increase Order, perhaps I need not say any more about it at this stage. I turn, accordingly, to the General Grant (Scotland) Order, 1962, which is rather more complex. I must begin by apologising to hon. Members for the omission from the Report on this Order of two columns of figures in the Appendix, which were not made available to Members in printed form until today. I very much regret this omission, which I did my best to repair by circulating the relevant figures to all Scottish Members yesterday as soon as I discovered that the corrigendum slip had still to be issued.

In the last General Grant Order debate, there were two main criticisms of the Report: first, that it was much too brief; and, secondly, that it was presented too late to allow adequate time for study and consultation. I have tried to meet these criticisms. Hon. Members will observe that the Report on the General Grant Order for the period 1963–65 has been expanded and provides a fair amount of detail.

The Order and Report were also laid in the House on 6th December, and I hope that hon. Members will feel that on this occasion there has been enough time between the date of laying and the debate. I am only sorry that our good intentions in this respect have been marred to some degree by the omission of the figures I have mentioned.

The early paragraphs of the Report set out the statutory requirements and procedure imposed on the Secretary of State by the 1958 Act. As explained in paragraph 4, I obtained detailed estimates from the local authorities of their estimated relevant expenditure for the period 1963–65, together with details of the actual or near-actual expenditure in 1961–62 and the revised estimates of expenditure in 1962–63. This information, submitted by the local authorities, covered all the services comprised in the general grant arrangements and set out in the Appendix to the Report, except for physical training and recreation, for which, as usual, estimates were made by my Department and later agreed with the local authorities.

As hon. Members know, the established procedure is that the local authorities' estimates of expenditure are examined by the Scottish Departments, who make adjustments, taking account of any items wrongly included or over or underestimated, increases in costs, and other factors which have arisen since the estimates were compiled, of likely fluctuations in the needs for individual services, and of the rate of development of services, having regard, for example, to levels of capital expenditure.

The adjusted estimates were sent to the local authority associations with a view to formal consultation with them, which is a requirement of Section 1 of the Act. The initial discussions took place between officers of my Department and local authority officials, and, finally, my hon. Friend the Under-Secretary of State had a formal meeting with the local authority elected representatives.

Following the preliminary discussions at official level, there was not a great deal of disagreement over the amount of local relevant expenditure left to be settled at the formal meeting, and after an exchange of views my hon. Friend was able to reach a settlement with the local authority elected representatives over the whole field of local relevant expenditure for the period 1963–65.

This, as hon. Members will see from paragraph 10 of the Report, amounts to £110.28 million for 1963–64 and £114.55 million for 1964–65. I should however, draw attention to the inclusion for the first time in the estimates of local relevant expenditure of accommodation for the aged and infirm, particularly as this occasioned the only substantial difference which we have had with the local authorities on this particular general Grant exercise.

Hon. Members may recall that the Report accompanying the General Grant (Scotland) Order, 1960, stated, in respect of expenditure on old people's homes, that in later grant periods, however, it is proposed to collate and include all expenditure on this service in relevant expenditure. There was no difficulty with the local authority associations over the amount of local relevant expenditure which should be included in respect of the provision of accommodation for the aged and infirm. The disagreement arose out of the method I proposed for the determination of the general grant in respect of the aggregated relevant local expenditure, that is, the expenditure including old people's homes.

Perhaps I can describe the difference with the local authorities shortly by saying that they for their part wanted the ratio of grant to expenditure ruling in 1962–63 applied to the agreed levels of expenditure for 1963–64 and 1964–65. This means, of course, applying the ratio for the current year, for which expenditure on old people's homes is not included, to the new levels of local relevant expenditure for the third grant period which do include expenditure on old people's homes.

My proposal was to apply the ratio which would have resulted in 1962–63 if expenditure on old people's homes had been included in relevant expenditure. The difference between the two methods is that the basis initially favoured by the local authorities—not surprisingly, perhaps—gives more general grant, whereas my method would bring out the same amount of grant as under the old system. Their initial approach would, in fact, have benefited them to the extent of about £1.2 million each year. This would, in effect, have amounted to a substantial extension of Exchequer grant into a new field.

The local authorities did not press their initial proposal, and, indeed, went so far as to say that they would rather forgo grant on old people's homes than see the overall percentage reduced because of the inclusion of old people's homes in relevant expenditure. On the other hand, my proposals have the same effect as if such expenditure had been included from the beginning of general grant.

However, I recognise that the local authorities do not like to see any reduction in the ratio of grant to expenditure. While I make it clear that the amounts of grant that I propose for the next period are the same as they would have been if we had proceeded on the basis used two years ago, when expenditure on old people's homes was excluded from the total of relevant expenditure, I agree that the question of ratio of grant to expenditure should be examined again before any further Order or increase Order is made.

I should now like to deal briefly with the developments that are envisaged in the relevant servioes and which are reflected in the increased grants for the period 1963–65. On education, the estimate provides for the further development of the service, new schools, maintenance and improvement of existing schools, additional teachers and the expansion of the school health service. They also provide for aid to pupils still at school and the development of all forms of primary, secondary, technical and further education.

A substantial increase in the provision of youth service and social and physical recreation has been made—and I might add that it is in the education service and not under the heading of physical training and recreation, mentioned in the Appendix to the Report, that the great bulk of expenditure for these services is shown.

With the exception of the cost of school teachers' salaries, and loan charges arising out of capital expenditure on educational building, the local authority associations accepted the adjustments made by the Scottish Education Department to the education authorities' estimates. With estimates approaching the £100 million mark it would, of course, be surprising if there were no difference between the local authorities and ourselves as to the expansion that might reasonably and realistically be achieved. In fact, the difference between us was relatively small—only about 1 per cent.—and the local authority associations, as I mentioned earlier, after discussion with my hon. Friend, were willing to accept a compromise settlement.

The finally agreed level of estimated expenditure for 1963–65 will enable steady progress to be made in the provision of new schools which are required to meet movements of population and the modernisation or replacement of out-of-date school buildings. Capital investment in this direction must, of course, keep in step with the amount of investment authorised by the Government for education. Provision has also been made for a substantial increase in the number of teachers to be employed, particularly in the secondary schools and for the introduction of new courses for pupils staying at school beyond the minimum leaving age to take the new O-grade examination of the Scottish Certificate of Education.

Further education in local technical colleges run by education authorities, is proceeding, and new colleges and centres of further education are being brought into use. As a result, the numbers of students in full-time and part-time courses are growing and there will be a consequent increase in the number of full-time and part-time teachers.

Youth work has been stimulated by the activities of the Scottish Consultative Council for Youth Service. The expansion of the service is expected to continue. This involves increased expenditure on additional youth organisers and leaders, to maintain youth clubs and to assist youth and other voluntary organisations.

As regards the local health and welfare services, hon. Members will observe that further expenditure is envisaged. The rise in the birth-rate and the increasing number of old people require more of such services as domestic help and health visiting. Local authorities generally are anxious to develop these services.

As the Report mentions, local authorities now have a statutory duty to make arrangements for the care and welfare of persons who are or have been suffering from mental disorder of any kind. During the last year, local health authorities have been submitting for my approval the detailed administrative schemes under which they propose to provide these services. It is clear they have taken careful note of the guidance given in the Report on Mental Health Services of Local Health Authorities, which was published in 1961.

Over the next few years, there is expected to be a marked increase in the number of places provided in junior and senior occupational centres, and centres already in use will be opened to larger numbers and for longer periods each week. The aim will be to provide residential accommodation where the need exists for those who no longer require hospital care but cannot, for one reason or another, return right away to their former homes.

Most important of all, more workers will be employed by local authorities to help and befriend those mentally disordered people who are still at home, and to advise the relatives and friends who are caring for them. Provision has been made for increased expenditure by local authorities on these services. Jordanhill College of Education is doing excellent work in training instructors for occupation centres. The taxpayer and the ratepayer have, it is true, to find more money for this. But no one—and certainly not the local authorities or myself, who have seen some of the great advances in this field—would wish to curtail these services.

Paragraphs 19–21 of the Report describe quite fully the developments of the welfare services which are contemplated in the period immediately ahead. There is not much that I need add, except to say that, here again, local authorities have a tremendously important part to play in making the lives of the physically handicapped and the aged and infirm happier, and my Department wants to do what it can to help the local authorities to expand and improve their services.

Because I have already spoken at some length, I do not propose to say more at this stage about the other smaller services, details of which are given in paragraphs 22–26 of the Report. If any hon. Member would like to have further information on any specific service, my hon. Friend the Under-Secretary will try to give it when winding up the debate.

In the belief that hon. Members will view favourably the considerable expansion of local authority services in the third grant period, which is recognised by the increased amounts of general grants set out in the General Grant (Scotland) Order, 1962, I commend this Order to the House, along with the General Grant (Increase) (Scotland) (No. 2) Order, 1962, to which I referred in the early part of my speech.

7.6 p.m.

Mr. James H. Hoy (Edinburgh, Leith)

May I say, on behalf of my right hon. and hon. Friends that we are grateful to the Secretary of State for having given us information a little earlier this year than on previous occasions, that we also accept his apology for the slip which was made in the figures which he gave us some time ago, and that we are grateful for them.

While we are considering this Order, which is very important, because it affects every ratepayer in Scotland, I do not want to widen the discussion beyond the general grant, but I am bound to say that if I do not do so the right hon. Gentleman must not take it from that that we do not still have some objection to the changes that were made from the specific grant to the general grant. I do not accept for a moment the argument which was put in our earlier debate, that because of the way it has worked out so far it has been successful. In view of the considerable part—rather more than half the total expenditure—taken up on education, there is still a case for re-examining the whole of local government expenditure, and, perhaps, the whole of the rating system.

Over the years, rate poundages have continued to rise, and I was amused to hear earlier the Minister try to explain that they are, proportionately, still less than some time ago. This argument carries no weight at all, and all that the local taxpayer knows is that the rates continue to go up and up. We on this side of the House believe that it has been deliberate Government policy to shift a considerable part of what should be central Government expenditure on to the local taxpayers.

It is true, as the Secretary of State has said, that some agreement was reached between his Department and the Scottish local authorities, but let us get the matter into perspective right at the very beginning. There was a difference m the estimates of expenditure on which these grants are to be paid. The Scottish local authorities, so far as I am aware, estimated that their expenditure for 1963–64 and for 1964–65 would be no less than £111.7 million and £116.8 million respectively. These were the sums with which the local authorities thought they would be faced, but the Government has fixed the sums, given by the Secretary of State, at £110 million and £114 million, so that, in the first place, there was this difference in the estimates between the central Government and the local authorities.

This is one of the objections which the Scottish local authority associations have to the system. They have always objected to the practice of Departments basing estimates of expenditure on a projection of expenditure in the previous year rather than on the local authorities' estimates of their relevant expenditure. The local authorities have always argued that a very much better basis for assessing their expenditure was the basis of relevant expenditure when the estimates came to be considerd.

It is true that in 1959–60 actual expenditure fell short of approved expenditure and that the grant received exceeded expenditure by about £990 million, but it is also true that in subsequent years it worked out the other way round, and the Secretary of State did not emphasise that. It is because of this that local authorities would much rather take actual relevant expenditure as a basis of grant.

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

There may have been a mistake, but I think that the hon. Member said £990 million. Did he mean to say so?

Mr. Hoy

I hope that I did not say "million". If I did, I meant "thousand" We have not got into those figures yet, not even with the present Government. I hope that I said £990,000.

Scottish local authority associations are especially worried about the inadequate consideration which is given to their estimates record. They think that approved estimates are more inadequate in the second and subsequent years for the simple reason that in the initial stages of any expenditure the budget level is frequently not reached, although expenditure tends to rise in subsequent years. Scottish local authorities feel that to fix the grant as now is not to pay sufficient attention to expenditure in future years, and I think that they have a very good case.

In 1959–60 the general grant represented 62.4 per cent. of the relevant expenditure, but in 1962–63 it was only 61.14 per cent. It is true that a number of things had happened. For instance, responsibility for students had been transferred from local authorities from the Scottish Education Department. There is to be a similar transfer in 1963–64 and 1964–65 in respect of old folk's homes, but the transfer of expenditure of this kind brings dawn the proportion from the height of 62.4 per cent. to 59.85 per cent. and 60.23 per cent. respectively for the two years concerned.

What worries local authorities is that if this trend continues, their share of the remaining expenditure will be that much greater. This is made all the more important because expenditure on education will tend to rise in future years as teachers' salaries, and so on, increase, and it is, therefore, important to local authorities that the proportion Should not be decreased in this way. While it may not be so important in the immediate years, it will become increasingly important in later years.

The Secretary of State said that he would offer to reconsider the proportion of grant. I did not understand what he meant by that. Is he saying to local authorities that although the grant has been fixed for these two years, at the end of that time he wii11 be prepared to consider the proportion of grant to local authorities, in other words, to return to the 62.4 per cent. figure, or some other sum?

Mr. Noble

The point I was making was that, although I could not promise that the amounts would be changed, I would keep an open mind about whether we should keep the proportions in the form which they have had in the past. That meets the point which the hon. Member has made about the concern of local authorities which feel that the main expenditure may be on education and might, therefore, lead to an erosion of the percentage, which might be a serious difficulty. I have promised to look at that.

Mr. Hoy

I find this a little difficult to understand, because it is obvious that if the proportion is changed the amount must be changed. That is bound to follow. That is what is worrying local authorities. They are now getting about 62.4 per cent., which will fall in the present proposals, not considerably but substantially when taken overall. If the Secretary of State says that he is prepared to change that, when does he propose to do so? He says that he will keep an open mind, but after we have passed these Orders, the grants will be fixed for the next two years, apart from transitional grants. His offer to reconsider is very important, but when will he reconsider? Surely he did not make that offer without thinking about it.

Mr. Noble

The point I made was that I would do it when there was an increase Order, or a new Order for these grants.

Mr. Hoy

That is even more difficult to understand, because the general grant is fixed by this Order and not by an increase Order. I hope that the Under-Secretary will clear up this point, which is important. As far as I know, the general grant is not altered by an increase Order, for a change would alter the proportions, which are fixed by a General Grant Order and not by an increase Order. I hope that we will have some clarification later tonight.

There was some slight disagreement when the Secretary of State spoke about the inclusion of expenditure on old folk's homes. The local authorities made it perfectly clear that they disliked this proposal entirely and felt that it reacted against local authority grants.

The Under-Secretary of State for Scotland (Mr. Gilmour Leburn)

To the extent that it brought down the ratio, which is what we have been discussing.

Mr. Hoy

Exactly. If that is done, the ratio is brought down, and that is what local authorities object to. They are prepared for it to be taken out altogether and treated as a separate item, and that would be fair to local authorities, who can raise taxation only through local rates. If the burden is passed more and more from central to local government, local rates must go up.

Local authorities frequently differ in their treatment of services. In his long peroration, the Secretary of State explained the social services and paid tribute to the work of local authorities. However, much of the work which local authorities undertake is absolutely dependent on their resources, and when we altered the specific grant system the effect on certain local authorities was that they either had to restrict the services which they could offer, or attempt to increase them and put the burden on the local ratepayer.

Local authorities take no tremendous objection to the Order except on the matter of principle, but in view of the right hon. Gentleman's offer, about which, if I may say so quite gently, he did not appear to be very clear, I hope that the Under-Secretary will be able to clear up this very important matter before the debate ends.

7.19 p.m.

Mr. Forbes Hendry (Aberdeenshire, West)

I was disappointed that the hon. Member for Edinburgh, Leith (Mr. Hoy) should have made such a point about the loss being sustained by local authorities. I am always surprised when an hon. Member takes such a personalised view of local authorities, because grants come not from some mysterious purse but from the taxpayer. The consequence of his argument would be the transfer from the local ratepayer to the general taxpayer of the cost of local services. That is important to individual local authorities, because it saves them having to raise their rates and incur unpopularity, but it must be remembered that the expenditure has to be met either by the taxpayer or the ratepayer and not from some mysterious source in the sky. We must take a wider view of this in the House, because our job is to look after the interests of the taxpayer rather than those of the ratepayer. Local authorities, through their associations, are capable of speaking for themselves.

The law on this subject was clearly laid down by the 1958 Act. It is evident from the White Papers that the Scottish Departments have carefully considered the position. They have tackled the job honestly. They have applied the law fairly. They have achieved a very satisfactory Order. It has been suggested that the Scottish Departments may not have taken into account future increases in expenditure, possibly because of inflation. The word "inflation" was not used, but I think that that is what the hon. Member for Leith meant. If expenditure rises, it can easily be dealt with by increase Orders. In fact there is an increase Order before the House tonight for the purpose of dealing with increased expenditure since the last General Grant Order was made.

The Order makes a very substantial increase in the grant. The relevant expenditure has risen by nearly £9 million to £110 million as against £101 million in the last year. This involves an increase in general grant of some £4 million, which by any standard is a great deal of money. Even deducting the new expenditure on old people's homes, there is still an increase in relevant expenditure of about £7 million. Therefore, we are dealing with very large sums of money.

We must congratulate the Government on bringing about the conditions in which this increased expenditure is appropriate. As one travels about the country one is aware of the tremendous difference there is in schools, not only in cities but in country districts. This costs a great deal of money, but it is money well spent. It is expenditure we all welcome. My right hon. Friend mentioned the increased expenditure on mental health. I remember during our discussions on the Mental Health (Scotland) Bill that a great deal of misgiving was expressed by members of the Opposition about the increased expenditure which would fall on local authorities under the Act. Questions were asked in Committee and elsewhere about how far the Government would contribute towards such increased expenditure. These questions are answered tonight in the Order, because expenditure for that purpose will qualify for grant.

It is not my purpose to underline everything that my right hon. Friend said under the various headings of social expenditure, but I think that we must all welcome—

Mr. William Ross (Kilmarnock)

I do not mind the hon. Gentleman underlining what the Secretary of State said, but I wish he understood what the right hon. Gentleman said. What the Secretary of State said about the Mental Health Act was that local authorities were in the process of submitting schemes. If they are submitting schemes, we do not yet know what is to be done. We can therefore take it that the Orders do not include anything in respect of that.

Mr. Hendry

If the hon. Member had read the White Paper with care and had listened to my right hon. Friend, he could read between the lines about what grant may be expected, but that was the impression I received. At any rate, that question has been dealt with by my right hon. Friend.

Hon. Members opposite must agree that the Government have dealt honourably, regularly and systematically with increases in expenditure by way of General Grant (Increase) Orders. The duty of the House is to attend to the interests of the taxpayer and act as a watchdog on Government expenditure. Not only must we ensure that justice is done, as it has been done by the Government in the Order. We must also ensure that it is done fairly in accordance with the Act and that not only is there fair treatment to local authorities but that the taxpayer receives fair value for his money.

All hon. Members will agree that the Government have a duty to examine local authority expenditure carefully. I think that they have done that very well, but I think that they ought to have a rather closer view on some aspects of the problem. It has been suggested to us that the Government should not have based their calculations on actual expenditure but should have based them on the estimates of individual local authorities. There is an old saying in Scotland and elsewhere that what you do not ask for you do not get. A local authority, being a human institution, is probably liable to ask for more than it expects to get. For that reason, the Government must make very careful research into the proposed expenditure. Probably the best basis from which to start is the actual expenditure in the past year. Adjustments can then be made to that.

I suggest that the Government should go a great deal further than that and decide, looking at Government expenditure between one type of local authority and another, what is the appropriate standard for Government expenditure. The standard of expenditure must vary very largely between, say, cities and country districts. A local authority with a very compact area must be able to run things much more cheaply than a very widely spread country area. Consideration must be given to that.

The Government must be very careful to watch for extravagance of any kind in local government expenditure. I do not intend to blame any particular authority for this, but everywhere we go we hear complaints from individual taxpayers and ratepayers about extravagance on the part of local authorities, particularly in regard to education. Many such accusations of extravagance are ill founded. The people who make the complaints do not understand exactly what is happening. The Government should give a certain amount of consideration to that. If they are satisfied that there is no extravagance on the part of local authorities, they should publish more widely the standards to which local authorities, particularly local education authorities, are expected to work.

Cases have been brought to my notice which are rather difficult to explain. For instance, a little school is downgraded from a junior secondary school to a primary school. Immediately after the downgrading takes place, large sums of money are spent in bringing the buildings up to modern standards. It is difficult for the ordinary ratepayer living locally to understand the reason for this. It is easy to explain that standards have risen. It could be done by way of public relations and explanations being given in such cases. I am not suggesting that there is any case of extravagance, but if there is the Government should clamp down and ensure that a proper standard is maintained.

The Government have a duty to ensure that we are getting good value for money by the most efficient administration. I suggest that regionalisation offers considerable possibilities in education. All over Scotland there are cases where by the accident of artificial boundaries geographical considerations are made nonsense. Here I hope to be forgiven if I give illustrations from my own constituency and its immediate environs. In the district of Lower Deeside in the County of Aberdeen the obvious secondary school for children to go to is in the town of Banchory, but by an administrative accident the town of Banchory is not in the County of Aberdeen but in the County of Kincardine. That causes difficulties which make it all but impossible for children living in the Lower Deeside villages to go for their secondary education to Banchory Academy. The obvious alternative is the City of Aberdeen, which is a cultural centre. It has been a centre of education for hundreds of years, but because of an administrative accident they are not able to go there. The education authority in the City of Aberdeen is Aberdeen Corporation.

What happens is due partly to independence and, I suppose, the self-esteem of Aberdeen County Council, that these children are taken by bus across Aberdeen to Bankside, which is away on the other side of the city. There they receive an excellent education at an excellent school—but it is a ridiculous distance for them to have to travel from home, at a ridiculous expense and causes a ridiculous amount of inconvenience to their parents. I hope that my right hon. Friend will look into questions of this sort, for they occur all over Scotland, to see whether some sort of co-ordination can be arrived at so that the ratepayers and their children are not put to such inconvenience and expense and so that there may be greater efficiency for all concerned.

While I have been speaking about extravagance, I dare say that most hon. Members have come across cases of penury on the part of some local authorities. In the cities this is probably not so obvious, but in the country districts one meets it every day. In these areas there is a comparatively small rate income and the local authority must take great care when using such income as it has. Because of that, some authorities may seem to act in a rather miserly manner. I can illustrate this by citing a case in my constituency.

In the village of Kincardine O'Neill, junior secondary children must find their own way to the village of Torphins, which is two and a half miles away. To do so they must traverse a secondary road which is not uphill all the way but is sometimes impassable in the winter. The alternative is for them to go by service bus on an excellent road to the village of Aboyne, which is four and a half miles away, but to get there they must pay the necessary bus fare. While the amount of money involved is small we must remember that the means of the local authorities in these country areas are also small, and I urge my right hon. Friend to consider this type of difficulty.

In urging my right hon. Friend to consider ways of easing the sort of difficulties I have described—perhaps by introducing some amending legislation—I would refer him to the excellent speech made by the Leader of the Liberal Party on 16th April last in which he dealt with these problems much more fully and ably than I can. He explained the difficulties encountered by country local authorities and when I say that my right hon. Friend should consider framing legislation to help these remoter authorities I am merely repeating one of the suggestions made by the Leader of the Liberal Party. The saying that one half of the world does not know how the other half lives is indeed true, for people who live in the cities do not appreciate the enormous hardships suffered by country children, particularly in the winter.

I turn to the new proposal about old people's homes. I was delighted to read that provision has been made for those. Although it seemed that some sort of allowances had been made for them in calculating general grants in the past, I was overjoyed to learn that specific provision was being made for them in the Orders under discussion. My joy, however, was allayed when I read with surprise that the new method of operation would make no diffierence to the amount of grant received. However, I gathered from what my right hon. Friend said that my disappointment may not be altogether justified and I hope that my right hon. Friend will explain more fully what he has in mind on this topic.

This is a subject on which we should not be in any way miserly because I do not think that many local authorities are doing their job for the old people under the terms of the National Assistance Act, 1948, Under that Act local authorities were given power to assist voluntary organisations running old people's homes, but, to the best of my knowledge, few of them have done so. There are some excellent homes being run throughout Scotland by voluntary organisations, notably by the Church of Scotland and other churches. In my constituency, in the town of Huntly, there is an excellent old people's home run by an ancient charity called The Scotts Hospital. That home has been in existence for more than a century but the work is carried on on a shoestring, the money being derived from ancient charities, without assistance from anyone. How it continues, I do not know.

I urge my right hon. Friend carefully to consider the possibility of making more generous provision for old people's homes and to encourage local authorities to give more generous grants to those splendid voluntary homes which are doing an excellent job and which are saving the taxpayer and ratepayer a great deal of money.

I hope that hon. Members will forgive me for having given illustrations from my constituency to strengthen my argument, for I have found that to be the easiest way to underline these points. I think that the Orders are excellent and represent an honest endeavour on the part of the Government to produce the sort of circumstances we wish to see. If they have erred on the side of niggardliness, as the hon. Member for Edinburgh, Leith suggested, further Measures to increase these sums may be introduced from time to time. Taking everything into account, I have the greatest confidence in commending the Orders to the House.

7.38 p.m.

Mr. Thomas Steele (Dunbartonshire, West)

I found the speech of the hon. Member for Aberdeenshire, West (Mr. Hendry) rather extraordinary. My hon. Friend the Member for Edinburgh, Leith (Mr. Hoy) will readily appreciate the assistance that speech gave to his remarks, because the moral of the hon. Gentleman's speech was that he wants a review of local government expenditure. The hon. Member for Aberdeenshire, West went on in a curious way to complain bitterly about the extravagance of local authorities and, at the same time, he asked the Government to act as the public relations officers for them in Investigating every rumour and every bit of tittle-tattle in his constituency and to assure his constituents that his local authority was not over-spending.

He then went on to say that we in the House of Commons should not be particularly interested in local government expenditure because we should be looking after the interests of the taxpayer. I found that rather odd, because he criticised the hon. Member for Leith for saying, in effect, that the rates were going up and that that was due to the Government's policy. The hon. Member for Aberdeenshire, West said, in effect, "Well, what does it matter? It is only a question of transferring expenditure from the ratepayer to the national purse."

That is exactly what my hon. Friends have been complaining about. That is exactly what this Government have been doing for the past eleven years through their legislation. They have been transferring the burden which should be borne by the national Exchequer on to the backs of the local ratepayers. We all agree that there are certain functions which are purely local. Some are so purely local that the ratepayers enjoy supporting them in their localities. There are, however, other functions which must be regarded as being national and for which the Government must face up to their responsibilities.

At the end of his speech—after indicating that the Government should pay more attention to the expenditure of local authorities, should criticise it and keep a watchful eye on it—he urged the Government to spend more money on many services. The hon. Gentleman made an entirely different speech in Committee, when he asked for more public expenditure on electricity supplies in his own constituency. We do not need to read between the lines of his speech because we know that he is trying to ride both horses at the same time, and that does not work.

I understood the Secretary of State to say that the main problem arising out of this Order is that of the provision of accommodation for the aged and infirm; that he had gone back to the previous year, looked at what the ratio of grant would have been in operation had this particular expenditure been in operation, had then looked forward and, in effect, had said, "This is the ratio that we will operate in the future."

The local authorities have not accepted that idea, and my hon. Friend the Member for Leith naturally wanted further information. He said that the local authorities asked that at least the ratio of grant should not be altered, and the Secretary of State indicated that though he was not prepared to undertake that at present he was prepared to look at it for the future. If that is so, the Secretary of State has, in effect, accepted the local authorities' case in principle and has accepted what the local authorities are saying, which is that the new arrangement means a loss to them.

I believe that in putting forward their proposals the local authorities meant that they were not gaining anything in the first two years, but were subjecting themselves to some balance the other way in recognition of the fact that their ratio—which is the important thing—if maintained in future years, would act to their advantage. They were considering the long-term case.

That being so, we should be told two things. The Secretary of State should first tell us why he did not accept the local authorities' recommendations to begin with. Secondly, as the right hon. Gentleman has now indicated that he accepts that the local authorities are right in principle—because no Minister says that he will look at something again without thinking that it must be wrong and needs some alteration—we should be told why, if he is satisfied that what he is now doing is absolutely correct, he will look at the subject again. Quite frankly, what we want to be told is that what is wanted will be done.

The right hon. Gentleman's explanation gave us a picture of expanding services, and it seemed that the local authorities would be given the opportunity to do all the things they want to do. I should have thought that the Secretary of State would have taken the opportunity to tell us of some of the things the Government intended to do about increasing local and national expenditure; that in the light of Scotland's present circumstances and the promises made by the Chancellor of the Exchequer—and the Prime Minister—it really was his intention to increase that expenditure.

We have been told that in those areas where schools were necessary schools would be built, and that where the labour was available roads and all the other things would be constructed. The Secretary of State might have taken this opportunity to explain how it was to be done. But we are discussing this Order and local authority estimates as if nothing had happened, as if no change had ever taken place, and as if there were no ideas about doing that sort of thing. This makes me quite suspicious that all this talk about encouraging local authorities in areas of high unemployment to increase their expenditure is just talk for public consumption and does not mean anything at all.

Road safety may be considered by some to be a very small matter, but to me it is very important. Here Scotland lags very badly behind England. I put down Questions to the Minister of Transport and to the Secretary of State for Scotland asking for comparative figures of people employed full-time on road safety. I am told that in England and Wales about 250 road safety people are employed by local authorities, but that in Scotland there are only four. When I look at the provision in the Appendix, I find that the road safety estimate for 1961–62 was £30,000. The actual expenditure is now about £26,000, and it only rises to £34,000 in 1964–65.

Those figures give no sign of the Government urging local authorities to press ahead with this work. Something must be done about road safety, and I hope that the Under-Secretary will tell us that it is receiving the Government's attention. I am confident that we could cut down the number of deaths and accidents on our Scottish roads if more attention were paid to this item. There are very many things that do not require any great expenditure but which would help in this direction.

7.49 p.m.

Mr. William Hannan (Glasgow, Maryhill)

I notice that the fire service figures have been increased, but has the Under-Secretary kept in mind that the Factories Act, which was passed some little time ago, brought in some extra fire prevention provisions and that, at this moment, a Standing Committee is dealing with the Offices, Shops and Railway Premises Bill which has no fewer than eight Clauses which are devoted to the development of the fire service and which put on local authorities the administrative responsibility?

I became rather alarmed when the hon. Member for Aberdeenshire, West (Mr. Hendry) was speaking of local authorities being miserly. I presume he was referring to Conservative councils. With miserly councils looking after the interests of the ratepayers and the hon. Member for Aberdeenshire, West looking after the interests of the taxpayers, the future would appear to be one of great misery for the whole country. Why cannot the hon. Gentleman and his hon. Friends recognise that we are in a period of expansion? Are they afraid of the term "affluence"? Our objection is that the affluence and expansion are not directed into the proper quarters and the proper services.

When the hon Member suggested that the Government might publish the standards of expenditure, I could see another job arising for Colman, Prentis & Vanley, which is something that none of us would want to occur. If, on the other hand, the Government are to get down to publishing the details of expenditure for the benefit of local authorities, where is Conservative freedom? These are the questions which are perturbing me.

Let me deal with the merits of the other statement made by the hon. Gentleman, that if these proposals do not match up to the estimated expenditure there can always be an increase Order. But when the Bill was being debated in 1958 one of the merits claimed for the new method of grant was that the Government would be able to see further ahead and plan their resources. Instead of that, what have we had? In each year we have had increase Orders. Indeed, this year we have had two, the one which we are now discussing being the second one. No doubt, we shall continue to have these increase Orders.

There was one such Order for 1960–61 and for 1961–62. Now we have this one for 1962–63. Before dealing with it in detail, I wish to point out that one of the merits claimed was that the Government would be able to see ahead for two or mare years. But two years was to be the minimum period. In fact, at one stage the Government were so enthusiastic that they were going to have an Order for three or four years. However, two years is apparently a sufficient period here, and so far there has been no attempt to introduce an Order for a period longer than two years.

In that case, I adhere to the doubts which were expressed by my hon. Friends as to the merits of this method of grant, compared with others that we have had in the past. Indeed, the right hon. Gentleman's predecessor two years ago said that experience had shown that the general grant was working very well. I take leave to doubt that statement, in view of the fact that we have these increase Orders coming along. Not that I have any objection to the increase. I am objecting, however, to the method. The merits which were then claimed have fallen by the wayside.

Coming to this Order, it should be noted that it is making a net increase of £2½ million in the general grant, bringing it up to £6½i million. This one increases the grant by £440,000, or a gross total of £61.94 million. But this increase of £440,000 is set against the additional relevant expenditure of £710,000. That is a percentage rate of 61.97 per cent.

When one examines the other figures in the proposed settlement of general grant for 1963–64 and 1964–65, the percentage of grant to relevant expenditure comes down to 59.84 per cent. in 1963–64 and to 60.23 per cent. for the following year. This is a reduction, and it can be shown from examination of previous figures that this reduction has been continuing since the institution of general grant. It is part of a continuing process which is bound to depress the resources of local authorities.

Far example, in 1959–60 the percentage of the relevance of the grant to the estimate was 62.4 per cent. In 1960–61, it was the same, but in 1962–63 it is down to 61.14 per cont. and in the following year 59.84 per cent. So the local authorities are being forced into an ever more unfavourable situation. I hope that the Government will think again, not once but twice, over the course which they have decided to take.

I will not go over the question of the old folk's homes, but I think that the hon. Member for Aberdeenshire, West said that these homes were included in the grant before. That is not so. It was only a small grant for capital purposes. Now, under the Secretary of State's proposals it is to be included. I hope that the representations which have been made from these benches will receive attention from the Minister.

As I understand, the local authorities first put their full estimates to the Secretary of State. Then they are examined by the various Departments. What the local authorities are objecting to—and I emphasise this—is that, instead of relating the grants to the estimates as is laid down in the Act, the Departments are continuing to use the method of relating the projected grant to the past year's expenditure. The local authorities are taking strong exception to this, and I think that they are right.

After all, if the local authorities' estimates are cut down in the course of negotiations, any expenditure into which the local authority enters over and above that amount goes on to the rates. In short, if they spend up to their original estimate the whale of the amount over the grant is added to the rates. Similarly, if a local authority, having made its estimate and having received grant, fails to spend the whole amount of the estimate, it can pass the advantage on to the ratepayers. So we give a prize to the slothful, or lazy, or miserly local authority which does not do its duty in providing for its services.

Other considerations come into the matter. The experience of local authorities is that in a period of rising prices there is a tendency that in the latter part of the two-year period no cognisance has been taken of that fact, and a cumulative amount builds up which cannot all be taken into account for a supplementary grant such as we have before us now. Indeed, it is admitted in paragraph (4) of the White Paper, in which the Secretary of State stated: Since the Increase Order was made further increases have occurred in the level of costs, prices and remuneration which could not be quantified at that time. These have been the subject of consultation with the Scottish local authority associations. The main items are pay awards for nursing and allied staff in the employ of local authorities, manual workers, administrative professional technical and clerical staff and part-time further education teachers. Let it be noted that this question of salaries and the rest are under the control of the Government themselves, and many of the disabilities of the local authorities are the result of the mismanagement of the Government in the question of interest rates and of these pay awards.

It is worth while noting that we are here dealing with services which a civilised society must expand by the very nature of things. Among these, primarily in my own list of priorities is the question of education. I say this not from the point of view merely of helping young people to achieve jobs. I am thinking of Britain as a nation and its place in the world in comparison with other countries. We are lagging behind. I believe, and I think that many of my hon. Friends do, too, that the question of education is quite wrongly placed in this category and should in some respects, particularly in regard to salaries, be a national charge and taken out of politics altogether. Moreover, there are the local welfare services and the question of mental health in which no development has taken place at all.

I am well aware that local authorities have been asked to submit schemes, and when they do, the Government will find that expenditure in these matters is bound to go up, and quite properly so. The total amount will rise year after year, yet the rate of increase in the successive general grants is being gradually reduced in the percentage rate. The grant made in 1958, operating for 1959–60, was relatively large. Of course it was. Comment was made about this at the time, but I must remind the House that that was the one made in the year preceding the General Election and that the local authorities have not had it quite so good since. We are confronted with a strategy, as my hon. Friend said, which, slowly but surely, and unmistakeably, is transferring the burden of local services away from the Exchequer to the local rates, and I cannot distinguish, as the hon. Member for Aberdeenshire, West can in so many instances, the ratepayer from the taxpayer—he is the same person.

The Under-Secretary of State, in part of the answer which he gave, said that the absolute figure would increase. Of course, they will increase—£114 million is higher than £110 million or £101 million. This is admitted. Of course they increase, but they tell us very little. We have to examine them in relation to the total size of the national income and compare the size of the grant with the total expenditure that local authorities expect to carry, and with that of the local authorities of other counties.

The Minister may boast that the local authorities' actual expenditure was less than their estimates but the reasons are these: first, the infliction of interest rates which make inaction and lack of planning by local authorities the order of the day. Local authorities would go very much faster but for the restrictions and handicaps in this respect. Secondly, there are the labour costs. This increase Order is the result of that. Thirdly, the acute shortage of expert workers is handicapping local authorities in getting on with their jobs. If one looks at the shortage of architects and administrators in the matter of town and country planning this is one of the principle shortages holding up local authorities in the meantime.

With the best will in the world, while I admit that there are increases here which we accept gratefully, if not gracefully, they are, nevertheless, quite inadequate for the purposes of the huge task which lies before the local authorities.

I hope that on the points about the fire service and the old people's homes the Under-Secretary of State will be able to give us some answers.

8.6 p.m.

Mr. William Ross (Kilmarnock)

I cannot say that this has been a thrilling debate. It has certainly been sober and we have exercised our powers of critical examination to the best. I am sorry that the Secretary of State has gone and I hope that he will return, because he dealt with some fairly important points and made some fairly important announcements. We are beginning to wonder whether they are important or not, or whether they are just something that he said, some departure from his brief and he is now away thinking how he will get out of it.

The first thing that matters is that I want to put everyone at rest—there is no danger of our voting against the Order. After all, we are getting an additional £940,000 in respect of the increase Order, and that brings the total to £61,940,000. Then we are dealing with the third-year period in which the grant is to rise by about £7 million over the next two years. The extent of the increase from now is about £7 million. I am surprised that the hon. Member for North Angus and Mearns (Sir C. Thornton-Kemsley) has not spoken. He is terribly worried when Scotland seems to get something out of the Exchequer which England and Wales does not. He becomes the hammer of the Scots when in the Public Accounts Committee or speaking in the Scottish Grand Committee.

If he will take the relative growth in respect of relevant expenditure and the grant that this House has dealt with in respect of England and Wales, he will see that if we were to get the same relative increase we should receive another £1⅓ million, if my mental arithmetic—done very speedily on this bench—is right. Strangely enough, this is almost the same figure with which the local authorities were concerned about the change in the form of grant being given for residential accommodation. I think that the first thing that we have to appreciate is the size of the sums with which we are dealing, because it is for the Government and for us as members of Parliament to be concerned with the well-being of the taxpayer and we cannot divorce ourselves from the fact that every one of us has asked for these services and for more of these services. We cannot ignore that the Government are paying through this Order only a proportion and the rest has to be paid by the local authority through rates. I do not think that there is anything contentious in that. If the Secretary of States argues that there is something sacred in a proportion or ratio which must be maintained year after year, then we must bear in mind what that means to the local authority. Let us work it out practically. We have the figures before us.

I have been doing a little more arithmetic. Taking the revised position for 1962–63, as I make it, we leave the local authorities to bear the burden of £39,500,000. In the next year, 1963–64, the local authority burden will be £44,800,000. In 1964–65, it will be £45,548,000. There is this growing burden falling upon the ratepayers. What is wrong with that?, asks the hon. Member for Aberdeenshire, West (Mr. Hendry) since the Government are bearing more, though not a higher proportion, as we have already shown. The proportion has, in fact, gone down.

But let us face the realities for the local authorities and what I regard as the general unfairness. The taxpayer may well be the same person. But we have a Budget every year. The Budget and the yield of taxation is fixed in relation to the national wealth, the national income, which grows every year. Whether it be a real growth or an inflationary growth, it is reflected fairly, and so from year to year one can spread the burden fairly.

What happens in the collection of local rates? They do not grow every year in that way. The individual sits in the same house. His assessment is fixed now for five years ahead. There is not a valuation growth in the basis for bearing the burden of rates as there is in relation to the national income. Thus, if we put a greater figure year after year on the local authorities and, therefore, on the ratepayer, the burden on the ratepayer grows unfairly from that standpoint because it unfairly reflects ability to bear the burden.

This is interesting from another point of view, having regard to what has happened in Scotland during the past few years. We have had a revolution in our rating system. At one time, the rate burden in Scotland was borne by two different sets of people, although in some cases they were united in one person, the owner-occupier. But the number of ratepayers in Scotland has been reduced by the abolition of owner's rates and the whole burden of rates is upon the tenant. We have narrowed the base, and as we have narrowed the base we have increased the burden and worsened the unfairness. This is all part of the great fallacy in what hon. Members say about low rents in Scotland, disguising the fact that the person who bears the rent, the tenant, has also borne the whole brunt of the revolution in regard to rates.

I ask hon. Members, when they are considering the proportion aspect of the matter, to look at the fairness and justice of it as it affects the rate burden. The hon. Member for Aberdeenshire, West shook me. He talked, on the one hand, about miserliness and, on the other, about extravagance. It was interesting to note that he had not a single specific example of local authority extravagance but he had examples of miserliness and unfairness where a local authority could, with reason, and with the hon. Gentleman's support, have spent more money. Why did not the local authority spend more money? The reason is fairly obvious when we look at the figures belatedly given by the Secretary of State.

The revised estimate of relevant expenditure for 1962–63 is £101 million and of that the education service takes nearly £88 million. That is a tremendous amount. It is a service which we cannot and dare not ignore. I hope that the Secretary of State is bending every effort to ensure that the local authorities do not ignore it. It is implicit in the White Paper that the new building programme for schools and, particularly, for technical colleges must be responsible for a considerable part of the increased rate burden and general grant burden being caused by loan charges alone, because that is the only thing which can come in at that point. Yet, of course, it is the first thing which is mentioned by the Secretary of State in connection with education.

I can remember the time when one of the lackeys of one of the right hon. Gentleman's predecessors—he is now in another place—told us that, although the rate of interest was then about 5 per cent., we had no reason to be pessimistic or raise our voices in protest because it would not necessarily remain at that for long. That was about five years ago. It did not remain at that level for long. It went up and has never come down to that high rate of which we were then complaining. Of course, the cumulative effect of this upon a local authority which must embark upon capital investment as a result of responsibilities which we have placed upon it is really frightening. Moreover, this has a bear- ing on all the authority's other services because it must inevitably take first priority.

It astounds me how easily the Secretary of State not only builds technical colleges but staffs them in a couple of sentences. I wish that it were as easy as that. He must know that he would be only too happy if he had to meet some of the expenditure for which he is allowed increases. We must find new full-time and part-time staff not only for schools but for further education. I hope that the Secretary of State knows where the staff will come from.

However, putting that aspect aside, the increases do not necessarily reflect a growth of services at all. Someone said that it was easy to come back and get some more money and that there was no bother at all. I wonder whether hon. Members have noticed the detail of what we are discussing. The Secretary of State has not the last word here. At the foot of the Order there are the words Michael Noble, One of Her Majesty's Principal Secretaries of State". Below that one sees two words, We consent and then follow the names of two of the Lords Commissioners of Her Majesty's Treasury.

I am not sure whether the hon. Member for Aberdeenshire, West was here when we passed the legislation providing for the general grant. The words, with the consent of the Treasury appeared more than once. The Treasury has a way unto itself much more mysterious than that purse of which the hon. Gentleman spoke.

It is an indication of the extent to which we have been forced to resort to this device that this is the second one we have had this year. It is all due not to increases in services but to inflation, to rises in costs, in wages and in salaries. This is what has been putting local authorities right up against it. The hon. Gentleman represents parts of Aberdeenshire. I wonder whether he has read today's local Press. I will refresh his memory. I am sure that the noble Lady the Under-Secretary of State will be interested in this. The headline in the Scotsman today is "Aberdeen again healthiest city". Well, "city" is all right. It says that the lopsidedness of development which had begun to hinder progress in 1960 became even more apparent in 1961. While more staff were occupied in providing services for the support of people handicapped by age, disease or disability, there was virtually no extension of the staff available for the promotion of health and the prevention of disease. This is what Aberdeen wants and cannot get. The report refers to the shortage of accommodation for doctors, health education … health visitors and the rest. It was becoming evident that the reluctant but ruthless pruning of important tasks was beginning to have detrimental effects. This is in Aberdeen. It goes on: Aberdeen would have to pay in poorer health statistics for the shortage of preventive staff", and the shortage of these staffs is related to the pruning which has to be done in order to meet the first priorities. The Under-Secretary of State must face the situation. These increases do not necessarily mean satisfaction for Scotland; far from it. What has been said there can be said of practically every local authority in the country.

The hon. Gentleman smoothed over the meetings which he had with local authority representatives. I do not know whether he recalls some of the speeches made by the noble Lady the Under-Secretary of State when she was on the back benches—when she was not in Australia and not in America. She may well have been one of those on whom it suddenly dawned that sooner or later the central Government must take full responsibility for teachers' salaries. Many hon. Members opposite, not necessarily those who are here at the moment, have been saying this. We said it a long time ago. Of course, this was one of the things that the hon. Gentleman and the local authorities quarrelled about. This is becoming a terrific and fantastic burden on local authorities. It is a question of controversy as to whether the proportion which is being borne by the central Government is enough.

There is also the question of the old people's homes and residential accommodation. We feel strongly about this matter. We do not want anything to impede the development of these homes. We want to encourage as far as possible the voluntary homes which have been doing good work and the other bodies from whose path we cleared any statutory confusion that there might have been through a Private Member's Bill last year dealing with the help that can be given to the W.V.S. and to other organisations providing meals-on-wheels, and that sort of thing. However, the main provision in this respect will have to be made by local authorities.

I represent a local authority which is pre-eminent in this service. We have three eventide homes. We do not like to call them old folks' homes. Some of the people in them are younger than many M.P.s here borne down with the responsibility of having won an election on a minority vote. We have The Mount, Springhill and Barbadoes Road homes. I invite any hon. Member and the noble Lady to see exactly what we think are the right conditions in which old people should live. We do not grudge what we have to pay out of the rates for these places.

Hitherto, as I understand it—and I confess that I have read the report for only a short time—the grant has been made for specific places, to the local authorities direct, but now it is being included, and in the first inclusion the Government are paying only the same sum of money, seemingly fairly, as they paid before. Am I right?

Mr. Leburn

indicated assent.

Mr. Ross

In future, however, it will form part of the general grant calculation, and we have been given no guarantee that what is being done by this method, which has meant a reduction in the aggregate percentage paid from general grant to local government expenditure, will be remedied in future.

All that we had from the Secretary of State—and I should like to know whether we have understood him correctly was that when the time came for him to reconsider this business, which obviously will be in the next general grant period—in other words, in about two years' time—he will have gone over the matter with the local authorities. My hon. Friend the Member for Dunbartonshire, West (Mr. Steele) was right. This is a sudden repentance, if it is a repentance. The Minister has just finished discussions with the local authorities about this. They left him in no doubt as to how they felt about it. I do not know whether he understands the general grant principle, which is that one strikes an aggregate, and then that aggregate is distributed on a formula which we passed a long time ago and which we have not touched yet, although the right hon. Gentleman is taking powers to enable him to make changes in it. Whether a local authority has provided a single old people's home or not, it gets benefit out of the aggregate for what is being spent by others.

The noble Lady the Under-Secretary of State will remember her arguments on this and how badly Aberdeen felt about breaking away from the specific grant and going over to the general grant, because authorities which were less concerned about the well-being of its old people nevertheless still got their share. This is why local authorities have a right to feel that they are not getting the benefit of their own expenditure.

I sincerely hope that the Government will consider this question of proportion. It is not a question of returning to the old proportion. If we stick to that we place an unfair burden on certain local authorities. Bodies other than the Labour Party are beginning to appreciate this. The Town Chamberlain of Edinburgh put forward, certainly for Edinburgh, a revolutionary proposal to try to bring an element of justice into this. The more we transfer essential services for which there is a very considerable national responsibility to the Exchequer for direct Exchequer payment, then so much less is the injustice created by the burden falling on the unfair system of raising money.

I hope that we shall have an entirely changed outlook on this general grant procedure in two years' time. If the right hon. Gentleman has not the power to make the changes that he considers necessary, then he has time between now and the end of January or the beginning of February and such time as we take to pass the Local Government (Financial Provisions) Bill—that will be done with the usual expedition of the Scottish Standing Committee—to think of the powers that he would like. We have seen the right hon. Gentleman take strange and wonderful powers that he would be far better without. If he wishes powers to make beneficial changes and to reduce the rate burden in Scotland, he will have us behind him.

8.30 p.m.

The Under-Secretary of State for Scotland (Mr. Gilmour Leburn)

As the hon. Member for Kilmarnock (Mr. Ross), who wound up the debate for the Opposition, has said, this has not been an exciting debate. Nevertheless, it has been intensely interesting and a debate in which not only those who have spoken, but those who have listened, have found the many points which have been put forward of interest and of vital importance to local authorities.

Local government and its problems must always be given the greatest consideration and attention by the House of Commons. Despite certain minor criticisms which may have been made of them, the two Orders which we are considering are an earnest of the Government's intention to ensure that local authorities have the resources to carry out the services for which they are responsible and, at the same time, to give to those authorities as great a freedom as possible to deploy these resources at their discretion.

I accept from the hon. Member for Edinburgh, Leith (Mr. Hoy), who opened the debate for the Opposition and who reserved his position, that he and his hon. Friends do not necessarily accept the whole question of general grant versus specific grant, but I do not think that either the hon. Member or, indeed, the Chair would allow me to go into that in detail tonight. I note, however, the point made by the hon. Member. Inevitably, a debate of this kind must range widely. It is difficult to get down to details of particular services. Nevertheless, one or two hon. Members have put specific question and I shall do my best to answer them. Before doing so, however, perhaps I may be allowed to cover the wider subject of the two Orders concerning general grant for 1963–64 and 1964–65.

As we know, the amounts involved are £66 million and £69 million, respectively. If one analyses the position, such criticism as there may have been, either by hon. Members or by local authorities, has been of what might be called a marginal nature. The figures on which the general grant is based are built up directly from the estimates of local authorities of what they expect to spend on the services included in general grant. For the two years in question, the local authorities' original estimates of relevant expenditure amounted, as the hon. Member for Leith has said, to £111.7 million in the first year and £116.8 million in the second year. The hon. Member will, perhaps, allow me to increase these sums slightly to take into account increases which could be quantified since June which raise the figure to £112.1 million for 1963–64 and £117.3 million for 1964–65.

As we know, local authorities' estimates are then examined by the officials of my right hon. Friend's Department and meetings and discussions take place. Finally, I met representatives of the local authorities. The general grant figures for relevant expenditure were finally agreed at £110.28 million and £114.55 million. That is a difference in the case of 1963.64 of £l.866 million and for 1964–65 of £2.737 million.

To describe that as a whittling away—although those exact words were not used, that was what was implied—is not accurate. The difference is accounted for partly by the exclusion from the estimate of certain expenditure which is inadmissbile and partly by adjustments which are made during discussions between the officials of my right hon. Friend's Department and local authority officials. There are certain good examples regarding prospective staff. By general agreement, both sides accept that a more realistic figure will be the one which is finally reached.

Even if hon. Members feel that there has been any whittling away or diminution of the figure, if one appreciates that the difference between the original estimate which is submitted and the final estimate which is agreed is no more than between 1½ and 2½ per cent., great credit is reflected upon everybody concerned in dealing with the negotiations and getting the figures right and agreed. It was some satisfaction to me that when I had the meeting with the local authority representatives they were able to give their complete agreement to the figures on relevant expenditure.

I should like to pay my tribute to the local authorities for the care and trouble which they take in preparing their estimates. I know it is suggested that sometimes they are inclined to aim too high in the first place. I do not accept this. A genuine attempt is made to get the figures as realistic as possible. Even with the best will in the world, however, some of the proposed expenditure may be a little off or inadmissible and to achieve an adjustment within only 1½ or 2½ per cent. is creditable.

I agree entirely with what the hon. Member for Kilmarnock said about old people's homes. They are very important. I was surprised to hear the hon. Member say that he preferred to call them eventide homes rather than old people's homes. Perhaps neither title is yet the perfect one. Probably we can do better than this.

Two years ago it was explained in the Report on the General Grant Order that it was intended in later grant periods to collate and include all expenditure in this service in relevant expenditure. My understanding of what happened at that time was that this proposal was not criticised. Running costs were not previously grant-aided. The only Exchequer assistance which was given was in the form of capital grants of up to £11 per place provided. By bringing all the expenditure for this service into relevant expenditure, we will in future be giving grant on the whole running costs. This will surely be an advantage to local authorities as the service expands as we would all like it to do, and the whole expenditure will attract grant.

I realise, however, that the local authorities have been worried concerning the point made by the hon. Member for Leith that, as this expenditure is brought into the relevant expenditure, the effect is to reduce the ratio of grant. This did not affect the agreement which I came to with the local authority representatives on the total amount of grant for 1963–64 or 1964–65.

I do not want to go into too detailed figures, but I think I can explain it simply like this. It did not really matter very much for these years, 1963–64 and 1964–65, whether we did the calculations my way, so to speak, of taking the 59.9 per cent., or whether we kept out the relevant expenditure on old people's homes and did the calculations on the basis of 61.1 per cent.; because the answer in both cases, it so happened, came to £66 million and £69 million.

Why the local authorities have objected to this, is, of course, because they believe that by so doing one is setting the pattern of applying this new percentage of 59.9 to all relevant expenditure in the future. Of course, unless the old people's homes expenditure were to go ahead faster than expenditure on some of the other services, and notably on education, then they would find that they would not be getting the same proportion of grant on, let us say, education; they would be getting only 59.9 instead of 61.1 per cent. This is really complicated and difficult for me, but I shall be delighted to give way if anyone wants me to.

Therefore, while there was agreement up to that point they were nervous that, if they agreed at 59.9 per cent., that would in future years affect them. It seems quite clear to me that if anyone brings in a service, no matter what it is, it will have the effect of reducing the percentage grant unless we take into the grant side of the account, grant at 60 per cent. or whatever the appropriate figure is, 59.9, 60 or 61.1 as the case may be.

It is for this reason that my right hon. Friend has said that for the next period he is going to examine the question. It does not affect the amount of grant in those years, namely, £66 million and £69 million. What has been worrying local authorities is the percentage which may apply in the future.

The further point I want to make is that—

Mr. Ross

It does not affect the money the right hon. Gentleman is giving. The same amount of money is going, but in a different way. Hitherto he has given directly to the local authorities. Now he is giving it as part of an aggregate which is distributed according to a certain formula. Does the hon. Gentleman not appreciate that that does not necessarily mean the same? Although no one can ever tell, it does not mean the same to each individual local authority which has been incurring expenditure. It will be determined purely in relation to local authorities' own expenditures.

Mr. Leburn

Yes, indeed. I see that all right. But this is built up on the assumption, as was put into the Report two years ago, that this service was going to be taken into general grant. I appreciate that it does not necessarily go to the same authorities.

There is one other point I should like to make on this, and that is that there is no particular sanctity about any particular percentage, because in the end of the day it is the responsibility of the Secretary of State to fix the amount of general grant. However, particularly having listened to the earlier debate, when we heard it mentioned once or twice by my hon. Friend the Joint Parliamentary Secretary to the Ministry of Housing and Local Government that in England the percentage had remained steady—I think, at 56.5—over the years, I can see that local authorities may suppose that there is some particular sanctity about some particular percentage of ratio of grant to relevant expenditure. At the end of the day, however, there is not. All I am explaining is that, in view of this fact, every time a new service is brought in it upsets this ratio, and it is just for this very reason that my right hon. Friend has undertaken to examine the matter before we come to the next general grant period.

Mr. Hoy

Local authorities are not saying that there is any sanctity attached to the percentage. They are not making that claim. But there has been a fall in the percentage over the years. Local authorities are afraid that the Government will use the lowest one, which they will be faced with in two years' time, and regard that as the Government's share. That is what the local authorities would regard as being very unfair.

Mr. Leburn

I clearly understood that point. It was for that very reason that my right hon. Friend took the point made by local authorities and has given the undertaking that he wishes to examine the matter further.

As to one or two of the specific points, the hon. Member for Glasgow, Maryhill (Mr. Hannan) mentioned the question of mental health. Expenditure in 1961–62 was £235,000. Expenditure has been allowed for in 1963–64 to the extent of £474,000 and in 1964–65 to £600,000. Thus, it has more than doubled since 1961–62.

The hon. Member also asked about fire services. As he probably knows, the main increases shown in the White Paper are concerned with expenditure on increased staff, due mainly to the adoption of the 48-hour week. I take note of his point with regard to the existence of the Offices, Shops and Railway Premises Bill, and if there is any unforeseen expenditure in that respect, there is no doubt that that will be a matter which could be dealt with by an increase Order.

The hon. Member for Dunbartonshire, West (Mr. Steele) spoke about road safety. I am afraid that I cannot necessarily give him a very encouraging reply. The figures which appear are those based on the estimates of local authorities. But he knows that I am anxious to see more being done about this. The amount of money available, however, is not very great and is applied mainly to increases in staff. I hope that as a result of our discussions today and what we have said about the importance of road safety some note may be taken of it.

Mr. Ross

Will the hon. Gentleman appreciate that what is happening with local authorities is that the main burden in respect of education is so heavy that it is pushing the proper meeting of responsibilities for road safety, the youth service and so on further and further down the list? Perhaps the hon. Gentleman will deal with the pressure of the rate burden on local authorities from that angle instead of telling them to spend more.

Mr. Leburn

I was about to finish by saying a word about the rate burden. Notwithstanding the criticism uttered this evening, I shall give the House two sets of figures which are fairly telling. First, in 1961–62 Exchequer grants in respect of Scotland totalled £112.21 million, which equalled 53.6 per cent. of expenditure. The rate proportion was £96.12 million, which equalled 46.4 per cent. The estimate is that in 1963–64 Exchequer grants will total £127.61 million, equalling 55.5 per cent. and the rate proportion will be £102.14 million, equalling 44.5 per cent. So the result is that the Exchequer contribution wild have gone up by 2 per cent. and the rate contribution down by 2 per cent.

Mr. Ross

So the rate contribution has gone down, but the rate burden has gone up.

Mr. Leburn

I understand that. On the other hand, as I have said before, and am not ashamed to say again, this is an operation where the interests of all sections of the community have to be considered, including both the taxpayers and the ratepayers. In these Orders we have genuinely tried to come to a fair figure as between the central Government and the local authorities.

Question put and agreed to.

Resolved, That the General Grant (Scotland) Order, 1962, a copy of which was laid before this House on 6th December, be approved.

General Grant (Increase) (Scotland) (No. 2) Order, 1962 [copy laid before the House 6th December], approved.—[Mr. Noble.]