LOCAL GOVERNMENT FINANCE (ELDERLY RATEPAYERS)

HC Deb 02 March 1962 vol 654 cc1695-797

11.7 a.m.

Mr. Julian Ridsdale (Harwich)

I beg to move, That this House, in view of the increasing amount of local government expenditure, and the consequent dependence on the national exchequer for grants, urges Her Majesty's Government to take early action to help elderly ratepayers with small fixed incomes, and to consider the possibilities of alternative sources of local revenue, and to appoint a committee to inquire into the rating system, and the possibilities of alternative sources of local revenue. My reasons for putting this Motion on the Order Paper are several. For some time I have been concerned about the growing level of local government expenditure. This naturally is leading to an increasing burden of rates which, to a degree, is falling on those least able to bear it—the small fixed income groups. But it is also leading to increasing dependence on the national Exchequer for grants. Today, therefore, I want to discuss the possibilities of alternative sources of local revenue so as to give more independence to local authorities to raise revenue and to decrease their dependence on the national Exchequer for grants as the only source of their revenue.

In principle, I believe that if we give more financial as well as administrative responsibility to local government it will lead to us all getting better value for money in local government expenditure than we are getting today. It has been rightly said that people pay their taxes in sorrow but their rates in anger. I do not believe that ratepayers have ever enjoyed paying rates. Indeed, judging from the letters I have received in the last week, I have had that opinion amply confirmed. But equally, local authorities have never found that the rating system has been adequate to provide all the services they require. More and more reliance has had to be laid on the Exchequer as a means of getting revenue.

This feeling against rates is nothing new. Sixty-five years ago, in 1896, the Royal Commission on Local Taxation was called upon to study the question of a local income tax as an alternative to rates, and in 1911 a Departmental Committee on local taxation again considered the question. On both occasions the findings were against such a tax, largely because the administrative difficulties were thought to be so great. During the last fifty years the subject of a local income tax has not been considered by any Government Department Committee or Royal Commission.

The question of income tax, and other solutions of the problems of raising revenue by local authorities, have, however, been studied on numerous occasions by other bodies and individuals. There was the Government Committee of Inquiry on the rating of site values whose Report was published in 1952. Local government officials published a report in January, 1953, on the effects of recent legislation on the finances of local authorities. There was a report published in 1956 by county treasurers on the financial relationship between the Exchequer and local authorities. But the almost standard work on the subject of new sources of local revenue was done by the Royal Institute of Public Administration study group. This was an extremely representative, and indeed strong, body, and the investigations and research carried out by this group were the most thorough and exhaustive which had been made on this subject for many years. Its report was published in 1956.

Despite the considerable thought and attention which had been applied to this problem of finding alternative sources of local government revenue during the last sixty-five years, rates today remain the one and only source of local taxation under independent control of local authorities. Indeed, other sources such as electricity and gas municipally owned corporations have been taken away as alternative sources of revenue. It is interesting to note that in 1938–39 they contributed one-third of what rates did to the total income of local authorities in England and Wales.

The need for some change and the practical obstacles to such a change being made were well summed up by Sir Gwilym Gibbon, who wrote in a Paper on "The Expenditure and Revenue of Local Authorities," delivered at the Royal Statistical Society in March, 1936: Local taxation is not elastic enough for modern needs, nor does it draw from a sufficiently wide field, and it is unlikely that these handicaps can ever be overcome. Alas, he was very prophetic. The difficulties found by the Royal Commission of 1896 and by Sir Gwilym Gibbon in 1936 are still with us today, in spite of one authority on rating before the war describing the tax as regressive, inelastic and militating against good housing, as well as being generally unsuited to meet the growing cost of local authority services.

Thus, when the Government in 1956 carried out a review of local authority finances they had available the results of the work of the study group of the Royal Institute of Public Administration, as well as the considered advice of the Board of Inland Revenue and the Ministry of Housing and Local Government. But in the outcome the Government decided against any new form of local tax. The Government's policy was stated by my right hon. Friend the present Chief Secretary to the Treasury, who said about five years ago: The Government, after a thorough investigation, do not think it practical to devise a satisfactory new source of local revenue, nor do they believe it right to earmark for the direct benefit of local authorities any tax that is now levied nationally. Rates are in this country a well-established instrument of local taxation. There are still some difficulties to be overcome in the rate system, but it provides a sound basis for local finance and no better system of local taxation has been propounded. But, looking at the present system, in the event of the changed economic circumstances of today, and bearing in mind the growing dependence on the national Exchequer for grants, and indeed also the burden of rates, surely the time has come to look at new sources of local revenue. Getting value for money in local government expenditure has become vital. I am sure that the more centralised revenue for local expenditure becomes, the more difficult it will be to see that value for money is obtained by that expenditure, and, with the present system, an increasing burden in the rating system is being put on industry, at a time when costs are a vital factor in the export trade. Yet the trend, too, has been for local authorities to become increasingly dependent on grants in the last ten years. They have increased from £298 million in 1950 to £741 million in 1960. They now constitute 11 per cent. of the central Government's expenditure, compared with 8 per cent. in the period 1950 to 1954.

The annual total of local government expenditure has increased in the last ten years by £1,248 million. Of course, naturally, productivity has increased too, but expenditure is moving well ahead of the growth in income.

For instance, I have the interesting figures from one county council which estimates that its net increase in resources due to increased productivity is £250,000 to be available in 1962–63, and that this is enough to finance an increase of 3 per cent. in the net general grant of rate-borne expenditure. But this expenditure has increased by 12 per cent. in the last two years, and it finds that the whole of the net increase of £250,000 will be needed to meet the net cost of the teachers' pay award, and the additional loan charges arising from the increased loan debt.

If we wish to decrease the dependence on the National Exchequer, and bearing in mind that rates may not be elastic enough for modern needs, surely we have to look at possible new sources of local revenue if we wish to make local government both administratively and financially more independent, and to get much better value for money, as I am sure we should.

Cannot we look again at possible new sources of local revenue which have been considered from time to time? Cannot we have a Government Committee to look at this problem and to report fairly urgently? I hesitate to suggest a Royal Commission, as it sounds as though one wishes to shelve the problem. In any case, a Royal Commission will only add to the burden of Government expenditure. But I think that we want a detailed explanation from the Government why other sources of taxation are not practical—at least more of an explanation than we had in 1957.

For instance, is it not possible to have a local services tax? I prefer that name rather than a local income tax. Those in favour of a local services tax argue that the raising of local revenue should be related to the ability to pay, and that the present system of levying rates on the occupation of property does not necessarily do this. Indeed, out of the many letters that I have had on this subject, one from Northampton brings this out very well. It is from an old-age pensioner who says: The size and position of a building is no measure at all of a person's ability to pay. I know of four identical bungalows. In one lives an old widow well over 70. In one a younger widow whose husband died of T.B. after many years of illness. In one live two widows. In the fourth live a father and mother and two sons all of them employed full-time in factories. The contribution towards rates is the same for the four households. I am sure that most people would not have to look far to find similar examples of gross unfairness. In any case, is it not time that we had an up-to-date inquiry into the possibility of such a services tax? A study could be set up by the Royal Institute of Public Administration to see if such a tax could be operated successfully and equitably.

Is it possible to have a local sales tax? A local tax on retail sales would be more of a practical possibility. Such a tax is operated in 900 cities in the United States, including Chicago, Washington, Los Angeles and New York. In New York the rate of tax is 3 per cent. of the retail sales, but certain goods and services, such as food products, are exempt. It could be that the raising of sums of money in either of these two ways would be less unpopular than raising the equivalent amount by rates. However, I realise that measures such as these could not wholly replace the present rating system as a source of local revenue.

Would it be possible to have a local tax on entertainments, betting and lotteries? The Royal Institute of Public Administration study group could find no reason why the Entertainments Duty should not be denationalised and put entirely in the hands of local authorities. Should not the possibility be considered of putting a local tax on the turnover of betting shops, recently opened with the passing of the Betting and Gaming Act, 1960? We have yet to see the opening of the first municipalised casino. In certain countries, these provide quite a source of local revenue.

Then there is the possibility of raising local taxes on road transport. What about the vehicle licence duties? If they were transferred to local authorities, the yield would be equivalent to 7 per cent. of the existing rate revenue, taking the average of all authorities. There would appear to be no difficulty of transferring driving licence fees to local authorities, for the present annual yield is only about £3 million and equivalent to a penny rate over the whole country.

Parking meters are an example of what can be done to find a new source of local revenue. Site value rating is an old hare, particularly of the Liberal Party.

Sir Henry d'Avigdor-Goldsmid (Walsall, South)

Where are the hon. Members of the Liberal Party?

Mr. Ridsdale

I thought that they would be here to talk about the virtues of this form of tax, but perhaps they are satisfied in the knowledge that in 1952 a Government Committee decided against the rating of site values. As a possible alternative source and as a supplement to the present form of rating, based on the annual value of property, it is said that no very great additional revenue could be expected from this source. That probably accounts for the absence of the Liberal Party today, but I doubt it.

I am sure that we can expect some other suggestions for raising local revenue from hon. Members. But in order not to put too much of a strain on the rates, particularly on the smaller owner-occupier and industry, and not to lean too heavily on the national Exchequer, we must have another look at alternative methods of raising local revenue.

More particularly today I wish to make a plea to the Government on behalf of one class of ratepayer; the householder with a small fixed income. I do so because of the growing rate burden being place on him. I shall make two practical suggestions other than fiscal means about how this class of person can be helped. Since 1950 the rate revenue for local authorities in Great Britain has increased, in money terms, from £337 millions to £764 million. For many people whose incomes have increased parallel with the increase in the national income the bill for rates is not greatly larger in proportion to what it was in 1950.

Indeed, although the bill for rates has gone up, the proportion paid by the domestic householder has slightly decreased, while the burden upon industry during this time has increased from 4.4 per cent. to 11.4 per cent. For the domestic householder living on a small fixed income the bill, in real money terms, is much greater. The bill becomes not so much a cause of anger but of despair, especially for the elderly, whose incomes have not increased in line with the national income and who have been retired for some time.

My mail in the last week has been full of letters from people in this kind of situation. They are particularly worried when they read about the effect of the revaluation in 1963, since various sources have estimated that that is likely to increase the domestic householders' share of the rateable value from between 19 per cent. and 45 per cent. The householders I have in mind are those with fixed incomes living in houses with average rateable values of about £25 a year.

From 1946 to 1956 the rates rose for this type of householder by 62 per cent. With the new valuation in 1956 they fell by 18 per cent. Since 1956 they have been rising and it is estimated that in 1963, before revaluation, the rates of such a person will go up by 67 per cent. Indeed, there has been a total rise of 111 per cent. in money terms—or a rise for this class of householder of £16 13s. 4d. a year. This is a lot for people living on small fixed incomes.

One way in which the Government could help these people is in the scale of deductions. I hope that when the scale is raised it will take account of this type of person and will be weighed in his favour. It may be that following revaluation any gross value up to £50 would still constitute a modest sized property. If relief were feasible up to 50 per cent. as a deduction from gross value it might be an important factor to mitigate the hardship of this type of ratepayer.

There is room for wise legislation on this subject and I doubt whether the cost would be very great. We must bear in mind that the remission of Schedule A would not help this type of ratepayer, because he pays a small amount of tax and would not qualify for any supplement, since his means would no doubt exceed the minimum. I urge the Minister, therefore, to look at Section 2 (4) of the Rating and Valuation Act, 1925, where there is provision for the relief of poverty on the part of the ratepayer. "Poverty" may be difficult to define but if the word could be extended to cover hardship it might be possible for rating authorities to meet the more difficult hardship cases by way of relief—temporarily in some cases—for these poorer members of the community.

It might even be possible for the rates to be held in suspense if such persons are expecting some capital sum in the course of a few years, such as an endowment insurance policy. Perhaps the Minister could discuss the question of poverty and hardship with the Association of Rating Authorities.

Before concluding, there is one further point to which I wish to draw the attention of the House. It is the position of owner-occupiers under the new valuation. The proportion of all non-council accommodation units now owner-occupied increased between 1948 and 1958 from 33 per cent. to 50 per cent. I am indebted to Mr. Ilersic who, in the excellent paper which he read at the Royal Statistical Society recently, gave these figures and estimates. He said that a sharp increase in rates might impose a very heavy burden on this group. He tells us that in 1963–64, for houses currently valued between £18 and £40 per annum respectively, the increase might mean a rise of between £6 and £14. I welcome the fact that the Minister has powers under Section 2 of the Rating and Valuation Act, 1961, to enable him to abate an increase in domestic valuations when he considers them to be excessive.

Nevertheless, the consequences of any such relief to the domestic ratepayer has the effect of shifting a great part of the cost of the rate burden on to other classes, including industry, at a time when it is surely vital that we should watch our costs most carefully. Surely this is another argument for looking for alternative sources of local revenue.

In conclusion, I want to say that although this morning I have been dealing with aspects of revenue, I am well aware that the cause of all our concern has been the increase in local government expenditure, which between 1950 and 1960 rose from 9.4 per cent. to 10.5 per cent. of the gross national product, an increase of only 1.1 per cent., but in money terms an increase of £1,250 million. I am sure that the more the payment for this expenditure comes from the national Exchequer, the less will be the urge and demand to get value for money. I am convinced that the truth has to be driven home to the country—that to spend is to tax, angry or sorrowful though that may make us.

I do not feel as strongly as that other authority who before the war said that rates were regressive and inelastic and militated against good housing. Indeed, I regard them as a quite reasonable indirect tax. But if we wish to make local government independent, strong and economical, I am sure that it is wrong to let local authorities have only this one source of indirect taxation as a means of raising revenue and there-fore have to rely so much on the Government.

It is for those reasons that I want to iron out some of the present injustices in the rating system and why I want the Government to appoint a strong committee as soon as possible to investigate the possibilities of new sources of local revenue in addition to rates. I am certain that local taxation is not elastic enough for modern needs. Nor does it draw from a sufficiently wide field. It does not encourage economy in local government expenditure and it is high time that these handicaps were overcome, not only in the interests of local government, but in the interests of our country as a whole.

11.34 a.m.

Mr. Denis Howell (Birmingham, Small Heath)

I should like, first, to congratulate the hon. Member for Harwich (Mr. Ridsdale), not only on his good fortune in winning the Ballot for a Motion, but on the subject which he has chosen for debate and the excellent research and manner in which he has presented the results of that research to the House. While I do not agree with all that he said in detail, the general case which he stated was overwhelming, and I hope that it will have the support of opinion on both sides of the House.

The rating system in this country is 350 years old, and one would have thought that even the British, with their built-in conservatism, would have thought it necessary after 350 years to have a look at the system, especially, to judge from the excellent turn-out of hon. Members opposite, as it is causing great concern in their party associations and among not only their supporters but their constituents at large. I know that that is true of this side of the House.

However, this morning we start from an unfortunate position, because before any of us had said a word the Minister had decided to turn us down. On Tuesday, the Minister answered a Question, which I had put down some time before the hon. Member for Harwich won a place in the Ballot, asking whether there would be an inquiry into new forms of taxation and the unfair burden being placed on older members of the community. All I got from the Minister of Housing and Local Government was a curt "No". That is not a very encouraging start to our deliberations, but I hope that the attendance today and the subsequent eloquence of hon. Members opposite will give us more encouragement.

There is no doubt that our present rating system is unfair and unjust, for it has no regard to ability to pay. Whatever system or combination of systems we favour, we must be bound by the guiding principle of the individual's ability to pay. To that I add the qualification that we ought to be able to get value for money, as the hon. Member for Harwich said. Local government politics should be concerned to see that local government electors get value for money.

We start from the fact that in recent years the Government have been unfortunately adopting a policy of unloading expenditure from the taxpayer on to the ratepayer. The system was controversial when it was introduced, and although it has not had a great deal of time in which to be judged, I think that everybody here has already come to understand, whatever his political views about local government, that the block grant system just will not work because it does not meet the needs of the time.

One has only to think of the tremendously increasing costs in education and in the salaries of teachers and the police and doctors, to give just a few examples. The Mental Health Act alone has put great new responsibilities, quite properly, on local government to keep people out of mental hospitals. One might say in passing that the recently announced hospital plan, if implemented in full, as we all hope it will be, will inevitably result in more sick people being cared for at home, with a consequential tremendous increase in costs of the home nursing and other services generally run by local medical officers of health. That is the pattern, and it is spreading.

We have to ask ourselves whether it is right for that burden to be moved from the taxpayer to the ratepayer. Unless the Government do something about making the burden more equitable, there will inevitably arise a demand that the salaries of teachers and the police and doctors and others should be met wholly by the Exchequer. Indeed, that demand is already to be found in many places.

I agree with the hon. Member that the burden on the elderly ratepayer has become completely ridiculous. We are here concerned with people who have raised their families and who are trying to get by in these days of galloping inflation. They use their savings, or the results of insurance premiums, or their inadequate pensions to help to pay their way.

But I hope that, in demanding an alleviation of their burden, we shall not forget the burden on the young married couple, especially the better type of young married couple, trying to set up their own home. As I know from personal experience, they are often faced with an almost impossible task. Interest charges have risen, and every time the Bank Rate goes up mortgage rates of interest go up. Incidentally, it is interesting to note that although mortgage rates rise when the Bank Rate rises, they do not fall at a similar speed when the Bank Rate comes down. A tremendous financial burden is put on young people who are trying to solve their own housing problems and set themselves up in their own home.

Those are the two categories who come off worse under the present system. The old person cannot hope to get anything out of the local government system commensurate with what he puts into it financially. The young person is asked to pay a heavy rating burden at the very time when he has other large financial commitments.

Another aspect of the present rating system to which I draw attention is that in Birmingham, for example, there is an increasing tendency for people to earn their living in one place and to live somewhere else. This is something which the hon. Member did not mention. I support his plea for an inquiry—and I agree with him that we do not want a Royal Commission, for this is a very urgent matter. We want an inquiry because nobody has a solution. We all have our pet schemes—and I have mine—but they ought all to be subjected to the most rigorous examination to see whether they stand up. But there must be an inquiry, and I think that it ought to be a Departmental inquiry told from the word "go" that this is an urgent matter. It should consider this changing pattern.

May I take an example from Birmingham, near my own home? On the main road north out of Birmingham, particularly at Sutton Coldfield and Streetly, there are two areas where there has been a tremendous increase of housing, particularly for owner-occupiers, since the war. This has produced tremendous traffic chaos, which has had to be dealt with. The costs of traffic regulation and traffic control have gone up appreciably. Even more important, there have been two or three major capital schemes for subways, underpasses and so on on the north side of Birmingham, the major purpose of which, so far as I can see, is to get people who earn their living in Birmingham to leave the city as fast as they can. These developments impose a tremendous burden on the Birmingham ratepayers. We have to consider how much the ratepayers earning their living in one place and living elsewhere contribute towards paying costs, inevitably created in these days of more and more motor cars, in the places where they earn their living.

There is also the general problem of the shortage of land in our great towns, particularly Birmingham, which can be resolved only by finding sites elsewhere. This complication of trying to provide for overspill will be very much in the mind of the Minister. It was very topical yesterday when the Government announced that they could not support the proposal for overspill building at Whitelaw. Without going into the merits of that, I think the Minister will agree that there has to be new housing somewhere in the Midlands to deal with the problem of overspill from Birmingham and other cities. This creates another burden—the other way round this time—for the receiving local authorities, who quite rightly say that they cannot be expected to engage in building a large number of houses to meet the needs of some other city unless they are given sufficient financial inducement to do so. This, again, illustrates the great complexity of the problem.

In supporting the proposal for an inquiry, I would tell the House that in 1938 the Association of Municipal Corporations endorsed the proposal of the Birmingham City Council that there should be a Royal Commission to investigate the possibility of a local income tax and other forms of local rates. I agree with the hon. Member that we do not want a Royal Commission, but I think that it is remarkable that 25 years from that time we have not had an inquiry of any sort.

I want to take up the point made by the hon. Member in connection with the 1925 Act, which states: The rating authority shall have power to reduce or remit the payment of any general rate on account of the poverty of any person liable to the payment thereof. I think that this is something which the Minister should look at at once. I do not think that there needs to be a great inquiry to understand the meaning of the word "poverty". The conception of poverty in 1925 was rather different from the conception of poverty that we have today. As the hon. Member said, it is not so much a question of poverty with which many old people are faced as hardship of a different kind. They have to pay a tremendous rate burden, which is creating hardship. Many of these old people have, to their credit, a tremendous sense of self-respect. They do not want to make application to the National Assistance Board for help in paying their rates, and they do not want to be turned out of their houses. There is, unfortunately, the idea in the mind of some people that when a house has got a little too big for them they should be moved elsewhere. I do not share that view. I think that it is anti-social. Why should old people who have brought up a family and who have their roots in one neighbourhood, with their church and their shops, be moved to another neighbourhood, perhaps into small houses, and have to start life again at a very late period in their own lives? I do not think that is good enough.

Old people are entitled to stay in their own houses. If they want to go elsewhere, that is one thing; but if they want to stay in the places where they have their friendships and roots they ought not to be burdened because they have their own houses, which many of them have paid for over the years and made great sacrifices to build.

This is a problem which can readily be seen. I doubt whether any hon. Member in this debate will say that the rate burden, as it is, is not unfair, especially on elderly people. We now have to consider what new form of local rating we should have. I myself favour the dual system. I think that there must be some form of local income tax and that there ought to be a change from the rating of property to the rating of site values. On the question of site values, I would not dismiss it quite as easily as I thought the hon. Member did. There is rating of site values in some parts of the world. If we dismiss this idea, we dismiss entirely the fact that site values are enhanced by community activities and development. I think that it is quite wrong that when the value of a site has been enhanced considerably by the activities of the community as a whole in developing the area, the enhanced value of that site should not be a factor to be taken into account.

Mr. T. H. H. Skeet (Willesden, East)

Would the hon. Gentleman give an estimate of the yield of the site value tax he has in mind? When the matter was considered, one of the arguments against it was that it would not yield enough money and that there would also be administrative difficulties.

Mr. Howell

When we looked into it in 1952, I think that the main reason it was turned down was because of the Town and Country Planning Act, 1949, which already had this development charge in it. Since then something has happened which has made that investigation superfluous.

The 1949 Town and Country Planning Act has been massacred by the present Government, and we now have a free market in respect of land. I think that such a free market, when so much community activity is going on, is immoral. However, I do not want to argue that too far. But the action of the Government in respect of the 1949 Act has produced a new situation which ought to be looked at again. It is one of the things which I believe the hon. Member would agree should be taken into account by his committee.

I think that the rating system ought to be changed completely from the value of the building to the value of the site. Such a change would produce the incidental by-product of making sure that sites in this country, especially in our urban and crowded areas, were used to the best possible advantage. I cannot give the hon. Member what I think would be the estimated yield, because I do not know, but this is the sort of information which one would hope would come out of the inquiry.

In respect of a local income tax—

Mr. John M. Temple (City of Chester)

Before the hon. Gentleman leaves that point, I should like to ask him one question for the purpose of clarification. Is he advocating the rating of site values as an alternative to the present normal rating system or as an ancillary to it?

Mr. Howell

As an alternative to it.

The other thing I should like to see would be a form of local income tax. I know that all the pundits tell us that such a system is almost impossible, but I refuse to believe that a system which works well in Norway, Sweden and Denmark could not be applied here. I appreciate, of course, that it could not be applied here in the manner in which it is worked in the Scandinavian countries, but I think that the principle ought to be very acceptable here.

Such a system would have one tremendous attraction, which is that as the rate of growth of income increased throughout the country, then, automatically, without increasing the rate of the local income tax the revenue of local city treasurers would also increase.

Mr. A. P. Costain (Folkestone and Hythe)

Will the hon. Gentleman explain where he proposes to have the local income tax collected—where a man works or where he lives?

Mr. Howell

The hon. Gentleman has anticipated me. I was just coming to that interesting point.

I think that the rate of 3d. in the £ which has been suggested, and which certainly ought to be the maximum, is the right figure. I accept that we could not at the moment have a local income tax much above that figure. It would produce overall an anticipated income of some £150 million, which I believe would be a very considerable help. Obviously, there is the great problem of where the tax is to be collected and who is going to have it. Quite obviously, it must be collected at the point where it is earned, especially under our system of P.A.Y.E., which means that it must be operated by the Inland Revenue. This does not necessarily mean that it would be retained by the authority.

For the reasons which I have already given, that people living in one place and working elsewhere are to a certain extent making demands on local services in both places, there has, I think, to be an element of apportionment. For example, if a man earns his living in Birmingham and lives in Sutton Cold-field, I think that it would be reasonable to say in such a case that 1d. of the 3d. should be retained by Birmingham and that 2d. should go to Sutton Coldfield. It could be quite easily collected.

In the past I spent a long time collecting Income Tax in the wages department of an office and I know that it is a very simple matter to deduct money from the pay packet. It would, of course, be a little more complicated when questions of investment income and those sort of problems arose. But in these days of computers and of automation in commerce and offices generally, I am satisfied that the problem of sorting out to which local authority the money should be sent after collection by the Inland Revenue would not be the tremendous problem which some make it out to be. I am satisfied that the job could be done expeditiously.

Sir H. d'Avigdor-Goldsmid

The hon. Gentleman quoted the figure of £150 million as the probable yield of a 3d. income tax. That figure surely included taxation on company profits. No one— I think that the hon. Gentleman will accept this from me—has found any satisfactory way of dealing with company profits on the very happy system which he has propounded. I do not want to take up the time of the House on this very interesting point, but I think that the hon. Gentleman must reconsider the figure of £150 million, because the sort of tax about which he is speaking is only applicable to personal incomes.

Mr. Howell

I am indeed obliged to the hon. Gentleman for that intervention. That is so. I am now talking about personal incomes and earnings. The general problems arising from company incomes create additional difficulties, and I very readily appreciate that.

This is all that I want to say this morning, which, no doubt, will please hon. Members who want to participate in the debate, but I come back to the main principle which we have to determine, that taxation of a local sort has got to be assessed on the ability to pay. There is going to be a tremendous upsurge in local government expenditure. Any Minister who is connected with any form of local government knows that, to a certain extent, we have been having our local government services on the cheap.

Teachers, doctors and policemen have all, to some extent, been subsidising these services for the common good. That is not good enough. We cannot expect public servants in local government to work for us on the cheap. They must be adequately paid. Indeed, in the case of education, to the extent to which we neglect these people so we neglect the whole future development of the country. I think that it would be appalling, by refusing to pay the teachers adequately, if we did not get the right people. We ought to be trying to get the best possible people from our universities and training colleges into the profession so that the mind of the young voter of the future can be properly conditioned. If that be true, then we have to realise that the burden on the local ratepayers will grow more and more. I am delighted to see this upsurge of interest.

Finally, I wish to say that I am sure that the brusque "No" which the Minister gave in answer to my Question on Tuesday will have to be reconsidered, if not because of pressure from this side of the House then from, I trust, hon. Members opposite.

12 noon.

Mr. Mark Woodnutt (Isle of Wight)

I, too, wish to congratulate my hon. Friend the Member for Harwich (Mr. Ridsdale) on his choice of subject today and on the excellent manner in which he has presented it to the House. Those of us who have been involved in local government for a long time appreciate the problems of local government finance, and I am particularly grateful to my hon. Friend for the opportunity which he has given us to discuss the matter this morning.

Two main injustices are pinpointed. The first is the excessive burden on the people with small fixed incomes, and the second is the injustice of the rating system itself. The first problem demands an immediate solution, because for those people it has reached a stage of intolerability. The second, the rating system, which I realise raises an enormous problem, will take many years to investigate in order to produce a better answer and another method of assessing which will be in accordance with ability to pay. Although that is a problem which will take a long time to solve, I think that, in view of the very large increases in local government expenditure, we must accept that there should be some short-term palliatives.

These problems have manifested themselves nearly everywhere since the war. Even in my constituency of the Isle of Wight, where there are very placid, happy people, every increase has annually produced vigorous protests. On the last occasion, it resulted in angry pickets at the county hall and deputations with placards showing their protests. A few stalwarts were demanding home rule for the Isle of Wight. This burden is now intolerable for many, and it will get progressively worse.

In order to emphasise the problem, I wish to look for a moment at the probable position in the decade up to 1970. In 1954–55 local authority expenditure on rate fund was just over £1,000 million. It increased in five years to the year 1959–60 to £1,600 million. If one projects that trend over the decade to 1970, it means that we can expect total expenditure by local authorities to be something in excess of £3,000 million. That is an enormous increase, almost double. It follows that if the proportion of grant allocated by the central Government remains the same—I emphasise that over the years 1956 to 1961 it remained fairly constant between 52 per cent. and 53 per cent.—the rate-borne part of the expenditure will approximately double by the end of the decade.

I realise that against that there will be many new buildings and extensions and improvements to existing buildings which will bring about a real increase in rateable values. It will follow that although the rate requirements will double, the amount of rate to be paid by individual ratepayers will be less than doubled, but, on the assumption that there will be a fairly steady increase in new properties of about 2½ per cent. per annum, it would be fair to say that by 1970 at least the increase in the rate burden will be something approximating to 50 per cent. In saying that, I have specifically excluded any shift in the burden as between one ratepayer and another such as is expected when the 1961 Rating and Valuation Act is operative in 1963, and I have ignored inflation.

It is true that wages and salaries will rise, but it is also true that the proportion which rates bear to total incomes will be higher for everybody at the end of the decade. It will be far too high a proportion of most people's incomes, and it will be quite impossible for people on fixed incomes. It has often been said that our system of local government can be described as a two-tier system. I think it has reached the stage where we can call it a "many-tear" system if one takes into account the tears in the eyes of the ratepayers when they have to pay their rates.

What are the courses open to us? We could either increase the proportion of the grant paid out of central Government funds, or we could cut back the services. The latter is something that no one in this House would wish to see, but many authorities are threatening to do it next year if there is not some easement of the burden. As my hon. Friend the Member for Harwich has said, and has expressed in his Motion, we could explore the possibilities of other means of income, or we could hive off some of those services and put them on the central Government charge. The last suggestion appeals to me most. I think local rates should be for local services and any service which is a national one should be borne nationally.

I have in mind particularly education, which takes a greater proportion of the total rate-borne expenditure every year. We are educating our children for the nation as a whole, not just for a particular county. It is time we considered transferring the costs of these services, or at least a far higher proportion of the cost, to the central Exchequer. My hon. Friend the Member for Harwich said that we must be very careful about responsibility and that the lower the amount borne by the local authority probably the less responsible it may be. I cannot understand that. I quote as an example the hospital service, which is all borne centrally and administered locally. I know of no case where there is irresponsibility in the spending of the funds. I also quote the school meals service, which is borne 100 per cent. by the central Exchequer. In my experience locally there is no question of irresponsibility.

Mr. Denis Howell

The hon. Member is now on a fascinating point, but would he not agree that one unfortunate byproduct of hospital management committees and regional hospital boards is that they seem to be accountable to nobody except the Minister? I make no criticism of them—indeed, I sit on a hospital management committee myself—but the net effect of the system is to take away accountability to the public locally, and the public locally do not know what is going on.

Mr. Woodnutt

That probably is the case, but I do not think it important because I am discussing the education service, and people who operate the education service have to account to local people. In any event, so far as responsibility is concerned, it is within the power of the central Government effectively to control the aggregate expenditure. In fact, that is done now. It controls the pupil-teacher ratio and controls the total amount spent on teachers' salaries. The central authority controls the specifications of buildings even to the width of corridors. So it is possible for it to control total expenditure, even if it is administered locally. I ask my hon. Friend, in view of the enormous increase to be expected over the decade, to consider doing something about my suggestion.

In particular, I wish to stress the plight of people on small fixed incomes. For them we must do something immediately. I am not thinking of those who already qualify for National Assistance, because this does not affect them, but I am thinking of people above that level. There are many who do not qualify but who find that having to pay an extra £4 or £5 each year is quite disastrous. They have to budget on very tight incomes, and if they have to pay an extra £1 in rates they have to go without a pound's worth of something else. Most of these people do not get the same benefit from the services as other folk with children get. It seems doubly unfair that they should pay for services to be rendered to other people and have to go short of something which they need in the twilight of their lives.

I have a suggestion to make. I remember that in my maiden speech two years ago, in a debate on the general grant, I suggested to the then Minister of Housing and Local Government that he might consider a differential rate. When he wound up at the end of the debate, apart from saying that it was a good speech—which subsequently I learned Ministers say to every new member, regardless of whether it is a good speech or not—he said that the point was an interesting one and he would look into it. I must, therefore, express surprise that from that day to this I have not heard a word from him about it. I do not criticise the Minister on that account, because I realise that he is a very busy man.

In fact, on considering the matter further I do not think that the suggestion would be practicable. But we could adopt a similar scheme. There is a level of income—I do not know exactly what it is—at which it could be said that people could not afford an increase in the burden. If we could establish what that level is, it should be possible for them to pay their rates in the normal way—because any form of differential rate system would lead to great difficulties for the local authorities in deciding the poundage required—but to claim back from the Inland Revenue an amount equivalent to the rates which they have paid. This would not be a repayment of tax, because they would not be paying tax.

It should be possible to work out a scheme of that nature on a graduated scale, which would vary according to the level of income in the household; they would be entitled in some cases to a rebate of 100 per cent. and in others, on a sliding scale, down to perhaps 10 per cent. The scheme could be worked through the Inland Revenue, and it should not be difficult for the Treasury to work out the cost of such a scheme. I ask my hon. Friend to request the Minister to consider it.

Views have been expressed many times by many people that the rating system is no longer a fair method of assessing ability to pay. It is a relic of Elizabethan times, and it was no doubt a fair system then. With the passing of the years, there is no doubt that it is no longer a fair system. I want to illustrate this by two cases in my constituency. I know of two families who live next door to each other, each living in a house with a rateable value of £30. In one house live an old couple with a total income of £8 a week, and in the house next door there are four earners, who bring into the house a total of £50 a week. In one house there is over six times the income of the family in the other house. Yet each household makes the same contribution towards the local rates. In the household with the larger income there is also a child at school, which means that the family is getting a greater benefit from the local services.

I know of two other families, of the same size, with roughly the same income. One family lives in a house with a rateable value of £30 and the other in a house with a rateable value of £60. For the same services, and from the same income, one family pays twice as much as the other.

I could pick thousands of similar cases throughout the country to prove how bad the system is. I stress the importance of the last two lines of the Motion, which call for a committee to be set up to investigate the whole system and to decide on an alternative method of raising local finance. It is no good having a Royal Commission; action has to be taken quickly.

The last revaluation becomes operative on 1st April, 1963, and there is no doubt that, as a result, there will be a shift in the burden from the commercial ratepayer to the domestic ratepayer which is likely to average, in rates payable, about 30 per cent. throughout the country. I recognise that there are unknown factors and that it is within the Minister's power to see that this shift of the burden does not take place. He can do that by exercising his powers under Section 2 of the Rating and Valuation Act to make a percentage reduction in the valuations of domestic property, he can vary it between county and county and he can also give relief by increasing the maintenance and repairs allowance. I beg him to use one or both of those methods to make certain that at least the share of the burden borne by domestic ratepayers is not increased in 1963.

12.15 p.m.

Dr. Horace King (Southampton, Itchen)

This is an important Motion, and I congratulate the hon. Member for Harwich (Mr. Ridsdale) not only on tabling it but on the cogent, thoughtful and, indeed, human way in which he has moved it—because it raises, as the debate has already shown, some very human problems.

I agreed with much that the hon. Member said but certainly not with his suggestion for casinos in this country. I should hate to think that we should ever have the cry, "Every council its own Monte Carlo" and mayors of England doffing their fur robes and wearing the evening dress of a croupier.

Mr. Ridsdale

If the hon. Member reads my speech he will see that I did not suggest that we should have casinos. I said that they were used as a source of local revenue on the Continent. I was thinking of the Common Market.

Mr. Denis Howell

Can my hon. Friend tell me what is the difference between the mayor presiding over a casino and the Prime Minister instituting premium bonds?

Dr. King

I was about to say, if I may get on with my speech, that Britain is already running too much of a bingo economy and that we cannot meet the problem which confronts the House this morning or indeed the challenge of our times on raffles and take-over bids, and even the E.R.N.I.E. introduced by the Prime Minister to help to raise funds for the national Exchequer.

Those of us who serve on local authorities, like the hon. Member for Isle of Wight (Mr. Woodnutt), who renders distinguished service as chairman of his County's Finance Committee, are, just now presenting our annual budgets. Ratepayers everywhere are facing rate increases, and if the increases vary from area to area, they vary only for adventitious local circumstances—the existence of a reserve last year to cushion what would have been a sharp rise this year or the luck of the final adjustment of the general grants, which means a windfall for some and a shock for others. Those which show smaller increases this year than others will find the position almost certainly reversed next year.

The general pattern throughout rate expenditure year by year is one of steady increase. This year's increase has surprised the Chancellor. He hoped to keep it to 2½ per cent. to match the increase in production. In my county there is a gross increase of 11 per cent. Fortunately for Hampshire the increase in the Government subvention is 14 per cent. with the result that there is a net rate-borne increase of 8 per cent. But that follows a similar increase last year and the year before, and I believe that increases of that nature will inevitably happen year by year ahead.

I want to tell the House why. The chief single item in this year's increase is teachers' salaries, but that increase in salaries was after a cut by the Minister in the proposals drawn up by the teachers and the local authorities in the Burnham Committee. They negotiated a salary agreement which was moderately satisfactory to both sides, but the Minister tore it up and imposed a reduced figure. Teacher's accepted this under protest. We were nearer a national strike in the teaching profession than ever we had been since the Burnham Committee was set up. In my opinion it is certain that the demand from the teaching profession this year and in the years ahead will continue and that they will press the local authorities for an adequate professional scale.

Mr. Woodnutt

The hon. Member said that before the Minister's cut both sides had reached agreement. I do not think that that is quite right. Am I not right in saying that the Burnham Committee had agreed but that the teachers had thrown out the proposals? At the time of the cut of £5½ million there was no agreement.

Dr. King

I am tempted to give the hon. Member the whole history of the Burnham negotiations. The fact is that when the Burnham Committee, which consists of both sides, met at the earliest possible moment, the teachers in response to the demand from the Minister for a wage pause accepted proposals which they had earlier resisted.

There is a growing body of public opinion behind the teaching profession in their demand for adequate professional scales. It is a simple fact that apart from clergymen, who are shockingly underpaid, this is the least well-paid learned profession in the country.

Mr. Denis Howell

Apart from Members of Parliament.

Dr. King

Firemen's wages, policemen's wages, roadmen's wages have all gone up. Local government workers are only temporarily kept in check. They are obviously restive and must make demands very soon. It is certain, as my hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell) has said, that local government public servants, who cannot make claims based on productivity, have lagged behind in the battle for emoluments and the pressure must continue and their just claims must be conceded in the years ahead.

Materials, equipment, land and buildings cost more. This is not the occasion to speak at length about the shocking racket in land prices. It will certainly continue as long as we have the present Government and local authorities will pay next year or the year after five or six times as much for land as they paid five years ago. There is no sign in Government policy of a substantially reduced rate of interest. Whilst the capital which local authorities borrowed in the earlier post-war years was borrowed at a low rate of interest, each year now it is borrowed at rates moving up from 5½ per cent. to 6½ per cent. Yet every local authority has ahead of it hundreds of thousands of pounds—my own local authority millions of pounds—worth of projected capital expenditure on new housing, new schools, new roads, new fire stations, new libraries—if they are to carry out the Robbins Committee's Report—and new occupation centres. Building costs have gone up 25 per cent. in the last ten years, as the Minister of Education told us yesterday, and these costs are still steadily rising.

All the efforts of the Ministry of Education to have more efficient building of schools—and I pay tribute to the building experts of the Ministry of Education in this—have been swamped by the rising cost of building. Moreover, education itself must expand. Under the new Education Bill local authorities are being given increased financial burdens. It is true that for two years the Government are taking a considerable proportion of that new burden off their shoulders, but there is no guarantee that that subvention will continue in two years' time under subsequent general grants.

We still have old schools to pull down. Hundreds have to be replaced and every local authority has a new school programme of which the Minister is only grudgingly conceding portions year by year. That building programme goes right through the decade of which the hon. Member for the Isle of Wight spoke. Moreover, the teaching force is tremendously below what it should be. Local authorities this year are on a quota or ration, and even that quota is cut back from last year's quota because we are in the crisis year of teacher supply.

Many local authorities will not be able to obtain their quota of teachers this year, and my local authority has even budgeted rather gingerly and hazardously, on the supposition that it will not be able to obtain in the market the number of teachers the Minister has said it can obtain under the quota. As the expanding training colleges turn out more teachers, however, and the quotas are achieved and even raised, the costs for local authorities will rise steeply.

We have set up a goal of classes of thirty for secondary schools and forty for primary schools. We have not achieved that objective and we have hundreds of thousands of children in over-sized classes. When we solve that problem we shall add again enormously to the rate burden. If we achieve the standards laid down in Ministerial regulations, if we build and equip the schools needed and we provide the teachers needed, and the technical and further education, for part of which local authorities are responsible, then, even without any change of policy and even without any dramatic increase in the steady flow of education expansion, it has been estimated that this means during the next decade an increase of 7s. in the £ of rate-borne expenditure if the present system of sharing the costs continues.

There is hardly a local authority which is not asking for a larger roads programme than the Ministry is prepared to concede. While it is true that a considerable proportion of any expenditure on the roads programme is borne by the Ministry, any new road scheme which the local authority wins from the Minister means an additional rate burden. Moreover, some of us wish to expand the education service at an even greater rate than the Government are doing, and that too would add to the cost of the system to the local authorities. As has been pointed out, the local authorities are just beginning to grapple with their new responsibilities under the Mental Health Act. They have been given a large field to take over. The schemes which are already operating in the form of rate burden are merely pilot schemes for the great schemes which will operate in the next decade.

Heavy as is the rate burden, it can be argued with some justification that compared with the rise of national income the burden is comparatively no more than it was in pre-war years. Indeed, I believe that it can be proved by statistics that it is less. I am not very happy about statistics at any time, and one of the arguments in the White Paper when the Government introduced the general grant was that the rise in rates was by no means comparable to the rise in taxation. There is no doubt that the ratepayer is getting much more for his money today than he did in pre-war years. It is worth considering for a moment, when we talk about rates, what we are getting for the money.

A ratepayer gets police protection which is the best in the world. He gets fire cover, an ambulance service to take him to hospital when he needs it, and domestic help if he is in trouble. For his children, there is education up to 15-plus and if the child is able there is a broad open road to university, technical college or professional training. In distress, in old age, there are the welfare services. There are civic gardens, open spaces, sports centres, swimming baths, the rapidly expanding library services, and the art galleries. Planning protects the ratepayer against ugly sprawl, seeks at best the ordered development of community building, the preservation of the natural beauty which he loves, and seeks to match the growth of house-building and of sources of employment for those who live in the houses.

For all these the ratepaper pays less per week than he spends on tobacco and drink and football pools. We spend nearly as much on advertising—£450 million—as on education, and in the first three-quarters of last year we spent £900 million on tobacco, which means an annual expenditure of far more than we spend on education nationally and locally. There is something wrong with the priorities if the ratepayer grumbles not about the cost of his tobacco but about his rates cost. This, however, is cold comfort to certain groups of ratepayers who certainly find rates at present a grim burden. The trouble about rates is that they bear little or no relation to the income of those who pay them.

I illustrated this once before, and it is a point which has been made today by the hon. Member for Harwich, the hon. Member for the Isle of Wight and my hon. Friend the Member for Small Heath. I illustrated it by looking at some families I know who are living in a Hampshire street. In one home there is a comfortable middle-class family of two with an income of over £35 a week. Next door there are five adults all working. There are no children and no odd folk there. The total income in that case is well over £60 a week. In another one there is a workman with three children. He earns £12 or £13 a week. He is one of the unfortunate men who do not get the national average of £15 a week. Moreover, he is not regularly in work; occasionally he is out for a time. In another house a retired couple are living on a small pension. In another house there are a husband and wife, both working. All these families pay exactly the same rate.

Nobody can argue that a system which levies from those houses the same burden—in one case borne by a retired old gentleman and his wife, and in another shared by five able-bodied and well-paid working men—is an equitable way of raising taxation. The rate burden falling heavily, as it does, on some people, is becoming particularly onerous to low-paid workers with large families, people in small houses with fixed incomes, when they also have to meet the increased rents under the Government's Rent Act or the increased council house rent until the Government's council house rents policy. It is good to know that the best elements in the Conservative Party are beginning to worry about this problem.

Before the war ratepayers' associations on the whole were reactionary bodies. They advocated a policy of keeping the rates down whatever the effect on the social services. I have seen a change. A Southern Federation of Ratepayers' Associations a fortnight ago demanded not that education costs be cut but that some of the costs be distributed more evenly as between local government and central Government. Last week the hon. Member for Crosby (Mr. Graham Page) made a speech in his constituency advocating a similar policy. Yesterday's Daily Telegraph reported that the Morecambe and Hey-sham Ratepayers' Association has written to the Prime Minister asking for a rate pause, saying that it can be achieved by transferring the costs of education, police and fire service to national taxation. These are, I believe, straws in the wind—a wind which I hope will become a gale and blow in a much-needed reform.

Many lifelong and devoted workers in local government, however, fear any transfer of costs from the local exchequer to the central Exchequer. Indeed, this is the burden of the hon. Member's case. Let us look for a moment at British education. Our system is unique—it is precious—in its blending of national and local responsibility. It is always difficult to explain to a foreigner just how intricate and worth while is this marriage of local education authorities and the Minister in running the national system of education.

None, I think—few at any rate—would wish to see the local initiative, local discretion and local patriotism replaced by a 100 per cent. central control of education with the Minister able to say, as we used to say a French Minister could, looking at his watch "It is now 9.45 in the morning. Every Form II in the nation's secondary schools is reading Act I, Scene II, of Moliere's Misanthrope and is somewhere about line 100."

Ours is the negation of such centralisation, British education has been built as much by the individual initiative of local authorities as by Ministerial decree. Indeed, it is true to say that very often the former has led to the latter. What a good local authority has done in its own area has eventually become the national pattern. Local conditions vary in a hundred and one ways. There are certain broad freedoms in our educational system. For example, even Ministerial views on what should be taught in our schools are conveyed to the teachers not as diktats but as "Handbooks of Suggestions for Teachers". No one would want to sacrifice these precious local elements in local government. This is one of the glories of British democracy, and local government is much older than Parliament itself.

But I believe that that argument can be over-stated. Teachers' salaries are fixed nationally. Up to last autumn they were fixed by the combined efforts of local authorities and teachers, with the Minister looking on—and the Minister's behaviour last autumn was, we hope, just a temporary aberration. But once the salaries are fixed by the local authorities and the teachers, they apply to all local authorities. Nobody in the name of local initiative or local patriotism can cut the Burnham Award. Nobody can over-pay either.

The same is true of the pay of policemen, firemen, roadmen—indeed, all local government workers. Their wages and salaries are all nationally negotiated. It would indeed be a bad authority, and one which ultimately would incur the displeasure of the Minister, which refused to honour nationally negotiated awards. Even differentials are laid down. Few authorities would be short-sighted enough to seek to vary the differential. I sit on a Joint Provincial Council where we do our best to secure that every local authority within our area applies not only the jointly negotiated scales but all the minutiae—every tiny detail—of the scales.

I believe, then, that there is the strongest possible case—I support what the hon. Member for the Isle of Wight said—for lifting from the shoulders of ratepayers some of the financial burdens which they are unable to vary by a single iota. When the central Government lays a statutory obligation on a local authority, an obligation which it cannot dodge, there seems to me to be no reason why the present sharing out of financial responsibility—which is roughly 40 per cent. by the local authority and 60 per cent. by the central Government—should stay. Indeed, the percentages are not really 60 per cent. and 40 per cent., because the central Government collects Income Tax on the salaries of all local government workers. It thus collects back very much of what it has granted to local authorities by way of Income Tax and Purchase Tax.

I admit the danger of moving in this direction. The Treasury always fears—this has been suggested this morning—that if one reduces the share that local authorities have to find, councillors will be irresponsible, that they will spend more if they know that the Government will meet, say, 80 per cent. of the cost than if the Government are to meet only 60 per cent. of it. I have already tried to show that that cannot happen in the case of nationally negotiated wages and salaries. It certainly cannot happen over a school building programme which the Minister either authorises or does not authorise. Moreover, the councillor himself is not only a ratepayer but a taxpayer. The Treasury in its heart of hearts has always seemed to me singularly to underestimate the character and the sense of responsibility of local government administrators, both professional and voluntary.

Those of us who sit on finance committees know the thorough and patient vetting given to the estimates which we finally place before the full council. I think that the danger of reckless spending by councillors is much exaggerated. After all, councillors, like Members of Parliament, ultimately have to face the electors, and to the councillors it is a battle which is much more intimate and much less remote than the battle which Parliamentarians fight at a General Election.

I suggest, therefore, that one way of meeting some of the difficulties of the over-burdened, suffering people in respect of rates is to shift at least some of the incidence on to the central Government. In this respect, I part company with the hon. Gentleman. But, failing that, we must, it seems to me, adopt some of the proposals which the hon. Gentleman has made. What he has said this morning has the support of many who jealously guard the principle of local government and who fear the extension of financial aid from the State because that might lead to the eroding of local government responsibility.

The method proposed by the hon. Member is to reform local government revenue-raising altogether. It has been said again and again today that the rating system is antiquated, unjust and obsolete, and that it ought to be possible in this modern age to devise some system of local taxation which would share local costs according to income and not according to property. I would prefer a local income tax to the present method of local taxation, even with the undoubted weaknesses of such a tax. I do not want to examine those weaknesses now; they have already emerged by cross-questioning in the debate. One is the unfairness of a local income tax as between a rich residential authority and a poorer industrial authority. We managed to iron out that kind of inequality, thanks to the martyrdom of Lansbury and, later on, the work of Nye Bevan, by Exchequer equalisation grants and rate deficiency grants, which levelled out some of the disparities in local government finance. Therefore, it ought to be possible to devise some way of ironing out any disparities revealed in the product of a local income tax.

There has also been the suggestion that local authorities should be allowed to keep their own motor taxation which they collect for the Government. Some of us who have been to America have seen the quite efficient working of a sales tax, which the hon. Gentleman mentioned in his opening speech. The practical form in which local revenue would be collected is beyond my capacity, but I submit that it is not beyond the capacity of an expert committee, if it is convinced that what we are after is just.

I therefore believe that the time has come for an ending of a system of taxation which taxes property and not people, in which the head of a household pays rates when other wage-earners in a household do not, when men with large families and low incomes often pay more than men with no families and large incomes. I emphasise that the problem will become more acute when revaluation takes place. Reassessment, as my hon. Friend pointed out, will shift the incidence of rates as between industrial and commercial rating and domestic rating. The only argument among the experts at the moment is whether this is going to be a frightening increase of 33⅓ per cent. as suggested by the hon. Member for the Isle of Wight or the broad figure of 27 per cent., or, as some of the experts now suggest, only 20 per cent. or even less.

It is true that the Government may defer the blow until after the next General Election. They may postpone the introduction of the new valuations for a year or so, because of the incidence of new valuations on domestic property, but if they postpone it, they are only postponing a problem which, sooner or later, the system will have to meet.

We live in an affluent society, but that affluence is not shared by 8 million Britons, some of whom live just above the poverty line. The old-age pensioners, those who earned respectable pensions during their professional careers and who have watched, year by year, their pensions shrinking in value, those who live on their savings, again whittled down in value by inflation to half or one-third of their original value, the lower-paid workers in the country, the workers whose work is irregular, the men who know the fear of unemployment, the men who go sick for a long time and the widow struggling to bring up her family—these are the people who find the burden of rates a real nightmare. It is true that only the very poorest of them can be helped by the National Assistance Board. It is the millions of people just above the grimmest poverty line who demand the reform which the hon. Gentleman has advocated this morning.

I support the Motion, and I am grateful to the hon. Gentleman who proposed it. Today, we put the problem, and I hope that the Minister will respond to our appeal and set up a Committee to examine it and find a solution.

12.44 p.m.

Mr. John M. Temple (City of Chester)

May I join in congratulating my hon. Friend the Member for Harwich (Mr. Ridsdale) in bringing forward this Motion, and also congratulate him on his extensive knowledge of this subject. I should like also to join in many of the observations made by the hon. Member for Southampton, Itchen (Dr. King), and particularly to confirm what he said in regard to the views of "experts" on the comparative incidence of rating pre-war and post-war. It is true that experts are very often wrong, and I shall seek to prove that one expert, or someone who has been considered recently to be an expert on this subject, Mr. A. R. Ilersic, of Bedford College, London, is wrong in his prognostications regarding the incidence of the rate burden on domestic ratepayers after the 1963 revaluation takes place.

I notice that this is a United Kingdom debate. We have not yet heard the voice of Scotland, and I am not going to deal with Scotland myself, because I am not qualified to do so, but I would emphasise that many of the same considerations would, I know, apply in Scotland.

I shall make reference to Northern Ireland. It is significant that the Northern Ireland Government in 1955 set up a committee to investigate the finances of local authorities. One of the most important investigations carried out by this committee, and reported in Cmd. Paper 369, was on the rating system itself. I am not going into all the conclusions contained in this Report, but I should like to draw the attention of the Parliamentary Secretary to the fact that, if Northern Ireland can have an investigation of this nature, it is manifestly important that England and Wales, and Scotland as well, should have a similar investigation into the rating system itself.

The hon. Member for Small Health (Mr. Denis Howell), in the course of his most interesting speech, made the observation that the block grant, as he called it—I prefer to call it the general grant—has altered the relationship between rates and grants as we know them today. I am sorry that the hon. Member has now left his place, but I would submit that in the last few years that has been proved erroneous. If we take the average figures, and I am quoting from the Local Government Financial Statistics, Table IV, showing the analysis of the rate fund income, we find that for the years 1956–57 to 1959–60 the rates produced 47.4 per cent. of the rate fund income and grants 52.6 per cent. In 1959–60, the first year in which the general grant became operative, the proportions were 48 per cent. and 52 per cent. Therefore, we can see that during the preceding period the relationship was very roughly similar.

Dr. King

May I remind the hon. Gentleman that I think my hon. Friend suggested that in the early years practically no difference had been made, but that the possibility was there?

Mr. Temple

My recollection is that the hon. Gentleman said that there had been some difference in the relationship, due to the introduction of the general grant.

I would now pass to where I believe there have been some erroneous forecasts made as a result of studies of what may happen in 1963 consequent upon revaluation. The question of what will happen then is of immense importance, and I have studied the paper by Mr. A. R. Ilersic read to the Rating and Valuation Association's Conference in October, 1961, and also the paper which he read to the Royal Statistical Society comparatively recently. It has been quoted in this House that it is anticipated by Mr. Ilersic that the increased burdens in the domestic sector will be between 27 per cent. and 30 per cent. I accept that estimate, but I believe that there are several fundamental flaws in the assumptions made by Mr. A. R. Ilersic.

I shall come to the domestic sector later, but taking the industrial sector, in order to arrive at his figures, what Mr. A. R. Ilersic did was to multiply by two the figure of the 1960 assessments and add on 25 per cent. in the commercial sphere. In a very interesting paper read to the Rating and Valuation Association conference, Mr. Philip Bean, a chartered rating surveyor, estimated that the increase in the rentals in the commercial sector between 1956 and 1963 would be of the order of 66 per cent.; in the industrial sector he estimated that the uplift between 1956 and 1963 would be of the order of 50 per cent. I am authorised to say that the Federation of British Industries, which should know something about the industrial sector, reckons that the average uplift in values in the industrial sector will be of the order of 75 per cent.

I propose to take for the basis of my calculations a general uplift in all sectors other than the domestic sector of 75 per cent. Having taken that, I recognise that Mr. A. R. Ilersic is quite right, looking at the industrial sector, to double that particular figure, because in the industrial sector re-rating will take place to 100 per cent. whereas previously it had been operative at 50 per cent. In the commercial sector, there will be an uplift of 25 per cent.

This leaves me with a multiplier in the industrial sector of three and a half times and in the commercial sector a multiplier of 2.2. That produces very different figures in the domestic sector from those produced by Mr. Ilersic, and I estimate that at the end of the day, in 1963, the industrial sector will be paying 31 per cent. more relatively than it is paying at the present time and that the commercial sector will be paying 18 per cent. less. Everybody who has studied these matters knows that the commercial sector is the sector which will come off relatively well; it suffered relatively as a result of the 1956 revaluation.

Now I will make reference to those other relatively important sectors, the miscellaneous sector and the Crown properties sector. I am again employing the basic uplift of 75 per cent. which I said I would employ across the board in all the sectors other than the domestic, and I arrive at the conclusion that the miscellaneous sector will contribute 32 per cent. less and the Crown propertties sector will contribute 30 per cent. less. I believe that it is unrealistic to suppose that these sectors will contribute all that much less, but both of these sectors, as hon. Members will know, are subject to valuation considerations mainly outside the scope of rating law. The miscellaneous sector contains all the nationalised industries and the Crown properties sector contains types of hereditaments which one would not expect, such as the hereditaments of the Atomic Energy Authority.

I now turn to the domestic sector itself. Mr. A. R. Ilersic used a multiplier of three times in order to arrive at his figure in the domestic sector. Mr. Chisholm, who is the County Treasurer of Cheshire and an acknowledged expert in these matters, who was referred to in a very interesting paper presented at the Rating and Valuation Association conference in October, 1961, disagreed with Mr. Ilersic. Mr. Chisholm said it was quite fair to take a multiplier of three in the Metropolitan area; in the county boroughs he said he would take a multiplier of two and a half; but in the counties of England and Wales themselves it would be fair to take a multiplier of two. The average multiplier of, say, 2½ times used by Mr. Chisholm, looking across the country, will be proved, I think, to be about right. Now I think we have got to try to get the whole picture in perspective, and here one must recognise that the domestic sector did profit very considerably as a result of the 1956 revaluation. The relative burden borne by the domestic ratepapers declined by 17 per cent. as a result of the 1956 revaluation.

There is one other matter which was touched on by my hon. Friend the Member for Harwich and that was the statutory repair allowance. I think enough has been said by Government spokesmen to lead one to suppose that there will be a movement, favourable to householders in the statutory repair allowance.

So, taking all these factors into consideration, I believe it is unlikely that there will be a relative increase of over 10 per cent. in the householders' share of the burden, and I believe that the incidence on the householders' sector may well be very much less, in fact, than 10 per cent. I hope I have given assurances to hon. Members who have represented Mr. Ilersic's point of view that, in fact, his estimates in this field may prove unrealistic.

Mr. Marcus Lipton (Brixton)

At the present time, the figures which I have been able to get seem to indicate that houses provide 47 per cent. of the total rate income. I do not know whether the hon. Member accepts that figure, but surely the extent to which houses will have to provide future rating in 1963 will be very much more than 47 per cent.?

Mr. Temple

Yes, 47.6 per cent., I think, is the correct figure for 1960, but I have just given the House a rather penetrating analysis of why I believe that the impact on the householders' sector will not be above 10 per cent. more than it is today owing to the 1963 revaluation. Of course, I cannot confirm that figure, but my estimate is that the burden will rise by very much less in fact than has been estimated in many expert quarters.

Now let me pass to a rather different part of the Motion, that part calling for an inquiry into the rating system. I believe that an inquiry of this nature is long overdue. There are many inequalities within the existing rating system. Inequalities in the domestic sphere have already been referred to. I do not dissent from some of those analyses at all, but I would point out the fact that there are inequalities in other sectors.

I think that it is not uninteresting that a very large appeal has been going on only this week at Port Talbot in South Wales in regard to the net annual value of the works of the Steel Company of Wales. If my assumptions are correct, and the industrial sector is going to bear a very much higher proportion than it has been bearing up to date then indeed I believe that industry itself will have reason to ask for an inquiry, and I did speak on behalf of industry on the Second Reading of the 1960 Rating and Valuation Bill as it was then. The Steel Company of Wales, taking 1956 values, in fact has a net annual value which exceeds 35 per cent. of the net annual value of the whole of the County of Glamorgan, including the County Boroughs of Cardiff and Swansea. So industrial rating is a very major factor and an interacting factor on the burden in the household sphere.

I have referred very briefly to rating in the miscellaneous and Crown property sectors which should be brought within the scope of rating. I see no reason to suppose today that the nationalised industries should not be subject to the same type of valuation as, say, a water undertaking, as they are not very dissimilar in fact.

Now let me return very briefly to the anomalies which T believe do exist in the domestic sector. I would say here that I have studied the average incidence of rating on those people who have average industrial earnings today, and in fact the relative contribution, relative to the average industrial earnings, has declined from 3.7 per cent. in 1955 to 3.1 per cent. today. Having said that, I recognise that in this debate we are concerning ourselves with wage earners who are earning something less than average industrial earnings.

On that, a good deal of play has been made today about the household which has a good deal of money coming into the house. It has been mentioned by my hon. Friend the Member for the Isle of Wight (Mr. Woodnutt) that there are two similar houses, I think in his constituency, into one of which there is £8 a week coming in and into the other £50 a week. What I would say is that those wage earners in the house where £50 a week is coming in are making a substantial contribution to general taxation, and I did point out in my opening remarks that in fact general taxation provides over 50 per cent. of the rate fund income at the present time. Therefore, in an indirect manner those houses With rather large incomes going into them are making a substantial indirect contribution to the rate fund income.

Dr. King

So is the person who pays rates. He is also a taxpayer. He makes his contribution.

Mr. Temple

Yes, but what I was very careful to point out was the analogy between the £8 a week household and the £50 a week household. It is very unlikely that the £8 a week household would be paying very much in direct taxation.

Mr. Michael Stewart (Fulham)

I think the hon. Member said that the burden on the domestic ratepayer might rise by about 10 per cent. What exactly does that mean? Does it mean, for example, that on the average, if it is assumed that the total amount of money raised by local authorities is not increased, the domestic ratepayer will have to pay 11s. for every 10s. he now pays? Is that what the hon. Gentleman's figure means?

Mr. Temple

Yes. That is absoluely accurate. I forecast something less than 10 per cent.

The Motion calls on the Government to consider the possibilities of alternative methods of local government finance. Many of us who have taken part in debates of this nature over a period of years know that this is a superficially attractive subject, but it hardly stands up to close examination. The reason why I believe that alternative forms of locally raised revenue are mainly impractical is that in England and Wales there are about 1,400 rating authorities. My hon. Friend the Member for Harwich said that in the United States some very large cities—he mentioned Los Angeles and Chicago—have some form of local taxation. I can understand that very large authorities which are isolated from other authorities by reason of distance could operate a form of locally raised revenue, but in this country some very small local authorities are rating authorities. I believe that it is unrealistic to suppose that these very small local authorities could raise local revenue on a basis other than the basis on which they raise it at present. I have closely studied the question of local income tax. It is superficially attractive, but I do not think that it will stand up to close examination.

I want to make a brief reference to rating of site values. I have with me the Report of the Simes Committee on the rating of site values. When one reads the Report and realises that the Committee sat for six years to consider the rating of site values alone one gets into proper perspective the task which we should set any Committee appointed to look into alternative methods of locally raised revenue. This is a very complex and difficult subject indeed. It may well be worth setting up a committee, but it would have to be a committee of experts.

I want to make a brief reference to assigned revenues. They were used in this country up to 1907. They operated in respect of such duties as whisky duty and licence duties. I forecast that if any assigned revenue proved to be a fruitful source of revenue, it would be taken over by the Treasury pretty quickly.

The matter which gives me the greatest possible concern is the future. We know the present situation, but looking to the future it is the very inelasticity of the general rate which gives me grave cause for concern. The Ministry of Housing and Local Government publication "Rates and Rateable Values" tells us that the total rateable value in England and Wales rose by 2.1 per cent. in 1959–60 and by 2.5 per cent. in 1960–61. The increase in rateable value one can say in England and Wales is relatively small every year.

Some people will say, "Wait for a quinquennial re-valuation". I would say to them that the only hope of a quinquennial re-valuation producing greatly enhanced values is because there has been inflation in the intervening years. Therefore, we are relying to a large extent on inflation itself to enhance the value. I would say to people who would like to rely on that factor that if they rely on it they can also rely on the fact that all the other costs will rise in proportion.

It is significant that, in the current terms, local government expenditure in 1958–59 rose by 7.1 per cent. and in 1959–60 by 7.8 per cent. Converting that back into real terms, there has probably been an increase in real terms in local government expenditure of about 6.5 per cent. This increase in local government expenditure is far greater than the increase in the revenue from rates could possibly be, using a stable rate poundage.

On the present system, rate poundages are bound to rise. I have studied the Morris Report on Education, which was published comparatively recently. It contains up-to-date forecasts of the growth of expenditure on education. The Report is generally accepted, because the figures given in it are not all that dissimilar from the figures given by my right hon. Friend the Minister of Education. It is fair to forecast that expenditure on education will almost double in the next ten years.

Now I want to look at the growth of local authority expenditure in another way. In 1960–61 rates plus grants—I ignore capital expenditure—absorbed 6.5 per cent. of the gross national product. If the cost of rate fund services is rising by 6.5 per cent. in real terms and if the gross national product is rising by 2½ per cent. in real terms, at the end of ten years local government expenditure may well amount to 9 per cent. of the gross national product.

If local authority expenditure rises as a proportion of the gross national product to 9 per cent., unless the total public expenditure rises as a proportion of the gross national product, some other sectors of public expenditure will have to give way. I see no signs whatsoever of those responsible for other sectors of public expenditure saying to local authorities, "Your needs are obviously greater than ours. We are going to cut back, say, defence expenditure. Therefore, we can allow an increase in local authority expenditure." Unless policy decisions are taken, public and local authority expenditure in the years ahead will take an increasing proportion of the gross national product.

Now I draw special attention to the main part of the Motion, which is directed towards helping elderly ratepayers. It may well be that elderly ratepayers should have assistance, but I do not believe that this is a matter to be borne by the rate fund income. It is a fiscal matter or a matter for the Budget. Therefore, I cannot support this part of the Motion. However, I support the recommendation that a committee should be set up to investigate the rating system. I am certain that there is a powerful case for this. I believe that there is also a case for looking most objectively at alternative sources of locally raised revenue. I do not think that there will be much joy from that particular investigation, but it should be objectively looked at.

The setting up of committees is no alternative to policy decisions. Unpalatable policy decisions may well have to be taken. I recognise the importance of local authority expenditure in the ambit of total Government expenditure. If my right hon. Friend the Minister of Housing and Local Government and my right hon. and learned Friend the Chancellor of the Exchequer want assistance in regard to unpalatable policy decisions, I am prepared to help them in the national interest.

1.10 p.m.

Mrs. Joyce Butler (Wood Green)

The hon. Member for City of Chester (Mr. Temple) will, I hope, forgive me if I do not follow his very interesting and, if I may say so, very informative speech in any detail, although in the course of my remarks I should like to take up one or two things which he said. I agree with what he said about the necessity for a policy decision by the Ministry, which I had regarded as being supplementary to the Motion moved by the hon. Member for Harwich (Mr. Ridsdale). I had assumed that when the committee which the hon. Member for Harwich suggests had met and considered the problems, then the Ministry would make its policy decision, which I agree is essential.

I want to associate myself with the congratulations which have been bestowed on the hon. Member for Harwich for introducing this extremely topical and timely subject.

I suppose that all of us who have either read about or witnessed a contest between animals, such as a dog fight or a bull fight, or some other contest arranged between animals by human beings as a spectacle, have thought to ourselves that if the animals could only reason, instead of fighting one another they would get together and turn on the people who were promoting the display.

I have much the same feeling about the annual dog fight which goes on in every local authority in the country between the ratepayers and the members of the council at this time of the year when the rate burden is being discussed. In saying this I mean no disrespect for local authorities or ratepayers because, like other hon. Members who have taken part in the debate, I am both a member of a local authority and a ratepayer.

But in this case we are facing a battle which is unreal. It ought not to be a contest between the local authority trying to provide public services and the ratepayers, aggrieved, and justifiably aggrieved, at the burden of the rates. Instead, we ought to be looking at the real cause of the trouble, which I believe the hon. Member for Harwich has pinpointed in putting the Motion on the Order Paper. The cause of the trouble is that the kind of inquiry for which he asks is long overdue, and the Ministry of Housing and Local Government must bear a large share of responsibility for having done nothing effective about the problem of rating for a very long time when everybody could see that such an inquiry was vitally necessary.

The hon. Member for City of Chester referred to the proportion of personal incomes spent in rates. The estimate for the coming year, 1962–63, is that the percentage of personal incomes spent in rates will be 37 per cent., but the 1938 figure was 4 per cent., and that comparison, I think, helps to put in perspective what the actual burden is on the domestic ratepayer. It will be less in the coming year than it was in 1938 as a proportion of personal incomes.

Mr. Temple

I said that it was 3.1 per cent. of the average industrial wage-earner's income, not that of the average wage-earner.

Mrs. Butler

I am sorry. I misheard the hon. Member.

However, this is only half the picture. I want to say something about the other half, which is that the burden falls unevenly on the ratepayers. Whereas it may be true that for a man earning over £1,000 a year the average figure is nearly the proportion of his personal income spent on rates—about 3½ per cent.—for the artisan living in a typical small house, such as most of us have in large numbers in our constituencies, the burden is nearer 14 per cent. of his personal income.

Reference has been made in the debate, and is made in the Motion, to the particular problem of those on fixed incomes. I have here a letter from a medical officer to a local authority in which he sets out the needs of an elderly person in terms of food needed for health. He puts the cost per week for one person of all the food needed for health, and the cost of coal, electricity and gas, but not of rent and rates, at £3 10s. 3d. That is what an elderly person requires.

Side by side with that, I have the case of a widow in my constituency who came to me in great distress the other day and told me that her total income was £3 10s. a week. Obviously, even a very small increase in rates to a person living on that kind of income, even if it is only the 10 per cent. increase which the hon. Member for City of Chester said he believed the 1963 revaluation would involve, will make all the difference between living on an adequate diet, living the kind of life which one ought to be able to live today, and real distress and hardship. It is the people who have managed on these very small sums, who are not at the very bottom of the income scale, who will be most hardly affected by revaluation. A whole group of people who are now just managing will be brought into the group below, in which they cannot manage without doing something which is vital to their well-being.

The present rating system was quite reasonable many years ago; it was reasonable that the householder in a small community was required to pay a levy to the local authority to empty his dustbin, to make sure that the paving stones in front of his house were even and that he did not trip over them and to provide a park just round the corner for his family. But when we come to the present situation with these vast urban communities, it seems to me unreasonable to expect the householder to pay an increased levy for such services as the provision of roads, which have become traffic routes right through the community, such things as overspill housing, which is outside the area of the local authority levying the rates, such things as redevelopment, which is an enormous burden and is in fact part of the national need for rebuilding and urban development, and such things as welfare services, which everybody agrees, I think, are a national problem and a national burden.

When we come to this kind of service, apart from the education and health services and others which hon. Members have mentioned, we have to ask ourselves whether it is reasonable to expect local rates to bear as much of the responsibility for this finance as they are bearing at present.

I entirely agreed with my hon. Friend the Member for Southampton Itchen, (Dr. King) when he said that this inquiry should look at the point whether the proportions are right and whether the Government should not be responsible for a greater share of the financial involvement of local authorities than they are at present. One of the difficulties, in addition to others which have been mentioned, about the present general grant position is that whereas when there was a percentage grant it was easy to see where the Government accepted responsibility for meeting the problems of local authorities—because the percentage grant was for specific services—with the general grant and the lump sum there is an increasing tendency for this responsibility of the central Government for local finance to be obscured and for the kind of statement to be made which has been made frequently—that local authorities should become increasingly independent of the central authority.

I think that this statement obscures the fact to which I have drawn attention—that some of these services, in addition to those which my hon. Friend mentioned in respect of which there is a national agreement on wages, must clearly be a Government responsibility, and the important thing is to make sure that we get the proportions right. This is something which needs examination every so often, because the national and local scenes are constantly changing, as are priorities. Continual readjustments are needed.

One point which has not been mentioned so far today is that some of the services administered by local authorities which go beyond the immediate parish pump level—such as overspill housing, roads, redevelopment and bigger planning matters—involve capital expenditure and are not met out of the current rate. This involves the raising of loans and the problem, therefore, of high interest rates. No discussion of the burden on ratepayers is realistic if it ignores this aspect.

Not only is the rate burden unfairly distributed among ratepayers, but it is carrying expenditure by local authorities which it is vital for the community to have if it is to be the kind of community we want—though the financing of it should not necessarily be a local responsibility. Reference has been made to the affluent society, but what kind of an affluent society is it where, in every town and city, we see factories cheek by jowl with residential areas, houses run down, having become obsolete and needing to be demolished and replaced, worn-out road patterns no longer relative to our needs, and a complete lack of open spaces and playing fields and other provisions which a community should have?

We lack these things all over the country, but every time the problem of the rate burden comes before a local authority it draws back and says, "We cannot do this job, because it would mean an increase in the rates and an added burden on the ratepayers. We must put it off." Year after year, local authorities put off such things as urban renewal, and so, year after year, we put up with congestion of housing, congestion of traffic, and congestion of urban centres, with the problem becoming ever more acute and difficult because we are so frightened—and rightly frightened—of the burden the expenditure involved would put on the ratepayers.

That is why the Ministry must examine both the priorities and the policy. We cannot allow this situation to drag on year after year, getting worse and worse, without doing something about it. The withdrawal of the kind of special grant which was once available for planning has tended to obscure this point and to make people feel that the only thing that matters is to keep down the rates. It is tragic when local authorities have to defer housing schemes—including special dwellings for elderly people, the rebuilding of worn-out areas, the provision of overspill housing and all kinds of other schemes for which they have worked for a very long time—because of the rate problem

In my constituency we are engaged on a redevelopment scheme which was first mooted just after the war. It has taken all this time to get to the point where the thing is really under way. But now that it is under way it is extremely expensive in the early stage, and already there is an outcry in the local Press that something must be done to cut the rates. It is against this type of scheme that the outcry is directed.

These capital schemes not only involve borrowing money at high rates of interest, but also a long period during which there is high expenditure without revenue being produced. After a period the revenue comes in. With other hon. Members, I have asked the Minister to look at this problem and see whether, for capital projects of this kind and for many other capital works of local authorities, a scheme could be evolved by which interest payments could be deferred until revenue was produced. I make that point again today because it is relevant to the problems we are discussing.

The burden on the ratepayers—particularly those with fixed incomes—the need for money to carry out essential services, particularly capital works, without deferring them year by year—all these constitute one side of the coin. The other side is summed up in the question, "Where is the money to come from?" Some should continue to come from the rates as we levy them now. Some of it obviously will continue to come from the central Government. But local authorities are in the great difficulty that they are expected to find money without having the means of producing it except through the rates.

It is a truism to say that all the money we have at our disposal comes from our productivity, but local authorities have no productivity from which to produce revenue. They can do it only by levying rates and in one or two minor ways. One of the ways in which they have tried to help themselves and become productive has been through the sort of scheme which operates in the Borough of Tottenham

Everybody surely knows about "Tottenham Pudding". If they do not, they should. The local authority collects the organic refuse from households, not only in Tottenham but in surrounding boroughs, and processes it to make pig-food. Since the war this scheme has run into great difficulties but rather than give it up—because "Tottenham Pudding" has proved a great relief to the rates—the local authority set up its own pig farm, selling the pigs after feeding them on "Tottenham Pudding" and using the income to relieve the rates.

But the Tottenham Council has had no encouragement whatever from the Ministry in the difficulties it has encountered in recent years. I could write a book about the difficulties facing this kind of development. Those of us who know anything about catering undertaken by local authorities could write volumes about the restrictions and difficulties placed on those who have tried to provide facilities for ratepayers of the type which is necessary for present-day needs. I hope that these difficulties in the way of local authorities will be examined.

Whenever we discuss local authorities and rates we always come to the question of building. It is part and parcel of the job of local authorities to build all kinds of things, but those which set up their own building forces, and are carrying out their own work, have had restrictions put on their activities.

The three boroughs of Wood Green, Tottenham and Edmonton have a joint scheme of house building in Cheshunt. All the houses are built on one plot of land. Edmonton is building its houses by direct labour. It is not allowed to build houses on the adjoining plot for Wood Green, although Wood Green applied for it to do so. It is not even allowed to put in a competitive tender against other builders to build these houses for Wood Green.

This kind of restriction is not justified if it is said, as it has been this morning, that rates are a burden on the ratepayers and that local authorities must stand on their own feet and be independent. I implore hon. Gentlemen opposite to forget some of their prejudices about direct labour schemes and to realise that any committee which looks into alternative sources of revenue for local authorities must consider some of these things.

I was horrified at the Ministry's lack of knowledge of such schemes as the composting of sewage and sludge, for which there is a great demand. It may sound an odd subject to mention today, but these schemes produce revenue for local authorities, and, as I say, the Ministry of Housing and Local Government did not know how many of them were in operation. It was left to an independent writer, the gardening correspondent of the Observer, to produce a list of the twenty or so local authorities which were composting their own sludge and refuse and selling it at a profit for the benefit of the ratepayers in their areas.

That brings me to the point made by one hon. Gentleman opposite about some local authorities being so small that they could not possibly do anything to produce incomes for themselves. One of the ways in which the Ministry has fallen down badly is that it has done nothing to encourage co-operation between local authorities. I mentioned just now the example of direct labour. There are many ways in which small local authorities could get together and jointly embark on revenue-producing schemes, though they could not produce such schemes on their own. I regret that the Ministry has done so little and has hampered this kind of co-operation which I think would be preferable to the iconoclastic way it has gone about knocking down local authorities by reorganisation and putting them up again in a different pattern.

Points which have already been made should not be reiterated unduly, but I think that there is a case for the road tax being used by local authorities for roads. There is also a case for the entertainment tax which is collected locally being considered as another source of income for local authorities. There is also undoubtedly a case for a committee looking at this question of differential rating, and I am impressed by the weight of support from both sides of the House this morning for an examination of this proposal. Many of the difficulties involved in this proposal have been mentioned, and these are just the difficulties which a committee, and only a committee, can examine and report upon.

I am not satisfied, either, that we have heard the last word this morning about the rating of site values. The significant thing about this dual problem—the problem of the ratepayer with a burden and the local authority without sufficient money to do the job—is that there are people who are not in the position of either the ratepayer or the local authority, but who benefit from what the local authority is doing because it results in an increase in the value of the sites they own.

I do not think that it is enough to say that the difficulties have already been examined and found to be insuperable. Surely this is the kind of problem which must be examined every so often. With this great problem of the high cost of land and the need to help local authorities to raise revenue, this is just the kind of thing which should be looked at in the light of present day circumstances.

I hope that the Parliamentary Secretary has been impressed by the weight of evidence from both sides of the House of the need for a committee to examine these and other suggestions which may be made. In spite of the hon. Gentleman's reply to a question by one of my hon. Friends the other day, I hope that the Minister will set up this committee and that it will report within a reasonable time, because, as has been emphasised this morning, this is an urgent matter for which only the Minister can take responsibility. We can talk and say what we think. Back benchers can put down Motions, but only the Minister can take the necessary action, and I hope that he will do so.

1.36 p.m.

Mr. John Woollam (Liverpool, West Derby)

The hon. Lady the Member for Wood Green (Mrs. Butler) and many other hon. Members have warmly welcomed the Motion. I, too, support it and wish, in particular, to associate myself with many of the concluding sentiments of the hon. Member for Wood Green.

I shall try to be brief, because I know that a number of my hon. Friends wish to take part in the debate, and many of them have more knowledge than I have of this subject and will make more worth-while contributions. It may be thought that, egged on by ratepayers and owner-occupiers, I am going to make a constituency speech. Lest that thought be in anyone's mind, let me say that I represent a constituency in which, of the 55,000 electors, at least 45,000 are council-house and council-flat tenants, and are not politically conscious on the subject of rates. It may be that such a constituency should not have a Tory Member of Parliament, but that is not a relevant consideration within the terms of this Motion.

I have devoted some amateur thinking to this problem over the last seven or eight years, and I have become aware of the concern, discontent and criticism which has been growing of the system of finding money for local authorities. The Government have a complex task before them, and I appreciate the dilemmas in which the Minister and the Parliamentary Secretary must find themselves. I have to concede also that many of the dilemmas are of our own making over the past few years.

First, we have encouraged the idea of local authorities introducing differential rental schemes or economic rent schemes, and this has resulted in people saying that some of the expenses of local authorities can be met by measuring what income goes into a house and what the people in it can afford to pay out of their income. The idea of using a measure of the ability to pay has become acceptable in many parts of the country.

Secondly, there has been a growing agitation in the country—and I think also on both sides of the House—about the reform or abolition of Schedule A tax. I know that the Government have so far conceded little on this, but they have acknowledged the substance and the feeling behind the agitation.

These developments in public opinion have eroded the basis of public acceptance of the idea of rates being the main source of local finance. People realise that the measure of the ability to pay does matter and can be included in local authority finance. They also realise that property as a basis of taxation is becoming increasingly archaic, irrational and illogical.

If we turn to the alternatives—and an impressive variety of them have been put forward by hon. Members today, but I am not competent either to choose or judge them—many of them turn time and again to the thought that some variation of local taxation should be introduced. In many previous debates, especially in Standing Committees, the major objection put forward was that while one could devise some form of local taxation which would be fair between individuals and residents, one could not solve satisfactorily the problem of how to tax companies and how to decide their place of residence for the purpose of taxation.

What has surprised me—and this lends support to the request for a committee of inquiry—when I have spoken to knowledgeable people on the subject of local government finance is that they have never been truly aware of the technical objections; these difficulties of how to deal with corporate taxation in the structure of local government revenue. They do not fully believe that this is the true obstacle we say it is and they cannot believe that there are no reasonable solutions that could be arrived at, just as there are reasonable solutions to all the rating difficulties that arise.

I have come to the conclusion that one of the prime needs of any committee of inquiry is to sort out to the satisfaction of all interested bodies and opinion that either this idea is on or it is not, and to establish to everyone's satisfaction whether these difficulties are more insuperable than any of the obstacles in the present rating system. If we are finally to accept that the superficial attraction of local income tax is outweighed by major injustices which would arise from dealing with companies we are driven to an entirely different tap, for we must consider withdrawing various types of expenditure from local authorities to the central Government.

Once we start to do that—and I must admit that my hon. Friends would be, if not in a dilemma, then certainly embarrassed—it would be contrary to what has been the Conservative policy for the past few years as expressed, not least, in the last Local Government Act. For these reasons the dilemma of local revenue, rates and taxation, and the relationship between local authorities and the central Government is getting worse rather than easier. I agree with my hon. Friend the Member for the City of Chester (Mr. Temple) that it is going to get even worse in the next few years. Thus, from all these points of view, I agree with hon. Members who have pressed for the setting up of a committee which will work urgently and command support and interest from all the bodies interested in this matter.

I stress again that in the talks I have had—and a fortnight ago I took the trouble to speak with the chairman and treasurer of a national association of owner-occupiers—I have discovered that all these organisations seem to be in a greater psychological difficulty than they are in a policy difficulty. It is as though they wish to get something off their chests rather than off their minds.

Whatever may be said about this old solution of politics, there can be no doubt that a high-powered committee, even though it might arrive at the same conclusion, acts rather like a lightning conductor. I have always believed that whatever conclusions a high-powered committee reaches people will accept those conclusions as being right—there having been a high-level, thorough-going, expert, publicised committee of inquiry into the problem. I share that view, for however unpalatable such a Committee's conclusions might be I would stand by them, even if the Government decide to adopt those conclusions.

Regarding the problem of elderly people, like all hon. Members I have a constituency interest in this but I have also another interest as President for the Merseyside area of the National Association of Old-Age Pensioners in Great Britain. In the sort of constituency which I represent—which is more than 80 per cent. owned by the local council—we have the appalling problem of elderly people living in what are described as family houses; the threebedroomed type.

The hon. Gentleman the Member for Birmingham, Small Heath (Mr. Denis Howell) has said that it is anti-social to encourage or drive elderly people to leave their family houses for old-age pensioners' flats, perhaps in other parts of a city. That is true, and one of the grim social problems concerning elderly people is this question of uprooting them from the place in which they have spent perhaps all their lives and near to which their friends reside. When one adds together the problems facing the elderly in these council house areas one discovers that any further rate burden would become intolerable. They are living in family houses and in many cases they would welcome being transferred to pensioners' flats, but they must often wait for many years to be transferred.

In Liverpool, I think in Birmingham and in some of the larger cities economic rent or differential rent schemes are operated. As a result many elderly people receive rebates or pay slightly lower rents but it sometimes happens, because of the burden of rates, that some of them pay much larger rents. If their rate bills are to increase and the housing circumstances are to become even worse the combination of these will make the position even more intolerable. Many hon. Members have already given examples of inequities and illogicalities concerning the way in which rates are paid between people living in similar houses, and I have no need to add to the specific examples that have been given.

The only aspect I have tried to stress is that we should encourage economic rental schemes. I know that Conservative councils do this, and I believe that many Socialist councils do so as well. The result is that people contribute to the housing revenue account of the local authority in accordance with the incomes coming into their houses. But as soon as one decides that they are to contribute to the other revenue account of the local authorities one then says, "We will ignore incomes entirely and have regard only to the rateable value of the houses." It is that inequity which is becoming realised and is being condemned by more people.

I hope that when the Parliamentary Secretary replies he will give, if not a concession, at least some hope that this call of hon. Members on both sides of the House for a committee of inquiry has not been falling on stony ground, to use the customary Parliamentary phrase, and that in the months to come we can have some means of studying this matter to the satisfaction of the many groups of people—those in every income group—who are deeply disturbed at this trend of affairs in their local authorities.

1.48 p.m.

Mr. B. T. Parkin (Paddington, North)

In a debate in which every Member has supported the Motion, it would be absurd to attempt to debate the points raised by the speaker immediately preceding one, although I shall touch on some of the points raised by the hon. Gentleman the Member for Liverpool, West Derby (Mr. Woollam).

I hope that the hon. Gentleman the Member for Harwich (Mr. Ridsdale) is gratified by the amount of support he has received, and I hope, also, that the Minister is impressed by that support. I was particularly fascinated in listening to the hon. Member for Harwich and wondering just how the emphasis in his speech might have been changed had he been elected some years ago to Paddington. North instead of to Harwich. I am sure that he would have adopted the same method of examining the problem, discovering from that examination the local anomaly, grievance or hardship under which some of his constituents suffer. He would then have thought out the possible palliatives and would have come to the conclusion that this was only one facet of a much wider problem—how wide he now knows as a result of the speeches that have been made today. I hope that the Minister and, when it is set up, the committee will realise that among many sections of opinion there are open minds about some rules which were considered elementary and inviolable only a few years ago. None of the traditional rules of taxation, local or central, is now accepted in its entirety, and there is now a mood to look at them all again.

The interesting thing about the Motion is that if at the last minute the word "elderly" had been deleted it would not have detracted anything from its force of the Motion, nor from the force of the speech of the hon. Member for Harwich or most of the arguments which have been developed since. He has proposed many things of a revolutionary character. The hon. Member for Harwich and my hon. Friend the Member for Wood Green (Mrs. Butler) have both been advocating forms of municipal trading and forms of raising direct income on behalf of local authorities. We have dropped overboard the favourite argument of the Financial Secretary to the Treasury—that we cannot have hypothecated taxation in this country.

But, in that case, I wonder why the word "elderly" rings a special bell; I suppose that it is because it describes a sector of the ratepayers who cannot escape the liability of a regressive and unfair taxation system. There are no personal allowances, as there are with Income Tax. There are no graduations, as there are in other taxation.

In other kinds of indirect taxation there is some element of choice. If an indirect tax is increased by the Chancellor of the Exchequer, it may come with special hardship upon those with small incomes, but they can of their own personal choice avoid some of it. They can choose to direct what small income they have into other channels, and they can abstain from some of the articles which are taxed. But they cannot abstain from living in their own homes, and there is no option in the tax levied on the right to live in one's own home, because when one is aged it is more costly to change one's home than to stay in it. That is one of the most important factors in this problem, because although it might be said that elderly people ought to move into small homes, the fact is that it usually costs them more to move than it does to stay.

I wonder whether the real anomaly about elderly people is not the fact that the community as a whole still regards old people themselves as an anomaly. The failure of this thinking is a failure to come up to date and to realise what a cruel mistake it has been to lump all old people together in a homogeneous group and then say that we ought to do something about them. They are not a separate and unified sector of the community. They are just the same as us, only more so.

I say "only more so" because any difficulty from which an older person suffers becomes so much more difficult as he becomes older. They are more different among themselves than are the rest of the community, because the differences increase—differences of temperament and of health and ability to cope with the world in general. Someone who had a limp at the age of 30 and who bore it and carried on with his work without suffering unduly finds when he reaches 75 or 80 that it is an additional burden in life.

Environmental influences bear more hardly on the elderly—the differences in rent, the differences in the cost of transport, the differences in the cost of heating. Earlier this morning I noticed through a window that it was snowing. That could be inconvenient to most people, but it is a positive financial disaster to people living near the poverty line who have to choose between walking to the place where they can shop most economically or shopping more locally but more expensively. It might mean that they have to spend a little more on fuel this weekend to keep warm and they might have to choose between fuel and food.

By introducing the word "elderly" into his Motion, the hon. Member for Harwich has drawn attention not only to anomalies in local taxation but to the grave anomalies in the community's attitude towards its elderly section. Although not much emphasis has been given to these problems in the debate, I hope that the Minister will feel able to reply in general terms to some of the points which I am about to make

One of the problems about the elderly ratepayer is that there are two occasions when there is a great jolt in his income and in his way of living. The first is when a couple retire on an old-age pension without having sought after or been encouraged to move into a smaller home before that date. If, like so many people, they retire abruptly, without having changed a job or a home in advance preparatory to retiring, that is the first jolt.

But there is another jolt which is often much more severe and which is often not sufficiently recognised. That is the jolt of the bereavement, when one of the couple dies and, perhaps, the occupational pension lapses, when suddenly a smaller income has to meet a rate bill which remains the same. I think that we have to give some thought to that when we consider the incomes of old people.

What I am sure of—and I am sure that the hon. Member for Harwich would agree with me—is that it is quite wrong—at least it is unfruitful—to try to help old people by moving round the perimeter of their activities, suggesting little palliatives here and there. We do not get at the root of the problem of how to grow old with dignity by dealing with it in the only way open to us in the House, except on Fridays, which is asking for walking sticks to be exempt from Purchase Tax or television licences to be made cheaper to the elderly and so on. That does not get at the need for a co-ordinated policy which is not only worked out behind the scenes, but advanced inside the House.

There is one device which is being advocated and which I hope will be thought by the hon. Member for Harwich and by the Parliamentary Secretary to be relevant to the debate. It is an idea which is beginning to be discussed among people concerned with these matters, including my hon. Friend the Member for Sowerby (Mr. Houghton). It is whether we ought not to devise a compulsorly Income Tax coding system and through it operate the old-age pension and the National Assistance supplements to it in a dignified way, as dignified as with the ordinary Income Tax rebate system.

For instance, three times in my life I have had the good fortune to receive a draft from the Income Tax authorities returning to me money which they thought I did not owe. They found out that I did not earn as much as they thought I did. It never occurred to me, and I do not think that it should have occurred to me, to send it back and say, "Thank you very much, but I can manage; I have managed so far and I did not realty expect this".

But how often is that exactly the attitude of elderly people who are afraid that there is some loss of dignity in accepting the National Assistance supplement to the old-age pension? Therefore, would it not be a good idea when the time comes for someone to draw a retirement pension to make it compulsory for him to have an Income Tax coding and for that to be used in conjunction with some such scheme, saying, "We find that instead of your owing us money, we owe it to you and here it is"? I think that there is a good deal of value in that suggestion and it might be applied in other directions, and precisely in this context of local taxation.

Above all, I hope that the procedure in the House will soon catch up with the immense progress which has been made elsewhere towards co-ordinating the social services. I asked the Prime Minister a Question, which, unfortunately, as sometimes happens, just did not get answered, asking him to designate a Cabinet Minister to coordinate "he work of all Departments concerned with the welfare of the older section of the population. We are all familiar with the situation that in the ordinary way we cannot discuss the housing difficulties of old people and their pension difficulties at the same time.

If we had a Minister answerable to the House, a Minister who would expound Government policy and who could say that on consideration the Government had concluded that we ought to divert some of the resources available for pensioners from housing to an increase in the pension or vice versa, or to further development of their medical treatment and so on, we would extend what we know already takes place in Cabinet committees and in the coordination between the Civil Service departments.

It would give the Parliamentary Secretary who is to reply today much greater freedom if he had authority to speak on behalf of several other Departments as well as his own, if he were empowered to deploy the general views of the Government and the general policy of the Government towards a certain social problem.

The debate today started with a reference to the elderly. It continued with the deployment of immense expert-ness about local taxation with some reference to general taxation. In so far as the Parliamentary Secretary is to reply on the subject of old people, I hope that he will tell us that he will use at least his own influence to see that we get more information about a co-ordinated policy on social problems, so that it is not only on Fridays that we can discuss them in the broad fashion that has been made possible today by the good fortune of the hon. Member for Harwich and his good judgment in choosing this subject. Like everyone else, I hope that the Minister will accede to the terms of the Motion.

2.3 p.m.

Mr. Walter H. Loveys (Chichester)

I should like to join with other hon. Members in congratulating my hon. Friend the Member for Harwich (Mr. Ridsdale) in being fortunate enough to win in the Ballot and in selecting a very suitable subject for discussion at the present time and for putting his Motion so well. It is a suitable subject because so many local authorities are producing budgets which will mean yet another increase in the rates, and because many people are feeling extremely concerned about the possibility of undesirable results of the Rating and Valuation Act which is to implemented next year. I feel that it would be of great help to us and to everyone in the country if my hon. Friend could give some indication of whether the remarks of my hon. Friend the Member for the City of Chester (Mr. Temple), about the possibility of a 10 per cent. increase, can be judged as being more or less accurate. If he could say that, it would be of great help to people who are thinking in terms of 40 per cent.

We all know—it has been mentioned by many hon. Members—that the present system of rating is inequitable. It is inequitable because in one house in a street large incomes may be coming in while further down the same street people may be living on small fixed incomes; yet in both cases the amount of rates going out is exactly the same. It is also inequitable because so many people, particularly those living on small incomes, do not benefit on anything like the same scale as many others.

In this respect, education is one service which, I feel, might well be paid for directly by the Exchequer. But we would have, of course, to be very careful to preserve our local administrative powers. Apart from education, I would certainly not advocate the policy of more services being paid for by the Exchequer. I would, if anything, put it the other way round. I think that it would be a very sad day for local government and the ratepayers if local services were taken completely out of the control of local people.

At present, local authorities are able to impose only one main tax, and that tax is the rates. As in the case of every single tax, the larger it becomes the larger the anomalies. The rate tax, as has been mentioned, is a very old one. I think that it started under the Elizabethan poor law and was levied by the parishes. My feeling is that it is a great pity that the present powers of parish councils have become so limited. I understand that their main powers now are, one, to keep the footpaths open, which is very important, and the other, if they are lucky enough to possess a bus shelter, is the responsibility of keeping it clean and tidy. Over and above that, they do, however, have the responsibility of keeping the senior authorities informed of local requirements. The parish councillors can and should act as kind of ombudsmen to prevent any steam roller tactics of the local authorities. I mention this today because I feel that their duties are very important but underestimated.

To go back to the question of a single tax system of rates, we have to consider the advantages which there are of course in it before we look at the alternatives. There are advantages in the single tax system. First, rates are a very old and widely accepted system, although, of course, there are always many grumbles about it. The second and, perhaps, the biggest advantage of this rating system is that it is easily and economically administered, and, thirdly, that it supplies a stable form of revenue. Any new form of tax, such as has been suggested, would meet with very considerable criticism throughout the country. It would be represented, or perhaps I should say misrepresented, as an attempt to increase the total taxation burden. In fact, it would do nothing of the sort and would be aimed at steadying and, if possible, reducing the general rate.

The present system is inequitable for the two reasons I mentioned; first, that in one house in a street there may be people with large incomes and in another house in the same street people with small incomes, and secondly, that they do not all get the same amount of benefit. The answer to the first question is probably a system of local income tax, or what my hon. Friend in proposing his Motion called a local services tax. I think that that would be a far better and more acceptable name. Although it would be unpopular in the first place, we must realise that it has been imposed in many countries with notable success—in Scandinavia and in several of the States in America.

The two objections, of course, would be, first, the difficulty in the basis of assessment, which has been mentioned today. I am not sure that my hon. Friend the Member for the City of Chester was quite right when he said that it would not stand up to close examination, because it was dealt with very thoroughly by the Royal Institute of Public Administration in its book entitled, "New Sources of Inland Revenue". As a result of its intensive research, it recommended the imposition of such a tax. The other objection to such a tax is that it may be so attractive to some local authorities that they would be tempted to use it an awful lot, perhaps add a bit as time goes on, and look upon it as an easy tax. I think that the answer to this is that there would have to be a limit to the rate in the £ which any authority could charge. I understand that a rate of 3d. in the £ would produce about £175 million, that is, if charged on personal incomes alone.

To deal with the second point, about the present system not benefiting every one equally, this, of course, cannot be dealt with so easily as can just one single tax such as the services tax. We have to think in terms of many other items. The first one which comes to my mind is parking meters. Initially, parking meters were very unpopular with the motorist, even though their aim is to reduce the general rate. They were very unpopular, of course, in London, but they are now working very successfully indeed. My main objection to parking meters in the countryside is the loss of amenity. I should hate to see—

Mr. Deputy-Speaker (Sir Robert Grimston)

I am sorry to interrupt the hon. Gentleman. This is a very wide Motion, but I do not think that we can discuss parking meters under it.

Mr. Loveys

I am very sorry, Mr. Deputy-Speaker. I was referring to them as an alternative way of raising local revenue which, I should have thought, came under the terms of the Motion. However, I naturally bow to your Ruling and will not go into any detail except to say that I should hate to see the main streets of our ancient cities dotted with parking meters. However, it would increase the revenue if they were to be used to a large extent in car parks. In several American States at the present time the revenue from their use represents 5 per cent. of the local budget.

I will not go in detail into the other items, because they have been mentioned so often—I know that many of my hon. Friends wish to participate in the debate—such as the local entertainment tax, bingo halls, casinos, poll taxes, service taxes, sales taxes and many others, which would have to be imposed at the discretion of local authorities.

While discussing this question of alternative revenue, we must not ignore the fact that much pruning should really be done at local government level. There is no doubt that there is considerable unnecessary spending by some local authorities. There is also no doubt that there is considerable reluctance on the part of some local authorities to take outside professional advice on the keeping down of expenditure. This has been tried by a few local authorities with marked and unexpected success.

There is much too much reluctance on the part of those in the country with read business knowledge and experience of cutting down expense and making profits to serve on local authorities. All these things play their part in increasing the rate burden, and we must not ignore them just because we are considering the possibility of new sources of revenue.

In conclusion, I wish to cite one rate burden which I should like to see removed entirely. You will have to rule me out of order, Mr. Deputy-Speaker, if what I am going to say does not come within the terms of the Motion, but it affects my constituency and other coastal constituencies, and it affects many elderly people living on small fixed incomes. It is the burden placed on some individuals of having to pay for coastal defences. I will not go into all the arguments on the Coast Protection Act, 1949. In some ways, I think it an extremely good Act. Under it people actually living on the coast have to pay for the estimated increased value which their property achieves through the building of a sea wall. This is based on the rate of erosion estimated to take place over the years.

On the face of it, this may seem a fair arrangement, but it is a fact that a very large proportion of retired people like to buy a small property by the sea in which to end their days. Having done that, they suddenly receive a large rate demand for services which protect their property from the possibility of being washed away in the far distant future. It is true that under the Coast Protection Act there is provision for appeal to the Minister. But even if the appeal is successful it still means years of worry for the people involved. I know that some of these people are considerably worried when they hear that a sea wall might be built in their area and that they may have to pay this enormous charge. This may be years before the wall is actually built, and only then can their appeals be made to the Minister for his acceptance or rejection. As I say, I should like to see the responsibility for this very small source of revenue removed altogether from those living on small fixed incomes.

I hope that the Government will think seriously about the Motion and will not be put off because it appears revolutionary or, at least, unorthodox. Perhaps its major asset is that it would not add one penny to Government expenditure but would merely ensure a fairer collection of money now spent by local authorities. To my mind, the Motion is an attempt to see that these elderly people who are living on small fixed incomes get a little more fair play.

2.16 p.m.

Mr. Michael Stewart (Fulham)

We all join in congratulating the hon. Member for Harwich (Mr. Ridsdale) on his choice of Motion and on his speech in moving it. We on this side of the House are naturally particularly gratified to note that the hon. Gentleman's Motion asks for the appointment of a committee to inquire into the rating system, and the possibilities of alternative sources of local revenue. It is now some fifteen months since the Motion for the Second Reading of the last Rating and Valuation Bill was moved. On that occasion, speaking through the mouth of my hon. and learned Friend the Member for Kettering (Mr. Mitchison), we on this side of the House urged the Government before proceeding with that Bill to institute an inquiry of just this kind. If only we could have had the support of the hon. Member for Harwich and of other hon. Members—the best elements of the Conservative Party, as my hon. Friend said—on that occasion, the inquiry would have been set up then, would probably by now have done its work and we might have been well on the way to a solution of this problem.

However, we will not complain too much about the time lag of fifteen months in ideas between this side of the House and the Government side. There was a gap of some seven years between the time when we began to urge the full rerating of industry and the time when the Government recognised the necessity for it. On the question of the need to extend training colleges, there was a gap of four years. So we need not complain too much about a gap in the transmission of ideas of fifteen months.

What has helped hon. Members opposite and, we hope, right hon. Members, to catch up with us in this matter? It is certainly the inescapable facts about public finance, central and local, and I think that the first of those facts is that the total amount of money spent on services provided by local authorities is bound to go up, and ought to go up. Whether it is provided from rates, taxes, grants, or from whatever source, the total amount spent is bound to go up if this country's general standard of living is going to rise, because an increase in what we spend on public services is a proper part of a higher standard of civilisation.

In a very primitive community men can provide for food and clothing and a little shelter, but not much else. As they become more prosperous and civilised they are able to think about doing something for the education of their children, for the care of the old and the sick, for the whole range of things which today we call social services and which are most conveniently provided through the public services and especially through the local authorities. As a society gets richer still it will naturally want to improve all these services. It will want to have smaller classes in schools, the treatment of the mentally sick more humane and more expert, and, therefore, we shall get a rise in the total amount of money spent if the community as a whole is getting richer and more civilised. The doctrine advanced in some quarters, that as the community gets richer we ought somehow or other to reduce the total of public expenditure, is a doctrine that fails to understand the whole nature of progress in civilisation.

I was very glad that this point was brought out in the speech of my hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell), who asked me to express regret to the Minister because he is unable to be with us for the latter part of this debate. This is a necessary reason why the expenditure on local government services must go up, but of course we are obliged to notice that Government policy has added one or two unnecessary reasons. There is the burden which high interest rates has imposed. If we compare the position today with that in 1951 we find that local authorities are borrowing now about 40 per cent. more than they were borrowing then, but the bill they are having to pay for interest is about two-and-a-half times what it was in 1951. Quite apart from improvement in the quality of services, that is one reason why the total amount of money is going up.

There is the burden of rising land prices which was referred to by my hon. Friend the Member for Southampton, Itchen (Dr. King). A few weeks ago he gave some striking examples of how the County Council of Hampshire found that a piece of land which it wanted to buy a few years ago and had not been allowed to buy had by now multiplied ten times in price, and the council had to buy it at that inflated price.

Those of us in London are viewing with some alarm, if the Royal Commission's and the Government's proposals are carried through, the cutting up of county education and children's services and the placing of them on smaller authorities with the result that either they must be less well provided or there will be a multiplication of buildings and officials and an increase in expenditure. I mention these unnecessary increases in expenditure which Government policy has imposed. If we want to help the ratepayer we might consider reversing policy in those directions. Even if we did that, we should still be left with the reason I gave at the beginning of my speech, with the rising total of money to be spent on the services provided by local authorities.

Granted that, where is it to come from? The nation, without hardship to anyone, can, of course, find more money if its ways of finding it are proportioned to the incomes of the various groups of citizens. What we are concerned with here is that we trust that we are to have a higher income for everyone and we must have a higher rate of public expenditure, but what are the instruments by which the money required for that expenditure is to be collected?

Whatever we do in local government finance about the way in which a local authority raises its revenue—whether by rents, local income tax, rating of site values, municipal enterprise or what you will—grants from the central Government are bound to play an important part in local authority finance.

I recognise the importance of what was said by the hon. Member for Harwich and other hon. Members about not invading too severely the independence of local authorities, but I think it is quite clear that there are even greater dangers in another direction. To take an example, suppose local authorities were left completely on their own to provide local services. We would get quite intolerable differences in the educational provision for people in an industrial town whose main industry was not among the more prosperous today and the position in a very wealthy residential area. We have to have a considerable element of Government grant in our finances to provide anything like reasonable equality in those matters where we believe a large measure of equality is essential. The education service is, perhaps, the most striking example of that.

Our problem is how to give help from the central Government to local authorities so as to prevent very great differences in the standard of services they are operating and at the same time to preserve a reasonable measure of local independence. In my judgment, and I think I am right in saying in the judgment of most people who have studied this matter, the percentage grant system got as near to the right answer to that question as in our present state of knowledge we are likely to get. The movement from that to a block grant system will make it more difficult for local authorities to meet the growing public demand for good services. That is another field where we need a reversal of Government policy.

I might suggest another and distinct way—probably an heretical way—in which central Government might help local authorities. My hon. Friend the Member for Itchen mentioned that the central Government gets back a certain amount of what it grants to local authorities through the Purchase Tax it charges on some of the articles which they buy. Whenever it has been suggested that what, say, a local education authority has to spend on Purchase Tax should be remitted, we are met with the reply, "You cannot discriminate in Purchase Tax according to who is to buy the article and according to what use it is to be put to". That may be so, but I put this to the Government. Would it involve too much accounting for a local authority to be able to say, out of the things it had bought during a year, how much money it had spent in paying Purchase Tax?

If that could be done, why should that amount of money not be refunded to the local authority by the central Government? That would mean in effect a new form of grant, but one of its merits would be that it would be a form of grant which would involve the minimum danger of interference with the freedom of the local authority. It would be an automatic grant proportioned to a considerable extent to the range of services the local authority was supplying. That, at any rate, is something which the committee, which we trust we shall be told the Government will appoint, could look at.

I have tried to develop the argument so far that we must have a very considerable and increasing sum of money to run the services and that grants have to play some part, but we all agree that it ought not to be done wholly by grant or we shall destroy local independence entirely. We are left with the question, what local sources of revenue are there? Not many hon. Members have referred to incomes from municipal enterprises. I was very glad that my hon. Friend the Member for Wood Green (Mrs. Butler) referred to them. I hope that the Minister will have something to say about that in his reply. I hope we shall hear that it is the Government's view that it is a good thing for a local authority to try to extend its income by remunerative municipal enterprises and so to relieve the burden on the rates. If we set that aside, there remain the rates themselves. There must be almost universal agreement that they are a burden and an unfair way of raising taxation.

Those two propositions are the same. We cannot complain that our rates or taxes are a burden unless we can show that, in view of our circumstances, we are being required unfairly to pay more than other people, and it is on that point that the criticism of the rates is launched. In the first place, they are liable to be unfair to the elderly, because the elderly tend, not always but frequently, to live in rather larger accommodation compared with the size of the household than do younger people. The children grow up and marry. The husband dies and the widow is left.

I entirely agree with my hon. Friend the Member for Small Heath that it is most undesirable to encourage the idea that the moment this happens the old lady ought to be told, "You can solve your problem by clearing out and finding a new home in an entirely new neighbourhood among strangers." The old lady may wish to go, and that is a different matter, and it ought to be an aim of Government policy to make it reasonably easy for her to go if she wishes to do so. Unfortunately, the survey on this matter brought out by the Ministry of Housing and Local Government in 1960 showed that, if anything, there had been a slight increase in the number of under-occupied housing units, and that probably means an increase in this immobility.

One reason for that is the Rent Act, because if one moves, one moves into an uncontrolled tenancy. The Government must face that that is the result of their policy. In addition, the special help for the building of homes suitable for elderly people, small dwellings, which used to exist has disappeared in the subsidy arrangements of the Housing Act, 1961.

All these things tend to aggravate the situation in which elderly people are obliged, towards the end of their lives, when they have ceased earning and are dependent on a small pension, to continue living in accommodation which is too large for them and, consequently, to have to pay exceptionally high rates in proportion to their income. Probably the section of elderly people which suffers must consists of those whose income is just above the level at which they could draw National Assistance or those who probably could draw National Assistance but who, not unnaturally, are reluctant to do so.

But it is not only the elderly who suffer. Reference was made to the difficulties of the young couple starting a family. Rates tend to be generally a regressive form of taxation, and the basic reason for that is that when people get richer, after a certain point their expenditure on house-room does not rise proportionately to their total income. In the early ages of society it did, because we had not then invented so many other ways in which rich people could spend their money. The Roman orator Cicero had eighteen country houses. His rates must have been enormous. Someone at that level of income living today would have plenty of other ways of spending his money luxuriously. Consequently, the size and expensiveness of the house which a man occupies is by no means a proper index of what he can afford to pay. The tax is regressive; it does not take enough from those who could afford it and therefore has to take from others more than they ought to be asked to pay. It bears more heavily on the large family than on the small, because they need more room, and it can also be inequitable between businesses. The dealer who requires a large stock may pay an unfair amount compared with people in other lines of business.

We all seem fairly well agreed—except possibly the Minister, who has yet to speak—that rates are not a very happy form of taxation. What are the remedies? There are some special and partial remedies. There is the use of the power to relieve a ratepayer on the ground of poverty—a power contained in the 1925 Act. There is the power to do something about the size of the statutory deduction for repairs and maintenance, and there is the power given in the last Rating and Valuation Act for the Minister to engage in a kind of partial and temporary derating of domestic properties when the 1963 valuations come into force.

On that point, I echo the hope which has been expressed that the Parliamentary Secretary will tell us whether he agrees with the calculations of his hon. Friend the Member for City of Chester (Mr. Temple). His predecessor, now at the Board of Trade, expressed in Standing Committee on the Rating and Valuation Bill agreement with a series of calculations which I put before that Committee and which I can assure him are quite different from those of the hon. Member for the City of Chester.

It may well be that the hon. Member for the City of Chester, who is very well-informed on these matters, is right, and if so he will be able to say that he has been right and that almost everybody else, so far, has been wrong, because when the Rating and Valuation Act, 1961, was introduced the Government talked as though normally the domestic ratepayer would have to expect to pay 13s. for every 10s. he is paying now. That is irrespective of any effects which might follow an increase in the total amount of money which needs to be raised by rates. The Government gave an indication that if there were a danger of the domestic ratepayer having to pay more than that 30 per cent. increase, the power of cushioning would be used. It is evident that the Government took a very different view then from that taken today by hon. Member for the City of Chester.

On the question of helping to relieve either elderly ratepayers or poorer ratepayers from the effects of the 1963 valuation by the use of the cushioning powers in the 1961 Act, in Committee on that Measure I moved an Amendment on behalf of my hon. Friends which would have required the Minister to make drastic use of that cushioning power. How I could have welcomed then the support of the hon. Member for the Isle of Wight (Mr. Woodnutt), who expressed his concern today about this matter but who, alas, did not support me in the Division in that Committee when it might have made all the difference.

Nevertheless, we must agree that all these remedies—cushioning under the 1961 Act, relief for ratepayers on the ground of poverty under the 1925 Act and anything done about the statutory deduction—are only partial, individual and temporary remedies. They do not go to the root of the problem. I look now at the last part of the Motion, dealing with alternative sources of revenue.

Some interesting comments have been made about rating of site values. My hon. Friend the Member for Small Heath was particularly interested in this, but one has to notice this point: one of the ideas behind the rating of site values was that it would stimulate development, because the owner, feeling that he had to pay a certain rate anyhow, would be encouraged to make full economic use of his property, but we are beginning to discover that encouraging every individual owner to make the full economic use of his property does not always have a happy result for the community. In any case, in view of planning legislation, we do not intend to allow owners to use their property in that way.

The idea of the rating of site values, therefore, has to be considered in the light of the fact that we have planning legislation, that the community determines whether one can develop and to a certain extent in what way one can develop particular sites. But when we have allowed for that, another fact remains. What was the idea behind the rating of site value? It was the very simple one that when the community rose in numbers and prosperity the value of land rose and the community ought to get at least a share of that increased value. It is that idea that we have to take and apply to present conditions.

This was the importance of the proposal which our party has made for the bringing into public ownership of land ripe for development. We regarded that as an instrument for bringing into the public purse part of the increase in the value of land which is the result of the community's own growth. I do not propose to develop here the arguments for that proposal. It is one means of getting that part of the increased value of land which belongs to the community into the community's hands.

If we did that it would be possible to make some part of that advantage available to the local authorities. We envisage part of the revenues of the Land Commission being made available to local authorities, and if hon. Members do not like that piece of policy but really want to do something about the burden of the rates, they must find some other answer to the question of how one gets part of the increased value of the land into the public purse and in particular into the purses of the local authorities, because here is a real and important source of revenue.

The other major claimant for recognition among the alternative sources of revenue for rates has been a local income tax. Here, I trust without any unkind-ness to them, I want to point out that hon. Members opposite are a little behindhand. My hon. and learned Friend the Member for Kettering would have welcomed over a gap of fifteen months their desire for an inquiry into local government finance. I would have welcomed in Committee on the then Rating and Valuation Bill the support of the hon. Member for the Isle of Wight. On the drastic use of the power of cushioning which that Act gives to the Minister, but above all on the question of local income tax, one should study the proceedings of the Standing Committee on the then Local Government Bill in 1958 and observe a new Clause moved by my hon. Friend the Member for Widnes (Mr. MacColl). It was entitled "New Clause—Local Income Tax", and hon. Members would be well advised to study the files for 27th March and 1st April, 1958.

My hon. Friend put forward in that Clause something that would be very difficult to reject as an unworkable scheme. It contained one particularly interesting and rather bold suggestion that, to begin with, it should be permissive for local authorities to have power to prepare a scheme which should be submitted to the Minister for approval. It would have to comply with certain conditions. This enabled the other side of the Committee to use the usual stock argument that if this ought to be done at all it should be done on a nation-wide scale. But if one urged that it should be done on a nation-wide scale they would say, "We have no experience of this. It would be a most dangerous venture and a leap in the dark".

My hon. Friend proposed to avoid leaping in the dark on a nation-wide scale by saying that we should begin to try it out in such localities as could frame a scheme to suit the Minister. He dealt in an ingenious and satisfying way with the problem of company profits. He recognised that one could not make them amenable to the machinery of local income tax, but one could allow in the national system of taxation for the fact that they were receiving this advantage and the money collected in national taxation could quite properly have been earmarked to be distributed to local revenues.

I am not prepared to believe that it is absolutely impossible to work out a scheme of local income tax. The Minister in commenting on my hon. Friend's proposal said that it was interesting, that he would not say that it was bad in principle but that he had asked himself this, that and the other, and had decided in the end that he could not accept the new Clause. We hope that the Parliamentary Secretary will be able to do better than that today. The last Minister of Housing and Local Government had an extraordinary gift for being able to turn down things and keep them down, even the rate of council house building. I suppose that that was why he was sent to the Treasury in the hope that he would have a similar effect on public expenditure, but that has turned out to be the only thing in the world that he has managed to encourage.

Mr. Percy Browne (Torrington)

I am sorry to interrupt the hon. Member in the middle of his excellent speech—not that I agree with all of it. There are nine local authorities in my division and in one of them 25 per cent. of the domestic hereditaments are occupied by people over 65 and the average wage rate is approximately £9. I do not see how one could raise a local income tax that would provide sufficient revenue in districts of that kind. On a case-to-case basis one could do it, but I do not think that one could do it nationally.

Mr. Stewart

One must regard the county as the unit for the levying of local income tax and not a district the size of a Parliamentary constituency, otherwise one runs into the difficulty which the hon. Member has described.

The second point, and the hon. Member will remember what I said about Government grants, is that we are not suggesting that either rates or local income tax can supply anything like the whole of local government revenues. One must use the mechanism of Government grants to deal with the kind of difficulty which the hon. Member has in mind.

Mr. Browne

rose—

Mr. Stewart

I do not want to take up too much time. We might be involved in a protracted argument about this, and, after all, we are not doing more now than trying to make out a case for an inquiry.

We on this side of the House are seeing the fruit of our earlier labours. We feel rather like the person described by the Psalmist: He that goeth forth on his way weeping and bearing forth good seeds shall doubtless come again with joy and bring his sheaves with him. But we still have the largest sheaf to collect, the representative of the Government who I believe, Mr. Speaker, will be catching your eye.

If the hon. Gentleman is not going to set up an inquiry, let him boldly say so and say that he will not accept the Motion and then I hope that his hon. Friend the Member for Harwich will not flinch to put it to a Division and we will gladly support him. But do not let the Government spokesman do what Government spokesmen sometimes meanly do when they accept a Motion and say that the words of the Motion mean what no reasonable person would take them to mean. This is a Motion plainly asking, among other things, for an inquiry. If the Parliamentary Secretary is not going to set up an inquiry let him resist the Motion, but I hope that wiser counsels will prevail and that he will do what everyone wants him to do—accept the Motion and set up an inquiry.

2.49 p.m.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Geoffrey Rippon)

I wish to join in the warm tributes expressed on both sides to my hon. Friend the Member for Harwich (Mr. Ridsdale) both for the subject he has raised and the skill with which he introduced it. He has undoubtedly rendered us a service by ensuring a valuable debate which has covered a wide range of matters. He and my hon. Friends have been concerned for some time about the general level of public expenditure both national and local and the need to ensure a proper balance between our income and expenditure.

I should have thought that my hon. Friends on this side of the House could speak with greater authority on these matters than some hon. Gentlemen opposite who weep crocodile tears from time to time but whose policies would certainly involve increases in both national and local Government expenditure. We have all noted the absence today of any representatives of the Liberal Party. I imagine that they have not yet recovered from the shock of having the Chancellor of the Exchequer point out to them last week that their policies would cost more than £1,000 million a year extra in national and local taxation.

Rates have, of course, been the subject of alarm and despondency almost from time immemorial—at any rate, one would gather from the speech of the hon. Member for Fulham (Mr. M. Stewart) at least since the time of Cicero. When the Royal Commission on the Poor Law reported in 1834, the direct expenditure on poor relief ran to a total equal to about 14s. per head of the population per annum, and we are told that the nation looked on in a kind of paralysis at the inordinate growth of moral abuses, of industrial disaster, of ruinous expenditure. It seems to me that we have today been listening to something of the same old story—similar sentiments, although perhaps expressed in less dramatic terms.

It is right, of course, that ratepayers should be concerned to see not only that they get value for money but that the total burden of expenditure upon them is not intolerable. The Motion first of all draws attention to what is described as the increasing amount of local government expenditure and the consequent dependence on the national exchequer for grants. I think I am right in saying that it is this assumption upon which the call for action is founded.

It is certainly true, as hon. Members on both sides have pointed out, that local government expenditure is rising. The revenue expenditure of local authorities in 1960 was £1,738 million or 21 per cent. of the total public revenue expenditure, while capital expenditure amounted to £610 million or 37 per cent. of total public capital expenditure. Of this 33 per cent. was met from Government grants compared with 28 per cent. in 1950, 19 per cent. from rents, dividends and interest compared with 13 per cent. in 1950, 16 per cent. from borrowing, etc.—that is, net of repayments—compared with 29 per cent. in 1950, and 32 per cent. from rates compared with 31 per cent. in 1950.

It is right that expenditure on this scale should be scrutinised carefully, but it is also important, especially in the context of the Motion, that we should put it in the right perspective. As will be seen, the percentage of local government expenditure borne by the rates has risen by only 1 per cent. in ten years. Quantitatively, the rates have risen considerably, but as the hon. Member for Southampton, Itchen (Dr. King) and the hon. Lady the Member for Wood Green (Mrs. Butler) pointed out, the actual burden on ratepayers expressed in average terms has not risen as high as one might have expected.

I share the suspicion expressed by the hon. Member for Itchen of many statistics. None of us has much sympathy with the statistician who drowned in a river with an average depth of 2 feet. Still, one can draw some general conclusions from some of these figures.

It is true that rates now take on average a smaller percentage of personal incomes—net of Income Tax and Surtax—than they did before the war—only 4.2 per cent in 1960 compared with 5.2 per cent. in 1938. As a proportion of total taxation, rates accounted for 12 per cent. in 1960–61 compared with about 19.3 per cent. before the war. In terms of actual cash—I think this is probably more important—the total rate payment in England and Wales in the financial year 1961–62 averaged under 10½d. per day per head of population. The average householder—the head of the family—paid an average of 1s. 4d. per day in rates. Bearing in mind, as a number of hon. Members have pointed out, the importance of the services provided—education, housing, welfare and the rest—this does not compare at all unfavourably with the weekly rent on a television set or, as the hon. Member for Itchen said, with expenditure on the pools and some other items of that kind.

I share the view expressed by the Chairman of the Finance Committee of the North Riding County Council in a letter in The Times on 27th February: … the … ratepayer … I would add the reservation "certainly where he is served by a prudent local authority". … is getting … thundering good value for his money. The hon. Member for Fulham indicated that some unnecessary burdens were being placed upon the ratepayer which had nothing whatever to do with the value of the service, and he referred specifically to interest rates, as he and his hon. Friends have done often enough. The answer is clear. Local authorities cannot be expected to be insulated from general economic trends and policies. Rising interest rates and broader considerations of public policy should encourage local authorities, like anybody else, to defer capital projects which are not essential until the auspices are more favourable.

Nor should one exaggerate the effect of increases in interest rates. If the rate of interest increased by I per cent. it is estimated that the interest burden would be increased by £20 million or an additional I per cent. of gross expenditure, and that increase, marginal though it is, would not fall to be paid by the ratepayer alone. The Exchequer pays its share by way of increased general and rate-deficiency grants, and the poorer authorities get assistance also through the rate-deficiency grant.

We heard, briefly, references to land prices. The hon. Member for Birmingham, Small Heath (Mr. Denis Howell) was cautious. He did not want to go too far into the matter. Indeed, we have asked Opposition Members on previous occasions whether they wished to go on record as being opposed to market prices being paid for the compulsory purchase of land. However that may be, the increase in the cost of land, like anything else, is taken into account in assessing the general grant, whilst the poorer authorities will get assistance through the rate-deficiency grant.

A number of hon. Members have rightly said that in looking at the country as a whole to ascertain whether the ratepayers get value for money it is also necessary to take a rather closer look at certain authorities. I do not in any way underestimate, with local expenditure on the present scale, the importance of bringing it under proper control. Local authorities have to plan their expenditure carefully, particularly their capital expenditure. They ought to be preparing long-term programmes of a capital nature showing what they will cost in loan charges and in running expenditure. Then they, too, can get their local priorities right and determine whether their ratepayers can afford to pay and whether they will be getting value for money.

As I indicated, in 1960 local authorities spent more than £2,350 million, of which £1,567 million came from local rates and borrowing, and £785 million from Government grants. As my hon. Friend the Member for Harwich said, that is more than 10 per cent. of the gross national product. Yet many people do not even bother to vote in local elections. Presumably they think that all the important decisions are taken by the central Government. They are quite wrong. I believe that both the quality and the cost of local services are directly affected by the sort of administrations that local authorities put into the town hall or the county hall. Incidentally, my experience also is that ratepayers get better value from Conservative authorities than from Socialist ones.

The hon. Member for Fulham said that we should encourage increasing income from municipal enterprises. One of the most important municipal enterprises is housing, and we certainly encourage local authorities to get a a reasonable income from their housing properties. We think that elderly ratepayers and others can often be greatly assisted by the adoption of a sensible rents policy, Which ensures that local authority money goes to those who really need it and not to those who are better able to bear the burden.

The careful scrutiny of expenditure of all kinds can produce valuable economies, and some striking examples were given in an article in the Daily Telegraph of 27th February, 1962. It cited, for example, the case of Wandsworth, which employed a firm of management consultants, who saved £20,000 in the first year, expected to save £30,000 in the next year, and after that £40,000 a year. It is certainly true that the job of promoting proper economy does not rest upon industry and commerce, and I agree with what the hon. Lady the Member for Wood Green said about these matters. Local authorities can often make important savings by increasing efficiency, by re-deployment of the labour force, cutting out unnecessary work and by increasing mechanisation. By all means let us encourage schemes such as the "Tottenham Pudding"—

Mr. James MacColl (Widnes)

The hon. Gentleman made some rather silly crack about Labour-controlled local authorities not running things as well as others. He went on to talk of the employment of a firm of management consultants. Would it not be fair to mention that one of the first authorities to have a co-operative scheme of O. and M. was the Socialist-controlled Metropolitan Standing Joint Committee?

Mr. Rippon

I think that there are probably other claims, including that of Coventry.

Mr. Stewart

That is Socialist-controlled.

Mr. Rippon

They needed it desperately. I speak only from my own personal experience.

Certainly, we want to see proper municipal enterprise, and "Tottenham Pudding" seems to be a good example. Local authorities ought to provide services which private enterprise cannot provide for the ratepayers either as well or at all, and I cannot see the ratepayers providing "Tottenham Pudding" for themselves. None of these schemes necessarily involves getting rid of staff, because if jobs are declared redundant, ordinary wastage takes care of that. A good number of authorities have set out to increase efficiency by using work study and O. and M. but they are still a very small proportion of the local authorities we have in this country. I certainly commend the book on work study and O. and M. in local government issued by the British Productivity Council, where there are very good illustrations of what can be achieved.

Assuming that the rate burden as a whole cannot be regarded as intolerable, it remains to be considered, in the light of what has been said today, whether there is an equitable distribution of the burden, first, as between the local authorities and the Exchequer, and, secondly, as between one class of ratepayers and another. In regard to grants, today they bear a rather larger share of net annual expenditure than do the rates. Taking the net cost of all services in 1959–60, 48 per cent. of the cost was rate-borne and 52 per cent. was from grants. In the case of the general grant services, the Exchequer share was 56 per cent. More topically still, as the House will recall, my right hon. Friend and learned Friend the Chancellor of the Exchequer last week told the House that the Estimates for 1962–63 showed that one of the largest increases in central Government expenditure in 1962–63 is in aid of the local authorities by way of general and rate-deficiency grants, up by £86 million, mainly to finance education, including higher pay for teachers.

We have come a long way since the party opposite was suggesting that the Government would use the general grant to cut down drastically assistance to local authorities, and today, apart from the hon. Member for Fulham, we have had no complaints about the operation of the general grant system.

Mr. Lipton

The hon. Gentleman will be getting them soon.

Mr. Rippon

There has been a wonderful opportunity in the debate today, which seems to me to have been largely missed, though perhaps the hon. Gentleman will catch Mr. Speaker's eye later on.

If we accept what the hon. Member for Fulham has said, as I think we must, that a considerable proportion of local government expenditure must be financed by general grants, rate-deficiency grants and methods of that kind, I think we are now striking about the right balance between the contributions from the national and local taxation.

Much more of our discussion today has been concerned with the shifting of the burden of rates, either as between different classes of ratepayers or perhaps by new taxation. One can understand the gloomy forecasts about large rate increases in the next financial year, combined with the fear of the effect of the 1963 revaluation, and what that may mean for householders in thirteen months' time. My hon. Friend the Member for Harwich mentioned 45 per cent. as the possible rise in the share of the burden on householders.

The hon. Gentleman the Member for Fulham asked if I could be a little more precise as to what exactly was going to happen, and he said that his own calculations had been endorsed by my hon. Friend the Minister of State, Board of Trade. I do not think that is strictly true because my hon. Friend said that he did not disagree fundamentally with the calculations but without endorsing the assumptions. All these calculations depend on the assumptions we make, and in considering whether we fancy the views expressed in Mr. Ilersic's paper or views expressed by my hon. Friend the Member for the City of Chester (Mr. Temple) we have to decide what assumptions we are going to make.

I can only say today that I think we are for the moment in the realm simply of professional and amateur speculation. I can only counsel a little patience. As Mr. Aneurin Bevan said, "Why look into the crystal when you can read the book?" In a very short time we shall be able to read the book, or, at any rate, have a preview of the chapter headings.

Whatever may emerge I do not think it feasible to change the structure of local government finance in relation to the burden on elderly ratepayers, to which the Motion particularly draws attention. It is undoubtedly true that many elderly ratepayers—indeed, everyone on a fixed income—are affected by any increase in rates, or, indeed, in any form of expenditure. On the other hand, as a number of hon. Members have pointed out, it does not follow that an elderly ratepayer, whether on a fixed income or not, is necessarily in a worse position to meet this expenditure than a young married family.

There are provisions to safeguard ratepayers against hardship. There is provision in Section 2 (4) of the Rating and Valuation Act, 1925, which gives powers to reduce or to remit the rate due from any ratepayer on grounds of poverty. I take note of the suggestion which my hon. Friend the Member for Harwich has made as to the extension of that Section to cover hardship. Of course, in any event, it will be a matter of definition. The local authority will have to consider the circumstances, but I am sure that my right hon. Friend would consult the local authorities' associations if they so wished. Then again, the National Assistance Board, as has been pointed out, has regard to rates both in fixing its scales and in supplementary allowances. No doubt, some of them, particularly the more elderly members of the community, have a reluctance to get assistance from either of those sources. That is a relic of the stigma of the Poor Law, and I am sure we are all anxious, like the hon. Member for Paddington, North (Mr. Parkin), to get rid of that.

On the broad issue, I think elderly ratepayers and everyone on fixed incomes can be protected only by other means. The argument against rates as a regressive form of taxation applies even more strongly to indirect taxation. The sort of houses people live in affords some indication of ability to pay, and in the last resort the best way we can help the elderly is by protecting the value of the pound and supporting the Government's general economic policy.

I turn now to that part of the Motion dealing with the suggestion for an inquiry into the rating system. Of course, it is right from time to time to consider whether we should have a new, fundamental review of the methods of meeting local government expenditure. Local government finance must be affected by changing circumstances, and I should be the last to stand here and suggest that the present system embodies immutable perfection. I might in years to come regret taking such a stringent view. The question is whether now is the time for such a committee as the Motion suggests should be set up.

My hon. Friend the Member for Harwich suggested that this matter has not been considered recently by the Government. I think, with respect, that some hon. Members have undervalued the comprehensive review which was undertaken by the Government before the White Paper on Local Government Finance (England and Wales) was published in 1957. That is Cmnd. 209.

It is said in the White Paper that the Government had undertaken the comprehensive review which had been announced early in 1956. It is stated that this review was the most thorough of its kind since 1929. It took advantage of a great deal of valuable voluntary and other research, including the Report of a study group of the Royal Institute of Public Administration and a research study set on foot by the Institute of Municipal Treasurers and Accountants.

The White Paper states this conclusion: In brief, the Government do not think it practicable to devise a satisfactory new source of local revenue by authorising the collection of a local income tax or other such impost on top of the national system of taxes; nor do they think it appropriate to earmark for the direct benefit of local authorities, or to hand over to them, the motor duties or any other of the taxes now levied nationally. In their view, improvement of the system of local finance in this country must come from improvement of the system of local taxation which is traditionally the right of local authorities, combined with a radical recasting of the system of grants. The action taken on this White Paper, both in the Local Government Act, 1958, and the subsequent Act of 1961, has perhaps been under-estimated. The House will find as the year goes on that the effect of these Acts is far-reaching, both in relation to the recasting of the grant system and the implications of rerating and revaluation.

A number of alternatives have been mentioned, and I have been asked to say something about them. First, I will deal briefly with the suggestion that there should be a local income tax. As the House will know, the Royal Commission on Taxation dismissed this idea in 1901. So did the Kempe Committee in 1914. The only enouraging noises have been made by the study group of the Royal Institute of Public Administration in 1956, perhaps because the study group could not find any other suggestion to put forward. It accepted that the introduction of Pay-As-You-Earn made it virtually impossible to introduce anything like the Swedish system. The study group thought instead of what it called a simplified local income tax to be levied by rates of 1d. to 3d. in the £. The hon. Member for Small Heath said "Only 3d.", but some hon. Members, though perhaps not many, will recall that in 1874 the national rate of Income Tax was only 2d.

The hon. Member for Fulham said that he very much wished he had had support on these benches in 1958, but I think I am right in saying that when this matter was discussed in Standing Committee only the hon. Member for Widnes (Mr. MacColl) made this suggestion. He was the only hon. Member who spoke in favour of it. At that time he would no doubt have liked the support of his hon. Friend the Member for Fulham.

Mr. M. Stewart

I was not on that Committee.

Mr. Rippon

I beg the hon. Gentleman's pardon. He spoke as if he were.

Mr. Stewart

No. The Joint Parliamentary Secretary must not misrepresent me like this. I think that he is confused between two Committees. I was on the Standing Committee which considered the Rating and Valuation Bill, to which I made frequent reference, but I was not, and did not suggest that I was, on the Standing Committee when my hon. Friend the Member for Widnes (Mr. MacColl) moved his admirable new Clause. However, I have studied it and I wish the Minister would do the same.

Mr. Rippon

The hon. Member will at least agree with me that the hon. Member for Widnes was the only member of his party, indeed the only Member of the House, who spoke in favour of this proposition.

Mr. MacColl

The Joint Parliamentary Secretary is being unfair. I think that he has served on one or two Standing Committees. He knows what happens at the stage when new Clauses are reached. The Chief Secretary to the Treasury, as he now is, at one time talked about Guillotines. One does not waste a lot of time debating something which obviously requires an inquiry. All I ask for is an honest inquiry into an income tax. I do not ask anybody to make up his mind about it. I have not made up my own mind. I want the Government to face up to the need to think about local government finance and not just produce a lot of vague platitudes about what happened in 1900.

Mr. Rippon

The Government considered this in the review which took place in 1957. They considered it in the light of the recommendations of the Royal Institute of Public Administration.

Mr. Ridsdale

I have studied the White Paper to which my hon. Friend refers. He will agree that no arguments or details were given as to the reasons why the Government came to those conclusions. We want to hear those reasons and arguments.

Mr. Rippon

I am trying to deal with that. One can get the background to a large extent by studying the White Paper. First, the Royal Institute came to the conclusion that it could only be levied on personal incomes. They envisaged the exclusion only of people earning less than £2 a week.

Mr. Skeet

I have studied the White Paper carefully. Only on page 3 does it deal with the matter. To assist the House, will my hon. Friend publish the evidence?

Mr. Rippon

I cannot make any undertaking to do that at this stage. It was, of course, open to anybody after the publication of the White Paper and during the proceedings, which, I imagine, were fairly protracted, on the 1958 Bill to ask for what information was required. The Government announced their conclusions.

The difficulties in relation to local income tax have been displayed both this afternoon and in the document to which reference has been made. There is first the difficulty that it can be applied only on personal incomes. There is also the difficulty of where it should be levied. The hon. Member for Small Heath said that it would have to be levied where a person worked, and that may well be true. He then suggested a distribution of 1d. to one authority and 2d. to another. If we had that system, we would need to have a national form of local income tax, which would not allow local variations of the sort that the House would wish to see if it wanted to redress the balance between the contribution from the central Government and the contribution from local government.

In respect of the local income tax, the practical problems which are indicated by the Royal Institute of Public Administration are formidable and would be difficult to overcome. Even if it were practicable, however, I do not think that the Government would consider it worth creating a new taxation service with all its attendant expenditure and disadvantages simply to have part of the taxpayer's contribution to the cost of local services levied locally. That seems to be the only certain effect, certainly if we accept what the hon. Member for Small Heath has said about collection and distribution. There are other difficulties concerning confidential information being too widely dispersed on matters of income.

My hon. Friend the Member for Chichester (Mr. Loveys) was quite right in saying that rates provide a much more stable and predictable source of income. To superimpose a local tax would produce a great many anomalies and uncertainties and a lot of litigation and would not be worth while.

The other suggestion is for a local sales tax. This was rejected in the study report of the Royal Institute of Public Administration, which pointed out, as my hon. Friend the Member for Harwich will agree, that there have been considerable difficulties in administration in America. Detailed returns are required from retailers. If these are not subjected to audit, there is a loss of 30 per cent. of the amount that it is hoped to collect. The complexity and costliness for the retailer is even greater, because he must, for example, account for a different rate of tax in each local authority area for which the goods are destined. The real difference between this country and the United States, however, is that we have a much greater concentration of urban population. This would make administration much more difficult.

The other hoary annual which has been canvassed has been site value rating. This has been examined by a large number of commissions and committees. Admittedly, as the hon. Member for Small Heath pointed out, the Simes Committee considered the question against the background of development charges. It is, however, relevant that after these had been repealed by the Town and Country Planning Act, 1953, the Sorn Scottish Valuation and Rating Committee found that it had received no evidence to cause it to dissent from the conclusions of the Simes Committee. It was dismissed by the study group of the Royal Institute of Public Administration, who pointed out that except for Denmark, it was used only in countries of extensive land areas and new urban development.

Furthermore, as the hon. Member for Fulham pointed out, although it encourages development of land in certain areas, that is not of interest to us now that the planning Acts have been enacted to control the development of land in its proper place and for suitable purposes. It is also worth bearing in mind that such a tax would not fall on the landowner exclusively, any more than the rate falls exclusively on the occupier. In many cases it would simply come out of a different pocket, like the present rate it is designed to supplement. Moreover, the Simes Committee pointed out that the yield would be low. It assumed an income of £10 million to £20 million a year at 2s. in the £, assuming sites values at 20 to 50 per cent. of the total value of the interest.

The hon. Member for Fulham went back to the old concept of site value rating in substitute for nationalisation. Many of the early advocates said, "Why nationalise land? We need only nationalise rent." Apart from the doctrinal objections that there may be to rating of site values, from the technical point of view a separate valuation would be extremely complicated and expensive. Even allowing that the Lloyd George Act of 1910 was badly drafted, ill-conceived and singularly unsuccessful, there would still be enormous problems in finding a satisfactory definition of site value and of apportioning it between the many different interests affected.

The Government looked at this again in their review in 1957 and had no hesitation in dismissing the idea. I have no reason to suppose that they would come to a different conclusion if a committee were appointed today.

A number of other proposals have been suggested—for instance, that entertainments duty might be passed to local authorities. The trouble is that this is a declining tax which is borne largely now by the cinemas. The duty on road vehicles and fuel taxes have also been considered. There is practically no scope for local variation in the rate of duty, however, so it would not really result in the increase in the autonomy of local authorities that my hon. Friend the Member for Harwich would like. There would be difficulties for the owners of large fleets of vehicles driving over great parts of the country. They would find it inconvenient to have to have licences in their areas of operation.

Mr. Woodnutt

I have been following my hon. Friend's arguments with intense interest. Most of us here are appreciative of them, but all we are asking for is that a committee be set up to inquire into this.

Mr. Rippon

These things have been looked at as recently as 1957. There are a good many arguments against them, with which we are all familiar. We have considered this matter very recently but we have also set in hand substantial measures of reform in relation to Government grants and re-rating and revaluation.

Whatever view the House may take of the merits of some of these suggested taxes, it would be untimely to start any further committee before the effects of some of the very important changes the Government have introduced can be seen either at all, as in the case of revaluation, or in full, as in the case of the reorganisation of grants and re-rating.

Mr. Ridsdale

My hon. Friend's reply and his arguments in rejecting the appointment of a committee have been very disappointing. I was aware that he would possibly not look with favour on some of these things, and I said that I did not want to divide the House. But I do say that I shall try to get an all-party Motion on to the Order Paper to see that a committee is appointed as early as possible.

Mr. Rippon

If my hon. Friend will allow me to finish he might be a little less dissatisfied. I have tried to set out some of the basic difficulties about the various suggestions that have been raised. Hon. Members have heard them before. I have made the further point that we have in hand at the moment a substantial measure of reform, the full effects of which it is impossible to gauge at the moment. It is not timely to set up a committee at present.

All the matters which have been raised in the debate must be borne in mind in the future. I started by saying that I did not believe that the present system embodied immutable perfection. But let us wait—that is all I ask my hon. Friend to do—until we can judge the results of the measures that we have taken. I think that in some ways the House has under-estimated the full implications of the policies set in hand in the 1958 and 1961 Acts.

Mrs. Butler

Can the hon. Gentleman say when the Government think an estimate should be made of the effects of revaluation?

Mr. Rippon

I do not think that it can be made until after we have a statement about the broad effects of the revaluation, and the discussion which will undoubtedly take place before long on Statutory deductions. I am not in a position to anticipate what will happen then. Afterwards, I think that the House may be in a better position to judge whether further measures are necessary.

3.26 p.m.

Mr. Marcus Lipton (Brixton)

The House will have heard with a profound sense of disappointment the speech of the Parliamentary Secretary. It consisted of a constant string of negatives to every suggestion put forward from both sides of the House. I share the disappointment that is no doubt felt by the hon. Member for Harwich (Mr. Ridsdale) at the unresponsive attitude which the Government have displayed to his Motion. I hope that the hon. Gentleman, with his sturdy belief in Parliamentary democracy, will not take this rebuff lying down, and that he will press his Motion to a Division, because this is the only thing that he can do if he has any self-respect at all. If the hon. Gentleman does press the matter to a Division, I, and possibly other hon. Members, will be happy to go into the Lobby with him. It is only by taking a firm line on these issues that one can ever expect the Government to take any notice of representations such as those made today.

The Parliamentary Secretary was boasting of the immense effect that was being brought about by the general grant system in relieving the burden on local authorities. I intervened at that point, because only this morning before leaving home—and I happen to live in the area of the Easthamstead Rural District Council in Berkshire; a Tory-controlled local authority, let me hasten to add—I read in my local paper a statement by the treasurer of the council in which he pointed out that the increase in the rate that had had to be imposed by the council was due almost entirely to the way in which the general grant scheme was operating.

The Parliamentary Secretary can make his jokes about drowning in 2 ft. of water, Which is apparently the fate of statisticians, but we must have regard to the actual facts of the situation. I shall be glad to send him the statement to which I have referred and ask him to demonstrate how his forecast or promise that the general grant scheme would relieve local authorities is working out in this case.

The fact remains that the most important figures, which I suspect the Parliamentary Secretary already has in his mind but is unwilling to disclose today, will emerge when we know the result of the new valuation that is to come into effect in 1963—only twelve months ahead. We can be absolutely certain about one thing concerning this new valuation. It is inevitable that, under the new arrangements, the share of the total rate bill paid by factories, offices and shops will go down and the householders' share will go up. That seems so elementary a proposition that hon. Members need hardly challenge it. We need not get bogged down in a mass of technicalities, conversion factors and multiplication tables. We have had enough of those. Only the facts are important and what I have said represents the facts.

The weakness in our rating system is that it takes no account of ability to pay. As I say, the householders' share of the rate burden will inevitably increase. The rates are imposed without regard to ability to pay and, therefore, it is not too much to ask—as the hon. Member for Harwich did—that there should be an independent examination of the whole system of local government finance.

It is not good enough for the Joint Parliamentary Secretary merely to wave the 1957 White Paper in front of us. Five years have elapsed since that was published. We have had a further five years of Tory rule, which is another disastrous factor to be considered, and many people believe that the time has come for a thorough investigation to be made of the whole system of local government finance.

I am not opposed to differential rating assessments. The Government are very strongly in favour of differential rents for local authority tenants. If the suggested committee were set up this idea of differential rating could be submitted to it for examination; that is to say, the committee would contrive the basis of assessment to ensure that the principal burden is borne by shops, offices and similar undertakings, which are in the best position to pay.

It has not been mentioned today that a zoned rating system is operated in Canada and one has recently been begun in Paris. In Paris, for example, the region is divided into three zones and in the first one, which is within ten miles of the centre, the top levy is about 24s. per square foot. Why cannot such a system be considered for London and other large cities? After all, we need to reduce the pressure on central London and other large cities resulting from the movement of population and the increased number of vehicles on the roads

It has been estimated that by 1980 2½ million more people will be residing in London and the surrounding area. It is no use playing about with things like parking meters, for they will not pay for the increased expenditure that is bound to come as a result of this pressure. The time has come for an inquiry to examine the zoning arrangement which I mentioned and other propositions which would no doubt be forthcoming from local authorities and others interested.

The hon. Member for Harwich and his hon. Friends have put a lot of work into this debate and they have done much research and have made valuable, constructive and positive contributions to the debate. I hope that they will not allow themselves to be brushed aside in this way and that when the time comes they will register their disapproval of the completely negative attitude of the Parliamentary Secretary by pressing the Motion to a Division.

3.35 p.m.

Mr. Dudley Smith (Brentford and Chiswick)

I have a great regard for the ability of my hon. Friend the Parliamentary Secretary, but I must confess that I, too, was very disappointed with his reply on a subject which affects me and my constituents as it does every hon. Member. In my researches into this subject, I was impressed to find that it is more than 300 years since rates were first collected as a compulsory charge on the community originally to provide money for the relief of the poor. The assessment of the charge in the early years was based on the householder's ability to pay, although that applied for only a few years. Today, it is often the poor which have to contribute a fair part of the money required for providing services for many who are better off than they are and who often do not pay rates themselves.

Basically, the system of rating is unsound in this day and age, and I am sure that my hon. Friend has taken that point made almost ad nauseam today by hon. Members on both sides of the House. Although he has not accepted the idea of an inquiry, I urge him to think about it again in the next year or so to see whether it would not be possible for the Ministry of Housing and Local Government to set up an independent investigation into the whole question. I know that there was an investigation in 1957, but since that time rates have been going up drastically and the imposition on the elderly and those with fixed incomes becomes more tense every year.

There has been little basic change in the condition of rating during the past 300 years. Rating imposes a heavy tax on the basic necessity of life, housing, something no one can do without, so that everyone is involved in one way or another. But, as has been said by so many hon. Members, the value of a house does not necessarily indicate the householder's ability to pay, and a rate charge bears more heavily on those with small incomes than on those with higher incomes.

We know that thousands and thousands of incomes have increased since the war, doubling and trebling in many cases, but there are also many thousands of elderly people on pensions whose incomes have not gone up by any appreciable extent in the last 15 or 20 years. Consequently, the added burden of even just £1 or £2 a year means that they will probably have to go without some luxury or even without some necessity to meet their budget. Many of these people are so honest and proud that they will make sacrifices rather than go to their Member of Parliament or local councillor in an effort to pay rates by instalments or have their rate burden alleviated.

As the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) said, young couples also find it extremely difficult with rising rates to cope with the general cost of living. We all know that unless a person has a private income, the early years of married life are usually the most difficult from the financial point of view, so that rising rates in addition to mortgages and buying furniture and providing for the family which comes along, can be a very serious business indeed.

I am sure that this burden of inequality must be studied again. The system is not a just one when there are so many examples, of which we all know, of similar houses, one occupied by a family with several people earning and an income of £50 or even £60 a week coming in, and another with perhaps an elderly couple living on less than £10 a week and still having to pay the same rates as the family with the income of £50 or £60.

I do not wish to say anything against council house tenants, because fine people live in council houses and we must do all we can to encourage council house building where that is appropriate. But many council house tenants are undoubtedly enjoying subsidised housing and not playing their full part in contributing towards the cost of local services which are of very good value and absolutely essential to the running of the community. The rate burden should be more equitable for the whole community.

I am told by local government experts that the simplicity and ease of the assessment system is one of the main reasons why it has remained unchanged for so long. It is an easy system to operate and it is easy to collect rates. There would obviously be some difficulties if we switched to local Income Tax. Like my hon. Friend the Member for Harwich (Mr. Ridsdale), I think that we should not call it a local income tax but rather a local services tax, and it would have to be worked out very carefully.

We have heard a number of ideas for the overhaul of the structures of local government finance, and although many have been rejected in the past by Government and local government experts, there is a case for re-examination of many of them. I am certain that it is not beyond the ingenuity of those who have studied the subject to produce something more equitable and more acceptable to the public than the present rating system. The outlook for the ratepayer is very bleak indeed. This is not a party matter. I believe in all honesty that it is a bleak outlook, whichever political party is in control, because of the expansion of services which are run by the local authorities.

I am a member of the Middlesex County Council, and this week we have put our rates up by one shilling, which, in some ways, is an extremely creditable performance. At the moment, the revenue expenditure of the county is £62 million a year, £5 million more than last year, and half as much again as it was six years ago. This has come about almost entirely through circumstances beyond the county council's control.

I am sure that responsible people in the county will appreciate that the pay award to teachers, which was generally supported throughout the community and certainly in this House, represents an increase of £3 million a year for Middlesex, and the award to firemen, £293,000 a year, which is a shilling rate on its own. Without these increases in salaries, the rise in the county rate would have been only about 2d. The awards generally to teachers have added to the rate burden in England and Wales the massive figure of £44 million a year. The gross expenditure on education in Middlesex alone next year will probably exceed £44 million, which will be double what it was eight years ago. Therefore, I think there is quite a good case for examination of the idea that education should be taken away and financed centrally by the Government, whilst still retaining the essential autonomy of the local authorities.

It always amazes me, sitting on a county council, to find that three-quarters of the revenue every year has to be spent on education. Education is an essential service, but it completely out-balances all the other vital services which have to be administered by county councils. I think that today we are in the position in which we cannot look forward to any reductions at all in future years in the rate burden because of this expansion of services. I forecast that probably in the next few years the rise may well be as much as 15 per cent. on the average person's rates.

I have a number of pet remedies, as have other hon. Members who have spoken today, but as time is getting short I shall not go into all of them. I think that we have to find alternative sources of revenue to finance local government and also new methods of sharing the burden more fairly between everyone in the community. I agree with the conclusions arrived at by the study group of the Royal Institute of Public Administration. After all, those people who took part in the survey have years of experience in the administration of local government, and I think that many of the points that they make, particularly on this question of a local services tax, are valid ones.

I would value that more than some of the other suggestions put forward, such as a sales tax, but I think that there is also a case for a betting and lotteries tax. This, of course, may offend some people's susceptibilities, but my own susceptibilities are more offended by the fact that there are so many ratepayers who are struggling along, trying to meet an ever increasing burden.

I also think that there is scope for greater efficiency in local government itself. I speak not as an outsider but as one who has taken part in local government over a number of years. I think that there is a good deal in the idea of a business efficiency unit being introduced into local government. There was a very interesting article on the subject in the Daily Telegraph a short time ago by Mr. Harcourt Kitchin, in which he drew the conclusion that a number of boroughs and counties which had tried this efficiency unit—which charged quite considerable fees—had offset those fees with a remarkable reduction in costs. Consequently, those authorities were able to make reductions in their rates. He also added: But how many authorities make this sort of investment? The Municipal Year Book for 1962 gives a summary of them. The number went up by 62 last year, but still only 375 of the 1,959 authorities in England, Scotland, Wales and Northern Ireland—rather less than one-fifth—have taken an active interest in efficiency techniques. I agree with what my hon. Friend said, and with what an hon. Member opposite said, that, generally, much of the criticism levelled against councillors and councils on the grounds of inefficiency is not fair. Generally speaking, these councils are well administered, but they are not so well administered that they could not make improvements and certain economies without impairing the efficiency of the services which they give to the public.

I suppose that we have all had experience of councils where debates have taken place for half an hour over the expenditure of such a paltry sum as £10 and then found that something costing about £20,000 goes through "on the nod." In some ways, we in this House are occasionally guilty of passing large items of expenditure without too deep a discussion. I have sat on local government committees where sometimes the officials have outnumbered the members present. I am quite sure that many business administrations would not consider that a particularly good way of running their own economy.

My conclusion about this debate is that this is a very human problem and that there are many people who are worried about it. The local authorities are not soulless about the difficulties; they appreciate the points we have made. That is why so many of them have introduced a scheme for the payment of rates by instalments. That is a definite boon indeed for the people on fixed incomes and for elderly people who find it a struggle to meet these quite large commitments every year.

It has been said time and again today that rates take no account of the ability to pay. That has been a salient point in this debate, and I am sure that my hon. Friend the Parliamentary Secretary realises how strongly some of us feel about it. I support the idea of an inquiry. I hope that my hon. Friend will look at the matter again in due course and that his Ministry, which is a very active one indeed and which creates a good deal of admiration in other directions, will in a few months' time put forward the idea that there should be a reappraisal of the whole question of rating.

We have built up an affluent society in this country. We have expanded social services and erased many inequalities. Action over the rate policy would be an extremely realistic and very humane step forward. Therefore, I join with other hon. Members who have spoken in commending my hon. Friend's Motion and in supporting all that has been said on both sides of the House to the effect that we should have not only an inquiry but, eventually, should introduce some new system of rating in this country.

3.50 p.m.

Captain Walter Elliot (Carshalton)

I am glad that in the last few minutes of this debate I have managed to catch your eye, Mr. Speaker, even if only to offer my congratulations to my hon. Friend the Member for Harwich (Mr. Ridsdale). I hope that he will not feel too disappointed that the Parliamentary Secretary has not accepted his request for a committee. I personally did not find the Minister's refusal quite so firm as some hon. Members opposite did, and in any case I can assure my hon. Friend that in raising this Motion he has done a great service, because the people he seeks to help are perhaps the least vocal section of our community. I think it absolutely right that we should speak for them in this House.

I am not an expert on rates or local government as possibly are a number of hon. Members who have spoken today. I greatly admire the knowledge they have shown, but I think that in many of their speeches they have dealt with the question of rates as a whole and with the means of controlling local expenditure. If we do only that we might lose sight of the need to divert resources to elderly people. I want to concentrate on how elderly people can be helped within the framework of local government. The Motion refers to the burden placed on elderly ratepayers, so in discussing it we must relate it to the needs of those people.

A solution to this problem is very difficult to find. There is no doubt that it is a great problem, and it is extremely baffling because it is difficult to define it exactly. Most hon. Members will know that in their constituencies there are elderly people who for one reason or another increasingly feel the burden of increasing rents and rates. Year by year the rates rise, and for elderly people on a fixed income the inevitable result is a steadily declining standard of life, which is not the case for people who are currently earning.

I am thinking in particular, as other hon. Members have been thinking, of retired persons, a widow or a couple who during their working lives have saved enough to buy a small house and on retirement have enough income to support themselves adequately if not in luxury. Over the years the declining value of money, which has nothing to do with them, upsets their calculations and the time comes when their income will not meet their needs. They may own their own house, which brings in a notional income, but it cannot provide a real income to sustain them. The time comes when these elderly people have either to cling on eking out a precarious and hard existence in the house in which they hope to end their days, or else they have to sell up, with all the expense and strain involved, and get accommodation as best they can for what they can afford and continue to live on their dwindling savings.

I find that type of case particularly distressing, because usually the people concerned have been thrifty and hard working during their lifetime and are only too willing to pay their way if they can. I find this problem in my constituency is a very real one. On the other hand, it is difficult to plead a special case for such people who may be suffering real hardship but still have capital resources as against other elderly people in a similar plight and with no capital resources. We cannot differentiate between elderly people who are in this position of hardship, however it came about, and if we are to tackle the problem we must work to certain rules.

The first rule, I think, concerns the age of the people concerned. An age must be fixed at which it is considered that special measures should apply. There may be hardship below this line, but in time the limit can be lowered—but, as we know from the statistics for National Assistance, the higher the age the more frequently do we have cases of hardship.

As a suggestion, I think that the age of seventy is about the age for which special measures should be devised. Elderly people are often very independent, and the last thing they want is to be or to appear to be a burden on anybody. They are often well able to look after themselves physically and certainly should be given the opportunity to do so.

Their first need is a house of appropriate size and cost, and I am sure that the increased building of houses suitable for elderly people must be a first priority. The number of these houses being built today by local authorities has greatly increased, and that is excellent, but the cost must be right. The approach to cost must be made not by having a means test and then slashing rents and rates. The cost of all these homes for elderly people must be kept at a low level basically. Obviously, if this is done the loss suffered must be made up from other housing resources. I have no time to go into that, because little time is left and there is an important point on which I wish to touch. The provision of these houses for elderly people is the first step. But the time comes when they become too frail to look after themselves, and there is undoubtedly a crying need for more communal homes.

I should like to tell the House about one such home in my constituency. This is called the Roselands Old People's Home and it is at Banstead. The Home was first conceived by a voluntary committee about twelve years ago. A number of local residents got together and gave their services free. They were people with various experience, including experience of architecture and finance. They raised money by various means and bought a site. Eventually, they built this old people's home, which can take thirty-five people. Those occupying it bring their own furniture and their own possessions; they have their own room, and there is a communal dining room and sitting room. This home can take an old person at a cost of 90s. a week. Anyone visiting it will wonder how on earth it is done at that cost. It is a perfect place, and I recommend any hon. Member who wishes to see an old people's home built by voluntary effort—

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

Question, That the Question be now put, put and negatived.

Question again proposed.

Captain Elliot

I was saying that I recommended anyone who wishes to see an ideal old people's home, build by voluntary effort, to visit this home. I am in the process of persuading the Minister of Housing and Local Government to visit it. Perhaps my hon. Friend the Parliamentary Secretary will accompany him. The successors of this committee have bought another site and propose to build another home.

To sum up, the way to help is not by giving special rate allowances or slashing rates or rents after a means test. People living in their own homes or rented houses can get National Assistance if this is needed, and although the Assistance rates are not as high as we should like them to be, we hope that in due course they will gradually be improved.

It being Four o'clock, the debate stood adjourned.