§ 8.4 p.m.
§ The Minister of Housing and Local Government and Minister for Welsh Affairs (Dr. Charles Hill)
I beg to move,That the General Grant (Increase) Order, 1962, dated 12th March, 1962, a copy of which was laid before this House on 15th March, be approved.Section 1 of the Local Government Act, 1958, requires that the Order should be laid together with an Explanatory Report. This Report has been published as House of Commons Paper No. 135.
As the House will know, when there are unforeseen increases in the level of prices, costs and remuneration, and where those increases have an effect on the cost to local authorities which appears to be so large that it ought not entirely to fall on the local authorities, Section 2 of the Local Government Act, 1958, enables the Minister to make an Order for the purpose of increasing the grants. This Order is subject to an affirmative Resolution.
The General Grant Order, 1960, prescribed the aggregate amounts for the year 1961–62 and 1962–63. For 1961–62 the amount was £454 million, and for 1962–63 it was £472 million.
The local authority associations concerned—the County Councils' Association and the Association of Muncipal Corporations—and the London County Council have made a statement to me of the items which they think should be taken into consideration for the purpose of increasing the aggregates of the grants, together with estimates of the increases in costs. There have been the usual consultations with representatives of the local authorities about these items. The consultations have not yet been completed. They are for the most part complete, but on a number of items, one particularly, the consultations are not yet complete. So it is that the Order now before the House is essentially an interim Order.
The Order has for its purpose to enable me to make agreed additional payments of grant for the year 1961–62 during that year—that is, before the end of the financial year in which the extra costs have had to be borne by the authorities. This Order, which expresses the 943 interim arrangements will be followed, when the consultations are complete, in the next few months, by a further Order which will bring together in a single document for the approval of the House an increased aggregate in respect of the year 1962–63 and any such further increase in respect of 1961–62 as may seem right in the light of the consultations still to be concluded.
In practice, with the exception of one item, the second Order is unlikely to be affected more than marginally by the further consultations in relation to additional costs in 1961–62. Any disparity of view in the consultations has been slight. There is, however, one item which will have a marked effect in relation to 1961–62. It concerns the Education Bill now in another place, and, in particular, the proposed altered arrangements for awards to students.
I should have wished to deal with this matter in the Order now before the House, but it has not been possible to do so. Until that Bill becomes law and gives me the necessary authority, as it will, for making additional general grants in respect of it, I am unable to include it in this Order. The matter will be dealt with in the Order to follow later in the year, though the House may be interested to know that there is no disagreement with the local authority associations on the amount of the estimated additional cost which is to be taken into account.
A word now on the sharing out. The aggregate of the general grants is shared out between authorities by reference to the objective factors specified in the 1958 Act in accordance with the weightings for each factor prescribed in the 1960 Order. Any increase in the total aggregate grant makes it necessary to revise the weightings. These are designed to maintain, as far as possible, the same proportional distribution through the basic and supplementary grants as before. They will require further consideration when we come to the further Order which it is proposed to lay before the House in due course.
In short, this Order is brought forward to ensure that the local authorities receive additional money during the present financial year. It will be overtaken later in the calendar year by an 944 Order which will not only cover such items as awards to students, but, if the current consultations, which are almost but not quite complete, in respect of the present financial year reveal that additional money should be included, it will cover such money also.
§ 8.11 p.m.
§ Mr. James MacColl (Widnes)
When the General Grant Order, to which this is a supplement, was considered by the House in 1960, the right hon. Gentleman's predecessor said that it would enable us to see in advance the development which was planned and the cost which it would entail. That was rather a triumph of hope over experience. We have enough experience of the working of the general grant procedure to know that it is not possible to anticipate all expenditure and all costs in this way. Each time that we have considered these Orders we have had the same comment to make, namely, that, so far from having a once-for-all decision, we are getting, rather monotonously, supplemental grants arising. It is true that we did not have one, as far as I know, in 1961, but the right hon. Gentleman has promised us two in 1962 to make up for that. I suppose, therefore, that we can take it that, after we have approved a general Order, we shall have a supplementary Order virtually every year.
The sooner that this Order is approved, the better. We are approaching the end of the financial year, and although local authorities, no doubt, have had a fair undertaking from the Minister that he has the support of his Whips and a majority in the House and therefore might reasonably expect these grants to be made, it is not until the final decision has been taken that they can be absolutely sure. For my part, I think that this is the least the Government could have done, and the sooner it is done the better.
The Minister said that this was essentially an interim arrangement, made after the usual consultations. It would be interesting to know whether there was a wide range of difference between the original proposals of the local authorities and the proposals of the Ministry. Consultation can cover a lot of strong-arm tactics in achieving agreement. On the other hand, it may be that there was 945 virtually very little difference. We gather that there was a certain amount of difference in one field, but whether that means that there was very little difference in other fields I do not know.
May I make one rather technical complaint? I do so as an individual struggling to understand these things, and it may be that I am being unreasonable. Under the original General Grant Order, the estimated expenditure on which the grant was based was analysed according to services—education, local health, welfare, and so on. This appears in Appendix A of the 1960 Report. It is most important that statistics should be, as far as possible, uniform and easily comparable. If they are not, they simply irritate people and waste a lot of time.
The estimates of additional expenditure are not analysed according to services. It does not require very much intelligence to realise that the Burnham award to teachers is falling on the educational services, or that the fire brigade increases are also falling on a specific service. But when it comes to awards to manual workers and other increases in costs and pay it is difficult to know to what extent they are spread over the different services in respect of which grant is made. It would help us to appreciate the effect of these increases if they were analysed.
One important item is the increase in loan interest rates. We on this side have said enough—there is no need to say it all again—about what we think of the Government's policy on loan interest rates. It would be interesting to know, although unreasonable to ask the right hon. Gentleman to forecast, what will happen in the second Order. Will there be a further interest rate increase in the second Order, or, as a result of the fall in Bank Rate, are the rates at which local authorities are borrowing likely to fall?
That is something which covers a very wide field of capital expenditure, but I presume that it does not cover capital expenditure on housing. That is one of the difficulties created by not having the figures split up. I assume that, as housing is excluded from the general grant, increases in rates of interest on housing loans are not included in this figure. A speech by me on the effect of increases in rates of interest, although it is a subject of absorbing interest to the 946 House and to me, would not be relevant this evening. Are these increases falling mainly on the schools or on highways?
When we are asked to approve a grant of this kind, it is desirable to know in respect of which services these increases are being made. It would answer a question about which I have been wondering, namely, weighting. On the face of it, it is absurd that, in making an additional grant of over 50 per cent. in respect of the increase in teachers' salaries, that grant should be distributed by weighting for old people and children under school age. That is a rather odd way of distributing it. I should like to know how supple and flexible is the formula in ensuring that this increase in grant goes to the authorities whose expenditure is being increased as a result of their educational activities.
I can see certain difficulties. We were told in the 1960 Report—and the Government ought to have been ashamed to say it—that at a time when we were desperately starved of teachers, the Government were budgeting for a reduction next year in the supply of teachers. Presumably that will affect the next supplementary grant, not this. But not only is there an absolute shortage of teachers; in certain areas there is an acute local shortage, and there has to be rationing and quotas for teachers to try to secure a more even distribution. To base the grant on a notional calculation of the population in terms either of children or of adults, when the teachers are not distributed evenly over the country, cannot be satisfactory. There will be an additional amount for authorities which are short of teachers, for they will get a little more grant than they would normally expect. Alternatively, in areas with more teachers, and consequently paying a higher salaries bill, a smaller share of the grants will be paid than would be expected.
Slowly, but nevertheless surely, the percentage of grant which is being paid on expenditure is falling. With the original General Grant Order in 1958 there was published an interesting table showing the percentage of expenditure met by the grant. In 1958–59 the proportion was 56.4 per cent. When the general grant began, it dropped to 55.5 per cent. It remained at 55.5 per cent. for 1960, but if my logarithms are correct it has fallen now below 55.5 per cent. as a result of the fact that the 947 amount which has been added to the supplementary grant is proportionately slightly less than the increase in expenditure.
I do not want to exaggerate the importance of so small a reduction, for a reduction of 0.1 per cent. on a grant does not sound very much. But it means that on every £1 million of expenditure the Government, by a little dexterous manipulation of figures, are dropping their grant by £1,000, which is a significant amount in terms of rates and rate products.
It is even more galling for local authorities when, as in this case, the substantial burden of the increase is falling on education. Some of these services were working on the basis of a 50 per cent. grant when percentage grants were given, but education worked on an average of about 60 per cent. It was not a flat percentage grant, because there was a formula, but the average was about 60 per cent. In other words, authorities which are receiving this extra grant to meet increases in teachers' salaries might have expected under the old percentage system to get a grant of 60 per cent. but in fact they are getting slightly under 55 per cent. Will the Parliamentary Secretary give an assurance that when the Government produce their further grant covering the next financial year and tidying up a little on this year, any errors of that sort will be corrected, so that the Government's share will be slightly more than their absolute mathematical minimum rather than slightly less?
The Government are rather like an unpopular grocer who sells a commodity in terms of weight and, when he finds it a little overweight, or, as in this case, a little underweight, takes a little off or puts a little more on, with the result that the customer pays a little more in proportion than he would pay if he had been give what he ordered. I suspect that the Government are being rather niggling with local authorities about this Order, and we want an assurance that these grants will be calculated and interpreted generously.
The amounts upon which the Order is paid are too small. I do not want to anticipate tomorrow's debate, but we think that the figures being paid in 948 respect of nurses, teachers and other services are much too small and that the expenditure ought to be greater. We think that the grant ought to be greater in absolute terms, because of the extra costs, and also relative to the amount which is falling on the local authorities.
While we must support the Order and see it through as quickly as possible, we express our complete difference of view on the working of the grant and the effectiveness of the grant as a flexible instrument of control. We regret that it is not larger and that the amount of expenditure upon which it is based is not also larger.
§ 8.27 p.m.
§ Mr. James Boyden (Bishop Auckland)
Local authorities suffer from two particular difficulties: their rates are very inflexible and they have certain difficulties in explaining to their electorate their policies which partly result from the rating system. This Order does nothing to make their problem any simpler. It is a model of uncertainty and of lack of clarity. I do not know how an ordinary councillor, sitting on the finance committee, can be expected to assist in formulating a forward-looking estimate and budget when the Government take three bites at the apple in the course of the year, when they are not certain of the weighting of the figures which will be produced and when they have to have two discussions with local authority associations in the course of the year to settle the figure.
This is one of the difficulties of local government. More and more the financial decisions are passing into the hands of treasurers and more and more the Government are getting what they originally wanted when they set out the General Grant Order—control of the total amount, irrespective of the sort of services which were to be developed. They are putting on local authorities the odium of rising expenditure.
Last week, in a Written Question, I asked the Minister for Education for some data about educational expenditure because I wanted to see how the general grant, of which this is the next Order, was working in respect of the weight on particular local authorities for particular functions. I asked for the total amount awarded by local authorities for university awards, and the percentage for each 949 local authority of its total budget; the same for further education awards; the same for maintenance awards; and the same for teachers' salaries. I hope that the House will bear with me while I explain what these results lead me to conclude, and perhaps I can give some supporting evidence for my conclusions. This Order specifically exempts the current Education Bill from its operation, which is a sign of the sloppiness of the Government.
§ Mr. Boyden
If the Government's timetable had been right they would have introduced the Bill earlier and would have given more consideration to the Opposition, who would have helped to get the Bill earlier. The Government would then have been able to bring the Bill and the Order forward at a more convenient moment.
It is interesting that with university awards the Minister originally relied on local education authorities to produce a more uniform system. During the discussions in Standing Committee, the right hon. Gentleman several times, or perhaps it was the Parliamentary Secretary—because the right hon. Gentleman was more absent than present—complimented the local authorities on bringing up the awards to a more uniform standard. The purpose of the Bill is to make university awards mandatory and uniform.
It happens that the university awards, of the three categories of expenditure which I have taken as examples, are the most uniform. The average expenditure for local authorities in the country is 2.1 per cent. of local education authority budgets. The lowest burden on a local authority is half that figure and the highest is twice that figure. In other words, in the area of local education authority expenditure, where the Minister is most concerned about uniformity, the range of variation of burden on local authorities is no more than four times.
I will give examples of some of the authorities which spend higher and lower proportions of their budgets in this way. The authorities are not taken at random, and I think that these examples give a better impression than general averages. The highest spenders from their budgets 950 are Cheshire 3.2 per cent., Devon 3.1 per cent., Blackpool 3.2, Darlington 3.3, Southport 3.1, Wallasey 3.3 and Bournemouth 3.5, and half the Welsh counties spent more than 3 per cent. Those are authorities for which university awards are the biggest burden in their budgets. I cannot say what the correlation is between their services, but those authorities are the ones that have spent more proportionately from their budgets than others do. Among the lower categories are Canterbury 1.3 per cent., Birmingham 1.2, Salford and West Bromwich 1, Bedford 1.8, Essex 1.7, and Nottinghamshire and Wiltshire 1.3.
Here is a service which the Minister wants to make uniform throughout the country, not precisely at this moment, because the Minister will bring in another General Grant Order to put this right. We have here, as I have pointed out, a range of variation of four times in the burden placed upon local authorities. Surely in the current situation the Government ought to be doing more to level up the burden.
§ Mr. Deputy-Speaker (Sir Robert Grimston)
Order. The hon. Gentleman seems to be going a little wide. It would help me if he would show how he relates his remarks to the Order before the House.
§ Mr. Boyden
I am sorry, Mr. Deputy-Speaker. My case is that one of the functions of the Government should be to make the burden upon local authorities more uniform. The increased grants are an attempt to ease the burden on local authorities. The Government have taken into account rises in prices and salaries, and have had discussions with local authorities to decide the most equitable arrangement before bringing out the Order. My case is that the Order does not go far enough. My figures are based on the similar system which has been operating. I understand that the present Order is no different in principle from other Orders. I am trying to establish that the system will not work out fairly for local authorities and that the burden will be very unequal as between them.
In respect of university awards the burden is more equally spread than in other examples which I shall give. In respect of further education, the Opposition have been pressing very hard for 951 the same mandatory powers such as the Minister wanted for university awards. The situation there varies from 1 to 80. I admit that this is a bit of a statistical freak. When one is working with smaller figures, a low figure and a high one will produce such an exaggerated effect. However, even if one makes allowance for that, the average expenditure in the country is 0.79 per cent. and the lowest spending authority on further education awards spends one-fortieth of that and the highest spending authority twice that figure.
This may have an effect on actual awards. It may be that geography is extremely important for a person who wants to have a further education award. Apart from that, the unequal way in which the General Grant Order has been working in this sphere where the local authorities have discretion—the "glorious freedom" of the Minister of Education and the Minister of Housing and Local Government—shows a very great range of burden on authorities.
The highest burdens are: Cornwall and the Isle of Wight 1.9 per cent., Bournemouth the same, and Plymouth 1.4, and half the Welsh authorities have more than 1.6 per cent. The Welsh come very well out of all these statistics. I am sure that the right hon. Gentleman will derive satisfaction from this as a result of the other post which he occupies. The lowest authorities include Northumberland 0.03, Northamptonshire 0.22, Bootle 0.02 and Norwich 0.04.
In maintenance allowances—where the Minister of Education says that everything in the garden is lovely—we find that the average expenditure is 0.13 per cent. and that the lowest spender spends one-sixth of that amount and the highest spender double. There is therefore a variation of 10 or 12 times in the burden on local authorities. Examples include Durham 0.22, East Suffolk 0.24, and East Riding 0.25. Half the Welsh authorities are more than 0.25. In the lowest categories are Cheshire, Leicestershire and Salford 0.04, Peterborough, Staffordshire, Chester and Coventry 0.03, and Warwickshire, 0.02.
The general picture is that loan charges make up 9.2 per cent. of the average budget of local education autho- 952 rities. All this expenditure on maintenance allowances in secondary schools and on further education and university awards, amounts to 3.02 per cent. In other words, the hand of the past weighs more heavily by three times than the hand of the future—three times more than the awards to the bright young generation on whom local authorities and the Government should be spending the maximum amount.
My criticism of this Order and of the system of which it is part is that it does nothing to redress the balance between these wide variations. Loan charges of local education authorities amount to £60 million per annum and awards of this description total £19¼ million. The situation in relation to maintenance allowances has practically broken down. Time and time again, when discussing this matter during the passage of the Education Bill and at other times in the House, the Minister of Education has rested very comfortably on what the local authorities are doing and on his case that the standard of living has risen and that maintenance allowances are hardly necessary. Again I stress that the general grant is doing absolutely nothing about this situation.
§ Mr. Deputy-Speaker
Order. The hon. Gentleman is getting very wide of the Order. He cannot deal with general principles. He must bring his argument to the provisions of the Order.
§ Mr. Boyden
I am sorry, Mr. Deputy-Speaker. But the Explanatory Report refers to an increase in interest rates on loans, and one finds that this Order is an effort to help local authorities to cope with the effects that the high interest rates are having.
Again, I can only speak in relation to education, for I have not the figures for housing or for the acquisition of land, but I find, on looking again into the past, and referring particularly to the Welsh authorities—which have been very forward-looking in the granting of education awards—that there is a direct correlation between low loan charges on an authority and the amount of awards it has been able to make. I picked out from last year's figure four Welsh authorities and we get a quite surprising correlation.
953 The County of Caernarvon, with a loan percentage of its budget at 6.3 per cent.—which compares with the national average of 9.2 per cent.—is making university and further education awards and maintenance allowances at a total of 5.4 per cent., which is twice the national average. It is the same sort of story which Carmarthen, whose loan charges are 6 per cent. and awards 5 per cent. Merioneth has loan charges of 6 per cent. and awards of 5.8 per cent., and Merthyr Tydvil has 5.7 per cent. loan charges with awards at 4.8 per cent.
There is a very strong connection between the way in which these loan charges fail to give an impetus to local authorities. They do not give the right incentive which would mean a more equal percentage throughout the country, with the emphasis on the right sort of things that a forward-looking Government would want.
§ 8.42 p.m.
§ Mr. A. E. Cooper (Ilford, South)
It is really disgraceful that when we are discussing an item of very nearly £500 million there is not one member of the Liberal Party present. One would have imagined that this party which claims to represent even a minimum proportion of the people at this time would at least have some interest in local government affairs. We can only hope that the country will take note that Liberal Members are so far removed from the realities of the situation that they do not even bother to take part in debates in this House.
Nobody would pretend that the present general grant system was perfect. There are obvious difficulties in various constituencies. In my own there is a very high rateable value upon which the grant is based, but the actual rateable value of the property is not necessarily a strict criterion of the ability of the people who live in that property to pay the rates which are being demanded upon it.
We have a very considerable old-age pension population in my constituency. Any increase in rates does not directly fall upon their shoulders because they can go to the National Assistance Board and the extra is covered in that way. So one has to regard this matter in this way: what actually falls upon the individual ratepayer and how much is paid 954 by the taxpayer through increases in National Assistance subventions?
I have some Questions down to my right hon. Friend tomorrow dealing with the increase in grant consequent upon the increase in teachers' salaries. I should like to draw his attention to the speeches made by my right hon. Friend the Chief Secretary to the Treasury when the general grant system was introduced. We were certainly promised that any increases of this category would be fairly met by the Exchequer. What we have to consider tonight is whether the increase of £13 million fairly represents the increase which the Exchequer should bear in respect of the increase in teachers' salaries.
In fact, it represents about 20 to 25 per cent. That is a little niggardly. The Exchequer should be bearing rather more than 20 to 25 per cent. of this item. There are other items which have to be considered, and I ask my right hon. Friend to give special attention to this point in the next year or so.
The Questions I have asked him relate to the increase in the interest debt incurred by local authorities year by year. Local authorities generally seem to tend to borrow and thereby incur an increase in their debt liability, whereas some increase in the basic rate over a period of years to cover items of at least small sums of money, which are normally met by borrowing and which be met by revenue, would reduce the burden upon the ratepayers. Local authorities generally seem to tend to take the line of least resistance and to borrow as hard as they possibly can. It will be interesting to see my right hon. Friend's answers tomorrow when we shall see the net annual increase of debt incurred by local authorities year by year.
Basically, the general grant principle contains an element of fairness, but one has to recognise that counties differ in the number of new people going to them, how close they are to the conurbation of London, and so forth. Ilford is in Essex, a county of particular difficulty. The population of the county has increased enormously in the last few years and there is little ground to suppose that that increase will lessen. In consequence, ratepayers in the county are faced with an abnormal increase in rates for the provision of new schools and the general 955 social services for which my right hon. Friend is responsible. Something has to be done for these counties where a special problem exists.
It is no use hon. and right hon. Members opposite and on this side of the House claiming that teachers' salaries have to be increased and more schools provided, there is no point in ratepayers' associations and the general public claiming that more and more teachers have to be provided and greater salaries paid to produce the number of teachers we need, unless they are willing to foot the bill. We have to face the fact that the general increase in rates this year is largely the result of the general increase in teachers' salaries and additional payments for the provision of schools, university buildings and so on.
This is the sort of thing which must inevitably go on. What we have to do over the next year or two is to make up our minds fundamentally how much of this great increase in expenditure on education has to be met by the Exchequer and how much can properly be met by the ratepayer. My view is that we have reached the limit, having regard to the old-age pensioners and persons living on fixed incomes. It is impossible for us to expect any more from this section of the community.
§ Mr. Boyden
Is the hon. Member aware that in their estimates for the coming educational year several county councils have reduced the number of teachers they require because of the problem of finance?
§ Mr. Cooper
I read a report in one of tonight's newspapers that one county had done that. The fact remains that our population is increasing at an alarming rate. I wonder whether you will permit me to make this point without calling me to order, Mr. Deputy-Speaker. Our school population has increased by more than 2 million since 1945, and is expected to increase by at least another 1½ million by 1970. These are astronomical figures, considered in relation to our resources. We must seriously consider how the education service, to mention only one service, is to be financed in the future.
§ Mr. Deputy-Speaker
The hon. Member is going much too wide. He cannot go into the question of general policy. He must come back to the terms of the Order.
§ Mr. Cooper
Far be it from me to quarrel with you, Mr. Deputy-Speaker, but I would draw your attention to the fact that this Order covers a wide range of subjects. It relates to the expenditure by Her Majesty's Government of no less a sum than £467 million this year. It involves almost the whole of our local government services
Although I approve of the general grant principle, because it is important that local authorities should have the absolute right to say how they should dispose of the money they receive from the Treasury, the responsibilities that are being imposed upon them year by year are growing out of all recognition, and it is becoming impossible for many local authorities to meet their additional responsibilities.
Although we shall approve the Order, and local authorities will be grateful for this extra money, I hope that my right hon. Friend will not overlook the fact that we have reached the breaking point in the ability of ratepayers to meet the ever-increasing burdens being imposed upon them.
§ 8.53 p.m.
§ Mrs. E. M. Braddock (Liverpool, Exchange)
My contribution is rather in the nature of a query. I have been looking at the terms of the Order, and I should like to know whether, when discussing these matters, the local authorities made any reference to the need for an additional grant in respect of the mental health service. If the Minister can tell me that the discussions which have taken place with the municipal corporations have embodied the question of the new mental health service, or that future discussions will do so, I shall be glad. This is an almost completely new service for local authorities, and it brings with it many additional requirements.
When I asked a question previously on the matter I was told that the grant was two-and-a-half times the amount spent during the financial year 1957–58. The Royal Commission went into this matter very carefully. On the question of cost, it thought that it would be necessary for a percentage grant of 75 per 957 cent. to be made to local authorities over a period of approximately ten years to enable them to provide the services necessary under the new Mental Health Act. That recommendation was not included in the Act.
The amount required by local authorities for mental welfare services is included in the general grant. The reason why local authorities are not generally meeting the additional requirements for the provision of mental welfare services is mainly that of finance. I would have thought that in the general grant provision would have been made for additional allowances for this purpose.
If the Minister can say that in the next general grant local authorities will be granted additional expenditure to provide the mental welfare services necessary, I am quite prepared to leave the matter there at the moment. I hope, however, that this matter will not be overlooked, because I can assure the Minister that the amount being allowed at the moment is quite insufficient to enable local authorities to provide these services for younger people who are mentally subnormal and for people coming out of hospital who require these services. Until such time as extra finance is provided for the local authorities we shall not get the services required for mental welfare.
§ 8.57 p.m.
§ Mr. F. Blackburn (Stalybridge and Hyde)
I think that the hon. Member for Ilford, South (Mr. Cooper) said that the local authorities were reaching the limit of what they could afford to pay at the present time, and no matter how large the general grant happened to be it would still not be enough to meet the heavy expenditure which the local authorities were having to bear. Rates are the most unfair system of taxation there is. Therefore, unless the Government are prepared to look into that problem there will be general dissatisfaction with the general grant.
Since I was Chairman of the Standing Committee which considered the Bill which became the Local Government Act, 1958, I have never had the opportunity of expressing my views about the general grant. If you are worried in case I intend to express them tonight, Mr. Deputy-Speaker, may I assure you that 958 I shall delay doing so until some other occasion. This grant, although very welcome to local authorities, is still not enough to meet the heavy increase in expenditure which local authorities are having to bear. I do not wish to go into detail, but perhaps I may give an example to show what is happening.
In my constituency every local authority is having a great struggle to prevent any increase in the rates. I live in an area which is not ruled by a "wicked" Labour-controlled council—there is only one Labour member and he was elected this year for the first time. When I first came to live there five years ago the rate was 18s. 6d. in the £. This year it will be increased by 4s. 6d., bringing it to a total of 27s. 9d. in the £. This means that in less than five years there has been an increase in the rate of nearly 10s. in the £. That increase, I suppose, would have taken place whether under the old system of percentage grants or under the present system of a block grant. But it is evidence of the fact that unless we have some new system of rating we shall find ourselves having to adopt a system of P.A.Y.E. for rates as well as for Income Tax.
I see that the Burnham award to teachers gives an increase in the award for payment of salaries for teachers of £12½ million. The hon. Member for Ilford, South was wrong when he said that that would meet only 20 per cent. of the increased cost of teachers' salaries. The £42 million granted to the teachers was for a whole year and salaries have not been paid for the whole year. So I presume that we can say that this is the Government equivalent of what should take place.
The increase in interest rates and charges takes £2.14 million. The Government always say that they cannot give the same rates of interest to local authorities, that they cannot insulate local authorities against a general increase in rates throughout the country. They do it in another way by making it an item in the general grant. I think that often we should find ourselves in a much happier position if, with a lower interest rate, there were less necessity for including it in the general grant.
The trouble is that the Government are continually increasing the burden on local authorities. I know that is not included in this grant at present because 959 it has not been dealt with by the House of Lords, but I quote it as an example of what is happening. The grants which have to be made to students are put on the local authorities as a burden. Why should not the Government take over the payment of the grants instead of imposing the burden on local authorities? Then there would not have to be a supplementary order to get some contribution towards the increased burden which local authorities have to bear in the future. It should be central Government expenditure and not one for the local authorities.
Since there is to be an increased grant to local authorities we can only welcome this Order. But I think the time is coming when the Government will have to consider in serious detail not only the matter of the general grant but the whole question of local government finance and how it is to be raised. Consideration will have to be given not only to the question of grants from the central Government but to whether some new system should be devised to ease the burden which at present falls only on certain people who live within the area of a certain local authority.
I am sure that the Minister would agree that a detailed examination of the present rate system would reveal it to be most unfair. I realise, Mr. Deputy-Speaker, that that matter does not come within the confines of this debate. I am merely trying to link the question of the size of the grant with the burdens being placed on local authorities. I hope the Minister will look seriously at both problems and not merely the problem presented by the general grant.
§ 9.3 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Geoffrey Rippon)
We have had an interesting debate which has shown that there is general agreement that this Order ought to be approved. A number of wider issues have been raised which I think it would not be appropriate for me to go into deeply this evening. But also there are a number of specific points on this Order with which I will deal to the best of my ability.
A number of hon. Members opposite followed the lead given by the hon. 960 Member for Widnes (Mr. MacColl) and suggested that in some way the Government were seeking to reduce their share of the burden of the increasing expenditure being incurred by local government to provide increasingly better services. The hon. Member for Bishop Auckland (Mr. Boyden) went further and said that the Government were deliberately trying to throw on to local authorities all the odium of increased expenditure. Those allegations are not borne out in any way by the history of the general grant, nor indeed by the Order we are considering this evening.
I think it only fair to recall that the first 1958 Order fixed the general grant figure of £393 million for 1959–60 and £414 million for 1960–61. There was in 1959 an increase Order which increased those figures to £402 million and £429 million respectively. In the event the Report of the Comptroller and Auditor-General on the Accounts for 1959–60 showed that the expenditure of local authorities fell below the estimate by £16 million, which meant in effect that they received £9 million more than their expenditure warranted. We make no complaint about that. It is one of the purposes of the general grant policy that local authorities should be encouraged to get the full benefit of saving they make, but it is also fair to say that this shows that we have not been ungenerous in the approach we have made to the estimates put forward by local authorities.
§ Mr. Boyden
I wonder if the hon. Gentleman saw the article in Education by the Secretary of the Association of Education Committees in which he pointed out that the arrangement of the general grant had had a damping down effect on local authorities so that the net result was that they could not spend up to these total general grants because they had to economise falsely?
§ Mr. Rippon
I do not think the hon. Member can say that local expenditure has been damped down and at the same time that it has been rising greatly. Here again, contrary to expectations voiced by some critics at the time, the share of local authority expenditure on education has not fallen as a result of it being changed from a specific to a general grant. I do not think there is very much force in that argument.
961 The 1960 Order provided for a grant in 1961–62 of £454 million and in 1962–63 of £472 million. This Order puts up the figure for 1961–62 by £13 million to £467 million. As my right hon. Friend has explained, there will be a further increase Order to tidy up both small items under dispute and the much more substantial figure of the grant in relation to the cost of the Anderson Report recommendations when the Education Bill goes on to the Statute Book. I think the figures show that the grants from the central Government have contributed an increasing percentage to local authorities, certainly much higher than before the war. For the period 1950–60 Government grants as a percentage of local Government expenditure rose from just under 53 per cent. to 55.9 per cent. As a result of this Order the same percentage is broadly kept.
The hon. Member for Widnes asked if the effect of the Order was to reduce the Government's percentage contribution. It is true that it falls very marginally as a result of this Order, but that is entirely due, I understand, to questions of rounding off. When the next Order is made the proportion will be altered again. The main factor in that will be the effect of the Education Bill. The hon. Member for Stalybridge and Hyde (Mr. Blackburn) implied that this would quite unfairly put an increased burden on local authorities. It should be understood, as has been made clear in debates on the Bill, that the general increase Order will provide for a 100 per cent. reimbursement of the expenditure falling on local authorities as a result of the implementation of the awards to students. That will alter the proportion of the grant to the total expenditure of local authorities to some extent.
The hon. Member for Widnes asked some questions about the distribution formula.
§ Mr. MacColl
Before the hon. Gentleman gets on to distribution, may I ask him a question? He has quoted some absolute figures but I was not arguing that the absolute size of the general grant has risen. Obviously it has because expenditure has risen, but I quoted the percentage figures from the general Order of 1958 to show that the proportion 962 met by grant had fallen from 56.4 per cent. in 1958–59 to something under 55 per cent. now. That was precisely the point which I thought he agreed. He said that this was just rounding it up. I am asking for an undertaking that next time he will round it up and not down.
§ Mr. Rippon
One must deal with each Order on its merits. The percentage varies and it will obviously be altered next time by giving effect to a grant which has regard to 100 per cent. of expenditure on a particular item. I was saying that if one looks at this between 1950 and 1958 one finds that not only has the Government's contribution gone up but it has also gone up when expressed as a percentage of total local government expenditure. This Order brings it down to 55.4 per cent. None of the statistics which we bandy across the House can, perhaps, be compared easily, like with like.
§ Mr. MacColl
The hon. Gentleman mentioned the year 1950. There seems little point in taking a figure for 1950 and another for this year. I am comparing the figure before the general grant was introduced and the figure which exists now. The hon. Gentleman's own figures—and I admit that I have not done a lot of homework on this—show that under the percentage grant there was an increase in the percentage and that, since then, the figure has tended to drop.
§ Mr. Rippon
I think that it was fair for me to take a broader picture covering a decade. I have been saying that the effect of this General Grant (Increase) Order will be a marginal reduction in the proportion of grant, that is not very substantial and, further, that it will be altered by the next increase Order. Broadly, as a percentage, it is fairly constant now at 55.4 per cent. Perhaps it will be up a little next year. There is no suggestion in any of these figures that, as an act of deliberate policy, the Government are trying to reduce their share of total local government expenditure.
This is worked out with the local authorities in relation to particular circumstances and services. As between one year and another there may be a variation upwards or downwards. Taken over a period of years the graph has moved steadily upwards and has remained fairly steady over a considerable 963 period. One cannot anticipate exactly what the future may hold, but all that has happened should be sufficient assurance for hon. Members and local authorities to know that future amounts will be fixed after discussions with the local authorities and others concerned on a fair and reasonable basis.
It is reasonable for hon. Members to remember that the Order has been agreed with the local authorities associations. There is no dispute about any of the figures of the Order. Such small items as remain in dispute will be dealt with in the later Order which will be necessary to give effect to the provisions of the Education Bill, assuming that, in due course, they are enacted.
On the distribution formula, as the hon. Member for Widnes knows, we carry out the mathematics in accordance with the provisions of Section 2 (2) and Part III of the First Schedule to the 1958 Act. There is no dispute about this, for it has the desired effect of distributing in the most equitable manner the increase which results from the Order.
Regarding interest rates, this does not cover housing, which is dealt with under a different provision. The greater percentage of the £2.14 million referred to is attributable to education, which accounts for £1.973 million. The hon. Member for Bishop Auckland asked if this covers the full cost. It certainly covers the increased cost of charges through higher interest rates and, in so far as local authorities have agreed to the figure, it must be assumed that they accept that that figure represents the additional cost.
A number of hon. Members went a little wider and talked about interest rates and the loan burden in the general sense. I do not think I can go into that tonight. I think most Members of the House accept that local authority borrowing rates must be influenced by general market conditions, but increased costs in respect of loan charges do not result simply from movements of exchange rates. They result also from the very great expansion of local authority borrowing which has taken place as a result of Government policies which have resulted in the expansion and the betterment of services.
964 The hon. Member for Liverpool, Exchange (Mrs. Braddock) raised specifically a point about the mental health service. The additional cost due to expansion of the mental health service under the Act is not taken account of in this increase Order. As I think she recognised, the power to make an increase Order is only for increases in costs attributable to services within the grant period. This was debated when the 1958 Bill was going through and an Amendment to what is now Section 2 (4) was defeated. The local authorities associations, I think accept this, albeit, no doubt, reluctantly, but, of course, they argue conversely, that if there is a contraction in the services in a period that should not be taken into account. That issue, no doubt, will come up again from time to time. Certainly increased costs of development of services can be and will be taken into account in the next Order.
§ Mrs. Braddock
Does that mean that the mental health services will be taken into account in the next Order specifically?
§ Mr. Rippon
In the next general Order.
The hon. Member for Widnes asked for a detailed analysis of increases between services. This was not done for the 1959 increase Order. The amounts are really very small by comparison with the total relevant expenditure. The fact that we have not done it before does not necessarily mean that we ought not to do it in future. I would certainly undertake to consider this point before any further increase Orders are introduced.
Finally, the hon. Member for Widnes wanted to know what the agreed difference was between what the local authorities estimated and what the Government have accepted for grant purposes in this Order. The reduction in fact is £3.15 million. The original estimate was £27.23 million. The greater part of this reduction results from information which was not available when the local authorities made their estimates. They made their estimates entirely in good faith. As time goes on and the increases are carried forward it will be possible to make more accurate assessments of 965 the increase in costs. The reduction is largely attributable to this amendment in the estimates.
I think that the crucial point about this Order is that agreement has been reached between the Government and the local authorities. This represents something accepted by all parties, and it is in that spirit that the House can also accept it.
§ Question put and agreed to.
That the General Grant (Increase) Order, 1962, dated 12th March, 1962, a copy of which was laid before this House on 15th March, be approved.