LOCAL AUTHORITIES, ENGLAND AND WALES (GENERAL GRANT)

HC Deb 15 December 1964 vol 704 cc218-77

3.49 p.m.

The Minister of Housing and Local Government (Mr. Richard Crossman)

I beg to move, That the General Grant Order 1964, dated 8th December, 1964, a copy of which was laid before this House on 10th December, be approved. It may be convenient to the House, Mr. Speaker, if, with this Motion, we also discuss the next Motion on the Order Paper: That the General Grant (Increase) Order 1964, dated 4th December, 1964, a copy of which was laid before this House on 9th December, be approved.

Mr. Speaker

Certainly, if the House so pleases.

Mr. Crossman

Under the system which we inherited from the previous Government the general grant is the main vehicle of Exchequer assistance to local authorities. When it was first introduced, in 1958, we opposed it from the Opposition benches, and we are still determined either to change it drastically or replace it with something better. And yet today I am seeking the approval of the House for a General Grant Order which fixes the total to be paid not only for 1965–66, but also—which is a great deal worse—for 1966–67. It is, in fact, two whole years of general grant—and it is two whole years of the life of this Labour Government—which I am asking the House to approve this afternoon.

The reason why I am doing so is simple and obvious. It is, of course, the General Election and its timing. It was not our fault that the election was postponed month after month, so that this Government was only formed in the middle of October, just when the local authorities and the Departments were about to meet, in order to reach agreement on the figures on which the general grant for 1966–68 would be based. Directly I arrived at the Ministry, I was told by my officials, "Minister, you really must start dealing with the general grant if we are to get it approved in time for the local authorities. Otherwise, they will not know where they are when they make their budgets in January".

Of course, this was true. Yet before we had taken our bearings and summed up the situation it was impossible either for me or for my colleagues in the Education and Health and other Departments to approve the figures prepared on the basis of the policies of the previous Administration. We had to re-examine the estimates. It was a rush, but the job was done, and though the local authorities were given very little time to digest our criticisms of their estimates, and even less time for discussion than they are accustomed to, I think that we can be satisfied that, despite the change of Government, and the rush, this Order has been carefully discussed and duly laid before the Christmas Recess.

I am aware that many of my hon. Friends are shocked at the mere prospect of continuing the present system of general grant for two more years. Let me give them a word of encouragement. They should not deduce from the fact that I am laying this Order today that there will necessarily be no change made before 1967–68. But it is not difficult to calculate that, however hard we work it will be quite impossible to make the comprehensive reorganisation of local government finance before the local authorities start budgetting for 1966–67, a year from next January.

As I said before, the General Grant Order must cover at least two whole years, so I now turn to deal with the method by which we have arrived at the aggregate of these years' general grants. I strongly suspect that the niceties of this calculation will be much more familiar to many hon. Members present than they were to me eight weeks ago. But in case there are one or two hon. Members whose knowledge is imperfect, I would remind the House of the following facts. The procedure starts with the preparation by the local authorities in the summer of detailed estimates for the next two financial years. This is the system imposed in 1958. The main estimates concern education, 83 per cent. of the total—that is the total expenditure taken into account for the general grant—local health, 8 per cent., fire services about 3 per cent., welfare accommodation, 3 per cent. and child care, 2 per cent. In addition, there are a number of minor services which make up 1 per cent. and include, I am told, registration of electors and school crossing patrols. These are the services taken into account.

In the preparation of these estimates, the local authorities have been helped, and we have been helped for the first time this year, by the fact that the tables summarising expenditure of the local authorities could be assembled, on a computer—we march with the times— not belonging to my Ministry, alas, but to the Cheshire County Council. These figures were then subjected to critical examination, but owing to the shortness of time for negotiations, in some cases, full agreement was not reached with the associations and the estimates presented with this Order are the product of the Departments' examinations as modified in subsequent negotiation, but not agreed with the local authorities.

I now turn from the Estimates to the grant itself. Here let me make one thing clear: the estimates are made in detail, service by service, for education, health, etc. But the grant is not assigned, which makes it the more difficult, to any particular service or services. It is paid as a block grant, and because it is a block grant a special, complicated and almost unintelligible method has been worked out to distribute it among the local authorities according to what is claimed to be the size of the job they have to do. The factors and the weighting which determine the amount which each local authority gets are listed in pages 7 and 8 of the Report. The most important of them is population. Others are the proportion of school children and old persons, the density of population and the proportion of children under 5.

As the representative of a county borough in the rapidly expanding West Midlands, I shall not, of course, pretend for one moment that either the weighting or the factors are fair. I gather that some expanding authorities, such as Hertfordshire, have made their protest on this point. All I can say is that this will all certainly be taken into account in the examination which we are now conducting into the whole subject of local government finance.

But quite apart from the special problems of the expanding areas, there has been for some time a general feeling of unease on both sides of the House about the growing burden of the rates. Local expenditure has been increasing al the rate of 7 per cent. or 8 per cent. per annum, almost all of it on essential services which very few hon. Members here would deny need rapid expansion. If the proportion of Exchequer assistance is kept constant, as it has been in recent years under Tory administration, this means that the unfortunate ratepayers have to find at least £80 million more each year out of rates. The average rateable value increases by 2 per cent. or 3 per cent. annually and so provides about one-third of the extra cash. The rest has to be found by increasing the ratepayers' bill by 5 per cent. or 6 per cent. a year.

So the fact is that unless the system is changed, or unless the balance is decidedly shifted within the system in favour of the ratepayer, rates must continue to rise quite automatically. That is how things work as a result of the previous Tory Administration, a steady process of moving the burden on to the ratepayer—a deliberate process, a process facilitated by the exquisite complications of the general grant. It was always easier to move things on to people when the method by which they were moved——

Mr. Speaker

I have to remind the Minister, otherwise we shall get out of hand, that we cannot discuss the merits of the principle of general grant upon this Order. I have allowed the right hon. Gentleman to express his dislike of it. That must be sufficient.

Mr. Crossman

I am grateful for that permission, Mr. Speaker. I will not make any further references except to say that, if I am explaining how the general grant works, it is difficult to restrain my feelings upon the subject. What I am now doing is to explain how we have worked it out this time.

We made it quite clear in our election manifesto that we are not content with the system or with the balance within it and we have promised to transfer a larger burden of the public expenditure from the local authorities to the Exchequer. This is a pledge we are determined to keep, both in its general form and in application to teachers' salaries.

As to the system which we are now working, and which I am now explaining, I assure the House that a radical re-examination is under way.

Mr. A. E. Cooper (Ilford, South)

The Minister has made a very important point, as it were "off the cuff". He referred to "a pledge we are determined to keep", especially with regard to teachers' salaries. We are entitled to know exactly what he means by that.

Mr. Crossman

Mr. Speaker would rule it out of order. I am already on the edge or margin of discretion. I had better stop it there. We are to have a radical examination of the system, but it will take time to work out practical proposals, discuss them with representatives of local government, and give them legislative form. In the meantime, we have to operate the general grant, and that is why these Orders are before the House today.

Mr. Mark Woodnutt (Isle of Wight)

The right hon. Gentleman has blamed the previous Government for the fact that under the general grant system the proportion of the burden falling on local ratepayers has remained the same. He goes on to say that the present Government are now reviewing the system. The General Grant Order is for two years. The Government are keeping the proportion the same at 55.1 per cent. for the two years. Could they not merely increase the percentage?

Mr. Crossman

This is a very important point, which had dawned on me, too. I am now coming to the method we have had of assessing the general grant. If the hon. Gentleman will contain himself, I shall be dealing with this problem.

I turn now to the Orders themselves, and I think that it will be for the convenience of the House if I deal first with the so-called Increase Order. In local government terms I gather that this is what we would call a supplementary estimate, which covers increases of costs which have taken place since the last Increase Order was made at the end of 1963. Since costs have risen during this period by nearly £11 million, the grant payable in 1964–65 is increased by £6 million, bringing the total to £625 million.

Hon. Members will observe that rather more than £3 million of this increased expenditure is for interest rates and of this £3 million a little under £1½ million represents the increased burden it is estimated local authorities will have to carry up to the end of next March as a result of the increase in the Bank Rate last month. The Order also makes allowance for the increased duty on petrol and other fuel.

I now turn to the main Order, the General Grant Order, 1964, covering 1965–66 and 1966–67. The estimated expenditure for the two years amounts to £1,246.45 million for 1965–66 and £1,338.56 million for 1966–67. The corresponding grant figures are £680 million and £731 million.

I do not propose to go through the Order or the Report in any detail, because I know that hon. Members want to speak and make comments on them. But there are three points to which I should like to draw the attention of the House. The first point concerns expenditure on the provision of accommodation for the aged and infirm—what is generally known as welfare expenditure. For some years the local authorities have been urging that this welfare expenditure should be brought into the general grant estimates alongside education, health and the other services. When I met the local authority representatives, they laid great emphasis on this point. I had regretfully to point out in reply that a concession on this point would have increased the total grant by about £18 million.

In view of the abolition of the prescription charges and the improved pension rates, which both bear heavily on the Exchequer, nobody could accuse the Chancellor of the Exchequer of failing to recognise the needs of the aged and the sick. But it was thought that the Exchequer could not make this further concession at this time. Instead of conceding £18 million, therefore, we have brought the welfare services into the General Grant, but maintained the aggregate total more or less unchanged by using a percentage of 55.1 instead of 56.5.

I shall not pretend that the local authorities expressed any pleasure at this device, but I am sure that they did realise the economic facts which forced the Government to make what seemed to them a harsh decision to keep the grant level for this year.

That brings me to my second point.

Mr. John M. Temple (City of Chester)

Before the right hon. Gentleman continues, would be confirm that formerly there was an element of specific grant within the figure for the aged and infirm and that, in fact, that element of specific grant has not now been carried forward into the general grant negotiations?

Mr. Crossman

I think that I am right in saying that that has all been left outside the calculation.

I come now to the item of £20 million which no doubt hon. Members have noticed is here for the first time and which we have included in the estimates for the second year of the grant period without allocating it to any particular services. This is an unprecedented addition and requires explanation, which I am pleased to offer. When I met the local authority representatives they accepted under protest the cut back of their estimates imposed by Whitehall for the first year. Having done so, they proceeded to point out that there were powerful reasons for treating them more generously in the second year.

Indeed, by analysis of the five years since the general grant was introduced they were able to demonstrate that in each grant period so far the out-turn of the second year had been less favourable to the local authorities than the out-turn of the first year, to the tune, indeed, of about 2 per cent. or £20 million on each occasion. This tendency for expenditure to out-run estimates in the second year should surprise no one. After all, it is difficult enough to make realistic estimates 12 months ahead. If one tries to extend one's predicting to 24 months ahead, the likelihood of error obviously increases.

In addition to faulty estimating, there is also the likelihood of developments in each social service, not as a result of new legislation or new policies, but owing to developments inherent in the natural growth of the service. If one is estimating education costs one year ahead, accuracy is difficult enough. Two years ahead it is almost impossible to foresee, for example, how far teacher training will have expanded, quite apart from the total of teachers' salaries. That was the local authorities' case for saying that they should be treated more generously in the second year than in the first or, to put it another way, that their estimates should not be cut back as harshly in the second year as we had cut them back in the first.

Whatever is the cause of this underestimating for the second year the Government accept it as a fact. That is why we have included, for the first time, in the estimate for our second year a special additional sum calculated to cover any under-estimating and to provide a very small margin for further development of the services. This addition of £20 million will mean an addition of £11 million to the general grant in 1966–67, increasing it from £720 million to £731 million.

I want to emphasise once again that by making this very small additional provision for the second year we have not excluded the possibility of a major change in the division of financial burden between central and local government before 1967–68. Indeed, I would prefer the House to accept this £20 million as merely a token of the Government's determination to halt the process of transferring more and more of the burden from the taxpayer to the ratepayer which has been proceeding under successive Conservative Governments for 10 years.

The third and last point to which I want to call attention is one on which I feel a great deal of sympathy, but I am sorry that I cannot do anything about it. When they saw me, the representatives of the London boroughs and the Greater London Council demonstrated to their satisfaction—or, if you like, dissatisfaction—and to mine, that they are likely to suffer as a result of the heavy increase in administrative costs from the staff duplications rendered necessary by the reorganisation of London government.

One of the few great achievements of this great Tory reform, the Greater London Act, has been to demonstrate, once again, the working of Parkinson's Law: the proliferation of new, powerful authorities inevitably generates a multiplication of staffs and a swelling salary bill. I congratulate the Tories on their great success. Unfortunately, the London boroughs and Greater London have to pay the bill. They came to me and asked, "Why should we pay the bill? Could not you pay some of it through the general grant?" Much though my prejudices were engaged, my objective judgment got the better of me. I expressed my sympathy with the Londoners; I did not deny that the amount included on this account in the total estimate is inadequate, nor did I attempt to pretend that when it was shared out among all the recipient authorities it would not make much difference to the London boroughs.

But I had to tell them that there was a paramount reason why they could not be helped over their difficulty out of the general grant. Under this grant, the sum which each authority receives is determined not, as in the case of a percentage, by reference to its own expenditures, but by a complex calculation in terms of population, numbers of school children and similar factors. The special metropolitan weighting, moreover, is limited by the terms of the Act to taking account of higher levels of costs and pay.

There is one other reason why I had to ask the boroughs and the Greater London Council to contain themselves in patience. My Tory predecessors in the Ministry have been ready to discuss suggestions with the local authorities for changing the weighting and the factors which determine the distribution of the general grant. This year, however, even before the election, it had been decided that, with the whole question of local government finance under examination, this was not a time for unnecessary changes. The arrival of a new Government, pledged to redress the balance in favour of the ratepayer by a radical reexamination of local government finance, adds strength to this argument. The system of general grant, unsatisfactory as it is, has had to be left unchanged for another two years. All I can tell the London boroughs is that I am sorry that they are suffering as they are under it.

I conclude as I started. Inheriting the general grant, which we opposed when it was introduced and which we still approach with the gravest suspicion, we have been forced at very short notice to administer it as fairly, or as little unfairly, as possible. In particular, we have tried to meet the urgent request of the local authorities that it should not bear too unjustly on them in its second year of operation. In this limited objective I think that I can claim that we have achieved a future for the ratepayers for the next two years slightly less harsh than their representatives expected a few weeks ago.

4.14 p.m.

Mr. F. V. Corfield (Gloucestershire, South)

The right hon. Gentleman the Minister of Housing and Local Government made great play, when he opened the debate, with the difficulties in which he has been placed by finding that the General Election coincided with the period of the year when the local authorities customarily make their estimates. He went on to tell us that he now, for the first time, had a computer. He did not convince me that this was a good reason why we should be considering this Order today, only five days after it was laid before the House.

We do not want in any way to obstruct its discussion, but I am sure that the House will agree—as, indeed, the Parliamentary Secretary himself said last year, when we discussed this matter with the position reversed—that this is the only opportunity which the House gets annually to make a comprehensive examination of the whole grant system in relation to local authorities. The length of time to study these rather complex issues is not a matter purely of inconvenience to the Opposition—we do not particularly object to that—let alone any matter of purely party political significance. I am sure, however, that the House, almost universally, agrees that this is an immensely important matter.

Local authorities today have responsibility not only for the expenditure of vast sums of money, but also for the administration of immensely important services, which are in many ways services which, as far as the private individual is concerned, have rather a more intimate effect than many of the services directly or indirectly administered by Government Departments. So I hope the right hon. Gentleman will realise that, as a result of this rather rushed process, it has not been possible to study these matters as adequately as we had hoped.

The Parliamentary Secretary last year was at great pains to rub in the difficulties which the Opposition had—with his slide rule checked by the long division of himself and his right hon. Friend the present Secretary of State for Education and Science, while the Minister with his computer, had a vast array of support behind him. I make no objection in that respect, now that the positions are reversed. It is a little hard that the hon. Gentleman the Parliamentary Secretary should so soon have forgotten his worries about his slide rule and the checking of his long division.

However, turning now to the Order itself, the right hon. Gentleman has been quite frank with us by saying that as a result of this rush—or failure or otherwise of the computer—the local authority associations have not been given very much time and they feel that they have not had enough time; and that as a result of that, though perhaps it might have materialised in time anyway, there was not full agreement. I am the last person to suggest that the local authority associations should have any form of veto on the House. Nevertheless, I hope that when the hon. Gentleman winds the debate up, he will be able to tell us whether—as I think it is almost inevitable that we shall have to face an Increase Order in the year ahead; we have had one on every occasion up to date—the Act permits of putting right any of the weightings which might have appeared to be more appropriate this time had the negotiations gone on a little longer.

Turning to the substance of the Order, I shall as far as possible endeavour to avoid becoming over-engrossed in the fascinating, if somewhat obscure, arithmetical problems. I had some sympathy with the right hon. Gentleman when he referred to the complexities and to his ignorance—he did not say that it was complete ignorance, but nearly so—of about eight weeks ago. This is a subject which I find that I can hold with some confidence for half an hour or so but with decreasing confidence as time goes on. My hon. Friend the Member for the City of Chester (Mr. Temple), who will be winding up the debate for the Opposition, has always shown a fascination for these matters which greatly exceeds my own and I have no doubt that he will be able to deal with anything under that head.

Nevertheless, there are one or two points on which I think it might help the House if he could have some more explanation than we have so far been given. The first question I want to put to the Parliamentary Secretary is a question in relation to the rate product deduction which is mentioned on page 8 of the Report at a figure of 2d. Perhaps he could confirm my recollection of this matter, which is that that represents the same figure as in the last General Grant Order which, in turn, represented a reduction, after making allowance for the effects of revaluation an effective deduction, of½d.

It was certainly the intention—according to my recollection with the full agreement of the local authority associations, that this rate product deduction ought gradually to be eliminated altogether from the general grant system. As far as I recollect, it was a hang-over, so to speak, of the original specific educational grant, and it had been agreed that the sensible thing was gradually to eliminate it, in view of the fact that it became more and more anomalous with the passage of time. I hope that the Parliamentary Secretary will be able to confirm my recollection, which I hope is right, and tell us, at the same time, why there has been a change with regard to this rather minor matter of policy and what is the reaction of the local authority associations to that change.

The second point which I should like to raise is that in the last debate we had there was some discussion as to the effect, or likely effect as it was then, on local authority expenditure arising from the provisions of the Children and Young Persons Act, which was a Bill before another place when we were having our discussions. May I be told what effect the provisions of that Act have had on the expenditure of local authorities and whether it has been taken into account? The main reason I ask this is that I notice that there is a specific reference to the equivalent Scottish Act in the Report accompanying the Scottish Order. It would help us if we were told why there is no corresponding reference in the Report on the English Order.

Thirdly, there was some criticism in the last debate, largely underlined by the Parliamentary Secretary, about the planning grant. As far as I remember, when I replied to the debate I said that we were somewhat short of experience in the working of the planning grant. I should, therefore, be grateful to be told what the further two years' experience has shown and what conclusions the Government have reached about this factor. I observe that it has gone up quite substantially in cost for the two years which are under consideration, but in view of the enormous cost, which we all know, which arises when any form of urban renewal takes place, it still seems a relatively low sum. This is not a criticism of the Government, because, as I said two years ago, this was a matter in which we had had little experience. We hope that the momentum of these expensive types of development will go on increasing, but if they do the financial needs will, therefore, go on increasing, too.

Reference was made in the last debate to the increased expenditure which would arise from what was then the Housing Act, 1961, in relation to the duties placed upon local authorities in connection with houses in multi-occupation, and largely in relation to the employment of increased numbers of staff. Here, again, it would help if we were told whether this factor comes into the grant formula at all, and, if it does, whether it has any appreciable effect.

Turning to the Increase Order for a moment, the right hon. Gentleman made the point that part of the increase was due to the estimated increase in cost arising from the higher interest rate following the raising of the Bank Rate. There is also, I think, a sum of over £2frac12;million for various items, which include costs of transport and fuel, and presumably the same increases come into the estimates on which the general grant is based. Is it possible to identify particular causes of an increase? If it is, it will help the House enormously to be told which parts of the increase allowed for in the course of the next two years are attributable to these factors.

Mr. Crossman

I think that I made it clear that the increase is accounted for only up to next March.

Mr. Corfield

I appreciate that. But presumably the same factors come into acount in the general grant. The general grant represents an increase over the current year's spending, and if it is possible to identify the proportion of the increase which is due to the increased cost of these items, that will be helpful.

In the last debate my hon. Friend the Member for the Isle of Wight (Mr. Woodnutt) raised two interesting points—they certainly interested me at the time—about the rather peculiar position of that part of the country. First, he raised a question which arises from the increased transport costs and the fact that it is an island. He suggested that the Isle of Wight should be included in the same category as the Scilly Isles, where I understand that the length of the sea lanes is added to the road mileage to increase the weighting in the road formula. Secondly, he raised the rather curious manner in which the assessment of prison populations affects the rateable value of places in which there are large prison populations. It would be helpful to my hon. Friend and to the House if we were told what further consideration has been given to those points and whether the Government have reached a conclusion.

The right hon. Gentleman referred to £20 million in the second of the two years, and I thought that he made it clear that this was £20 million above the figure finally agreed by his Department rather than £20 million above the estimate originally put forward by the local authorities.

Mr. Crossman

Roughly speaking, it is about the same as the estimate put forward. If the hon. Member adds this sum to the figure to which we cut them down, he will get back, roughly, to where they were before.

Mr. Corfield

I am obliged to the right hon. Gentleman. That is the point which I wanted to bring out.

I turn to perhaps the most important aspect of this Order from the point of view of both local authorities and the ordinary member of the public—the effect on the rates. The right hon. Gentleman was very keen to say that this was a great instrument for shifting the burden from the taxpayer to the ratepayer. It is an equally good instrument for shifting the burden from the ratepayer to the taxpayer. As I said in my closing speech two years ago, there is nothing sacred about the figure of 56.6 per cent., 51.5 per cent., or whatever percentage it may be. Yet we have the right hon. Gentleman paying lip-service to this great urge to relieve the ratepayers while he sticks rigidly to exactly the same percentage as that which, as far as I recollect, his right hon. and hon. Friends criticised only two years ago.

It is not good enough to say that this is an instrument which works only one way. Indeed, he claimed that the whole object of the exercise by the last Government was that we should increase the burden on the ratepayer for the relief of the taxpayer. But if we have a proportion of over 50 per cent., then for every increase in the total bill, more falls on the taxpayer than on the ratepayer. That was our policy. There is no reason why the right hon. Gentleman should not have used this instrument, ready to his hand, to increase the Exchequer contribution and to lighten the rate burden. He will recollect, no doubt, from what was said in his own manifesto that it was not just that we were to have one of these endless reviews to which the Government have committed themselves in their 100 days. I nearly said "famous 100 days", but those famous 100 days had a rather unhappier ending than, I imagine, the right hon. Gentleman contemplates for the 100 days of this Government.

But we have had any amount of effort by the Government to pass off their promises as reviews of this and that and cancellations of something else. But what was stated in their manifesto was: While the reform of the rates system and investigations of alternative forms of local government finance may take some time to accomplish, we shall seek to give early relief to ratepayers by transferring a larger part of the burden of public expenditure from local authorities to the Exchequer. We may have sympathy with the right hon. Gentleman in his difficulty in coming to the task with the election interfering with his calculations, but when they fought the election his party took the trouble to produce a little pamphlet which they issued with the manifesto and which, as far as I recall, was entitled, "What the new Britain will be like when Labour wins". It contained the delightful phrase, ''Labour is ready. Eager to take over. Poised to swing its plans into instant operation. Instant Government. A number of prominent members of the Government drew attention to this specifically in their own election addresses. As I said earlier, it is no good the right hon. Gentleman saying that he has not a weapon with which he can fulfil his promises at the moment. There is no doubt that even if he were able, within the rules of order, to elaborate the reasons why he dislikes the general grant, it would make an admirable interim instrument to do exactly what he promised to do and what his right hon. and hon. Friends promised to do.

I hope that the Parliamentary Secretary will say not only why this decision has not been taken, but when it is likely to be taken. Although the right hon. Gentleman was at pains to say that this is for a two year period—which is statutory; there must be two years or more, so I am not attempting to claim a point here—he agreed that it did not necessarily mean that the review would not be completed by then. But it seems rather odd that such considerable attention was paid to the second year, with the figure of £20 million deliberately added, and therefore, looking right ahead to the second year, if the right hon. Gentlemen contemplates abolishing this system earlier. It does not give the impression that there is a great deal of urgency on the part of the Government to fulfil what they said they would do.

I have no doubt that I would be trespassing on the indulgence of the Chair if I were to embark on a discussion of the merits of general grant versus specific grant or any other kind of grant. But I think it fair to say that the general grant, whatever the right hon. Gentleman may say, definitely adds to the responsibilities of local authorities compared with the specific grant. It is also worth remarking, in view of the bitter attacks which were made on the idea when it was first put forward, that it has not and cannot be shown to have in any way affected the growth of expenditure on education.

I hope that the right hon. Gentleman will agree that anything which detracts from the true responsibilities of local authorities and anything which tends to assimilate them more to the position of agents of the central Government is bound to make them that much less attractive to the people of the calibre which local authorities require. In view of the remarks of the First Secretary of State and Secretary of State for Economic Affairs about planning boards, along with the astonishing definition of the functions of the Minister of Land and Natural Resources given by the Chancellor of the Duchy of Lancaster the other day, there seem already to be factors which could well become a considerable threat to the independence and responsibilities of local Government.

I hope, therefore, that the Minister will go somewhat wider than the figures in the Order itself, let alone in the Report accompanying it, and say what the Government have in mind about the future of local government. Local government finance so clearly, on the one hand, conditions its future, and, on the other, is conditioned by it. I hope, therefore, that we will have a speech in reply to the debate which will attempt to fill in some of the large gaps which the right hon. Gentleman appears to have deliberately opened.

Mr. Deputy-Speaker (Dr. Horace King)

Order. I think that it will be convenient to the House if I remind hon. Members that we are discussing only the general grant and that it would not be in order for the Minister who will reply to the debate to respond to the invitation he has had to have a complete review of the future of local government and the whole of the Government's policy on local government.

4.33 p.m.

Mr. G. A. Pargiter (Southall)

I approach these matters with rather mixed feelings. I will deal, first, with the Increase Order and in doing so I hope that it will be realised that the local authority associations are disappointed that the 1963–64 figure has not been further adjusted by the inclusion of about £900,000 of additional expenditure which would undoubtedly have ranked for increased grant.

It is suggested that the 1963–64 figure could not be included with the 1964–65 figure because the amount is not considered, presumably by the Treasury, to be large enough. I suppose that £1 million is not much to the Government, but it is certainly a lot to local authorities. It means more to me than I can calculate, because I do not know what £1 million even looks like. I repeat that the authorities were most disappointed that the figure was not included, particularly since there would not appear to have been any relevant reason why it should not have been included.

It is said that the two years could not have been taken together for the purposes of making an adjustment for the increased grant. I do not suppose that at this stage the Minister will be able to change the Treasury's mind about this, but I hope that the matter will be examined, for if we are to get increased General Grant Orders in the future local authorities should be able to benefit to the extent of all relevant expenditure. It is not satisfactory for them merely to be told that the amount was not sufficiently large. After all, what is considered not large enough to be included for the purposes of a General Grant Order? It is important that authorities should know the answer.

I am in the position of having taken part in the negotiations for some years past and I know a little about what goes on. The first thing is that the authorities send in their estimates, which are then considered by the relevant Department. This has happened over the years. The Department almost inevitably says that the estimates are too high. "They are inflated and cuts will have to be made," local authorities are told. In the past, local authority officers have been cooperative in making cuts in their estimate. Indeed, I think that they have been too co-operative, as is indicated in the second year of each of the two year periods.

This is apart from the first grant period, when everyone recognised that the Government leaned over backwards to prove how good the general grant was. Local authorities must spend money and the amount of grant they got was in excess of anything they received in any subsequent period. However, we are now in the position where they are losing out on both years in the excess of expenditure over their estimates.

It should be remembered that one can get an increased grant only on specific grounds; that is, increases in costs which are shown to have occurred since the estimates were accepted for grant purposes. Thus, if a cut is made in the estimates none of that can be got back. One can get an increase only if it can be proved that there have been increased costs.

This all shows that the first figure is particularly important. If present legislation can be amended so that we may have increase Orders on relevant expenditure which is properly incurred, matters would not be too bad, but at present authorities are always having to fight for any extra because of the limitations of the legislation. As I said, the first year is very disappointing to local authorities, particularly from the point of view of the cut of £17 million.

My right hon. Friend said that the forecasts had been done extremely well. As he knows, we have used a computer for this purpose. This is not a Government computer, but one made available by Cheshire County Council. As a result, there was a remarkable degree of accuracy in the forecasting.

We expect the various Government Departments involved to make some initial cuts, probably if only to make local authorities prove the necessity for the amounts sought. In this case, although the figures were submitted in ample time for the Departments to go through them and query them, the suggestions of the Departments were made known only one day before the meeting with the local authority officers. At that meeting local authority officers had to meet officials of the Government Departments to discuss the cuts which were proposed.

It was a sheer impossibility to do this within the time-table. We had to have a statutory meeting and the Minister had to get the Order, but it seems to me that somebody should look at the Departments and the way in which they work to ensure that at least when estimates have been submitted in reasonable time the authorities should be given reasonable time to examine the proposed cuts and, if necessary, make counter proposals. This did not happen on this occasion and we were faced arbitrarily with the £17 million cut.

We recognise the factor that there had been a General Election, but this ought not to have stopped departmental examination of the figures. This is something which I do not understand. The examination of the figures, quite apart from the conclusions which the Treasury or the Minister might have arrived at about the final figures, should have gone rather better than it did. I hope that this will not happen again. If it does, it will leave local authorities in an awkward frame of mind and they will not be as friendly in their approaches to the Minister as they were on this occasion.

I might say, on behalf of all the associations, that, apart from the material factors, about which they differed, the associations appreciate the spirit in which the Ministers met them, even if the Minister of Housing and Local Government did not restore the cuts made in the first year. We at any rate hope that from that friendly basis we shall be more successful in future than we have been on this occasion, particularly in respect of the first year.

We recognise the facts of life and that when the Government are running at a deficit, which the Government found in terms of the money that was available, it would have been too much to expect the restoration of the whole of the £17 million, though we might have expected the restoration of half of it even if the Treasury did find itself in some difficulty.

Mr. Woodnutt

When you talk of a deficit are you still——

Mr. Deputy-Speaker

Order. The hon. Member must put his question through the Chair.

Mr. Woodnutt

I beg your pardon, Mr. Deputy-Speaker. I should like to ask the hon. Member what he meant when he said that the Government found a deficit. We are referring to an internal situation and money available internally. What does the hon. Member mean?

Mr. Pargiter

I find when I look at my internal money and my external money that there is not much difference between them when it comes to paying. I have either got it or not got it, and whether I can play about with it by means of credits or debits at some stage makes no difference to the fact that I have to produce the cash when it is required. I cannot see any material difference between the two.

We appreciate that there are many things which the Government might have wished to have done early in their term of office but which they were not able to do and would not be able to do because of the conditions that they found. I am not accepting this necessarily as an excuse for the cut of £17 million. I still very much regret that it was made and I still think that it was unjustified on the figures. Already, as admitted by the Minister, the Government have had the advantage of good forecasting as a result of the method used by the local authorities in presenting their estimates to the Department.

I come to the second part and I thank the Minister, though rather grudgingly, for the restoration of the £20 million. I do not want to be too effusive about this, because the £20 million is amply justified. There is no question of there being a gift in it. This is money which we can easily demonstrate will be needed. If our experience in the second year over each of the grant periods is taken into account, it will be found that the local authorities have been at the losing end all the time. This is one of the arguments which can be used against the general grant. There is no means of making up this loss. Once it has been lost it has been lost for good, and the general ratepayers cannot understand why they should bear a burden which quite properly ought to be borne by the Exchequer.

It is often difficult to see two years ahead what developments there will be. On the whole, local authorities, instead of being as extravagant and irresponsible as was at one time suggested if they had a percentage grant instead of the block grant, have always been careful in the preparation of estimates. It has been shown that we have been at the losing end in the second year of each grant period and I am sure that this £20 million added as an ad hoc figure—the only way in which it could be added in the circumstances and in the time available— is not a sort of contingency or bonus figure.

In future, a Minister might say, "We have given you £20 million", but the Government have not. We in the local authorities have had the restoration of cuts proposed to be made which the Minister has decided now should not be made. We are grateful for this, but we are not too grateful because we shall regard it merely as a jumping-off point to ensure that we have better terms in future.

I do not want to go into the question of any alternative method, but I am sure that the local authority associations, and I know that it is the case with my own county council association, will be happy to enter into discussions with the Minister and other appropriate Ministers on these matters. My right hon. Friend will be aware from correspondence that we are already concerned about the increasing burden of the rates, and under the General Grant Order the burden of the rate will increase next year and the following year and there is nothing in the grant system which will alter that situation.

I accept that the percentage could be altered, but alteration of a percentage does not necessarily cover the whole picture in relation to specific services in the best possible way. I am not suggesting where it will go or how far it will go, but we shall be glad to enter into discussions with the Minister to see whether an alternative method can be found which will be fair to the ratepayers and will stop this increasing burden which they are called upon to bear, very often as a result of Government policies which the local authorities have to carry out and in respect of which we often think the Exchequer carries a lesser portion of the burden than it should carry.

My right hon. Friend has expressed his sympathy with London. We discussed this matter at some length. We in the local authorities were glad to find that the Home Office was able to indicate an additional £150,000 for the children's services because of recognition of the fact that the cost will increase considerably in the London area as a result of the operation of the London Government Act. It is no comfort to be able to say, or for the present Government to say, "We told you so" to the Opposition, when they were the Government and, at the same time, give a rather tardy and niggardly recognition to the amount which the local authorities must bear.

It will be a considerable amount and will be of a kind which will not fall to be dealt with in any Increase Order. We shall not have it back. There is no question of having an adjustment except for increased costs over and above the basis already fixed, and if the basis should prove wrong the London boroughs will have a rough deal during the course of the next two years.

If one suddenly creates posts for 20 or 30 children's officers instead of three or four, or 20 to 30 education officers instead of three or four, it is inevitable that the cost will go up; and these are administrative costs. This is not a question of improvement in the service. This is purely an increase in administrative costs which we think the Government have not taken sufficiently into consideration in the preparation of the figures.

Another point is the inclusion of welfare services in the general grant system. When we discussed this two years ago, an indication was given that these would be included in the general grant figures for the purposes of the calculation, and we rather optimistically thought that this would mean more money. I admit that the Minister at the time was careful to say that it might not necessarily mean more money. I am prepared to accept that no specific promise was made that there would be more available as a result of the change in the method of calculation, but the local authority associations are bitterly disappointed at the failure to provide more money for welfare services over and above what were virtually the per capita grants which we previously had for the provision of accommodation for the elderly and infirm.

The answer based on the possibility of increased pensions and the abolition of the prescription charges does not quite meet the point, in the local authorities' view. I am sure that they will not be willing to accept that as an alternative to a proper increase in the grant. I hope, therefore, that the Minister will say that the question will receive more serious consideration than it has received during the whole of the grant period, not just recently.

Throughout the whole of the time, local authorities have been quite unfairly treated as regards the provision for the aged and infirm. This serves merely to highlight the case, because the same amount of money, virtually, has been included and put into the grant and had the effect of reducing the grant percentage. Had the proposal been that we should receive 56.5 per cent. as against 55.1 per cent., we should have said that, that would be reasonable, but, as it is, we think that it operates unfairly. It has not operated in the way we hoped and we were half led to expect that it might. I hope, therefore, that we shall be told that this question will he seriously considered. It is an essential matter, just as much a part of local government expenditure as any other expenditure is, which ought to be properly included on the same rate of grant as for the health and other services which are provided.

I have spoken rather longer than I had intended. I am disappointed, with this Order, especially for the first year. I am glad that the Minister has found it possible to restore the £20 million for the second year. For this we are grateful. We shall be looking for means by which a very much greater share of the burden may be moved from the local ratepayer to the general body of taxpayers. Obviously, when money is taken from the taxpayer generally, the system operates much more fairly than the rating system can possibly do for the provision of our local social services.

4.52 p.m.

Mr. Mark Woodnutt (Isle of Wight)

I must join issue with the hon. Member for Southall (Mr. Pargiter). He said that, within the framework of the general grant, it was not possible to relieve the burden on the ratepayer. In an intervention during the speech of my hon. Friend the Member for Gloucestershire, South (Mr. Corfield), I pointed out that it is quite easy to relieve the ratepayer of a proportion of the burden simply by putting up the percentage of the general grant. If the Government really want to take part of the burden from the ratepayer and put it on the taxpayer, it can do it perfectly well at once by raising the 55.1 per cent. of aggregate expenditure which is borne by way of general grant.

I do not know why the Minister looked so pleased with himself when he said in his speech that the Government were pledged to adjust the distribution of the burden. We had already set up a committee to carry out a complete review of the financial relationship between central and local government, and we also had realised that there must be an adjustment of the burden.

Mr. Pargiter

The hon. Gentleman will be aware that the White Paper which was published at the time when the general grant was instituted said that the Treasury was already bearing too much of a burden vis-à-vis the local authorities, and the intention was to shift the burden in such a way that it bore less heavily on the Treasury. The fact that they were paying more than half the total at that time was regarded by the then Government as not being a healthy feature.

Mr. Woodnutt

I am aware of what was said in the White Paper. All I am saying is that, if the Government want to shift the burden, all they have to do is to increase their percentage. There is no fixed maximum percentage in the general grant.

Just before he concluded, the Minister said that he was relieving the lot of the ratepayer considerably. In fact, he is not. Keeping the percentage the same for next year means that the Isle of Wight County Council ratepayers' share of the extra burden will be equivalent to about an 8d. rate, and I cannot see how it will be less than that in the next year unless they cut some of their services or make economies in some way.

The first point I make relates to the low density weighting. The House will know that the basis of the calculation is the ratio of road mileage to 1,000 of population, and for this purpose all roads in the local authority area, classified and unclassified, are included. There are also roads which we refer to as green roads or green lanes. These are roads which the local authority has really ceased to maintain although they have a responsibility to do so.

I am not arguing the merits or otherwise of including these green lanes, but remind the Minister that some counties include them in their total mileage for this purpose while others do not. Counties which have suddenly found out—the Isle of Wight is one—that their fellows are including these green roads and which have applied in the last few months for theirs to be included have been told that it cannot be done. It is wrong that some counties should be including them while others are not.

Clearly, there is an anomaly here. The Minister should correct it, making up his mind one way or the other. Either they should all be included or should not. The effect on total grant will be nil. There will merely be a difference in the distribution of the grant arising from this factor as between different counties, the aggregate remaining the same.

My second point relates to the isolation factor. I refer particularly to paragraph 30 in the Report accompanying this Order. Everyone connected with local government finance will be very disappointed to read that we are not to have a review of the formula. I cannot understand why. It was promised in the debate which we had on 19th December, 1962, and it was promised in paragraph 28 of the 1962 Report. The Minister said it has been overtaken by the review which he is now carrying out, and it was, in fact, overtaken by the review which we started. But the committee has been sitting for about two years discussing the question. There are many anomalies to be corrected and other factors to be brought into the formula. We ought to know what the results of its deliberations over the past two years have been and how the formula should be adjusted.

One factor affects my own constituency rather badly. The Minister will have seen the Report of the Working Party appointed in 1962 to investigate the Working of the Rate Deficiency Grants. Paragraphs 28 to 32 are all devoted to the special position of the Isle of Wight, following a case presented by the Isle of Wight County Council in 1962 which showed that the isolation of the island is a factor not taken into account in the general grant and adding to the cost of the provision of all services by about 4½ per cent. compared with the mainland. In paragraph 30, the Working Party, which was set up by the previous Minister, said that it recognised that there was a prima facie case for a weighting. It also said: We bring this point to notice so that it may be further considered. This is one of the factors which I hoped would have been considered in the review and introduced in a formula to take account of this isolation. I ask the right hon. Gentleman to look at this. I suggest again something I advocated two years ago and to which my hon. Friend the Member for Gloucestershire, South referred today—that is, that the Government could give a little immediate relief to the Isle of Wight by including a factor for the sea lanes, as is done for the Scilly Isles. I do not see why this should not be done for the Isle of Wight.

Then there is the question of the prison population, which is calculated for the purpose of assessing the grant by taking the population on a given day in the year. It happened recently, however, that the day chosen for two prisons was the very day when lots of the "lags" had gone home and, therefore, the number of inmates was low. It would be fairer to take the average population over the year because these prisons are very prominent in the local authority services.

The Minister has mentioned the growing burden of rates, as did my hon. Friend the Member for Gloucestershire, South and the hon. Member for Southall. We all realise that it is inevitable that local authority expenditure will increase from year to year by the very nature of the services and the cost of the improvements which we all agree must take place. But most of us are also agreed that a greater proportion of that burden should be borne by the Exchequer. I have harped on that theme ever since I first became a Member of this House.

Many ways have been suggested of easing the rate burden. During the election campaign, the party opposite spoke about switching teachers' salaries to the Exchequer. Right hon. Members opposite may also have suggested that a higher proportion of the cost of education should be placed on the Exchequer.

But the easiest way to bring relief, and to bring it quickly, is to increase the percentage. Right hon. and hon. Members opposite are always talking about the advantages of a percentage grant over a general grant. I cannot see the point of that argument when, in the general grant, there is a weapon that the Government could use. The Government could put up the general grant percentage of total local authority expenditure to 65 or 70 per cent., whatever they might decide. The weapon is in their hands. They could use it this year. I cannot accept any excuse for not doing so. I hope that the Government will give this matter immediate and serious consideration.

5.3 p.m.

Mr. Bryant Godman Irvine (Rye)

I ask the Minister to be more specific about his proposals for General Grant Orders. In paragraph 30 of the review it is said: …the Government has decided that in advance of conclusions being reached on the basis of its own examination of local government finance no changes should be made in the weightings … I understood that the position before this White Paper was that a working party had been set up to undertake a major review of the position. The right hon. Gentleman has not told us what has happened to that working party. Are we to see any of its conclusions? Is it to proceed to the end of the road. or is it to be swept to one side?

Mr. Crossman

The working party was not designed to reach conclusions, but to collect the evidence and make a survey. This is nearly completed and when it is we shall go ahead with our job, which is to make up our minds what to do. The job of the working party, which was set up by my predecessor, was to do the research work—the basic collection and selection of material on which conclusions could be reached.

Mr. Godman Irvine

I am obliged to the right hon. Gentleman. Perhaps I can put the problem in a slightly different way. Since the general grant was first introduced, I have been placing various considerations before his predecessors in relation to certain parts of East Sussex. I hope that the right hon. Gentleman is already aware that there are ways in which the seaside areas and parts of the country that I represent can be differentiated from other parts of the country.

I have no doubt that, in due course, I will try to avail myself of other opportunities of dealing with these matters with him when he himself is in a position so to do. All I say today is that, in listening to him with as much attention as I could, I received the impression that, if I were responsible for planning the finances of a county council, it would be a little difficult to know just when or how any decision could safely be taken.

On Monday of last week, the Joint Under-Secretary of State for Economic Affairs referred to Bexhill, which is part of my constituency, as being one of the places in south-east England with the highest percentage of people over the age of 60. On page 14 of the review, where the results of calculations are set out, there is nothing to indicate that, as a result of this factor, East Sussex is in a very much more favourable position than the others. I see that the Minister looks a little surprised. If he cares to have the figures given to him on behalf of my county I will let him have them.

The only other point I put now is that, at the moment, there are a number of factors I should like to put before the right hon. Gentleman at some stage. The working party is now out of the way. When and how should these factors be placed before him? Could he help us as to how forward planning can safely be done in county finance?

5.9 p.m.

Mr. James Allason (Hemel Hempstead)

I think that most hon. Members would agree that what really concerns us is the effect on the householder and not so much the actual amount of rate-borne expenditure. The Minister says that there has been a steady increase in expenditure over the last 10 years, but he will not have forgotten that, in 1954, industry was re-rated, as a result of which the rate burden on the householder fell by one-third in 1955–56.

This burden slowly crept back to the old position over the succeeding years until, in 1962–63, it was back to where it was before 1955. It is only in the last two years that there has been this increase in the burden and it has not been intolerable until now. I entirely agree that here and now it is intolerable.

I entirely accept that local government expenditure has to increase, but it is not necessary that that increase should fall on the householder. It is unreasonable to expect the householder to see an increasing amount of his income paid out in rates every year. Yet this is the effect that the General Grant Order will have.

I calculate that the increase in expenditure will be 8.7 per cent, next year over this year and 7.3 per cent. for the year after compared with next year. The general grant takes care of exactly its proportion of that so that, allowing for the 2 per cent. gain from increased valuation, local rate-borne expenditure will increase by 6.7 per cent. next year and 5.3 per cent. the year after. That is intolerable.

In its election manifesto, the Labour Party said that it would take action straight away to avoid these increases. I deeply regret that the Government have not done so. If the right hon. Gentleman would increase the general grant to 57 per cent. next year and 59 per cent. the year after, he would not breach the principle of the general grant, but that action would have the effect of stabilising rate-borne expenditure, which is what we all want to see.

The right hon. Gentleman mentioned the factor of the expanding population. I represent a constituency in a county with the greatest expansion of population, Hertfordshire. However, there are other counties whose populations are expanding. In these areas the problem is that expenditure on things such as schools, roads and sewerage has to be made well in advance of the income resulting from the increasing population. The experience in Hertfordshire has been that every year an average of 1 per cent. less comes from the general grant, so that we are dropping from an original average of 55 per cent. to 50 per cent. this year and probably to 49 per cent. next. This is clear from the evidence which has been given to the working party.

I agree that it is very difficult for the Minister precisely to work out a beautiful formula which will make it just about right, but he could have a rough shot at it and make some effort now that it is accepted that there is this problem of expanding populations. To give him an instance of the sort of thing I have in mind, I can speak for Hertfordshire in saying that an increase in its general grant of about £1¼ million, while not enough, would be acceptable and I think that we would be prepared to settle for that.

I may be speaking for almost all county treasurers and for many millions of householders if I make an offer to the right hon. Gentleman. It is that he should take this General Grant Order away and take a little more time about it and then, although that will have made life more difficult for the local authorities, come back with a higher proportion of general grant. He could do this easily. It is not reasonable for him to complain that he has not had the time, for I am offering him the time now.

If he does not do this, it will be clear that there is a great difference between Labour Party promises and Labour Party performance. I very much regret that I have to use the same words that I used yesterday—to ask whether the Government have not come to power on a false prospectus.

5.14 p.m.

Mr. A. E. Cooper (Ilford, South)

The Minister will not be allowed to get off the hook on this subject of giving relief to the ratepayer. Throughout its General Election campaign the Labour Party made it perfectly clear that relief for the ratepayer would be one of the earliest problems to which it would give attention. Eight weeks after coming to power, with every possibility and opportunity in their hands to give relief to the ratepayer, the Government have failed to do so.

The rate burden is the most serious problem confronting the average householder. I am sure that the House will approach the problem constructively in an attempt to secure an easy solution. The right hon. Gentleman seems somehow to be bemused with this figure of 55.1 per cent. He told us that he had had only eight weeks to look at the problem and that there were probably some hon. Members who knew more about it than he did. He never spoke a truer word, because if ever there were a Minister who displayed complete and absolute ignorance of local government, it was the right hon Gentleman this afternoon.

When the hon. Member for Southall (Mr. Pargiter) complained about the new costs to be imposed on London government, he forgot, and the right hon. Gentleman forgot, that the London Government Act was to define new areas of government in London, not to define the cost of that Government. That was obviously something which would follow. It is unfair of the right hon. Gentleman to take the immediate situation, for these new authorities are not to operate until next May and cannot have any idea of what the cost is to be.

There will not be the proliferation of offices which he has suggested. In my own area of Redbridge, where there are two new boroughs making one authority, we do not envisage this great new cost which the right hon. Gentleman has been discussing. All I am asking is that he should free his mind of prejudice against the London Government Act and—and I am asking a lot—give the new authorities time to settle down, when he will see that most of his fears are not justified.

Mr. Crossman

I hope the hon. Gentleman will not misunderstand me. I was reporting to the House what the representatives of the London local authorities said to me. What they told me was about the greatly increased administrative costs caused by the London Government Act. It was not my prejudice but their fact. They spoke on behalf of their boroughs. They made the complaint to me.

Mr. Cooper

Two sets of organisations are now operating. The existing borough councils are to operate until May of next year. New councils have been set up as a result of the Act and the Greater London Council is operating as a holding authority for this one year. That applies to the others. In this period of changeover there will obviously be redundant officers. For example, in Redbridge there are still two town clerks, but when the new authority starts in May there will be only one.

Many other authorities have problems when they have two top officers, or other officers at various levels, of whom one is being kept on in a consultative capacity for a year or two because he has not quite reached retirement age. This is a method of causing the least possible distress to men who are getting on in years and who would find it difficult to get another job.

But this is a problem which will resolve itself in a matter of two or three years. What I am asking is that the right hon.

Gentleman should give the local authorities a chance to settle down. Let them get their plans organised and he will then see that his fears are not justified.

Mr. R. W. Brown (Shoreditch and Finsbury)

It is 1st April next year when the new authorities will take over, not May. I say that in case there is some confusion on the record.

The Minister of State, Home Office (Miss Alice Bacon)

The figure which London gave us in respect of the child care services was an extra £800,000 a year which it was calculated would be needed specifically for the break-up of the children's services in London.

Mr. Cooper

I am not aware of the figures given to the hon. Lady. If that is what she tells me, I must obviously accept it, but I would have thought that there would be other factors to justify an enormous increase such as that. However, it would be profitless to deal with that matter now.

The right hon. Gentleman's strictures on the system are not valid, because under Section 2(4) of the original Act he has power at any time to make an Increase Order for certain items. For example, it is said in his own Report: …if it appears to the Minister that during any grant period there has been an unforeseen increase in the level of prices, costs or remuneration the right hon. Gentleman can present an Order increasing the grant. There is nothing wrong in the system. It is only in the Minister's mind that these difficulties arise.

My objection to what the right hon. Gentleman said this afternoon is that he took no account of that part of the section of the Act which says that unforeseen increases in the development of services cannot be taken into account. Therefore, if the Labour Party is to be true to its election pledges and expands the education system as it promised, presumably the local authority will get no increase at all in its grant. Or are we to hear from the Minister that in the next two years there will be no expansion in the education system?

However one studies the figures of these two Orders, they allow of no increase or expansion in the education service other than that planned by the Conservative Government. Account is taken only of increases in the number of teachers planned by the Conservative Government. Account is taken only of the increase in the number of new schools planned by the Conservative Government. No new initiative whatsoever on the part of the Labour Government is shown.

Therefore, since the Minister is asking us to authorise the expenditure of grant up to 1966–67, we are entitled to ask him this question: will he increase educational development in this period beyond what was planned by the Conservative Party? If so, and since this will call for a great deal more expenditure on the part of local authorities, what steps will he take to relieve the ratepayer of this increased burden?

The Minister, at the beginning of his speech, mentioned his abhorrence of the general grant system. But, as is not unusual, he did not offer one single argument to show why the system was wrong. In fact, it is very difficult to find anything wrong with the system. It is generally approved by local authorities. Even Labour councils like it? Why?—because it enables them to plan long-term and to get their decisions taken and working quickly. There is not a local authority which has not gained great benefit from operating this system.

I know why the Minister does not like it. It is because it takes control out of Whitehall. It gives control to the local authorities, which the Labour Party does not like. It wants everything nice and tidy in Whitehall. The doctrine laid down by the right hon. Member for Battersea, North (Mr. Jay) some years ago was that the man in Whitehall knows best. It is still a doctrine which is dear to the hearts and minds of the Labour Party. The Government must come forward with very strong arguments to show why the general grant system, for which they are asking substantial sums, is wrong. Personally, I think that it is very good.

Turning to the sums of money involved, the general reorganisation of local government which has taken place, particularly in the London area, will obviously call for a complete reallocation of the sums for the various authorities. The appendix lays down the figure which Redbridge can expect. Redbridge, as an authority, does not come into existence until 1st April next year. By whom were these figures submitted? Were they submitted by the Essex County Council, by the Ilford Borough Council, or the Wanstead and Woodford Borough Council in isolation, or were they prepared as a result of joint discussions with the authorities in Redbridge? It may be that these figures are quite proper, but I should like to know that there have been proper discussions at that level and that they have not been arrived at as a result of—and I do not use the word offensively—guesswork within the Department.

The Minister was a little evasive when I spoke to him about the transference of a certain item of expenditure to the national Government. He claimed that if he dealt with that he would be out of order. Nevertheless, I repeat the question so that I can get it on the record: what will be the position of the Government in the years 1964–65, 1965–66 and 1966–67 with regard to teachers' salaries? This is a question to which the House is entitled to an answer at some time. What account has been taken in these calculations of the increase of 3s. 3d. in the National Insurance stamp which operates from next year and which I calculate will amount to a very large sum indeed? What account has been taken of the increase in Bank Rate and petrol duty? What allowance has been made of any increase in education expansion?

These are questions to which the House is entitled to an answer. Looking at these figures, it would seem once more that the Government have failed to keep another of their election promises. May I suggest that when the famous 100 days are over it will be a good thing if the Prime Minister declares a national day of mourning.

5.26 p.m.

Mr. Geoffrey Rhodes (Newcastle-upon-Tyne, East)

I did not intend originally to take part in the debate, but I feel that I must intervene because it seems that hon. Members opposite are trying to make party political capital out of a very difficult problem for which the former Government were largely responsible. Under the General Grant Order, very substantial aid is being given, and it is intended that it should be given, to local authorities in the next year or so. But it was said quite clearly by my right hon. Friend the Minister that, in spite of this, obviously an increasing burden of local government finance would fall on the shoulders of the local sources of income, namely, the ratepayer, in the next year or so. This is inevitable.

The hon. Member for Hemel Hempstead (Mr. Allason) said that during the election the Labour Party promised to deal with the problem of local government finance straight way. I am not sure exactly what was implied by "straight away".

Mr. Allason

May I give the hon. Gentleman the quotation: …we shall seek to give early relief to ratepayers by transferring a larger part of the burden of public expenditure from the local authorities to the Exchequer.

Mr. Rhodes

It is a question of what one means by "straight away". The hon. Gentleman also used the word "early". If he says that "early" and "straight away" are identical in meaning, that is fair enough. But I believe that when another party takes over the reins of office, having been in opposition for 13 years, it inherits a very substantial number of problems. A number of emergency Bills have been presented in the last few weeks. It would be unfair to criticise the Government for not immediately, here and now, completely altering the basis of local government finance in a fundamental way. My right hon. Friend, I understood, said that in the near future consideration would be given to altering the system of local government finance in a fundamental way.

If the argument of hon. Members opposite is that this should have been done more quickly, may I draw their attention to the fact that in December, 1963, the then Parliamentary Secretary to the Ministry of Housing and Local Government said that there was no "really satisfactory alternative" system of financing local government. That was just a year or so ago. It is grossly unfair of hon. Members opposite, within a few weeks of the formation of another Government, to say that the whole basis of local government finance needed alteration straight away. The fact that it would be done straight away in the first few days of a Labour Government was never implied.

Mr. Cooper

I do not think that any of the speeches from this side today have suggested that it was possible for the Minister to come forward with a fundamental change in the financial structure of local government. What we have said is that the Minister now has at his hand the simple weapon of increasing the figure of 55.1 to 57 or 58. There is nothing in the law of the land to prevent him from doing it. He could have done it straight away and given aid to the ratepayers while he was giving thought to the long-term problem.

Mr. Rhodes

The hon. Member is saying that the substantial sum of money which is being granted to the local authorities over the next year or so should be even more substantial by increasing the percentage given under the Order. That is one way of dealing with the problem. I would regard it as a piecemeal solution. In my view, what is required is not a piecemeal solution but a fundamental review of the whole of local government finance. That cannot be done overnight.

Mr. Temple

rose——

Mr. Rhodes

I have given way rather a lot. It should, however, be borne in mind by my right hon. Friend that this is a fundamental question of burning importance. Rates are a special levy on house occupiers in particular. They are a tax on house occupation. In view of the burdens of owner occupation and of tenancy, of which my right hon. Friend will be fully aware, this imposition is something which should be dealt with urgently.

No longer can we say that the rateable value of property and personal occupation bears any serious relationship to an occupier's capacity to pay this tax. It is a particularly heavy burden on the family man who needs a larger house. There may have been a time in the last century when there was a relationship between the rateable value of property occupied and the income and the capacity to pay of the occupier, but I doubt whether that is anywhere near the truth today.

I do not want to get out of order, but I should like to draw attention to the problem that exists in many cities, particularly in Newcastle. When property was reassessed under the legislation of the former Government, supported by right hon. and hon. Members opposite, the proportion of the rate burden switched considerably away from commercial and industrial premises to the occupiers of residential accommodation. This was particularly true in the City of Newcastle.

There are in my constituency many houses with ludicrously high rateable assessments in what is classed as a pleasant residential district backing up to shipyards and bone yards making glue, and so on. This is a problem of urgency. In some respects, I agree with hon. Members opposite in sympathising with the problems of the ratepayer. I do not sympathise with their viewpoint, even when I have felt that they had fought hard in trying to change the system of local government finance during their 13 years of office, in supporting the revaluation Measures which passed a considerably greater burden on to the shoulders of owner occupiers.

Therefore, whilst I am happy to support the Order today and I believe that the grant which is being given to local authorities is generous, and as generous as can be expected in view of the current financial situation, as a matter of great urgency my right hon. Friend and his associates in the Government should give priority to tackling the basis of the financing of local government, because I agree that the financing of the expansion of our education services over the next four years will be beyond the capacity of house occupiers to carry.

Although there will be substantial increases in finance to local authorities through the General Grant Order to finance that development, it will still mean far too heavy a burden upon the shoulders particularly of young family men who are trying to develop their family life in houses suited to their needs. I urge my right hon. Friend to give priority to this matter in considering legislation in the near future.

5.35 p.m.

Mr. R. W. Brown (Shoreditch and Finsbury)

I should like to participate in the debate in order to reflect the view of the London boroughs. I am surprised when I hear hon. Members opposite speaking about what could be done by my right hon. Friend the Minister when one realises that the position in which local government in London is now placed is due to the reorganisation of London government.

Right hon. and hon. Members opposite refused consistently to answer my colleagues and I when we visited them from time to time asking how much this would cost. They refused point blank to tell us. When, three years ago, I put forward the figure of a 10s. increase in 1965 in the rate for the area which I represented, nobody disputed it. As chairman of the finance committee in question, I have little doubt that I shall be forced to impose a substantial rate increase for the people of the area in April next year. I still feel that to bring up the rateable value idea will mean at least a 3s. rate increase.

Hon. Members opposite cannot get away with what they regard as an attack on the Government in failing to give more money to the local authorities when it is they who are responsible for the position in which we find ourselves in local government in holding a position without considering the situation which will take effect on 1st April.

When we take on the new functions from the London County Council—and I am a member of a local authority which is doing just this—we will be building up a proliferation of officers whom it is necessary to have. The organisation has to be set up. In my area in Central London, for example, we will be responsible on 1st April for children's homes way out at Chislehurst. To obtain control over those homes in the way that is necessary, the staff must be built up and made available. Thirty-one other London boroughs will have to do exactly the same thing, because they have homes well outside their borders. Whereas formerly provision of this kind was centralised under the London County Council, 32 boroughs have to build up staff to take care of the very same thing.

There is a similar situation concerning welfare. We are now building up this tremendous issue where we have to try to solve the problem. We are having to buy buildings to house the homeless families after 1st April, because the local authorities will be statutorily obliged to do this. No longer will they be able to say that it is a matter for the London County Council. They must themselves accept responsibility immediately in April. It is, therefore, nonsense to say, as the hon. Member for Ilford, South (Mr. Cooper) suggested, that if the local authorities are given time to settle down, they will be all right.

My authority has a £22 million capital debt to which right hon. and hon. Gentlemen opposite contributed a great deal. I was a member of a deputation which saw the hon. Member for Gloucestershire, South (Mr. Corfield) when he was a member of the previous Government and put this problem of local government finance to him. We had many discussions about it, but after 12 months he still had not replied telling us what he was proposing to do. We saw him in September, 1962, and the first reply that we had from him was in September, 1963. This problem of local government finance has existed for a long time, and it is just not on for right hon. and hon. Gentlemen opposite to suggest that my Fight hon. Friend can deal with it within seven weeks of taking office.

I am sad that my right hon. Friend has not been able to suggest that on this occasion London should be treated differently because of the difficulties placed on it. I again appeal to him to find some way of ameliorating this harsh burden which is going to fall on London ratepayers, if not at the commencement of the Order, at some time in the not-too-distant future.

5.41 p.m.

Mr. John M. Temple (City of Chester)

We have had a useful debate on this complex subject of the General Grant Order, and I should like to welcome the Minister to our rather select deliberations. As I look round the Chamber, I see many familiar faces which have changed sides but which have a continuing interest in these Orders.

We are looking forward to an interesting winding-up speech from the hon. Member for Widnes (Mr. MacColl), because in days gone by he used to have to rely on his slide-rule and the long division sums which were checked by his right hon. Friend the Member for Fulham (Mr. M. Stewart), but now he has the great advantage of having the Cheshire County Council's computer behind him, and I have the great privilege of representing a part of that council's area.

One of the significant factors in this debate is that we have had so little time in which to consider the complexities of these Orders. I accept the Minister's statement that as far as he was concerned there was very little time indeed, but the hon. Member for Southall (Mr. Pargiter), who I regret has left the Chamber, rather let the cat out of the bag. The hon. Gentleman is Chairman of the County Councils Association and he told us that the negotiators from the local government side received the Ministry's calculations only one day before they were asked to discuss these matters departmentally. This is not good enough.

We, as Members of Parliament, have had precisely five days in which to digest these comparatively complicated matters. Those five days included the weekend, and it did not improve my weekend to have to settle down to a study of the General Grant Order on a Sunday and to have consultations with the Treasurer to the Cheshire County Council over the weekend. However, local authority officials are most accommodating where matters of this nature are involved, and in an emergency they will discuss these matters even at the weekend.

I shall try to pick up a few of the points which have been made during the debate, reinforce one or two minor points which I have discovered for myself with regard to this Order, then endeavour to draw attention to the sheer size of the expenditure which is embraced within this Order, and, finally, come to that very important point covered by a number of my hon. Friends, namely, the question of the relativity of grants to rates.

I tried to intervene when the hon. Member for Newcastle-upon-Tyne, East (Mr. Rhodes) was speaking, but he would not give way. He quoted what was said by my hon. Friend the Member for Gloucestershire, South (Mr. Corfield), and I should like to put it on the record that at c. 1330, on 19th December, 1962, I asked my hon. Friend, who was then the Parliamentary Secretary to the Ministry of Housing and Local Government, whether he could justify the sanctity of the relativity of grants to rates,—the 56.5 per cent.—and he was frank enough to say that he could not. In other words, the Government of that time never said that there was any particular sanctity in this relativity. Therefore, it is a matter which could have received attention by the present Government, and could have altered the whole picture.

I was glad to have the support of my hon. Friends the Members for the Isle of Wight (Mr. Woodnutt), Rye (Mr. Bryant Godman Irvine), Hemel Hempstead (Mr. Allason) and Ilford, South (Mr. Cooper). They all made the point that there was no justification whatsoever in the present circumstances; recognising that the rate burden would go up, for the Minister to stick so rigidly to this percentage—56.5 as it was before, and 55.1 as it is today—as if it were sanctified. A small shift in the percentage can effect a great change in the weighting of local government finance from the ratepayers' point of view.

My hon. Friend the Member for the Isle of Wight rightly drew attention to the special position of the Isle of Wight. We have only biennial debates on this important matter, and I remember that two years ago my hon. Friend drew attention to the special position of his constituency. I think that the point made by my hon. Friend should be looked into during the general review of local government finance which has been promised by the present Government as it was by the preceding one.

My hon. Friend the Member for Hemel Hempstead drew attention to another factor which I believe should be taken into account in formulating any further proposals with regard to the general grant. It is the factor of expanding population. In the present General Grant Order there are factors which have regard to a declining population, but I do not believe that there are any factors which have regard to an expanding one.

My hon. Friend the Member for Ilford, South, in a particularly powerful speech, said that the Minister had not got the Labour Party "off the hook" with regard to its approach to local government finance. I agree with my hon. Friend, and I shall return to this later, because what he particularly referred to was the proposed expansion of the educational service as set out in the Labour Party's election manifesto, and I suppose that even 60 or 70 days after the publication of the Manifesto we are entitled to presume that this is still official Labour Party policy.

Mr. Crossman indicated assent.

Mr. Temple

I am glad to see the Minister nodding. If that is the case, there is no proper provision in this grant order for the expansion of the educational service which was looked forward to by the Labour Party when it published its manifesto.

I said that I would pick up one or two what I regard as minor points in this Order. The first point to which I refer is that referred to by the hon. Member for Southall. He said that no Supplemental Grant Order had been brought forward for 1963–64, and he added—and I agree with him—that the local authorities had thereby lost about £l million in grants. I am not going to criticise the Minister for not bringing that forward. I am just drawing attention to that fact, and I suggest that when grant periods of two years are to be considered, the Supplemental Orders should cover the two years concerned. I realise that the Government cannot do that at the present time, but I believe that this matter should be considered during the major review of this problem.

With regard to the General Grant Order itself, there is this new factor of the aged and infirm. During his speech I asked the right hon. Gentleman how the financing of this matter had been handled. His answer was what I expected, that this figure had been taken into account without any allowance for any specific grant which was within that Order prior to it being taken within the General Grant Order.

It would appear that continuing this practice has reduced the relativity from 56.5 per cent. to 55.1 per cent. I can say that the local authority associations are very exercised about this matter. This means that in future, if this relativity is to be sancrosanct—it appears that the Labour Party think that it is at least for the next three years—then indeed the educational services will attract within the General Grant Order a grant of the proportion of only 55.1 per cent. rather than a figure of 56.5 per cent. This is a relatively important factor because the local authority associations are inclined to think that the cost of the aged and infirm service may well grow at a lesser rate than the growth of some other services within the General Grant Order. So I believe that this is another factor which should be looked at closely in the general review.

Having read the Explanatory Memorandum, I realised how wrong one can be. I thought at first—I put a marginal note in my own memorandum—that the £20 million special allowance for 1966–67 was a windfall. Having a little experience of the Treasury, I knew that these things just do not happen. Again the hon. Member for Southall let the cat out of the bag—the Minister confirmed this—that the £20 million was, in fact, slightly less than the figure which had been "lopped off" the local authority estimates. What the Minister did not say was in the first year, 1965–66, over £17 million had been lopped off and nothing supplemental was put into that Order. I do not accept the excuse that the Minister put forward, because it is a remarkably thin one, that it is rather more difficult to estimate what is to happen in the second year of the General Grant Order. Of course it may be more difficult, but was it not rather significant that in fact the £20 million was replaced in the second year when by that time the present Government hoped, perhaps, to be rid of some of their financial difficulties? I believe that is something which needs explanation.

Mr. Crossman

To get this fairly on the record, my hon. Friend the Member for Southall (Mr. Pargiter) was, of course, perfectly correct in saying that local authorities had to meet that in the second year. This happened on each of the three years when the Estimates had inevitably been under-estimated. We therefore decided that they had proved their point, and whereas in the first year the Estimates and the outcome had been virtually coincidental in the second year they had not. So it seemed reasonable to put in the £20 million because every probability existed that the actual outgoings would be roughly substantially at that level. There was no trick about this. I think it was fair play on our part to the local authorities to do so and an improvement on the practice of our predecessors. The second year period permitted the local authorities to over-spend and, therefore, to have to pay out of rates what should come out of the general grant.

Mr. Temple

I accept that the right hon. Gentleman had an argument, but I do not think that it was a very power- ful argument. I should like the hon. Member for Widnes to clear up whether the amounts which have been lopped off on this occasion are larger or smaller than the amounts lopped off in 1962 under a Conservative Administration. I have good reason to believe that on this occasion the Labour Government have lopped off considerably more than the figure which was lopped off in 1962 so that I do not think the Government will be able to claim on this occasion that they have been extraordinarily generous towards the local authorities.

What should concern the House tonight is the sheer size of the figures which we are discussing. I do not think it is profitable to go into the underlying factors within the formulae. I believe that those factors are extraordinarily carefully weighted. It may well be found that further refinements could be made, but I am convinced that in this country, under the grant system which we operate, we have the finest financial mechanism in the world for distributing central Government money to the local authorities. Therefore, I make my position and the position of my party perfectly clear when I say that we stand tour-square behind the system under which this General Grant Order was produced.

As I was saying, the sheer size of the figures is, I think, causing concern at present. There is a difference between 1962 and today. In 1962, when we were discussing this matter, there was an authoritative report from the Association of Municipal Corporations. I studied that report, and I made a comment during the debate that it was over-complacent with regard to the growth of local authority expenditure. But on the basis of what the local authorities were thinking at that time, I believe that the then Conservative Government were perfectly justied in taking up the position which they did. Very significantly, the local authority associations have now shifted their ground. The Association of Municipal Corporations has produced an extraordinarily valuable document, dated 29th October of this year, and entitled "Finances of Local Government." In this document concern is expressed that public expenditure, particularly local authority expenditure, is growing at a greater rate than productivity.

The County Councils Association take an almost identical view, and so we are in fact facing a different situation today than the situation which faced the then Government in 1962. All the reliable indicators point to a very rapid acceleration in the growth of local authority expenditure. Taking the figures within this Grant Order it is estimated that there will be an increase, in those seven years, up to 1967, of about 70 per cent. of the total amount of money required; the estimated expenditure under this Grant Order. But the Association of Municipal Corporations reckoned that local authority expenditure, that is rates plus grants, are in fact growing at the rate of 10 per cent. per annum cumulative at the present time.

The effect on the ratepayers—I think that this is accepted by hon. Members on both sides of the House—of this Order will be that they will face an increase in rates each year of something like 7½ per cent.; perhaps even 8 per cent. or 9 per cent. I should like the Government spokesman to tell us what is his best estimate of the increase in the rates which will face the ratepayers of this country as a result of this Order going through in the form in which it is produced tonight.

Very significantly, the Conservative Government were containing total public expenditure in the eight years up to 1961. Total Government expenditure relative to the gross national product was declining. During that period local government expenditure was rising relative to the growth of the gross national product. Today we face a situation where local government has to face an increasing expenditure which will go up almost automatically as a result of the various committees which have been set up for education, as a result of the Report of the Buchanan Committee on traffic in towns, and as a result of the redevelopment of our cities. Again we face this situation against a background of growth in expenditure which far exceeds the growth of rateable values and the growth in the gross national product.

I hope that I have made my point. That the whole economy of Britain will be affected by this rate of growth of local government expenditure and this General Grant Order is a major factor in the whole of local authority finance. By the time of the last General Election I should think that this was pretty well known to the Labour Party. Yet the Labour Party at that time in its Manifesto was consistently urging that more money should be spent on education. [HON. MEMBERS: "Hear, hear."] I am glad to hear those "Hear, hears", because that confirms exactly what I have said.

With the full knowledge of the effect of increased expenditure the Labour Party was urging further expenditure. But they did not say that there would be any delay in giving relief to ratepayers; in fact, they envisaged a situation in which they would give relief whilst carrying out this full investigation of local government finance. They said, however, in the explanatory memorandum to this Order that they would not be able to give any relief until the review had taken place, although in their manifesto they laid stress on the fact that they would be able to give early relief to ratepayers.

Mr. Crossman

We shall.

Mr. Temple

The right hon. Gentleman says, "We shall". I will explain to the House how this early relief could have been given. It could have been given by way of this General Grant Order, and passed by the House tonight. I do not think that there would have been any disagreement about it if the relativities in this Order had been shifted. This is the key to the whole situation. We know that the Government have the advantage of a computer behind them, but when I spoke to the Chief Finance Officer of the Cheshire County Council and asked whether he would have any difficulty in distributing this relief under the general grant formula, he said that there would be none.

So we know that there would have been no difficulty in distributing the money; the only question was whether the Government were prepared to give rather more money from central funds to local government in order that there should be relief for the ratepayers. I would have thought that this could be done far better within a general grant system than within a specific grant system, just because the general grant system has special regard to the sensitivity which is felt by local authorities when there is any increase in their burden.

I want to explain this factor of sensitivity, because it is important in this context. Let us suppose that the proportion was increased so that 65 per cent. was found by way of grant and 35 per cent. by way of rates. That is the position that has been put to me by the Association of Municipal Corporations which would take care of the teachers' salaries, which was the question raised by the Labour Party manifesto. Just because local authorities are raising a smaller proportion by way of rates, rating authorities will be even more sensitive to an overall increase in the total amount of money expended within the services taken care of by the Order. Therefore, so long as the general grant system is preserved in being, a shift of these relativities would give aid to ratepayers whilst preserving financial responsibility.

I have been wondering why there has been a delay in bringing forward this Order.

Mr. Crossman

Delay?

Mr. Temple

I am suspicious about delays. I went to the Vote Office day after day, saying "When is this General Grant Order expected?" and I was told, "It will be with us at 2.30 in the afternoon." Then I was told that an embargo had been placed on it. I wondered what was happening behind the scenes, and whether the Treasury had had a hand in the matter.

As a back bencher I have had occasion to be suspicious of the Treasury in dealing with financial matters in connection with local government. Was it the Chancellor of the Exchequer who sent a note to the people taking part in these negotiations to the effect that there was an upper limit to the figure which could be agreed? Was it the First Secretary, the economic Poo-Bah of the Government, who has now demoted the Chancellor of the Exchequer? I can hardly believe that it could be the First Secretary, because I have always known him to be a very open-handed man. We welcome his brother in our discussions today.

I always welcome the First Secretary as being expansive. If this question about relativities had been put to him, and it had been explained to him that through this General Grant Order a much happier situation could have been brought about for the ratepayers, I am sure that the right hon. Gentleman would have seen to it. But there has been such a proliferation of Ministries under the present Government that the First Secretary has no doubt not even heard about these matters. He has probably not heard that his right hon. Friend the Chancellor has placed an embargo on a higher figure which would have helped local authorities and ratepayers.

When next May comes round ratepayers will want to know why the Government have not given further relief, which they could perfectly well have done through an Order of this nature. I am afraid that ratepayers will suffer and I am sure that this Order will be a very big disappointment to them.

May I conclude with a few words about the magnitude of local government finance today. Two years ago the expenditure envisaged within this type of Order broke through the figure of £1,000 million. That figure is an extraordinarily high one from anybody's point of view, but tonight we have an estimated expenditure for 1966–67 of £1,340 million—a very significant uplift. I estimate that the total United Kingdom local government expenditure taking rates and grants together, will be £3,000 million in 1966–67. At that stage local government expenditure of grants and rates will be considerably in excess of our whole defence expenditure.

It is, therefore, clear that we are not discussing something small; we are discussing something which is very large and which I believe bankers across the world are watching very closely. Unless there is sensible control of public finance there will not be much confidence in our economy.

I reinforce the question put to the right hon. Gentleman by my hon. Friend the Member for Ilford, South (Mr. Cooper): where do the Government stand in regard to the increase in education expenditure? The Labour Party election manifesto was very clear on this matter. I read it closely. I hope that the right hon. Gentleman keeps it under his pillow and reminds himself what the Labour Party said in it, namely, Our country's 'investment in people' is still tragically inadequate.

Mr. Crossman

Hear hear.

Mr. Temple

All the estimates within this Order were based on the realistic policies of the Conservative Government, and if the right hon. Gentleman is now saying that his policy is to increase the amount of education expenditure, what he is really doing is bringing before us tonight a document which will prove to be extraordinarily misleading. More than that, the Order will have the effect of placing a much heavier burden on ratepayers, because an increase in the services cannot be taken account of in a supplementary grant Order.

The Conservative Party is extraordinarily proud of the fact that it introduced the general grant system. I believe that the system is immensely valuable for forward forecasting. I was surprised when, at the commencement of his speech, the Minister sneered at forward forecasting. He said, "How can we look two years ahead?". That is exactly what I have been saying about the Labour Party for a long time; they cannot look even 12 months ahead. Two years they say is far too long. But that is what we tried to do through our general grant system. We know now that the Labour Party has adopted a policy under which it intends to reverse the sensible forward forecasting which we always adopted, and return to a system of percentage grants, which is not wanted by the electorate or by the local authority associations.

The system of local government finance which we introduced will stand the test of time. I have said that the Labour Party could well have come to the aid of the ratepayers tonight. I trust that the Parliamentary Secretary will explain just why the Government did not decide to give help to the ratepayers through the general grant system which they could certainly have done through this Order.

6.10 p.m.

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

The hon. Members for the City of Chester (Mr. Temple) and for Gloucestershire, South (Mr. Corfield) have pointed out that these biennial occasions on which we discuss the general grant always have something about them of the air of an old boys' reunion. The few of us who are devotees to this extremely exotic art discuss things that most people probably find quite incomprehensible.

I am malicious enough to share with the hon. Member for the City of Chester some delight in thinking that my right hon. Friend, who only a year ago probably thought that general grant was an American President, now has to face the grim realities of sparsity factors, and the rest. It is, in a way, sad that something as human as local government expenditure on the welfare of people should be so closely linked with these abstruse and quite incomprehensible calculations.

Both hon. Members quoted a good deal from my own speech of two years ago, and I am, of course, happy to think that this has now become common form, to which people will refer in future years in order to get ideas for debate. One thing that the hon. Member for the City of Chester said last time but has not mentioned today—and it would have been, perhaps, a little more generous if he had—was that it should seem necessary to discuss these complicated matters late at night. He complained that it was monstrous that the Government should be putting on this vitally important part of the Government expenditure after ten o'clock. That is something that tonight——

Mr. Temple

I am grateful to the hon. Gentleman for giving way, and so giving me the chance of putting things right. In 1963 we were discussing a Supplemental Grant Order, which is customarily taken at a late hour. In 1962 we started our deliberations immediately after Question Time. Perhaps the hon. Member will check that.

Mr. MacColl

I did check it, because I took the precaution to read the hon. Gentleman's speech. It is, of course, desirable that we should discuss these matters at a reasonable time——

Mr. Corfield

The hon. Gentleman is wrong in what he has said. The debate on that occasion finished at 6.22 p.m.—not a.m.

Mr. MacColl

The debate to which I refer, in which the hon. Gentleman spoke, was at ten o'clock. It may have been in the later year—I accept that at once, of course.

We have from time to time had interesting discussions about the welfare and efficiency of our computers. The hon. Gentleman should congratulate his distinguished constituent on the great contribution he made to the work of calculating local government expenditure. I am told, though, that it is not true that the introduction of computers has been uniformly successful. I think that the hon. Gentleman found that at times they were not always right, and had to be rather carefully checked.

It is a comment on our system of local government grant that these marvellous instruments that can translate the Bible into Russian, or compose an aria in grand opera, can get completely hysterical when asked to calculate what amount of grant should be given to a county council. It is time that we cleaned up the mess that we have got into with this general grant. The hon. Gentleman and other hon. Members have said how proud they are to have introduced general grant, yet not one of them spoke without some complaint about the way in which things had been working, and the trouble there had been in reaching figures.

That, to some extent, is part of the answer to the question: why did we not do more in this General Grant Order to meet some of the difficulties that face local authorities? A number of suggestions were made. Some hon. Members asked why we did not just increase the percentage of approved expenditure in order to get an increased grant. One obvious answer to that is that if we were rigidly limited in the maximum grant we could distribute we would be limited in regard to the weighting factors in order to ensure that the money went where it was wanted. One also had to consider the effect on the rate deficiency grant, otherwise some local authorities might find themselves worse off than they were before.

The hon. Member for Gloucestershire, South illustrated this when he asked what had been happening about urban renewal. This is a slow business. It is a matter of revenue, not of capital investment. It is the loan charges item that gets into the approved expenditure for the general grant. But there is no means of ensuring that any one authority that indulges in urban renewal gets back the money in grant. This is because the money goes into the whole pool that is allocated to local authorities without any regard to whether or not they are going in for urban renewal. That is one of the difficulties of merely increasing the aggregate of general grant. It is necessary to look at the whole interrelationship of local government finance and the workings of the grant system.

The hon. Member for the Isle of Wight (Mr. Woodnutt), who complained about this uncertainty, answered himself, because he proceeded to demand changes in the weighting factors. In particular, he asked why we had not pushed on with the review of the weighting factors, and quoted the case of the density calculations which he more or less implied were "fiddles". He implied that local authorities use different types of road measuring to effect their weighting factor for density per mile of road—in itself sufficient evidence of the extraordinary inadequacy of the weighting factors upon which we must be dependent in order to distribute the money going to grant.

We have been asked why we have not done something bold and decisive in seven weeks. We are asked to change the whole basis of the weighting factor. In this connection, I must draw attention to paragraph 30 of the Report relating to the Order. After referring to paragraph 28 of the 1962 Report, it continues: … it was stated that the formula was to be thoroughly reviewed. I just pause to point out that it was not until 1962 that the previous Government began td think of reviewing the working of the grant, and that we are expected to have solved all these problems in seven weeks. In 1962, four years after the introduction of the Local Government Act, 1958, the previous Government began, for the first time, a review of the weighting factors.

The Report goes on: That review was overtaken by the previous Government's general review of local government finance"— That was not our general review but that of the previous Government—changing their mind under political pressure and deciding that there would have to be a general review. So the present Government came in to find that the review of the weighting factors was in cold storage whilst the general review was taking place.

The paragraph goes on: … and after consultation with the representatives of the local authorities the Government"— that is, this Government— has decided that in advance of conclusions being reached on the basis of its own examination of local government finance no changes should be made in the weightings, beyond those required to ensure, as far as possible, that proportionately the same amounts are distributed … In other words, this standstill, which had been begun by the previous Government, was accepted by this Government. Until the general review had taken place we felt that it was not wise to have a partial review which, clearly, would hold up the whole proceedings because of the need to rediscuss and renegotiate with the local authority associations.

The hon. Members complained about the lack of time they had had to consider this Order and the unfairness of having this complicated business thrust at them at short notice. I quite agree and I thoroughly sympathise. I do not take a different view in office from that taken in opposition, but the position would have been far worse if we had tried, during this seven weeks, to start on a fundamental revision of the machinery for allocating the grant.

So that local authorities should have time to prepare their estimates, and to know what grant would be produced, we had to go on with the existing increase, accept the existing figures and prepare the General Grant Order and rush it through with inadequate notice. There is nothing else we could do if we were to treat the local authorities fairly.

My hon. Friend the Member for Southall (Mr. Pargiter) made some extremely fair and pungent criticisms—as is his duty as a very prominent member of the County Councils Association—of the workings of the whole of our discussions about general grant. I can tell him that I am sure my right hon. Friend will want to look very carefully at the whole machinery for consultation and to do everything that can be done to be quite certain—not necessarily that we are agreed, because there would not be much fun in negotiating if we always agreed —that full weight is given to representations by the associations.

My hon. Friend the Member for Southall and my hon. Friend the Member for Shoreditch and Finsbury (Mr. R. W. Brown) have this common approach to these problems. They are the unfortunate people who have to try to work these things which the last Government produced. They have to tackle this problem and they have the ever-present problem of the growing burden on the rates. I know that my right hon. Friend is acutely aware of the need to take into account their problems.

My hon. Friend the Member for Southall also complained that we were too rigid in our control. He was not distinguishing in this respect between this Government and the last, but suggested that Whitehall was too rigid and inflexible in negotiations. That made for a little irony when the hon. Member for Ilford, South (Mr. Cooper) said what a wonderful thing the general grant was because it provided freedom and independence for local authorities. The truth is that in any system of grant where central Government funds are providing more than half the grant it is extremely difficult to avoid having a great deal of discussion and negotiation before agreeing about how much to give.

The hon. Member for Gloucestershire, South also asked what had happened to child care expenditure. I understand that the position is that in the Increase Order this expenditure under Section 1 of the 1963 Act appeared separately because it was an entirely new thing. Therefore, we could measure the impact on the estimates, but, once a year has passed in which child care expenditure, including expenditure under Section 1, is merged in one operation, and it is partly for preventive work and partly for supervision, it becomes difficult to say which are the particular increases due to Section 1. The increases then are in the general increase of expenditure on child care.

I think that I am right in saying—this is not a calculation of the computer, but is my own arithmetic—that that increase is £3 million.

Mr. Corfield

I am not trying to catch out the hon. Gentleman, because I remember how difficult it is to keep all these things in one's mind, but I cannot find reference to this in the Increase Order, although it may be in the Scottish Order.

Mr. MacColl

It is in the Increase Order for England for last year and in the Scottish Order this time. Once we have had a complete year of a new service it is difficult to winkle out the amount spent on that particular service.

My hon. Friend the Member for Southall asked how far the recent increases due to increases in taxation and other financial changes are included in the General Grant Order. The answer is that increases for the tax on petrol have been included because that is a basic increase which is expected to continue unless there is a change in legislation. The rate of interest—this was done also by the previous Government—is put in the Increase Order because we can measure only to the end of the year the average rate of interest. We hope that in the new year the rates of interest will begin to fall. If they do not there will have to be another Increase Order to meet them.

Another point raised was why could not something be done about rising population as a weight as well as falling population? I use the same caveat here I used when quoting paragraph 30, that all this must go into a general review. I am advised that there is no evidence that an expanding authority finds this so difficult as an authority with a falling population. If the overheads are separated, when more people come into the district expenses do not go up as they do when there is a falling population and the same staff and facilities have to be employed.

Questions were continually asked about education. I think that it is perfectly clear that in so far as educational expenditure has been estimated and as in the local authority estimate such expenditure has been regarded as going up, it is included on the estimate covered by the grant. We certainly hope there will be considerable changes in education. If there are, that would require further legislation. One of the things which will be included will be the impact on local authority finances.

I am sure that the hon. Member for Gloucestershire, South will agree that we cannot get into the general grant hypothetical expenditure. He said that to me when I was trying to get him to put in Section 1 expenditure shortly after the Children and Young Persons' Act, 1963, was passed. He said that it was only a Bill and it could not be included. That will be covered in the "general review of education policy."

My right hon. Friend looked at the rate burden, mentioned by the hon. Member, and said that about 5 per cent. or 6 per cent. per annum was required. If the hon. Member thinks that this is due to prodigality by the present Government—although I do not want to rub in the point—I cannot help asking why nothing was done by the last Government to meet this problem. In 1962, already the impact was being felt. The time to meet the ratepayers' problems was when it could be done in a situation in which one could manœuvre —at the time of the last Order and not under the present Order when we are under pressure.

Mr. Temple

The hon. Gentleman keeps asking why we did not do these things. I explained that the local authority associations, in 1962, were relatively complacent about the situation. Today, the reverse is true. That is why it was right to do what we did then and wrong to do what the Government are doing now.

Mr. MacColl

If the local authority associations were reasonably complacent in 1962, they were the only people who were complacent. We were having debates in this House about the impact on local government finances. The truth is that the last Government hoped to get over the difficulty and hoped that they would not have to do anything about it. They were muddled and confused, they changed their minds at the Blackpool conference, and left us with a welter of indecision which will take a long time to resolve by producing a final constructive answer to the problem.

That is not to say that we have done nothing about it. We were asked to compare the amount which had been lopped off the local authority estimates by the Government. The position is that in 1962 for the first year the amount lopped off was 1.14 per cent. By the second year it was 1.33 per cent., which illustrates that what had been happening was that local authorities had been estimating more for the second year but had not been believed and the estimates had been cut down, although the turnout often showed that they were fairly accurate. We in our first year cut off 1.39 per cent.

Faced with coming in, as we did, in the middle of these discussions, and with the whole of the financial problems, we had to cut off 1.39 per cent. But for the second year, which had gone up under the previous Government——

Mr. Corfield

Am I not right in saying that the object of the cut-back is purely on the basis of his Department, or his advisers, not being satisfied that the local authorities are able to spend that amount? So the question of what financial situation the Government may or may not have been faced with does not really arise.

Mr. MacColl

The hon. Member for Gloucestershire, South is, I think, perfectly right, but the hon. Member for City of Chester was on very different lines. He was saying that the Treasury, being faceless men, ruthlessly cut down the expenditure because they wanted to avoid the grant. I think that that is not far wrong. I do not know whether I am allowed to say that now, but, at any rate, I said it last year.

But what has happened is that instead of cutting more off the second year—and this is the important point—we are only to cut off 0.05 per cent. instead of 1.57 per cent. which is what it would have been if we had followed the previous policy. Therefore, although my hon. Friend the Member for Southall is quite right in saying this is not largesse—it is money earned—it is really a substantial help to the local authorities and is based on the principle that while we are reviewing the position and trying to work out a more tolerable and fairer system of grant, we do not want the local authorities to be handicapped.

We hope that it may very well be that by the second year we shall have got something to produce, but it is a slow business to get it through, and one cannot be too optimistic because parliamentary procedure and consultations take a long time. But if we do not get it through, at least we have given a token of our good will to local authorities and an indication that we want them to go on developing the efficiency of their services.

Mr. Corfield

The hon. Gentleman has not answered the main question. All he has said about whether or not we could alter the relativities was to select the one planning grant, with which I fully agree with him is slightly in a class of its own, whereas the main weight of this order falls upon education. Education, with the health services, comes, I think, to ten-elevenths of the total and the formulae are designed very largely on the basis of the educational needs so as to distribute the main bulk of this in relation to the needs for education. So there is really no reason why he could not have increased the 56.6 per cent. or the 55.1 per cent. and given more money to the local authorities, and he has not faced that point.

Mr. MacColl

I did not take planning as a chief debating point. I took it because it was the only specific point that the hon. Gentleman raised. If we take the question of education, we have the Member for Rye (Mr. Bryant Godman Irvine) asking why his area got no more grant when it had a very large elderly population. The answer is that it has very few children and that is why the grant is low. The question of the repercussion of these changes on different local authorities has to be very carefully examined and renegotiated with the authorities otherwise we should have been faced with extremely harsh criticism from the people who felt that they had got the wrong end of the stick.

The hon. Gentleman has been roughed up by the hon. Member for Bournemouth, West (Sir J. Eden) in his day for not having been sufficiently considerate to people in retired areas, but the whole of the Rating (Interim Relief) Act was brought in to deal with the problem of retired people. We cannot just lightheartedly go away and say we think it is all right, that it will work out more or less, unless we can be clear of what is happening. We have to give a chance to the authorities to express their views. When the computer produced the results of the effects we would have had to get their views. That would have held the Order up. We cannot afford to play about any longer with the local authorities. We must get the Order through and we have had to have this standstill arrangement for next year.

Question put and agreed to.

Resolved,

That the General Grant Order 1964, dated 8th December 1964, a copy of which was laid before this House on 10th December, be approved.

General Grant (Increase) Order 1964, dated 4th December 1964, [copy laid before the House, 9th December] approved. —[Mr. Crossman.]