LOCAL GOVERNMENT EXPENDI TURE (RATING SYSTEM)

HC Deb 20 March 1964 vol 691 cc1847-948

11.5 a.m.

Dr. Horace King (Southampton, Itchen)

I beg to move, That this House recognises that the present system of financing local government expenditure is inequitable, welcomes the Government's setting up a Committee to inquire into some aspects of the rating system, but urges both that more of that part of local government expenditure which is nationally determined should be nationally financed, and also that a thorough investigation be made into alternative and fairer methods of raising local taxation than the present rates based on property I regard it as a privilege that a back bencher should have the opportunity of initiating a debate on an important subject, and I should like to take this opportunity—I am sure that hon. Members on both sides of the House would wish to join me—of paying tribute to the Library staff and to its Research Department for their unfailing and courteous help whenever any important topic is before the House.

Perhaps I might begin by paying tribute to those citizens who serve Britain—men and women by the thousand—in local government. Many hon. Members on both sides of the House, including the Minister who I am very pleased to see present, graduated to this place from local councils, and they especially would know the fine unpaid work and service given to the community by councillors and aldermen under our present set-up by which Parliament enacts the Measures, and local authorities carry them out. Councillors and councils may vary in quality, ability, and efficiency, but their battles at local level, inside the framework of national policy, are quite as fierce and as fairly carried out as they are in this Chamber. Britain has a right to be proud of its voluntary workers in local government, and it is at least partly on their behalf that I raise this matter today.

But their work would be impossible if it was not matched by the skill of the professional administrators in local government, men and women who match in quality the best civil servants. I say that deliberately this morning, because in my contacts with central government and the civil service apparatus I have found an attitude to local administrators, both professional and voluntary, which smacks of superiority, illustrated by the ironic catch phrase, "Whitehall knows best". I believe that attitude to be ill-founded. The quality and character of the professional men in local government bears comparison with the character and quality of our civil servants—and I for one am proud of both groups of administrators.

I consider that local government, in which I passionately believe, is in danger for a number of reasons at the present time. The old structure is creaking, and I believe that we must find a twentieth-century way of organising local government. The Boundary Commission must by now have discovered as it wanders round the country that the mere adjustment of boundaries will not cope with the problem of matching the present functional and structural set-up to the needs of the second half of this century, and yesterday's South-East Report throws a sharp light on the need for matching a radical report with some radical adjustments.

I believe, however, that the gravest danger to local government comes from the present antiquated method of raising local government finance and the crippling burden which rate increases impose on considerable sections of the community—and I am not merely thinking of the hardships imposed on a very narrow group.

It is because I believe in local government, with its intimacy, its immediateness, its closeness to the citizen and his problems, and because I want it to survive as a vital part of democracy that I think the time is ripe for a radical reform of the method of financing local government.

Some of us, on both sides of the House, have been saying it here for quite a long time. It was once said that it takes 10 years for an idea to percolate through and to be accepted by the House. In debate after debate and in Motion after Motion hon. Members on both sides, and certainly my own Front Bench—I remember an important Motion which was moved and seconded on the other side years ago—have urged the Government to do something about it. For years we were fobbed off with all too easy answers, and the easiest answer of all is, "We accept that there is a problem, but there is no answer to it."

First the problem itself. Local government expenditure is borne, roughly, 45 per cent. by the local authority and 55 per cent. by the State. Even inside that rough percentage there are disparities which are inequitable. The pioneers of the Labour Party went to jail in Poplar, as my right hon. Friend the Member for Poplar (Mr. Key) who has served that constituency so faithfully and well will remember, because the old rating system was grossly unfair, because Poplar carried financial burdens which its citizens were too poor to bear and was carrying even some of the expenditure which ought to have been borne in equity by the richer boroughs of London, because the services were common to all.

Government after Government have tackled the problem of the inequity of the rating structure, the rating system, by a series of reforms which have sought to ease the unfair incidence of rate burdens by varying the central grants according to a number of factors—for example, the number of children, or, as in the Ministers' own latest Measure, the number of old folk. These adjustments, however, give only rough justice. When we think, for example, that the Exchequer equalisation grant gave some millions of pounds to the county council of which I am a member at a time when nothing was given to the blitzed town of Southampton which I represent in this House, or when we think that the Government's new Bill helps rich old ratepayers in some areas more than it helps poor old ratepayers anywhere, or that the percentage of central Government aid to local authorities varies between 51 per cent. and 60 per cent. and that some are better off and some worse off under the general grant than under the percentage grant—by the same token the overall percentage is the same—we realise that, looking at anomalies like this, every Government since the time of Poplar has been attempting to deal with some aspect or other of the unfairness of the rating system without solving it entirely. The rate deficiency grant itself is palpable evidence of the injustice of the rating system.

Why has this first Elizabethan method of taxation survived so long? First, because rates are convenient to assess, and now one might say, since the Government's excellent Measure introducing new assessments two or three years ago, are as near as possible scientific and fair. But having said that, we have seen during the last 18 months or so some shocking anomalies in the new assessments. The average treatment of assessments may be all right, but inside what we regard as a piece of pure science there are now, in the national system of assessments, anomalies, examples of which many hon. Members can produce,

The Government's latest Bill for dealing with this problem has been condemned by the County Councils Association, which consists largely of hon. Members opposite, as tinkering with the problem. On 10th December last year, The Times said: It is ill-prepared, introduces at least one objectionable principle, and threatens to breed as much discontent as it is supposed to remove. As we tackle the problem by tinkering with it, we solve one anomaly and create another.

Then, again, rates are easy to collect, and the cost of collection is low. I must confess that I have always been a bit amused with the argument put forward quite seriously since the White Paper was introduced that because few people go to gaol for not paying rates there must be something good about the rating system. That is a defeatist argument. It is an encouragement to Poujardism. Another advantage of the rates is that they cannot be avoided. Everything is quite clear and simple about them. This is why they are so dear to the hearts of borough and country treasurers.

The figures usually given by the defenders of the present system as late as the A.M.C. Report on the question last year, is that incomes have gone up some 3½ times since 1939 and that rates have gone up only three times, so that, on the whole, ratepayers are better off than they were in 1939, and have much better services than in 1939. Taxes, on the other hand, have gone up five or six times in that period. Indeed, it was this particular and fallacious argument behind which the then Minister of Housing and Local Government sheltered when he introduced the general grant. It formed the whole of paragraph 1 of the White Paper introducing the grant. Now, if everyone's income had gone up by the national average increase and if every rate had gone by to the national average increase, then, of course, this argument might have validity, though not complete validity.

We know, however, that that is not true. There is no such thing as the average man. Teachers teach individual children, and not the average child. People are different, and inside the average figures is a confused set of anomalies. Even now, despite all central Government attempts at levelling, rates depend, among other things, on where one lives. This is a remit of the Allen Committee. Bournemouth's rates, for example, are lower than Hampshire's rates, and, incidentally, Bournemouth is to receive relief under the Rating Relief Bill.

The disparity between the two rates is not a measure of the administrative skill of Bournemouth councillors as compared with that of Hampshire's councillors. It arises from the nature of the services which a local authority has to provide, the difference between urban and rural government, and the differing needs of the different ages and social pattern of groups of citizens inside the community.

I am glad that the Allen Committee is going to examine that aspect of the question—the geographical disparity, the disparity between authority and authority for a variety of reasons. It is important. I think that the work of the late Aneurin Bevan in this field was gigantic. Later reforms have sometimes improved on the work of Aneurin Bevan when he was Minister of Health and sometimes, possibly, taken away from it. It is a simple fact that varying groups of county and borough treasurers are at any moment to press for reforms of the central grant system because the present system weighs heavily on its group. My own county treasurer is one of such a group at the moment pressing the claims of rapidly expanding areas like Hampshire.

All this, however, is just part of a problem which is much more fundamental. It is a truism to say that whereas Income Tax is a progressive tax, rating is a regressive tax. That the more income one has, the more Income Tax one pays, is true. That the more income one has the more rates one pays is manifestly untrue. Rates are levied on the kind of house one lives in. They are a special tax on property, but the relation between the size of one's house and one's income is a very crude one. Those with larger families need larger houses than those with small families to no families at all, earning the same income.

Although they are entitled in this democratic and free society to vote for the local council, many people do so without paying rates at all. I illustrated these points in a debate in my own council by comparing the occupants of five houses of which I knew in an area in Hampshire, the properties being exactly the same.

One was inhabited by a dock worker who had four children. It is true that when he worked in the docks he got the average national wage increases, but he was not always in work. The next house was occupied by a retired business manager with a pension which had been allocated about 1945 or 1946 and had not changed. In the next house there were five wage earners, each earning good wages and each of whom had benefited by rises in wages. Next door was an old-age pensioner and his wife. These were taken care of by National Assistance, always provided that they had no other income.

When we discuss the hardships which confront people today, I think especially of the hardships of those just above the National Assistance scale. If they have no other income than National Assistance, they will be helped with their rates—this distresses me very much—they are among those people—their existence is one of the most distressing features of our time—who are too proud to ask for National Assistance, even though they are entitled to it. The fifth of the five houses was occupied by a salaried worker who had had no increase in salary for the last eight or nine years.

There were, therefore, five different sets of people in fantastically different circumstances, with fantastically different abilities to pay the tax which the locality imposed; and all were paying the same tax. Even that is not strictly true, because one had had the wit and ingenuity to transform an old out-house into a kitchen, and because he had devoted his skill to doing that he was assessed for rates at a higher figure than the others. One of the penal features about rating is that a person is punished for improving his property.

Income Tax increases every year in its yield with the rise in incomes, even if the rate is the same. So the same rate of tax may be levied year after year and a man may grumble because he has to pay more, but he knows that he is receiving more money with which to pay it. That is not true of rates. I tremble to think what would happen to any Chancellor of the Exchequer, Tory or Socialist, if each year he had to make a powerful and steady increase in the rate of Income Tax such as local authority "Chancellors" have to do in respect of rates.

Let me illustrate, again taking an example from Hampshire. This year the rate-borne expenditure in Hampshire has gone up by 14½ per cent. The rateable value in Hampshire has gone up by 4½ per cent. So somehow the Hampshire local authority must obtain an extra 10 per cent. from its ratepayers this year, and it can do so only by increasing the rate poundage. I think that this is the heart of the reason for the old saying that people pay their taxes in sorrow and their rates in anger. This increase in rate-borne expenditure does not happen only this year. It happens every year and it must go on happening unless we reform the system radically.

I am not good at figures and I rarely use them, but I must give the House one set of figures. Local government expenditure is increasing at present every year by between 7 per cent. and 10 per cent. This year the average for 238 local authorities is 7.8 per cent. Last year it was 9.9 per cent. The year before it was 8.6 per cent. and the year before that is was 7.5 per cent. Already, in four years, we have an increase in rate-borne expenditure of over 30 per cent. and this at a time when, as I have said, the rateable property is increasing in value only slightly each year; and this at a time when the national income is increasing only at the rate of 3 per cent. to 4 per cent.

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

The hon. Member is making a clear and lucid speech. But I think that it would help other participants in this debate if I gave an approximate figure for the factor of increasing rateable value. I believe that it is something between 2 per cent. and 2½ per gent. per annum which has, therefore, to come off the aggregate increase to which the hon. Gentleman refers. He did refer to this increase in rateable value; he did not give a figure. I thought that it would help if I gave a scale of magnitude.

Dr. King

I am grateful to the Minister who has reinforced my case. The figure in Hampshire this year will be 4½ per cent. The national figure is 2 per cent. The increase in rate-borne expenditure is between 7 per cent. and 10 per cent. and the increasing rateable value 2 per cent. to 2½ per cent.

Sir K. Joseph

Additional.

Dr. King

Exactly, that is part of my case. If the, two figures matched, half of the problem would disappear, but they never have matched.

Even if all rates were fairly levied up and down the country, even if everyone paid according to his capacity to pay, we should still be faced with the obvious fact that year by year there would be a terrific increase in rate poundage. That breeds resistance not merely to paying rates but to the purpose for which they are paid.

We cannot solve this problem by cutting local authority expenditure. I hope that the House will not mistake me. I believe it to be the duty of councillors to scrutinise every penny of local government expenditure. Professional staff, whose salaries are conveniently adjusted time after time to meet rises in the cost of living, have not the same interest in watching every penny of the rates as has an elected representative of the ratepayers. I believe it to be the duty of local government to be efficient and anything which improves the efficiency of local government should have the support of people of all parties.

I believe that local government must give value for money and I shall have something to say about that later. But, given all the efficiency in the world, and with all the skill and ability in administering local government, that alone will not solve the problem. We cannot solve this problem as one or two "backwoodsmen" would attempt to solve it, by making council house tenants bear the burden of civic improvement. There is room for manoeuvre inside the political parties and the structure of local government. There are differences of policy between parties in local government. The Socialist battle for the leadership and control of councils and the Tories battle for similar control, both for very understandable reasons which make sense to each of us. But even the room for manoeuvre is limited in its financial effects. The amount of financial benefit gained by pursuing one policy or the other is infinitesimal compared with the basic issue at stake in this debate.

Let me illustrate. Every local authority has a police force. The size of the force is determined nationally. Most local forces are below strength and are trying feverishly to attain the nationally fixed establishment. Police pay is nationally fixed. No super-efficient councillor can save his authority's rates by reducing the salaries of the policemen, or by sacking any of them. Local authorities and police chiefs have the job of making their police forces the most efficient in the country, if they can. But most of the cost involved is determined nationally. The same is true of local government staff salaries. Every chief officer, every clerk, every road man, every caretaker and cleaner is paid at a rate which is arrived at either nationally or regionally.

Turning to education, which represents over half the cost of local services, we find that practically every item in the education budget is fixed nationally. The salaries of teachers are fixed by the Burnham Committee, or whatever new system the Minister will set up in place of the Burnham Committee. At present the Minister is seeking to establish for himself a place on the Committee as of right. He has previously turned down salaries negotiated between local authorities and teachers and imposed salaries on the teaching profession centrally from Whitehall.

Whatever we think about this present move of the Minister of Education into the Burnham Committee, it is quite certain that the power of the individual on the local authority to modify teachers' salaries in the country is practically nil. The number of teachers is fixed nationally by quota. The school building programme is fixed nationally. Every authority is pleading with the Minister to allow it to have more building programmes than the Minister is prepared to allow. Even the minor works programme of school building is fixed nationally. The cost of school places is fixed nationally and the age of entering and leaving school is fixed nationally. The size of playing fields and classrooms, the number of lavatories, the basis of university awards, are all fixed nationally.

No local authority initiative or lack of it can tamper with any of these things. In some fields of educational activity it is even worse. In certain aspects of further education and training of teachers the total national cost is arrived at and the local authorities are sent a bill by the central authority. For my authority this year it is over a quarter of a million pounds. No county councillor could touch a penny of that quarter of a million; it is a national allocation. It seems fantastic that nationally allocated charges such as that should not be met by the nation as a whole.

The central authority is always imposing new burdens on the local authority. When the country decides to have clean air the local authority has to carry the burden. When we have a magnificent Mental Health Act the local authorities are faced with rapidly increasing charges for mental health services. Against all this background I urge first a simple reform, to increase the proportion of local expenditure to be met by the central Government. Both the A.M.C. and the C.C.A. have examined this question, the A.M.C. rather inadequately. The C.C.A. examined every aspect of rating reform and came down fairly and squarely in suggesting that the only solution was to give greater aid from the State to the locality.

There is a built-in natural resistance to this proposal by many workers in local government. Of course the Treasury speaks of it, as Red Indians would say, with a forked tongue. It says that the initiative would go and that already Whitehall has too much to say but would have a greater say in local affairs. This fear, especially by the teaching profession, is particularly understandable when they remember that the local education authorities stood by them as friends when they were attacked by the Minister. This was the fear of the local authorities when university awards and the financing of awards were taken out of their hands. Some of us wanted to make the central Government pay not only for university awards, but also for all further education awards, but local authorities resisted that because they thought they would be losing local autonomy.

I have tried to show that most of local government finance is nationally determined. It, therefore, should be nationally financed to a greater extent. This simple truth has penetrated the not so progressive minds of Aims of Industry. If I had time I should quote from the only enlightened document it has ever produced, a document called "The Ratepayer's Burden," in which it advocates the transfer of the whole cost of education to the central Exchequer. The simplest method of increasing the national contribution by the central Government would be to raise the general grant. Roughly the percentage which existed before the general grant was introduced has been about the same since the war. There is nothing sacrosanct about 60 per cent. If national taxation is fairer than local taxation, and most of us believe it is, the case for increasing national and reducing local taxation is overwhelming.

There are various other ways of achieving this. We might lift the salaries, which are nationally fixed, of policemen, firemen, local government staff and teachers on to the Exchequer. Or we might lift the whole of one service—for example, as has been can- vassed from both sides of the House, the whole costly education service—on to the shoulders of the nation because it is a national service. I am certain that some of these suggestions will emerge in the debate which I hope will follow my speech. I have not time to make a case for any of them, although it is easy to do so.

There are the inequities of the whole road burden, for example, and its unfairness to different kinds of local authority. We might take loan charges on school buildings which are a very heavy burden and pass them to the Exchequer since school building is a national programme nationally decided. The Society of Municipal Treasurers and Accountants in at least one article in its Journal made the revolutionary suggestion that we should take the whole of local government finance and transfer it to the central authority. When one examines it one finds that it is not such a foolish suggestion as it might at first seem, though it is far too radical to commend itself to the average Briton, who likes to move slowly and pragmatically.

The second reform which is needed is reform of the rating system itself. For years the Government have sheltered behind the intractable nature of this problem. The question is whether we can find a fairer method of levying local taxes. I have urged in this House and elsewhere a local income tax, but over the years I have come to believe, with regret, that it is a non-starter. If it were assessed locally it would mean new administrative costs. Local inhabitants know that Income Tax officials can be relied upon to keep the confidences of the taxpayer. We pay tribute to this noble body of men, much as we dislike their effect on us. The financial position of the taxpayer is a matter of confidence which is never broken.

Many fear that if tax were assessed locally a local councillor would know how much income his neighbours have and so on. I think it is an unfounded fear but it certainly exists.

Mr. Denis Howell (Birmingham, Small Heath)

It is absolute rubbish.

Dr. King

It may be rubbish—but it is the view of many citizens. If income tax were levied locally there would be the difficulty of knowing to what authority the tax should be paid, where the man lives or works, or both. There would be the difficulty of how to deal with company profits and dividends. Having levied local income tax, we should have to distribute it according to some national formula to local authorities if we were not to be unfair to some of them. If one accepts the praiseworthy objective of such a tax it seems that the simplest way would be to levy it nationally and use the present national apparatus to levy it and then apportion it to local authorities according to the fairest formula that one could devise on their social claims, as we do the present rate deficiency grant. If one did that, surely the same objective could be achieved by increasing the central national grant for local authorities even by increasing national Income Tax or by some other method.

The taxation of land values is attractive, despite its snags. If Lloyd George's original proposals had remained on the Statute Book or those which the first minority Labour Government introduced had been implemented, we could have carried at least half the social burden of the country on the unearned income from land which passes into the hands of landowners.

One of the criticisms up to the present of taxation of site values has been that if we tax land as distinct from property on it we should have to set up a whole apparatus of new assessors and carrying out new assessments would be so difficult that it would not be worth trying. That argument has been shot down. The Whitstable pilot scheme has shown that this is possible. Whether it should be done or not is another matter, but it is arguable that we should substitute for the present system of taxing property and houses, taxing the land which they are upon and unused land also.

This debate may reveal some of the problems, and, indeed, perhaps some of the injustices, of the rating of site values. But as one who sang as a boy: God gave the land to the people", and as one who believes that the increased value of the land through the provision of schools and houses ought to belong to Britain, I believe that the proposals for land reform of my party when it becomes the next Government will be some contribution not only to social justice so far as land is concerned but also to easing the burden of rates. I commend to the House a very fine study of the case for and against the rating of site values given in the County Councils' Association Report for 1963.

The idea of a poll tax has been canvassed, but for most decent folk it has only to be mentioned to be discarded. Even those who have advocated it to me as I have attended ratepayer association meetings in the country, when I discussed it with them, really do not mean a poll tax. A poll tax is the same for the millionaire and the poor widow—the same charge per head. What these people are really suggesting is that it ought to be a tax which everybody pays. What they are really worried about when they ask for a poll tax is that some people do not pay rates. What they are asking for is a graduated poll tax, which is a contradiction in terms. What they really want is a local income tax.

I hope that the House will dismiss out of hand the reactionary idea that we can solve the problem by making people pay for the services which they get. Nothing is free. Everybody pays for education, roads and the rest of the social services. Payment out of taxes ensures, as far as one can, that the load is distributed fairly and that nobody is deprived of something which Britain regards as essential for him merely because he cannot pay for it. To make charges for services to relieve rates would be to substitute for one regressive burden another, and the second one would be even worse than the first.

It has been suggested that the central Government should make use of an assigned revenue—a tax on some commodity—for local authorities. I recall the "whisky money" at the end of the last century. It was the first time that we had any money given by the House towards secondary education. It was the left-over whisky tax which a rather straitlaced Government was unwilling to scrap and which it retained and earmarked for secondary education. But if one assigns a duty or tax like that, its yield is uncertain. The assignment of the motor tax, for example, has been canvassed, especially as local authorities collect it. But its yield is uncertain. It would raise money in varying proportions in various communities not perhaps equivalent to the needs of the particular community. So even the assigned tax proposal leads us back to the simpler income tax.

Perhaps the most fruitful field of investigation would be into whether we could not levy differential rates—different rates for different taxpayers according to their means. I know that this has been crudely begun in the Government's latest rate relief Bill. But I think it could be carried out on a much wider scale than merely coping with some hardship cases. It has been suggested for example, that differential rates could be levied simply by linking the rate assessment with a man's income tax position.

The C.C.A. Report suggests five ways of tackling this, each with advantages and each probably with disadvantages, but all very simple. One suggestion is that the householder whose gross income does not exceed a certain figure should not in any case be asked to pay more than 6 per cent. of his income in rates. Another would ask the inspector of taxes to place people in four groups—surtax payers, those who pay the full rate, those who pay less than the full rate and those who pay nothing—and these four groups could pay a 100 per cent. rate, a 75 per cent. rate, a 50 per cent. rate and a 25 per cent. rate, respectively.

If any such differential scheme were adopted, it would be important that the other ratepayers should not bear the new burden, that one should not transfer from the poorer ratepayers to the other ratepayers the cost of subsidising the poorer ratepayers, especially when one still has the problem that many people do not pay rates at all. The cost of differentials should be state-borne. If we look at the cost of the services, only diehards would say that we could cut it down.

There are, however, two items of local Government expenditure which we must cut. One is the fantastic cost of borrowing money. My authority is paying £2 million this year in interest charges because it is borrowing at between 5 and 6 per cent. If we could cut the rate of usury, we could make a signal contribution to the solution of not only the rate burden but also the rent burden.

The other is the colossal and, to me, utterly unjustifiable racket in land. In my own authority area there is a piece of land which was worth £17,000 in 1956, and it has been sold for £220,000 this year, and that unearned increment has to be met either by the rent payers of the houses which will go on the land or the ratepayers if they subsidise, as the London County Council may do, some of the houses on it. This seems utterly inequitable and utterly unjust to me.

When my county buys land for a school, it also buys the land for a playing field, and it pays the price that the the playing field would fetch if it used it to put houses on it. We do not even buy land today at its prospective use value, but at the use value which the valuer has to say it might have if not used for a school or hospital.

I have dealt with the burden of rates and said nothing about what rates are levied for. Let me be clear and frank about this. Even with all the anomalies of the present system, I believe that the ratepayer, certainly the average ratepayer, gets value for his money. A hundred examples leap to mind. I take a fortnight's holiday every year. The police keep an eye on my empty house. Nobody could buy that service for what he pays in rates the whole year. That is a tiny fraction of what police protection means.

On Christmas Day at Fawley refinery there was a fire, which was checked by the skill, courage and devotion of the Hampshire firemen. If it had not been for those men, this would have been a major economic disaster not only for the Esso refinery and the surrounding countryside but also for the nation. We take our roads for granted and grumble about the [...]nadequacy of the road programmes, without appreciating sometimes just how much work has been done by roads and bridges committees in the last 50 years. We do not appreciate our road workers until there is a great freeze-up, like there was last year.

One might think of the precious work of the welfare committees, for old folk especially, the Christian work of children's committees, the colossal work of housing committees, the work of planning committees and public lands and transport committees, maternity and child welfare committees—all these provide real wealth for the citizens, and they provide for the ratepayer by co-operative effort things which he could not buy with the money that he spends on rates if he were given his rate money in his hand to go and buy with it.

If I do not speak of the inestimable value of the education services, it is because I speak so often of that in the House. I would only say for a moment that this is not only a most priceless boon for parent and child but we are now realising that what we invest in education determines whether Britain will survive as a forward and progressive nation in the next 50 years. This is indeed value for money.

Having said that, I would add that we do not necessarily have to get value for our money by levying unjustly. There are better ways of financing local government expenditure. I have suggested some. I hope that others will emerge in the debate. For years I have had the fear that the burden of rateborne expenditure would mount so high as to breed resistance to the splendid purposes of that expenditure, on the one hand and jeopardise local government itself, on the other. I am happy to feel that this is not so today, that people are saying not that we should cut down the rates for socially worthwhile things but that we should change the whole structure of finance. It is because the burden of rateborne expenditure increases so swiftly, and because it must continue in the next decade to increase at at least the same rate, that I urge the House to pass the Motion which I have the honour to move.

11.50 a.m.

Mr. Walter H. Loveys (Chichester)

I should like to congratulate the hon. Member for Southampton, Itchen (Dr. King) on his good fortune in winning a place in the Ballot and on choosing a subject which is of such great interest to so very many people. It is a privilege to follow the hon. Gentleman whose interest and expert knowledge of local government is so well known in this House. I agree very much with him that the time is now ripe for a radical reform of the rating system of the country. I particularly agree with him about the disparity of rating in different parts of the country and that rapidly developing counties are having special difficulties at the present time. Like other hon. Members, I could give many examples of people living in similar houses whose rate burden varies very considerably.

I am very glad that he felt himself able to make a fairly non-party speech today. He told me the other day that he was going to be completely non-party. I did not think that he would be able to keep that up entirely today, however, be made a valiant effort to do so.

I cannot agree entirely with the words of the Motion, which refer to the ever-increasing burden borne by the ratepayer. This gives the assumption that the average ratepayer—if there is such a person—or the overall ratepayer is having to bear an increased burden. Indeed, on the whole, the ratepayers far from having an increased burden pay a lower proportion of their earnings on rates than before the war.

Mr. John Hall (Wycombe)

Would my hon. Friend not agree that this may be so on average, but that averages are very dangerous things to quote and that the burden is extremely unequally divided?

Mr. Loveys

I thank my hon. Friend for that intervention, because this is the whole theme of the subject which I hope to develop in a few moments. Having made this point about overall earnings, it is also true to say that the rates burden today represent a smaller proportion of the gross national product than was the the case before the war. It is also true to say that it represents a smaller proportion of total taxation—national and local taxation—than was the case before the war.

I understand that in 1938 the rates amounted to about 17 per cent. of the total taxation. In 1961 it was a little more than 10 per cent., and today it is about 11 per cent. It is perfectly true and only fair to say that most ratepayers have a smaller burden proportionately than before the war. Having said that, I am very much aware—and this is my reason for joining in the debate—that many older people who have not joined in the general affluence of increased wages and salaries are suffering from special hardship caused by rate increases imposed for many services which do not bring benefit to themselves. Particular hardship is imposed in those areas where there is very little industry to take up the increased burden of rates having to be borne under the last Rating and Valuation Act.

It is in those areas where there is very little industry that people come to retire. They obviously do not wish to retire in a factory district. They come to constituencies such as mine and find that they have a very heavy increased rates burden. Therefore, there is urgent need to help the elderly ratepayers throughout the country, and particularly those in areas where increases have bitten savagely into the pockets of those who cannot bear the strain. It is a serious anomaly in our affluent society to find so many elderly people with small pensions or fixed incomes suffering hardship owing to the increased rates burden.

The Government were fully aware of what these hardships meant when they introduced the Rating Interim Relief Bill to give some help to those most affected in those areas. By its very name, the Measure admits to being a stop gap Measure, and something much more concrete must be introduced to give a greater amount of relief and which if possible does not depend on a means test. Therefore, the Government have—and this is mentioned in the hon. Gentleman's Motion and it is very important—set up the Allen Committee to inquire into the whole matter. I understand that it is reporting in a few months' time and its report will, I am sure, be of great assistance to the Government in making adjustments, which, I feel, they are fully aware will be necessary. Its particular importance will be because of its terms of reference which refer particularly to cases of hardship.

There seem to be two broad answers to the problem mentioned by the hon. Gentleman and generally recognised. One is that a much larger part of the rating burden should be borne by the national Exchequer, and the other is to find alternative methods of raising local revenue. Over and above these two broad answers is the constant need to prevent waste by the local authorities. That there is excessive expenditure in some fields is, I think, true, although I think that it is very much exaggerated. Local authorities are always a popular target for the armchair critics, who are always very reluctant to give specific examples of which service they would most like to have reduced in order to reduce the rates.

Mr. Denis Howell

I remembered the great wisdom of the hon. Member's utterances. In Birmingham the Conservative Party is a notable example.

Mr. Loveys

I am glad to be referred to as having great wisdom. I thank the hon. Gentleman for that helpful intervention. On the other hand, I feel that some local authorities are rather too reluctant to take any outside professional advice on keeping down expenditure. It has been tried by a few authorities with marked and quite unexpected success.

I. want to say a few words on the two broad answers that I mentioned earlier. I know that many hon. Members wish to speak so I shall not go into lengthy details. Whatever action we take in this field, we must first of all in the matter of transferring the cost to the national Exchequer be careful to preserve our local administrative powers. To my mind it would be a very sad day for the country if local services were taken completely out of the hands of local people with local knowledge. But there is much that could be done. The Government have recently by revaluation increased the burden, on industry. I do not think that many people realise sufficiently the simple fact that because the rates on industry can be set against tax that in itself is transferring a large amount of the burden to the Exchequer. It is now also a fact that under the general grants scheme nearly two-thirds of Exchequer grant to local authorities is completely free from specific control on how the grant is to be spent.

The solution most often suggested is the transference of a greater amount of the expenditure on education direct to the Exchequer. I cannot understand the fears of some local education authorities if a further proportion is borne by the Exchequer. The Robbins Committee recommended that teacher training colleges should be paid entirely by the Exchequer. A great relief to rates would be achieved if all teachers' salaries came direct from the Exchequer.

Many other suggestions are made for transferring part of the burden of rates to the Exchequer, but I do not believe that we should go too far in this direction, because it would increase our Income Tax burden and we must find a fair balance between national and local taxation. Although it would give an overall relief to the rates, the idea of transferring more to the Exchequer would not channel relief to those elderly people in certain areas who really must be helped.

The second solution, that of finding alternative methods of raising Revenue, could bring more assistance to those in real need by enabling them to contract out of, or in fact never enter into, certain services from which they derive no benefit themselves. It is because the hardship caused has been selective that some adjustment must be made. It must also be made selective and, if possible, flexible.

Before considering alternative methods, however, we must bear in mind all the time the very definite advantage of a single tax system. This is the difficulty. There are three very definite advantages of a single tax system which we must not lose sight of when we are considering alternative methods. The first is that it is a very old and widely accepted system, and any new idea will be highly unpopular. The second is that it is an easily and economically administered system, and this is very important. The third is that it supplies a stable form of revenue.

I do not intend to go into many of the possible advantages. The hon. Member for Itchen has already done this so much better than I could. He and I both took part in a debate in the House in 1962 on a Motion tabled by my hon. Friend the Member for Harwich (Mr. Ridsdale), who is now the Under-Secretary of State for Air. Since then the Government have agreed to set up the Allen Committee. I am sure that they are looking into all the alternative suggestions.

There is an interesting and old suggestion of rating site value. I am sure that we shall hear more about this, probably from the hon. Member for Huddersfield, West (Mr. Wade), who, together with the hon. Member for myself, are joint chairmen of an important body called the Association of Councillors. I am sure that we shall hear more about this system. It is an old idea, because many Royal Commissions and committees of inquiry have inquired into this suggestion. It has always been rejected. The most important reason for its rejection is that it might be found to be more suitable in some areas than in others. This would surely cause even more anomalies, which is what we are trying to avoid. However, I should be most interested to hear a more detailed account of this system.

The sort of alternative methods would like to see are all aimed at giving relief from the overall burden in a selective way to help that section of ratepayers who are really suffering. I think of a local entertainment tax, a services tax, a sales tax, and perhaps the introduction of local competitions. We must not be afraid to allow local authorities to introduce methods which might seem revolutionary or even unorthodox.

Mr. Richard Marsh (Greenwich)

Having said that he would like to see local authorities not shrink from these revolutionary methods, would the hon. Gentleman mind telling us what methods he has in mind?

Mr. Loveys

I mentioned some, such as competitions. Some local authorities approve of the casino idea. Others do not. Some prefer to call it "competition". There are sales taxes and other taxes which I mentioned briefly. I explained that I would not go into details because so many others want to speak. Indeed, the hon. Member for Itchen went into details about alternative methods. There are so many which are worth considering. When we have the Report of the Allen Committee, we shall be in a far better position to decide how many of these are worth taking forward.

In conclusion, I would mention that hon. Members on both sides must share my joy on passing through towns and villages and seeing our schoolchildren waiting at bus stops, well dressed and healthy, waiting to catch a bus to a first-class school. They have far better opportunities for further education than their parents ever had. If this is an Islington, North (Mr. Reynolds) and affluent society let us have more of it, but one of the anomalies which must be removed from this affluent society is the fact that in some selective areas many elderly people are suffering real hardship by having to carry too much of the rate burden on their own shoulders.

12.7 p.m.

Mr. Donald Wade (Huddersfield, West)

I am very glad that the hon. Member for Southampton, Itchen (Dr. King) has had the opportunity to raise this important subject of rates. If the present system of raising rates continues unaltered, the future prospects for ratepayers are not at all cheerful. The analysis of the Rating and Valuation Association of the first 238 returns from local auhorities shows that ratepayers in England and Wales will have to pay an average of 7.8 per cent. more on the new rates coming into force next month.

This estimate may be too low. When all the returns have come in, the average increase may prove to be as high as 10 per cent. Hon. Members will recollect that last year the increase was 9.9 per cent. over the previous year. It is a rather gloomy prospect. We also have the warning of Mr. R. E. Goodwin, chairman of the finance committee of the L.C.C., who, according to reports in the Press, has hazarded a guess that the Greater London Council rate will be 6s. 6d. to 7s. Od. in the £. He called this a sombre warning.

Sir K. Joseph

The hon. Gentleman must acknowledge that it is a transfer prediction owing to the redeployment of general grant under th London government legislation.

Mr. Wade

I am not for one moment suggesting that it is in addition to the burden already borne. I quote the actual words used—" a sombre warning".

Mr. Marsh

In fact a large number of London boroughs, as a direct result of the introduction of the Greater London Council, are having their rates increased purely for this reason. This is certainly the case for Greenwich and Woolwich.

Mr. Wade

I think hon. Members will agree that all the evidence tends to show that the burden will grow. I believe that anomalies and hardships will continue, unless there is some fundamental change. Throughout the post-war period, we have been going round and round in circles. Attempts have been made to get back to some simple and consistent principle for assessing liability for rates, but there has always been a long time-lag and as soon as any re-valuation has taken place there has peen pressure for amending legislation to lessen the hardships which arise. This is probably inevitable under our existing and rather antiquated system of raising rate revenue. We have the Rating (Interim Relief) Act, the Allen Committee considering the whole question of hardship, and the Government's own Committee reviewing the financial relationship between central and local government. What the outcome of those will be is by no means clear. The last revaluation. or the Act on which it was based, was supposed to establish a clear principle, out that has already been eroded.

I am rot condemning the Rating (Interim Relief) Act outright. Something had to be done, although that legislation put local authorities in a somewhat embarrassing position. It is, without doubt, in the nature of Poor Law relief. At any rate, we must recognise that it is only a palliative. It is by no means simple to administer and it will not remove all cases of hardship. I have been interested to read a report of the procedure which has been adopted by Orpington Urban District Council's finance committee. My hon. Friend the Member for Orpington (Mr. Lubbock) has given me the report.

Mr. John Farr (Harborough)

On a point of order. Is it in order for the hon. Member for Greenwich (Mr. Marsh) to read a daily newspaper in the Chamber?

Mr. Marsh

Further to that point of order, Mr. 'Speaker. Would it be in order if I were reading not a daily newspaper, but the Kentish Independent, in which there appears reports about large increases in the rates of both Greenwich and Woolwich becaues of the Government's extraordinary action in introducing the Greater London Council Measure?

Mr. Speaker

It does not matter whether it is a daily newspaper or more local journalistic matter. What does matter is that the hon. Member should be doing something in connection with a speech which he has great hopes of making; in which case that is in order.

Mr. Wade

I was speaking about a report I have been handed of the procedure being adopted by Orpington U.D.C.'s finance committee. That committee has drawn up a scheme to provide as fair a method as possible of administering relief under the Rating (Interim Relief) Act. The scheme is worthy of study. I say this because, taking the country as a whole, I do not believe that that Act will be particularly easy for local authorities to administer and, in any case, it is only tinkering with the problem,

It is obvious, looking ahead, that we will have to make a choice between, firstly, abolishing rates altogether; secondly, transferring a large part of the burden of local authority expenditure to the Exchequer; and, thirdly, of introducing a new method of raising local revenue or some new basis of assessment. The objection to both the first and second policies is that they would tend to destroy the autonomy of local authorities. Their scope is already very much restricted by decision in Whitehall and there is not much room for manoeuvre on the general question of curtailing expenditure.

For example, even if the present system were altered and a greater share of the financial burden transferred to the Exchequer, this in itself could have far-reaching political consequences. Under the present method of raising local revenue the cost of education, for example, is a heavy burden. There is a strong case for suggesting the transference of the whole cost of teachers' salaries to the Exchequer, but it is important that we should preserve the freedom of teachers from too much control and interference by the State. Who knows what a future Government might do if the payment of teachers' salaries were entirely in the hands of the State?

I would rather see a new method of raising local revenue introduced which would make it practicable for local authorities to continue to contribute to the cost of education, including a percentage of the salaries of teachers. However, a radical reform of the method of raising revenue is essential.

To transfer a greater part of the cost of taxation to the Exchequer under the existing system would provide a temporary relief but not a long-term solution. If there is to be a new method of raising revenue locally I believe that the choice will lie between some form of local income tax and a new method of assessing liability to rates based on site values rather than hypothetical rental values. I prefer site value rating as the simplest and fairest solution.

There are two objections to the present system. The first is that it is based on a hypothetical rent and that, therefore, no rates are payable on vacant land and empty properties. I have in mind the case of a large block of offices situated on a valuable site. No rate income is derived from it because it is kept vacant. In one case of which I am aware the block was kept vacant for 18 months because of the high rents that were being sought. Surely it is reasonable to suggest that there should be a contribution to local authority expenditure from such property? Similarly, where waste land is temporarily held back while the site value rises it is unjust that that land should make no contribution to the local authority. However, these things are bound to happen under the existing system.

The second objection to the present system is that it imposes a penalty on improvements. If a householder or shopkeeper improves his property, that results in an increase in rates. If a bathroom is added, a garage built on or a new shop front put in, up go the rates. On the other hand, when someone does not bother about his property and allows it to deteriorate he is likely to be rewarded. Does not that seem totally illogical?

It is because of these anomalies that the demand has been made for the system of site value rating to be introduced. I have never been one of those who has said that site value rating would solve all our social and economic problems. Of course it would not, but it would introduce an important new principle and help to spread the financial burden more equitably.

Two arguments that used to be deployed against site rating have now been demolished. The first was that carrying out the valuations would present too many practical difficulties. That has been proved to be incorrect by the Whitstable survey. The second argument was that it would be impossible to raise sufficient revenue, and that, too, has been proved incorrect by that survey. Furthermore, it is important to remember that the cost of carrying out a valuation would be less for site value rating than the present system. I recall being told that it would be terribly expensive and difficult to carry out, but this is not so, and on page 13 of the Whitstable Report we read: It is clear now that the field work involved in valuing the site only is very much less than valuing the site plus … This shows that there has been unwarranted hostility to the principle of site value rating. The Liberals were laughed at for advocating it but now, at last, it appears that it is becoming an acceptable idea.

Mr. Guy Barnett (Dorset, South)

Has the hon. Gentleman considered the other criticism of site valuation; that it would be difficult for a local authority which wanted to undertake a big scheme of redevelopment to justify preventing an individual from delaying a part of the scheme because the rate he paid would he the same whether or not his site was developed?

Mr. Wade

I will come to that. I am aware of the criticism.

I hope I am wrong, but I suspect that the Government are still opposed to the idea of site value rating. Although the Simes Report of 1952 expressed opposition to it, there was a powerful minority in favour of it. One of the reasons for objecting to site value rating at that time was the existence of the development charge, which has gone. Another objection was that a test valuation would be necessary, and I agree that the Simes Report stated: It would be essential to carry out such a test before any decision to introduce site value rating was made. I have often urged that such a survey should be made, and in 1961 I tabled a new Clause to the Rating and Valuation Bill of that year calling for this to be done. By it, the Minister would, in the year after the valuations first came into force after the Measure was passed, have undertaken a pilot survey, in consultation with local authority associations and such local authorities as he thought it desirable to consult. Unfortunately, the Government would not adopt that proposal. We have now had the Whitstable survey, carried out by voluntary effort. That is an excellent piece of work. The survey was done objectively, and it makes an excellent contribution to the subject.

I should like to see a further pilot survey carried out in another area. Hence my Question to the Minister of Housing and Local Government on 17th March, 1964, asking for a pilot survey in a northern industrial town. The Minister replied: I think that the Whitstable survey together with previous studies provides all the information that is at present required for further consideration of the system."—[OFFICIAL REPORT, 17th March, 1964; Vol. 691, c. 153.] So we first had the excuse that there was no survey, and then, when such a job is carried out voluntarily and we ask for a further survey to get a complete picture, we are told that the Whitstable survey gives us all the information that is required. I do not think that the Government have been very co-operative.

This is not an academic point for the ratepayers—It will affect them very materially. On the basis of the Whitstable report, domestic ratepayers as a group would save over 40 per cent. on houses and nearly 60 per cent. on flats and maisonettes. These figures may have to be modified. I do not want to exaggerate the benefits that I believe would arise from site value rating, but I calculate that householders would benefit by between 25 per cent. and 33 per cent.—quite a substantial amount——

Sir K. Joseph

Where? In Whitstable only? Or the hon. Member assuming that the Whitstable experience would apply everywhere? If so, on what evidence?

Mr. Wade

I am making my own calculations for the country as a whole. I have already quoted what the Whitstable figure would be——

Mr. John Hall

Is it not true that the Whitstable experiment shows that in some cases the household rate would go up, not down?

Mr. Wade

I am, of course, speaking of averages. As I have said, there might be a house on an extremely valuable site and the rate might go up.

Mr. Denis Howell

If householders are to pay less, who is to pay more?

Mr. Wade

I have already mentioned the case of an office block on a valuable site, vacant, and paying no rates at all. That is one example.

Some modification of the definition by which the surveyors were bound might give a different result. The site value of playing fields and open spaces might be regarded as only nominal until they were available for development. Even if that was not so, we must assume that there would be some relief, for social reasons, granted, not only on playing fields but on land occupied by charities. That being so, the final result might not be as favourable as the Whitstable report indicated. Nevertheless, there would be a substantial relief to householders——

Dr. Alan Glyn (Clapham)

Has the hon. Member included agricultural land in his calculations, or has he deliberately excluded it?

Mr. Wade

That site value would be so low that it would not make a material difference to the overall position. It would simply be a question of whether it was worth the cost.

The other advantage of site value rating lies in recouping development values for the community, which would be of great importance. It cannot be emphasised too strongly that, of all the suggestions for recouping development values for the community, site value taxation is the only proposal that would not freeze development. The great objection to the nationalisation of land and the development charge was that they would deter development. This valuation method would not do that.

As 1 say, I do not want to exaggerate its importance, but I think that this Whitstable report is extremely valuable, and I hope that it will Iead to a break through, and to a radical reform of our rating system. It is certainly high time that we had some radical reform.

Miss J. M. Quennell (Petersfield)

Before the hon. Member sits down, perhaps he would help me to clarify my mind on this matter. If site value rating is to bring down the burden on the domestic householder, how will the council of a small market town, with practically no industry and commerce, meet its obligations?

Mr. Wade

Whitstable is a fairly typical place to choose for a survey. I do not want to continue at length, but if the hon. Lady studies the report I think she will find the answer there.

Mr. Eric Lubbock (Orpington)

Before my hon. Friend sits down——

Mr. Speaker

No. I think that we must have some finality about the process of sitting down.

12.27 p.m.

Mr. John Hall (Wycombe)

I had not expected to be here this morning, but I am very glad to have had the opportunity, despite the late hour at which the House rose, to listen to the very excellent speech of the hon. Member for Southampton, Itchen (Dr. King). We are very indebted to him for deploying such a well-reasoned statement on a subject that is of great interest to us all.

The hon. Member for Huddersfield, West (Mr. Wade) will forgive me if I do not follow his proposals too closely; they are obviously matters of considerable difference of opinion which I would prefer to leave to the experts. I do not hold myself out in any way to be an expert on rating. I am concerned only with its impact on the individual, and it is to that aspect that I want, in the main, to direct my attention.

I join the hon. Member for Itchen in paying tribute to the many people who give up their time to serve on local authorities, and I join with him, too, in paying tribute to the local authority officials. There is no doubt that they do an extraordinarily valuable job, which is too little recognised. Having said that, I think that we must face the fact that the quality of those who are now coming forward may not be quite as high as it has been in days gone by. Year by year it is getting more and more difficult to persuade men and women of outstanding calibre to come forward and serve in their local authorities. There are all sorts of reasons for this; I will not go into them, but we must realise that this is a fact.

I agree with the hon. Member that many problems arise out of the present rating system and in discovering ways and means of raising the revenue to meet local authority expenditure in ways that are fair to all concerned. It is a problem that has puzzled all parties, and no party has yet come up with the ideal solution, although many ideas have been canvassed.

The hon. Gentleman paid tribute to the present method of valuation, and it is true that since the Inland Revenue was put in charge of it, valuation has been placed on a much more logical basis. On the whole, it is carried out remarkably fairly and, generally speaking, with comparatively few anomalies. Nevertheless, anomalies still exist, not so much between house and house in the same area but between various areas. One can think of examples in one's own constituency—and, indeed, as between one county and another—where the valuation of two houses, of apparently the same type, with the same amenities—with the same amenity value, to use the estate agents words—tends to vary, sometimes quite considerably. I have recently come across examples of houses, in what I think are called emergent areas—areas which are coming up in the world—which are changing hands at considerable sums. Such areas are obviously going to become fashionable; more and more houses are painted up and fitted with attractive doorways. They are changing hands at between £10,000 and £12,000, and yet they bear a valuation and an assessment lower than houses which are half their value in other parts of the country.

This is difficult to explain to the ordinary ratepayer. It is hard enough to understand how any valuation is arrived at; but, in general, it is thought to bear a relation to the market rental value of the house in the area in which it stands. The rental value must have some relation to the capital cost of the house. So often we find that houses with quite different capital valuations in the open market bear rating valuations which are almost similar.

We have heard that the increase in rates in the country as a whole compares favourably with the increase in incomes nationally as a whole. This may be true if one considers the average. But, as I said earlier, averages are dangerous things to talk about unless some breaks them down and see what they cover. A constituent wrote to me a few days ago pointing out that in the small house that he occupies he was paying before the war 2s. 10d. a week in rates, whereas he now pays 25s. 2d. The amount which he has to pay has increased more than seven-fold. There are many such examples all over the country. It is because of the unevenness of the effect of rating that so many of us are concerned.

The problem of the present system seems to me to be, first, that the tax bears no relation at all to ability to pay. Secondly, it penalises those who wish to improve their property, and. this not only appears to be unjust to the householder but it discourages him from doing things which we would all like householders to do. Furthermore, the burden bears unequally as between one person and another, and particularly as between one area and another. Above all, it creates a feeling of injustice. No one likes paying taxes. There is no such thing as a good tax, but at least people, when they do pay taxes, like to feel that the taxes are just and that they are paying their fair share, and no more than their fair share.

In the case of rating, so often ratepayers feel that they are being unfairly penalised compared with some of their fellow citizens in the same area. This is a state of affairs which we must remove. If I may be forgiven for referring to my own constituency, of which I have closer knowledge than I have of the country as a whole, I should like to tell my right hon. Friend. as indeed he already knows because I led a deputation to him some months ago, that in the High Wycombe borough the actual amount of rates payable—not just the increase in valuation but the actual rate payable—has gone up by nearly 25 per cent. and in the rural district council area it has gone up by 22½ per cent.

Mr. DenisHowell

Since when?

Mr. Hall

Since revaluation, and including the increased county rates. While many householders have had less to pay than the average increase of 22 per cent. cr 25 per cent., I have been informed of cases in which the increase in rates payable has been 50 per cent. In some cases of this kind the occupier may have the kind of income which can carry this increase without too much trouble, but time and time again one comes across examples not only of old people and others living on small fixed incomes, but young married couples starting out in life who find that the sudden increase in rates has absorbed overnight, without their having any previous warning, what little balance they had between their total outgoings and their total income.

One of the major problems that we face today is that people marry much earlier. Because of the increased prosperity of the country, they have become accustomed to certain standards of life which, perhaps, in our younger days we would have regarded as luxuries. They get a house on mortgage. They buy furniture and one or two other things on hire purchase, and in general they are committed to the last penny of their income. They go to live in a certain area. They may come to Wycombe, for example, and buy a house because they cannot afford to buy one in London. They are attracted to an area like Wycombe because the rates and the total amount that they have to pay for the house are within their earnings, but, generally speaking, only just within their means.

Suddenly all their carefully-laid plans and calculations go for naught because of a sudden sharp increase in the rates. There must be something wrong with a system which imposes taxation of the kind which bears no relation to an individual ratepayer's ability to pay.

Sir K. Joseph

I am grateful to my hon. Friend for giving way. I fully appreciate the defeated expectations that such a situation can produce. But there is something wrong with a situation which can produce that result. It is the fact that for 24 years we did not have a revaluation. Now that we are back on the quinquennial review of assessments, there should be no more shocks of this sort.

Mr. Hall

That may be true. I am not debating the reasons for this situation having arisen. I am merely pointing out the hardship that this kind of situation can produce. Nor will it stop at the present level. The fact that we have a revaluation—and presumably if the present system remains, we shall continue with quinquennial revaluations—does not offset the fact that rates are bound to increase if local authority expenditure goes ahead at its present level. Therefore, we shall continue to find that the total demanded from a householder mounts year by year and still bears no relation to the ability of that householder to pay it.

The Government very wisely and promptly introduced a measure of temporary relief in the Rating (Interim Relief) Bill. This was designed to help those living on small fixed incomes and who might suffer hardship, until such time as the wider survey which has been made took place and the Government's policy following that survey was announced. This is a very worthwhile piece of legislation, but it has brought certain problems in its train. Clause 1 of that Bill deals with the proportion of old people to the population, and I believe that a figure of 10 per cent. was established. A local authority with 10 per cent. or more is entitled to some relief. There is a curious anomaly in my constituency. In High Wycombe the figure was about 9.4 per cent. in the 1961 census, and the local authority does not qualify. On the other hand, the figure for Wycombe rural district is 10.5 per cent. and it just qualifies, but the amount which it gets is £2,500 which does not go very far to meet the rate problems in that area.

Clause 2 of the Bill deals with hardship, and this has presented local authorities with considerable difficulties. Even those with some experience of rate differential schemes will still find some problem. As rates continue to increase year by year, as they are bound to do, so the number of applicants for relief under this Clause will increase. This will present local authorities with some not inconsiderable administrative problems.

Sir K. Joseph

It is temporary.

Mr. Hall

I am glad to hear my right hon. Friend say that. Indeed, we realised that it was, and I hope that it will soon be replaced by something much more effective and long term.

Several different proposals for alternative ways of raising the revenue required by local authorities have been canvassed. There is, for instance, the idea of a local income tax. I confess that, in common with the hon. Member for Itchen, I do not like this very much, and I can see several disadvantages in it. There is the idea of a land tax, based, I think, upon the theories of Henry George. As far as I can gather, having discussed it with tax experts who know much more about these things than I do, this also has many disadvantages, and, little though I can understand it, I should not myself like to see it introduced.

The hon. Member for Itchen suggested, as one of the ways which might be adopted—this is a very commonly canvassed idea—that more and more of the greatest items of expenditure in local authority budgets should be undertaken by the central Exchequer. Education and police are two headings which come to mind. The hon. Gentleman suggested that, perhaps, the proportion of the expenditure on education now borne by the Government should be increased. I would go even further and say that there is a case for removing the entire burden of the cost of education from the local authorities and placing it firmly on the central Government.

Dr. Alan Glyn

I understand that amounts such as 1s. 6d. on the standard rate of Income Tax might be involved here. Could my hon. Friend give us some indication of how the cost would run?

Mr. Hall

I have no indication of the cost, and, quite frankly, I do not think that it really matters because all one is doing is shifting the burden from one pocket to another, and, more than that, one is ensuring that it is spread more evenly in relation to ability to pay.

One objection to proceeding in this way and removing the cost of the police force, for example, from local to central Government is the fear expressed by many people that, if Whitehall pays, Whitehall will completely control the services. However, as has been explained already, it is very difficult now for a local education authority to do very much without the authority of the Minister of Education. Local authorities have, perhaps, more power over their own county police, but, even so, I do not think that the control which they exercise would be reduced if the police were paid for centrally. I doubt very much that the effective administration of education and other services which cost a great deal would be changed to any great extent if Whitehall were paying the entire cost. In my view, this is one of the possible ways of tackling the problem.

In the long term—this is a long way ahead, because entrenched prejudices and long traditions have to be overcome—it will be likely, I believe, that the entire cost of local authority services will be met by the Treasury. This will not mean that interest in local government will diminish. I do not believe that it will be any more difficult than it is now to get people of the right calibre to serve on local authorities. As I envisage it, although the cost might be met centrally—I am thinking some years ahead now—the burden of administration would still remain with the local authorities.

The necessity for considering the needs of their own areas would still remain with the local authorities. The necessity for putting up requests or demands, whichever they be called, to the central Government would still remain with them. The necessity for arguing the case on behalf of their areas would still remain with them, and they would still have the task of ensuring that such funds as were placed at their disposal were administered wisely and well. Therefore, I do not think that it would male any difference to the calibre of those presenting themselves for election or the calibre of the officials serving our local authorities. I believe that this may well be the way in which the problem is met in the future.

I await with the greatest interest not only the report of the Allen Committee but the outcome of the Minister's own investigations into the matter over a field rather wider than that covered by the terms of reference of the Allen Committee. I hope that we shall not find that the Allen Committee turns out to conform to the definition of a committee which, I am sure, is familiar to all of us—that a committee is composed of individuals who individually can do nothing but who collectively can meet together and decide that nothing can be done. We have had too many committees of this sort in the past.

I hope that, as a result of a very full and comprehensive investigation into the whole [...]ating system, its impact on individuals and the injustices as between one householder and another there will emerge a constructive and worthwhile solution. I hope that my right hon. Friend will be able to give us today some idea of the way his mind is working on how to overcome this intractable problem which has so far defied the efforts of everyone who has studied it.

12.45 p.m.

Mr. Denis Howell (Birmingham, Small Heath)

I agree with a great deal of what was said by the hon. Member for Wycombe (Mr. John Hall), but, as a product of local government and as a very keen supporter of local government, I must say at once that I am convinced that nothing could more speedily ring the death knell of local government than the transfer of its fundraising activities to the national Exchequer. There might be a case for doing this in part, but I would adopt a very cautious approach. The hon. Gentleman said at one point in his speech that there was difficulty in finding people of the right calibre willing to serve in local government, and I think that there is something in that. But he then astounded me by saying that, if local authorities had no longer to raise their money but only had to spend it, the quality of local government would not be affected.

We all know what our approach can be on local authorities if all we have to do is to spend money. It is extremely important that the people spending the money should have some regard to the raising of it. This is the point of one of the criticisms which I make, particularly in Birmingham, about education and the teaching profession. I have great sympathy with the position in which education now is because of the increase in rates, but there must be someone to hold the balance as between what the ratepayer can afford to pay and the expansion which the State and the individual want to see in education. There must be a disinterested person holding the balance, and I hope very much that the hon. Member for Wycombe will think again before committing himself to ringing the death knell of local government by his revolutionary proposals.

Mr. John Hall

The hon. Gentleman will recall that I said that this was a long way off and that many things had to be overcome before it would be likely to take place. He speaks of the death knell of local government as we know it now. Medical science has made tremendous advances, and I am sure that we can find a way of putting off the death of the local authorities if something like this occurred.

May I put this question to the hon. Gentleman? He is, I think, a councilor—

Mr. Howell

I was.

Mr. Hall

—he was a councillor of many year's experience. Does the hon. Gentleman really believe that he would administer the expenditure of money provided by the central Government less conscientiously because it was all provided by the central Government?

Mr. Howell

Modesty prevents my answering that question. I can think of a lot of other councillors who would not. [Laughter.] I will take it no further than that.

I congratulate my hon. Friend the Member for Southampton, Itchen (Dr. King). I intend no criticism—I hope that he will not take it so—when I say that he gave a wonderful academic insight into the whole business of local government finance. We need such an examination, and I think that the House does well to consider these matters in that light. However, I hope that my hon. Friend will not mind if I become a little more political. We have a very political Minister, and I am sure that the right hon. Gentleman would be disappointed if we did not, for a few minutes, look at the matter in a political light. Who is responsible for the terrible rate revolt now raging in the country? After 12 years of Conservatism, if the party opposite wishes to take the credit for any benefits flowing from its administration, it cannot complain if all the moans, groans and justified complaints about burdens also are laid on the shoulders of the present Administration.

There can be no doubt that public opinion is thoroughly dissatisfied with the present rating situation. In the end, public opinion will be decisive. Already, it has had its influence because the Minister has had to take emergency steps to placate his hon. Friend's who complain about the tremendous increase in rates. There has been a great loss of confidence.

I do not want to give too many figures, but rate expenditure has increased by 104 per cent. in seven years. This is astronomical. There is hardly any other aspect of expenditure, national or private, which has increased by that amount in that time. The increase is a measure of the tremendous discontent throughout the country. The Minister looks pained, but this information comes from an excellent paper presented on some effects of revaluation by the Borough Treasurer of Reading. Since it has not been contradicted, I assume it to be correct. After careful analysis of many local authorities, he says that 28 out of 129 which he examined had had rate increases of at least 20 per cent. in each of the last eight years. These astronomical figures show the crisis in local government finance which now faces us.

One of the reasons for this burden is the block grant system of financing local government. This has not yet been mentioned, but when Conservative Members of Parliament complain about the present rating position, it should be remembered that they all voted for the block grant system. If anybody bears responsibility for the present position of ratepayers, it is the Tory Party which, willy-nilly, supported the block grant in spite of all that we said at the time of its introduction.

There is no doubt that the object of that exercise was to transfer the load for local authority services from taxpayers to ratepayers, and that is exactly what has been achieved. That is what the argument is about and that is the reason why we have the debate today and why there is so much concern in local government circles. According to the figures of the Association of Municipal Corporations, 85 per cent. of local expenditure is on education. What is happening in areas like Birmingham and other large authorities is exactly what many of us predicted would happen if the block grant were introduced. Local authorities get a block grant without regard to specific services and then tend to spread the jam as evently as they can over all their services. Those services which ought to be the growing points of expenditure, particularly education and health, are those which, relatively speaking, do not get their fair share.

Sir K. Joseph

indicated dissent.

Mr. Howell

It is no good the Minister pooh-poohing this.

Sir K. Joseph

The hon. Gentleman is being most misleading. Consistently over the years, before the specific grant was changed to the general grant, and since, the Proportion of local authority expenditure paid by the taxpayer has remained very nearly constant.

Mr. Howell

I do not see that that intervention has any relevance to the point I was making, which was that under the block grant system neither the Minister of Education nor any other Minister can intervene in any way—this is one of the things which the Government claimed for their Measure—to see tlat the block grant is used at the growing points of the various services.

Sir K. Joseph

This is because the present Government trust the local authorities. The hon. Member said that the object of the switch from specific to general grant was to transfer the burden from the taxpayer to the ratepayer. My intervention was directed to showing how utterly untrue that was. The taxpayers' share of total local authority expenditure has remained constant throughout.

Mr. Howell

I will give a specific example. I am very interested in the subject of health services. Only in this very week, all our newspapers have had large pictures of the Prime Minister under the slogan "Straight talking". He tells us how well we have been doing. The Prime Minister claims that we are expanding maternity services and building hospitals and getting things done. May I say in parentheses that one has now concluded that, whatever his attributes, the Prime Minister is determined that political controversy in this country shall be conducted at the most infantile level for many years, for that statement hardly bears examination.

The number of hospitals going up in the so-called ten-year plan is nothing like what we were led to believe it would be. A hospital of whose management committee I am the chairman was to be rebuilt in ten years, but every member of the management committee, whatever his politics, now believes that it will not be even started within ten years and that we shall be extremely lucky to get it finished in twenty. Because of the tremendous increase in the birth rate and the fact that the Government were so late in doing anything about it, many hospitals, certainly in Birmingham, now send mothers out of hospital within less than forty-eight hours of the birth of their child.

This transfers a tremendous financial load from the hospital, where the mothers and children ought to be looked after and where the cost is paid by the taxpayer, to the local authorities, so that the cost is paid by the ratepayer. Because there is no room in the hospitals and because there are not sufficient maternity places, mothers who are turned out of hospital within forty-eight hours have to be looked after by someone else, and that someone is the local health authority, the domiciliary nursing services and so on. This is another subtle way in which the Government have transferred the financial load from the taxpayer to the ratepayer. The same situation is true with mental health and in many other respects. It is the transfer of the burden by the Government's block grant system for which Conservative Members voted and which is one of the great evils of the day and one of the first things which must be put right by the next Labour Government.

There are other evils. When we consider the burden on local authorities, let us think of the result of the increase in the Bank Rate the other day. Just because the economy seemed to be running into a little difficulty and because right hon. Gentlemen opposite derided the suggestion from the Opposition that we should have a separate interest rate for local authority expenditure, another burden is unfairly placed on the ratepayer.

I have asked the Birmingham City Treasurer to calculate the effect of an increase of 1 per cent. in the Bank Rate if it is maintained for the rest of the year. He tells me that the effect on the housing fund and so on will cost Birmingham ratepayers £430,000 in a full year. Where is the money to come from? Who will find it?

Mr. James Callaghan (Cardiff, South-East)

What rate is that?

Mr. Howell

On my feet and thinking very quickly I cannot give an exact answer, but it is between 10d. and 1s. These are astronomical figures. No doubt the Minister will find out exactly what this means to Birmingham. While he is doing so, I hope that he finds another piece of information. Are the Government to increase the general rate of block grant so that the evils of the Bank Rate increase are not put on the shoulders of the ratepayers?

Do the Government intend to make any contribution towards easing this, or is it to be yet another dead load of debt on the ratepayers? Not one single house will be built with this extra £430,000. Not a single extra school place will be provided. Not a mile of road will be constructed. The money will go straight into the hands of the moneylenders. The burden on the local ratepayers will be increased to no purpose.

I agree that, by and large, we get good value for our rates. I agree also that the amount of rates paid in proportion to income is roughly the same as it was before the war. But, of course, one cannot consider rates in isolation. Certainly the householder cannot. He must regard them as part of a package deal which covers the cost of his house as a whole. Again, there are interesting figures about this.

Since the war, house prices have gone up from six to eight times. The Minister says that incomes have only risen three and a quarter times. The proportion of rates has risen about three times. It is therefore convenient for the Government to claim that the rate burden has not gone up very much but the fact remains that it has kept pace with the increase in incomes. But that is not the full story. The combined total of rates and rent as compared with pre-war has risen six times, which is double the rise in income. That is what discomfits householders. When a man rents or buys a house he also considers the rates as well. He looks at the two things together, at the total cost. Indeed, Bank Rate and loan charges affect both.

We have already heard in the debate about the difficulties encountered by young married couples and I am glad that this point was made by the hon. Member for Wycombe. If any section of our society has a right to complain about extremely shabby treatment from the Government it is the young married couples, all of whom were asked to support a property owning democracy—a slogan which they must now consider to be hollow. They are unable to rent houses and are forced to buy. I believe that it is not a bad thing to buy one's own house and that people should be encouraged to do so, but my complaint is that these young people should not be Imposed upon as the Government impose on them.

As the hon. Member for Wycombe said, when a young man sets out to buy a house he calculates his income and knows reasonably well how much he can afford to pay for the house, how much furniture he can afford and what holidays may be taken. When all these things are taken into account and added up the margin left is very slender. It only needs a rise in Bank Rate for there to be an increase in mortgage repayments and in the rates and thus put these young people, who set out in the best of faith, into financial trouble. It means that they must deprive themselves of something and the responsibility for that deprivation lies on the Government.

Mr. Dudley Smith (Brentford and Chiswick)

The hon. Member should also bear in mind that young people have the opportunity to earn increasing amounts of money as they progress in their professions whereas the elderly and retired and those on fixed incomes have no chance of doing so.

Mr. Howell

It is a mistake, in looking at problems like this, to start dividing the community up into sections and saying that one is better off than another and that the situation of young married people and others should be set off against the situation of old people. Obviously, the elderly are in another category, but that does not alter the fact that the price of housing has risen six to eight times since the war and that this is an intolerable burden for young people.

Three things are political dynamite for the Government. They are high rates, high mortgage interest and the failure to deal with leasehold tender. They are the three things above all which prevent the Government from receiving credit for owner occupation, and I hope that: the Labour Party, while still emphasising its concern about those even less well off and who have to be housed by local authorities, will more and more stand up for those young people buying their houses who have been affected by Government policy in this way.

Dr. Alan Glyn

One of the disservices which might arise from an artificially low rate of interest on houses is that it would mitigate against young people simply because it must have the economic effect of putting up the prices of housing.

Mr. Howell

I cannot follow the logic of that. If one keeps down the price of land and of interest, one apparently puts the price of the product up. How keeping interest rates down automatically puts prices up is beyond my comprehension.

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

My hon. Friend the Member for Clapham (Dr. Alan Glyn) is quite right. I do not believe that the party opposite can destroy the whole basis of supply and demand. If more money is made available for housing which is not in increased supply the price is bound to go up.

Mr. Howell

But both sides are committed to building more houses, so what are the goods which are to be in so short supply?

Mr. Corfield

The hon. Gentleman knows perfectly well that it is a question of the relation of supply to demand, and that even if we built 400,000 houses this year it would be some years before the two balanced.

Mr. Howell

We are getting more and more involved. The more that the Minister tries to explain the more confounded the position becomes. It is quite clear that this has nothing whatever to do with the plight of young married couples who are struggling to pay mortgages and rates under the tremendous impositions they suffer under the present Government.

If we had reasonable, guaranteed rates of interest for young people buying houses and for local authorities, together with a sensible grant aid system by the Treasury, all these things would be to the advantage of the owner occupier and the young married couples. If the Government think otherwise, then that proves the suspicion that they are out of touch with the matter and cannot hope to produce any improvement for the young married couples. Nor can they do so for the old people or any other categories of hardship.

I am glad that one thing has not so far been raised in this debate, and I hope that the Joint Parliamentary Secretary will not do so in his reply. It is the old story that old people generally speaking are living in houses too big for them and that they should sell those houses and move to smaller ones. Nothing could be more cynical or callous than an attitude of that sort, which one sometimes finds in this country. There is every reason why old people should wish to stay in their homes. They are living in a community they know, knowing the neighbours, having lived there, perhaps, for many years, and are, perhaps, members of a local church or social club. That is exactly the sort of relationship they need in their old age. It means they are constantly in touch with the community. None of us has a right to suggest that old people should get out of their houses. The rating system, however, imposes an additional handicap and hardship upon old people, because it rests entirely on the basis of the size of the house they live in and has no regard at all to the number of local authority services which they require.

There are two other sections of society on which the present rating system bears very unfairly. One of them is comprised of the widows. A woman, perhaps with a family, suddenly loses the breadwinner of the house and she at once finds herself in difficulties, and one of them is that she has to continue paying out the same amount of money in rates as though her husband were still alive and earning. She has to go on paying the rates just the same, though her husband's income has gone. A system which does things like this must be plumb crazy, and that is what I believe our present rating system to be, and it is wrong.

A word about council tenants living in flats. I believe the rating system is very unjust to them. If people choose to buy and live in a flat of their own, all well and good, but most council tenants of flats are put in flats although they do not want to be there but would sooner be in a house. They do not want to occupy a flat 16 or 20 storeys up. Under the present system flats are rated on the same basis as any other property, and it seems to me to be wrong. That is not a major matter, but it is one I think the Government's inquiring committee might well look into.

So we have inequities in the system. I have said in this House before, and other people have said it, that there are far too many people in our society paying no rates at all. It is quite wrong that in my constituency and in other constituencies there are houses in each of which there may be four or five or six families living and using four or five or six times the amount of local authority services as the unfortunate old folk in the house next door, and yet they are not making a fair and proper contribution to the rating system. It seems to me, therefore, that there is a great deal to be said for having much greater regard for ability to pay, and this does not mean ability to escape.

The last time this point was raised in this House the Minister gave us a most unsatisfactory reply, stating, "Well, people who are lodgers pay rent, and that rent usually includes a degree of rates." Of course a degree of the rent is for the rates, but the point is that a family house with four or five families in it is probably demanding of road services, and police and fire services, four or five times the amount the house next door, which is in single family occupation, is demanding This situation just does not bear examination. Those people are escaping rates.

There are other people who work in large cities and escape out into the countryside, and escape the cities' rates. I myself think there is no justification for this. As I was on my way here this morning from Birmingham, driving through Solihull. I found coming the other way—fortunately, or I would not have been here now—a tremendous row of traffic, miles of lines of traffic, all trying to get into Birmingham, people coming into Birmingham to earn their living, and whose one idea is to get out of it at night, to escape from my fair city to what they presumably regard as the pleasanter and healthier atmosphere outside. We are pleased to see these people coming to Birmingham to earn their livings, but the point is that we have to police that traffic, we have to provide the roads and other services for people who at the end of the day drive off to Sutton Coldfield and Solihull and elsewhere in Warwickshire. These people are imposing a tremendous task on the ratepayers of Birmingham and not paying a penny piece themselves in contribution towards those services.

This kind of rating is worthy of Alice in Wonderland. People come into the city to earn their living in tremendous numbers, and create a tremendous financial problem for the local authority of the city, and then go away at night leaving some chaos behind them, and certainly financial chaos, because they are making no contribution.

This brings us automatically to ability to pay a local income tax or something of that sort. The present system is certainly crazy. One pays one's rates if one is one of those who are called the better members of society—improving one's house, looking after one's home. What a man does with his income at the end of the day is, I agree, his own personal business, but what nonsense it is that if one spends one's money backing horses, or on buying a motor car, or if one spends one's money on buying a house, or travelling abroad, or keeping two wives, this has no regard to easing the burden of the rating system; but if one is one of those prudent, sensible, intelligent British householders who spends his money on improving his house one has to pay additional tax for so doing.

It is almost to say that the rating system is a built-in incentive to immorality. None of us wants that position, but that is really the situation in 1964, and it cannot be right. It can- not be right, that a man who puts his home first, who wants to improve his home, who wants a bigger home, who keeps it going, who adds to it, should be additionally imposed upon under the rating system every time he does these things. It is just plain nonsense. I do not believe that there is an hon. or right hon. Member in this House who would attempt to defend that sort of situation. I certainly hope not.

Mr. Corfield

Is the hon. Member suggesting that if this very praiseworthy citizen were instead to invest in Government securities, which I think the hon. Member would regard as equally praiseworthy, his income from that source should be tax free?

Mr. Howell

No. What I am suggesting is that a man who puts his money into his home, rather than spending it on wine, women and song, ought not to be additionally handicapped by the rates, or be a burden on the other ratepayers. I am not sufficiently a financial speculator myself to comment with any authority on what the effect would be if this gentleman, instead of putting his money into his own home, were to put it into the Stock Exchange, but from what little I know of the Stock Exchange I would hate thought that another form of gambling——

Mr. Corfield

Buying Government securities?

Mr. Howell

It is an even bigger form of gambling.

Mr. Callaghan

Certainly at the moment.

Mr. Howell

Yes, certainly at the moment.

Mr. Callaghan

My hon. Friend will remember that if this man had put his money in 1954 into War Loan he would have had to pay £80 for it, and that now, if he tried to sell it, so that with the proceeds he could do repairs to his house, he would get only £50 for it. So either way, under this Government, he loses.

Mr. Howell

Certainly. I am delighted that my hon. Friend brings such support to me from the Front Bench. Perhaps I am wrong to call that gambling. As a man who likes a flutter myself, when I start my little gambling techniques I hope to be able to invest the money, but apparently if one puts one's money into Government securities under this Government one has no hope whatever of winning: that is lunacy, not gambling.

It does mean that we have to have regard to some form of ability to pay. The hon. Member for Wycombe, in his interesting speech, told us throughout that we must have regard to ability to pay, but he disappointed me by ending up saying that he did not like local income tax and he wanted to know how we could assess ability to pay on any other basis than that of income. He who has the highest income, it seems to me, ought to pay the highest amount for services. That. is a practical proposition.

Some figures have been produced of the cost of the rate services in this country if they were put on the rates. I understand that they would produce a gross figure of an additional 1s.10d. on the rates if all the local services were financed by national Income Tax. If they were financed on the basis of a contribution according to what a person earns, but without having regard to allowances, and not counting people earning less than £5, the figure would be about 10d. These figures have been supplied to me by the Treasurer of Birmingham, to whom I am indebted.

If that is the case, it seems that we have the solution to the problem. We can have a system by which a degree of local authority rates can be levied and collected in the same way as national Income Tax is collected. No doubt we shall be told that that would give rise to problems of distribution, but, as we have computers which can assess all sorts of difficult statistical problems very quickly, it seems that the problem of distributing local income tax could be dealt with fairly easily. I think that it would have to be on the basis of, say, one-third of what a man pays—if it was 9d. in the £—to be retained by the authority in whose area he works, and two-thirds to be distributed automatically to the authority in whose area he lives.

That seems to be a sensible and reasonable proposition. At any rate, having given it a great deal of thought I cannot find any snags in it. It would get over the problem of people who live in lodgings in large houses not paying anything. It would mean that the widow and the old person—the people who are hit hardest—would pay very little, if anything. It would also mean that at the same time as national incomes rose, the wealth of local authorities would be automatically increased. We would have a healthier system of local government because the local authority would know that when the gross national income rose its revenue would be automatically increased, and therefore these are the years when it should be embarking on expanding its services, because these are the years when, generally speaking, people can afford to pay for them. I hope that it will not be long before the inquiry which is now being conducted produces results, but what can we do about the problem in the meantime?

I return to the political point on which I commenced my speech. Let there be no doubt that the revolt among ratepayers is due, first and foremost, to the Government's policies. The first thing to do is to move back to the percentage grant system, if it is possible, but many of us know that the crisis is so imminent that a new Government, immediately on taking office, cannot go back to that system overnight. We must therefore deal with interest charges in the way that has been suggested from these benches on many occasions. We must look at the general grant situation, and then get back as quickly as we can to the percentage grant system of finance to which we on these benches are committed.

Above all, we must appreciate the great burden of the present rating system. One of the things that appalled me in the Minister's speech—and I am glad that he has now returned from lunch—was that in reply to an intervention from one of his hon. Friends he said that the great shock had come, and that there would be no more. He said that ratepayers need not worry any more. Revaluation has taken place, and the great shock is over. There never could have been a more complacent utterance. It means, of course, that from now on there will be a steady stream of shocks, each one greater than that of the previous year.

I quoted 28 authorities which had had their rates increased by more than 20 per cent. in each of the last eight years. There must be a change of Government policy. We must break down this iniquitous block grant system of financing local authorities, which is the cause of so much of the trouble. We must return to honest Government. When the block grant system was imposed, the Government said that it would have no effect on local government finance. As we said at the time—and we have been proved right since—the block grant system was imposed to relieve the taxpayer of certain financial obligations and to impose them on the ratepayer. Unfortunately those gloomy prophecies have been proved correct, and I hope very much that in the months ahead the nation will realise the consequences of the Government's action and will take the necessary steps to deal with them.

1.26 p.m.

Sir John Eden (Bournemouth, West)

I do not know what I am suffering from, but at any rate it is not shock.

Mr. Callaghan

Hunger.

Sir J. Eden

That is probably true. It is a long time since the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) began his speech, but he apologised in advance for it, and I am sure that the House will accept his apology. I do not expect the hon. Gentleman to remain in the Chamber for the short time it will take me to make my speech. If he is hungry and wishes to leave to get some lunch, I shall understand. The hon. Gentleman widened the scope of the debate considerably, and I shall not attempt to cover all the points raised by him.

I start, as other hon. Members did, by congratulating the hon. Member for Southampton, Itchen (Dr. King) on his admirable speech, which he made as a result of many years experience of local government. We have come to respect that experience. We hold him in high regard and listen to his speeches with great interest.

I quarrel with the introductory words to the Motion in one respect, and that is where it says: the grave problem of the ever-increasing burden of rates". I should like to interpose the words "to some people", because I think that that is really the key to what we are discussing —the ever-increasing burden for some people.

It is on that aspect of the matter that I wish to say a few words. In doing so I inevitably, speak of Bournemouth. The hon. Member for Itchen was kind enough to refer to the Bournemouth case, although not in quite the same terms as I shall.

My hon. Friend the Member for Wycombe (Mr. John Hall) referred to the fact that in his local authority the domestic rate had increased by 25 per cent. since revaluation. The figure for Bournemouth is very much higher. The average rate payable on domestic assessments in 1963–64 increased by about 47 per cent. over the 1962–63 figure.

Mr. A. E. Hunter (Feltham)

In some areas in London there has been an increase of nearly 100 per cent.

Sir J. Eden

I quoted the average figure. Some have increased by very much more than that. In some individual cases, of course, it is well over 80 per cent. This gives some idea of the size of the actual shock, about which the hon. Gentleman was speaking, which came to the people of Bournemouth as a result of revaluation. I perfectly well took my hon. Friend's point that we should have had revaluation very much earlier. Had we done so the shock would have been nothing like as great

It is well known why the shock has been so great in a place like Bournemouth. It is because there is virtually no industry there to share the burden of rates, which is now almost entirely borne by the domestic ratepayer. In fact, the average increase suffered as the result of revaluation, amounting to something like 47 per cent., should be compared with the average increase over the country as a whole of only 1 per cent.

This is the backcloth to what we are discussing today. There are, of course, individual cases of very great hardship. The hardship has been greatest on the bungalow owners and owners of small flats in particular. The bungalows are probably the most difficult of all. Elderly people live in bungalows because they are easier to manage and to look after and are in keeping with their needs.

Before I come to discuss how these problems have been met in Bournemouth as a whole, I wish to generalise for a moment or two. I agree with the intervention by my hon. Friend the Parliamentary Secretary, in the course of the hon. Gentleman's speech, when he emphasised the fact that increasing costs for local government, as in Government expenditure generally, must reflect increasing demand. When we talk about the burden of rates, we must also recognise that there is an increasing burden of demand. This demand is one of which we hear a great deal in debates in the House on education, the police, salaries and wages and public services of all kinds.

We constantly hear about the demand for improving and expanding the services. There is no quarrel between us on this, or as to the liability of being able to do this. Inevitably, this demand must be reflected in the form of increased costs and increased expenditure locally. We have to face the fact that this increase in demand, and, therefore, increase in expenditure, is likely to go on in the future rather than to be repressed. Therefore, we have to face some of the implications of this, at any rate for some of the people in the local areas if not for the whole range of ratepayers.

I am thinking about some of the people primarily, and that is one of the reasons why I am not at all happy about either the local Income Tax proposal or the site valuation proposal, to which I will come back in a moment. The most obvious of the increasing demands is that of education. In his speech, the chairman of the Bournemouth finance committee, when presenting this year's rate, which showed a rise of 6d., again drew the attention of the council to the fact that the education committee remained the largest spending committee of the council. The actual net cost of the rates in the coming year in Bournemouth will be just under £2½ million, an increase of £200,000 over the current year.

Even so, as I think the hon. Member for Itchen said, this increase still nothing like satisfies the people of Bournemouth—the parents or the children of Bournemouth, or even the hon. Member for Bournemouth. We all want to see vastly improved school services and facilities. I can think of a very fine school in Bournemouth which is doing very excellent work in sending out some well educated boys and girls which is in desperate need of physical improvement and alteration. There is a boys' school which was originally designed for 300 boys, and which was built a long time ago, which has now to accommodate 600 boys.

By its very nature, in picking out a problem like this one is always liable to give the impression of negligence and failure to live up to responsibilities, whatever they may be. But the advances which have been made in terms of education, both locally and nationally, are very great indeed. I am sure the House will be grateful to the hon. Member for Itchen for the tributes that he paid to this fact and for the way in which he has always recognised the tremendous progress which has been made in this field over a great many years, spanning all political parties. This is the trend we want to see, but the question is how to finance it.

At the moment the cost of financing education is divided as to 62 per cent. out of taxes and 38 per cent. out of Government funds. This varies again between one area and another, as, indeed, it must inevitably do. I do not see at the moment how we can depart from local variations. I recognise the desire to try to make everything as equal as possible in terms of sharing the burden. I certainly recognise how necessary it is in local rating to ensure that locally there is equity as between one type of property and another. This was the whole purpose of revaluation—to ensure that the burden was shared as equitably as possible between all categories of ratepayers. However, I do not see—I am putting it interrogatively in my mind because I would like to hear more discussion about it—how we can get spread across the country as a whole an absolutely equitable basis, as between one type of property in one area and its counterpart in another area, for financing local services and needs.

There is tremendous variation between local rating authorities, between their requirements and the sort of needs they have and between their outlook. The hon. Member for Birmingham—I cannot remember for which division he sits—

Mr. Callaghan

Small Heath.

Sir J. Eden

Now I have forgotten what I was going to say about him. At any rate, the hon. Member for Small Heath spoke at some length about the desirability of getting local Income Tax in order to ensure complete equity as between one ratepayer and another, but, inevitably, the services provided by one local authority are going to vary from those provided by another. For example, I do not suppose that many local authorities would happily take on the costly services which Bournemouth has willingly undertaken in order to take care of the great proportion of elderly people in its population. This is a peculiar problem of Bournemouth to which particular attention should be paid both by local councillors and local ratepayers as well as by the Government in seeking to assist Bournemouth in the various forms of grant and rate deficiency. Equally, of course, Bournemouth has nothing like such a substantial number of children who require educating as have some other areas. And so we would not happily take on the tremendous burden that other more industrialised areas have to consider when dealing with the problems of education posed by their larger child populations.

There are bound always to be local variations and local problems. I have now remembered the point I wanted to make about what was said by the hon. Member for Small Heath. He referred to the large number of people who came to work in his constituency but who lived outside the area and did not make any rate contribution to the services provided there. Although I cannot speak for Birmingham, I doubt whether the city would like those people to work somewhere else. I am sure that a substantial contribution is made to the prosperity and well-being of Birmingham by the presence of those people who work there, and that the workers would probably think twice about going to Birmingham if there were some form of local impost placed upon them because of the fact that they worked in Birmingham. Were we to carry that argument to its logical conclusion, it would mean that an area such as Bourne- mouth, which is a seaside holiday town, would have to levy an impost on all the holidaymakers who come there and upon whose visits depends the prosperity of the town.

Again, therefore, we see that there are special interests in special cases. To attract holidaymakers, Bournemouth must provide special services, special facilities and amenities. One matter which is cawing a great deal of concern in Bournemouth is the heavy cost of coast protection. It can be—it is and it has been—argued frequently that the cost of coast protection is rightly a national charge, and should not be borne by the local ratepayers. I can sympathise with this point of view, but only to the extent that some assistance should be given from central funds for this sort of operation which has great national implications. I do not go so far as to say that the total burden should be borne nationally. Were Bournemouth not in such an ideal position, with such an ideal cliffside frontage, it would not be one of the prime holiday resorts that it is. Nor would it be in a position to attract holidaymakers upon whose visits its wealth and prosperity depend.

There must be a balance between all these things, and my point is that in each area there are different problems, requirements and circumstances. This is one of the prime reasons for ensuring that these different problems are catered for locally by people who understand them. That is a great argument in favour of local government. My hon. Friend the Member for Wycombe lamented the, fact that the standards of some of the local councillors, or of people who offered to serve on a council, is not now as high as it was in the past. I do not know what the standard was like in the past. But I do know that it is becoming increasingly difficult for people to give up the amount of time required to do local government work. I do not know how some hon. Members are able to combine local government work with their duties in this House. Obviously, they must be extremely hardworking people.

More local people would probably be prepared to serve on the council if this service did not involve quite so much committee Work. If we could find a way to reduce that work, or to increase the actual amount of representation in each ward or borough, perhaps a greater number of people would offer to serve on local councils.

There is no doubt that local government is becoming very big business. If we could find some way to encourage big businessmen and men experienced in the conduct of business affairs, to serve on the local councils, it would do a great deal of good. I must admit that I do not know how we might persuade them to do this. But it would do a great deal of good, because very large amounts of money have to be administered locally and many important matters come up for consideration. This will become increasingly the case with the greater prominence being given to city centre development, urban redevelopment and property development of all kinds. I am sure that we should try to encourage experienced businessmen, who are accustomed to handling large sums of money, to join with others in service on these local authorities.

Now, I should like to say something about how this problem of the increasing rate burden for some is being met in Bournemouth in accordance with the, provisions of the Rating (Interim Relief) Bill. The way in which this is being done has been published in the Bournemouth area, and it may be of interest to the House if I go over some of the highlights of the scheme which it is proposed to attempt to operate. I should say, first, that the amount of grant provisionally allocated for the coming year as a result of the Measure, on the basis of the persons over 65 years of age in Bournemouth, is £97,880, which gives an indication of the number of elderly people who live there. In fact, looking at the rates and bearing in mind what are the qualifying requirements enumerated in the Bill, most householders in Bournemouth will qualify for assistance. But then we must bring in the second test, that of hardship allied with need, and this is where the numbers become reduced pretty considerably.

The local authority has sought to devise a scheme to help those who, in its opinion, it was the intention of the Minister should receive help. To quote from the Ministry circular 4/64, special attention should be paid to retired people or other people on incomes that are above, but not so far above, the National Assistance level… etcetera. Of course, those on National Assistance levels get their rates paid by the National Assistance Board and will not qualify for assistance under the local authority scheme. The statement of income that the local authority, or the borough treasurer, will have to have, in order to determine the need and the extent of hardship, may reveal that there are a large number of people eligible for National Assistance but in fact do not draw it. I am glad to note that the borough treasurer will point out to them that were they to apply for National Assistance, they might get the whole amount of their rates paid and not a portion, as would be the case under the provisions of the Rating (Interim Relief) Bill.

It is important that all who think that they may qualify for assistance should come forward as soon as possible and give a full statement of their income, as they are required to do. But the way in which the scheme will operate shows that a maximum remission of rates could be given to persons whose means will be £5 4s. 6d. per week for a married couple after rent or mortgage interest and rate payments have been met. It is hoped that the outcome will entitle the individual ratepayer to the highest remission if his income, after all those deductions for rent, mortgage interest and so on, is not more than £6 10s. per week, or £338 a year.

Mr. Callaghan

How will Bournemouth treat the person who is not entitled to the full National Assistance scale rate, but to a portion of it because he has a small pension?

Sir J. Eden

A small pension counts as income and has to be taken into account when considering the income for the determination of need and the extent of hardship. The authority is seeking to see that those above the National Assistance Board scale of income will get the maximum relief under the Rating (Interim Relief) Bill. It is hoped that the right balance has been obtained by saying that if the ratepayer has an income of £6 10s. per week, which is above the National Assistance scale, he will be in a position to get the maximum relief which the local authority is able to give under the Bill after paying rent and mortgage interest. To calculate this a notional figure has been allowed for rent.

Mr. Callaghan

How much?

Sir J. Eden

I have all the figures here. Fifty per cent. of the rateable value of the house is allowed for rents, so, if the rateable value is £110, the figure would be £110 plus £55. Added to that would be the allowable income of £338 and then the remission would begin. I am sorry, but there is too much detail here to spell out this very complex scheme. It is weighted and designed to meet just that category of people. It is further weighted in favour of elderly people by waiving to some extent capital and income of those aged 65. For example, where the ratepayer is 65 or over, the first £52 of his income is not taken into account.

This will go some way to alleviate immediate hardship. The maximum that is likely to come from it for a ratepayer is something over £24 in the year, but the most likely figure will be in the region of £10 or £12 in ratepayer relief. In many cases this will restore the status quo ante. This, of course, is allowing for the limited increase allowed for in the Bill. This is a step in the right direction.

The reason why I draw attention to what is being done in Bournemouth is to show that this Bill will help to some extent, although I admit to a limited extent. It is in this direction that we should be looking for future help for local authorities. In Bournemouth we feel rather sore about the position of the rate deficiency grant, as my right hon. Friend knows. The fact of the high proportion of elderly people and the amount of help that many of them require from local services and the justification which many of them have for assistance from more able-bodied ratepayers should be more clearly reflected in a Bournemouth rate deficiency grant.

There seems to be an anomaly here. Whereas the figures for domestic rate payments per head of population in Bournemouth is £14 13s. 11d. and in Bradford it is £6 19s. 2d., Bradford gets a 30 per cent. deficiency grant while Bournemouth gets none. This has been frequently emphasised to my right hon. Friend. I hope that further consideration will be given to this aspect of the problem, Particularly in some of the reviews which are now being undertaken. I am sure that the Allen Committee will help considerably on the hardship front in dealing with the individual. I hope that the major review which is being undertaken within the Department will point some way to carrying this individual help on to the actual borough or area assistance with various forms of weighting grants, of which deficiency grant is one from which we should like to benefit in Bournemouth.

While this inevitably is a difficult subject locally in view of the disproportionate increase which some individuals have suffered following the belated revaluation, I am certain, as was the hon. Member for Itchen, that no one wishes to see a retrenchment in these essential services. We all want to see the greatest possible amount of efficiency locally and the pruning of waste, but no one wants to see a cut back in what we all regard as necessary services. We want to see that those who cannot possibly meet this burden shall be spared from the obligation of trying to do so and that there is some fair method devised to enable the rest of us to help them.

1.58 p.m.

Mr. Marcus Lipton (Brixton)

The details about Bournemouth given to the House by the hon. Member for Bournemouth, West (Sir S. Eden) are most revealing. They show to what extent the Government are forcing local authorities to rely on all kinds of tinkering devices to deal with this problem.

As the hon. Member said, Bournemouth is to benefit to the extent of £97,000 by way of the Rating (Interim Relief) Bill, but in the Borough of Lambeth, where there are many more poor people than in the town of Bournemouth, there are more than 25,000 who are over 65 years of age and the total amount Lambeth will get from the Government under the Act will be £13,000 per annum. That is equivalent to ¼d. rate for the metropolitan borough. Although I cannot speak for the Borough of Lambeth as a whole, because I represent only part of that area for which the council is responsible, I say to the Minister, "Thank you for nothing". This equivalent of a ¼d. rate which he bestows upon us is not worth a light. We must tackle the problem in a much more serious way.

Whenever the present Administration is faced with a problem, it sets up a committee. So we have the Allen Committee to deal with rates, another committee to deal with the financial relationship between local and central authorities and another dealing with the especially difficult position in London. We have the Government running round dabbing a little ointment on every itching spot on the body economic. That is not the way to deal with the situation.

We know why the Government are suddenly showing this outburst of activity. A General Election is approaching. But all these problems began to loom a long time ago, and effective action should have been taken long before now. I remember having an altercation with Lord Hill when he was the Minister of Housing and Local Government. I forecast that as a result of revaluation ratepayers would have to bear a swingeing increase. I made a similar statement after the right hon. Gentleman became the Minister of Housing and Local Government, and was severely reproved by him. In the end a White Paper was produced showing that the average rate increase would be a trifling amount, but when the figures were finally worked out there was a tremendous outcry.

I received many letters from Bournemouth and other South Coast resorts at that time. Apparently the people thought that as I had shown such a degree of clairvoyance I was perhaps the best person to take up the case for the south coast resorts, all of which are represented by Conservative Members of Parliament and all of which combined to force the Government to introduce the interim relief Measure.

We are now faced with the need for a radical reorganisation of local government finance. It becomes all the more urgent when we have in power a Government who say, "We will build so many houses. We will construct so many miles of new roads. We will expand education facilities." What the Government really mean is, "We will urge the local authorities to get on with these things and leave them to raise the necessary capital with which to do it." All the Minister of Housing and Local Government does is to make speeches saying, "We are going to do this and that", but in the end the burden of carrying out and paying for the schemes is placed on the shoulders of the local authorities. The right hon. Gentleman is sufficiently intelligent to know, or not to controvert my statement when I say, that when he says," I will build so many houses and do this and that", it means that he is urging local authorities to get on with the job and that he will help them out as far as he can but the money and the effort will have to be provided by the local authorities.

What is the position? The Minister says, "We will build so many houses in London." The fact remains that only a day or two ago the London County Council revealed that the cost of an acre of land in London for building purposes is now £61,800. That was the average cost per acre for new homes during the last 12 months. It means that if the Minister wants the London County Council to build the houses, he must face the fact that the local authorities must spend more than £60,000 per acre, which represents a very heavy capital charge on each dwelling before it is occupied. It means that the financial relationship between the central Government and the local authorities is of crucial importance.

The debate has shown what a strong case can be made out for transferring the cost of the police and education services, taking those two items alone, from the local authorities to the central Government. This would not in any way destroy or weaken the democratic principle of local government. It would by no possible means deal a blow to the democratic principles and sense of responsibility on which local government is based. There are one or two suggestions that I should like to make which have not yet been mentioned during the debates, but I want first to try to make the Minister understand how Government policy and in particular Government financial policy imposes a very heavy burden on local authorities.

The Government made an abrupt switch in lending policy in 1955, as a result of which the London County Council and other authorities were forced to borrow regularly and extensively by means of public issues of stock. Since 1955 the London County Council has borrowed £185 million in this way, and that borrowing has cost £3.3 million in underwriting fees and other charges. In that one respect the switch in lending policy in 1955 has cost the London County Council £3.3 million which could otherwise have been saved.

I cite as an example the £30 million stock issue of the London County Council in January. To begin with, it was issued at a discount, and it produced only £28,650,000, although the London County Council has to repay £30 million at the end of twenty years. Adding interest and management costs and so on, the London County Council, and, of course, the London ratepayers, will have to find £64½ million in order to pay off the £30 million loan—and in a comparatively short period. On the other hand, if the London County Council had been able to borrow the £28,650,000 from the Public Works Loan Board even at the present high rate of 5¾ per cent., it and the London ratepayers would have saved £2½ million.

Reference has been made to the problems created for local authorities by the substitution in 1959 of the general grant for specific grants. I will quote one or two figures to show how London has been affected. The Minister intervened a little while ago to show that the situation had not been changed to the disadvantage of local authorities to any large extent. However, in London in 1958–59 Government grants met 32 per cent. of the gross maintenance expenditure and 39 per cent. was met by the taxpayers. In 1964–65 Government grants will provide for only 27 per cent. of gross maintenance expenditure and 42½ per cent. will have to be borne by the ratepayers. That does not seem to fit in with the assurance that the right hon. Gentleman was trying to give to the House only a few minutes ago.

Sir K. Joseph

What is this maintenance expenditure and who pays the remaining 20 per cent, which the hon. Gentleman has not allocated? I do not recognise this as a normal head of rateable expenditure.

Mr. Lipton

The figures that I have given relate to education.

Sir K. Joseph

Education maintenance?

Mr. Lipton

Yes.

Sir K. Joseph

What does that mean?

Mr. Lipton

I am giving the figures given to the London County Council at its last meeting.

Sir K. Joseph

What do they mean?

Mr. Lipton

If the right hon. Gentleman will allow me to finish what I have to say, it may become clear. It is very difficult to go into a long explanation of figures. I shall be very happy to send the right hon. Gentleman a copy of the report which was submitted to the London County Council when it was being asked to fix the rate only a few days ago. As a result of the shift in the balance, ratepayers in London have to provide about £5 million more, the equivalent of a 3½d. rate, than would have been the case if the proportion met by Government grants in 1958–59 had been maintained.

I do not want to detain the House because I do not wish to emulate the example of other speakers who have occupied more time than they should have, but I shall be happy to ensure that the right hon. Gentleman is given in greater detail the figures that I have very briefly and roughly summarised. I think that he will find that the figures do not support his contention that the block grant is not making all that difference to local authorities.

No mention has been made today of the rating of empty properties. The Minister should bear this in mind. There are millions of square feet of office building now, particularly in the Middlesex area, and it strikes me as being quite wrong that all that property, which requires police protection and other local services, should escape rating altogether while office buildings are unoccupied. I should also like the Minister to consider the possibility—this is being carried out in one or two countries on the Continent—of zonal rating. With this system, a higher rate would be paid by a person who wanted to operate in the City of London than by someone a few miles out. I think that London and other large towns could be zoned for rating so that the people who wanted to be in the centre for business purposes would pay a very much higher rate than those who wanted to operate their businesses a little further out.

That would, I think, help the South-East plan, which the Government, in another fit of demoniac energy just before the General Election, published a day or two ago.

I hope that the Minister will take into consideration some of the points raised in the course of the debate today—not that he will have the opportunity very much longer of doing very much about them. It is all part of the educational process, not only of the Government, which we are trying to carry out as best we can, but which is going on throughout the country as a result of which, before we are very much older, newer and better methods will be applied to the solution of local government and rating problems.

2.16 p.m.

Mr. H. P. G. Channon (Southend, West)

I cannot agree with all that the hon. Member for Brixton (Mr. Lipton) said in his speech, but, like him, I should like to thank the hon. Member for Southampton, Itchen (Dr. King) for introducing this debate. We are all deeply grateful to him, and I agree with very much that he said.

All of us who come from areas where there have been severe rating problems, particularly like that of my hon. Friend the Member for Bournemouth, West (Sir J. Eden), are grateful to the Government for setting up the Allen Committee and in providing recently the Rating Relief Bill which, although a rough and ready and interim Measure, will help to alleviate the hardship of people in certain areas.

As my hon. Friend demonstrated, perhaps of more fundamental importance is what will happen in the review which the Chief Secretary to the Treasury is carrying out in the whole field of local government finance. I hope that when my right hon. Friend replies he will be able to tell us a little more exactly how far this review will go. There is a great deal for this Committee to inquire into.

The hon. Member for Itchen has long taken an interest in this problem, and I read with interest his speech in the debate of 2nd March, 1962, when he advocated, as he did today, some shift in the burden from local government to the centre. I agree with him. It was particularly interesting that he of all people should be prepared to advocate, or at least to consider with some favour, the idea that teachers' salaries might go from local government to the centre. I find that many teachers in my locality are very worried about this situation. I think that probably they have no reason to be worried about it. I hope that my right hon. Friend will be able to tell us that the question of teachers' salaries will be considered. Education takes up about one-half of the rates and teachers' salaries take up one-half of that, so that alone accounts for about one-quarter of the total money raised by the rates.

Dr. King

When I made that suggestion I was speaking for myself. The teaching profession is not satisfied that it would not be dangerous and that they might not lose some of their professional independence if that came about.

Mr. Channon

I appreciate that, and I am glad to have the hon. Member's support for my point of view.

There are many other things that the Chief Secretary's Committee ought to inquire into. I am well aware that the question of local income tax, which has been referred to today, was dismissed by one Royal Commission in 1911 and that there have been a few later inquiries. There has not been a full inquiry into this for many years. There is also the question of a local sales tax which ought to be considered. I think it was a pity that the Government did not publish the evidence which led them to the conclusions that they came to in their very important White Paper on local Government finance published in 1957, where they dismissed the idea of local income tax and all these other policies, but gave no reasons why they came to those conclusions.

After all, although the rating situation has gone on in Great Britain for 350 years it is by no means the normal procedure in other countries, and I do not see why there is not a case for examining a great many other methods. It is true that all countries, so far as I have been able to discover, with the possible exception of Finland, have some system such as rating, but many other countries have other sources of local income. It is only in Great Britain and Ireland that rating remains the only, or by far the largest, form of local revenue. I hope that all these matters will be considered by the Chief Secretary's Committee.

It is time for a very authoritative review of the whole system of local government and the whole system of its finance. Unfortunately, as I think that the House will agree, this conflicts with the other matter, which is the very great need for speed. If we do not have speed about this, we shall be faced with another quinquennium in 1968 and this problem will arise all over again. I hope that the Committee is pressing on not only with an exhaustive study but also with a very speedy study, because it would be very interesting to everyone to have some firm conclusions well before the next quinquennium.

The real reason why there is a need for an inquiry and why I am so grateful that we are having one is that there have been so many widely differing results in rates. My right hon. Friend has said in the past—it is well that it has been said—that in general the amount of money levied in rates in proportion is less than it was before the war. My right hon. Friend has said that rates have trebled on the average since before the war and incomes have risen by about 3½ times. On those figures it is fair to say that over the country as a whole the rating problem does not strike home to a great many people.

However, certain areas, and in every area certain categories of people, have been hit very badly. I have obtained figures of the average rate per domestic hereditament in 1939–40 and 1963–64 in various areas. My hon. Friend the Member for Bournemouth, West (Sir J. Eden) would have been interested to learn that the average rate per domestic hereditament in Bournemouth in 1939 was ten guineas. Today the average rate per domestic hereditament in Bournemouth is £53 3s. That increase is much greater than the increase which has taken place in incomes. The average rate in Southend before the war was £15. In 1963 it was £54 7s. Therefore, we, too, have suffered a rise in rates greater than the rise in incomes, but not to anything like the same extent as Bournemouth.

Dr. King

I hope the hon. Gentleman will not pin too much on these figures, because they may measure amongst other things improvement in the type of property.

Mr. Channon

It is practically impossible to get any figures which are absolutely satisfactory. The figures for Bournemouth are much worse than ours. It is even worse in Westminster: before the war the average domestic rates was £31 17s.; it is now £103 17s. It is true that in some areas, probably in most areas which have a large incidence of industry, the domestic ratepayer is probably better off than he was before the war. Therefore, the review my right hon. Friend is carrying out must take into account whether it is not possible to have some regional variations in the form of local taxation or some form of differential taxation so that there is not this great sweep which exists at the moment, which takes no account of local variations. This principle is accepted in a rough and ready way by the Rating (Interim Relief) Bill, which gives relief to certain areas for certain reasons. I hope that the Chief Secretary's Committee will consider something along these lines.

There is one thing which the Government should do at once, or show themselves willing to do. I fear that I shall not enlist the support of the hon. Member for Itchen in this cause, although I hope he will allow me to make it in due course. Under Clause 8 of the Public Libraries and Museums Bill it is not possible for a local authority to levy a charge for public libraries. As my right hon. Friend knows, although it is not primarily his responsibility, many hon. Members think that there might be a permissive or optional charge that local authorities could levy for the use of public libraries. In the long run, this must be in the interests of the libraries. I imagine that legislation on public libraries is a very rare event. If they are to be paid for out of the rates for the foreseeable future, there is a danger in the long run that libraries will be starved of support because local councillors will be extremely reluctant to spend the money they should on the service.

If an optional charge were made, naturally certain categories—students, children, the elderly and the needy—would be exempt. At present we spend more than £20 million on the library service. Sixty per cent. of the books borrowed are fiction. A high proportion of these are categorised as light fiction, whatever this may mean. It has been calculated that 70 per cent. of the population never enter a public library.

I do not believe that it would be beyond the capacity of an efficient library staff to administer a selective free library service if a local authority wished in certain cases to make a charge. This would be one small blow for the ratepayer which the Government could make immediately.

I have no intention of making a party speech. Today few hon. Members have done so. [HON. MEMBERS: "Why not?"] As I have been asked "Why not?", I shall make my one party point now. As the only member of the Standing Committee which considered the Rating (Interim Relief) Bill present, I must say how horrified I was when in Committee the Opposition moved an Amendment which would have automatically limited any relief which might have been granted to people who live in hereditaments with rateable value of £100 outside London and £120 in London. This would have had the effect of limiting relief for many people who have a very good case for relief. For example, automatically one-third of the householders in my constituency would have been precluded on that score alone from even applying to the local council for relief. It was a great pity that the Opposition moved that Amendment. I suspect that the Amendment would also have limited the number of people who could have applied in London and many other places which have been sorely hit by revaluation.

There is such high feeling about rates and it has blown up to a head because of revaluation. As recently as 1938–39 rates—not only domestic rates, but rates as a whole—still represented 24 per cent. of total taxation. Before the war it was an enormous proportion. So many other forms of taxation have risen since then that a sudden increase in rates hurts perhaps more than any other form of taxation levied. A sudden increase hurts people who have made carefully laid plans for the future; they are faced overnight with great hardship.

There are many arguments against the rating system. The system has not had a good day in the House today. Some of the arguments against it are that it is not a progressive tax; that people on fixed incomes are the worst hit; that it works purely by chance; that a person living in an area with a large amount of industry does not pay much, whereas a person living in an area with a small amount of industry pays too much.

This is ridiculous. The system may be hallowed by antiquity. Rates may be easy to collect. However, these are no reasons for going on with the system blindfold without considering other methods. Everyone agrees that local responsibility must be encouraged, but, as the hon. Member for Itchen said, there is nothing particularly sacred about the 60/40 per cent. or the 55/45 per cent., whatever it may be, divided between local government and the central government.

Finland, Norway, Sweden and Denmark have local income and property taxes, as do large cities of the United States of America. In this country local authorities have an average share in expenditure but a low percentage of revenue from their own taxes. In Canada, France and Spain, among others, local authorities spend much less, while in Scandinavia and Japan they spend much more.

Sir K. Joseph

I have the impression that my hon. Friend has been suggesting that the property tax which he says exists in Finland and other countries is not comparable with our rating system.

Mr. Channon

Local income tax, particularly in Scandinavia, is a good variant, but I think that I may have been speaking too quickly and misled my right hon. Friend. I am pointing out that there are differences in forms of local taxation in those countries. I have also been pointing out that in some countries local authorities spend less while in others they spend more. There are many different methods of raising revenue and of spending it. The Joint Parliamentary Secretary, when speaking on Second Reading of the Rating (Interim Relief) Act said: …I would be immensely happy if I could find a really satisfactory alternative to the rating system."—[OFFICIAL REPORT, 18th December. 1963; Vol. 686, c. 1364.] He went on to say that the likelihood of our being able to do so was remote indeed. That may be so, but I hope that the Committee which the Government have established will go into the different methods of rating and taxation operating in other countries so that we may eventually have a fairer form of tax.

We all appreciate that everything must be paid for. Money must be raised and the raising of money is likely to be unpopular, whatever method is used. However, the arguments for preserving our rating system—that it is an old system, that it provides an easy way of collection and so on—are not sufficient to warrant the system standing unexamined for much longer. I welcome the remarks that have been made about the necessity for changes in our rating system and I particularly welcome the inquiry set up by the Government.

2.32 p.m.

Mr. A. E. Hunter (Feltham)

I support the Motion and I congratulate my hon. Friend the Member for Southampton, Itchen (Dr. King) on calling attention to the serious problems caused by the present rating system. I will be brief because I know that a number of hon. Members wish to speak. I have been waiting since 11 o'clock this morning to speak, so I will be brief to prevent hon. Members from being disappointed and not catching your eye, Mr. Speaker.

The points I wish to raise concern the rate burden in London and Middlesex, where I have personal knowledge of this burden, but before doing so I wish to pay tribute to the local authorities. I served for many years in local government, and I am only too well aware of the spendid work done by councillors. The local authorities in my constituency follow progressive policies and the local officials give spendid service.

In drawing attention to the problem of rates, we must consider the unfair way in which the rating system is now operating. The Government cannot escape responsibility for the recent increases in residential assessments in London and Middlesex. Today's debate has to some extent been conducted along non-party lines, but I must draw atttention to the Rent Act removing control, which, I believe, has played an important part in the increased assessments in London and Middlesex, causing many residents to pay increased rates.

Revaluation added fresh burdens, and some of the rating figures in some parts of the London area are fantastic. I have some details applying to rates. The rates for a one-roomed flat are more than £1 a week. The rates on a two-roomed flat in some London areas are nearly £2 a week, and on a three-roomed flat they are about £2 10s. a week. These high rate charges have been brought about by the revaluation of property because assessments are based on rents and, with higher rents, in London and Middlesex it has meant higher rates. Personal tragedies often lie behind these figures, and it must be remembered that when people living in flats or houses are told that when rent control was removed they must pay higher rents they either do so or move out, and this has been followed by rate increases.

It has been the tendency of Governments that local services should be borne on the local rates. I served in local government as far back as 1925. I was on the old board of guardians for the relief of the poor, and at that time we had what was known as a poor law rate, which was levied on local rates. Later, in the 'thirties, their duties were transferred to public assistance committees under county authorities, and today we have the National Assistance Board, the expenditure of which is borne by the central authority.

This all shows that, over the years, public opinion has forced the central Government to adopt more financial responsibility instead of placing the cost on the rates. There is now a strong case for saying that teachers' salaries and a good deal of the local expenditure on education should be transferred to the central Government. As a start, 75 per cent. of the cost of education should be borne by the Exchequer and all teachers' salaries should be paid from that source. Interest rates for loans to local authorities should also be lowered.

This argument can be carried further, and I suggest that 75 per cent. cost of local fire services should be transferred to the Exchequer. So should the cost of police. Local authorities in London do not have any control over the police and it is only in the provincial cities that any such control is exercised. Thus, in London and Middlesex the police expenditure could be transferred to the Exchequer without difficulty. I think I am right in saying that the Government bear 100 per cent. of the expenditure of Civil Defence, and the local administration is carried out by local authorities, and this system should be followed in some other services.

We have had the Buchanan Report, the publication of the Government's plan for the South-East, suggested safety measures for roads, forward plans for new roads, education and other matters and all of this will mean considerable local expenditure. It is unfair that the local burdens should go on being increased, which means an unfair burden on local ratepayers, when this expenditure should be paid for by the central Government.

My hon. Friend the Member for Brixton (Mr. Lipton) suggested the rating of empty property. In my constituency a block of offices remained empty for many months. Despite the problems caused by the necessity to build new schools, hospitals and so on, speculative building still goes on. In parts of London and Middlesex, blocks of offices remain empty for many months. I suggest that such property should be rated to the extent of 50 per cent. and in that way lower rents might be asked by speculative builders, for I understand that it is the high rents that keep the offices empty.

The present rating system falls heavily on those on fixed incomes, and on retired people, but salaried people and wage earners also feel the weight of the big increases in rates that we have had in the London area. The only solution may be to find a better rating system, but the practical suggestion at present is that the Government should pay a larger share of the cost of education, the police and the fire service, so that the burden on the ratepayers can be reduced.

We want councils to have progressive policies. We want new schools and new youth centres, we want housing and hospitals, and we want to make a better Britain, and that can be done if the cost is fairly shared. The cost ought not to be put on the ratepayers but met out of national funds by the central Government. I fully support the Motion moved by my hon. Friend.

2.41 p.m.

Dr. Alan Glyn (Clapham)

As the hon. Member for Feltham (Mr. Hunter) has just said, no one wants to see any of the services reduced; the short point is from which pocket the cost should come. We are all very grateful to the hon. Member for Southampton, Itchen (Dr. King) for introducing this subject. This is the second week running that we have discussed local government, which shows that most people are extremely interested in this problem. Throughout the debate emphasis has been put on the very good work done not only by the councils but by their staffs. The difficulty lies in deciding what proportion of local expenditure should be borne by the ratepayer or whether the whole method of the rating system should be changed.

It has been suggested that valuation might be linked to income, but that would be extremely difficult to achieve equitably. It must be fairer to base the demand on what the property is worth rather than on the earnings of those living in it. An income basis of valuation would mean extremely complicated machinery, because the levy would have to be altered every time the income changed. There can be no doubt that the worst of the rate burden falls on the elderly. My hon. Friend the Member for Wycombe (Mr. John Hall) said that there were no good taxes, but I would not altogether agree with him. I think that a good tax is the tax one does not pay oneself.

The rating problem does not affect just the 42 per cent. of the population who own their homes. With the exception of the odd itinerants in caravan dwellings this burden falls on everyone, because no matter where people live, whether in council or other rented property, some share of the rate burden must be passed on to them directly or indirectly. Everyone is concerned in this matter. The question is: is the burden fair under the present system? I believe that if we continue with the existing system we shall probably have to decide in the future on different proportions to be contributed by the taxpayer and the ratepayer. I have always thought that the cost of education might have to be removed from local authority expenditure, but I do not support doing that in respect of only part of the service, such as teachers' salaries. The reduction should be general, not specific.

The present system has hit us harder because for the last 30 years we have been operating what has been a fundamentally out-of-date valuation, and the revaluation has tended to focus the attention of us all on the present burden. It is not the revaluation of the properties but the general rise in the cost of services that has increased the burden. If we double the rateable value and halve the poundage the amount to be met by the ratepayers must be the same. I do not want to be controversial but I think that a lot of the criticism that has been levelled against the Government for the increased rate burden is not justifiable. The amount required has risen, so that the actual amount to be met by the house-holder would probably have risen in any case, and many local authorities are hiding behind the shield of general revaluation. To do so is not altogether correct. In any case, my right hon. Friend is not responsible for the increased burden falling on the householder.

How do we approach valuation? Do we value the property on what it would bring in if it were let, or do we assess it on capital value basis? The present method is probably the fairest one. I do not say that it is ideal and that because it has gone on for 300 years there is no reason to change it, but it is probably the best way of estimating the value of the property.

The Rating (Interim Relief) Bill is welcomed by everyone, but on this occasion I agree with the hon. Member for Brixton (Mr. Lipton) that its effect will possibly be much less on the concentrated London boroughs where we still have very large numbers of retired people on fixed incomes. I do not think that under that Measure, worthy though it is, we shall be able to bring direct relief to the elderly and to those on fixed incomes. It will probably be much easier to furnish relief in areas where the concentration of the elderly or needy is not so great.

I understand that if all the cost of education were passed to the Exchequer it would mean approximately 1s. 6d. on the standard, rate of Income Tax, and that to pass to the Exchequer only the cost of teachers' salaries—which I would not advocate—would mean approximately 9d. on the standard rate. I mention those figures because we should get this matter into proportion. We must realise that from whichever fund the cash comes it represents the cost of services that both sides regard as being absolutely essential——

Mr. Marsh

Perhaps the hon. Gentleman will accept that the burden would not be any the less, and that all that would happen would be that the 1s. 6d. would be raised partly on the ability to pay it.

Dr. Glyn

I was not arguing that. I was merely saying that if the cost were passed from the rates to the Exchequer it would mean another 1s. 6d. on the standard rate. The hon. Member quite rightly says that it would be divided in a different way——

Mr. Marsh

No.

Dr. Glyn

It would be passed to the individual is a different way; but the money still has to be raised.

A local income tax would be impracticable because it would mean two revenue systems, one central and one local. That would be extremely complicated and, in my view, not possible to administer. Even if its administration were possible, it would be very costly.

I would reinforce what I said about interest rags in an intervention. believe that the result of differential rates of interest on house purchase could mean only the available properties would tend to rise in value so that the amount of money a person would have to pay for a house would increase even though the rate of interest might be the same. That is pure economic fact, and there can be no dispute about it.

As has been suggested by my hon. Friend the Member for Southend, West (Mr. Channon), we have got to look at the whole field and consider the method of raising taxes locally. At the same time, we must realise the importance of local people raising their local funds and administering them. There is no question of any Member suggesting in this debate that if money were collected centrally, local councils would be less zealous in administration, although there is the valuable point that if funds are locally raised and locally administered it would maintain the importance of a really local administration.

The other point that I wish to submit is one which was mentioned earlier, namely whether local authorities might not look for other methods of revenue raising, whether by a sales tax, from parking meters or other measures, so that services which are enjoyed by ratepayers could be individually paid for by those participating in them.

The hon. Member for Feltham spoke about property which was empty. It would be fair to say that when a property is empty not all the local services are being used. Possibly the only services which are used are the police and fire services. Therefore, this question of site rating and the rating of empty property is not so easy of solution as appears on the face of it.

Mr. Hunter

I mentioned 50 per cent. of the rates.

Dr. Glyn

If we take the police and fire services, which are probably the only services required, the figure would be smaller than that. If we were to deal with the problem on an equitable basis like that, I think it would probably be hardly worth collecting the additional revenue. The revenue raised in that way would most probably be less than the cost of collection.

I hope that my right hon. Friend will indicate how the Government are thinking on this problem, whether it is not possible to consider wider fields of local authority revenue production, and also whether, possibly in the future, a higher proportion of the very heavy burden of education, which we all wish to see extended, should not be shifted from local authorities to the general Exchequer.

2.53 p.m.

Mr. James Callaghan (Cardiff, South-East)

I only intervene in the debate; I am not making a winding-up speech. In doing so perhaps I should declare my interest. I notice that no hon. Member has done so today. In fact, my rates have gone up by 30 per cent. since 1959. Therefore, I suppose, in supporting a Motion of this sort I must declare that I have a very substantial personal interest in seeing the burden properly distributed. Whether I should be any better off if the burden were differently distributed I very much doubt, but at least I have an interest in the fact that over the last five years my rate bill has gone up by 6 per cent. per annum. In this, of course, I am typical of hundreds of thousands of families throughout the country where the average rate burden has gone up by anything between 5 per cent. and 10 per cent. per annum.

We are indebted to my hon. Friend the Member for Southampton, Itchen (Dr. King) for introducing this subject today, because the debate enables us to focus on what, by all accounts, people believe increasingly is one of the major burdens which they have to bear. As we all know, there are many people in this country to whom the burden of rates represents something akin to hardship, especially the retired members of our community, who have, in the course of a lifetime, accumulated savings, purchased their own homes, budgetted for the amount that they believed they would need to live on during their retirement years, and then found that these burdens are visited upon them in a way that they did not anticipate and in a way which I believe is not inevitable.

I received this morning a letter from a gentleman whom I do not know, living in Gosport. I shall not identify him. I do not suppose for a moment that he will mind my conveying to the House what he has told me, because I believe that what he says in his letter is typical. The letter was written on 18th March, by an old gentleman who was 82 last birthday. He said: In September, 1951, I gave £1,650"——

Sir K. Joseph

Could I be told the date, please?

Mr. Callaghan

September, 1951. plus £70 conveyancing fee, for my house…At that time the rateable value was £17, with rates at 16s. 6d in the £"—— and he gives the water rate. Today the rateable value is £69 per annum, with rates at 9s. 7d. in the £"— and the water rate has increased. His rate burden has increased from £14 10s. 6d. a year to £32 4s. a year.

He gives details of his income. He is an old-age pensioner. He is getting a little public assistance. It is all very well the Government telling us by how much pensions have increased. In 1951 this gentleman's pension, with that of his wife, amounted to 50s. It is now I09s. That is a substantial increase, but, while his pension has doubled, his rates have more than doubled, and it is this factor, among so many others, in relation to the cost of living, which is making the elderly people feel that they have been forgotten by the Government. I do not believe that this burden is inevitable and must be placed upon the backs of these people.

I differ from the hon. Member for Clapham (Dr. Alan Glyn) who, I thought, gave an excellent Tory description of a good tax when he said "A good tax is one that I do not have to pay." That is a very good Conservative definition, if I may say so. I would proffer, as an alternative definition of a good tax, a tax that is fairly adjusted to the capacity of people to pay and in accordance with their ability to pay it. I believe that is a much more worthwhile definition than the definition that the hon. Member advanced—I suppose lightheartedly, although I am sure that his hon. Friend the Member for Kidderminster (Sir G. Nabarro) would agree with him wholeheartedly. I will not go into details about the hon. Member for Kidderminster, but we all know how he glories, like other hon. Members opposite, in finding ways and means of evading taxation through perfectly legitimate loopholes, which only means that gentlemen like the one who has written to me, who do not have the legal facilities at their disposal, are required to pay an even greater burden.

Dr. Alan Glyn rose——

Mr. Callaghan

No, I cannot give way at the moment. I shall have to leave fairly early, as I have explained to the Minister, and I do not know whether he is to follow me immediately anyway. I do not know what he can tell us today. He certainly cannot tell us anything new. He has one committee inquiring into relief from hardship. He has another inquiring into the relationship between central and local government finance. I have no doubt that he will speak with his usual vigour, but I doubt that there will be any startling pronouncements falling from his lips this afternoon.

I do not want to trundle out again all the arguments which have been used in the debate. It would be more interesting, perhaps, if I were to draw my own conclusions. The first conclusion I reach is that we have here an example of the Government's chickens coming home to roost. I put it in its broadest context. Everyone realises that the Government's recently announced programmes are a belated recognition of the need to modernise Britain. The expanded programme for roads, the programme which admits the need to accelerate house building, the programme for education—all these are belated programmes which, broadly, appeared during the last six months, some would say just before the General Election.

The programmes have all got to be financed. As the hon. Member for Bournemouth, West (Sir J. Eden) has said, no one of us can renege from these liabilities. They are an essential part of the modernisation of our country. That is quite right, but the Government's chickens are coming home to roost in this way. They have said that we must undertake these great programmes involving hundreds of millions of £s, but they have not provided the financial underpinning for the local authorities to enable them to carry out their task.

The Government should have done it the other way round, of course. They should have had all these things marching hand in hand over the past 12 years. But, in any case, if they suddenly decided that there had to be a rush of new programmes for roads, housing, health, education and the like, they should first have made certain, before the programmes were introduced, that the basic financial structure of local government was sufficient to support the burden. In fact, it is not, and this is what the argument is about.

I detected a certain split-mindedness in the approach of the hon. Member for Bournemouth, West. He did not know whether to stand on one foot and say, "There is a great deal to be done in education and so on", or to stand on the other and say, "Of course, we must be careful lest we give any appearance of negligence". Both are true. A lot has been done in 12 years, of course. It would be astonishing if even this Government had done nothing in 12 years, The truth is that there is a great deal more to be done, and the conclusion which must follow is that the Government are saying to the people now, "You must accept an annual increase in your rate burden, and there will be no relief". This is the conclusion which follows, and everyone had better face it.

To illustrate the point, I turn to the White Paper on Public Expenditure presented by the Chancellor in December, 1963. This shows that expenditure on roads, a part of which will fall on the local authorities, will rise by 6.9 per cent. per annum from 1963–64 to 1968. Expenditure on housing—no percentage is given in the White Paper, so I will give my own—will rise, I believe, by about 10 per cent. per annum, and part of this will fall on the local authorities, though some, no doubt, will be recovered from additional rents. The increase given in the White Paper for education—I do not really know why no figure was given for housing——

Sir K. Joseph

I am not following. I am sorry.

Mr. Callaghan

If he does not follow, perhaps the right hon. Gentleman will read paragraphs 16 to 18 of the White Paper and tell us what percentage he makes it. The housing programme is the only one for which no percentage is given. It is Cmnd. 2235.

For education, we are told that the increase per annum will be 5.7 per cent. between now and 1968. For health and welfare, according to the White Paper, the increase will be 3.3 per cent. per annum.

We cannot evade the issue. Unless the Government make some alterations, every ratepayer must expect an increased rate demand each April. It is inevitable. Is this the only way to do it?

This is what appealed to me, among other things, in the speech of the hon. Member for Southend, West (Mr. Channon). I thought that the hon. Gentleman was quite right—if he is not an iconoclast at his age, he never will be—when he asked whether the rating system is inviolable and sacrosanct, whether it is the only way in which we can raise the money.

The problem we have to face is two-fold. Is the finance for this large increase which we are to have to face to come from central revenues or local revenues or a mixture of the two, and within the local revenues is it to be financed by means of taxation which, except in the tiniest minority of cases, bears no relationship to capacity to pay? That is the problem which the House has to face and I very much regret that we are on the threshhold of these great expansions in our social services and in the nation's social infrastructure without having solved these problems when there has been plenty of time to do so.

Hon. Members opposite now all welcome the review of the relationship between central and local government expenditure which is to take place. A number of hon. Members today have said how splendid it was. What a pity they did not think so three years ago! I wonder why. It is no good the Minister looking perplexed. He made a speech about it on 30th November, 1960. My hon. and learned Friend the Member for Kettering (Mr. Mitchison) moved an Amendment on the Second Reading of the Rating and Valuation Bill declining to give the Bill a Second Reading until a full inquiry had been made into the financial relationship between central and local government under modern conditions. I congratulate my hon. and learned Friend on his prescience. He was exactly three years ahead of the party opposite. We had been pressing before that, but I look around the benches today—and I have made a careful check—and every hon. Member opposite now present, except the hon. Member for Brentford and Chiswick (Mr. Dudley Smith), voted against having such an inquiry.

Right up to last March, the Minister was telling us that he saw no occasion for such an inquiry. On 3rd March, 1963, he gave an interview to the Sunday Pictorial. [Laughter.] This is not a laughing matter. I regard the right hon. Gentleman as convicted of a great deal of vacillation and negligence on this issue. He was then asked: Does the rating system need an overhaul, and if so what ways of distributing the burden more evenly are you considering? Sir KEITH: I feel I have no evidence that an inquiry could produce an answer here. I wish I could be convinced. But for the Government to set up an inquiry might unfairly raise hopes of some positive results. Why is he now nodding his head for there is an inquiry now?

The Minister went on: It would be easy for me to get off the hook by passing this to an inquiry. But, after deep worry about this, I do not think there is any prospect of any new solution being produced. That was what the Minister was saying a year ago, but then came the Conservative Party conference six months later when the Chief Secretary spoke. I know that nobody was listening at the time, for everyone was waiting for news about the leadership, but the Chief Secretary said: I think it is clear that the time is now ripe for a searching review of the relations between central and local government expenditure with particular reference to the share which each can and should carry. We will also review the rating system itself in order to see whether it could be improved so as to ensure that the money which local authorities must collect from the ratepayers shall be raised as fairly as possible…we regard the matter as urgent. I should jolly well think so! Years have gone by during which right hon. Gentlemen opposite have been pressed time and again to conduct such an inquiry. They waited until they were overwhelmed by revolts from, of all the unlikely places, Bournemouth, and, faced with those revolts and with the fact that they had themselves committed the nation to a substantial programme of overhauling and modernising our services, at this very late stage they turned round and said that they had better find out how we were to finance it. This is the policy of the bucket shop.

The right hon. Gentleman always gives the impression of great vigour and drive—he has been at the Ministry since 1959—but in my view he stands convicted of vacillation and of changing his mind—for I assume that he agreed to the inquiry which six months earlier he had said would not yield any useful result. He also stands convicted of negligence for not undertaking this basic review into the sources of local government finance at a time when he had the elbow room to do so and when he had been pressed to do so by my hon. and learned Friend and other hon. Members from this side of the House time after time. My fear is that a great part of this modernisation that is absolutely vital may be jeopardised because we have not the financial underpinning and because the sources of finance have not been put on a proper basis.

Another important question is the burden being placed on local authorities by the failure—indeed, I go further and say the deliberate policy of the Government in allowing a free market in land. It is not as though the Government have failed to act. They have acted. But they have done so in a way which enables the maximum profit to be made out of a piece of land. According to The Times today, the L.C.C. estimates that an acre of land which cost £8,800 in 1951 now costs £61,800—a sevenfold increase. I hope that the right hon. Gentleman will listen to these figures. The L.C.C. estimates, in terms of cost per house, that in 195[...] the land on which a house stands cost—I wish that the right hon. Gentleman would listen to this because it is his policy which is responsible for the situation. I will wait until he is in a position to listen.

Sir J. Eden

Do not be pompous.

Mr. Callaghan

I am not being pompous. I want the right hon. Gentleman to listen to these figures so that he may answer them. I want him to be in a position to answer. As I was saying, the L.C.C. estimates that a plot of land on which a house stands which cost £270 in 1951 will today cost £1,550—five times as much. I think it is fair to say that a three-bedroomed house without land costs about £3,000. That means that one-third of the cost of every new three-bedroomed house in the London area is taken up by the plot of land. That is the result of the right hon. Gentleman's own policy—and every hon. Member opposite voted for it—of a free market in land, which made London a paradise for speculators. It is not altogether appropriate for them now to get up and wail about the cost and the burden of the rates. Do not they realise that actions have consequences and that they themselves, through their own policies, are partially responsible for the increases in rates that are taking place and about which their constituents are complaining?

I read the interesting article in the Daily Mail today. It was headed "The Gold Rush". It said: Speculators expect to make quick fortunes when building starts under the Government's plan for south-east England. Experts in many of the towns named in the report estimate that with houses already in short supply prices might go up by 30 p.c. until sufficient new homes are built to take off the pressure. The plan could mean a £1 million jackpot for builders like Mr. H. E. Figgins, of Portsmouth, a local firm for 100 years. He paid £1,500 an acre for 100 acres of 'white' land—areas zoned for development far in the future. He did not expect to be able to build for at least ten years, if at all. Now, if the land is released for immediate development for the proposed new city, he hopes to get the £10,000 an acre price of other local building land. What has the Minister to say about that? He is responsible for the situation.

I give this undertaking on behalf of the Labour Party. I do not know what the Government intend to do between now and the General Election. I hope that the anger of the people will frighten them into taking action. If the Government do not, I warn the speculators that there will be no profits to be made out of the South-East scheme when Labour is returned and I know that we shall have the people behind us when we take action in order to curb the profiteering which is going on at present.

I challenge the Minister to give a similar pledge now and to promise that he will undo the harm that was done by his own Act a few years ago which gave us a free market in land—free for the speculators to make untaxed profits. If he does give that pledge now, he can at least in the dying days of this Parliament redeem a great deal of the damage he has done to thousands of decent, small, innocent householders in this country.

How do we distribute this burden which has to be borne one way or another? I myself believe that the rating system is reaching the limit of its usefulness. I think with the hon. Gentleman the Member for Southend, West that, obviously, it had a part to play, but I believe that now the nature of the increasing burdens which are going to flow from these programmes which we are undertaking and to which the Government have put their hand will mean that the burden will be intolerable for a great many people to bear. It is interesting that in fact we have moved for the first time into a period when to some extent the rates paid will be related to capacity to pay, at any rate for the elderly people.

Why be so timid about it? When I review the history of rates over the last twenty years it seems to me that there have been no new arguments produced for years—with due respect to all who have taken part in them. All the difficulties have been argued a dozen times. Everybody knows what the difficulties are about local income tax; everybody knows about ease of collection of rates, and so on. The hon. Gentleman the Member for Chichester (Mr. Loveys) gave us the classical Adam Smith doctrine in favour of the rating system—ease of collection, certainty, and all the rest of the canons which Adam Smith laid down. My goodness, how much longer are we going on rehearsing these arguments? The difficulties will argue themselves.

If the Minister had been as active on the rates side as he has been on some other sides of his own set of problems, and if the local authorities themselves are unable to agree on a method of financing, he could himself have produced his own plans, without waiting until the inquiry which has been set up now. He is not only failing in his duty to the House, but he is failing local government as a system.

Complaints have been made of local government, or part of it, and the complaint was made again today about how much better it would be if like the Americans we had town managers and all the rest who are really expert and know how to handle these things. I rebut that approach completely. I believe that the whole essence of the democratic system is participation, and participation should mean that at the local level as much as at the national level people are taking part, and are encouraged to take part, in the decisions which will influence their daily lives. This is the basic part of democracy.

I say to the Minister that by his failure to put local authority financing on a sound basis he is responsible to a considerable extent for the falling away which some hon. Gentlemen today have lamented. I do not myself believe that the block grant system will stand the test of time. As has been said by my hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell), we cannot get rid of it, because we have to build, but what I do think we should do is to superimpose upon it percentage grants. This would be one way to combine both local responsibility and national aid.

I will not go into the question of interest rates as I will not take up so much time, except to repeat what I have said before to this House, that the Government themselves are responsible for fixing the level of interest rates. My hon. Friend gave illustrations of the cost to local authorities, how the Public Works Loan Board interest rate has been put up again in the last ten days by the decision of the Government. It is all very well the hon. Member for Clapham coming down here and telling us he thinks the Government are being unfairly attacked, and that some part of the increase at least is the responsibility of the local authorities. I tell him now, before he interrupts, when he can make his comment, that the greater part of the increase which every local authority is having to visit on its ratepayers is the consequence of Government actions, either necessary or unnecessary.

Dr. Alan Glyn

I said that it was not due to revaluation alone. It was due to the increased costs which local authorities were finding it necessary to pay.

Mr. Callaghan

It is due to decisions made by the central Government, most of which have the support of hon. Gentlemen opposite; to unnecessary increases arising out of land speculative costs; and to other things such as the Public Works Loan Board rate of interest and the Bank Rate.

Dr. Alan Glyn

indicated dissent.

Mr. Gallaghan

I do not know why the hon. Gentleman shakes his head. If he disagrees with that, he cannot be capable of following a connected argument. That is the simple fact of the situation.

I leave aside the fact that the Government are convicted of delay, and more delay, over the years, until shortly before the election they come along and say what can be done. There are four things that must be done. The Government must revise the block grant so that the percentage grant can be superimposed on it. They must take steps to deal with interest rates and insulate at least part of local authority activities from the rise in interest rates. They must deal with the problem of land speculation.

The fourth thing that must be done, but I do not believe that the Government have time in which to do it, is to produce a method of fitting the rate burden to the backs of those who can afford it. I believe that to be the test in local government finance, as in national Government finance. The rating system today does not adjust the burden to the backs of those who are able to carry it. That is clearly demonstrable. We should move into local government finance just as we have done in national Government finance and relate the burden to the capacity to pay.

I do not suppose that during the next three or four months the Minister will have time to do what the Government have failed to do in respect of rating during the last 12 years. It is along the lines which I have described that the Labour Government will proceed. We shall make local government both a healthier and a more effective means of government, and we shall at the same time make the burden on local ratepayers much fairer than it is today.

3.23 p.m.

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

There was a certain sour truth in one of the comments of the hon. Member for Brixton (Mr. Lipton) when he said that all the Minister of Housing and Local Government does is to make speeches. Having left this Box at 3.45 this morning, and having occupied it for most of Wednesday, I feel that I am imposing myself on the House a little much this week, but, like the hon. Member for Cardiff, South-East (Mr. Callaghan), I am only intervening now, and I hope that there will be time for other hon. Members to take part in the debate.

The first thing I must do is to pay a well deserved tribute to the hon., and if I may say so highly respected, Member for Southampton, Itchen (Dr. King) who made a comprehensive, on the whole constructive, and, if I may say so, on the whole accurate speech. There were certain points on which I could take issue with him, but I shall not delay the House by doing that.

Before I go on to deal in detail with the general issues raised by the hon. Gentleman's speech, and picked up by other hon. Members, I think that it would be as well, since the hon. Member for Cardiff, South East, has courteously told me that he has to leave before the end of the debate, to take up one or two of the more general points that he has just made.

He charged the Government with belatedly adopting some modernisation programmes. I can only tell the hon. Gentleman that through a series of redeployed priorities, adding up over the last 12 to 13 years to the most massive simultaneous attack on the social needs that this country has ever seen, and during a period in which they have won two General Elections, the Government have consistently and steadily improved the conditions of the people.

During that time there has also been a large increase in the population which has obscured some of the net benefits which a static population until the late 'fifties would have left. During that time, all that expenditure—and I will only pick out one figure in the proportion of the gross national product spent on education rose by nearly three times. That is in proportion, in real terms, as a share of gross national product. There has been a constant share of rising local authority expenditure borne by the taxpayer, and at the end of it, that is today, it is common ground between all who have spoken that rates in general take a smaller share of the gross national product or national earnings than they did pre-war.

That is not to say that certain things do not need to be done, but I think that these general propositions need to be set against the wild statements to which we have been listening. Of course, it is also common ground that the country wants increasing services and that these have to be paid for by rates and taxes, or by a combination of them, and it is the division between rates and taxes that the Government are now examining.

The hon. Member for Cardiff, South-East made great play with the demand for a full inquiry put by his hon. and learned Friend the Member for Kettering (Mr. Mitchison) during a debate five years ago, just before the House finally approved the Bill which the Government introduced in preparation for the revaluation. As the House will remember, revaluation was bound to occur in 1963 under the 1948 Act unless the Government interfered to repeal it. What the Government did was to ensure that at the time when domestic rates returned to current assessment—after 24 years on a pre-war basis—the burden on the domestic ratepayer would be relieved by removing simultaneously the derating relief which industry had enjoyed at the expense of the domestic ratepayer right through the life of the Labour Government, and the 20 per cent. relief which commerce had also enjoyed since 1957.

In that debate, in which they demanded a full inquiry, the Opposition tried to deny to the people of this country, under the revaluation which was inevitably impending, the relief which would come to the domestic ratepayer from the removal of concessions which the Government had proposed and which, in fact, on enactment the Government's Bill provided for.

Mr. Denis Howell

Nonsense.

Sir K. Joseph

It is not nonsense; it is the absolute truth.

To cover up this pusillanimous attitude, hon. Members opposite demanded a full inquiry. They flinched from revaluation during their term of office and when we removed the distortions of 24 years of pre-war assessment they demanded a full inquiry. What would have been the point of a full inquiry just before revaluation? At that date, let me remind the House, industry paid half rates on 1956 assessments, commerce paid 80 per cent. of rates on 1956 assessments and domestic ratepayers paid 100 per cent. on 1939 assessments. On such a distorted base, what would have been the benefit of the famous full inquiry? In fact, even as late——

Mr. G. R. Mitchison (Kettering) rose——

Sir K. Joseph

I hope that the hon. and learned Gentleman will not insist on intervening, because I have only a little time and a large amount of ground to cover.

Mr. Mitchison

What happened at this time was that there were three special differences. The householder had an out-of-date valuation which helped him; shops and officers had a 20 per cent. concession, and industry had a 50 per cent. concession. All that was done was to remove two of them and to see that the other went.

Sir K. Joseph

That is exactly what I said, and the Opposition, at that stage, and on that distorted basis, demanded a full inquiry.

The hon. Member for Cardiff, South-East quoted against me an interview which I gave on 3rd March, 1963, in which I said that I saw no evidence of the justification for an inquiry. At that time there were far too many variables for the Government possibly to help, even—the hon. and learned Member for Kettering will remember—by the use of the Government's "Chinese mathematician''. It was then three weeks before the new revaluation became effective. It was impossible to arrive at any sort of conclusion with so many variables.

Let me recount them. There were the assessments of individual properties which were only just becoming known. The rate call was not known. The precept was only beginning to be known. The general grant and the rate-deficiency grant had to be applied to all those variables. Not even a battery of computers could have provided an inquiry—had we set one up then—with the results which were to become plain to us during the following six months.

Mr. Denis Howell

Come off it!

Sir K. Joseph

Let me quote against the Government a White Paper of our own production. We tried to guess the general result of all these variables in a White Paper predicting the effect of revaluation, and we are very seriously wrong. For instance, for the constituency of my hon. Friend the Member for Bournemouth, West (Sir.J. Eden) I think that we predicted a shift towards the householder of a 27 per cent. share of the burden. I think I am right in saying that in fact the shift towards the domestic ratepayer turned out to be 21 per cent. Even if we had been right in looking at rating areas as a whole, with all these variables we could not possibly have been right in assessing the effect on individual households, and it is, as I shall show, the individual households with which, in most cases, we now have to deal.

The hon. Member for Cardiff, South-East—I shall well understand if he has to leave the Chamber in a few minutes—went on to charge me particularly, and the Government, with freeing the market in land, to the grave damage of local authorities and this country. All I can say, on the evidence available, is that since the freeing of the market in London there have been more houses built; three times as much subsidy paid; consumption is up enormously; and, to clinch the matter, savings have multiplied, I think, by 17 times. That is the result, in total, of this "evil" which the hon. Gentleman alleges against me.

I am glad that he picked up one headline which appeared in one of the daily papers this morning, and which very much distressed me. The hon. Gentleman mentioned the possibility, which was touched on by this headline, of speculation in the proposed designated new towns in the South-East Study. Let me repeat the assurance in the Government's undertaking in the White Paper to acquire through public agencies, in advance, as necessary, all the land needed in the communities that in due course, after consultation, are established as new towns or expanded towns. The existing new town procedure, by which the Government have already established 19 new towns, will remove altogether the chance of speculation in these designated new communities.

Mr. Callaghan

Will the Minister conclude his sentence by telling us at what price he proposes to purchase this land?

Sir K. Joseph

Yes. The process of acquisition will be precisely the same as we are now, and have been, practising in the case of new towns; that is market value, in general terms for housing, but discounting altogether any increase in value due to the designation or creation of the new community. The standard new town procedure.

Mr. Denis Howell

What about the expanded towns?

Sir K. Joseph

I included the expanded towns also. The expanded designated towns. I said that particularly.

Mr. Denis Howell

That will need a change of law.

Sir K. Joseph

The White Paper is categoric that in the designated expansion schemes—which I call generically planned expansion schemes, whether they be new towns or expanded towns—this is the procedure we shall use.

I come back to the opening speech of the hon. Member for Itchen and the comments that have been made upon it. I think there is general agreement that there is now a problem in connection with the rates and a general unease about the change. It is clear that some alteration will be needed, although on what scale and by what method we cannot judge until we have had the results of the Allen Committee and the Government review. The hon. Member for Cardiff, South-East was right in suggesting that I am not able to make any earthshaking new pronouncement this afternoon. If I were, what would be the point of setting up the Allen Committee and waiting for its Report? In answer to my hon. Friend the Member for Southend, West (Mr. Channon), the Government's review will cover all aspects of the rating system and will certainly be free to cover very nearly all the points he mentioned. I shall come to one reservation later.

In the light of this general unease, and of its general approach, I advise the House to accept the Motion, but I should not like to accept the implication on a strict literal interpretation of the words of the Motion that the rating system is outmoded and unfair. I accept that some changes and some adjustments will be needed, but I do not accept, nor do the Government accept, that the whole rating system—given that those changes and alterations will need to be made—is outmoded and unfair. My hon. Friend the Member for Bournemouth, West referred to the introductory words to the Motion: To call attention to the grave problem of the ever-increasing burden of rates; and suggested that the words "to some people" should be inserted after the word "burden". I wish to develop this argument as I proceed with my speech.

Before I pick up some of the points which have been made, I shall give a few facts which have not been given today. In general, the trend looks as if this year there will be something of the order of a gross increase in rate call of 7 per cent. to 8 per cent. but this will be affected by the addition of new rateable value of about 2½ per cent., and the average increase of rate call will thus be something about 5 per cent. to 5½ per cent. These rates are going up in general because of two main tendencies. Approximately half the increase is due to increased and expanded services—more schools, more teachers, more home helps, more district nurses and more police. Half are due to the increased costs of existing services—higher teachers' pay, higher policemen's pay, higher material and salaries costs. That is the first bit of background which I give.

The second piece of background is to enlarge on the reference which the hon. Member for Itchen made to the existing division of costs. He quite rightly pointed out that the taxpayer through the Exchequer already bears something like 55 per cent. of the cost of all local authority services. What the hon. Member did not say, however, was that of the remaining 45 per cent. slightly more than half is already borne by industry and commerce, so in the net result something under one quarter, on a national basis, of all local authority expenditure is paid for by the domestic ratepayer. That fact needs to be known.

I well realise how suspect averages are, but they are about all we have except for constituency cases until we receive the Allen Committee's Report. At the moment, the average rates paid per household in the last rateable year were £30 12s., which is 11s. 8d. per week—3s. 2d. more on the same average house than in 1957–58; which is an average increase in the last six years of 6d. a week. The case given by the hon. Member for Cardiff, South-East, or rather the trend he gave of an increase of 5 per cent. to 10 per cent. per annum or 30s. to £3, on the basis I have given, works out at something between 8d. and 9d. a week extra per annum.

So the two figures are not widely apart. Indeed, even in the case that he chose to quote of the pensioner who had written to him about his rating experience since 1951, when one comes down to brass tacks it amounts to an annual increase in rates paid since 1951 of 25s. a year or 6d. a week.

For expanding and better paid services with particular emphasis on more services for the elderly and the children, this is not, subject to the means of the individual household, a very large amount. But the national average covers a very wide range. There is a rural district council in Wales where the average rate per domestic household is 4s. a week. On the other hand, in Westminster the average rate per domestic household is about £2 a week. In more than half the rating areas the average rates are less than 10s. a week; in less than one-tenth of the rating areas they are more than 16s. a week and in less than one-fourtieth are the domestic household rates more than £1 a week.

In view of all this, it is impossible to maintain that domestic ratepayers generally are as yet hard pressed, but I very much agree with my hon. Friend the Member for Bournemouth, West that a very large number of individual ratepayers are hard pressed—or feel themselves likely in the future to be hard pressed. There is, therefore, this wide spread over and under the national and local average, and some householders are paying a great deal more than the average while others are paying a great deal less. The difficulty comes because, as hon. Gentlemen are all agreed, the rate system is not exactly tailored to means and often those who are paying more than the average are not those whose pockets are deepest.

Over and above these existing figures, there is the trend, the fact that local authority expenditure is likely to rise. Even if the Government were in due course to increase their help, there would still be likely to be some net increase for the local authorities. If those with fixed incomes are in many cases already heavily burdened, they are naturally worried that with this trend they will find themselves impossibly pressed in years to come.

At the moment, therefore, I would wish to interpret the Motion as indicating, with the agreement of the Government, that some ratepayers—a substantial number in aggregate, and many rate- payers in some areas—are feeling the pressure heavily, and those areas where the pressure is most felt are often those without much industry and yet with a sufficiently high level of rateable value not to qualify for rate-deficiency grant.

I should particularly like to congratulate my hon. Friend the Member for Bournemouth, West, on a very balanced speech. He has been an outstandingly robust and attacking constituency M.P. and critic and, where he thinks it right, defender of the Government. I acknowledge the effectiveness of his and other hon. Members' criticisms.

Having put some figures on the record, I should like to comment upon the general arguments that have been brought out. First, there is the argument about unfairness in the present system. I have acknowledged that the system may need to be altered to some degree to meet some of the points, but I think that there is misapprehension due to looking at the rates as a contribution to local authority services on their own. I shall argue that we have to look at rates and taxes together.

Let me take the quintet of examples of the hon. Member for Southampton, Itchen—five neighbouring houses with the same rateable value, containing respectively a dock worker plus four children, a retired business man, five wage earners, a pensioner couple and a salaried worker. I have made some assumptions about the earnings or incomes of these people, and I will send the hon. Member my assumptions if he is interested.

But when one reflects that the taxpayer already pays 52 per cent. of local authority services and then applies that to the general tax burden on the country, it follows that 15 per cent. of all direct and indirect taxes are used to pay for local authority services.

Therefore, I thought it fair to take in each of these circumstances the rates plus 15 per cent. of the probable direct and indirect tax paid by those households. By that criterion, these are the combined contributions to local authority services paid by those households: £34 a year for the dock worker and his four children, £31 for the pensioner couple, £103 for the retired businessman, £131 for the five wage earners, and £97 for the salaried worker, whom, I assumed, was married with his wife living. These are all very broad assumptions and include indirect as well as direct tax. When we bear in mind that 15 per cent. of the total tax goes to pay for local authority services, the unfairness is not so sharp as is often thought between the pensioner couple in one house and the house full of wage earners.

Dr. King

Does not the right hon. Gentleman mean that if one adds a fair tax to an unfair tax and averages that, the product is fairer than the original unfair tax?

Sir K. Joseph

If we can find a fairer system we shall adopt it, but the pursuit of absolute justice is likely to continue until Domesday.

On the point made by my hon. Friend the Member for Wycombe (Mr. John Hall) about valuation anomalies, I fear that it is inherent in basing rateable value on rental value that identical houses in appearance and design in different places tend to command different rents according to the desirability of the area.

The point was also made by my hon. Friend the Member for Wycombe that people who had come recently into houses just before revaluation have had a defeat of their expectations. This matter I take extremely seriously, but I hope that the House will realise that we are very unlikely, unless we allow a long period of time to elapse between revaluations, to get such a sharp change in assessments in future. The defence against frustrated expectations is regularity of revaluation.

The hon. Member for Feltham (Mr. Hunter) made an interesting speech, but I thought that the effect of it was slightly spoiled when I was given, after inquiry, the rate experience in his own constituency. I found that between 1962–63 and 1963–64 the average ratepayer of Feltham has had a reduction of £1 in rates per year.

I should like to endorse very strongly the argument of a number of hon. Members about the importance of seeking value for money in local authority expenditure. I draw the attention of the House again to the admirable initiative of the main local government associations in asking me to set up, on their behalf, two committees to look at people in local government. These inquiries are, of course, of the greatest relevance on this point.

After dealing, very briefly I fear because of the time, with these main charges of unfairness let me come to the other main ingredient of the debate, which is the question of alternative or extra sources of revenue. Certainly, all these will be looked at during the review. Among them, we shall certainly look at the rating of empty property, though I doubt whether, when one has been fair to people who are keeping their property empty for legitimate and understandable reasons, like conversion or improvements, there would be an enormous amount to gain in net increase. Still, this can be looked at again.

On the vexed question of local income tax, I myself come down firmly on the side of the hon. Member for Itchen, but this will be looked at again by the Government in this review.

The one point which I fear I do not think the Government can look at in this context was the plea of my hon. Friend the Member for Southend, West for an optional libraries charge. This is very much the affair of my right hon. Friend the Minister of Education, but I would only point out that, when the costs of administering a service which would exempt some people and charge others are added up, there might not be an enormous gain to be made, even if, in principle, it proved to be the right thing. I only want to tell my hon. Friend that I think that this is a matter which will probably be disposed of one way or the other during debates on the current Bill, and I would not like to hold out undue hopes on that.

Then there was the big issue made by the hon. Member for Huddersfield, West (Mr. Wade) of site value rating. The work of the Rating and Valuation Association at Whitstable has been extremely valuable, but it must be realised, as all those responsible for it have made plain, that it was based on a number of assumptions and raises a number of issues which have naturally not yet been cleared up. For instance, one of the biggest increases shown is in the rateable value of public open spaces and other local authority property. There is no gain to the ratepayer in increasing the rates paid on what is already his own property. Then there is the other large element to be obtained by increasing the rateable value of land to be developed. There is the question whether the construction industries can be assumed to be able to develop all the land ready for development simultaneously. Then there is the question of how much of any increase of rates on such land would one way or another be carried through into the cost of the properties—generally houses—built upon that land. A number of such assumptions would have to be considered.

I repeat that the whole idea of site value rating will certainly be considered in the review. Hon. Members who are interested in this subject will find it valuable to read an article in the Estates Gazette for 29th February which spelled cut a number of the assumptions and difficulties at some length.

After these brief comments on the main ingredients of the debate, I return to our need for more information. All hon. Members, and, even more, all members of the public, loathe averages, but unless we get more information, which is what the Allen Committee is set up to find, we are powerless to deal in other than averages. Professor Allen and his high powered Committee are getting us the facts. I hope that we shall have those facts during mid- or late summer, and the Government's review will lean heavily on the facts that the Committee finds.

The Government's review will extend also to an assessment of the likely trend of local authority expenditure and of the adequacy of existing sources of local authority revenue to meet it. This will naturally lead to a review of Exchequer grants for local authorities, both as to amount and as to distribution.

I think that it is important—all hon. Members will agree with this—that we should not undermine local authority financial responsibility. Those who spend the money should have a part in raising the money. If we come to the view that the Exchequer—that is, the taxpayer—should bear a larger share of the cost, we shall have to consider whether the best thing is to increase grants, or whether it would be prefer- able that the Exchequer should take over the responsibility for one or more of the services.

The hon. Member for Itchen made the point that much expenditure by local authorities is nationally determined. This is so, hut value for expenditure is not nationally determined. I can only testify, after 20 months in my present post—I think that my hon. Friend the Member for Wycombe will agree with this that the relative efficiency of local government units varies strikingly from place to place. It is this that makes it so important for the responsibility to be left as much as possible in local government hands.

If it is decided at this review that some transfer of cost to the taxpayer may prove t0 be needed, we may have to see how much help that will, in itself, bring to these who are most heavily pressed at the moment.

My hon. Friend the Member for Chichester, who I know has had to leave the Chamber, made a valuable speech on this point. He pointed out that some extra help from the taxpayer, if spread evenly over all domestic ratepayers would include those who in the rural districts are paying only 4s. a week and though it would benefit those most heavily pressed, particularly those on fixed incomes, it would not be enough to relieve them sufficiently. We must, therefore, not only consider the broad division between local rates and Exchequer contributions, but also whether we need more discriminating or selective changes which would help those who are most burdened.

The hon. Member for Greenwich (Mr. Marsh) rightly said that even if is. 6d. were added to Income Tax to enable all education., for example, to be transferred to the taxpayer, that would be only a transfer, although it would probably be acceptable. I think that my hon. Friend the Member for Clapham (Dr. Alan Glyn) had the truth of the matter whet he stressed that people tend to applaud the idea of transferring costs from ratepayers to taxpayers, although they would not applaud it so much when hey realised the extra cost it would me an to them as taxpayers. This is a possibility that must be considered, but we should not think that it would be universally popular when in due course it comes to be considered.

The rating system has stood the test of time and it is not likely to be thrown overboard. What matters is not only the impact of rates alone but the impact of rates and taxes combined. Everybody who pays taxes contributes, through Exchequer grants, to the cost of local government. The main worries are about those on fixed incomes and the accelerating trend of local authority expenditure. But there are other worries—the poorer householders who need larger houses, and a number of other worries to which I have already referred. The immediate grievances will, I think, be adequately dealt with through the Rating (Interim Relief) Bill.

I will finish as I began, by repeating that it is clear that some alterations will be needed, though on what scale and by what method we cannot judge until we have had the results of the Allen Committee and the Government review. All the suggestions made today will be considered during that review and I should once again like to congratulate the hon. Member for Southampton, Itchen on his admirable speech initiating this useful debate.

Mr. Dudley Smith

Can my right hon. Friend indicate when the Allen Report is likely to be available and when the Government review is likely to be complete?

Sir K. Joseph

I hope that the Allen Committee will report during the summer, although it may be the late summer. I fear that the national review will take some time. It must cover a lot of material and we cannot expect it before the end of the year, if not some time next year.

3.59 p.m.

Mr. Guy Barnett (Dorset, South)

I want to make a 10-minute speech but only about a minute remains in which to do so. I wish that the Minister had set up the Allen Committee a year or two ago so that the various questions could have been investigated. The Minister could not have had the relevant information to decide whether or not it was necessary for Parliament to have passed the Rating (Interim Relief) Bill.

Well over a year ago I was being flooded with letters from constituents about the rating problem. It was well known even then that revaluation was likely to affect them. Everything my constituents feared in their letters was borne out by what happened when their rates were finally fixed—simply because in a constituency like mine, which has little industry but which is an attractive part of the country, the cost of services to local authorities is relatively high and this was bound to involve a high rate for the householder.

A great deal of distress has been caused in my constituency directly as a consequence of the failure of the Government to do anything to face the rating problem which has existed for some time. There is little evidence to show that the Rating (Interim Relief) Bill will prevent all of this hardship and——

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

Question, That the Question be now put, put and agreed to.

Question put accordingly and agreed to.

Resolved, That this House recognises that the present system of financing local government expenditure is inequitable, welcomes the Government's setting up a Committee to inquire into some aspects of the rating system, but urges both that more of that part of local government expenditure which is nationally determined should be nationally financed, and also that a thorough investigation be made into alternative and fairer methods of raising local taxation than the present rates based on property.