LOCAL GOVERNMENT BILL

HC Deb 14 June 1966 vol 729 cc1259-380

Order for Second Reading made.

4.9 p.m.

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

I beg to move, That the Bill be now read a Second time.

When I introduced the Rating Act, in the last Parliament, I described it as the first jab of a two-pronged attack on the inequalities of the rating system. This Local Government Bill is the second jab. When we pass it through the House, as I hope that we shall before the Summer Recess, we in the Commons will have completed our share in the interim reform of local taxation to which the Government are pledged. Rate rebates, which were the main innovation of the First Act—the Rating Act—will soon be helping more than one million of the hardest pressed ratepayers.

Now, in this new Measure, we shall fulfil the second part of our election pledge by the creation of a double mechanism designed, first, to achieve a small but steady annual shift from rates to taxes; and, secondly, to use this shift in order to help the domestic ratepayer. Although the improvements we shall make by this two-pronged attack will involve the biggest reform of rating that has taken place for at least 100 years, I do not want to pretend for a moment that by this means we shall have achieved a viable system of local taxation. That will take time. What we are concerned with this afternoon is the second half of an interim rescue operation and I am more than ever convinced that the job of really radical reform must be undertaken as soon as possible.

When a few months ago I became Minister and made my first criticism of the rating system I was condemned as irresponsible by the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), who was then my shadow opponent. He told me that since rates are irreplaceable a responsible Minister should never attack them. During the last 12 months, however, the movement for the radical reform of rating has grown apace and more and more people have begun to realise that our whole system of local democracy is now being rapidly undermined by the inherent weaknesses of rating as we know it.

Since the Prime Minister announced the terms of reference and the membership of the Royal Commission on Local Government, I have been delighted to observe, for example, that almost the only criticism which his statement invoked was a complaint by one or two newspapers that the Royal Commission had not specifically been enjoined by its terms of reference to work out a reform of local finance.

Dame Irene Ward (Tynemouth)

That was not my complaint. I made one.

Mr. Crossman

That was not the only complaint. I left the hon. Lady out. I have no doubt that the hon. Lady will make her complaint later.

Apart from her complaint, I welcome the spirit which motivates the critics who complain that we do not compel the Commission to consider the reform of local finance. The critics are right to recognise that for local democracy to flourish it must be based on a viable system of local taxation, but I should have thought that it was now clear that the reform of local finance must follow, not precede, the reform of local government. As long as we have in England alone about 1,200 units of local government, each with the right to raise its own taxes, it will be impossible to get rid of the rates or, indeed, to improve them very much more than we are doing in these two Measures.

In fact, it is the present structure of local government, with its inherent conflict between town and country and with its multiplicity of petty units, which is the root cause of the trouble today. Only when local government has been reconstructed on a larger scale and on modern lines will it be possible to answer the question whether rating should be abolished altogether and replaced, or whether it should be kept and strengthened by other taxes which do nor share its three inherent defects—regressiveness, lack of buoyancy, and sheer unintelligibility.

Sir David Renton (Huntingdonshire)

Sheer what?

Mr. Crossman

Unintelligibility.

I have been delighted at the speed with which the Royal Commission has settled down to its job and I have every hope that before the winter of 1968 is over we shall have received its report and have been able to prepare our legislation. Nevertheless, since the reform of local government finance must follow the reform of local government, I cannot see how it can be undertaken in the lifetime of this Parliament. So there is every likelihood that for five or six years we hall have to be content with rates patched up as best we can. That is why we rushed the Rating Bill through during the short life of the last Parliament and why we have given the Local Government Bill, the second half of our rescue operation, such a high priority in this Parliament.

Before describing the main proposals of this new Measure, I want to try to outline what it is we have been trying to achieve in this two-pronged reform. I have just complained of three things which are wrong with rating as we inherited it: first, that it was socially unjust; secondly, that it was unintelligible thirdly, that it was unbuoyant. I think that these defects are inherent and cannot be removed without destroying rating, but they can be softened and blunted; and that is what We are trying to do.

In the Rating Bill we dealt with the injustice of rates as between ratepayers. Following the recommendations of the Mien Committee we created an instrument capable, if fully used, of reducing the burden on 2 million of the poorest, hardest-hit ratepayers. Despite the gloomy prognostications of one Sunday newspaper, two Opposition spokesmen and a handful of treasurers, the Act—hough I warned the House that it is a rough and ready instrument—is proving perfectly workable.

Indeed, I should like to pay tribute here and now to the energy, common sense and humanity with which it is being administered, not only by the vast majority of treasurers but, just as important, by a whole host of local National Assistance Board officials whose co-operation is essential to its safe working. It is their understanding and collaboration which are making rate rebates work. Indeed, the only defect so far manifested has been the slowness of the public to understand what is being offered.

The Act came into force at the beginning of April, and it was unfortunate that, for obvious political reasons, none of the propaganda which we had planned for publicising rate rebates could be launched during the key month of March. This may account for the comparatively small number of ratepayers who have so far made application and perhaps also for the fact that virtually no tenants have recognised that the tenant equally has a share with the landlord or the owner-occupier.

I have not got full details, but I think I had better tell the House what our rough calculations are. We reckon that so far in the first rebate period only about 1 million applications have actually been received. If our estimates are right, this is a little over half of those who are eligible. Even more puzzling is the marked variation between town and town and region and region. Here are a few examples which I thought might interest the House. Incidentally, the figures are up to mid-May.

I will take two successful areas first. In Liverpool, 27,000 applications have been received, representing 13.3 per cent. of domestic hereditaments. In Bourne-mouth, 5,348 applications have been received, representing 11 per cent. of domestic ratepayers. At the other end of the scale, in Barnsley, 915 applications have been received representing 3–8 per cent. of domestic ratepayers. In the London Borough of Lewisham, 4,250 applications have been received, representing 5 per cent. of domestic ratepayers.

Taking a case in the middle of the scale, in Whiston rural district in Lancashire 1,500 applications have been received, representing 8.4 per cent. of domestic hereditaments. There is thus this enormous variation between 13 per cent. and 4 per cent. for the numbers applying in different parts of the country.

These figures show that we have a long way to go before every ratepayer entitled to the rate rebate is drawing it. Nevertheless, applications last month were still coming in at the rate of 100,000 a week and I am sure that in the second six-months period which begins next November they will be substantially increased.

Mr. Julian Ridsdale (Harwich)

How much of the burden will go on to the other ratepayers, because in my division it represents an increase on the rates of 3d.

Mr. Crossman

As the hon. Gentleman knows very well, 25 per cent. is carried by the other ratepayers. I can assure those hon. Members of the Opposition who helped us to smooth out some of the wrinkles in the Rating Bill that this reform has already removed from the rating system its most glaring social injustice.

I turn now to the other two main defects. I want, first, to consider—this will interest the right hon. and learned Member for Huntingdonshire (Sir D. Renton)—unintelligibility. I will illustrate this by the fact—the right hon. and learned Gentleman will not deny that it is a fact—that there are those in the House this afternoon who cannot explain exactly how gross value differs from net annual value or why the amount they pay for their own dwellings differs from the amount paid by their neighbour for what is apparently an identical dwelling.

Moreover, the difficulties in the way of explaining the working of the rating system as it applies to dwelling are as nothing compared with those which face us when we start looking at the rating of a nationalised industry. One of the constant and largely justifiable complaints of local authorities is that there is no rational way of reconciling the growth of a great State monopoly in any particular area with the amount that it pays in rates. There is, indeed, an insoluble difficulty in applying a local tax based on rental value to a gas works, an electricity works, a railway yard or a water- works which, in any normal sense of the word, has no rental value as such.

Local authorities can make what seem to them to be a convincing case for a new reassessment of a nationalised industry or a water board in their area, but the nationalised industry can make an equally convincing case against any particular formula that a council or the Minister puts forward.

I must admit that, after vainly trying to find a principle on which rating for these public services could be based, I have almost been driven to the conclusion that it is really a question of thinking of a number and seeing whether one can get away with it. Let me add rapidly that this is only a passing feeling and not a settled conviction. But I must admit to the House that despite all the efforts, despite much prodding from the local authorities and much hard work by my Department, we have not yet worked out a satisfactory new formula. It is a gap in the Bill which I hope can be filled before the Committee stage is over.

Would it be possible to make rates more intelligible and more defensible by breaking away from rental value—an aspect which is getting rarer every day as owner-occupier and the council landlord take over from the private landlord? Would it be possible, in fact, to substitute capital value for rental value? At first sight, that is tempting, until we realise that the simple idea of basing rates on capital value in the sense of what the property is actually worth is quite impracticable.

Moreover, to switch to capital values would cause a greater upheaval than that which follows a normal revaluation, and it might well produce scores of social anomalies that no one could defend, so that the simple, intelligible capital values that one hoped to achieve would soon be distorted by concessions to particular interests and so become as hoary and mythological as rental values are today.

It would be absurd to say that capital values are not worth looking at. Some research upon them is contemplated by my Department. But we are not prepared to invest a large amount of skilled manpower in chasing what will probably prove to be another will o' the wisp. If rates are to be retained, it will probably be impossible to dissociate them from a rental value, with all its mythological disadvantages.

I now turn to the third inherent defect of rating as a system of local finance; its lack of bouyancy. As a local tax, rates have the great advantage that they are locally based. Unlike human beings, who live in one place and work in another, houses stay put; they are fixed assets, and rates which are based on house property are genuinely local and easy to collect. But they have the defect of their own virtues. Because they are a tax on a fixed asset valued on a certain date at a certain sum, they are not a levy like Tobacco Duty or Income Tax, which expands automatically within an expanding economy. The trouble about rateable value, from the treasurer's point of view, is that it takes no account of growth and change. A rateable value does not change naturally, even with the increased convenience one obtains by building on a new bathroom.

It is not buoyant in that sense of the word. On the contrary, it remains at a fixed sum until a valuer comes along and reassesses one's property. If the quinquennial revaluation does not take place, then what justice there ever was between ratepayer and ratepayer will become progressively distorted as one property increases in value but pays no extra rates and another decreases in value but gets no automatic remission.

Even if the valuation were always fair and intelligible, which it very often is not, rates are a tax which starts getting out of date the very moment the valuation is over. No wonder local authority treasurers rely on the quinquennial revaluation, and no wonder they were upset when I announced that the revaluation due next year would not take place. The reason for the postponement is the shortage of valuers which has been intensified by other commitments, such as tae establishment of the Land Commission.

In the absence of the 1968 revaluation, is has become essential to introduce what was a desirable and a long overdue change Ea the law. Most of the properties in the current valuation lists were assessed by reference to the level of rents prevailing in 1962. As the law stands, a new property which has to be assessed now, four years later, ought strictly to be valued by reference to the levels of rents now current. But, in times of changing prices, that might create unfairness and result in identical adjoining properties having different values. It has been the practice, since valuation officers took over the job 16 years ago, to value new property in what is called the "tone of the list". The Bill provides an overdue statutory basis for this fair and sensible practice of valuers.

It lays down that the value must be fixed as though the valuation were being made at the time when the list was being prepared; that is, in 1962. The property and the locality are, however, to be assumed to have existed at that time in their present state. Anyone who tells me that a fair rent is difficult to understand will appreciate that a "toned" list is equally difficult.

It means. for example, that if a shopping centre has become more prosperous because of some change in local circumstances such as a new car park, the replacement of small premises by large stores or the building of a housing estate nearby, the valuation would be on the basis of the rents that would have prevailed had those changes already taken place when the list was being prepared in 1962. The same applies, naturally, to the property itself. If it has been altered, valuation will take account of its current state. I hope that it is clear that by doing this we shall make sure that, as houses are assessed, the assessment will not value them too high.

Apart from the change to the statutory justification of the tone of the list, the only really important change in rating which we have introduced is the rating of empty property. Hitherto, in England and Wales, except for the City of London, no rates have been collected on empty property. Rates are a personal tax chargeable on the beneficial occupier. Where there is no occupier, no one has been rated. That means that owners have been able to leave buildings empty for long periods without making any contribution to local revenues. One of the things which people most widely recognise as a social anomaly is the failure to rate empty property in order to prevent people keeping it empty for long periods.

I do not regard the rating of empty property as a revenue raiser, and I have not made it mandatory on every authority. Its main purpose is to discourage owners from keeping their property vacant and thus to reduce the waste of accommodation. It is an affront that houses or flats should be left empty in areas where housing lists are long and the pressure on accommodation severe.

At the same time, I am prepared to accept the view of some of the local authority representatives with whom there have been consultations that in many areas there is little, if any, anti-social withholding of property from occupation and that in those areas the operation of the provisions for the rating of empty property would cost more and require more staff than the results could conceivably warrant. It is for that reason that the Bill lays down that the provisions shall not be mandatory. They apply only if adopted by any particular rating authority. The pressure has come mostly, I may say, from the Greater London area, for obvious reasons.

Where the provisions are adopted, there will be no liability until a property has been unoccupied for three months. After that, the owner will have to pay half the rates that would have been payable if it were occupied. So as not to discourage house building for private ownership, the free period for newly erected dwellings is to be six months. Certain classes of buildings are to be exempted entirely. Those include properties which it would be unlawful to occupy on account of a clearance order, those under threat of compulsory purchase, and historic buildings which are often very difficult to let. The Bill gives me power to add to the exemptions, and, during the Committee stage, I shall listen carefully to what is said about proposals for increasing the list of exempted buildings.

Before turning to grants, which is the other main subject, I want to touch on Clauses 29 and 30 and Schedule 3, which deal with licences and registrations, subjects with which I was not very familiar before I became a Minister.

I am astonished to find the number of licences which exist and which local authorities are entitled to raise. When I started, I hoped to abolish the lot, if I could, but some are in local Acts which I cannot change and some are in general legislation and very much mixed up.

The Bill deals with only the 33 licences listed in Schedule 3. Those in Part II of the Schedule have their charges or maximum charges unalterably fixed by Statute. The earliest of them were fixed over 100 years ago. The most productive, the dog licence, was fixed at its present 7s. 6d. 88 years ago. If I read the papers aright, there are those outside who believe that it should be increased, not because of the increased value of dogs, but to improve the status of the dog.

What the Bill does is to enable the appropriate Minister—in that case the Minister of Agriculture—to alter the fee by Order if he feels so fit. It is a continuing power, so that it will be practicable to review the charges from time to time and alter them as seems appropriate. I hope that the House will agree that this is a reasonable and long overdue change. We had hoped that it might have been possible to dispense with a substantial number of local licences and registrations. Someone got in before us to get rid of armorial bearings, manservants and the like. But I found, for example, that county councils are still required by the Agricultural Gangs Act, 1867, to issue licences to persons of good character fit to be entrusted with the duties of gang-master. Those duties still include preventing females from being in the same gang as males, or from being under the control of a male gangmaster. Since the fee is only 1s. for six months, I felt it was hardly worth keeping, and we have therefore decided to repeal the licensing requirement.

We have also decided that it is possible to abolish the gun licence. As there is justifiable public anxiety about the use of firearms, I should remind the House that a gun licence is obtainable on demand from the Post Office. There is no question of the suitability of the applicant. The licence serves no control function and, as it does not raise very much revenue, I thought that it might as well disappear.

So much for licences. I now turn to grants, which is the most difficult part of the Bill.

Sir Spencer Summers (Aylesbury)

Before the right hon. Gentleman leaves that point, can he say what will be the effect of it on game licences?

Mr. Crossman

None at all. I have not changed game licences.

Our concern is with the rapid growth in rates, and our aim is to establish a principle by which a fair balance can be struck between the burden to be carried by the ratepayer and the burden to be borne in the form of grants by the taxpayer. We have introduced a new concept in the relationship between the Exchequer and local government. Hitherto, the total Exchequer aid has been no more than the sum of the individual grants, and changes in the proportion between grants and rates have been the casual result of changes in the pattern of local authority expenditure.

By the Bill, I hope to finish with that disconnected, almost random, approach. Under the new scheme, we shall first, in consultation with local government, build up an estimate of the total local authority expenditure on revenue account for each of the next two years. The total grant, excluding housing subsidies and capital grants, will then be determined as a proportion of that expenditure. In other words, one first of all assesses the total expenditure and then fixes the grant as a percentage of that expenditure.

Once the total is established, all else becomes a question of distribution between local authorities. The creation or abilition of a specific grant will not affect the total grant. That is not to say that the cost of new and developing services will fall entirely on the rates. Services of all kinds will be taken into account in building up estimates of total expenditure and will influence the total amount of the Exchequer aid for the year. When it comes to deciding whether there should be aid for a particular service related directly to the expenditure of the individual authority, both Government and the local authority associations will be able to address themselves to the merits of the case, knowing that their conclusion will make no difference to the total amount of Exchequer aid to local government, but only to the way in which it is divided between the local authorities.

The next stage is to estimate the part of the aggregate Exchequer aid which will be required to pay specific grants. Under the Bill, we have introduced four new specific grants. The first is for expenditure on comprehensive redevelopment. The second is for land for public open space. The third is for the reclamation of derelict land, 50 per cent. of which goes outside our development areas. The fourth is in respect of certain expenditure due to large numbers of Commonwealth immigrants in any area. In national terms, these four new specific grants are relatively small, but they can be of critical importance to a small number of local authorities which are concerned with urban redevelopment or which have great immigrant problems.

I am determined to keep the number of specific grants to the minimum. One of the results will be to knock out two important specific grants. One relates to lower category highways, which I shall discuss later. The other relates to school milk and meals. Neither of them satisfies the test which I have laid down, which is that there should be special need to control the service centrally or that the expenditure is unevenly distributed. We have decided that a specific grant can be justified only on two grounds: that it is required because the service concerned requires unusually close control from Whitehall—for example, the police force—or, alternatively, that the service is so unevenly spread that it would be unjust to leave the few authorities concerned to bear the total cost of this quite unusual expense.

Those are the two conditions which I have laid down for specific grants.

Mr. John M. Temple (City of Chester)

The right hon. Gentleman has mentioned four specific grants.

Mr. Crossman

Four new ones.

Mr. Temple

There appear to be five—Clauses 7 to 11, inclusive.

Mr. Crossman

The fifth—I think that it is the fourth one—is merely a reaffirmation of existing grants in a different form.

Coast protection is an obvious example of the second type of specific grant. Not every area has coastal problems. If those areas which have them were left to deal with them alone, they would be overwhelmed by the problem. School meals do not meet the requirement because every authority provides school meals; they are firmly established in every local authority and are now accepted as an integral part of the education service.

I repeat that the amount of the total aid paid out in specific grants will be even smaller than before. Even with the four new specific grants, when one reckons in the police grant and the grant for principal roads, only about 15 per cent. of the total will be distributed in specific grants and 85 per cent. through our new rate support grants.

I now turn to the rate support grant, which is a single grant but is divided in the Bill into three separate elements. One of these I have called the needs element, corresponding to the old general grant; the second is the resources element, corresponding to the former rate deficiency grant; and the third, a new one, is the domestic element.

The needs element, which is a new version of the old general grant, will, like the general grant, be distributed among major authorities according to a very complicated weighting formula. In the Bill, the formula differs from that of the general grant in several important particulars. For example, the weighting must now incorporate both a new highways factor and a new factor for school meals, which have ceased to be specific grants.

Looking at the Schedule, however, it will be found that there is no mention of school meals. That is because it contains only a reference to education units—a horrible phrase which I must explain, because the education units are a genuine refinement of the weighting formula in the old general grant system.

At present, under the old general grant system, the supplementary education grant is based on the numbers of primary and secondary school pupils on the school register. Thus a primary school child carries the same weight for grant purposes as a secondary school child aged 16, although a place for the latter costs the local education authority an average of three and a half times the cost of a place for the former. Students who are being educated at the expense of the local authority and in other institutions of further education were not counted at all in the old distribution formula.

The use of the education unit will largely overcome both those defects. I am still discussing the precise details with the local authority associations. Broadly, however, our intention is that a pupil or student at a particular level of education should count as a number of education units in proportion to the national average annual cost of education at that level. That is to say, if an authority has more children of secondary age or more in further education than of primary school age, it will get a bigger grant for that reason. For example, the primary school child will probably represent one unit and the over-16 secondary child three and a half units. Incidentally, the take-up of school meals will be another item which earns education units.

Sir S. Summers

In comparing the two types of child and the basic cost, does that mean that it can vary from year to year?

Mr. Crossman

It will vary each time the grant is re-estimated in the two-year period. There is no difference here from the present system; one estimates the number of children. Of course, it varies in each biennial period.

I turn now to the resources element.

Mr. James Allason (Hemel Hempstead)

Before the Minister leaves the question of the supplementary grant, can he confirm that he is thinking in terms roughly of one-third of the education grant being in the supplementary grant and two-thirds in the basic element?

Mr. Crossman

No; there are not two elements. The education grant will be in the needs element, all of it in one element.

Mr. Allason

Surely, in view of the factor of the number of the population under the age of 15, it will be the basic element. This is an important point to local authorities, because there is such a wide variation in education costs between different authorities.

Mr. Crossman

I repeat that we have been slightly more novel than the hon. Member thinks. I have defined the needs element in a grant which has three elements: needs, resources and domestic elements. The education grant will come in the needs element.

I will try now to explain the resources element, which is simply the old rate deficiency grant in a somewhat new guise with the main difference that the total amount of the resources element will now be fixed in advance. This is done to meet the criticism made by the Public Accounts Committee of the openendedness of the rate deficiency grant in its Fourth Report in the Session 1963–64. The total amount of this rate resources element will, if we get our calculations right, bear the same proportion of estimated expenditure which rate deficiency grant has borne since the 1963 valuation.

The House may express surprise that a Labour Minister, in view of the strong opposition of the Labour Party to general grant while we were in opposition, should produce only minor modifications in the general grant.

Mr. Geoffrey Rippon (Hexham)

We express pleasure.

Mr. Crossman

I hope that I may combine a little pleasure and surprise, too. I have been surprised and impressed by the affection which so many treasurers show for the two old grants, the general grant and the rate deficiency grant. Since we are preparing only a holding operation before the big radical reform of local finance, I have accepted the consensus of the treasurers and I have tried to improve and rationalise the existing system to make it as palatable as possible in the intervening period.

As the treasurers made only too clear to me, it would be somewhat unreasonable to impose two upheavals of grants upon the local authorities, particularly when we are asking them to administer a whole lot of other improvements in rating, rate rebates, rate instalments and, as I shall show presently, domestic re-rating. Local authorities are being asked to do more changing during these two years than they have had in the whole period since the war. They have been bitterly complaining about these changes, z nd I did not want to add any gratuitous changes. I must admit, however, that I can see much more to commend itself in general grant at this time than I estimated when I was in opposition.

I therefore come to the third element in the new rate support grant, which I call the domestic element. This is completely novel and it is designed simply and solely to help the domestic ratepayer who feels himself overwhelmed by the size of the annual increase in his rate demand which, unless we cut back the social services, has become almost inevitable.

When I introduced rent rebates, I was well aware that although I was helping the hardest-pressed ratepayer, I was doing so at the cost of imposing a further burden upon the rest of the ratepayers, who are bearing 25 per cent. of the cost. In all justice, I found it essential to find a special way of helping them, and the way I have chosen can best be described as domestic derating.

I propose to pay out a special grant each year designed to lower the domestic ratepayer's poundage as compared with that of the industrial and commercial ratepayer. That seems to me to be common justice, because the domestic ratepayer is the only ratepayer who pays the full rate. Agricultural land and buildings are still entirely exempted from rates. We have made no proposition in the Bill to alter this. Charities get 50 per cent. relief as of right, and in the Bill we have made sure that this discrimination is maintained in the case of empty properties.

Commerce and industry are no longer derated, but they are permitted to treat their rebates as deductible expenses in computing profits for tax purposes. On average, therefore, commerce and industry get 40 per cent. or more of their rates back from the Exchequer. Only the poor old householder has to pay. If only he were allowed to charge his rates as a legitimate living expense, he would be on a level with the shop and the factory, although not with the farm.

Domestic derating will work as follows. In fixing our total of grants, we have decided not to keep the present balance but to shift the balance from rates to taxes by 1 per cent. a year: £30 million in the first year, £60 million in the second year, £90 million in the third year, and so on. We shall devote almost the whole sum to the domestic ratepayer by means of this special domestic element in the rate support grant. The rate support grant order to be made under Clause 2 will, therefore, specify not only the amount of the domestic element, but its equivalent in pence in the £ of a rate reduction for householders.

Rating authorities will then be required by Clause 6 to reduce the rate levied on dwellinghouses by that number of pence in the £ and will, in turn, get a share of the domestic element proportionate to the amount of relief which that reduction affords to their ratepayers. This reduction to householders will not result in an increase to commerce and industry, since it will be made good as near as may be by the extra grant made by the Government through taxation. Furthermore, the domestic element will not use up the whole of the extra grant and all ratepayers, including householders, will get some benefit from the balance. The poundage reductions for domestic ratepayers will be 5d. next year, 10d. the year after, and so on.

Finally, I turn to highways, Part III of the Bill. We intend to bring about a drastic simplification——

Sir S. Summers

When the right hon. Gentleman says "and so on", does that mean that the poundage reductions for domestic ratepayers will be 5d. next year, 10d. the year after, and so on, proportionately indefinitely until the rates are wiped out in favour of taxation?

Mr. Crossman

Oh, no. I have indicated that this is a short-term interim measure before the drastic reform. However, it means that each year 1 per cent. of the total will be transferred from rates to taxation. This is a shift of burden from rates to taxes. One per cent. is to be given to the domestic ratepayer, equalling roughly 5d. in the first year, 10d. in the second year, 1 s. 8d. in the third year, and so on. Clearly, this could not go on for ever. It can be done only for a period.

Mr. Rippon

I am sure that the Minister does not want to mislead the House. Will he not agree that all that is happening under the Bill is to give to the ratepayer some relief from the increase in his rating bill? The bill will go up year after year in spite of this.

Mr. Crossman

Of course. I am saying that, roughly speaking, half the increase falling on the domestic ratepayer will be covered by this special grant. If I had divided it up, less than one-quarter would have gone to the domestic ratepayer, but by giving not a sou to the commercial or industrial ratepayer and putting it all to the domestic ratepayer, I can just get it up to 5d. out of an average of 10d. in each year.

Sir D. Renton

Would the Minister agree that if the new rate support grant replacing the general grant produces less money for a county council than the general grant now produces, there is a serious risk that the 5d. extra due to the domestic element could be wiped out?

Mr. Crossman

Yes, there might be a possibility. We are negotiating with the county councils on this point to ensure that it does not happen. The right hon. and learned Gentleman will see the position more clearly when he has heard what I have to say about highways, which is the disputatious element, and about how this affects the counties and the county boroughs.

I want to simplify the question of central Government grants for roads, which at present are classified in Classes I, II and III. In England and Wales there are about 15,000 miles of Class I roads, 13,000 miles of Class II and 42,000 miles of Class III. The Minister of Transport pays specific grant for major improvements and for maintenance and minor improvement at rates of 75 per cent., 60 per cent. and 50 per cent., respectively, to each of these classes of road.

The payment of specific grants inevitably means a degree of detailed control by the central Government which may have been acceptable when the classified road programme was relatively small, but the great expansion of the road programme in recent years has brought us to see the need for drastic rethinking.

Under the new arrangements, all local authority expenditure on highways, with the one exception, will receive its grant by way of the rate support grant. It is part of the general grant, like education The exception is the improvement of the so-called principal roads. I have made the exception because it bears so unevenly between one local authority and another that they would be unfairly burdened if they had to sustain it. For these so-called principal roads, 15,000 miles of them, there will be a specific grant of 75 per cent. for those who have to pay for them.

In addition, the Bill provides that highway maintenance in county boroughs and in inner London will become eligible for Exchequer assistance for the first time since 1929. Part of the extra £30 million which the Government are to make available next year is intended to give assistance in this respect without drawing upon the money already available to other authorities. There is an argument here as to whether this is sufficient to compensate the counties for what they fear might be a loss as a result of this transaction, and we are still discussing the matter with them.

I think that all this will amount to a great simplification of the highway grants system. By limiting specific grants to the improvement of those roads which make an important contribution to the national highway system, we are, I think, striking a better balance between the respective responsibilities of central and heal government in carrying out the road programme, and giving local government a greater degree of independent decision. All those concerned—engineers, lawyers, and administrators—will be able to concentrate their efforts on bringing about road improvements where they are most needed.

Mr. Ronald Bell (Buckinghamshire, South)

Can the right hon. Gentleman give a rough estimate of the proportion of present Class I roads which he envisages as being principal roads?

Mr. Crossman

I have roughly indicated them, because I said that there were about 15,000 miles of Class I roads, and we would have about 15,000 miles of principal roads. This is roughly the same as the figure for Class I roads. The figure for principal roads is roughly the same, but not precisely so.

I come now to street lighting, where, again, we have an important improvement in Clauses 23 to 27, because our present organisation of street lighting, like that of local government, dates from, and is rooted in, the nineteenth century, when the main purpose of lighting was "watch and ward" and preventing robbery. With the growth of motor traffic, however, another function has emerged, the prevention of traffic accidents which are the main source of danger. Lighting and road safety are now so closely connected that highway authorities must, we believe, be the lighting authorities. Good lighting in appropriate places has been shown to reduce the number of accidents after dark by at least 30 per cent. It follows that our organisation of lighting must be geared to this primary purpose of road safety.

At present, the size and resources of lighting authorities vary. Local authorities range from parishes to county boroughs. Many are not the highway authority for the roads they light, and, even when they are, their highway powers and their lighting powers are separate, and lighting is not legally eligible for grant as a highway improvement. The result is that road lighting is often patchy and uneven as the road passes from the area of one authority to another. Some of the smaller authorities simply do not have the resources of manpower or money to provide an adequate standard of lighting.

In principle, I am convinced that the highway authority for a road should be the lighting authority. It is wrong that there should be a division of responsibility between lighting and other forms of highway improvement. The design of a highway, including its lighting, must be done comprehensively. The decision whether road lighting is needed depends on such factors as traffic flow, the lay-out of the road, and the accident record. In many cases there is a choice between the installation of lighting and some other form of improvement.

What we are determined to ensure is that the authority responsible for lighting is the one which is in the best position to take such decisions, and which has the resources to carry them out. By "resources" I mean not only financial, but manpower resources. Good road lighting calls for engineering techniques and experience, which are not available to the vast majority of small local authorities today, and are best developed in greater concentrations of work.

Thus, we have drawn this distinction in the Bill between road lighting, which is provided mainly for the benefit of traffic, and footway lighting, which is provided mainly for the benefit of pedestrians. The effect of the Bill is to leave the responsibility for footway lighting with the existing lighting authorities, while transferring the responsibility for road lighting to the highway authorities.

We have, however, made provision for highway authorities to delegate the carrying out of their new lighting responsibilities to existing lighting authorities if they think fit, and this provision enables the existing organisation and experience of lighting authorities to continue to be used when it seems appropriate. I hope that this will go some way to meet the objections which have been raised to this part of our proposals by some of the local authorities affected.

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

The Minister referred to the Public Accounts Committee, where there was some reference to the authority of his accounting officer for roads. Is this affected in any way by the Bill? It was felt by the Public Accounts Committee that it was wrong that the Minister's accounting officer should have responsibility for expenditure on behalf of the Ministry of Transport.

Mr. Crossman

The hon. Gentleman has floored me with that question. He had better wait for my hon. Friend the Joint Parliamentary Secretary to reply at half past nine, because that is a detail which I cannot answer this afternoon.

I do not want to go on for too long. I think that I have covered the main provisions of the Bill. It is not an easy Bill to understand. Indeed, I found it almost as difficult to read as the Rent Act, and that is saying a good deal. But I am sure that in winding up the debate my hon. Friend the Joint Parliamentary Secretary will, with his usual perspicacity, elucidate all the points which I have left obscure and unintelligible.

When we look at them together, what can we fairly claim for these two Bills, the Rating Bill and the Local Government Bill? I think that there are six things. First, they soften the regressive character of the rates. Secondly, we have introduced two long overdue reforms of rating, the mandatory right to pay in instalments, and the rating of empty property. Thirdly, we have provided a solution to a major technical problem, the fair assessment of properties between general revaluation. Fourthly, we have imposed for the first time a principle on which grant aid can be determined totally, rather than as a series of disconnected items.

Fifthly, by the use of these mechanisms we have provided a method of slowly, continuously, and steadily shifting part of the increasing burden from rates to taxes. Sixthly, and lastly, we have made sure that the continuous reduction in the proportion of the rate burden as compared with the tax burden is not distributed over the whole field of ratepayers, but is concentrated exclusively on the hardest hit, the domestic ratepayer.

As interim Measures pending a radical review when the work of the Royal Commission has been concluded, I commend these reforms to the House, with the added observation that although the help they provide is modest, it is a great deal more than anything attempted by our predecessors.

4.57 p.m.

Mr. Geoffrey Rippon (Hexham)

We have heard the Minister open this debate by referring back to the discussions on the Second Reading of the Rating Bill last December and describing this as the second jab of a two-pronged attack on some of the inequalities and iniquities of the rating system. This is not a jab. It can hardly be described as a pinprick. It certainly would not be right to describe the Bill as a major reform, or the most important reform for the last 100 years.

As the Minister said, it is not an easy Bill. I would say that it is not even the most intelligible Bill that we have had even in one year. Of course, we are grateful to the Minister for the explanation that he has given in his characteristic fashion of the provisions of this Measure, but I think that he has been guilty of a great deal of over-valuation of the Bill. Indeed, it ought to be said at the outset that because of the way in which the Minister has presented the Bill there is a real danger that the public will be seriously misled by what he has said.

I have two preliminary observations to make. First, it is clear that the Bill cannot be described in any way as a fulfilment of the Government's pledge to give early relief to ratepayers. Indeed, and this was brought out in the short exchange that we had during the Minister's speech—the average ratepayer, including the domestic ratepayer, will receive next year a larger bill than ever before. The year after that it will be larger, the year after that it will be larger still, and this will go on, as the Minister said, throughout the life of this Parliament.

Secondly, the Bill is certainly not the major reform which the Minister has talked about so frequently, and indeed after listening to him this afternoon it is fair to say so recklessly, since he took office. All the brave words have ended up with a Measure which is to some extent a technical reorganisation of the grant system on principles long established and of which we approve, and the debate has boiled down from that to a discussion on dog licences, street lighting and the rating of empty property, which, whatever may justify it, cannot be regarded as any sort of contribution to the finances of local government or to the relief of the general body of ratepayers.

What the House must understand is that ratepayers are in for a very bad time in the next few years under the Government's policies and administration. In 1965–66, it was estimated that the percentage increase in rates in England and Wales was 13.9 per cent. The latest provisional figure for 1966–67 is 11.8 per cent., making a total over the two years of 25.7 per cent. Nothing in the Bill will relieve the ratepayer, domestic as well as commercial, from carrying an increasingly heavy burden in the years ahead.

There are, of course, perfectly acceptable arguments for saying that ratepayers, in any event from most authorities, get good value for their money. But what the Government must stand condemned for is the way in which they have consistently promised action which has never materialised and solutions which either did not exist or which they have now cynically abandoned. It is right that the House and the country should recall some of the quite unequivocal declarations of intent which the Minister has made in the last year or so from that Dispatch Box.

On 5th May last year, the Minister told the House: … what we face now is a situation in respect of rates which is so serious that we must introduce reform and a radical change in the shortest possible time. He continued: No one can afford to tolerate rates going up at a compound interest of 8 per cent.… The system must be changed. … We shall reform the rates. For good measure, he added: We shall have to have a special grant for education and once more take education out of the general grant."—[OFFICIAL. REPORT, 5th May, 1965; Vol. 711, c. 1492, 1493, 1495.] That was hardly more than a year ago. He then went on not merely to give a pledge to shift the whole of teachers' salaries from the rates to the Exchequer, but also to declare that he did not think that that was enough and that a much bigger operation was required.

By the time of the Second Reading debate on the Rating Bill on 6th December last year, the Minister was in full spate against the inequities of rating, which he described as "aggressive and vicious". He went on to describe the Rating Bill as … a short-term relief from this unpleasant tax while we make our plans to abolish it. That is the central point. Without a radical reform of local taxation, including the abolition of rates, I see no future for local democracy …"—[OFFICIAL REPORT, 6th December, 1965; Vol. 722, c. 43.] What the right hon. Gentleman has told us this afternoon is that local democracy will have to go on surviving for many years without the Minister's proposed radical reforms and in spite of all his Delphic warnings.

Now, "the oracles are dumb". If I may adapt the Delphic oracle's message to the Emperor Julian, we must tell the ratepayers: … the bright citadel has fallen to the ground; Appollo hath no longer any shelter or oracular laurel tree or speaking function. However, having heard the Minister this afternoon it would probably be premature to put in the final part of the message and add that … even the vocal stream has ceased to flow. While we may give a measure of welcome to any Bill which ensures the necessary continuation of existing contributions to local government expenditure, we cannot be asked to greet this particular Measure with any great display of enthusiasm. As it stands, the Bill is, in our view, totally inadequate in relation both to the Government's promises and to the needs of the times. It is certainly very far from being the "very big reform" which the Minister promised last November.

We are now told that the reform of the rating system must come after the reform of local government. The Minister says that this will not, of course, be within the lifetime of this Parliament, but that it will be five or six years before we can hope to do anything about the local government financial system.

It is against that background that we must try to decide something far less exciting—whether Part I of the Bill, which distributes the Exchequer grants, provides within the present structure of local government areas and finance an equitable distribution of the burden, first, between the local authorities and the Exchequer. second, between one class of ratepayer and another and, third, between one local authority area and another.

On the first point, the distribution of the burden between the local authorities and the Exchequer, the Bill must be regarded by everyone as inadequate—not because of the machinery which it suggests, which, in spite of what the Minister said about it, is not very revolutionary, but because of the way in which the Government have so far indicated that they propose to use it.

I think that the local authority associations have been unanimous in expressing their disappointment to the Minister at the total amount of grant proposed. There are no figures in the Bill. All we know is that, according to the Explanatory and Financial Memorandum, it is the intention to provide additional Exchequer assistance of about £30 million in 1967–68. £60 million in 1968–69 and £90 million in 1969–70, and so on. But what the amount of grant will be in future, expressed as a percentage of local government expenditure, we do not know——

Mr. Crossman

One per cent.

Mr. Rippon

That is what the Minister says. It is not in the Bill. Perhaps he should write it into the Bill and, if so, perhaps make it 2 per cent.

The Bill says simply that, for the purpose of fixing the aggregate amount of rate support grant for any year, the Minister "shall determine" the aggregate amount which is to be available and distribute it in such amounts "as may be prescribed". Nothing could be vaguer than those words in the Bill. There is no indication in the Bill of any intention to make available any prescribed fraction of local government estimated expenditure.

Mr. Crossman

I think that it is fair to make a comparison. When the right hon. Gentleman's own party introduced the general grant—I have been looking back—it seemed to me as though the Bill in which they introduced it was in much the same form as our Bill for introducing the rate support grant. Perhaps the right hon. Gentleman would tell us what figure his party put into that Bill.

Mr. Rippon

I am grateful for what the Minister says: that is what I have been saying. This Bill is not a major reform. It is in much the same form in which the Conservatives put forward their general grant proposals——

Mr. Crossman

They introduced a mechanism without writing in a figure. We have introduced a greatly improved mechanism, but have written in no figure, just as the party opposite did.

Mr. Rippon

But we gave more information as we went along than the Government have done. Nor did we make the sort of statement which the right hon. Gentleman made of the intention to do something in a definite way and then not write it into the Bill. If the Government say, "It is our firm intention that the increase should be 1 per cent. per annum", they should put that into the Bill.

As it stands, the Bill refers not to the amount which local authorities need, but only to the amount which is available. From the point of view of the local authorities and their ratepayers, it would seem important that the Bill, if possible, and certainly the Minister, should give a much clearer indication of the basis of all these grants for the future.

At the moment, our discussion of the Bill is effectively limited merely to the general structure or, as Mr. Aneurin Bevan used to say, to the size of the spoon, and does not relate to the amount of jam which will be put in it. The White Paper issued last February said in paragraph 15: The aim will be to keep the average increase in rate poundages more nearly in line with the growth of the economy as measured by the gross domestic product. That does not appear in the Bill, or even as a declaration of intent in the Explanatory and Financial Memorandum.

Indeed, even this afternoon there have been expressed the fears of the County Councils Association in relation to one authority and another. They have also made representations to the Minister that the amount of the additional grant in total proposed for 1967–68 and subsequent years will be insufficient to achieve that aim. It may be that the omission from the Bill or memorandum of the intention which was expressed in the White Paper is deliberate.

Mr. Eric Lubbock (Orpington)

Does the right hon. and learned Gentleman have any figures showing the increased total amount in recent years which would enable us to make a comparison with the £30 million, £60 million and £90 million mentioned in the memorandum?

Mr. Rippon

I will be coming later to the question of how this matter should be dealt with and what previous Governments did to assist.

As far as we can judge, the greater part of the additional grant envisaged will be used simply to keep down the growth of the rate poundage for householders and, of course, even an Irishman's decrease of this kind is entitled to some welcome. However, by 1969–70 the amount of relief under the Bill will, I judge, be well below the amount of relief which would be brought about if the Government accepted the proposals we have made.

Our proposals would involve the transfer from the rates to the Exchequer of the cost of a number of services, like Class I and Class II roads, teacher training and student grants. That would reduce the rates by about £100 million in 1967–68. And to the extent that the cost of many of these services is rising, such a transfer would, by 1967–68, be worth more than £100 million of relief.

Or the Government could have acted on the suggestion made by my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) on 5th May and simply, as an interim measure, have given £100 million across the board through the general grant. Yet even under the Government's present intentions, by 1969–70 the amount of relief will be only £90 million. There is clearly a limit to the process by which one can transfer local government expenditure to the Exchequer if one is to have sufficient responsibility entrusted to local government and have local government in a real sense. We accept that, but what is being proposed now is very much less than the party opposite promised the country it would do.

While it may be counted to the credit of right hon. and hon. Gentlemen opposite that they have abandoned their repeated pledge to abolish the general grant and to restore the percentage grant for education, it is a betrayal of ratepayers' expectations for hon. Gentlemen opposite to rat on their firm undertaking to … transfer the larger part of the cost of teachers' salaries from rates to the Exchequer When the Minister spoke last May he said that there was a pledge to transfer the whole amount, but the right hon. Gentleman is notoriously careless, which is the Parliamentary way of putting it, about a number of matters, such as housing statistics and similar pronouncements to the House. Since the cost of teachers' salaries is already well over £550 million—and the rates meet 40 per cent. of that—this Measure cannot be described, by the wildest flight of Wykehamist imagination, as carrying out that specific and definite commitment.

The fact is that the £30 million in 196768 will barely, if at all, make good the increase in costs which are taking place not as a result of improved social services but as a direct result of the Government's policy of high interest rates, mounting taxation, increased postal charges and the rest. According to the Financial Secretary to the Treasury, speaking in the House last month, local authorities will need to raise £1,700 million by borrowing in the year 1966–67. It is very necessary, therefore, to take account of the effect of high loan charges on the rates, bearing in mind that in 1965 loan charges amounted to £457 million or something like one-sixth of the current total expenditure of local authorities.

We are now to have the Selective Employment Tax, under which local authorities will, presumably, have to pay the tax in the first instance whatever their prospects may be of ultimate reimbursement. That, in effect, means that local authorities will have to make an interest-free loan to the Government. The Greater London Council, I understand, has estimated that the cost of that to the Council will be £4.5 million in a full year. This is a factor which must be reflected in the rates, at any rate to some extent.

All the information we have about the S.E.T. is that it is to be dealt with separately and that local authority returns in respect of grants under the Bill are not to include the S.E.T. as expenditure. Perhaps the Parliamentary Secretary will tell us more about this later.

It must also be borne in mind that this £30 million increase for 1967–68 must immediately be offset to the extent of about £10 million because the Minister explained that he has had regard to the £7 million extra burden on the rest of the ratepayers as a result of the Rating Act, 1966, plus the £2 million cost of administration. There is also any amount which the Government may allocate for the new specific grants under the Bill of which, so far as I understand it, only about £1 million has been spoken of in current discussions. All in all, there will be only about £20 million of relief, largely for domestic ratepayers, in 1967–68.

While the principle of the new specific grants—covering matters which vary from one local authority to another—is to be welcomed, it is the adequacy of the financial provisions about which we will need to know a lot more. Moreover, as these are to be a first charge on the aggregate grants, they may be made in future at the expense of the general relief to be given to other local authorities.

That brings me to the second question, whether there is an equitable distribution as between one class of ratepayer and another. Some useful action has been taken, which we welcome, to provide a measure of relief for the poorest ratepayers as a result of the action recommended by the Allen Committee, which we set up. I welcome what the right hon. Gentleman said about the action he is going to take to ensure that this is properly administered and as reasonably as possible. The right hon. Gentleman gave me some assurances the other day at Question Time that there would be a generous attitude taken to an extension of time if people did not make their applications on time.

But as my hon. Friend the Member for Harwich (Mr. Ridsdale) pointed out, this action puts up the rates for the great majority of ratepayers, although it can be said that the domestic ratepayer will have some relief in the sense that some of the increase in the rate demand will be removed. However, there is nothing in the Bill for small shopkeepers who are having to face increasing costs, remembering that they are not necessarily easily able to bear them.

But even the assistance being given to the domestic ratepayer is meagre compared with the relief which was given during the period of Conservative Administration. I recall having long arguments with the present Foreign Secretary about whether, under the General Grant Order with which I was concerned in 1961, the percentage was 55.5 or 55.3. Some of those percentages gave rise to certain difficulties, but I suggest that under Conservative rule and under the grants which Conservative Governments made, more than 50 per cent. was given; in other words, more than 50 per cent. of the increase in the burden at that time was met.

We must remember that we gave very much more relief than that. Far more important a reform than this Measure was the comprehensive rerating of industry which we carried out. In 1955–56, the domestic ratepayer paid 59.8 per cent. of the total rate bill. That was when industry was derated 75 per cent. In 1963, we fully rerated industry so that, in 1965–66, the domestic ratepayer paid only 47 per cent. of the total rate bill. If we had not carried out that measure of reform, last year the domestic ratepayers would still have been paying 59.8 per cent. of the bill; in other words, they would have had to have found £140 million more.

We carried out a major revaluation, and that helped the domestic ratepayers in many areas. We brought in the Rating (Interim Relief) Act, 1964, under which grants of about £6 million a year are being paid now—and we shall want the Minister to tell us what is to happen to these grants, because we know that they will be diminished and then abolished. We hope that in the new grants regard will be paid to the eventual loss to the local authorities of this £6 million a year.

Mr. J. T. Price (Westhoughton)

The right hon. and learned Member refers to the action taken by the previous Administration in the revaluation of household property. I was a member of the Standing Committee on the 1959 Act, and we told the Minister in charge of the Bill that it would result possibly in an increase in valuation of up to 300 per cent. He said that this was nonsense and a gross exaggeration, but a Clause was built into the Act to give special relief if our forecast proved to be correct. I challenge the right hon. and learned Member to deny the statement made by the Minister that, in fact, the revaluation brought no benefit to ratepayers and that its general effect was to increase rates. The rate poundage did not fall as much as the valuation rose.

Mr. Rippon

It varied from area to area. In a great many areas the domestic ratepayer paid a smaller proportion of the total burden; although the valuation of his property may have risen, the valuation of other properties, including industrial and commercial properties, went up, too, and therefore their share of the burden was increased.

Mr. Price

Not at that time.

Mr. Rippon

Over the years the average increase in the rate poundage has been very considerable, as the Minister said. Nobody denies that. But the Allen Committee showed that the most serious aspect of the position was only just about to arise. As reported in paragraph 54, it said: Our evidence suggested that some householders are as much concerned with the impact of rates in the future as in the present. They may be able to cope with their existing rate demands and just get by, but they are afraid that if rates continue to rise in the future as they have done in the past, they will no longer be able to make ends meet". This fear can be readily understood when it is realised that this year there was an average increase of no less than ls. in the rate poundage, about the same as in the previous year. The average householder will be paying this year almost £40 compared with £18 13s. ten years ago. It is against the background of that situation that the total provision envisaged by the Government at the moment, even for the domestic ratepayer, is in our view pitifully small and inadequate, and we have said specifically what we should have done and what we still urge the Government to do to increase it.

What may be of even more concern—my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) referred to it—is the distribution of the various Exchequer grants as between one local authority and another, because if this is not done on a fair and equitable basis, some authorities will be penalised instead of being helped.

Although the Bill proposes a reoganisation of the grants, it does not contemplate any fundamental change in their nature. Indeed, the basic principle of the general grant, so long condemned by right hon. and hon. Gentlemen opposite, has been preserved and even extended under the Bill. Eighty per cent. or more of the Exchequer assistance, including the support for education, we are told will be distributed through the new rate support grants. I understand from the Minister that there are three elements. The first is the needs element, which corresponds to the general grant and which will be distributed on a formula basis. The second is the resources element, which is the present rate deficiency grant, but—and this may be significant later—distributed within a fixed total. It is only the third element, the domestic element, which is in any sense new.

But how far such changes as these will be beneficial will depend on factors and information about which the Government need to tell us a great deal more. This is, in effect, only an enabling Bill, in that the aggregate amount of the Exchequer grants will be dependent on Government decisions and their distribution on detailed formulae to be agreed under the various headings set out in the first Schedule.

Can the Parliamentary Secretary say, in his winding-up speech, how far the discussions with local authority associations have gone? As virtually all the financial provisions will be contained in the rate support grant order, will he tell us when he expects that to be published or when we shall be given some information about what will be in it? Above all, will the Minister, before Committee stage, publish a Schedule giving a comparison between the existing position and that now envisaged, as it will affect individual local authorities? That was the demand which I remember the Opposition made when we introduced the Bill in 1958. It may be that it was in the Committee of which the hon. Member for Westhoughton (Mr. J. T. Price) was a member that they demanded, before they went ahead, a Schedule setting out how this would affect individual authorities. We conceded that demand, and no doubt the Minister will behave equally rightly.

It may well not be possible to show the effect of the changes in the grant system on every individual local authority. But we ought to have at least some sample figures, because it can be very misleading to talk about the total increase in grant or the effect on the so-called average ratepayer when the situation can vary so much between one type of authority and another and when the formulae can throw up serious disparities. As the White Paper said: Here, as in other fields, averages conceal more than they reveal. Nobody—I am sure not the Minister—feels any sympathy for the statistician who drowned in a river of an average depth of two feet.

One of the most important proposals contained in the Bill concerns the new arrangements for education. As I understood the Minister's explanation, there are to be two main changes. First, instead of there being a grant based uniformly on the number of school children, under the Bill the grant will differ according to age, on the ground that it is more expensive to educate an older child. That seems sensible enough in principle.

We on this side of the House have never taken the view that provisions laid down in any particular order at any particular time in 1958 or at any other time—were sacrosanct. But we need to have much more information than we have at the moment about how this will work in practice, because the Bill is silent as to the variations to be made according to age between one education unit—I agree with the Minister that it is a horrible expression—and another.

The second change is the merging of the 100 per cent. specific school meals and milk grant within the rate support grant. Will the Minister give an assurance that no local education authority will lose financially as a result of this change? And since so much is to be left by the Bill to subsequent regulations, can the Minister assure us that there will be full consultation with local authority associations before he makes his regulations?

That is the most important part of of the Bill—that relating to the grants and and distribution of the grants. Part II contains very little in the way of reform of the rating system. The only proposal in the whole Measure which can remotely be regarded as a reform of the rating system is the provision for limited rating of unoccupied properties. The Minister said that he does not put it forward as any financial contribution. There may be something to be said for it, particularly as it has been left to the discretion of individual local authorities as to whether they adopt it, but I think we shall find in Committee that there are serious difficulties of drafting and definition. As the Bill stands, so far from this provision being all that intelligible, it may be that most local authorities will come to the conclusion that it would be better to let it go than to go through all that trouble.

For the rest, we have a mass of minor amendments and some tentative steps in the direction of the consolidation of rating law. We are to have the repeal of the rateability of the "inhabitant parson-vicar", in what the Minister called a great rating reform. I am not sure why we should have this consolidation process at all if the Minister is to abolish the system at the earliest opportunity. He sneered at my right hon. Friend the Member for Kingston-upon-Thames for having said this to him, but he has a duty to make the rating system work as well as possible as long as it exists. This is what the Bill fails to do and what the Minister fails to do. It is particularly regrettable that he has abandoned the 1968 revalution simply by inserting "1973", and it is not good enough to say that there is a shortage of valuers because of the Land Commission. This ought to be the priority, not the Land Commission.

The Minister makes the point that rateable value does not grow on its own and that if revaluation does not take place, distortions increase year by year. This is the case for revaluation. Even if the 1963 lists could be regarded as perfect, it would be necessary for revaluation to take place at regular intervals, for there is bound to be a continuing, widening gap between the level of assessment and the true value with every year that passes. But we know that the 1963 revaluation was far from being perfect. Speaking on the Report stage of the Rent Bill on 30th June and referring, particularly, to London, the Minister said: Unfortunately, under the new valuations … in some areas more than a quarter of the rateable values are unfair. "—[OFFICIAL REPORT, 30th June, 1965; Vol. 715, c. 705.] As long as the rating system remains, it must be the first priority—and in some areas the most urgent need—to have an equitable valuation list. It is no good raying that we shall have elaborate provisions for maintaining what is termed the tone of the list, provisions which may be intelligible to the Minister but are not ill that easy to understand, if errors existing are to be perpetuated under the Minister's policy and if existing anomalies are not to be corrected and wrong policies are not to be righted.

The Minister said that he would do something in Committee. I hope that he will do something about capital values. By all means let us consider capital value, although not necessarily as an immediate reform. Perhaps the right hon. Gentleman can do what the professional associations suggest, which is to have capital value considered by valuers and the Lands 'Tribunal as part of the evidence of the value of a property.

The Minister talks about how inequitable the arrangements are for the rationalised industries, but he is to do nothing about them for five or six years. If he chinks that they are all that un-intelligible and inequitable it is his duty to do something about them. All his diatribes against the rating system have done is to undermine morale and damage recruitment in the valuation service in which he himself admits there to be a shortage of skilled people.

All of us, Socialists, Conservatives and Liberals, are aware of the difficulties and weaknesses of the rating system. Rates have been the subject of alarm and despondency since time immemorial. When the Royal Commission on Poor Law reported in 1834, we were told that the whole nation looked on in a kind of paralysis at the inordinate growth of moral abuses, of industrial disaster, of ruinous expenditure. Since then we have had numerous Royal Commissions and working parties to try to find new sources of revenue and all the Prime Minister has been able to say and all in effect that the Minister now says is that they hope that someone will stumble on the secret one day. They do not think that it is very likely to be Ole Minister. He still goes around abusing the rates, with not the slightest idea in his mind of what to put in their place. Nor, let us face it, is the Royal Commission likely to be able to give him any help, because it is concerned only incidentally with finance so far as it may affect the viability of any changes it suggests in relation to the structure and function of local government.

If the Minister says that the system is as bad as all that, something should be done now, in Committee or elsewhere, to consider the various suggestions which have been put forward. We know that they, too, have weaknesses, whether they are rating of site values, or a sales tax, or assigned revenues, or higher dog licences, but sooner or later we in the House of Commons will have to take the necessary decisions ourselves. We cannot just go on abusing the system, as the Minister does, and then doing absolutely nothing but make the situation a great deal more difficult. If we have to have the rating system, as the Minister says, for five or six years, it is no good his refusing, when he says that it is as bad as it is, to give any sort of worthwhile relief, or a fair and equitable administration under the present system.

We regard the Bill as being justified as a means of continuing Exchequer grants, and justified because it embodies the general principle of the general grant which we have supported. But we need much more information before the Committee stage about how the Bill is to work and we hope that it will then be very much improved. Unfortunately—and this is the final verdict on the Bill—it only tinkers with the real problems while serving the Minister as a means of wrapping up just another series of broken pledges and broken promises.

5.35 p.m.

Mr. James Wellbeloved (Erith and Crayford)

The Bill will receive a warm welcome on this side of the House and outside the House. As with all the Measures put forward by the present Government to redeem the disasters which they inherited, it will receive the same grudging support from hon. Members opposite which they have given on so many other occasions.

The right hon. and learned Member for Hexham (Mr. Rippon) was a little coy in his support for the new-found Conservative policy of £100 million off the ratepayers and on to the taxpayers. I can understand some of his coyness, having looked up what he said in a debate initiated by his hon. Friend the Member for Harwich (Mr. Ridsdale) four years ago. The right hon. and learned Gentleman said: …I think we are now striking about the right balance between the contributions from the national and local taxation."—[OFFICIAL REPORT, 2nd March, 1962; Vol. 654, c. 1777.] Things can change and perhaps it is understandable that the right hon. and learned Gentleman is a little hesitant about so publicly showing his rapid transformation of opinion.

Mr. Rippon

It is a long time.

Mr. Wellbeloved

It is a long time. We shall be going into this conversion, this sudden concern which is bursting forth from hon. Members opposite for the ratepayers.

It is not true that rates have only just started increasing over the last 20 months. The average increase in rates over the last 10 years has been about 10 per cent. The right hon. and learned Gentleman's figure of 25 per cent. was a little stretch of the imagination, a rather unusual mathematical process. I was not aware that to add the average increase of two individual years gave the total increase, although I know that the total increase comes somewhere near it. The total increase in the last two years is only 20 per cent. I have the figures available, although they may be somewhat different from those dragged up and dreamed up by the Conservative Central Office.

Mr. Rippon

The hon. Gentleman will get the figures from the Rating and Valuation Association, whose figures I quoted.

Mr. Wellbeloved

I have those figures and I also have the figures which my right hon. Friend gave to the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter).

Talk of this figure of £100 million is a dramatic departure in opposition from the sort of policies which the Conservative Party put forward in power. What were the Conservatives then doing about the rate burden on the ordinary ratepayer? What were they doing about the demand of my hon. Friends to transfer some of the burden to the taxpayer? What were they doing about the suggestion to transfer whole services, education, grants to students, further education, civil defence, registration of births, marriages and deaths, to the taxpayer, as was suggested by the hon. Lady the Member for Finchley (Mrs. Thatcher) at the Tory Party conference? What did hon. Gentlemen opposite suggest in their promises at the last election, and what did they do when they had the opportunity?

I can quote nothing better than their election campaign guide for 1964. It has a rather amusing title, which refers to it as a unique political reference book. Indeed it is, for it is a catalogue of excuses for not having done in those 13 years all those things which, in opposition, they now have the effrontery to press upon the Government. In that guide, on page 301, they said: It is all too easy to talk airily … about transferring the cost of whole services … to the taxpayer … but are they prepared to face higher taxes in consequence? That was what they were staying when they had the opportunity to transfer the services.

The change came when they went out of office and they have now come forward with this proposal. I do not know whether to call it a proposal, a policy, a promise, or a bribe. It can hardly be a policy and is certainly not a promise, because the promises of right hon. Gentlement opposite have little chance of being put into operation and some chance of being implemented must be inherent in a promise. We had better stick to calling it an electoral bribe, which seems to fit the bill.

How does this promise or bribe now of £100 million transferred from the rates to the taxpayer compare with what the Opposition actually did in their one Act which brought relief to ratepayers, the Rating (Interim Relief) Act, 1964? The sum total was £100,000.

Mr. Rippon indicated dissent.

Mr. Wellbeloved

The right hon. and learned Gentleman shakes his head. I can only quote from his own party's political propaganda, from the Notes on Current Political Affairs, issued by the Conservative Political Centre. I take the figure from that. This was the sum total in relief to ratepayers. I know that there was £6 million, but under Section 2 of the Act only £100,000 was direct relief to ratepayers. Yet right hon. and hon. Members opposite, after such dismal failure, talk now in terms of £100 million.

It is interesting to try to track down when this proposal for the transfer of £100 million first burst into the light. It seems that the hon. Lady the Member for Finchley brought it out at the Conservative Party conference. The right hon. Member for Bexley (Mr. Heath) immediately snapped it up. Anything which is new, bright or at all "gimmicky" has a fatal fascination for the right hon. Gentleman.

Mr. Lubbock

"Gritty" is the word.

Mr. Wellbeloved

"Gritty" is the right word. Perhaps "grotty" is the term we would use in London. I think that the right hon. Gentleman's flat must be packed with detergents, patent potato peelers and, perhaps, even some "smashing" new plastic aprons. New "gimmicky" things certainly have a great fascination for the right hon. Gentleman.

As I say, he seized this proposal from the hon. Lady the Member for Finchley and he launched it in his television broadcast on 15th December, 1965. He launched it as a brand new product, and he spoke easily and airily of moving whole services from local to national taxation. But it takes time even for a gimmick which has the blessing of the Leader of the Conservative Party to become official policy. I suppose that we ought to have some sympathy for hon. Members opposite because, even when it becomes official policy, they never know whether the right hon. Member for Wolverhampton, South-West (Mr. Powell) or the Monday Club will agree with it.

What happened next was the publication of the political notes by the Conservative Party on 20th December. But there was not a word about the £100 million there. It had not yet seeped through to official quarters. There was talk only of the Conservative Party having for a long time urged that the Government should deal with the hardship arising out of rates.

Of course, it might have seemed a long time to Conservatives, 13 months as it was then. I suppose that the difficulties which they had been having with their leadership at about that time, a long and painful period in their history, must have made the time seem longer. Then, in February, 1966, the £100 million really burst on the nation in full trim. We had the next edition of the unique political reference book. This was a reversal of the previous unique political reference book, because it explained why all things had suddenly become possible though they were impossible before. In fact, it was the greatest unintended compliment to my right hon. Friends since they took office. The party opposite now recognises that it is possible to do many of the things which it found impossible during the 13 years of Conservative Government.

So we can go on. [Laughter.] I suggest that hon. Members opposite contain themselves with patience. In a moment or two, I shall deal with the London Government Act and the effect of their policy on London ratepayers. If they then find something to laugh about, they must be very peculiar people or live a long way from London. I think that they are, in fact, peculiar people.

In its propaganda, the party opposite has been talking about the long time during which Conservatives have urged the Government to undertake rating reform. They tell us that they have been consistently doing it, but, in fact, when they had the opportunity, they failed dismally to put any such thing into effect.

The Bill is the second step, as my right hon. Friend said, towards redeeming our pledge to bring early relief to ratepayers. The first step was the Rating Act which enabled a considerable number of people—I think that my right hon. Friend spoke of 1¼ million—to obtain relief. Again, what a contrast to the performance of hon. and right hon. Members opposite when they had their opportunity. It is all very well to laugh and jeer, but it is quite useless when in opposition to make suggestions for things this Government should do when they failed to do them themselves when they had a chance.

The right hon. Member for Leeds, North-East (Sir K. Joseph), when he was Minister of Housing and Local Government, said that he could not see how it was possible to give direct grant in support of individual ratepayers. In December, 1963, he said: Unfortunately, it is not possible for the Government to direct general grant to individuals who are in difficulty ".—[OFFICIAL REPORT, 18th December, 1963; Vol. 686, c. 1264.] Yet what is not possible for the Conservatives is possible for my right hon. Friends. They have done it in the Rating Act.

The Bill fundamentally changes certain aspects of local government support. There is very little difference as regards needs and resources, and whether there will be any beneficial effect here on local government finances will depend entirely on the amount of the cake which the Minister makes available.

The provisions regarding the domestic element are very welcome. The effect will be for the first time to contain the annual increase in rates. As regards the specific grants for development, I hope that the regulations which the Minister publishes will be a little clearer than the present legislation. I understand that grants for development and reclamation can be obtained under the Town and Country Planning Act, but I am advised by my own local authority that this is a very difficult piece of legislation to interpret. I urge my right hon. Friend to make certain that his regulations under this provision are really clear.

We all welcome the provisions regarding the rating of unoccupied property. The Minister said that this would be particularly welcome in London. Indeed it will. In my borough, the London Borough of Bexley, it will represent something between ½d. and ¾d. off the rates. It will be a most welcome exercise.

I was rather amused when the Minister referred to the miscellaneous provisions and licences. My mind was brought back to the dog licence deduction. I see that, under the Bill, the Postmaster-General is to be able to deduct his costs of collection from the licence fees before they are transferred to the local authorities. But I notice that the Bill refers only to counties and county boroughs in this connection, and I assume, therefore, that the London boroughs are to be exempt and will still continue to receive the whole amount of the dog licence fee. I do not imagine that this will be of great support in relief of the terrible burden laid upon London, but it will be something.

We in London are pleased also to see that the Government intend to continue the supplementary payment to local authorities in the Metropolitan area, that is, continuation of the present system under which the Metropolitan area receives a 5 per cent. increase of basic grant. Reading the debate when the Minister introduced the general grant in December, 1964, I noticed with some satisfaction that he expressed his sympathy with Londoners who are today suffering from steep and substantial increases in rates. He went on to say that he would ask the London boroughs and the Greater London Council to contain themselves in patience. London has contained itself in patience for two years; the ratepayers of London are reaching the point of exhaustion.

Urgent help for London is needed now. London has been recognised as a high-cost area for years, and it had 5 per cent. extra on the basic grant long before London government reorganisation. I recently reread the debates which took place in this House on London government reorganisation and it was with fresh astonishment that I read the final sentence in the speech by the right hon. Gentleman the Member for Wolverhampton, South-West in the Second Reading debate when he said: I ask the House not to deny these benefits to the capital city of the empire."—[OFFICIAL REPORT, 11th December, 1962; Vol. 669, c. 338.] Benefits! A strange term to describe the financial disaster that has befallen London ratepayers as a direct result of the London Government Act which was forced through by the hon. Gentlemen opposite. That comment was not out of keeping with the right hon. Gentleman who in the 1960s can still talk of Empire. London has been raped; it staggers, battered, bruised and bleeding from one rate demand to another. It has been ravished by the hon. Gentlemen opposite in their vain lust for power in London. [Laughter.] Hon. Gentlemen opposite laugh. They did not achieve power in London because of the courage and integrity of some Members like a former Member for a Croydon constituency, who opposed his own Government's proposals. There were some hon. Gentlemen opposite, representing constituencies in Surrey, who opposed the entry of their areas into the London government organisation. This is how hon. Gentlemen opposite were frustrated, but London staggers, degraded and debased by the cynical, irresponsible folly of London government reorganisation.

Strong language, but what are the facts? Rates in England and Wales, since amalgamation, have gone up by approximately 20 per cent. London has suffered an average rate increase of 32 per cent. in the last two financial budgets. Even with the domestic element provided in this Bill, London boroughs will still be at a grave disadvantage. The time has come for them to be relieved of the financial burden thrust upon them by the Tory reorganisation. I would have expected hon. Members opposite to have expressed some sympathy for London ratepayers, because they are responsible for this effect. There is no difference between the London boroughs, irrespective of the political complexion of the parties in control. They have all suffered to an almost equal degree from the tremendous increases that have taken place.

I would like to give some examples of the terrible burden from which London is suffering. I have chosen the boroughs represented in this House by the hon. Gentlemen opposite. I do not see many of them here, they do not seem to be very interested. The ratepayers in the constituency of the hon. Gentleman the Member for Merton and Morden (Mr. Atkins) have suffered an increase of 38 per cent. against a national average of 20 per cent. Is he satisfied with this? Did he tell his electors at the last election, when he gained the maiority of 420, that they were paying 18 per cent. more than the rest of the country as a result of the activities of his party in reorganising London government? Of course he did not, or else he would not have got the 420 votes which gave him his majority.

Did the hon. Gentleman the Member for Carshalton (Captain W. Elliot), whose ratepayers have suffered an increase of 36 per cent.—with a Conservative-controlled council—tell his ratepayers the facts? What about the hon. Gentleman the Member for Twickenham (Mr. Gresham Cooke)? In the Conservative-controlled London Borough of Richmondupon-Thames the ratepayers have faced, in two years, a rate increase of 51 per cent. Are hon. Gentlemen opposite still happy? Do they still find some joy and laughter in this, the results of their irresponsible folly in forcing London government reorganisation through without taking account of the financial effects?

I can remember my own local authority pleading with the then Minister of Housing and Local Government to postpone for another year the appointed day for reorganisation, so that London might consult to bring some realistic appraisal to salaries and staff. That was turned aside and the result has been a mad scramble, a mad market shambles to obtain officers. The results are here in these fantastic increases which have taken place. Let us take one of the London boroughs which was not altered in its boundaries. I refer to Harrow. This is an area which is precisely the same now as it was before reorganisation. What has happened there to rates? Under a Conservative-controlled council the ratepayers of Harrow, for the benefits conferred upon them by reorganisation, have had, in two years, to face an increased rate bill of 44 per cent.

Sir S. Summers

Will the hon. Gentleman explain, when he has finished with his list, what help such local authorities and ratepayers are to get from this Bill?

Mr. Wellbeloved

If I read the debate correctly the former Member for Brent-ford and Chiswick, Mr. Dudley Smith, very often criticised his own Ministers. I wish to make a proposal to my hon. Friends. I believe that my hon. Friends have spent 20 months struggling valiantly to reduce the effects of the disastrous policies of the party opposite, pursued for 13 years. They are doing it with great success, but in London there is another aspect to which they must turn their attention in redressing the disastrous effects of the policies of the party opposite.

I will not bore hon. Gentlemen with a detailed list—[Laughter.] Hon. Gentlemen may laugh, but I can assure them that the ratepayers of London are not laughing. They are crying, because they have been faced with this terrible financial burden, which was not of their own choosing and which was forced upon them. If they can justify an increase of 44 per cent. in the rates of Harrow in two years, then perhaps I can satisfy my ratepayers. There is no answer to this. Even the fact that Harrow School is derated as a charity cannot account for the 44 per cent. My hon. Friend the Member for Harrow, East (Mr. Roebuck) assures me that this is so.

We in London are victims of the same disaster and I beg the Minister to embrace this battered body of London and to give it some relief. Great harm and injustice has been inflicted upon the people of London, which can be alleviated by a special supplementary grant. This is what I am asking the Minister to do—not just to continue the 5 per cent. on the basic grant, but to give to London a supplementary grant which will go a long way to alleviating the ravages cast upon it by hon. Members opposite. I ask the Minister in the name of the great City of London and the Greater London Council area, to reach out and grasp the bleeding hand of London.

6.0 p.m.

Sir David Renton (Huntingdonshire)

The hon. Member for Erith and Crayford (Mr. Wellbeloved) told us that after 20 months of Labour Government his constituents are exhausted and staggering but that the Bill redeems the pledge made before the 1964 General Election to give early relief to those and other ratepayers. I think that the hon. Gentleman's speech can be summarised by saying that the sour grapes are ripening at last, but that they will still be very small and the pips enormous. I hope that the hon. Gentleman will forgive me if I do not follow his apologia of his own party or his analysis of the Conservative Central Office's apparently accurate information which he used.

This is an abstruse and difficult problem which affects everyone. The burden of rates still falls most heavily on those who can least afford them. The Rating Act helped only 2 million ratepayers, but it did so at the expense of all other ratepayers, including millions with limited means. In spite of the promise to which the hon. Gentleman referred made before the 1964 election to give early relief to ratepayers, the Bill does nothing to lighten the load already being borne which has been increased by 25–8 per cent. since the 1964 General Election. I think that that is the accurate figure, using the sources which the hon. Gentleman used. It will give relief only in respect of future increases, and only minor relief at that.

It should not be assumed that the Bill will give relief to all domestic ratepayers, because, as it stands, many ratepayers will receive no benefit at all for the reason which I put to the Minister in an intervention, namely, that the 5d. increase in the domestic element can easily be wiped out in the case of many counties by a much more serious factor, which is the extent to which the new rates support grant falls short of the general grant as it now is. It seems that domestic ratepayers in my constituency will be worse off as a result of the Bill.

To put it mildly, the Bill is a disappointment to all ratepayers. I should think that it must be a very great disappointment to the Minister, who was pretty candid about it. I rather admired his presentation of his subject this afternoon. He acknowledged that it is a very difficult and obscure subject. He acknowledged his own limitations, with which I sympathise. I have some limitations, too, in understanding parts of the law on this subject. But, with his strong personality, I wonder how he has been able to contain himself behind the scenes when the Bill has been discussed among his colleagues. This is not a new episode in the Minister's life arising only in this Parliament, because in February we had the White Paper on Local Government Finance in England and Wales, which was the Government's prospectus on which they went into the General Election on this issue which aroused so much concern.

Paragraph 5 on page 4 of the White Paper is relevant to the announcement recently made about the Royal Commission. That paragraph reads: The Government have made a careful study of possible sources of local revenue with the object of substituting for rates as we know them a new and fairer system of local taxation. But they find themselves "— and these are the words which I stress— driven to the conclusion that within the present structure of local government there is no prospect of any major reform of local government finance". So what did the Government do? They appointed a Royal Commission and asked it in its terms of reference to consider "structure, boundaries and functions" but not finance, in spite of what is said in the White Paper. The Government have missed a great opportunity in not getting the Royal Commission to discuss finance.

We are told that it will take at least two years for the Royal Commission to report on structure, and so on. Then there must obviously be an interval for considering its recommendations and having them discussed with the interested parties. Presumably there will then be another Royal Commission on finance and then another interval, and we shall have the next General Election on us——

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

I know that the right hon. and learned Gentleman does not intend to mislead, but he may mislead the House because it has not had an opportunity of seeing his quotation marks. In quoting the terms of reference of the Royal Commission he put "finance" in brackets with his comment. Finance was not in the terms of reference.

Sir D. Renton

I said that finance was not in the terms of reference.

Mr. MacColl

My point is that finance is not specifically excluded in the terms of reference.

Sir D. Renton

That is splendid. I thought that the Minister made it clear this afternoon that the Royal Commission would not be considering finance. If it is intended that the Royal Commission should consider finance, then let it be contained in its terms of reference. Not only would the Commission then know where it stood, but people interested in submitting evidence to it would know that it has a duty to consider financial matters as well. Surely finance and structure depend so much on each other that it would be unwise to separate them.

I congratulate the Government on having obtained the services of Sir John Maud as Chairman of the Royal Commission. He is Master of University College, Oxford, which is the oldest and best college in the country.

The whole tenor of the White Paper was that the rate burden on domestic rate- payers would be lessened. Certainly, there was no suggestion that it might be increased, even in some cases. May I refer to the paragraphs concerned? Paragraph 7 reads: The need now is to take such steps as may moderate the harshness of rates over the next few years without prejudicing the outcome of the wider review, to prop up the present system rather than radically to reshape it". Paragraph 12: In the short term increasing the proportion of local expenditure met from the Exchequer offers the main hope of reducing the burden of rates and the Government have therefore given particular attention to this part of the field". Paragraph 17: The Government propose to devote the great part of this additional grant"— that is, the new rate support grant which forms 80 per cent. of the Treasury support— to reducing the rates of householders". That was the prospectus which the Government put before the electors. There is no suggestion in the White Paper that anyone would be relatively worse off, but I am reliably informed that the County of Huntingdon, and Peterborough, of which I am one of the two Members, will receive less through the rate support grant under the Bill than they receive through the general grant.

Further, I understand that, unless the Bill is amended or unless the Government change their intentions, this new county will be affected worse by the Bill than any other local authority in England or Wales. As a result, my constituents, who already in the past year or so have complained very strongly indeed about high rates, will pay even higher rates, both absolutely and in comparison with other counties, and also in comparison with London boroughs from which many of them came.

The trouble is that the Minister decided to help areas which often had the highest rateable value, namely the London boroughs, at the expense of counties with a much lower rateable value, such as largely rural counties, one of which I represent. We are entitled to ask exactly why the Minister has done so. He has talked a little about highways in the London boroughs, but I do not think that the highway problems of the London boroughs are a sufficient justification for creating this appalling anomaly in the counties. The Minister should reconsider this matter.

I want now to refer to the special problems of those local authorities which have expansion schemes either under the Town Development Act, 1952, or under the New Towns Act. In Great Britain, there are 70 expansion schemes altogether. Two of them have already been operating for some years in my constituency, one at Huntingdon and the other at St. Neots. We are asked to assume that Peterborough will be the subject of a major expansion scheme, as forecast in the South-East Study. This process of encouraging people who live in overcrowded areas to go and live elsewhere is an established and growing feature of local government. I do not think that it is a feature that should be discouraged. It is inevitable and necessary. In many cases it is to be welcomed, but it creates considerable financial problems, and it creates those problems in spite of the help given under the Town Development Act, 1952.

That help is given and confined to housing schemes only. It is, in effect, a housing subsidy grant and a development grant for housing estates. It stops there. It is paid only to the housing authority. Under the Housing Subsidies Bill, introduced in the last Parliament, a Bill which fell because of the General Election, some further modest relief was offered for house building under development schemes. When that Bill comes into force, as I understand it will some time this Session, it will not apply to greatly increased costs already incurred. It will apply only to costs incurred after the Bill comes into force. So it will help only in the future and will not ease present burdens.

Although these new large housing estates in expansion schemes present their own financial problems which marginally cause rates to rise in early years, those problems are less serious than the educational problems which arise in the counties in which the receiving councils happen to be. Most of those moving in, for example to Huntingdon and St. Neots from London under the town development scheme, are young couples with very young and growing families. As a result, counties where such schemes arise have a much higher proportion of children of school age in relation to head of population than other counties.

My county is an illustration of this. This year it is already having to spend £29 7s. 10d. per head of population on education, as compared with an average for England and Wales of £28 3s. 2d. It follows that our county rate is also higher than the average—9s. 9d. compared with an average of 8s. 10d. It is impossible to predict how much greater our educational commitment will be in the years ahead, but it will be very much higher still.

The Bill will make it even more difficult for us. With a population of only 180,000, this financial year we shall be spending about £5¾ million on education. In the next five years, to provide the schools needed, we shall have to spend over £8 million, although we have a population of only 180,000. This is too much to ask. Our loan charges for education alone this year amount to £3.7 per head of population. I cannot give a comparable current national average, but the national figure for 1964–65 was £2 a head.

Education is vitally important and new schools must be built. We do not want to deprive our children of the future coming in under these overspill schemes of adequate schools, but neither do we want to increase an already heavy rate burden. Therefore, I think that the Minister should get the Treasury to give him some real support so that he can make the necessary provision.

It is interesting to note that Clause 11 contains special provision for local authorities which are to receive Commonwealth immigrant populations. This is fair enough. Immigration is the greatest social problem of this century and of the next. It is only right that local authorities which have to incur unusually large expenditure in respect of it should receive some help. However, the wording of Clause 11 is strange, because there are some important words of limitation.

The Clause refers to substantial numbers of immigrants from the Commonwealth whose language or customs differ from those of the community. Thus, where the language and customs of the immigrants differ, grants may be given, but otherwise apparently they cannot be. Is this an indirect reference to the increased educational charge due to immigration? I am asking the Joint Parliamentary Secretary rhetorically now, but hope to receive an answer later.

Whatever the answer is, if it is right for a local authority to get special financial help for the education of people coming from the Commonwealth it is no less right for it to get special help for the education of people coming from cities in our own country. If I am wrong, I challenge the Joint Parliamentary Secretary to tell me why when he replies. The Government have ignored the problem of increased educational commitments where there are expansion schemes, and I think it is a problem which must be dealt with.

I conclude by summarising what I think the Bill will do to my constituents. First, it will have an adverse general effect on the people of the County of Huntingdon, and Peterborough. Secondly—I have to state it negatively—the Bill will do nothing at all, in spite of its pretensions, to help us with the large educational costs clue to the expansion schemes. The Minister has been very candid about the Bill. I hope that he has an open mind about it and I hope that when the sour grapes ripen they will be larger and have smaller pips.

6.20 p.m.

Mr. Michael Barnes (Brentford and Chiswick)

The Bill is very important because of the transfer of extra money which is involved from the national Exchequer to local authorities to relieve the very heavy present burden on the domestic ratepayer. The Bill will be welcomed by hundreds of thousands of ratepayers. When it was first written about in the Press I saw a cutting which I checked immediately, because unfortunately the cutting had it wrong and made a great mistake. It said that the Bill was going to halve the rates, and this is not at all the case.

This is an understandable Freudian slip for somebody to make because it is surely a measure of the failure of past Governments—particularly during the 1950s, when the problem became acute—to do something about the whole rating system, that we are not able today to talk about halving the rates. This would be too good to be true, and we are not even able to talk about halting the increase of rates. We are talking about halving the annual increase in the rates. Having said that, I want to add immediately that I am sure that all Members who represent areas that have been very hardly hit by rate increases in recent years will be greatly encouraged by the determined way in which the Government are tackling the problem.

I do not understand some of the references from the Opposition to the fact that the Government's action in this field does not match up to its words at the time of the General Election. Surely the action which the Government have taken is falling into a very logical pattern. First, we have the two interim measures—the Rating Act, 1966, which gives very substantial relief to those who qualify, to those who are most in need, and now we have this Bill. It will cushion the effect of the increases on the domestic ratepayer, and for the long term the Royal Commission has been set up to look at the whole question of local government reorganisation. From that can come a new system of raising money locally, which I am sure that we all want to see.

My right hon. Friend the Minister said that the Bill provides for a transfer from the national Exchequer of £30 million in the first year, £60 million in the second, £90 million in the third and so on, to cushion the effect of the increases. He emphasised that this was an interim measure and said that he thought that the reform of local government had to come before any reform of the rating system.

Although I accept the way in which the Government are tackling the problem I am a little alarmed at the way in which the new system which we ultimately want seems to be receding a little into the future. The Minister said today that it would take five or six years. I can see that it will be that period, because I have done some calculations, and anybody can do them. The Royal Commission will take about two years to do its job.

Finance is not precluded from its terms of reference, but it is unlikely that in the two years it will be able to get round to detailed matters of rating reform. This is the answer to the question that the right hon. and learned Member for Huntingdonshire (Sir D. Renton) raised as to why it is not to consider finance. There will not be time if it is to do the main job in two years. Would the right hon. and learned Gentleman not agree that the logical way to tackle the problem is to reorganise local government, and then to decide how to raise money under the new system?

The reorganisation of local government must come first and then there must be a financial review to see how we should raise money locally. One can see how it will be the early seventies before a new system can become operative. I understood the Minister to say at one point that he thought that the reform of the system of raising money locally, when it comes, might take the form of a modification of the rating system or of a different system altogether.

If we are to get away from the regressiveness of the present rating system which he emphasised, we have to move away from the whole basis on which rates are now calculated and towards something much more like a local Income Tax. The patience of ratepayers has been very sorely tried over recent years. Even though they will certainly welcome the provisions of the Bill, they will look for something still more in the years immediately ahead.

There have been some references to the reorganisation of local government in London by my hon. Friend the Member for Erith and Crayford (Mr. Well-beloved). The rate increases in London have been particularly hard to bear. In my constituency, Brentford and Chiswick, in the London Borough of Hounslow, ratepayers have had to face increases of 56 per cent. in the two years since the reorganisation. I think that that is higher than any of the figures to which my hon. Friend the Member for Erith and Cray-ford referred.

The Minister said that until there is a new system of raising money locally we have a choice, either to accept the increases in the rates or to cut back the services which are provided. I am certain that the vast majority of ratepayers do not want to see the services cut back. They want to see them improve all the time, but they also want to see a fairer way of raising the money that must be raised locally. The Bill is welcomed in that it goes part of the way in the right direction. It provides for the transfer of more money each year from the national Exchequer to local authorities. The more we do this, the fairer the whole thing becomes, because we pay taxes according to our means but we do not pay rates according to our means.

It is in this fact that the inherent unfairness of the present rating system lies. We could all quote examples, such as the case of two exactly similar houses in the same street where the same rates are payable, although perhaps a retired couple live in one while in the other there is a much younger family, with two or three times as much money coming in every week. The 1966 Rating Act was certainly a godsend to such retired couples—those who qualify for the substantial relief which it gives. But one does not have to be earning very much to be beyond the scope of the help which the Act gives. This is especially true of people living in London, who have a high cost of living. When there are big rate increases, they can easily find themselves in very difficult circumstances.

The very outdated nature of the rating system is a measure of the way in which we progress all the time towards a more classless society, because it is an old-fashioned relic of a bygone era, when people were supposed to know their place and one could judge what sort of man a person was, or what his income was, by the house in which he lived. Therefore, it was perhaps a fair basis for taxation in those days.

By today's standards, the rating system penalises large families, with quite a few children, who require a largeish house and who, perhaps, set a high priority on a garden for the children to play in. It also penalises people who set a premium on having as nice a house as possible and who decide what is the most expensive house that they can afford. They consider the monthly mortgage repayments very carefully, and take into account their hire purchase commitments. People like this have found themselves knocked for six by the swingeing increases in rates which they have had to bear, particularly if they live in London.

I now wish to summarise the point which I am trying to make. The part of the Bill which gives relief to the domestic ratepayer and transfers more money from the National Exchequer to local authorities is a very good thing, because it is an important move in the right direction. If we are not to get a new, fairer and different system of raising money locally for another five or six years, it seems to me that either ratepayers will expect more help still from the Government in the years that immediately lie ahead, or the move towards a new system of raising money locally has to be speeded up considerably.

In devising this interim relief, for which ratepayers will be very grateful, I hope that the Government will not allow the sense of urgency with which they are trying to find a new system of raising money locally to slacken and that they will introduce such a new system at the earliest possible opportunity, because it is the only way in the long term of removing the basic difficulties of the present rating system.

6.30 p.m.

Sir Spencer Summers (Aylesbury)

In his speech, the hon. Member for Brentford and Chiswick (Mr. Barnes) seemed to follow the pattern set by other speakers from the benches opposite. They have told us that the Bill will be greatly welcomed, that their constituents were suffering grievously from the great increase in rates, and went on to say that no reduction in the rates now paid will follow from the Bil. Their constituents must be even more credulous than they appeared to be at the General Election.

Before I come to my main criticisms of the Bill, there are one of two general points which I should like to make. The Minister alluded to the possible change in the basis of the valuation from what was the theoretical rent to that of capital value, and he appeared to dismiss it more or less out of hand without giving any reason which had induced him to reject that basis of calculation. It would be interesting if the Joint Parliamentary Secretary would amplify what the Minister said on that score, because many people feel that they would be better able to judge the fairness of their valuations if they were related to capital values rather than to letting values.

There seems to be no reason why the criterion for establishing the basis of rates should necessarily be the same for all types of ratepayer. It does not follow that a house should have exactly the same method of compilation as a factory. It may be that by accepting the principle of differentiation between different types of ratepayer, something more acceptable all round would follow.

Reference has been made to the proposal for the first time to tax unused property at half rates. I am bound to say that I look upon that with considerable suspicion. In the first place, there is every incentive to get unused property occupied. The additional income is obviously an attractive thing for the owner and, secondly, the property tends to deteriorate if it is empty. On grounds of incentive, there seems to be ample evidence to suggest that taxing empty property is not necessary.

If we are going to accept the proposition that assets which are not used and which do not for that reason bring in revenue to the Treasury shall, for some new doctrine, be deemed suitable for taxing at half rate, is that to be the forerunner for cars which are laid up in winter to be taxed at half rate. Are we to suppose that wireless sets and television sets which are left unused in a house while the owner is abroad on a job shall be taxed at half rate? I can see many arguments which might follow from the proposition that unused property is something which the State cannot contemplate and that people must be induced to use it by charging a half rate when it is unused.

On that score, it is welcome that local authorities should have discretion as to whether they use the power now granted to them. I hope that, as he has promised, the Minister will consider amendments during Committee stage to define more closely those empty properties which it might be reasonable to charge at half rate. From personal experience, I know that there are many properties which landlords try to let, without success.

Mr. Dan Jones (Burnley)

Are they asking too high a rent?

Sir S. Summers

Does the hon. Gentleman wish to intervene?

Mr. Dan Jones

If I am invited to do so. Local authorities have to keep services ready for empty houses, and the owners of those houses would be very angry if the services were not in existence when tenants became available.

Sir S. Summers

The hon. Gentleman has missed the point, but I do not wish to dwell on it. I am saying that there are properties which landlords have attempted to let at reasonable rents. They have not succeeded in doing so, despite their best endeavours, and I see no reason why such properties should be called upon to pay rates at half price.

The main criticism of the Bill is that, whereas ratepayers expected that a reduction in their rates would follow, in fact it does nothing of the kind. Moreover, the limited transference from rates to taxes only affects increases which may follow hereafter.

My right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) alluded to the effect on his county of particular expansion schemes. However, the effect of growing populations may not necessarily come from some such project as he mentioned. There are six counties in the country which are gravely affected in terms of rates because of increases in population far in excess of the general average. I refer to the counties of Berkshire, Buckinghamshire, Hampshire, Hertfordshire, West Sussex and Warwickshire.

Sir D. Renton

And Huntingdonshire.

Sir S. Summers

My right hon. and learned Friend was perfectly right, in his reference to Huntingdonshire, in saying that a very large proportion of those who have moved into the county from London and elsewhere are generally young and require a greater expenditure on education than would be the case for the average person. But there is another factor which affects the educational impact. It is that schools frequently have to be provided before the revenue from the rateable properties associated with the people coming in is available. There is an element of timing which affects counties of that type.

I will not weary the House with statistics from each of those counties. Instead, I will highlight the position by referring to my own county of Buckinghamshire, which is by no means the highest in the list, but neither is it the lowest. Whereas the average rate of increase in population between 1951 and 1961 was 5.3 per cent., the increase in Buckinghamshire was 25.9 per cent.; in other words, five times the average rate. If one takes the period of 1951 to 1965, the average increase was 3.7 per cent., whereas Buckinghamshire's was 11.1 per cent., or some three times the rate of increase available to the country. Among other things, that has meant that whereas the average rates per household in the country are £30 12s., in Buckinghamshire they are £41 16s.; in other words they are one-third higher in the county. If they are calculated on the basis of rates per head, they are £12 Os. 8d. on average, whereas in Buckinghamshire they are £17 15s. 7d.

If the effect of that situation had not diminished the proportion of the rate bill provided by the central Government, as it has done, in the case of Buckinghamshire it would have meant an improvement of something like £100,000 annually over recent years, and that would have increased in the future.

One of the complaints which we have about the Bill is not only that no account is taken of the situation that I am describing, despite the fact that a deputation submitted full facts and figures to the Ministry in good time; but the effect of the Bill on Buckinghamshire is to make the position worse by about 4d. in the £.

There are other features of the sitution which affect a county such as Buckinghamshire, apart from population. The hon. Member for Erith and Cray-ford (Mr. Wellbeloved) referred to the very high costs in London which, in his view, are accountable for the great increase in rates which he quoted and to some extent justified the special weighting for the Metropolitan area. But the additional costs of the Metropolitan area do not suddenly cease at the boundary. They percolate over it and gradually diminish as one moves further from the centre.

It is quite unreasonable that counties immediately over that boundary should be denied anything of the argument about the higher costs which prevail on the other side of the boundary, which is the case at present. Whilst there may be other aspects of the Metropolitan area to which counties adjoining it would have no claim, there are good grounds for saying that those counties whose areas adjoin it should have the fact of increased costs recognised by empowering the Minister to include such counties, in his discretion—and, in any case, it is discretionary how much help he shall give on that account—particularly when one remembers that the Schedule I refers to remuneration in and around the area". It is particularly poignant that the increased population springs from the overspill from London, particularly in the case of Buckinghamshire, and yet no special help is afforded because Buckinghamshire is affected by the higher costs immediately next door. It would seem to be a very powerful argument to point out that the difficulties of the ratepayers in Buckinghamshire are brought about by the transference of population from London. whose higher costs are reflected in Buckinghamshire.

One of the changes to which the Minister referred is that affecting highways. I would submit that the criterion of milage alone may give rise to unfairness in calculating the element to be included in the rate support grant. Traffic volume should also be taken into account.

I have referred to the case for the Government considering a supplementary payment for counties especially affected by increases in population, and that is only fair if, in the scheme as we have it in the Bill, counties whose rates are below the average are to get special assistance under the Bill.

For some time there has been criticism that the effect of that is to modify a situation that is far too disproportionate and should, therefore, be abolished. If, however, it is to continue, it would seem to be only fair that certain of the counties whose rates are so adversely affected should have some assistance from the relief which could be afforded to those whose rates are very much below the average.

A strong case was made by my right hon. and learned Friend the Member for Hexham (Mr. Rippon) for saying that much greater transference from rates to taxes should have been included in the Bill. I do not want to go over the ground a second time, but I wish to add my voice to what has been said that the transference envisaged under the Bill is grossly inadequate to deal with the present situation. The figures which have been quoted from the opposite side of the House serve only to confirm the need for further transference than is envisaged under the Bill. Far too many people have far too big a burden to carry and far too few will get adequate relief under the Bill.

6.46 p.m.

Mr. Arthur Jones (Northants, South)

I was very much in sympathy with the views expressed by the hon. Member for Brentford and Chiswick (Mr. Barnes), but I could not follow him in saying that the review of local government could, to the extent that the hon. Member suggested, be divorced from the financial considerations. Unless one ends up with new local authorities which are financially viable, and if one divorces the financial considerations from administrative considerations, I am sure that we are likely to meet an extremely difficult situation. Although the financial considerations are not excluded from the terms of the Local Government Boundary Commission, I hope that the financial considerations will play a substantial part and will be included extensively in the review proposals.

There is widespread concern among local authorities generally at the way the Government's proposals in the Bill have been hurried. Many of the changes are fundamental. Understandably, the Government are working to a timetable, but this has been so restricted that the local authorities who have been expected to play their part in the discussions have been presented with only the barest possible outline of the Government's proposals and the financial implications which follow.

The Minister has given no grounds of substance for the change in the method of grant support under the Bill. We are to have these changes, but no reasons for them have been advocated. Some of the financial considerations which lie at the very root of the proposals are completely inadequate and the definitions extraordinarily vague.

I applaud the introduction of a grant system which is designed to keep the growth of rates broadly in line with the growth in the economy as a whole. I am sure that this is a requirement; it is a difficult operation in which to succeed. I am pleased to see that a start has been made. When, however, we turn to the 54 per cent. figure of the Exchequer contribution based upon the 1963–64 figures, we must satisfy ourselves as far as we can that we start from a sound basis of calculation. From the information that comes to me, I am not at all sure that this datum line has been adequately and satisfactorily determined. There appears to be considerable doubt upon the reliability of the figures which are being used and the adequacy of the figure of 54 per cent. as a basis for calculating the grant for 1967–68.

There have been a series of estimations of the effect of the introduction of the needs element under the proposed rate support grant, and various figures have been suggested this afternoon of the effect that these proposals will have in varying degrees upon counties. Am I right in saying that to some counties the grant will mean a higher rate of demand from ratepayers than the 5d. which is promised as help to the domestic ratepayer? The Joint Parliamentary Secretary is, apparently, deeply engaged in another discussion, and I shall repeat the point presently when he has an opportunity to listen to what I have to say.

I repeat my question. Under the new system of computation, will some of the counties be adversely affected to a greater extent than the 5d. help that they are to get for the domestic ratepayer? In other words, will the computation for some counties mean that they have to levy a rate of more than 5d. right across the field of their rate demand? The Minister is nodding in assent to my suggestion——

Mr. Crossman

No. I was nodding in recognition of intelligibility when I heard it.

Mr. Jones

That is high praise from the Minister in what he recognises to be an involved subject. I suffer, perhaps, more than he does from the disabilities that are inherent in the subject.

It is, I think, true that, on the other hand, some counties will make substantial gains. I do not propose to quote the figures which I have with me, but the Greater London Council, for example—and this is the point which was raised by the hon. Member for Erith and Crayford (Mr. Wellbeloved)—will be a benefactor to the extent of a substantial number of millions of £s.

Mr. Crossman

Beneficiary.

Mr. Jones

Yes. But although we have a beneficial effect in some quarters, there is a loss effect in others. This was not brought out clearly in the Minister's speech.

May a plea be made that if the 54 per cent. grant figure results in a disadvantageous position for a series of authorities, they shall be no less better placed after the introduction of the new system than they are at present? Or will the Government accept the situation that they are promising extended relief to the domestic ratepayer which local authorities, because of the incidence of the new grant aid, will not be able to make effective to domestic ratepayers, because that is, in effect, what will happen in many counties under these proposals?

I turn to the question of definition under the Bill. This may be a minor point, but it refers to trading accounts and to the need for their exclusion. I understand that for trading accounts there is no definition; there is no set pattern in local government to produce the answer of what is or what is not a trading account. That cemeteries and crematoria are included in trading accounts has, I understand, been a municipal joke for many years. It is doubtful whether there is any profit in the accepted sense of the word in this type of essential service. Some authorities include under this heading catering activities in parks, and so on. It would be interesting to know how seaside authorities treat the hire of deck chairs. On the other hand, I understand that services which are not treated as trading include car parks, car-parking meters, municipal hostels and the provision of laundries and swimming baths, together with public halls and show grounds. Water presents a particular problem. The purpose of my argument is that there is inadequate information and inadequate definition to enable local authorities to see clearly the effect that the Government's proposals will have on their financial resources and the demands upon the ratepayers.

I am grateful to the Under-Secretary of State for the Home Department, the hon. Member for West Bromwich (Mr. Foley), for being in his place and giving me an opportunity of putting to him my final point, which was raised earlier by my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton), concerning immigration. Clause 11 of the Bill proposes the provision of a grant for certain expenditure due to immigrant population. It is clearly the Government's intention to assist local authorities in areas where Commonwealth immigrants have settled. It would be interesting to learn from the Minister how it is proposed that local authorities which fall within this scheme shall be identified. I have not seen any system of identification in this respect. What is to be the basis of assistance and how is it to be assessed? The Government's aim will surely be to encourage local authorities to extend their services where this is necessary or where a worthwhile improvement can be made.

Many authorities have already incurred substantial expenditure. Many housing authorities use their housing accommodation for the benefit of immigrants. The public health services are under substantial pressure where there is any degree of immigrant population. Is it suggested that where local authorities have gone forward in this work, their circumstances shall be given special consideration? Is the system of help to be such that local authorities can be assured of reimbursement?

The Government's requirements call for identifiable staff engaged on this work. Does this mean that a proportion of a local government officer's time can be allocated to work with immigrants? I am glad to see the Under-Secretary giving his sign of assent.

Would it not be considered preferable to suggest a per capita grant system? This may be contested, but in my view the number of immigrants in any local authority area is the truest indication of the pressure upon local government services. I do not consider it right to try to assess the demand on any other basis.

Much of the work that has already been done may be an easement to the problem. If one is concerned only with the proportion of an officer's time that is spent on the work, one is disregarding the amount of work in this direction which a progressive local authority has already achieved. It would seem to be worth while to give local authorities grant on the basis of a per capita system. This would in no way be an open-ended arrangement, although it would call for periodic returns of the numbers of Commonwealth immigrants involved. This in itself would surely be a useful addition to the information which may be at the Government's disposal.

The emphasis in this debate has been upon the inadequate consideration which has been possible by the local authority representatives, the lack of information and the uncertainty of the datum line upon which all the Government's calculations of the 54 per cent. have been made. I am confident that there is a rewarding prospect for the Bill in Committee.

7.0 p.m.

Mr. Jack Dunnett (Nottingham, Central)

In common with my hon. Friends, I greatly welcome the Bill. It is another step in the progressive easement of the local burden of rates on the population. The Bill does not go as far as we would all like, but it is one further step towards the policy which the Government have enunciated, and which they are carrying out. I shall not dwell on the question of the burden of rates on residential ratepayers. This has been elaborated, and we all know enough about it.

I should like to applaud, in particular, two parts of the Bill. First, the relief to be provided for the domestic ratepayer. We should all like to see some provision which would ensure that rates would not increase at all, but I suppose that in a hard world such as this we cannot have such a guarantee. It is at least something probably to halve future increases in rates which are due to the unfortunate built-in increases which seem to be inevitable.

I welcome also Clause 11 which deals with the burden on local authorities with large immigration populations, and, following the remarks of the hon. Member for Northants, South (Mr. Arthur Jones), may I say to my hon. Friend the Member for West Bromwich (Mr. Foley) that my constituency has a large number of Commonwealth immigrants, and that if he has any influence in disposing of this additional grant I hope he will look kindly on us. Older parts of the larger cities tend to attract immigrant populations, because it is here that they find the only sort of property which they can acquire easily, or the only property in which they can get accommodation. It is these parts which have had a run-down, in particular, in the educational services, and the projections of local authorities, including those in Nottingham, have not provided for an increase in the number of schools, particularly primary schools.

In addition to the non-provision of schools for the future, the large number of Commonwealth immigrants with an increasing proportion of young children of school age are thrust on inadequate facilities. I hope that this is one of the factors which will be taken into account when specific grants are made under Clause 11.

Furthermore, a greater number of social workers is needed in areas such as those to which I have referred, and in this respect I applaud the new specific grant, because it will benefit not only Commonwealth immigrants themselves and their children, but also what I refer to as the so-called indigenous population, because the increasing pressure on already inadequate social facilities is having a detrimental effect on their future careers and lives.

I have two suggestions to make to the Minister. There is no mention of specific grants for dealing with non-conforming industrial and other users. This again arises in respect of the older parts of our larger cities. The cost in some areas of London, and in Nottingham, of removing non-conforming industrial users is quite fantastic. This means that such users are allowed to persist, purely for financial reasons. if so many other specific grants can be made, I ask my right hon. Friend to make a specific grant for this purpose also.

I wonder also whether the provisions under which an increase in expenditure over a period can be considered only where there are what one might call inflationary reasons can be extended to include increases in the cost of service due to an unexpected or unusually high expense on a particular service? As I understand it, the estimates on which the grants are based are computed for two years, and probably computed six months in advance of any such period. After eighteen months a new service may be found to cost much more than expected, but no account can be taken of it until the two years have expired, unless the increase in cost is due to an inflationary element as distinct from the element of a new service.

I imagine that many other hon. Members wish to take part in the debate, and I shall say no more except to repeat that I heartily commend this Bill to the House.

7.5 p.m.

Mr. R. Bonner Pink (Portsmouth, South)

Unlike hon. Gentlemen opposite, I find the Bill disappointing. It is disappointing, first, because in view of what the Minister has been saying over the past few months I expected a complete new structure of local finance. But I suppose it is not quite so unexpected when one realises that the rating system has been in existence for nearly 400 years—I believe it was first introduced during the reign of Queen Elizabeth land one would hardly expect, therefore, a revolutionary new system to be devised and introduced overnight. We now know that we must await the report of the Royal Commission, and I hope that the Commission will be successful in finding an alternative to the rating system which I think we are all agreed is unsatisfactory in many respects.

I think that the Bill merely tinkers with the existing rating system. The new grants are substantially the same as the general grant and the rate deficiency grant, and, while I welcome the increase in the total sum, I feel that this is not enough in view of the large annual increase in the rate poundage. We cannot tell exactly what effect the Bill will have until the prescribed sums are known, but in general this Measure appears to favour urban districts, or urban areas, at the expense of rural areas, and as a representative of a county borough I naturally welcome this.

I propose to comment on one or two features of the Bill, and to deal first with the question of school milk and meals. I wonder why the present grant system is to be stopped. It seems to be a satisfactory system, and it has worked well. Is it that the number of meals is increasing beyond the increase in the number of school children? I think that this is a service which should remain on a national scale, and should not be dependent on local finance, because there could be a tendency for local authorities to skimp a little on this service.

On the question of the reduction of rates on housing, I am glad to know that the full cost of derating for householders will he met by Government grant, because, as I read the relevant paragraph in Part III of the First Schedule, it seemed to me that it would only be in proportion to the national average. I hope 'hat I am wrong about that, and perhaps the Minister will confirm that the grant will cover the whole cost of derating.

There is much to be said in favour of the principle of rating empty property, but I think it is clear that it will be very costly lo administer. As the Minister said, file object is not financial. I do not think that the proposed provisions are entirely satisfactory. After all, it takes time to sell a house, even at a proper price. It takes time for the legal processes to be worked out. It takes time for mortgages to be negotiated, and so on, and a person buying a house may find that his three months have nearly been exhausted by the time he actually gets possession. He may then find that he has to carry out redecorations, and so on. Would not it be fairer if the three months were for each owner, and not for each void. On the question of the maintenance of roads, for a long time county councils have had grants towards the cost of road maintenance, whereas county boroughs have not, and I am glad to know that the Minister proposes to put them on the same basis. Can the Minister tell us what the grant will be for principal roads as they will be called under the new designation? I do not think that he gave a percentage figure in his opening remarks.

One small point which affects my constituency relates to grants for land improvement and reclamation. We are in the process of reclaiming tidal mudlands and saltings on our boundaries, and I would be grateful if the Minister could see his way to including this type of reclamation in subsection (1,a) of Clause 9.

The matter of major importance to my constituency is really, in effect, the continuance of the rate deficiency grant. We are probably not alone—many other county boroughs are in a similar situation—in that, due to redevelopment, reclamation of war damage and slum clearance, we are in effect exporting population. The result is, of course, that our ratable value per head of the population is going up. On paper, therefore, we are becoming better off but in fact we are becoming poorer. Our present position is such that, if our population dropped by a further 3,000 people, we should get no grant under the present rate deficiency grant. Would the Minister consider that problem also? It must affect other cities than mine. Would he also consider introducing some weighting factor in the same way as is done for counties with low densities?

I feel that the Bill is disappointing because it does little to solve the problems of local authorities and to appease the frustrated ratepayer. I hope that the Minister will take note of the points which I have raised.

7.10 p.m.

Mr. Gordon Oakes (Bolton, West)

I am sorry that the hon. Member for Portsmouth, South (Mr. Pink) is disappointed with the Bill. He has admitted to the House that immediately before the Royal Commission even sits to report on the structure of local government it would be unwise, even if it were possible, for this House to present a Bill which was a cure-all for all the problems of local government finance. I do not think that it was ever promised by my right hon. Friend or any hon. Member on this side of the House that a system which, as the hon. Gentleman mentioned, came into being at the time of Queen Elizabeth I, could be so drastically changed that a perfect system of local government finance could be produced in a matter of days. Surely, no such promise could ever be made by any sane man nor was any such promise made by any hon. Member on either side of the House.

I would follow the hon. Gentleman on one point, which disturbs me as well. I should like my right hon. Friend or the Parliamentary Secretary to deal with the question of school meals and school milk. I had always thought that the grants for school meals and milk had worked fairly well on a national base. It was a very simple system of granting aid. It has resulted in Britain having a population of young children who are probably healthier than those of most other nations.

Local authorities could, I fear, skimp on this essential provision unless very tight Regulations were laid by the Government to see that that did not happen. They would ensure that children were not affected by having either less milk or smaller meals, and that those children who need the milk and the meals most would not be prejudiced by having to live in the area of a local authority which was not sufficiently generous. I say that because, like the hon. Member for Portsmouth, South, I should like an explanation of why it was felt necessary to deal with this specific grant and eliminate it when it appeared to be working so well.

My hon. Friend the Member for Erith and Crayford (Mr. Wellbeloved) dealt in dramatic detail with the effects which he alleged hon. Gentlemen opposite had had in their designs upon London. At one point he accused hon. Gentlemen opposite of rape, but suggested that they were frustrated in their attempts, so they are presumably guilty only of attempted rape.

I want to talk about no such passionate subject, but about the neglect and decay in industrial towns in the north of England, towns which could be materially helped by the Bill's provisions, particularly the specific grants. Clause 7 deals realistically with a modern problem, one which faces many local authorities, particularly in the north—how to get rid of slums, dirt and derelict land, how to re-create a town, to make it a modern town and a fit place in which to live.

One of the biggest problems for local authorities engaged in such redevelopment schemes is that of finance. Clause 7 of the Bill gives the Minister power to make Regulations which can materially assist towns engaged in redevelopment projects. I appeal to my right hon. Friend and to the Treasury—such Regulations can be made only with the consent of the Treasury—to be most generous in making these Regulations and in the amount of money made available under the Regulations to towns such as Bolton, which I represent, and to so many towns in the north of England, where vast redevelopment schemes are afoot and are prejudiced by lack of money.

We had a debate in the last Parliament on compensation for owner-occupiers of houses affected by slum clearance schemes. I hope that the Regulations and the money available under them can do something to assist such owner-occupiers. Although that Act created the provision of compensation where none would have existed otherwise after 13th December, 1965, the position is still far from satisfactory. It still gives rise to tremendous anomalies. There are examples still of two houses with different rates of compensation next door to each other. It gives rise to great confusion, often among the older people of a town when it is redeveloping and they are not certain what money they will receive. Of course, the local authority must provide the money for the compensation of such owner-occupiers.

The position is even worse for the small shopkeeper, because at the moment the law on compensation is in chaos—largely the chaos of the financial effects. Everyone is worried about where the money is coming from. We all worry about where the money is coming from. I hope that, by these Regulations, my right hon. Friend will be sufficiently generous to allow local authorities which are redeveloping to provide adequate compensation in all cases where the home owner is thrown out of his home by necessary redevelopment.

The Clause replaces Section 184 of the Town and Country Planning Act of 1962. So far as I am aware, that dealt only with redevelopment in war-damaged areas and certain redevelopment of land affected by subsidence caused by the workings of the National Coal Board. It would be interesting to discover how much money, if any, has been paid out by the Treasury under the provisions of Section 184 of that Act. The real need today, which Clause 7 recognises, is the need for providing money for local authorities engaged on a general clean-up to make their towns better towns in which to live.

Clause 9 allows local authorities to spend money on reclaiming derelict land, often in the middle of the town, which is also essential in northern towns. Section 11 has been referred to by my hon. Friend. It also is vitally important in many northern towns where there is an immigration problem. This is not always a coloured immigration problem, but often concerns a population of Hungarians or Polish people as well as people from the Commonwealth. The local authorities will now be able actively to persist in the integration of these people in the community. Consequently, officers of the authorities can be appointed to do this work. If they are appointed, the local authorities will need money, and the local authorities must find the money.

This is a national problem, just as redevelopment and derelict land are national Problems. Therefore, it behoves the nation as a whole to assist local authorities to carry out these essential tasks in a modern age. I applaud the Bill because it takes a realistic view of many of these specific grants.

It is often the poorest authorities which are least able to bear the burden of slum clearance, redevelopment, derelict land and immigration. This Measure seeks to redress the balance on a national basis and I therefore applaud it.

7.20 p.m.

Mr. Charles Morrison (Devizes)

Perhaps the main criticism of the Bill is its tacit admission that nothing major can be done to relieve the burden on ratepayers in the foreseeable future. There has, consequently, been running through the speeches of my hon. Friends and of many hon. Gentlemen opposite the theme of disappointment.

The hon. Member for Bolton, West (Mr. Oakes) began by saying that no promise of rate relief had been given by his right hon. Friend. I cannot remember every word uttered by the right hon. Gentleman, but I urge the hon. Gentleman to read his party's last two General Election manifestoes.

Mr. Oakes

I said that my right hon. Friend had not promised a cure-all for all the problems of the rating system. This Bill is designed to give relief, but not to be a cure-all. One would not expect it to be.

Mr. Morrison

Nevertheless, the party opposite promised early relief in its last manifesto. The hon. Member for Bolton, West implied disappointment with the present position. Like Oliver Twist, implicitly he asks for more, but I am afraid that he will get very little joy in the near future.

The Minister said that the Bill was the second half of a two-pronged attack. I will only say that it is a very weak attack. The Measure is the second bite by the Government at an extremely dried-up cherry and provides a very different picture from the succulent fruit of rating relief and reform depicted by the Labour Government as long ago as 1964.

I have no doubt that Labour's specific promise to seek to give early relief to ratepayers and to transfer the larger part of the cost of teacher's salaries to the Exchequer was taken by most people to mean that their rate demand would be cut. Now, two years later, rates have increased by one-quarter and Labour's promise has been amended, so that in its 1966 manifesto we read: When our reconstruction of local government has been completed, we shall introduce major reform in local government finance. Presumably that referred to a reconstruction which will, or may, take place as the result of the recommendations of the Royal Commission. However, that Commission will not report for at least two years, so that if we are to await legislation and consequent reconstruction before there are any financial changes—as has been implied several times this afternoon—it is hardly likely that there will be any major changes in the rating system before the next General Election. Perhaps when we get to that stage the Labour Party will fall back on its 1964 formula of early relief with which to entice people. I am inclined to think that that was confirmed by what the Minister said earlier.

In the meantime, we have been presented with the Rating Act, 1966, and now we have this Measure. The Rating Act had an estimable purpose—some relief for the poorest ratepayers—but the means of achieving it were odd, to say the least, for far from all the relief coming from the Exchequer, 25 per cent. of it came from the huge majority of ratepayers, many of them equally as hard pressed as those being relieved.

The truth is that the Rating Act was a very minor Measure introducing only the most limited relief but no fundamental reorganisation whatever. Today we are debating a Bill which will be similar in its effect. It follows the White Paper published in February, and that was a defeatist document if ever there was one. The Times dubbed it "a mousy little thing" and stated: It proposes some alleviation of symptoms and abandons the search for a remedy. Thus we are debating what is, once more, an interim Measure. If it were not an interim Measure there would be an immediate and serious objection to it in that, by progressively enlarging the Exchequer grant in the total of local authority revenue, it threatens to reduce steadily what remains of the independent initiative of local councils. This is one of the dilemmas of local government financing; increased grants and reduced independence, or retain grants at their existing levels and provide no relief whatever to the ratepayer. To this dilemma there can be only one solution, which is an alternative means of raising local government finance.

I recommend to the Minister a study of the Private Member's Bill which was introduced last Session by my hon. Friend the Member for Norfolk, Central (Mr. Ian Gilmour), who had some good ideas on the subject of local government financing and who made far-reaching proposals in his Bill. It will be interesting to see how near the Royal Commission's recommendations, when we finally see them, come to those proposals of my hon. Friend.

As things are, this Measure is only a temporary stop-gap and, as such, it is difficult to disagree in principle with its main provision, the rate support grant. It is not so different from the system which it replaces and this has been admitted by the Government. One wonders, when the Minister apparently considers that the present structure of local government finance is doomed in any case, why he considers it worth while to introduce this minor amendment because he could have achieved very nearly the same objective, of providing relief for ratepayers, merely by increasing the general grant.

There are certain practical aspects of the Bill about which fears must be expressed. The first is an administrative point which was referred to by my hon. Friend the Member for Northants, South (Mr. Arthur Jones). Under the new proposals each type of local authority, county district councils as well as county and county borough councils, will have to submit estimates of expenditure for two-year periods so that an estimate of total expenditure can be built up from which can be calculated the aggregate grant total. But for this purpose the estimates must be obtained 12 to 15 months in advance of the year to which they apply.

If the new system is to come into effect by April, 1967, councils should have been working on their estimates for some months already. As I understand it, they have received no guidance from the Government about how their proposals are to be implemented, with the result that now they will be faced with an intolerable and impossible administrative burden. Once again, the Government have put forward a hastily drawn up Measure and I hazard a guess that they have not consulted with or listened to the local authority associations about the practical application of these proposals to the extent they should have done.

The second aspect about which I am concerned is more serious and was referred to by my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton), my hon. Friend the Member for Aylesbury (Sir S. Summers) and others. It seems certain that the share of rate support grant to some county councils will be less than they would have received under the existing general grant system. Therefore, the new system might well result in higher rates for some counties than at present.

This may be aggravated in that, in the past, county boroughs have not received grants towards maintenance of their highways. It may be excellent that, under the Bill, they are to do so in future, but, if they are, extra money must be provided for what is, in effect, a new grant. The position is again aggravated by the fact that the overall redistribution of grant money will help some areas like London, probably to the disadvantage of the counties.

I have referred to the disadvantages to the counties, but this, in effect, means to the non-county boroughs as well and is of particular and unpleasant relevance to counties such as Wiltshire, which have not only a number of relatively small non-county boroughs, but, of even more importance in this context, fast-growing towns like Swindon. The new grant system could well have a serious effect on the development of that area and others like it. Too often already, there is occasional friction between counties and non-county boroughs regarding the provision of services and, if the new system is to result in a decrease in the grant, this can only exacerbate the situation.

On the specific grants, I make one comment about the grant for public open spaces. As the years go on, leisure time will increase, or should increase, and it will at least have better use made of it. Thus, the provision of open spaces will become steadily of more importance. But it seems that, if present administrative arrangements continue, there will at some time be a growing overlap of responsibility for recreational provision of all sorts between the Ministry of Housing and Local Government and the Department of Education and Science.

Recently, there has been set up as an offshoot of the National Sports Council a number of regional sports councils, and they have some responsibility, under the Department of Education and Science, for planning for recreational provision of all kinds. There should be a review of this whole problem because it will undoubtedly grow, and such a review should be from the point of view both of efficient administration and spending and of planning for the provision itself. I want the Parliamentary Secretary to comment on this matter when he winds up.

This is not a Bill over which I can become very excited or enthusiastic. There are 45 pages and 37 Clauses of it, but its net result will be very little different from that provided by the existing system of local government finance. Marginally, some authorities will benefit while others will suffer. I am sorry that we shall have to wait so long for more far-reaching measures, and I am certain that all ratepayers share my sorrow. In the meantime, local authorities will have to waste time learning the intricacies of a new system the life of which, in any case, is limited.

7.32 p.m.

Mr. Roy Hattersley (Birmingham Sparkbrook)

I add my general welcome to the Bill, especially so since it provides a slight change of emphasis from the rate-borne to the tax-borne element in local government finance. But I shall confine myself entirely to the provisions of Clause 11 and what it is promised to do for those local authorities which have special needs arising from the concentration within their boundaries of immigrants from the Commonwealth.

In a sense, I take exception to the wording of Clause 11, particularly in the first sentence, which, incidentally, takes up 10 lines. Special grants are to be made available where necessitated by the presence within local authority areas of substantial numbers of immigrants from the Commonwealth whose language or customs differ from those of the community". I object to that not only because it is prolix even by the standard of Government Bills, but because there is a clear implication in the words I have quoted that immigrants from the Commonwealth thus described are not themselves members of the community.

I hope that, in Committee, an adjective will be found to precede the reference to the "community" to make quite clear that the intention of the Bill—I know very well that it is the Government's intention—is to make them what they are or what they should be; that is, full and free members of the community as a whole. But that is a marginal objection. Basically, I welcome the Clause. It must be much welcomed by all hon. Members on this side who have within their constituency boundaries appreciable numbers of Commonwealth immigrants.

This is the first time for almost a year when a debate or a Bill on the Floor of the House has directly concerned immigration. There was a time when we seemed to be preoccupied by it, when we debated it in one form or another week by week and month by month. But we have now moved from the emotional, indeed hysterical, phase of immigration politics into the more practical realm of the work of which Clause 11 represents one vital aspect. Inevitably, with more action there is less talk.

Clause 11 is part of the implementation of the third section of the Government's White Paper on Immigration, published 11 months ago. It was a much maligned document, almost as maligned as were the people who sought to support it between its publication in August, 1965, and the beginning of this year. But those of us who believed it essential to do something to make integration and absorption possible supported Part III of the White Paper then and support now this second step in its implementation.

I call Clause 11 the second part of the implementaton of those policies because the first example of special help being offered to areas with a high concentration of immigrants was the additional assistance announced in February for housing authorities with particularly pressing slum clearance problems. By and large, they are immigrant areas, and by and large they will benefit. Moreover, they are the areas which will have the most benefit and assistance from Clause 11 of this Bill.

The Clause gives the Home Secretary wide powers of discretion, after consultation with the Treasury, in deciding how the special grants, qualification for which must be demonstrated by specific expenditure, are to be made. I make the plea that that discretion be exercised as widely as possible. It is, perhaps, out of the question to specify in the Bill or anywhere else the exact terms of qualifying expenditure for grant aid under this head, but I emphasis how important it is that the Clause should be administered and its benefits passed on to local authorities with the greatest possible generosity. It is vital that money could be provided under the Clause for some services which the unenlightened would regard as essentially peripheral both in education and in health.

I take my examples almost entirely from the problems of education in immigrant areas. I very much wish that the right hon. and learned Member for Huntingdonshire (Sir D. Renton), who made some reference to this in his speech, were now in his place. He asked why special assistance was to be provided for those areas into which immigrants from the Commonwealth had come in large numbers. Do not the same problems arise, he asked, in local authority areas into which immigrants from other parts of the country have come in large numbers? The right hon. and learned Gentleman spoke so often in the House about immigration in 1964 and 1965 that I should have expected him to know the answer to his question. I wish to put it clearly and firmly on the record, reminding the House of some of the special problems which arise and of the need to interpret Clause 11 in the widest possible way.

I do this with some trepidation, because I know very well that to enumerate the problems of constituencies like mine, with 30 per cent. of its inhabitants immigrants from the Commonwealth, is to court the accusation that one is emphasising the problems for most unworthy reasons. I shall try to enunciate them as objectively as I can, and as sadly as I can, emphasising, with the Milner Holland Report, that the immigrants who live in my constituency are very largely the victims rather than the cause of our social malaise, and emphasising, also, that I am drawing these matters to the attention of the House in the hope that Clause 11 will in due course be interpreted in the widest possible way.

There are in my constituency schools in which 30 per cent. of the children speak no English at all. There are schools in which 50 per cent. of the children speak English in a quite minimal way. Also—this is probably more important, and it is the central issue which I put before the House and the Government—there are schools in which 70 or 80 per cent. of the children have really no experience of English customs and English mores.

I hope that, when the money under Clause 11 is distributed, the Secretary of State will bear in mind that, as well as providing smaller classes in which English can be adequately taught, as well as providing extra visitors to remind parents of their new obligations in Great Britain, it is essential to make provision to teach these children basic British customs, basic British habits and, if one likes, basic British prejudices—all those things which they need to know if they are to live happily and successfully in an integrated way in this community. The United States has discovered the need for this sort of education after 150 years, and, in Operation Headstart, is beginning to teach under-privileged children the basic social customs which they need to know if they are to be free, happy, and prosperous members of society.

I hope very much that the special grants under Clause 11 will be available for teaching in that sense as well as teaching in the more formal sense. The immigrant areas are usually areas where the schools are too old and the classes too crowded. But as well as the great problem of providing formal education, there is the need for formal instruction of both the children themselves and their parents. Again, I ask that a very wide interpretation be given to the Clause when money under it is offered to certain local authorities for disbursement.

I ask, also, for a similarly wide interpretation to be given when money is made available for health and housing services. As well as the routine jobs of making sure that overcrowding legislation and health regulations are properly observed, there is here a great work of education and encouragement to be carried out. I know from my own experience in Birmingham that those who carry on this work with immigrants, who are there to give informal advice and assistance, and to persuade as well as to teach, are often regarded by the unenlightened as unnecessary and unimportant. Again, I ask that the grant shall be made available for this purpose.

I welcome the grant, because this is the first occasion when money has specifically been set aside for authorities which suffer from this problem. There is a tendency to believe that general help for the twilight areas and general help for areas with multi-occupation of old property and with old schools will itself solve the immigration problem. This is why I very much welcome the proposal that the grant should be tied to specific jobs done by specific people demonstrated to exist before money is provided.

We have passed through the phase when it was possible to say that, if we cleared the slums in general, some immigrants would benefit and that, if we reduced the size of classes in general, many immigrant children would be better educated. We have reached a point when, if we genuinely believe in integration and in giving all the citizens in our great towns the right to live freely and equally, some of them must be given special help. The passing of Clause 11 will be the first occasion when the House has specifically agreed to do this.

I welcome the Bill for many reasons, but principally and overwhelmingly because of Clause 11.

7.45 p.m.

Mr. Oscar Murton (Poole)

Even allowing for the partisan approach of hon. Members opposite, which I can quite understand, I find that they put a very great gloss on what I consider, and what I am sure my hon. Friends consider, to have been a very disappointing performance by the Labour Government in rate relief in the last two successive Parliaments.

First, in what we now call the short Parliament, after doing nothing at all in the first Session, except to make specious promises, in the 1965–66 Session the Goverment produced the Bill which eventually became the Rating Act. The intentions underlying that Act were good in that it set out to help the poorest ratepayers in the country, but where the right hon. Gentleman the Minister fell down on his job was by burdening local authorities with finding 25 per cent. of the cost, thus striking at the pockets of those ratepayers whose incomes were only marginally greater than those eligible to receive help. Here, again, we have a Bill whose intentions are good, but, again, the Minister has failed to grip the problem firmly and comprehensively. It is just one more stopgap Measure.

The right hon. Gentleman may not have been flattered during February and March of this year by a number of references which associated him with that homely creature the mus musculus, which causes most women to scream and all householders to trap. The house mouse, for I gave its Latin name, figures very much at this time in the Minister's life. The Times, for instance, called this de-rating provision of his a "mousey little thing" and the Local Government Chronicle wrote of "Mr. Crossman's mouse". The fact is that on the subject of local government finance the Minister and his party are as easy to trap as is any mouse. The only bait required is a General Election, when big pronouncements are made. To quote one: When our reconstruction of local government has been completed, we shall introduce major reforms in finance. That was in Labour's election manifesto in 1966.

The Prime Minister himself on 9th November, 1965, with exemplary frankness, made a statement which has been and will be quoted time and again from this side, when he said about finding an alternative to the present rating system: We all hope that someone will stumble on the secret some day, but I cannot say that a satisfactory alternative source has yet been discovered."—[OFFICIAL REPORT, 9th November, 1965; Vol. 720, c. 46.] In an endeavour to find that satisfactory alternative source, the Government have seen fit to set up a Royal Commission on the structure of local government. The House has not yet heard the terms of reference of the Commission. The only hint which we have had has come in the White Paper Cmnd. 2923. But in my view it is absolutely essential that both structure and finance should be considered as one problem. If this is not done, we may well find that we are no better off in two years' time than we are at present, with another string of promises from the Treasury Bench and further temporary legislation introduced to ameliorate the effects of soaring rates, while yet another Commission is set up to find a new method of raising finance which can be grafted on to the new local government structure.

What I want to say in respect—and I cannot emphasise it enough and I hope that the Parliamentary Secretary will give us an assurance or at least some idea of what is in the Government's mind—is that when the Royal Commission is set up its terms of reference will include this vital question of finance as well as that of administrative structure. One makes a nonsense without the other. They must be taken together, or much more time will be lost than will be lost while the present Royal Commission is considering what to recommend to Parliament.

I wish to make one or two short, but particular observations on the Bill as it affects most South Coast towns and, in particular, the non-county boroughs such as my own constituency. In Part I it is proposed to taper off now the Conservative Party's Rating (Interim Relief) Act, 1964, which was not due to expire until 1968. The Minister realises, I think, that to repeal the Act entirely now would cause rates to rise sharply in certain areas, particularly along the South Coast. Indeed, a Government Press release on 18th May made this very point—that a sudden ending would involve a sharp increase in rates for a small number of local authorities. That was something of an understatement, because the Exchequer grant of £5 for each person over 65 years in excess of one tenth of the population of the area concerned in the case of Poole amounted to about £30,000.

As it is, the direct consequence of the Bill, which alters the formula to £5 for each person over 65 in excess of one fifth of the population, will cost the ratepayers of Poole the equivalent of a 1½d rate, because where, previously, 16,000 elderly people enabled the borough to claim 6,000 at £5 a head, Poole now falls short of the 20,000 minimum which will be required as a result of the change in the formula. In all equity, I would hope that the rate support grant would compensate this and similar local authorities fully for their loss under the new provision during the next rating year.

Will the Minister confirm that they will be compensated? I also hope that he will now do something to compensate such local authorities along the South Coast for having to bear 25 per cent. of the cost of the Rating Act, 1966, for the same set of authorities are the worst hit under that provision, too.

In Part II of the Bill there is the Government's previously announced decision to postpone the 1968 quinquennial revaluation. This is a decision which will have the most serious consequences. The postponement of the 1961 revaluation until 1963 was bad enough in its effects on householders, but at least there was then the valid and very good reason for postponement that the Inland Revenue at that time was of the opinion that until 1963 there would not be sufficient evidence available to obtain an assessment of free market house rentals.

Now there is not even such a sensible reason as that. We learn from the Minister that there is to be such a shortage of valuers, solely because of the needs of the Land Commission that revaluation has to wait. Such is the effect of Government legislation on an already overloaded branch of the Treasury. It is an appalling state of affairs that first things cannot come first, but must be sacrificed for a piece of doctrinaire legislation.

The trouble will come when rateable values soar again, as they did before. Moreover, the Government are postponing yet again the rationalisation of valuation procedure. It is well known that ratepayers feel that valuation procedure needs some rethinking, especially on the problem of property revaluation for rating purposes. This is long overdue. There is no proper distinction between purpose-built flats and flats in converted houses. There is much hard feeling about the fact that a flat or a bungalow is customarily valued proportionately higher than a two-storeyed semi-detached house. There are many other anomalies of a similar nature.

My final point concerns the vexed question in Part III of the Bill of the double burden which non-county boroughs are called upon to bear in connection with unclassified roads. Although county councils will receive a needs element grant, the non-county boroughs and the urban districts will continue to have to pay 100 per cent. of the cost of maintaining not only their own unclassified roads, but also to share the burden of the unclassified roads in rural districts, and this in spite of the fact that any really impoverished rural district will qualify for the rate support clement of the grant.

I draw the Minister's attention to the present unsatisfactory position. The basic problem arises from the fact that non-county boroughs and urban districts with a population of 20,000 or more usually maintain their own unclassified roads. In the example of Poole, this amounts to a 10d. rate. In addition to this, however, Poole also pays the Dorset county precept another 51d. towards the maintenance of unclassified roads in the rural districts of Dorset. This is about 38 per cent. of the county's total expenditure on this subject.

What with this, and in certain other ways in which Poole subsidises rural areas, in 1965–66 the rate in Poole amounted to lls. and the average rate per domestic hereditament was £55 6s., while in two neighbouring rural districts the corresponding figures were respectively a 10s. 2d. rate and a 9s. 7d. rate and an average rate per domestic hereditament of £41 16s. and only £29.

Whatever may have been the position in the past. I consider that the proposed grant changes will once again have the most unjust results with unclassified roads. I ask the Minister to look again at this aspect of the Bill. Surely it is wrong that the unfortunate ratepayers of the non-county boroughs and urban districts should have this levy made upon them when the county councils will be receiving Government grant and when rural authorities, aided by rate support grants, should quite reasonably be expected to meet the costs themselves.

Those are the most important comments which I wish to make and I hope that we shall receive some encouragement from the Treasury Bench.

7.57 p.m.

Mr. Ronald Bell (Buckinghamshire, South)

Rating and local government finance are not only complicated subjects but are also regarded as very dull subjects. I fear that that has been reflected by the number of hon. Members present during the course of the debate. Whatever its inadequacies—and they are substantial—this is an important Bill which will affect very many people during the next few years, and it is therefore a matter of regret that so few hon. Members, not including the Parliamentary Secretary apparently, should be interested. The Parliamentary Secretary does not seem to be interested at the moment. However, we have conducted the debate for a considerable time without the presence of any Minister from the Ministry of Housing and Local Government, which seems to be highly regrettable in the circumstances.

The mirage of local government reform as a solution to the problems of local government finance—I do not know whether I could have the Parliamentary Secretary's attention for a moment I appreciate that he has other subjects to talk about.

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

I was only saying that the hon. and learned Gentleman is being so dull in any case.

Mr. Bell

The hon. Gentleman should realise that I have hardly had the opportunity to be dull yet. In any case, I remind him that this is by no means the first occasion in the debate on which hon. Members have had to complain about conversations on the Treasury Bench while they were speaking.

I was saying that ever since before 1956 we have had this preoccupation with the reform of the structure of local government as a solution to the problems of local government finance. We had the White Paper of 1956 on local government reform and then the Local Government Act of 1958 which established the Local Government Commission to reform the structure of local government. Then, some weeks ago, just before the General Election, the Minister of Housing and Local Government announced the dissolution of that Commission and the setting up in its place of the Royal Commission. Today the right hon. Gentleman the Minister of Housing and Local Government described this Bill as a holding operation for, perhaps, three years until the report of the Royal Commission.

He used the phrase which I have found to be fairly common both in his own speeches and in the Command Papers which have been issued for his Department for the years—the phrase "a really radical reform of local government". He invited the House to accept this Bill as a holding Measure pending a really radical reform of local government finance which was likely to result from the Report of the Royal Commission.

I believe this to be a mirage. I do not believe that the Royal Commission will succeed, at the end of two years, in producing a really radical change in the structure of local government. There are problems inherent in the structure of local government which were plainly present in the minds of those who drafted the White Paper of 1956 and which one can sense again in the debates which took place on the Local Government Bill of 1958. These are problems of size, or of identification of the individual ratepayer with the unit of local government with which it is desired that he should take an interest, which cut across the desire of the Conservative Government of the time and the present Government to develop large units of local government in the interests of relating the resources to functions—a very laudable objective.

Today, the Minister said that, in his view, the really radical reshaping of local government finance must be preceded by a really radical reshaping of the structure of local government. If that is so, then it would appear that the intervention by the Joint Parliamentary Secretary in the speech of my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) should be taken only at its face value. My right hon. and learned Friend was drawing attention to the fact that the terms of reference for the Royal Commission do not refer to the finance of local government. The Parliamentary Secretary intervened to say that they were not expressly excluded, which is true. One notices that in another place on 28th April last the noble Lord, Lord Kennet, who is another Joint Parliamentary Secretary to the Ministry of Housing and Local Government, said: We are not looking beyond three years, because it is more than possible that by that time the Royal Commission will have reported on the entire question of rates and the fabric of local government, taken together."—[OFFICIAL REPORT, House of Lords, 28th April, 1966; Vol 274, c. 249.] There the noble Lord was certainly implying that the Royal Commission would examine local government finance and the structure of local government together and report upon both. That is not consistent with what the Minister said today, that the reforming of the structure of local government must precede the financial changes, nor, if what the noble Lord said was really intended, can one imagine that all mention of finance would have been left out of the terms of reference of the Royal Commission. That being so, I find it difficult to accept this Bill as a stopgap, as something to deal with the situation for the next two or three years.

Because of that in particular, although there are other reasons, I find it especially regrettable that the Bill proposes to defer the next revaluation which ought to take place in 1968. The Minister said today what he had said before, that one of the defects of rates was a lack of buoyancy. The same phrase appears in the White Paper, when it is said: …rates lack natural buoyancy; …rating assessments do not adjust themselves to rising values. They do every five years under the provisions of the Rating and Valuation Act, 1925, but they do not if one suspends one quinquennial revaluation. The whole trouble from which we suffered when the last revaluation took place in 1963 was that it was the first revaluation for some 15 years. The changes were so great that they caused general indignation and upset.

If we are to avoid the 1968 revaluation and move on to the 1973 revaluation, then we are going to have a ten-year interval in revaluation. The 1963 revaluation was based upon valuations made during the years 1961–62. Thus very great distortions will have taken place in that period, wholly notwithstanding the provision in this Bill for Amendments according to the tone of the list. Because the reason for postponing the quinquennial revaluation is the shortage of valuers to carry out the 1968 valuation, for the same reason, that they are not available to carry out the quinquennial revaluation, they will not be available to adjust the existing lists according to the changes in the value of property. Therefore, we shall have a ten-year distortion, and it is this sort of thing which has given the rating system a bad name.

I am not going to take up time in defending the rating system. It is possible to say a great deal more in its favour than one has heard in this debate, and I thought that the right hon. Gentleman the Minister was very fair about this in his speech today and in the April White Paper when he indicated that there were some strong advantages in using the net annual value of properties as the basis of raising local revenue. I merely mention this in passing, but we should all beware of condemning the rating system for no better reason than that it was introduced approximately 365 years ago. One hon. Gentleman opposite seemed to think that it had not been altered in the intervening 365 years. That is far from being the case.

This Bill is just tinkering with rates. What is wrong is not so much the rating system as the rate of growth in the burden of rates. The 27 years which have elapsed between 1936 and 1963, with the war in between, and the rapid growth in local government expenditure have gravely discredited the rating system and produced the problem with which we are trying to deal today. The figures are given in various places. Local government expenditure has increased by 2½ times in the last ten years. The cost per head of local government expenditure has doubled in 10 years. This is a phenomenal rate of growth, and I do not think it is true, as the Minister said today, that the only significant reductions which can be made are by cutting services or transferring them from the rates to the Exchequer. I believe that quite substantial economies could be made if the connection between expenditure and the rate charge were less blurred.

I have been a Member of the House continuously for 16 years. In that period, I do not think that I have had more than two or three letters from constituents suggesting any specific economy in expenditure. I have had innumerable letters suggesting increases in expenditure. Of course, when the rate demand comes along there are plenty of letters complaining about the burden of rates and the general level of local authority expenditure. All the pressures on councillors as well as on Members of Parliament from the public are for increased expenditure, never for reduced expenditure.

In rates, the reason for that is not very hard to find. Three-quarters of local expenditure is paid for by central Government grant and by rating places of work. Only a quarter of local authority expenditure is raised by rating places of living—domestic rating. Therefore, the connection between spending some more money on this, that and the other is so blurred that it does not connect up in the mind of the local government elector. That is one reason which I had in mind when at the beginning of my speech I said that there are very great problems facing anybody who tries radically to reform the structure of local government, with the finances in mind.

Suppose that we go in for regionalism. That means very much bigger units—I suppose three or four counties. By that time the unit is so big that expenditure in any place will be lost in a wide fund, and nobody will care very much. That is the trouble. Alternatively, if we try to solve the problem by enhancing the powers of the local authorities rather on the Greater London basis, we shall have destroyed the regional proposal, because the real power is in the rating authority and not in the precepting authority. Hon. Members on both sides of the House have criticised the Bill for not transferring enough to central funds. In a way, I will do that myself later. But the more we do that, the more we destroy the responsible element in representative local government.

The difficulty about rates as I see it—and I have spent a fair amount of time in dealing with rating matters—is that the distribution of the burden on some classes of the community is awkward. Old people are the real problem. Hon. Members on both sides have tried to deal with that to some extent. More could be done. I would prefer to see more done in that respect rather than looking for pie in the sky in the form of local income tax or sales tax, or anything of that kind.

The other element of rating which I do not like is that it taxes improvements in a man's house. Suppose that he gets busy and devotes his attention to making a beautiful garden. He may succeed in doing that and it will not increase his rate burden because, to put it very simply, valuers do not count gardens; they reckon that they do not affect the rent which a hypothetical tenant would pay. If, on the other hand, he spends his time putting down a wood block floor, his rating assessment goes up as automatically as night follows day. For one room it puts his assessment up by £4. It probably means that he pays £2 a year for the rest of his time in the house for a block floor which he put down. The fact that every time a person improves his house he pays a tax is one of the defects of rates.

Since I do not see any radical change being made and as I think that this is an illusion, I am driven to a conclusion which I do not like, which is that the defects of the rating system are tolerable provided that the amount of rates is not too high. To achieve that, we have to shift more of the burden to the Exchequer, although for other reasons I regret it. I will not suggest specific services, but I think that it is possible to pick out some services which avoid the inconvenience mentioned in the White Paper, which is that it is bad to have services paid for centrally and controlled locally. It is much better that the control and the duty of raising the money should be in the same hands. I think that the remuneration of teachers is a very good example of local authorities not having effective control. There is no reason, in my view, why the whole of that responsibility should not be put on the national Exchequer. I believe that it could be done without any disadvantage to the vitality of local government.

There are other suggestions which I could make in that respect. My broad point is that, in spite of all the disadvantages, the only practicable solution is to put more of the burden on the central Exchequer. I would carry that quite a long way because we have gone too far in rating industry and shops. The amount of rates which we raise by taxing places of work is excessive and blunts the responsibility of the ratepayer when he goes to the polls.

I want to make a local point very shortly because it has been made already. I represent South Buckinghamshire, the part of Bucks nearest to the Metropolitan area which most feels the cost effect of the Metropolitan area. This is something which should be considered in Committee.

The general effect on counties has also been mentioned. Again I wish to say only one sentence on that matter. I think that the counties are being shortchanged on the highway proposals because the specific grant will be cut down and the maintenance of all roads, including Class I roads and the improvement of Class II and Class III roads, will still fall on county rates. I cannot imagine that it will be covered in the support grant.

The third fault which the Minister found with rates was their utter lack of intelligibility. With respect to him, I do not think that this is really a fair criticism of them. He described the Bill as softening and blunting, but what the result will be when one softens and blunts utter lack of intelligibility, I am not quite sure. I feel that it will be much worse than what we start with. Rates are horribly complex but Governments rather than the system make these complexities.

I mentioned water works while the Minister was speaking, with a certain nostalgia, because it is fantastically complicated and because I had some practice in the rating law. I moved a series of Amendments to the assessment of water works during consideration of the Rating and Valuation Bill, 1961, and there was one day on the Committee stage when I fully understood the rating of water works—though I have never done so since. It is just one little peak of achievement that I fully grasped the incredible complexities of that system.

I agree that there should be changes in some of the principles according to which properties are valued, but, with all respect to the Minister, I do not think this is important, although he made it one of his three main points. Does it really matter if there is not a general appreciation by Mr. Smith of why his house is rated more highly than an identical one along the road? He can go to a tribunal. I do not suppose that anybody understands the rating of water works, except in flashes of inspiration, when somebody has to be paid to understand it. But it does not matter. You fix it for three years and then there you are.

It is not a difficult principle that a house is valued on what a hypothetical tenant would pay to live in it, and I doubt if one would find a simpler principle. I am against the adoption of a capital value basis, which would lead to greater complication and cannot be done, because if we have not got the valuers to carry out the 1968 valuation how can we have the valuers to carry out the total revaluation of the whole country on a capital value basis?

I am disappointed with the Bill in a way, because I should like to see a much greater degree of relief for those sections of the taxpayers who feel the rub of the green under the present system, that is to say, the old people. parents whose children have gone away but who still like to keep on their house to which the children can return at holidays and weekends, and so on. They are at present taxed for a local basis on the size of their house.

This made sense in 1601 and for long after that when there was only one rate, the Poor Rate. It was then not unreasonable that one should contribute to the relief of the poor according to the size of one's house. Now there are many rates, and most of them are in the nature of payments for services. It is ridiculous, if one looks at it dispassionately, that a person should pay twice as much rates because he has a larger house and ten times as much rates because he has a shop in the High Street rather than in a side street. This has ceased to bear any relation to payment for services.

The Minister's first point was that rates were regressive. They are not. They are too progressive. They are highly progressive, and the trouble is that they are progressive in a very eccentric manner. I should like the progressive element in rates to be toned down for those whom it hits savagely, and to see mitigation of the effect of rates on those sections of the community which are hurt by them at present.

I ask the right hon. Gentleman and his colleague not to think of this as a holding operation for two or three years. We shall be rated in this way for 10 or 20 years to come, without any question, and it is time that we got down to the problem of finding a system which is equitable and provides finance for local government.

8.26 p.m.

Mr. James Allason (Hemel Hempstead)

The principal points which we have to discuss are the overall size of the Exchequer grant and the fairness of its distribution. It is very difficult to discuss the fairness of the distribution if we do not know what the formulae for the factors for the distribution shall be. At least we know what the factors are to be, and we know the factors which are not there.

I wish to deal, first, with two factors which are not there. There is a factor for a reducing population, but a factor for the expanding population does not exist, although the Minister is well aware of the need for it. He knows that there are very high debt charges, and in Hertfordshire, for example, the debt charges are twice the national average. The reason is that it is necessary to provide facilities well ahead of the increase in rateable value, which is ultimately achieved by the expansion of the population.

When it was decided not to include this factor in the 1958 Act the reason given was that it was thought that experience would prove that the expansion of the rate capacity would follow so quickly that it would not be necessary to meet this factor. The experience of Hertfordshire and other counties with expanding populations has been exactly the opposite.

Since 1959 the loss has gradually increased until now it is £1,700,000 a year. That loss is the difference between what Hertfordshire gets. or fails to get, because it has an expanding population, as compared to the average. That is the element of loss over those years, and this will continue. By 1967–68 it is estimated that the loss will be £2 million, i.e. if no action is taken now there will be a further loss of £300,000 a year to Hertfordshire. The total loss as a result of this is the product of a 10d. rate.

Another factor which is missing is where there is a high average rateable value. It sounds a very satisfactory thing to have an area with high rateable values, but, as my hon. Friend the Member for Poole (Mr. Murton) said, it can work out expensive. For example, in St. Albans the average payment per domestic hereditament is £53 15s. 6d. In Todmorden, the corresponding figure is £13 4s. ld. A possible reason for this is that Todmorden receives a rate deficiency grant. There was a possibility of a factor being included, but it was left out. There is a corresponding factor for London, but there is nothing for the rest of the country.

We need more information about factors which are included. I asked the Minister about education earlier. He said that all education fell within the needs element. Of course it does. I was not asking that. I was asking about the split between the basic payment and the supplementary payment.

Schedule I deals with the needs element. There are two factors. The basic element is the factor for the numbers of the population under the age of 15. The supplementary element which is what the Minister spent his time talking about is the excess of education units to population. There is a rumour that the basis element is to be two-thirds of the total sum and that the excess of education units per head of population element is to be only one-third.

There is a wide variation in education costs. My right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) gave figures for 1966–67. I want to give actual figures for 1964–65. In Hertfordshire, the costs were £26 12s. per head of the population. In East Sussex, the figure was £18 10s. In Eastbourne, the figure was £15 9s. This is not to say that Eastbourne is being mean in its expenditure on education. It is only that its needs are less because it has a fairly high age group, whereas Hertfordshire has an expanding population, a young population and great educational needs.

Therefore, we are paying very highly for it. If two-thirds of the total sum is to go on the basic element and only one-third on the supplementary element, counties which pay highly for their education per head of the population will suffer badly. I should like to know whether it is intended that the split-up is to be two-thirds and one-third.

Figures are available for roads. I complained that nothing has been stated. The formulae are not yet decided. The figure quoted by the Ministry of Transport for Hertfordshire entails a net loss to the county of £134,000 a year. This is explicable if all secondary roads in the county are considered to be principal roads. I understood from what the Minister said this afternoon that principal roads are to be Class I roads plus a very few extra roads.

I should like a firm undertaking that the Ministry of Transport, if it has provided that secondary roads in Hertfordshire should count as principal roads, will not change its mind later simply because of what the Minister said today or for any other reason. Hertfordshire, being so close to London, has to provide roads of a very high standard. Many of the first-class roads in the county are dual-carriageway and twin-track.

My hon. Friend the Member for Aylesbury (Sir S. Summers) suggested that it might be possible not only to take the factor of road mileage, but also to take account of use. I would suggest that one might take into account as well the width of the road, because that is usually related closely to the volume of traffic which it carries. The greater the volume of traffic, the wider the road that the local authority is forced to provide. Consequently, it might be useful to consider the width of the road, because there is a wide variety of different maintenance costs. In Surrey, for example, the cost of a Class I road is £2,639 a mile, whereas in Devon it is £619 a mile. It is obviously necessary to produce some factor other than the distance.

Turning to the domestic element in the grant, those counties with severe problems of huge increases in rates in the past, in the present and in the future are worried about the reduction of rates by the fixed sum of 5d. There may be some areas in the country, though I rather doubt it, where rates will not rise by as much as 5d. If they rise by 6d., the domestic ratepayers will find their rates going up by only ld., whereas in places like Hertfordshire, where the customary rise in rates is about ls. 6d., a 5d. reduction will not be very helpful.

It is difficult to forecast what the effect will be in the future, because the Ministry is giving out figures suggesting that future rate increases will be about 10 per cent., whereas they have been considerably more in the past, if we apply the difference between the year before last and last year, we get some fairly interesting figures. In 1964–65, domestic ratepayers paid £468 million. In 1965–66, they paid £533 million. Those are the actual sums of money collected from domestic ratepayers, and it is clear that in that period there was an increase of 14 per cent. If one knocks off the £25 million which, as I calculate it, represents the 5d. rate, one finds that instead of art increase of 14 per cent., one gets an increase of 9 per cent.

That is an increase which is still totally unacceptable, and it does not marry up with what is said in paragraph 15 of the White Paper, that the aim would be to keep the average increase in rate pound-ages more nearly in line with the growth of the economy, as measured by gross domestic product. I suggest that if the element in the domestic product is to be held at around £25 million, that is totally inadequate in view of the way rates are going up at the moment.

A number of hon. Members have recalled the Labour Government's pledge that they would reduce rates. The 1964 election manifesto spoke of early relief for ratepayers by transferring a greater proportion of the expenditure to the Exchequer. However, these proposals are totally inadequate. They do not fulfil that pledge. They are a shabby betrayal of promises which were made and which were accepted by people in good faith. I condemn the cynicism and complacency of the Government in the face of the severe problem of ever-increasing rates, and I call on them to think of something very much better in order to fulfil their election pledges.

8.40 p.m.

Mr. Stan Newens (Epping)

It ill becomes the Opposition to attack the Bill in the terms which some hon. Members have employed. It is strange that the hon. Member for Hemel Hempstead (Mr. Allason) should refer to the Bill as a shabby betrayal when we reflect on the amount that the Conservative Government did to tackle this very important problem. It is one which has not arisen in the last couple of years. It has been with us for a long time.

Not only did the Conservative Government do practically nothing to improve the situation; they did a great deal to make things worse. I refer in particular to what was done at the time of the London Government Reorganisation Bill.

In the case of my own constituents in Chingford, who were brought into the Greater London area, rates went up very considerably, and that is true right the way round the outer Metropolitan ring. Ratepayers suffered very considerably as a direct result of the policy of the Conservative Government. It is true that a miserable relief Act was passed by them, but it helped practically no one except one or two boroughs on the South Coast.

Mr. Ridsdale

Did not the previous Government set up the Allen Committee whose Report is the basis of all the present proposals?

Mr. Newens

It may be true that they did that, but they took no action during the time that they were in office to deal with this important problem in any effective way.

Having said that and having welcomed the Bill in general terms, I want to say, none the less, that I find it a disappointment, to some extent. When the Labour Party was in opposition, it fought the block grant proposals very hard. At that time, many of us argued the virtues of the specific grant system, which tended to encourage local authorities to spend more on worthwhile services. The Bill, unfortunately, does not do many of the things which the specific grant arrangements previously did. In fact, it perpetuates and preserves many of the faults to which many of us objected in the Conservative proposals. In these respects, I feel that the Bill is not radical enough.

My right hon. Friend the Minister, in introducing the Second Reading of the Bill, pointed out that it has many merits. It will, of course, do something towards shifting the increasing burden on the rates from the local authority to the central Government, and it will give aid to domestic ratepayers. This is very good indeed, but it is not enough. Certainly in the London area, particularly in the outer Metropolitan fringe, the burden of rates has reached such astronomical proportions that something more is called for in the very near future. A rate burden of the proportions which has been reached in these areas is acting as a tremendous deterrent to progressive authorities. I must make a forceful plea to my right hon. Friend to consider the plight in which many authorities in the London area are placed. They need more help than is provided by the Bill.

Despite the fact that we provide in the Bill for four new specific grants, I want to express alarm that we have decided to discontinue the provision of specific grants for school milk and school meals. I cannot help saying that I regard this as a retrograde step. It is very regrettable that the initial attack upon this vital service should have been made by a Labour Government.

I hope that my hon. Friend the Joint Parliamentary Secretary, when he replies to the debate, will say what safeguards the Government envisage to prevent local authorities economising in these services and what safeguards are envisaged to prevent local authorities from reintroducing charges or increasing existing charges. The benefits which have accrued to the community as a whole from the meals and milk service in the schools are not easy to measure, but I know as a teacher that many schoolchildren do not normally have the right diet.

There is a great tendency for the children who most need school meals and milk to go out during the day at the secondary stage and merely have chips or something like that which will not give them the sort of benefit which a school meal is designed to do. It is precisely the sort of children about whom we are most concerned and who most need school meals who are likely to be deterred from partaking of these services if they deteriorate as a result of this step. I hope for this reason that my hon. Friend will give us some assurances about this.

One other issue that I would like to mention in connection with the Bill and which gives me cause for alarm is the question of teachers' salaries. The need for the payment of teachers' salaries to be transferred to the Exchequer is very necessary. We must recognise in the community as a whole that there is great need to pay teachers properly. The rates which teachers are at present paid are certainly not high enough. The ever-increasing rates are a great deterrent which affects local authorities in their attitude towards increases in teachers' salaries. We must seek to do something soon to implement the pledge which Labour made in this respect during the last two election campaigns.

To sum up, I feel that although the Bill does something which we should applaud and welcome, it does not go far enough. I support the Bill accordingly as a development in the right direction, but I hope very much that my right hon. and hon. Friends will work hard to see that something is done to go considerably further than the Bill. More than this, I hope that in Committee they will be prepared to consider Amendments, particularly concerning the school meals and school milk service.

We all know that there is great pressure wherever financial questions are mentioned. We all know of the great need which is continually pressed upon us to restrict rather than encourage local government expenditure. We must, however, face the fact that we shall not get the quality of local service that we desire, we shall not get fair treatment for the domestic ratepayer and we shall not be able to encourage progressive local authorities until we get far more far reaching reforms than are envisaged in the Bill. I therefore appeal to the Government to press ahead with their full review of the rating system and with the job that the Conservatives did not do, a job which must be done in the interests of the community as a whole.

I repeat what I said earlier, that I think it ill becomes the Opposition today to attack the Bill in the way that they have done, because it goes quite a way towards doing some of the things which ought to be done. But, at the same time, I think we should face the facts clearly and recognise that until far-reaching changes which are not at present proposed are carried out, we shall not have the local services that we all require to meet the needs of the country as a whole.

8.50 p.m.

Mr. John Nott (St. Ives)

A few weeks ago in this House we debated the provision of local authority capital finance through the Public Works Loans Board and the open market, and tonight we are concerned with the revenue side of local authority finance, namely, grants, rates and miscellaneous income. Fortunately, the amount of locally-collected revenue of local authorities still far exceeds the amount of revenue which comes from the central Government. In 1963, about £1,700 million of local authority revenue came from locally-collected sources, and only £1,000 million from central block grants.

I mention this at the start of what I want to say because I think that it is vital for the independence of local government—it was referred to by my hon. Friend the Member for Devizes (Mr. Charles Morrison)—that in discussing the whole question of the rate-grant relationship in local government we do not overlook the fact that through local government finance runs the important theme of the independence of local government.

In the Bill the Government have propped up—I use their own words from the White Paper—the present system by introducing the needs element which closely resembles the old general grant. They have produced the resources element, which is almost exactly similar to the old rate deficiency grant, and the only new thing which they are proposing at all is the domestic element. We have no details of how this will work, and, therefore, to my mind tonight we are largely debating this whole Bill in something of a vacuum.

It is true that the needs element has been slightly refined this is very good, and we are not complaining about it—and the resources element has been stabilised instead of being adjustable, but I repeat that it is only the domestic element which is new, and, as I say, we know very little about it. It seems hardly worth while having presented the Bill at all—I shall come to the domestic element in a moment—when it is likely to throw up more anomalies and more problems than it will clear up.

Let me quickly run over a few of the obvious anomalies which exist. First, the whole basis of calculating the new aggregate amount of grant seems to be quite impracticable in the time allowed. The 1,350 county district councils in the country are saying that they simply cannot produce the estimates in time for this Measure to come into effect in April, 1967. This is reminiscent of the Minister's introduction of the option scheme, which the building societies described as unworkable almost as soon as it was announced.

Again, there is general confusion about the domestic rate aid grant which has been called "drag" by a number of local authority treasurers. There are also a whole host of questions to be answered about the factors in the needs element, and how they will affect different authorities one from another.

I think that when presenting the Bill for its Second Reading the Minister was under an obligation to give further details of how these factors would be calculated. Under the old system there were wide discrepancies indeed, and perhaps I might quote two examples. Merthyr Tydvil had 74 per cent. of its income in grant, and 26 per cent. in rates. Oxford, on the other hand, had 34 per cent. in grants and 66 per cent. in rates. If these relationships are to be completely changed as a result of the Bill, at least the House should have been told, or some estimate produced, so that we could have studied the matter very carefully.

I believe that the change to education units, the changes in highways and also the low density factor will help my own County of Cornwall and the Isles of Scilly, about which I am most concerned. However, it will certainly not help a host of counties throughout the country. Many will be worse off as a result of the Bill. It is surely wrong for the Government to say that this will relieve the burden of rates if a large number of ratepayers is worse and not better off as a result.

The Minister described several liabilities which surround the rating system. I want to name three, which are similar to his. First, the rating system is criticised for its regressiveness. Secondly, it has been criticised—in perhaps slightly more sophisticated terms than the Minister used—for its overall incapacity to bear the strain of increasing local government expenditure. Thirdly, the rating system has been criticised for the disparity of contribution between one local authority and another. I do not believe that the Bill will get to the roots of any of these problems.

First of all, on the question of regressiveness, the Rating Act has done something for the 2 million ratepayers living in poverty, but it has done nothing for those who suffer considerable hardship from the rating system as a result of their living in hardship on fixed incomes. These are the people who have been seriously affected. Secondly, there are those living just above National Assistance Board levels. They will not be helped by the Rating Act. Third, there are those who are too proud to get help from the National Assistance Board. These are the new poor of the 1960s. I cannot see that they will be helped by either of the two bites which the Government have had. These are the very people who will suffer most from the Selective Employment Tax if it goes through. They have suffered most from the attack on savings in the 1965 Finance Bill and are suffering most from inflation, which is now running at 5 per cent. a year.

The second aspect is the overall incapacity of the rating system to bear the strain. I believe that the Civil Estimates show that the social services will grow by about 14 per cent. in 1966–67 and local government will bear a large proportion of that growth. The rates have been increasing by 10 per cent. a year. The £30 million grant, starting in 1967–68, the "drag" element, the domestic element, will only cut in half that increase of 10 per cent. I believe that the increase in social services envisaged in the Civil Estimates indicates that rates will grow by more than 10 per cent. over the coming years. Therefore, this domestic element will not halve the increase in rates but have a much slighter effect.

On disparity of contribution, the domestic element does very little to try to balance up the amount which one local authority pays with that paid by another. In the journal "Local Government Finance", there was a very interesting comparison of how this domestic element would affect two different local authorities. It took Torrington, in Devon, as the first. There, the average rates paid per household are £14. In five years' time, assuming that rates continue to rise at 10 per cent. a year, it will be £22. However, if one takes the domestic element into account, that £22 will come down to £19.

Then consider, at the other end of the scale, Eton. Here the householders are paying £66 in rates. In five years' time they will be paying £100 and the domestic element will bring it down to £87. Thus, the disparity between one local authority and another is hardly affected.

I am delighted to know that the Minister is looking at the question of the nationalised industries. The local authorities on the working party which has been considering this matter have produced a suggestion to the effect that certain nationalised industries should be paying up to £240 million a year in rates as opposed to the £60 million which they seem to have been contributing in the past. If the nationalised industries could be made to pay their proper contribution, the additional sum would shift a large amount of the burden from local ratepayers to central taxes.

I do not believe that the Bill will tackle the objects set out in the White Paper. It certainly does not meet the promises which the Government opposite made in their 1964 General Election manifesto, in which they said that they would give early relief to ratepayers throughout the country.

9.1 p.m.

Mr. John M. Temple (City of Chester)

The most apt description of the Bill came from the hon. Member for Epping (Mr. Newens), who described it as a disappointing Measure. He took the words out of my mouth. Anybody who is interested in local government finance or ratepayers will thoroughly agree with the hon. Gentleman's description of the Measure.

Mr. Newens

Does the hon. Gentleman agree with my other remarks, particularly my references to the record of the party opposite?

Mr. Temple

I will deal with that later. I noted the hon. Gentleman's description of the Bill and, as I said, he took the words out of my mouth.

The enthusiasm of hon. Gentlemen opposite has been typified by the paucity of speakers from among them and the scant interest they have shown in the debate. At one time, for a considerable period, only one hon. Gentleman was on the back benches opposite listening to our discussing a matter which I regard as being of prime importance for the whole administration of local government finance.

I will take up during the course of my speech some of the interesting points which have been made, particularly by my hon. and right hon. Friends. I agree with the Minister about the complexities of local government finance and I share his respect for those complexities. I look forward to tomorrow, when we will be discussing the Finance Bill. Compared with the complexities of local government finance, the finances of the country are run on a much more comprehensible basis. I forecast that this Local Government Bill will add to the complexities of local government finance and that it will prove a positive minefield of complexities. I anticipate a rather complicated Committee stage, because the Measure bristles with difficulties.

My hon. Friend the Member for St. Eves (Mr. Nott) pointed out that we were debating the Bill in a vacuum; he was right. It would be easier if, when speaking, there was not a continuous conversation going on between the right hon. Gentleman the Minister and his hon. Friend the Parliamentary Secretary, because I was about to say that the right hon. Gentleman is undoubtedly offering the House and the country a complete pig in a poke. The Bill has been introduced with no proper Explanatory Memorandum. When we introduced the principal legislation, the 1958 Act, it was preceded by a White Paper which quantified the factors on which the general grant would be determined. None of those factors have been specified by the Government in their White Paper.

At the request of the then Labour Opposition, the then Minister of Housing and Local Government provided a table of exemplification as to exactly the effect of the proposed legislation on all local authorities throughout the country. That gave local treasurers and ratepayers an opportunity to see objectively what the effect would be in their own areas, and it gave Parliament, in our Standing Committee, a proper chance to discuss the real merits or otherwise of the proposals.

It is significant after all that the Labour Party has said about specific and percentage grants, that right hon. and hon. Members opposite have had a conversion to the principle of the general grant. I do not know quite when that conversion took place, but it must have been one of those recent but welcome conversions to Conservative policies which we see coming over the Labour Party all the time. It is quite wrong to describe this as a Local Government Bill devoted primarily to finance. It has so many miscellaneous provisions that it should be a Miscellaneous Provisions Bill.

Turning to the question of the more extensive type of general grant, I wonder whether the Minister read my letter to The Times of 9th June. It was directed primarily to him. I asked in that letter that we should have put before us at an early date an exemplification of the effect of his Bill. If he has not read it, I draw that letter to his attention, hoping that we shall have action along those lines before we reach the Committee stage.

Everyone is united, outside the Front Bench opposite apparently, in condemning the postponement of revaluation. The Minister is no lover of the rating system, but he has gone a great way to damning it by postponing revaluation and thereby not giving the rating system a chance to work properly.

Another matter which could have been left out of the Bill is the reorganisation of street lighting provisions. In the Minister's own words, this is a temporary Measure and it is his expectation that we shall shortly have a redrawing of boundaries as a result of the Royal Commission's recommendations. That would have been time enough to deal with this complex transfer.

I come now to the background to the Bill. The Labour Party manifesto of 1964 was extraordinarily forthcoming about the relief for ratepayers which Labour would give if returned to office. It said specifically: Labour will restore the percentage grant and transfer the larger part of the cost of teachers' salaries from the rates to the Exchequer. We all know that, in the intervening period, very little was done and, when the 1966 election came along, the Labour Party manifesto then dealt with the matter in small print. There was little reference to it by Labour speakers during the campaign, and I am not surprised. They wanted the impression to remain that they were still going forward with their 1964 proposals although they had been whittled down. All we heard then was that there would be relief for hard-hit families. This has been given, but it was done largely at the expense of other ratepayers. [HON. MEMBERS: "No."] Yes, very largely it was. I know about the 25 per cent., but a very large element was back-loaded on to all other ratepayers.

Mr. Crossman

We are comparing rates here. Will the hon. Gentleman consider the Tory rate relief Measure introduced before the previous election? What proportion was provided for there in the grant as between ratepayer and tapayer?

Mr. Temple

I do not know that exactly.

Mr. Crossman

I do.

Mr. Temple

But that was always called an interim Measure, and it was brought in at a time when a complete review of local government finance was going on.

Mr. Crossman

Ours, also, is an interim Measure, as I made clear. Why not admit that the hon. Gentleman's Government did the same thing?

Mr. Temple

If the right hon. Gentleman is now talking about this Bill as another interim Measure, he must remember that it is to go on for five or six years. This was never the intention of the Tory Party. Ours was just an interim Measure to carry us forward for a very short time indeed.

The short answer as to why Labour's enthusiasm for relief to ratepayers evaporated between 1964 and 1966 was that the opinion polls at that time indicated that the Labour Party would be returned with a large majority. Enthusiasm among right hon. and hon. Members opposite for the relief of ratepayers dried up. As a result, we now have this very disappointing Bill presented to the House.

The 1966 White Paper showed a tremendous turn-about, or climb-down, in the Labour Party's attitude to local government finance. We are extremely glad that the Labour Party has returned to a certain amount of Conservative financial sanity. The Government have now introduced what is, in effect, a very much more extensive general grant. I congratulate them on it. It is a Conservative policy which they have extended, and we look forward to working in Committee to improve this general or rate-support grant which they have now proposed.

However, having been a member, like my right hon. and learned Friend the Member for Hexham (Mr. Rippon) and the hon. Member for Widnes (Mr. MacColl), of the Standing Committee on the 1957 Bill, I am surprised, after the criticism levelled at us at that time, that right hon. and hon. Members opposite have made this turn-about, departing entirely from the percentage grant which they so glibly promised to bring in if returned to office.

Looking for a moment at wider questions, I am greatly concerned about the total current expenditure of local authorities in general. It is rising at the cumulative rate of 9 or 10 per cent. per annum. I took some figures from Cmnd. 2966 of April, 1966, and found that the total amount of current local authority expenditure had risen by £1,000 million between 1960 and 1965. The sum of £1,000 million in five years is a very large increase indeed. It means that local authority expenditure during those five years has galloped past the total of defence expenditure. I would have thought that this was one of the matters which has been very much the concern of the central bankers who have been meeting in Basle recently. Frankly, I have been a little disappointed at the small attendance, certainly on the Government side, during the discussions of the Bill which deals with the whole problem of the finance of local government.

I make one small quotation from paragraph 17 of the White Paper dealing with the relief to ratepayers proposed by the Government. It says: …the increases in rates which householders are called on to bear in 1967–68 and subsequent years will be only about one-half of what it otherwise would have been. That is perfectly clear and plain English, but it does not mean what it says. The action of the Bill will not be to halve the increase in rate poundage which will occur in every local authority throughout the country. I shall go on in a few moments to show that the incidence of expenditure and the incidence of rates among local authorities throughout the country will be most uneven and that the effect of the Bill will by no means be to halve the increase in rate poundage among all authorities.

Mr. Crossman

I did not say that.

Mr. Temple

The White Paper says that and it was acknowledged to read clearly.

One of the effects of the Rating Act, 1966—I disagreed with the Minister a few moments ago and said "major share when I should have said" quarter share "—was to back-load about £9 million a year on to the domestic sector.

Mr. Crossman indicated dissent.

Mr. Temple

I am quoting from the County Council Gazette of 1966, which says that in 1966 the back-loading on the domestic sector would be £9 million a year. The built-in increase in local government expenditure will increase this in 1967 to about £10 million a year and half of this will be in the domestic sector. Therefore, as the Minister proposes that the actual increase in grant in the domestic sector through the new domestic element will be £30 million less the £5 million increase which I have just mentioned. The benefit to the domestic sector in the forthcoming years will clearly be less by £5 million than stated. In other words, it will be £25 million rather than £30 million and will be whittled away further by the recasting of the highways grants mentioned by the right hon. Gentleman.

The Bill is not as generous to ratepayers as the Minister makes out. I am now scanning the Government Front Bench to see whether any Treasury Minister is present. I see that there is not and there has not been all day, but without doubt most of the Bill's provisions have been dictated by the Treasury. The Bill is nothing like as generous as the Conservative proposals would have been if we had had the chance to implement them. We made it perfectly clear in our 1966 manifesto that we would give rate relief by the transfer of services of £90 million a year in England and Wales and £10 million a year by a different method in Scotland. The Labour Party cannot claim that it is being more generous than we would have been had we been returned to office.

I now turn to the Bill itself. I regard Part I and the First Schedule as by far the most important part of the Bill. We are extraordinarily glad that the general grant principles have been accepted and expanded. I should like to know whether the Government have had consultations about dropping percentage grants with the National Union of Teachers and with the Association of Education Committees, because I remember exactly where the N.U.T. and the Association stood in 1957 and 1958 on the subject of percentage grants. They stood firmly behind the proposals of the Labour Party, which were diametrically opposite to the proposals contained in the Bill. My hon. Friend the Member for St. Ives said that the Bill was being debated in a vacuum. In view of what my right hon. Friend the then Minister did in 1957 and 1958 to secure widespread knowledge throughout the country before that legislation was introduced, the present Minister should be ashamed at the paucity of the information which he has offered to the House so that we can have a well informed debate on this subject. None of the factors is known to hon. Members. They are known to the working parties of local authorities, but they are marked "confidential". I have not seen them myself, because I would not claim to see a confidential document from a working party and nor would I expect a local government representative to show me a document marked "confidential".

We in Parliament are discussing these things in a vacuum whereas behind the scenes all these factors are known. The right hon. Gentleman is, or should be, in a position to tell us what the factors are and their effect. If not, he has not the right to bring the Bill before the House, because to do so would be to sell Parliament a pig in a poke.

I would refer now to the question of the timetable. This was a matter which has been referred to by a number of speakers on this side of the House. I took down roughly the words of the Minister when he said that local treasurers are being asked to do more in respect of this Bill than in respect of any other change which has been made in local government finance since the war. [Interruption.] Very well, in the two Bills. I believe that the Minister is putting an enormous burden of administrative work on the local treasurers and that it is virtually impossible for all of this administrative work to be done accurately and in time so that a new rate support grant Order can be laid before Parliament at the correct time.

The Minister will know that he is asking for a sample on a 10 per cent. basis of estimates of expenditure from district councils. I have seen these forms only today, and they are most complicated and are going to the "sample" authorities throughout the country. I would like to ask the Minister whether he has consisidered how he is to raise that sample from 10 per cent. to 100 per cent? On what basis will he raise the sample? Perhaps the Parliamentary Secretary will be able to tell us. I know that it is a very difficult problem indeed.

Will the Government call on the Cheshire County Treasurer and the Treasurer of the Manchester Corporation to do the calculations for them, as they have done hitherto in respect of grants for the counties and county boroughs, or will the Ministry do this very difficult bit of calculation itself? I consider that the new educational units and the new system of bringing highway grants into this new rate support grant will be extraordinarily complex and difficult and will add many difficulties to those which treasurers are already facing, in working the very difficult administrative procedures which the Government are putting upon everyone in every walk of life.

One point which has been made to me by the Association of Municipal Corporations is the prime importance of the reliability of the figures in the base year. The Minister will know that the base year for the calculation of his rate support grant is the year before the reorganisation of local government in London. I do not believe that a transferability of those figures which were arrived at prior to the reorganisation of functions in London can be done with reliability in order to arrive at a realistic estimate of what the figures should be in the year 1967–68, which will be the first year of the new rate support grant.

It would be very wise of the Government to consider deferring the operation of the Bill for one year, while, at the same time, giving the domestic ratepayers the benefit of the domestic element. During the Committee stage I shall be very happy to explain to the Minister just how this rather delicate but necessary operation could be done.

I turn now to the specific grants, both old and new. The House must make no mistake that these will be a first charge on the rate support grant. Therefore, the larger the specific grants are, the less general grant or rate support grant there will be for all authorities.

Mr. Crossman indicate assent.

Mr. Temple

I am glad to see the Minister confirming that I am correct in that respect. I know that this is a difficult and complex Bill and I am pleased that the Minister should confirm that I have this clear.

If a national determination is made for a vast increase in police expenditure, as may well happen, the police grant will be taken in as one of the specific grants. But if that unexpectedly grows in size, then the increased burden will fall upon the local ratepayers, who, especially with the reorganisation of police functions, have very much less control over the police authorities than in the past.

This is only one example of many in which I regard this Bill as having a certain underlying aspect, a sleight of hand, on the part of the Treasury. If the specific grants are taken in at what the Minister calls in his White Paper the "historic figure"—and having been taken in as such they are only given the 54 per cent. or 55 per cent.—then, in the succeeding year, whereas in the other instances they would have been 100 per cent. or some other specific rate. This is a complicated point. I am wondering whether cognisance has been taken by the Government of the Treasury sleight of hand. I have spoken about Treasury sleight of hand before on local government finance.

I am absolutely certain that London and the great conurbations will be the gainers by the whole reorganisation of this grant system. The highway grants will definitely benefit London. The new educational units will do likewise. This will be to the detriment of counties and the county districts. My hon. Friend the Member for Devizes (Mr. Charles Morrison) and my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) made points about the detrimental effect on the counties of recasting the grants. I believe those accusations to be true in general terms. Only when the Minister explains more about the factors will we be able to judge this matter objectively. I know that the County Councils Association shares this view.

What is abundantly clear from the Bill is that the rates of industry and commerce will rise even faster as a result of Government policy, and this must put up prices.

My comment on Part I, which deals with the new support grant system for five or six years ahead, is that it will be a disappointment for everybody and that in some areas the ratepayers will be positively disgusted when they discover the effects of the Bill.

I pass to Part H, which deals with the postponement of revaluation. This is being universally condemned, and I hope that we on this side of the House will do something about it in Committee.

Mr. Crossman

What?

Mr. Temple

We shall inform the Government of our views in Committee. I merely say that the view is universally held that this is a disaster.

I turn to the rating of unoccupied properties, which the Minister fairly described as no bonanza for ratepayers. These provisions need adjustment along the lines of the Local Government (Scotland) Bill. There are two other Parts to the Bill, Parts III and IV. In view of the complexities of Parts I and II, the Government might well be advised to drop most of the provisions in Parts III and IV if they want to get the Bill speedily through Parliament.

There are many aspects of Parts III and IV on which I should like to comment, but time does not permit me to do so. I should, however, like, through the Parliamentary Secretary, to put one point to the Minister of Agriculture. I have had representations today from the Royal Society for the Prevention of Cruelty to Animals about the views of the Minister of Agriculture on dog licences. The Society rightly takes the view that a dog licence should be obtained when the dog is bought or acquired. I believe that that provision could be brought within the scope of this Bill. I should like confirmation of that, because the Society thinks that this is a matter of very great importance.

The Bill comprises in its latter parts a mass of minutiae. However, I warn the Government that they will need very careful watching indeed. I wish to ask one question on this mass of minutiae. Why is the Minister, who dislikes rating so intensely, preparing for the consolidation of rating law? That seems to be a very inconsistent action even for a man of the eccentricity of the Minister of Housing and Local Government.

I should have liked to say a great deal more about the Bill because there is a great deal in it, but we on this side are united in the belief that it is a big disappointment after the promises which have been made to ratepayers generally and that it will be a tremendous disappointment to those who own small shops and small industrial properties because no relief will be given to them. In fact, the rate burden in those sectors will double before the Act which results from the Bill is superseded by something else.

Rates on those sectors will double within five or seven years, and I am afraid that the administrative strain on local treasurers will be very great. In the Financial Times of 9th June, there was a report of the President of the Institute of Municipal Treasurers and Accountants drawing attention to this factor at the Institute's conference. The report said that he noted that new services had often been introduced with little foundation in research, inadequate statistical information and few pilot schemes. This had resulted in signs of strain in the administrative machine. I warn the Minister of these signs of strain.

We are not opposing the Bill from this side of the House, because we welcome the conversion of the Government to the principles of the general grant. We deplore the deferment of revaluation. It is, as usual from the Labour Party, action before thought. We will do our best to find out what it really means when the Bill is in Committee.

9.31 p.m.

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

The hon. Member for the City of Chester (Mr. Temple) began his speech in a fighting mood. He rebuked us for the inadequacy of our legislation and our failure to grapple with the problems with the vigour and comprehensiveness that there would have been from a Conservative Government. By the end of his speech he had asked us to withdraw all except one part of the Bill. He threatened that if we did not do that we would not be able to get the Bill through Committee. I am quite certain that the local authorities most urgently want this Bill to go through and will very deeply resent any suggestion that it should be carved up in order to meet the prejudices of the Opposition.

I thought one point which he made was unusually unimaginative and churlish, and it must have deeply shocked the hon. Member for Crosby (Mr. Graham Page). This was his mocking reference to our attempts to modernise street lighting. He said that this is a very unnecessary frill which could be dropped from the Bill and could wait for later legislation. As the hon. Member for Crosby could tell the hon. Member for Chester, street lighting is a major factor in the prevention of accidents at night, and there is evidence that adequate street lighting which is integrated with the work of the highway authority will save life. Therefore, I do not think that there is much reason for saying that we should drop the opportunity of giving the highway authorities a chance for bringing the system up to date.

I wish to deal with one or two matters of detail before turning to the general points of the Bill. The hon. Member for Hemel Hempstead (Mr. Allason) raised the question of the distribution of the educational element in expenditure between the basic payment and the educational units. As far as I can tell, the hon. Gentleman's figures were about right. I say that because the figures are not yet fixed. The difficulty of talking about these matters is that there has to be a great deal of hypothesis about the figures which are used. But there is no reason to quarrel with the hon. Gentleman's figures.

My hon. Friend the Member for Bolton, West (Mr. Oakes) and my hon. Friend the Member for Epping (Mr. Newens) both expressed dismay at the proposal to take school meals and milk away from the specific grants and put them into general grant. They wanted to know if this was the beginning of a cutting down of expenditure on these services. In fact, this has nothing whatever to do with that. As my right hon. Friend explained, the point about taking them into the general grant is that they are services which are generally spread over the school population and do not require an extra special grant. My right hon. Friend the Secretary of State for Education and Science has all the powers necessary to ensure that these services are provided. It is still the duty of education authorities to provide them.

The hon. Member for Folkestone and Hythe (Mr. Costain) asked a very technical question about the control of the Estimates. If I understood the hon. Gentleman's point, he was referring to the recommendation of the Comptroller and Auditor General that the appropriate witnesses for the Public Accounts Committee should be the accounting officers of the Ministry of Housing and Local Government and of the Ministry of Education and other Departments responsible for the services towards which general grant is given. I have no reason to doubt that that will continue to be the practice.

The debate has shown some lack of appreciation of the impact this grant will have. There have been suggestions that the grant will be vitiated because increases in prices will cut into it and as a result the increased proportion of central Government grant will be absorbed by increased prices. I want to make it clear that this is an increase in he grant in real terms. It is not an increase purely in terms of monetary expenditure. The general grant at present is about 55 per cent. of relevant expenditure; that is, about 52 per cent. of total expenditure. We will pay the grant at the same proportion of total expenditure. We intend to go on giving an extra 1 per cent. in proportion every year. We are not merely meeting increases. We are meeting an increased proportion of increases. The Bill contains powers, as did the previous Bill, for varying Rate Support Grant Orders to meet increases in prices, salaries and wages.

I want to say something about the position that we inherited. The right hon. and learned Member for Hexham (Mr. Rippon) said that the Bill was totally inadequate to deal with the needs of the time. It was fitting that my hon. Friend the Member for Erith and Cray-ford (Mr. Wellbeloved) should have followed the right hon. and learned Gentleman and brought him rather rudely down to earth by quoting from the speech he made in 1962 when he accepted that the existing proportion between national and local expenditure was about right.

Mr. Rippon

I referred to the needs that time. The present time is four years on.

Mr. MacColl

I was coming on to that. The right hon. Gentleman went on in that speech to say this: I should be the last to stand here and suggest that the present system embodies immutable perfecion. I might in years to come regret taking such a stringent view."—[OFFICIAL REPORT, 2nd March, 1962; Vol. 654, c. 1779.] We regretted the right hon. Gentleman's absence from the House. He paid rather bitterly for backing the wrong horse on rates. He held up the proper progress of rating reform. He held up having any inquiry into the working of local government finance. He has now come, very bitterly, I am sure, to regret that and he is now in the embarrassing position of having to take a completely opposite view from that which he took some years ago.

Mr. Rippon

The Joint Parliamentary Secretary said that we held up any inquiry into local government finance. What inquiry into local government finance is taking place now?

Mr. MacColl

We have just had an inquiry into local government finance which was started at the very end of the last Government. This we continued, but we had to recast its recommendations. We are now going on to have a more general review of alternative sources of revenue when we have a new organisation of local government.

When one looks at what emerged from the good wishes of the last Government, it was simply the Rating Relief Bill, a Bill which I was astonished to find the hon. Member for Poole (Mr. Murton) speaking of with such warmth and regretting its disappearance. It must be remembered that the total amount of money which was paid to local authorities under the capitation grant was £6 million. The total amount which was distributed to individual ratepayers over the whole country was £40,000. Only £40,000 got into the pockets of elderly ratepayers. That must be compared with what we have done already in our own Bill.

Mr. Murton

It is interesting that the hon. Gentleman should mention that. In a radio broadcast during the election, his right hon. Friend the Prime Minister said that Poole and Bournemouth had fared better than any other town as a result of that particular Bill.

Mr. MacColl

I suppose that it had some electoral value somewhere. I am sure that we are all glad to see the hon. Gentleman back as a result of the great advantage which Poole got from the Bill, but no one else obtained any benefit from it. The Bill was ineffective and a complete washout.

Our Rating Bill has already got started. I was rather surprised to hear the hon. Member for St. Ives (Mr. Nott) quoting from an article in Local Government Finance. He quoted that part of it which referred to the incidence of domestic rates. I wish that he had quoted an earlier passage, from the treasurer of a rural district council. He said: Whilst we shall not be able to assess for some time the degree of success which the rebate scheme has achieved, the manner in which rebate applications are pouring in to my office as these notes are being written leaves me in little doubt that this scheme will at least go some considerable way towards fulfilling the intentions of those who devised the scheme. The annual report of the Institute of Municipal Treasurers, which was presented to the conference at Torquay, said: It is to be hoped that the measures of domestic derating that have been taken will enable balanced long-term decisions on local government finance to be taken, freed of the urgent pressures arising from increases in domestic rates. Those are two quite independent testimonies to the effectiveness of the Act. When I went down to talk to the conference at Torquay, I was prepared to be met with some violent opposition and to be attacked upon the workings of the Act by shock-ridden borough treasurers on the verge of nervous breakdowns. The only complaint that I received was that my right hon. Friend did not appear more on television.

I want now to come on to the problems which face the Government, and the reasons why we have had to approach them in the way that we have. Again the right hon. and learned Member for Hex-ham, in that famous speech which he made on a Friday afternoon long ago, made a remark which had a significance which I am sure that we did not really appreciate. He said: I think that in some ways the House has under-estimated the full implications of the policies set in hand in the 1958 and 1961 Acts."—[OFFICIAL REPORT, 2nd March, 1962; Vol. 654, c. 1786.] That was the main trouble with which we were faced. No one realised the full implications of the 1958 Act. We were straitened by the rigidity of the local government reform which was possible under it. None of the main problems which we had to tackle could be tackled under it, and even my right hon. Friend, with his computer-like mind, took a little time to recognise that he could not work the Act and had to start again. It is perfectly true that waiting to see whether it was possible to do something under the Act caused some delay.

The other difficulty which also arose out of the 1958 Act is the actual working of the general grant formula itself. That was so rigid that, while one could vary the weights in the formula, one could not vary the factors which determined the distribution of the money without further legislation. That has been one of the main reasons why it has not been possible to make the changes which we would like to have made to modernise the 1958 Act.

The criticism has been made, quite fairly, that our Bill is much more flexible than the 1958 Act was, and that not only the weights in the formula but the factors in it can be altered. It is perfectly fair to say that that makes it difficult to appreciate how it will work. However, if one is not prepared to allow flexibility in the grant order to deal with these problems, one will get tied up immediately in an out of date formula which one cannot make flexible enough to deal with the problems involved. I make no apology at all for the fact we have reserved to ourselves the right to come back to the House with orders which can be much more effective in dealing with the problems as they exist at the time.

The right hon. and learned Gentleman asked whether there would be full consultations concerning the regulations before the grant orders are made. The answer is "Yes". He also asked whether some education authorities might lose by the changes. It is quite true that where one makes a readjustment of formulae some people will benefit and some will lose. Both views have been put forward today. My hon. Friends who represent London constituencies complained that what we have done has not dealt with London's needs. At the same time, we have had the counties complaining that we have taken money from them and are preparing to hand it over to London.

The final problem facing us is to get a permanent solution of an alternative source of revenue. As my right hon. Friend has said, that involves a substantial reform of local government in order to get effective units of government which can be relied upon to administer a new system of raising revenue.

The question has been asked about the power of the Royal Commission to look at the financial problem. My right hon. Friend the Prime Minister made it quite clear that whereas there was no directive to the Royal Commission to do that, there was no earthly reason why, if it thought it necessary, it should not do so.

Mr. Ronald Bell

It is not a matter of whether the Royal Commission has power to look at financial problems, which, I suppose, it would inevitably have to do as part of its examination of the structure, but whether the whole question of an alternative basis for local authority finance was remitted to the Royal Commission.

Mr. MacColl

It was not remitted specifically, because there is no mandate upon the Royal Commission, but it is clear that if in looking at the problems which have been given to it to solve it is necessary to deal with finance as well, there is no reason why the Commission should not do so. It is, after all, a high-powered Commission which can be relied upon to do that.

Sir D. Renton

Would the hon. Gentleman agree that under the terms of reference there is no obligation upon the Royal Commission to consider finance and make recommendations, and that this is an unsatisfactory state of affairs?

Mr. MacColl

I do not want to waste any more time. I simply refer the right hon. and learned Gentleman to col. 292 of the OFFICIAL REPORT for 24th May, when my right hon. Friend the Prime Minister dealt with that point.

I want now to quickly look at the alternatives which the Opposition have offered to what we are doing in the Bill. The right hon. and learned Member for Hexham put forward two possibilities. He said that we could follow the suggestion of the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) and simply make a general increase in the old grant right across the board. The disadvantage would be that, because of the unsatisfactory nature of the formula enshrined in the 1958 Act, to do that would simply be to produce more anomalies and unfairness.

The right hon. and learned Gentleman's second proposal was that the cost of services amounting to £100 million—for the whole country, and not simply for England and Wales—should be transferred to the Exchequer. This, however, would be a once-for-all operation. It would presumably also mean either that these services would go directly into the control of the central Government or that 100 per cent. percentage grant would be paid for them. In view of what has been said time and again by the Opposition about the disadvantages of unlimited percentage grants, I do not think that they would really intend to do that. What it would amount to would be to taking-over these services.

What would have been the financial effect of doing that? After taking over the money for the first time and getting the benefit of a substantial reduction in expenditure there would be no more help. There would not be a steady increase such as we are giving. There would be only the one substantial improvement and rates would then continue to rise in the normal way with poundages going up by about 8 or 10 per cent.

Of the £100 million that would be saved, less than half would have fallen to the domestic ratepayer. Of the other half, which would have gone to the commercial and industrial ratepayers, a substantial amount, probably another half, would have come back in the saving of tax. Thus this tremendous gesture of handing over £100 million to the ratepayers would not have been £100 at all: it would have been nearer £75 million. The domestic ratepayers would have received only £50 million, whereas our proposals start with £25 million in the first year, £50 million in the second year, £75 million in the third year, and so on. Clearly, our proposal is more flexible and more effective.

Mr. Rippon rose——

Mr. MacColl

I am sorry, I cannot give way. I have to watch the time.

I want now to refer to some of the points which have been raised on the details of the working of the grant. The hon. Minister for the City of Chester spoke about exemplification. What he said was perfectly fair. One of the difficulties is that we have no effective figures for London. That makes it difficult to produce worthwhile statistics. That is the main reason why we are not anxious to produce figures, which could only be misleading because they would be founded on completely false circumstances.

There are two main reasons why, as far as one can see, some counties could probably lose. The first reason is the effect of the education units, because the proportion of expenditure in the higher levels of education is greater in some of the urban areas than in the rural areas. The other is that some counties have benefited for quite a time from the weighting of the low density formula. Under the new system they will cease to get that benefit. They will therefore tend to lose. Nevertheless the general shape of the grant is now clear to the House. The total amount is £1,400 million. Of that, £150 million is specific grant, about £1,250 million is rate support grant, of which about £200 million is based on resources, and about £25 million rising upwards is domestic.

I should like to say something about the expanding areas, and I say this with a good deal of personal feeling, because I represent an expanding area. I would be the last person to want to be indifferent to the realities of this problem. One of the difficulties is that the evidence that we have had so far does not justify special treatment of their problems in the formula. If in the course of the arguments in Committee other evidence emerges, it may be that we will find a means and a reason for changes, but at the moment, as far as one can see from the facts—there is a strong case for saying that though the expenditure in expanding areas is high, it is high in other areas as well. There really is no convincing evidence that the element of expansion is the really important thing.

The right hon. and learned Gentleman asked why we had a grant for immigrants from the Commonwealth, and not for expanding areas. He gave the answer to that himself when he asked why we had the phrase in Clause 11 about people who are distinguished by their language and customs. We may sometimes get parochialism over the overspill problem. Even moving people from Lancashire to Cheshire is not moving people who are especially distinguished by language and custom. The whole point of having a special grant limited in this very narrow way for immigrants is to make it clear that we do not regard immigration generally as something which is a social disadvantage, or an economic disadvantage, calling for special assistance, but we recognise there are certain problems peculiar to immigrants from the Commonwealth. That is why we must treat this aspect separately.

I have dealt as well as I can with the shape of the Bill, and I have no hesitation at all in inviting the House to give it support. It comes forward while we are in the middle of a process of modernising and reforming our whole system of local government finance. This will give not only substantially increased help to local authorities, but is an increase to them which will gather momentum as the years pass. As the pressure gets heavier on local authorities, the proportion of the grant will go higher. Finally, it has the great advantage that it is specially directed towards the domestic ratepayer, and in this respect it is a very fitting partner to our last Rating Act which did precisely the same thing.

We are taunted by hon. Gentlemen opposite that we have done nothing for the ratepayer. It is an insult for this to be said to us by the party opposite, which lamentably failed to do anything for them over the years, and then produced a Bill which was known to be a mockery even before it got on to the Statute Book. It was an insult to the draftsmen to ask them to draft it. It was just too stupid, and, finally, it proved to be utterly ineffective, and has done nothing to help.

Therefore, I think we can with confidence say that we have started on this very important job of recasting the system of local government finances, and that this Bill will be an effective instrument in playing a very important part in doing just that.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).