RATE SUPPORT GRANT (INCREASE)

HC Deb 14 December 1967 vol 756 cc738-57

8.48 p.m.

The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Arthur Skeffington)

I beg to move,

That the Rate Support Grant (Increase) Order 1967, a copy of which was laid before this House on 30th November, be approved.

The Local Government Act, 1966, requires the Order to be accompanied by an explanatory report. This report was laid at the same time as the Order and has been printed as House of Commons Paper No. 19.

Section 3 of the Act empowers my right hon. Friend to make an Order increasing the rate support grants, and any elements of the grants, if it appears to him that there has been an unforeseen increase in the level of prices, costs and remuneration and that the effect of the increase on the relevant expenditure of local authorities is substantial. There must, therefore, be two elements satisfied before the Minister can act.

To put the Order in perspective, it might be helpful if I refer to the new rate support grant system. Under Part I of the Local Government Act, 1966, this took effect from 1st April, 1967, and replaced, with modifications, the former general grants, rate deficiency grants and specific grants in aid of expenditure on school milk, meals and on the maintenance and improvement of roads other than principal roads. It introduced a grant, known as the domestic element, with a new purpose, that of making good to rating authorities a prescribed reduction of 5d. in the £ in the rates on domestic properties for 1967 –68 and l0d. in the £ for 1968 –69.

In determining the amount of rates support grant, the Minister first examines the estimates of relevant expenditure produced by the local authority associations and the Greater London Council, and there are consultations about them. The conclusion having been reached about the aggregate of the estimated relevant expenditure, the Minister next considers the aggregate of Exchequer revenue grants, other than housing subsidies which are outside the system.

The grant percentages used for the first Order were 54 per cent, for 1967 –68 and 55 per cent, for 1968 –69. The 1967 –68 figure was a little over 1 per cent, more than the corresponding percentage for the previous year under the old grant system. Having arrived at the aggregate amount of grant, the Minister next estimates what portion of it will be allocated to specific revenue grants, for example, for the police. The amount remaining after deducting the estimated amount of these specific grants is the aggregate amount of the rate support grant.

There are three elements in the rate support grants. They serve three purposes and are divided into three parts. First there is the needs element, which is about four-fifths of the total grant and which replaces general grant but covers a wider range of services, in particular school meals and milk and the maintenance and minor improvements of highways. The needs element is distributed to counties, county boroughs and London Boroughs on the basis of objective factors of which population is the key one.

Then there is a resouces element which replaces the old rate deficiency system of grants and, like them, is payable to local authorities of all types whose rateable resources per head of population are below the national average according to the shortfall in those resources. Thirdly, there is the domestic element, a new feature, which is payable to rating authorities in respect of the loss of rate income from relief to domestic properties at amounts in the pound prescribed by the Minister.

The Rate Support Grant Order, 1966, which we shall be modifying if the House approves this Order, came into force on 1st April. It fixed the grant at £1,254 million for 1967 –68 and £1,362 million for 1968 –69 on the basis of forecasts of relevant expenditure of £2,557 million and £2,726 million for the two years respectively. Increases in relevant expenditure which have taken place since are listed in the first part of the appendix to the Order on page 5.

As hon. Members will see, the major reason for the present increase Order is the teachers' pay increase negotiated in the summer, which accounts for increased expenditure of £27.3 million in this year, and £37.1 million in 1968 –69. These increases, together with awards to police, manual workers, firemen and others, form the bulk of the total expenditure increases taken into account for this Order which, adding in the range of smaller items, comes to £72.7 million this year and £91 million in 1968 –69, as the report very carefully enumerates.

Against these are to be set reductions in costs, the major one being variations in interest rates between the rates ruling last December and those ruling when the negotiations for the present Order were concluded during the first week or so of November this year. Again, at the bottom of the first part of the appendix on page 5 hon. Members will see details of what the reductions in costs were for this and for other items.

Also to be offset are increases in income, the largest of which is nearly £14 million for school means in 1968 –69, which results from the increase of 6d. per meal. This increase in the charge will be accompanied by the introduction of more generous remission scales. Free meals will be made available as of right to fourth and subsequent children. A campaign is being undertaken with the object of encouraging as many as possible of all those eligible for free meals to make use of the service. I add these facts, because the £13.9 million estimated increase takes into account the probable effect of the factors I have just mentioned.

The net effect of all these variations is to produce an increase in estimated expenditure of £62.1 million for this year and of £66.9 million for 1968 –69.

After allowing for increases in specific grants due to pay and price changes, the increases proposed in the rate support grants, as the Report again indicates, are £29 million for the current year and £33 million for 1968 –69. These additional sums are divided by the Order between the resources element and the needs element. As the domestic element is the estimated cost of a 5d. or l0d. relief to domestic ratepayers, it is not subject to increases in prices, costs and remuneration, and so remains unchanged. The Order also makes necessary changes in the weightings for the needs element so as to distribute the additional grant. The factors are altered so that the proportions remain the same for the larger amount to be distributed. In other words, the £29 million and the £33 million for the two years will be distributed to local authorities by raising the amount payable per head of population, per child under 5, per child under 15, per person over 65, and per education unit. If anybody wants to know what an education unit is, it is all laid down in Regulations. If anybody wants the details, I have them here and can give them. However, hon. Members, who will be familiar with the subject, probably do not want me to make an even longer speech.

For both years, broad agreement has been reached with the local authority associations and the Greater London Council on the matters taken into account in the Order, and my right hon. Friend would like to thank them for the help they have given in reaching the settlements in the Order.

I commend the Order to the House.

8.58 p.m.

Mr. Graham Page (Crosby)

A rate support grant Order is a terrifying document to anybody who does not claim to be a human computer. I am sure that the Joint Parliamentary Secretary does not make that claim, and I certainly do not claim to be that sort of person. As hon. Members will see, the Order contains a schedule of figures and formulae, with phrases such as— As the sum by which the road-mileage of the roads in the area of the authority classified as principal roads under section 27 (hereinafter called ' the prescribed sum') is to be multiplied— Then there is a complicated set of figures in two columns for one to try to work out.

Who would think that hidden amongst all these formulae and figures is a most important factor in the figure that we see on our rates demand note as it comes in perhaps twice a year, or four times a year, as the local authority thinks fit, of so many shillings in the £?

Fortunately we have had the explanation from the Parliamentary Secretary, for which I am sure the House is very grateful, and we have before us the Report of the Minister, explaining why the increase is necessary, from which I understand the point simply to be that the Government tell the House: "A year ago we said that local authorities would have to spend £2,556 million this financial year. We now find that they will have to spend £2,619 million, which is £63 million more than we thought." That is for this year. For next year, they say, "We thought that they would have to spend only £2,726 million, and we now find that the figure will have to be £2,793 million, that is, £67 million more than we thought a year ago."

If the ordinary man in the street who pays his rates realises that fact, that something over £60 million a year more for this year and next year, in other words over £1 a head more, has to be found, he will not be very pleased with a Government who promised him at least some relief from the burden of rates.

A year ago, when we were discussing the rate support grant which the present Order is intended to amend, the hon. Gentleman the other Joint Parliamentary Secretary, replying to the debate, told us that we were in the middle of "a desperate economic crisis"—incidentally, this seems to be an annual event for this Government—and there would be no Santa Claus that year. He went on to say: …we have gone a very long way indeed on the road to curing the crisis. … This is not the record of a Government who have faltered or failed to stand up to the economic crisis. It is the record of a Government who have tackled that crisis with determination ".— [OFFICIAL REPORT, 20 December, 1966; Vol. 738, c. 1324.] That determination has now taken us steadily downhill to devaluation and all that that will mean as a burden on the rates.

However, I ought not to blame devaluation for the increases which I have mentioned because the figures in this Order are calculated before taking devaluation into account. Still, without that increase in the cost of services to the local authorities, there will be about £2 or £3 increase per household now found by the Government to be necessary expenditure of the local authorities. By the Order the Exchequer will cushion that increase by contributing 54 per cent, this year and 55 per cent, next year. But even after contributions from the taxpayer of £29 million this year and £33 million next year, the ratepayer is still left to find more than £30 million for each of those years before any debit is made for increases caused by the devaluation and the higher interest rates which have occurred over the past few weeks.

In law, as the Parliamentary Secretary said, the Minister has to justify a Rate Support Grant (Increase) Order of this sort on the ground that there has been an unforeseen increase in the level of prices, costs or remuneration and that that unforeseen increase has had a substantial effect upon local authority expenditure.

The expression is "unforeseen increase". One might well say that this Order is entirely ultra vires because the increasing costs were not unforeseen at all. It was inevitable that the Government's policies would bring about increases in prices and costs. This has been as plain as a pikestaff throughout the past 12 months. If government is based on the philosophy of antagonism towards private enterprise and protagon-ism towards increased taxation, the levels of prices, costs and remuneration are bound to rise. This is not forecasting. It has been a proven fact in the past in connection with rates.

To meet the rise in costs in the past, since the first rates day after the Labour Government took office, rates have risen 2s. 6d. in the £. I am talking about the average rate poundage, the figure in the £ that we see on our demand notes. Despite savage cuts in local authority expenditure for 1967–68, estimated at £160 million, rates have steadily increased over the years of office of the present Government.

The Government must now satisfy the House that there are unforeseen increases which will cost about £60 million to £70 million a year. They are set out in the Appendix to which the hon. Gentleman referred. The very first is teachers' salaries, which show an increase of £27.3 million for 1967 –68 and £37.1 million for 1968 –69. What has happened to the promise in the Labour Party manifesto in 1964 to transfer the larger part of the cost of teachers' salaries from the rates to the Exchequer? The House and the public will want to know. That policy would have affected the Order by at least the increases of £27 million for this year and £37 million for next year. In fact, it would have affected it by almost the whole of the teachers' salary element in the rate burden. The House is entitled to a categorical answer from the hon. Gentleman on what has happened to that policy. Why have not teachers' salaries been transferred to the taxpayer, as was promised in the manifesto? If we do not have an answer we shall have to treat that as another of the Labour Party's pledges which had gone down the drain with the Government.

I have mentioned only teachers' salaries but Part II of the Appendix shows that the cost of education as a whole will increase by £36.3 million over the estimated figure for 1967 –68 and by £50.4 million over that for 1968 –69. When examining the figures in the Report we must remember that although it and the Order were laid before the House on 30th November, 12 days after devaluation, they take no account of the increases resulting from it. Yet those increases in costs and interest rates will have an effect for 4£ months of the first year to which the Order applies and for the whole of 1968 –69. To that extent the Report seems to be wholly misleading. Paragraph 4 says: … the Minister is satisfied the unforeseen increases in costs since the 1966 Order was made are such as to warrant the making of an increase order in respect of both years of the grant period. Pay awards and other increases in cost are estimated to increase expenditure by …"— and the figures are set out— These increases are partly offset by reductions in costs (mainly the result of lower interest rates) amounting to "— and again the figures are set out.

What will happen about the lower interest rates now with the policy which has resulted from devaluation. After devaluation on 18th November, the Minister should have taken the Order and the Report away, redrafted the Report and consulted the local authorities again. It will be no good, if the Parliamentary Secretary is so minded, for him to quote the Prime Minister's broadcast of 19th November in which the Prime Minister said that: … the priority programmes of housing, school-building, and hospital-building will be safeguarded in all these measures. … How can they be?

Mr. Deputy Speaker (Mr. Sydney Irving)

Order. The hon. Gentleman is getting a little wide of the Order now. It does not concern itself with housing subsidies. The hon. Gentleman must come back to the Order.

Mr. Page

I referred in full to the Prime Minister's statement, which included the word "housing", but I did so in full so that I should not be accused of misquoting. The quotation is that: … housing, school-building, and hospital-building will be safeguarded in all these measures … I was only intending to refer to school building because that comes within the terms of the Order.

If the local authorities are to build as many schools after devaluation as they had planned, before devaluation, to build, more money will be required. The builders have estimated that there will be an increase in building costs of about 4 to 5 per cent. Will that money be forthcoming? It is not in this Order. Nowhere do we find the increase referred to in the Order. If not, will the school building programme be cut to bring it within the figures put before us in the Order?

A similar question arises, although on a smaller scale perhaps, on all other local authority services covered by the rate support grant. The same money will produce less in future and that is not taken into account in the Order. Like Alice, the councils will have to run faster to keep in the same place. They will have to have more money to build the same buildings and to carry out the same services.

Did the Prime Minister, when he gave that assurance to the public, really mean that the programmes would be safeguarded, or merely that the same nominal amount of money would be spent on those programmes? The Order does not answer that question. Indeed, it does not recognise it as of interest at all. The Order is just not related to the situation with which we are faced since 18th November, despite the fact that the Order was made on 27th November and laid before the House on 30th November.

Let us look at the interest rates. In the Appendix to which the hon. Gentleman referred, there is a credit item for interest rates. How ludicrous it is to suggest that there can be savings of £½million on interest rates in 1967 –68 and £6½ million in 1968 –69 when interest rates are as they now are. I imagine that this credit item in the Appendix ought really to be a debit item of about the same amount. I am told that the increased loan charges for Birmingham alone are costing £100,000 a month since devaluation and the consequent increase in interest rates.

We have not had any explanation, either from the hon. Gentleman today or in answer to Questions which have been asked previously, as to how the present policy is going to affect local government expenditure. We have no explanation in the Order, which merely assumes that devaluation and the increases in interest rate have never happened. In the debate on 22nd November, my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) asked the then Chancellor of the Exchequer: The Prime Minister said that the priority programmes of housing, school building and hospital building would be safeguarded. As we understand that, as a result of devaluation, the cost of building will go up, will there be additional funds available on top of those already planned? The right hon. Gentleman replied: This problem will have to be looked at. I am not in a position to give an answer tonight."—[OFFICIAL REPORT, 22nd November, 1967; Vol. 754, c. 1439.] On 28th November, my hon. Friend the Member for Northants, South (Mr. Arthur Jones) asked the Minister of Housing and Local Government, as a result of the economic measures announced on 18th November", whether he had ordered the postponement of some local authority spending programmes; and what estimate he has made of the amounts involved in such postponements. The Answer was: I am not yet ready to make a statement. But some reduction in local authority expenditure will be called for ".—[OFFICIAL REPORT, 28th November, 1967; Vol. 755, c. 50.] Is the hon. Gentleman now able to tell us where these cuts will take place, because that is very relevant to the Order?

Let me be specific in my attack on the Order. I do not believe that the unforeseen increases as set out in the Appendix to the Report should form the foundation for this Order. First, both in 1967 –68, and in 1968 –69, the figures take no account of increases due to devaluation and higher interest rates, or, alternatively, they take no account of the threatened cuts in local authority expenditure. As far as the column relating to 1968 –69 is concerned, they take no account, or take insufficient account, of capital projects which have been deferred this year by the squeeze or wage rises which have been deferred this year by the freeze, both of which will become urgent during 1968 –69.

Mr. Eric S. Heffer (Liverpool, Walton)

Would you tell the House how you arrive at the figure of 4 per cent.—

Mr. Deputy Speaker

Order. The hon. Gentleman must use the traditional form of address.

Mr. Heffer

How does the hon. Gentleman arrive at the figure of 4 per cent, increase in building costs as a result of devaluation? As I understand it, having been in the building industry all my working life, the one thing which we import is timber. Apart from timber, what other products will we import for which we have no substitute in this country? I am naturally interested and concerned if the hon. Gentleman's figure is right. I do not see how he can arrive at it.

Mr. Page

Although I have not the paper before me now, I will give the hon. Gentleman a complete breakdown of the materials used in the construction of a house which gives that figure. There are the metals used, both in paints as well as the separate metals, the timber, the alterations in taxation and in the financing of building, because local authorities have to finance it and to pay the extra cost of the money which they have to borrow to finance it. These figures give the percentage which I mentioned, and I have taken the precaution of acquiring from a builder—a reputable firm, I hope —a breakdown into 20 items in the construction of a house. I grant the hon. Gentleman that I was applying the figure to the construction of schools. There may be a distinction.

Mr. Deputy Speaker

Order. The hon. Gentleman is discussing housing, which is excluded from the Order. No doubt he can bring himself quickly into order by using another allusion.

Mr. Page

I was using these figures for perhaps a different item of construction, but I believe they are just as valid in constructing schools.

I said that the column relating to increases unforeseen for the year 1968 –69 did not take into account the capital projects shelved during this year or the wage rises shelved during this year, both of which will become urgent next year. In particular, they do not take into account the fact that, owing to the economic pressure, many local authorities raided their reserves for this year, instead of increasing the rates, and that is something that cannot happen again.

For that reason the unforeseen in creases for 1968 –69, as given in the Appendix, are quite inadequate. Perhaps the Minister is hoping to counter act this by the proceeds of the betterment levy. Why is this not mentioned in the Report? We all remember the noble Lord, the Minister without Port folio, in another place in November, 1966, telling the noble Members of that other place —

Mr. Skeffington

On a point of order. I do not know whether to curtail the discussion, as I find it extremely interesting, but I fail to see how the betterment levy can be discussed on this order. I am sure that there are other opportunities if the hon. Gentleman wishes to discuss it.

Mr. Deputy Speaker

The hon. Gentleman is right in his submission. The betterment levy is not part of this increase and therefore not admissible for discussion.

Mr. Page

If I may pursue that point of order a little further. We are considering the amount to be provided for local authorities in order to account for an increase in their rates expenditure. In the appendix to this Report there are set out a number of items in which the Minister considers expenditure will increase and a number of items where there are offsets, reductions in cost, variations in interest rates and offsetting— increases in income, such as school meals, welfare accommodation, students' fees and "other income". I do not know what "other income" is but I was questioning whether that included something which we had previously been told would go to local authorities and would be income to them.

Mr. Deputy Speaker

My understanding is that the Order is made under Section 3 which does not allow the hon. Gentleman to take into account the betterment levy. Therefore it cannot be included in the designation.

Mr. Page

I bow to your Ruling and pass on to sum up my arguments, I hope succinctly. I invite the Joint Parliamentary Secretary to answer these questions, with the leave of the House. First, are the present programmes on educational and welfare services of the local authorities to be maintained? If so, where and how is the increased cost to be found, because it is not in this Order. If not—and if this Order is confirmed— what services will be cut? His Minister has admitted that some services are to be cut and it is relevant to this Order to know what they are.

Secondly, by how much does he consider that the rates will rise next year? The difference between the figure of estimated expenditure upon which this year's rates were based, that is £2,557 million, and the revised figure for next year, £2,793 million, is £236 million. That is without taking devaluation into account. Does he anticipate that local authorities will seek to raise more or less than half that difference? To put it in simple language how much in the £, on average, does he think that the rates will rise? My guess is, even taking into account the domestic element of l0d. in the £, that the average might well bump up by a greater amount than ever before, to something getting near to two bob in the £.

Thirdly, do the figures in this Order take account of the Government's recent policy that rates should pay for keeping local authority rents at uneconomic levels?

Fourthly, does the Order take into account—Mr. Speaker, I must pause there because I was about to ask a question which Mr. Deputy Speaker told me was not in order. I had it still on my notes; but I will not ask that question.

My final question is whether the teachers' salaries item in the Order means that the Government now completely abandon their election pledge to move the greater part of teachers' salaries from the ratepayer to the taxpayer.

Nobody expects to get out of the troubles, into which the Government have led the country, without painful financial operations, but what everybody expects is to be told, not only frankly but truthfully, the nature of the operations and where the knife is to be used. To have a diagnosis, such as that which is embodied in the Report and Order brought before the House at this moment, only confirms in our minds that there are some very incompetent surgeons in the Government's operating theatre.

9.26 p.m.

Mr. Julian Ridsdale (Harwich)

The Order shows that Labour planning is a myth, because it takes no account whatever of either devaluation or the cost of increases in interest charges which have taken place recently. However, as one who represents an area with little industry, North-East Essex, I do not wish to look a gift horse in the mouth. The rate support grant certainly helps such areas, with their increasing costs, increasing staffs and the increasing burden of teachers' salaries. What a pity that there has not been proper planning and proper foresight and that the Government have not been able to keep costs under control so that we could debate items helping the productive resources of the country and not just putting straw into the holes caused by devaluation and increased costs due to inflation.

In my part of the world there are many vital capital projects, such as sewerage and so on, in a developing area which we would like to be developed but which are not being developed. All the Government are doing is trying to deal with inflation and not with the productive resources of the country. What a disappointment, too, that the Labour Government could not honour their pledge about teachers' salaries, because if they had —

Mr. Speaker

Like the hon. Member, I used to debate these issues when I was a free man, but he must get to the Order.

Mr. Ridsdale

The item for teachers' salaries is a substantial part of the Order in so far as the Order deals with a £27 million increase in teachers' salaries. I am saying that I had hoped that it would be possible to help councils more by taking the whole teachers' salaries off the rates and making them a national charge, when there would have been no need to have included £27 million in the Order for teachers' salaries.

Mr. Speaker

That may be so, but we cannot examine it on this Order.

Mr. Ridsdale

I come now to the domestic needs element of the Order. I refer to the rate relief grant going to areas such as those in my constituency. In Clacton, 18.7 per cent, have qualified for rate relief, almost as high as the figure in other urban and rural districts in the constituency, all of which have been hurt not only by devaluation, but by the rate relief legislation. The domestic element needs careful consideration. I think that I heard the Minister say that it was costing £13 million.

What has happened to the other £10 million? Is the other £10 million of the rate relief rebate to be used for rate support grant? I ask the Minister that question specifically because I have no doubt that, because of devaluation, alteration will have to be made in this rate relief grant. I hope it will be, because if it is not, then those who have been hardest hit by devaluation will suffer, particularly in areas such as there are in my constituency, where this domestic relief grant is helping a considerable number of people who definitely will be even further hit by devaluation. If the Minister agrees, will he help those who need help most, and see that the rate support grant helps those areas such as North-East Essex which are without industry, and that something is done to protect those who need help most? Is it fair that the rate relief up to 25 per cent, should be found from other ratepayers who happen to find themselves so hard hit to pay rates in respect of rate support grant? Help must be given to those who need it in spite of the rate support grant. I do not believe this is happening at present.

What, however, concerns me much more in asking for more money is the growing bill for local government expenditure—it is needed, because the Government are coming to the House for rate support grant—and especially the educational bill, and the increasing costs which ratepayers are expected to pay. For the purpose of fixing the general rate support grant it is estimated that the education bill has increased between 1965 and 1966 through to 1968.69 by £312 million. The trend, indeed, seems to be even higher. Why have local government employees been allowed to increase by 160,000 since October, 1964? It is an astronomical increase. Is it not a wonder, with such an increase, that we have had devaluation, considering the extra cost of £200 million on local government employees?

I make this point because, in my view, although we are debating rate support grant, I believe that if the Government had been looking at the broader sphere, they would have realised that the only real way in which they can stop coming to the House continually for rate support grant is to tackle the problem of the reorganisation of local government and by tackling —

Mr. Speaker

Order. The hon. Member must keep to the Order.

Mr. Ridsdale

Well, I end my intervention by saying that I hope that the Government will realise that the way they can best help the ratepayers is by reorganising local government, and hurrying up the report of the Royal Commission. If this is done then we shall be able to see further help is given to the ratepayers.

9.33 p.m.

Mr. James Allason (Hemel Hempstead)

The Association of Municipal Corporations tells me that it accepts this Order. The Joint Parliamentary Secretary has told us that the negotiations were completed round about 1st November, and so I take it that the acceptance must be qualified by the fact that it is since 1st November.

I felt that there was a curiously unreal air about the way in which the Joint Parliamentary Secretary put this Order ever. He seemed blissfully to have forgotten the events of 18th November. I do not doubt that he sincerely wishes he could forget them and that he wishes they had never happened. So does everyone in the country. Nevertheless, we have got to take account of what the effects will be.

So far we have had by this Order merely marginal increases, which are very necessary, and, therefore, to be welcomed. Nevertheless, when one considers next year, 1968 –69, can the change in the rate support grant be in any way relevant to what is required then? Obviously, there will have to be severe cuts in local government expenditure, and, therefore, we ought to look at the piosition last year when the Order was made which this one varies. At that time, the financial state of the country was described by the Joint Parliamentary Secretary as being one of crisis. My hon. Friend the Member for Crosby (Mr. Graham Page) quoted his remarks on that occasion, and I will not repeat them.

It is very much worse now. How the Joint Parliamentary Secretary would describe it today, I do not know. I do not suppose that he wants to think about it. Obviously, the situation will be desperate next year, and making slight changes on the rate support grant made last year is quite inadequate.

My hon. Friend has mentioned already the two heads under which devaluation will hit local authorities hard. They are the increased cost of materials and increased loan charges. Loan charges are taken into account up to 1st November. On 18th November, Bank Rate went up to 8 per cent, and we have heard no hints of its coming down. Loan charges are at an all time high, and, although they do not affect local authority housing, it must be remembered that it is no good building houses unless one has schools and all the other ancillaries, all of which will result in increased loan charges which are not taken into account.

The result must be a very considerable increase in local authority expenditure next year, however much authorities try to cut it, because the cuts already being made are not enough. Proposals for new swimming baths and sports centres have already been thrown out of the window, and it will be extremely difficult to find further cuts. Notwithstanding that, costs will go up next year.

All this seems a very far cry from election pledges about bringing early relief to ratepayers. Unless there is further aid from the Exchequer, there must be substantial increases on the rate burden. I suspect that the Government wish to transfer this burden to the local authorities. They take the view that someone has to pay and that, if the central Government do not, the local authorities will have to. In other words, it must be borne by the rates. I suspect that it is the intention of the Government to make local authorities unpopular by forcing them to increase their rates. Do not let us forget that when ratepayers complain next year that they are feeling the pinch either from an increase in rates or from the failure of local government services. When they feel that pinch, they must be reminded that the fault lies entirely with the Government.

9.40 p.m.

Mr. Skeffington

With permission, Mr. Speaker, I ask the leave of the House to speak again.

I was a little disappointed with the speech of the hon. Member for Crosby (Mr. Graham Page), who knows a great deal about these matters, because a number of his points were rather more narrowly political. Certainly if I attempted to reply to them all I should be out of order. I cannot forecast what will happen about educational burdens— teachers' salaries—except to say this, the hon. Member for Harwich (Mr. Ridsdale) also raised a similar point.

What the Government have done generally concerning local government finance is to bring in what seemed a fairer and better system under Part I of the 1966 Act, because it has resulted in a higher contribution being made to local authority expenditure. It is 1 per cent, higher this year than under the old scheme.

The hon. Member has introduced other matters besides, which I should be out of order if I went into in detail, including rate rebate schemes.

When the report of the Royal Commission has been received and the Government have made up their mind on that recommendation and others, it will be possible to look at the relationship between central and local government finance including education. This is the order in which the problem has to be tackled. One cannot make piecemeal changes until one knows the structure and is able to devise the appropriate financial arrangement for it.

I will not forecast what the rate increases will or may be next year, as I am sure that no one would expect it of me.

The hon. Member for Crosby and several other hon. Members said that the Order does not take into account devaluation. This is true. The negotiations which had gone on so that the grant could become payable under the Order were completed in November. The hon. Gentleman knows about Part I of the Act, and he knows that, if the grim forebodings which he and other hon. Members have given vent to about devaluation take effect, this matter can be looked at again in a further Order. However, this is no excuse for not bringing forward the substantial relief for which this Order provides.

Mr. Graham Page

Does the hon. Gentleman anticipate that the Government will bring before the House another Rates Support Grant Order for an increase before 1st April next?

Mr. Skeffington

The hon. Gentleman knows that I will not answer that question, and he should not have put it. I have already given the background. I hope that the gloomy forecasts of the hon. Gentleman are not right, but the power is there. We are dealing with a situation which has been negotiated with, and accepted broadly by, the local authorities and which is of very considerable help.

I thought it unfair, even taking a party political point, to suggest, as the hon. Member for Crosby did, that the need for this increase is due to the malevolence and incompetence of the Government's economic policies. The major reasons for the increases are in the report. The amount required for teachers this year is £27 million, and it is £37.1 million next year. That is an increase which I am sure we are all glad to see. Increases to the police, roadmen, firemen and others are also responsible for this sum. It is nothing whatever to do with any failure in policy. We were meeting payments which had long been negotiated, and I am sure they are welcomed by the House in general.

Interest rates are high at the moment, but they were high when negotiations for the Order started in December last year. It was because there was a favourable change for loans and interest rates generally that there is a saving, which is again referred to in the Report. Page 5 refers to reductions in costs. Variations in interest rates for this year are estimated at £8 million and at £5.9 million for next year. These have been taken into account. One hopes that the interest rates will not remain at their present level any more than they did in December last year.

The hon. Gentleman asked me about economies, and whether the amounts in the Order would be reduced. I give him the assurance that if the House approves the Order these amounts will not be subject to reduction. In the meantime the Government believe that responsible authorities everywhere will absorb any additional costs which may arise as a result of devaluation, and we shall certainly have consultations with them in due course about the problems which may be encountered in this way.

The hon. Member for Harwich asked a question which I am not certain that I understand, and therefore I am not certain that I can give the right answer. As I understood it, he asked whether there would be a variation in the domestic allowance. This is fixed. It is 5d. for the first year, l0d. for the second year, and so on, and we will see what amounts are involved. Rent rebate schemes are a matter for the future. We will see how the schemes are going, but I can hold out no chance at the moment of them being altered.

This has been a brief, but interesting, debate, and in reply to those hon. Members who have taken part I say that it would be wrong to adopt the view of the hon. Member for Crosby that the Government are sitting idly by giving no help to the ratepayer. The contribution which the Government have made to the individual ratepayer has never been equalled by any other Government. We have a rate rebate scheme which is contributing substantial sums of money to nearly every authority, compared with what was a farce under the previous Administration. There is this domestic element which has enabled many authorities to keep their rate demands almost stable. They have claimed the credit for this, and given none of it to the Government, if they are authorities in the hands of our opponents. The Government have shown considerable care and concern, and are making available to local authorities a substantial contribution which we know they welcome. I hope, therefore, that the House will feel that it can give the Order its approval.

Question put and agreed to.

Resolved.

That the Rate Support Grant (Increase) Order 1967, dated 27th November, 1967, a copy of which was laid before this House on 30th November, be approved.