§ 11.4 a.m.
§ Mr. Julian Ridsdale (Harwich)
I beg to move,That this House, observing the burden of rates on householders particularly in areas with little industry, calls upon the Government to ensure that the cost of local government and particularly of education, now costing £1,500 million excluding the cost of universities, should be more fairly apportioned between taxpayer and ratepayer by giving to local authorities more power to raise revenue other than by rates, that the cost of teachers' salaries should be transferred to the Exchequer, and urges the Government to ensure that interim reports of the Royal Commission on Local Government should be made as soon as possible, so that action on the reform of the financing of local government will be made before the next General Election.This is the third time I have been fortunate enough to win a place in the Ballot for Private Members' Motions and it is the second time that I have raised the subject of local government finance. Just over five years ago when I won the Ballot you yourself, Mr. Speaker, gave me practical support. I drew attention then to the increasing level of local government expenditure, which I warned then was likely to lead to an increasing rate burden falling particularly on those with small fixed incomes.
At that time I warned too that this was likely to become an increasingly heavy charge on industry as a whole. Over the last financial year industrial, commercial and domestic ratepayers will have paid over £1,300 million to the local authorities in England and Wales. Just over 12 years ago the comparable figure was only £400 million. Although there has not been such an increase this year, renewed wage claims and depletion of the reserves of local authorities are likely to bring the charge up to £1,600 million before very long. A tax bill which quadruples over a period of 13 years or so must be regarded as heavy, and indeed 856 onerous, by any standards, particularly on the retired section of the community and the domestic ratepayer whose incomes do not increase relatively with the increased national income.
A great part of the problem that I debated five years ago in a similar Private Member's Motion is still with us, and indeed grows, but in fairness to local councils, especially urban, rural and small boroughs, it is only right to point out that a lot of this increase has been due to the rising cost of education. This has increased since 1954 when I first came into the House from £400 million to the present figure of £1,500 million. Local councils have done their best to keep a close watch on expenditure and in many cases they have been doing very well, though much necessary work has had to be postponed. But the chief problem facing local government finance and the country is what is the right way to finance the growing burden, or the growing cost, of education.
I am sure that we want a much more strategic plan than the piecemeal legislation that we have been having of late to deal with this problem of how to pay for the growing cost of education, the necessary cost of education. Since the debate in 1962 we have had the Rate (Interim Relief) Act of the Conservative Government, the setting up of the Allen Committee by the Conservative Government, and then the Report of the Allen Committee after the General Election, which formed the basis of the extension of the Conservative Rate (Interim Relief) Act by the Labour Government.
This has helped many who have been hardest hit by the rating burden. Because I knew what a serious problem this was I raised it first in 1962. At least part of the problem I raised then has been solved. I am glad to say that in one urban district in my constituency 2,700 people are benefiting from that Act and in a rural district 1,000 are benefiting from it. But, as I said at the time that the Act was introduced, this was transferring the burden from those who cannot pay on to those who can hardly pay, for 25 per cent. of the cost of the Rate Relief Act has got to be paid by other hardly pressed ratepayers and the administrative costs of that Act have again to be paid by local ratepayers.
857 The Government's answer then was to introduce the Rating Act which has led to increasing grants to help ratepayers to the extent of 5d. this year, 10d. next year and 1s. 3d. the year after. This of course was far short of the promise of the Labour Party at the General Election that they would take the major part of teachers' salaries off the rates, which would have helped the domestic ratepayer to the extent of 2s. in the £. All this, however, is piecemeal legislation.
The problem that faces us is an urgent and growing one. That is why I am calling for interim reports from the Royal Commission in England and Scotland so that we can deal with the problem of local government finance now, before the next General Election. It cannot be postponed. The problems are becoming far too real and desperate for the domestic ratepayer, particularly when one considers some of the extra burdens that will be forced upon ratepayers if the negotiations to enter Europe succeed.
The cost to the nation of education is £1,500 million a year, excluding the cost of universities. A large part of this cost falls on the rates as well as subsidies for university students who are supported by local education authorities to go to the universities. That figure of £1,500 million a year was the cost of defence a few years ago. I wonder what ratepayers would have said had they had to face a major part of that kind of expenditure on the rates. Many of us realise what their feelings would have been had that been asked of them as well.
Such heavy burdens as this, which are likely to increase, lead me, as I did in 1962, to challenge the reliance of local government solely on the rating of property as the only means of raising rate revenue. It is leading to an increasing dependence on the national Exchequer for grants and putting a burden on householders, particularly the retired, out of all proportion to the amenities which they enjoy from that expenditure.
Having pinched and saved to pay for the education of their children, they now have to pinch and save to pay the educational charge of the rate burden whilst those who enjoy the benefit of that education, and whose parents could afford a little bit more, are getting away with paying for far less. That is why I call 858 for an interim report from the Royal Commission, especially bearing in mind the burdens which are likely to fall upon the community from the Common Market.
I therefore urge the Government, as an immediate step, to honour their election pledge to take the major part of teachers' salaries off the rates. I go further and suggest that the salaries of the police should also be taken off the rates. This, however, must be part of a major strategic reform.
I accept that the pattern of local government is likely to be drastically changed. We are moving to a pattern of a few elected regional councils which will have strategic powers like those of the Greater London Council. It is greatly to the credit of my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) that he was the pathfinder in moving to the kind of reforms which I am able to outline to some extent because of the example of the Greater London Council.
I believe that county councils and county boroughs in their present form will shortly have to disappear and that in many cases there will have to be an amalgamation of borough and district authorities which will handle simply the personal and local services. This is why I am sure that we must find new sources of revenue other than the rating of property as the sole means of paying for local government expenditure.
Not only does complete dependence on the rating of property hit the retired, but it forces up rents, it makes the letting of houses more difficult, it places additional burdens on industry and, although to only a degree, it destroys the mobility of labour, which is so important at this time if we are to get the kind of productivity we want.
Industrial rerating has even encouraged extravagance in local government spending at the expense of those areas which have little industry. There is, for example, the recent example of the Postmaster-General in putting the local radio stations on the rates, all in areas with a high product from a penny rate. In Manchester, the product of a penny rate is £108,500, in Merseyside £101,838, and in Sheffield £88,825. That is very different from the product of a penny 859 rate in East Anglia, for example, where in Norwich it is £11,000, Ipswich £11,000, Clacton, in my constituency, £6,000, and in the Urban District of Brightlingsea £610. We could not afford, like Liverpool, to put a glossy magazine on the rates when in Harwich the product of a penny rate is £1,855. This is why one talks about the burdens hitting the areas without much industry.
I know that the problem is not nearly as great to many hon. Members opposite because they are able to afford these extravagances. Large regional units would, I am sure, give a much better balance and ensure that funds were used to help necessary development such as unmade roads and sewerage rather than local radio stations or a glossy magazine.
I hope that the Minister will not use as an excuse for doing nothing the fact that rates for the domestic ratepayer have increased by only a small amount this year, particularly when we consider what has happened in the last two and a half years. The average increase in rates has been about 10 per cent. Even the small increase this year seems to be the straw which has broken the ratepayer's political allegiance to Labour. I notice that the Rating and Valuation Association attributes the smaller rise this year compared with previous years mainly to postponed expenditure and the use of cash balances in hand.
We cannot expect a smaller rise to be the normal rate of increase from now on, especially when we realise the number of pupils at school. In 1965 they numbered 9 million. They are likely to increase by 1 million by 1970 and by 2½ million by 1975. Over a period of 20 years, the number of pupils is likely to increase by 50 per cent. Children will be staying at school a year longer after 1971, and increasing numbers are receiving full-time education after leaving school even now. Expenditure on education, already at a very high level, is bound to show a strong upward trend.
Other services are likely to rise in cost as well. For instance, in England and Wales alone, since 1964 there has been an increase of 147,000 in the number of local government employees. Half of these have been in education and the remainder in health and other services. At a conservative estimate, this imposes 860 on the rates a burden of £150 million for each 1,000 employees. If we include Scotland also, the burden generally is likely to be about £200 million extra on the rates simply by the momentum of this increasing educational expenditure.
The result is a yearly rise in the rate burden, reflected in all-round increases every year in the rates demanded from practically every ratepayer out of all proportion to the rise in incomes and prices. The fact is that rate revenue is not keeping pace with the national income.
Annual increases of rate poundage impose a proportional increase to all ratepayers instead of particularly to those whose incomes have shared in the growth of the national income. It is no wonder, therefore, that in their piecemeal legislation which we have had, the Government have postponed the next quinquennial revaluation.
Do the Government realise the urgency of the problem, particularly in growing residential areas such as North-East Essex, which are not shielded by a heavy industrial rate and certainly cannot afford local radio stations or transport on the rates like rich industrial areas? The cost of education is almost half the help which the Government give to ratepayers in seaside areas. That is illustrated by a reply that the Minister gave recently to a Written Question. The fact is that many people who enjoy the full benefit of local services never pay rates. A single person, a married couple, a large family or even two or three families may occupy similar houses and each be charged only one lot of rates.
For these reasons I am sure that alternative sources of revenue has to be found to give independence to local authorities and to decrease their dependence on the national Exchequer and rates as their only sources of revenue. Unfortunately, more and more reliance is being placed on the Exchequer. The Government's share in 1913–14 was 22 per cent.; in 1938–39 it was 35 per cent.; in 1953–54 it was 42 per cent.; and in 1966–67 the share has grown to the enormous proportion of 54 per cent.
I referred to the need to find new sources of local revenue in the discussion on my last Private Member's Motion in 1962. I hope that in five years' time, when by the law of averages I shall draw another Private Member's Motion, I shall 861 not have to raise the problem in the House again. Yet, despite the considerable thought and attention applied to the problem over many years, rates remain the only source of local taxation under the independent control of local authorities. Other sources such as municipally controlled electricity and gas undertakings have been taken away as alternative sources of revenue. In 1938–39 they contributed no less than one third of what rates did to the total income of local authorities in England and Wales. Looking at the present system, with the changed economic circumstances of to-day, and bearing in mind the growing dependence on the National Exchequer for grants, surely we must find new sources of local revenue. Getting value for money in local government expenditure has become vital.
I am sure that the more centralised the revenue for local government expenditure becomes the more difficult it will be to see that value for money is got by that expenditure. With the present system an increasing burden of rating is being rut on industry just at a time when costs are vitally important in the export trade. That is why I am against increasing costs any further by the re-rating of agricultural land.
The trend has increasingly been for local authorities to be dependent on grants from the central Government. I am sure that if we are to decrease the dependence of local authorities on the national Exchequer, and as rates are not elastic enough for modern needs, we must find new sources of revenue. This is important if we wish to make local government both administratively and financially more independent in that way and get better value for money.
I discussed all these possible new sources of revenue in the debate in 1962. I discussed site value rating, of which the Liberal Party are such supporters, but I see that they are not represented here today. I have always opposed site valuation in that it puts a burden particularly on the older houses and older development. I discussed the possibility of a regional income tax, a regional sales tax, of transferring petrol duty and payroll tax and taxes on betting and lotteries. We discussed all these extensively in the House in 1962.
862 In the recent Budget debate I came out against any further increases in direct taxation. We have had enough of them already. I am sure that the present high levels are not only a disincentive to production but a disincentive to saving as well. There is already too much tax on income. If we go into the Common Market, then we shall have to adopt the methods used there for taxation. The countries in the Common Market have much more indirect taxation and taxes on expenditure rather than taxes on direct income. To add even another 1s. in the £ to the standard rate of Income Tax would, I feel, be a damaging blow to productivity.
The right course, I am sure, is to find a suitable expenditure tax to finance regional services. A regional sales tax such as I suggested in the debate in 1962, occurs in 900 cities in the United States, including, New York, Chicago and Los Angeles. In New York the rate is about 5 per cent. on retail sales, and certain goods and services such as food products are exempt. In France the percentage is 2½. I am sure that a sales tax would provide regional councils with money to make them much more viably independent units, and we should also get much better value for money than if the money continued to come, as it does at present, in grants from the Exchequer.
I would, therefore, use the rating system exclusively to finance local services broadly similar to those run by borough and district councils. If we did this, rates could be cut by more than half. What a much better prospect there would be. I do not want to abolish rates, but I believe that we can halve their incidence and make them a bearable tax. At the moment they are a completely unbearable tax, especially to the domestic ratepayer and many others.
I would use a regional sales tax to pay for education, police, housing development, fire and ambulance services, planning and traffic. This would not be on food or essential services. With the salaries of teachers and policemen met wholly by the Exchequer, rate support grants could be abolished, with a valuable saving in administrative costs. Detailed control of borrowing for individual projects would cease. Councils would have authority to decide these matters themselves within a global total laid down by the Chancellor.
863 But all this is dependent on the pattern of moving to a few elected regional councils which will have strategic powers like those of the Greater London Council. This is the pattern that we started when the Conservative Government were in power. It was the pattern of my right hon. Friend the Member for Leeds, North-East. It is dependent on the abolition of county councils and county boroughs in their present form and the amalgamation of some boroughs and district councils to handle personnel and local services.
Getting something done urgently is dependent on an early interim report both from the Royal Commission in England and from the Royal Commission in Wales. As I know how urgent the problem is to the many retired and lower wage earners, particularly in areas of little industry, I call for an interim report from the Royal Commissions this year and not later than 1968, because if that is so it means that we shall not tackle this most urgent problem ahead of the next General Election.
Besides, I have no wish to bring once again to the House in five years' time, when I next win the Ballot for Private Members' Motions, a debate on local government finance and particularly the problems that I have talked about today.
§ 11.30 a.m.
§ Mr. Tony Gardner (Rushcliffe)
I must, first, declare an interest. I am not one of those hon. Members who represent one of the very wealthy authorities with the ability to print glossy magazines or run its own transport services.
Like most hon. Members, I am very grateful to the hon. Member for Harwich (Mr. Ridsdale) for introducing this subject. I am sure that his motives are wholly admirable, but I am also sure that other hon. Members will realise that the debate is not unconnected with certain events taking place next week.
The problems and policies of local government, the actions of local councillors, very often affect the individual much more closely than even the decisions of this House. That is another reason for being grateful for the opportunity to discuss the whole problem of local government finance at this time. Unfortunately, these debates sometimes have an air of 864 unreality about them. George Bernard Shaw tells the story of the time he was elected to a London Board of Guardians, and the first meeting he attended was the rating meeting. The treasurer presented the estimates for the year and made a very convincing case that the bare minimum needed to do all that the Board had to do during the year was a rate of 1s. in the £. The chairman immediately moved that the rate be 10d., and G.B.S. records that this coloured all his thinking about local government after that.
Unfortunately, because of the system by which we raise local revenue, this attitude to local government finance has prevailed. Each year local councillors in my constituency and in those of most hon. Members present to the electors a long list of things which need to be done locally and expenditure that needs to be undertaken, and each year they promise faithfully that they will keep down the rates. I believe that this has resulted in the kind of poverty of environment and local resources to which I tried to draw attention in my maiden speech here just 12 months ago.
Whatever the merits of the hon. Gentleman's Motion, and I find a great deal of merit in it, it is very clear that local government expenditure will not decrease, but will continue to increase. The reason for this continuing burden on all ratepayers is obvious enough. It is simply that we are saddled with a form of raising revenue that is quite unrelated to the needs of the 20th century and the demands which we, as Members of Parliament, citizens and local authority electors demand of those authorities.
We now demand first-class education for all our children, and all hon. Members can testify to how far we still have to go in achieving that. Many of us from time to time bring before the House cases and problems of teacher shortage and old schools in our constituencies and demand that something should be done. All of that means greater expenditure. We are now car owners, and we demand better and better roads. When my right hon. Friend the Minister of Transport answers Questions, hon. Members opposite spend a great deal of time demanding that more roads be built and that roads be improved. We rightly expect a decent environment and demand parks and open spaces, all of which, given present land 865 prices, cost a great deal. Those of us who are fortunate to represent the so-called wealthy industrial areas must face the problems of slums to be cleared and the provision of decent living conditions. All of us, day by day, experience the need for vastly increasing welfare services.
Whatever else we may expect, this burden of local taxation cannot disappear, but can merely be shifted. That was the situation which this Government found when it came to power. I agree that we need to do a great deal more to examine the whole position of local government finance, and it was obvious at the beginning that we faced not merely increasing local government expenditure but real and increasing public dissatisfaction about the way the money was raised.
The hon. Member has been pursuing this issue for a long time, and rightly so. The time has come to do something fundamental about it, but in the meantime there were urgent needs and it was necessary in the face of all the vested interests to start on the inquiry properly. I was delighted when the Royal Commission was announced, but while the study was in hand it was absolutely essential that we should provide some assistance to those hardest-hit.
I am sure the hon. Member agrees that the decision taken by the Government to provide assistance to the elderly and the poorer family by rating relief was very welcome; it certainly was in one urban district in my constituency, where about 980 applications for rebate were granted in this second half year, involving £7,000. In a rural district there were 1,178 rebates, involving £5,267. Incidentally, one might point out in fairness that the vast bulk of that money has gone to private tenants and owner-occupiers.
That was an essential move which we had to take, but, of course, it is only an interim move. Equally important has been the move to alleviate the burden on domestic ratepayers as such. Whatever criticisms the hon. Gentleman may make about the Government's promises, there are many thousands of people in my constituency who have reason to be grateful for the actions taken by a Labour Government.
But, of course, we are merely touching the fringe here. We must look towards more radical reforms of local govern- 866 ment finance. The hon. Gentleman has mentioned some of them, and I want to mention one or two more. I completely agree with him that more of the cost of certain services should be borne nationally. We are unlikely to get the real equality of opportunity in education which all of us want unless the fabric of education is paid for nationally, in terms of salaries, buildings and provisions, leaving local authorities to provide the service part of education and develop it as they see fit.
All of us can testify to the teacher shortage and to one of its causes—the pay and conditions which we ask our teachers to accept at the present time. We cannot expect this burden to be carried locally for much longer. When we do persuade my right hon. Friend that the cost of teachers' salaries should be borne nationally, I hope that the hon. Gentleman will join me in supporting the raising of the necessary revenue nationally to pay for it. I hope that we shall not have constant complaints about increasing national expenditure and the effect of this locally.
I also hope, with the hon. Gentleman, that the Royal Commission will show the way to provide economic local government units. It is unfortunate that we have undertaken reforms of local government in the past and have maintained broad county boundaries which have been with us in some cases for a thousand years. I do not believe that we shall create viable local government units until we can provide units based on main conurbations, on the areas where people in the main work and live. We should also consider whether that part of national revenue which is raised locally should be retained locally. I certainly agree that motor vehicle licence duties should be retained locally and be spent locally.
It is perhaps unpopular in the House from time to time to say so, but it is true that municipal enterprises can also be profitable. The Conservative-controlled borough council where I once lived practised a great deal of municipal socialism. It owned public transport, the theatres and the piers, and it had a monopoly of catering and ice cream sales on its promenades and beaches, and in its public parks. Like many other authorities it did very well out of the hiring of deck chairs and so on, which provided a substantial rate subsidy. 867 While those particular forms of revenue-raising are not available to those of us who live in inland areas, I still believe that there are opportunities for engaging in profitable enterprise that local authorities might undertake.
But, of course, the hon. Member is right. The basic problem is that in local government finance raising we are still living in the age of the poor law. In the mid-nineteenth century, when the main responsibility was to relieve the poor of the parish, and since the amount involved was relatively small in relation to the population of the parish, it was logical that the burden should fall on those who owned or occupied houses. It seemed reasonable to do this in order to provide for those who had nothing.
This system, however, translated into the growth of local government since then and into the conditions of the mid-twentieth century, is manifestly unfair and inefficient. It takes no account of means. It is unpopular because it is seen to be unfair. Ratepayers living side by side are rated on the basis of house value and their burden bears no relation to their ability to pay.
Worst of all, until recently the money was mainly collected in one lump sum evry half year. Those of us who suffer P.A.Y.E. do so perhaps unwillingly, but at least we do not notice it quite so much as we would if we got one big tax bill in every six or 12 months. But the ratepayer until recently in most cases had to pay his rates in terms of hard cash in one lump sum.
Unless we change the system there is the danger not only of not being able to do all we want in local government, but that a kind of Poujadiste mentality will arise in local politics. I find it very depressing when local politics are solely concerned with keeping down rates. Of course, we must watch the spending of money and ensure that it is spent efficiently and economically, but local elections should not be run purely on the platform of cutting the rates. They should be run on what needs to be done and how to pay for it efficiently.
We have to move towards a new system based on taxation where people earn. I realise that there are many problems associated with a local Income Tax, but I hope that, when the Government con- 868 sider this, they will weigh against those difficulties the relative simplicity and cheapness of collection that might be gained if the collection were allied to a national taxation system and the money collected in the same manner and by the same people.
I agree with the hon. Member in hoping that the Royal Commission will feel able to recommend very large regional authorities as one part of a tier structure in local government. If those regional authorities could follow roughly the trade catchment areas so that they included not only the local shop, but also the very large multiple store, where one goes to buy furniture, and so on, we should be able to operate some kind of local sales tax without the injustice which might operate if we were to try it in the existing rather small local authority areas.
Of course, such a tax might be held to be regressive and if these were the only form of raising local revenue it would hit most hardly those least able to pay. What we shall have to look at is a broad range of means of raising revenue, perhaps a local Income Tax and certainly some kind of local sales tax allied to some kind of rating for industrial and commercial properties.
Unless we tackle these problems very quickly, not only will we be unable to fulfil all that we ought to be doing in local government but there will be a decline in the environment in which we live because we shall have failed to provide enough money to improve that environment. In any event, something needs to be done and done quickly. If we cannot have the special report that the hon. Gentleman asks for, can we at least hope that the Royal Commission's main report will be made as quickly as possible and that, when my right hon. Friend receives it, he will act on it speedily and with a great deal of courage, despite all the vested interests?
§ Mr. Speaker
I think that almost every hon. Member present in the Chamber wishes to take part in the debate. I shall be able to call them all if speeches are reasonably brief, as the last one was.
§ 11.46 a.m.
§ Mr. Frederic Harris (Croydon, North-West)
I hope that the hon. Member for Rushcliffe (Mr. Gardner) will forgive me if I do not follow in detail what he said, although I want to take up two of the 869 points he made. I share with him the sense of urgency he stressed. Those of us interested in the subject—and they certainly included you, Mr. Speaker, for many years in this House—agree that the problem is very urgent indeed and must be tackled speedily. I was a little disappointed that the hon. Gentleman expressed some suspicion of the motives of my hon. Friend the Member for Harwich (Mr. Ridsdale) in putting down the Motion.
§ Mr. Gardner
I intended to convey, and had, hoped that I did, that I had no suspicion of the motives of the hon. Member for Harwich. I referred to the fact that some hon. Members might think, however, that the Motion was not unconnected with events next week.
§ Mr. Harris
I am glad the hon. Gentleman has cleared up the point, from his point of view at least.
I say to my hon. Friend the Member for Harwich that I think he deployed his case extremely well. His speech will bear considerable reading. It was full of many worthwhile points, and I look forward to going through it again very carefully.
It is only eight weeks since I was privileged to obtain second place in the Ballot for notices of Motions. I chose the subject of rating. The Joint Parliamentary Secretary will recall that we were left with very little time for my Motion and that one did not have the opportunity to deploy one's case. However, I think the House knows that this is a major interest of mine and, that like my hon. Friend, I have taken every opportunity to raise, I was delighted when my hon. Friend won this place in the Ballot for today—a win which he seems to be able to claim as a regular performance—and that he chose this subject.
Everyone who is a ratepayer is keenly concerned with every aspect of rating and with what we are to do in future. Looking back on some of the points I have constantly made to the House, I suppose that one could be accused of tedious repetition. Nevertheless, these issues are so important that they are worthy of resubmission. When I raised the matter on 13th March, the Joint Parliamentary Secretary almost revelled in his reply. Those present then will recall the performance. He did this because he was 870 able to claim that, at least for the one year—this year—the rise in the rate burden had not been so steep.
Had there been time to reply to him, I would have stressed, as I do now, that his glee might sadly be short-lived and that the whole burden of what I was trying to put to the Government was based more on long-term worries, such as those my hon. Friend has stressed, than on the immediate short term. However the Government twist and turn, it must be the policies of the Government of the day which directly affect the ratepayer's burden.
I constantly remind myself and my constituents—because it is fair to do so—that, in the last two General Elections, the Labour Party promised the country that it would not be subjected to heavy increases in rates. Incidentally, of course, it promised the same to the taxpayers, but we know what has happened to them. To keep to rates, however, as everyone in the House knows, and certainly the ratepayers know, in the same two and a half years they have gone up by about 25 per cent. on average. However one looks at this it is a substantial increase, and does not bear out the Labour Party's pledges.
While, during local elections, main national issues are bound to come very much to the fore, the Government know the views of the electorate on this and other matters as a result of the sweeping defeats which they suffered during the Greater London Council elections a short time ago, and indeed their outstanding defeat at the Brierley Hill by-election. This reminded me very much of the by-election which I fought in 1948. Prior to my coming in there had been a Conservative majority of only 600. This was put up to 10,000, and I am sorry to say that the Liberal candidate lost his deposit. It was an extraordinary similarity after all those years that the Conservative majority at Brierley Hill went up from 1,500 to 10,000, and again the Liberal lost his deposit.
The Government are aware of the present rating difficulties. During the latter part of last year and this year they sought the co-operation of the local authorities in an endeavour to stabilise the rates. To a certain extent they succeeded, certainly in the short term, 871 but I stress only in the short term and not, regrettably, in the long term. By providing the standard rate relief of 5d. in the £, the domestic ratepayer's increase, on average, was only about 1 per cent., but factories, shops, and business houses suffered, on average, an increase of about 5 per cent. These increases will have to be passed on somewhere, and undoubtedly and regrettably they will eventually be passed back to the consumer, who, in the main, is again a ratepayer, so it is really a vicious circle.
As I told the House on a previous occasion, if the Government had not done this "juggling act" by which £23 million of the domestic element was set aside in the new rate support grant for 1967–68, the domestic ratepayer would, on average, have suffered an increase last April of about 1s. in the £. I mention this to ask what else the Government did. They instructed local authorities drastically to review all expenditure claims, which meant a real cutting back by the spending committees. In my town revenue was cut back by about £500,000, thus saving about 7d. in the £. Some authorities took the opportunity of reducing their rate poundages as a result of the change in interest rates of consolidated loan funds, but, as I pointed out before, this was really mortgaging their future. It will certainly mean a reduction in cost of loan charges during the earlier years of loans, but in later years they will have to suffer the increase.
In a previous debate I asked the Minister whether he could tell us, on a global basis, what general commitments had been cut, and what had merely been rephased. The hon. Gentleman was so keen on that occasion to say how happy he was about everything that he forgot to answer me. I would still like to know whether these commitments have only been rephased, because if they have we must be heading for a sharp increase in expenditure next April. I have no doubt that a large number of authorities have rephased their capital schemes on which they had hoped to embark during the current year. If, in due course, local authorities push ahead with their retarded schemes, all ratepayers will be heading for swingeing rate increases in the not-too-distant future.
872 I would like again to ask the Government—and my hon. Friend the Member for Harwich made the point this morning—why they have not honoured the pledge in their 1964 election manifesto that they would transfer the larger part of the cost of teachers' salaries from the rates to the Exchequer. I appreciate that this would merely pass the burden from the ratepayers to the taxpayers, but it would spread the burden over a very much wider field. If the Government do not intend to pursue that policy, why do they not say so? If they intend to honour their pledge, why has it taken them two and a half years to get to it?
On a previous occasion I was told by the Government that we were heading for a new rating system altogether. I remember this point being made by the Leader of the House when he was the Minister of Housing and Local Government. If there is a proposal for such a major reform for local finance, when will we be told more about it? Surely we are entitled to know what the Government have in mind. I strongly support what my hon. Friend said that we cannot go on raising tremendous sums for local finance by means of taxes on property. There must be other solutions to this very difficult problem.
On previous occasions I have said that substantial savings can be achieved in local government by streamlining the present system and avoiding duplication, particularly between the Greater London Council and London boroughs. I had very much in mind the long-winded duplication that goes on, for example, between the Croydon planning authority and the G.L.C. I have always found it absurd that a planning authority such as Croydon, with a long-established valuation department, should be subjected to duplication of effort and detailed control by the G.L.C.
I am confident that because of the completely different complexion of the G.L.C. now we shall get some action to deal with this situation, because my colleagues on the G.L.C. are very conscious of the problem. Conservatives are more attuned to streamlining, administrative saving, and avoidance of duplication than are members of the Labour Party. Conservatives have a better business approach to these problems, and they 873 do not live in the theoretical dream-world of the Labour Party.
I am not happy, either, about rating reliefs, which were referred to by my hon. Friend. As I said in the House when these were originally announced, 25 per cent. of these allowances are paid for at the expense of other ratepayers, and so, too, are the administrative costs. There are many other ratepayers who find life difficult. I am all for giving the maximum easement to deserving cases—and I think we can claim that some of these allowances are not sufficient—but the total of such reliefs should surely come from the Exchequer, so that the burden can be spread more evenly.
§ Mr. Eric Lubbock (Orpington)
Does the hon. Gentleman remember the Conservative Rating (Interim Relief) Act? What proportion of the amount given to poorer ratepayers under the provisions of that legislation came from other ratepayers?
§ Mr. Harris
I appreciate the point. For many years I have been battling, sometimes on my own, for an easement of rates. It is easy to look back and ask why the Government did not do this or that. Nevertheless, we achieved a great deal, as I shall show.
§ Mr. Oscar Murton (Poole)
Would not my hon. Friend agree that £60 million a year given to ratepayers under the provisions of that Act was no small amount of money?
§ Mr. Harris
I thank my hon. Friend for that intervention.
I am not happy about the revaluation, for rating purposes, which has been postponed from 1968 to 1973. I consider this to be a retrograde action, because valuation should be kept abreast of the changing times, for the benefit, where applicable, of all ratepayers. What has happened is that the Government have so burdened the country with the Land Commission Act and the Capital Gains Tax, that there is a shortage of valuers in the Inland Revenue Department to undertake this work.
I am pleased that the Government have at least taken steps to see that the nationalised industries pay their proper rates, particularly with regard to offices. There is still much more to be done on nationalised properties, of an ordinary 874 commercial or industrial character, which should be rated separately, in the ordinary way. Only by this means will there be rating justice for the individual local authority. The same applies to Crown property of an ordinary character. Post offices too should be dealt with as privately-owned properties.
Looking back over the years since I came into the House I can certainly claim that I have played my own limited part in trying to put right rating anomalies. I have advocated the abolition of industrial rating, which we eventually achieved, in two "goes". I have played my part in getting the nationalised industries to pay rates for their office accommodation. This is a very vital subject. It cannot be shelved until new rates are announced. All that the Government have done is to buy short time. The domestic ratepayer is heading for further substantial demands.
§ Mr. Roland Moyle (Lewisham, North)
I wonder whether the hon. Gentleman will devote some part of his speech to explaining how it is that his hon. Friend the Member for Poole (Mr. Murton) thinks that the Rating (Interim Relief) Act, 1964, sets aside £60 million, whereas my impression was that it set aside £6 million, and hardly any of that went to individuals, anyway.
§ Mr. Harris
In deference to Mr. Speaker's suggestion I will keep my remarks short. I am sure that my hon. Friend will attempt to catch Mr. Speaker's eye, when he can answer that point very fully.
The domestic ratepayer is heading for further substantial demands unless the issues which have been drawn to the attention of the House are speedily and effectively tackled. I, too, would like to call upon the Government to face this issue and to let the ratepayer, in the long term, know where he stands. This is a very serious annual worry to all ratepayers, particularly to would-be home buyers, whom we are so anxious to encourage.
§ 12.3 p.m.
§ Mr. Julius Silverman (Birmingham, Aston)
I am sure that we are all grateful to the hon. Member for Harwich (Mr. Ridsdale) for raising this interesting and important subject, even though we may not all agree with all that he has said. 875 I am sure that he would not expect hon. Members on this side to do so. All speakers so far have said that this is an urgent problem, and in so far as that is true, it would be quite unrealistic to depend upon the implementation of any report emerging from the Local Government Commission. For obvious reasons, it must take time to issue the report, and considerable time would be required to implement it, if it were to bring about a revolution in our rating system.
The Government have taken the right course in dealing with an urgent problem by adopting what has been described as piecemeal legislation. There is a considerable volume of piecemeal legislation which has been of great benefit to many ratepayers. As a political note has been introduced into this debate, I would say that piecemeal legislation is better than no legislation at all. For 13 years, while this was a growing problem, the other side of the House brought out no legislation, except for that legislative mouse, the Rating (Interim Relief) Act which, I believe, resulted in subsidies of about £6 million, of which only a small part reached those for whom it was intended, the lower income group. The rest is divided equally—sometimes unequally—among all the ratepayers, including the wealthy ratepayers.
I do not regard this as a serious contribution to the rating problem, particularly the problem of the lower income group. The Government have introduced a number of measures, and, so far as resources have permitted, have fulfilled their election promises. There is the Rating Bill with its provisions for rebates—about 1 million people so far have benefited each year. There is the instalment system. One of the difficulties about rates used to be that they had to be paid in a lump sum. There are the new rate support grants and, very important, the domestic element, which is 5d. this year, 10d. next year, and 1s. 3d. the following year.
There are other matters which have assisted local authorities, such as the quota which can be borrowed at a fixed and lower rate of interest. There is also the Housing Subsidies Bill which, although it is not yet in operation, is having an effect upon local authorities. It affects council rents. If it were not for this 876 very great assistance, local authorities would have to choose between substantially raising council rents, through massive increases, or putting a certain amount on the rates.
This is of great assistance to the ratepayer. We must not forget rents or the other costs of housing. Those can be very much more important than the rate element. Birmingham ratepayers have reason to be grateful to the Government for these Measures. A report of the Finance Committee to the Council in April says:The total sum estimated by the Minister to be payable to Birmingham in 1967–68 by way of Rate Support Grant"—that is the resources element only—is £22,699,165, compared with estimated figures for £20,660,083during the preceding year, taking into consideration the shift in the school milk and meals grants. That is an increase of £2,039,082 or 9.8 per cent. This does not include the domestic element, and the new grant, payable in 1967–68, to local authorities which have made special provision for increasing their expenses, due to the presence in their area of a substantial number of immigrants from the Commonwealth. The amount receivable by the city in 1967–68 is estimated at £100,000. Compared with recent years, that is massive assistance and is duplicated throughout the country.
In consequence, it has been possible for the Birmingham Council—now a Tory Council—to peg the rate, and the domestic ratepayers have actually had a reduction of 5d. in the £. The council says, "Look what we have done," but it is not what it has done at all, but what the Government have done. Throughout the country there will be the smallest increase in rates that there has ever been—about 1 per cent. I should be interested to know of any year during the Conservative period of office when this was so—
§ Mr. James Allason (Hemel Hempstead)
May I draw the hon. Gentleman's attention, then, to 1955–56, when the average rate for domestic ratepayers outside London was precisely the same as in the year before?
§ Mr. Silverman
I have not gone into the finances of that year, but I should be 877 surprised if the general level did not increase. One must consider valuation and such things. The rate in the £ does not matter, but how much the ratepayer pays—
§ Mr. David Watkins (Consett)
Would my hon. Friend not agree that the year referred to by the hon. Member for Hemel Hempstead (Mr. Allason) was the year of industrial and commercial re-rating and that the outcry which followed from those circles led to a 20 per cent. commercial derating, which added to the burden of domestic ratepayers?
§ Mr. Allason
The hon. Gentleman would not wish to mislead the House. It was, of course, in the following year that the average rate of 23s. 4d. went down to 16s. 2d. That is the year to which the hon. Gentleman refers.
§ Mr. Silverman
Surely that is the point. It has been admitted that, year after year for 13 years, the burden of rates—not just the rate poundage—has been increasing. There is no dispute about this. Since the Labour Government took office, they have done many times as much as was done before.
It is not enough, I agree, and I hope that, when the economic situation improves, this can be dealt with at any rate in the short term by further modifications, perhaps by increasing the level of income provided for in the Rating Act, under which an application for rebate or relief can be made—at present it is rather low—and bringing in a further belt of people, and perhaps a further contribution of Government funds, whether for education or any other purpose. We should try to prevent any increase in rates beyond that of the average national income.
New proposals for rating are complex and should be approached with caution. When the hon. Gentleman asks for an interim Report to deal with local government finances before reorganisation, he is putting the cart before the horse. One cannot adequately consider new methods of raising local government finance until one knows what units of local 878 government will operate and what their spheres and tiers of activity will be. It is no use discussing this matter until that is known. This should come after reorganisation as part of the full Report.
I hope that the Commission will fully consider these things and not make a hasty report. If our rating system is to be revolutionalised, with all the impact of entirely new taxes, these things must be considered. After all, the Allen Report took many months to prepare and is a great volume of about 400 pages—and it dealt with only one aspect of the rating system. The Commission must consider not only all aspects of the present system but all the formidable problems of alternative systems. I would therefore not wish to hurry the Commission.
Among proposals put forward is that of a local income tax. The hon. Member for Harwich mentioned some of the objections—the question of incentive, assessment and collection. Will it be collected by P.A.Y.E., which would create considerable difficulties? Some people live in one district and work in another. There are many other problems. The Commission would have to consider its impact not only on lower income groups, but also on the economy, as well as the practicability of assessment and collection and the further burden which the creation of a new bureaucracy might impose.
Another proposal is to transfer the raising of income to some such means as a petrol tax or the excise tax for vehicles and its allocation to the local authority instead of the Government. This is simply a shift of the source of income and I do not object to it. The same could be achieved simply by transferring a greater contribution to the rates from the Exchequer.
Rating of site value is an attractive and interesting proposition, but it is complex and, anyway, it is still rating although the basis of valuation would be different. All these matters are difficult and should be considered by the Commission.
Least of all do I like the sales tax. It would be a regressive and a flat tax which would mean that the mink coat and the Rolls-Royce would be taxed at the same rate as the bicycle or the pram or the cotton frock.
§ Mr. Silverman
This happens with a sales tax. It is with Purchase Tax that we get a different tax on luxuries—
§ Mr. Silverman
This is what is meant by a sales tax. If the hon. Gentleman suggests a tax on luxuries imposed by local authorities, all right. I gather that this is not what a sales tax usually means. In America, it is a flat and regressive tax and brings into the net the poorest sections of the population. Old people will have to pay it. Elderly people living in rooms, who cannot afford to buy a house, and the homeless will have to pay their contributions through such a tax, and I think it is an unfair one.
What I have said indicates that there are formidable objections to any alternative system. One objection was raised by the Allen Committee. One has to consider whether if one decreases the level of rating it will result in our market economy in more demand for houses and, therefore, an increase in the level of rents and the cost of houses. This is an argument to which no one can give a complete answer. However, it is one of the factors that have to be taken into consideration. These are the complex and difficult matters to which the Royal Commission will have to give full attention, and their deliberations should not be hastened.
In the meantime, while I congratulate the Government on what they have done, I hope that their resources will allow them to do even more in the modification of our rating system in the years to come.
§ 12.21 p.m.
§ Mr. A. P. Costain (Folkestone and Hythe)
First, I congratulate my hon. Friend the Member for Harwich (Mr. Ridsdale) on selecting such a Motion as this. I also congratulate him on his optimism in thinking that he may be able to bring forward another Private Member's Motion on the subject in five years' time. I have had my name down for most Ballots but I have not yet been lucky.
Listening to the hon. Member for Birmingham, Aston (Mr. Julius Silverman), I thought how easy it is to offer 880 help to ratepayers before an election but how difficult it is when the election is over. I recall reading in New Britain all the promises that the Socialists were going to make. The hon. Gentleman dealt in some detail with the difficulties that would be involved in altering our rating system. If he represented a constituency like mine and got the number of letters that I do weekly from elderly people living in small houses that they have built for their retirement, who have carefully calculated their income and how much they can afford, he would know how year by year the increase in the rates presents them with greater and greater difficulty. They cannot wait for those difficulties to be solved. They are having real difficulties at the end of their life. It is for that reason—
§ Mr. Julius Silverman
Does the hon. Gentleman think that those people would be any better off if they paid a sales tax as well?
§ Mr. Costain
If they did that they might avoid paying by not buying something. Their difficulty is that they have carefully worked out their budget. Time and time again, they can do nothing about the difficulty that they are in. There are no smaller houses available for them. Many of them decided to live in bungalows believing that a bungalow would be the best type of dwelling for them to live in as they got older. Unfortunately, in seaside resorts bungalows are the highest rated buildings relative to the superficial area, because they can bring in a higher rent in the summer months. The very fact that these people looked far ahead and were prudent is the reason why they are now suffering.
The Conservative Government re-rated industry. That helped a number of constituencies but not constituencies like mine, where there is little industry. Indeed, the policy of the Socialist Government at present is to stop industries going to such areas. So we can expect no relief from that direction. Several problems are encountered in such areas. One of my small boroughs wants to undertake a large new sewerage scheme. But the present system of grants for such schemes specifically prohibits a borough, regardless of its size, getting the relief that a rural district council would get. As a result of this, the rates 881 will be put up out of all proportion to what people can afford.
This explains why I am so grateful to my hon. Friend for his Motion seeking proper apportionment between taxpayer and ratepayer. In its election address the Conservative Party made clear that it would give relief by transferring the burden of education, first and second class roads and other items, which indirectly affect people who are retired and living in such areas. Indeed, seaside resorts need special attention in regard to the national economy. We are delighted that large numbers of people visit our resorts, but they provide very little relief to the ratepayers who have supplied the amenities that are enjoyed on a national basis. When people are paying petrol tax to come to our areas, surely some of that tax could go to give relief in respect of the amenities that have been provided.
These are points which cannot wait for many years. Indeed, many of my constituents who have been harassed by these problems will not live many years. On behalf of such constituents I make a special appeal to the Minister. When we had the unfortunate experience through the accident to the oil tanker, the local authorities were grateful for the help that was offered to them, but they were still left with a burden. A 2d. rate might need to be imposed by such local authorities to meet the cost of that national calamity. To many of my constituents a 2d. rate is an important matter. A bungalow may be rated at about £90 and so a 2d. rate means a great deal.
Recently a lady came to see me to show me her budget for existing in a small bungalow. Her husband had bought it, and had then died and left it to her. She had worked the budget out to cover even what she was spending on food for the cat, which was 6d. per week, and she was worrying whether she ought to get rid of the animal. This is the sort of burden that these people have, and that is why this as a matter of real urgency.
Let us admit that our rating system is out of date. It has been going a great many years. All parties have attempted to put right. This is not a matter that we want to make a big political issue because it is too serious. It affects the 882 individual life of many of our constituents. What we object to is the way the Socialists make promises before an election and the way they perform afterwards. That is why there has been sueh disillusionment about the Socialist Party.
I hope very much that my hon. Friend gets more benefit from this debate than he did from his last on the subject. I am afraid that it may be a matter of third time lucky. I think that we have to get a Conservative Government into office before we can really deal with the situation. I see the Minister laughing. I presume he thinks that I am making a political point—
§ The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl)
I was much moved to hear the hon. Gentleman saying that this was too serious a matter for party politics and then going on to make an unashamed bid to get support for the Conservative Party in a field of activity where it did lamentably little.
§ Mr. Costain
I am sorry to see that the Minister's conscience appears to have caught him up so quickly. A reaction like that often comes from a guilty conscience. When I gave way to the hon. Gentleman, I had hoped that he would intervene to tell the House that he had an idea to meet the problem. He could have made a wonderful political point if he had said to you, Mr. Speaker, "Do not let the hon. Gentleman go further. I have an idea whereby I can make some political capital by giving some relief." I would be happy to let him gain such a political point, because my constituents are very worried.
Mr. Speaker, you have asked that speeches should be kept short, and I have spoken on this subject on three occasions. I do not wish to delay the House any further. I hope that I have been able to impress upon hon. Members the serious nature of the problem to the elderly and particularly those living in seaside resorts.
§ 12.31 p.m.
§ Mr. David Watkins (Consett)
The hon. Member for Harwich (Mr. Ridsdale) is sincerely to be congratulated on two counts. First, upon his extraordinary luck in the Ballot, a luck which, in my comparatively short time in this House, has been denied to me. Second, he is 883 to be congratulated on his obvious confidence that, in another five years, he will be mathematically lucky once again. I have the picture of his name being drawn out of the Ballot every five years, while the hon. Member for Folkestone and Hythe (Mr. Costain) and I continue regularly and religiously to put down our names with the lack of success which has crowned our efforts in that direction so far.
The hon. Member for Harwich is to be congratulated, too, on his choice of subject which has enabled the House to draw attention to what is unquestionably a very serious problem throughout the country. Irrespective of the views which might be held as to ways in which it can be tackled, the undeniable fact is that it is a most serious matter.
The hon. Member has given us the opportunity to look at the nature of the problem and some of the measures which the present Government and previous Administrations have introduced in an effort to try to get to grips with it. It is particularly important, as he states in his Motion, that we should seek to ensure that the cost of local government should be more fairly apportioned between the taxpayers and the ratepayers.
When one looks at the nature of the problem, one finds that, in the period between 1951 and 1964, the average domestic rate payment almost doubled. At the beginning of the period it was running at about £16 10s. per annum. At the end of the period, it had reached £32 per annum, showing an average overall increase of about 8 per cent.—
§ Mr. Allason
Can the hon. Gentleman tell us how he calculates his 8 per cent.? Is it not fair to take it at compound interest, which works out at 5.4 per cent.?
§ Mr. Watkins
If one paid rates on a compound interest basis, that might be so. But if, over a period of years, the amount which is paid has increased by a certain sum, a simple process of division gives one a rough and ready guide which, I suggest, is sufficiently reliable.
The fact remains, however, that we have been confronted over the last four or five years with an inevitable and more or less automatic increase of approximately 10 per cent. per annum which has fallen upon the shoulders of ratepayers. 884 Incidentally, in one of the years during the period that I have mentioned, the increase was as much as 15 per cent. compared with the previous year.
We must look at some of the efforts which were made during that period to attempt to come to grips with the problem. It was only in the financial year 1956–57 that commerce and industry were brought up to what were then current rateable values. Hitherto, although domestic ratepayers had been paying at something near current rateable value of the time, commerce and industry had not been re-rated and had been enjoying a subsidy from domestic ratepayers as a result.
As I said in an intervention to my hon. Friend the Member for Birmingham, Aston (Mr. Julius Silverman), there was such an outcry and so much pressure brought to bear upon the then Government following the revaluation of industrial and commercial premises that, in the following year, there was a 20 per cent. commercial derating, which increased the total amount of rates paid by householders from 49 per cent. to 52 per cent. of the total of rate-borne revenue.
§ Mr. Allason
Would the hon. Gentleman confirm that this is the year which he referred to when there was an exceptional increase of 15 per cent.? He has given the reason for this very exceptional increase, but he has not mentioned the exceptional increases over the last two years of Labour rule since 1964.
§ Mr. Watkins
I shall be dealing with that type of party point later in my remarks.
I certainly confirm what the hon. Gentleman says, that this was the year of the exceptional increase, because it was the policy of the Conservative Government, with their commercial derating, to put a heavier burden on to householders so that they should further subsidise industry and commerce. However, I hope that we can now leave that point, because it has been belaboured to some extent already.
In looking at the events of the period of time to which I refer, one cannot overlook the introduction of the block grant system in partial replacement of the previous system of percentage grants which had been made from the national 885 Exchequer to local authorities. That was a piece of legislation which placed an intolerable burden on local authorities, because it presented them with the choice that, if they wanted to improve their services, they were faced with substantial increases in the rates which they had to levy, and if they did not raise the rates, it became inevitable to some extent that services suffered. That was a contributory factor to the steady yearly rise in rates.
§ Mr. Iremonger
I do not want to encourage this type of "Yah boo, sucks to you" debate, but am I not right in thinking that the general grants, much against the expectation of those getting them, turned out to give the local authorities more than they would have got under percentage grants?
§ Mr. Watkins
As the hon. Gentleman says, we do not want to pursue the "Yah boo, sucks to you" type of debate, but I do not think that the factor to which he has referred is completely correct. Let me say 3I once that I do not accuse him of deliberate inaccuracy, but it is a much more complicated subject with many qualifying factors than he suggests.
§ Mr. Watkins
Reference has been made already to the 1964 Rating Relief Act, which I well remember, as I am sure other hon. Members do, coinciding somehow with an impending General Election in that year. It was introduced with a great deal of publicity as being a means of affording relief to the poorer ratepayers. The hon. Member for Poole (Mr. Murton) has quoted a figure of £60 million a year. My hon. Friend challenged that as being £6 million—
§ Mr. Murton
If, in fact, I said £60 million, it was a slip of the tongue. The figure is, indeed, £6 million.
§ Mr. Watkins
I am sure that the House welcomes the hon. Gentleman's correction of his clearly inadvertent misleading of the House. Although the total amount allocated was £6 million per annum, the fact remains that in the three years during 886 which that Act has operated the total amount that has gone to individual ratepayers has never exceeded £100,000 per annum. That is the measure of the relief, if relief it can really be called, which the Act gave to ratepayers.
That is in striking contrast with the record of the present Government, which recognised the problem in Opposition and acted on it in Government. I refer particularly to the 1966 rent rebate legislation which was at least a move in the direction of a practical remedy of a situation in which the lower one's income the bigger the amount, proportionately, one has to pay in rates. Already, more than 1 million people are benefiting by an average of £15 a year, which is about 50 per cent. of the amount they have to pay in rates. The total amount being used for this purpose is currently running in excess of £15 million per annum, which is a remarkable contrast to the less than £100,000 a year going for the same purpose under the previous Act.
Another reason why I welcome this debate is that there still seem to be large numbers of people who are entitled to this relief but who are not obtaining it. That is the experience of the two local authorities in my constituency, and I believe it to be a fairly general situation. If this debate in any way serves to publicise still further what people are entitled to it will have served some useful purpose, quite apart from the other useful purposes it is undoubtedly serving.
Reference has been made to further measures of progressive domestic re-rating introduced by the present Government, running this year at 5d. in the £, increasing progressively to 10d. in the £ next year. I am not quite sure what the long-term changes will be in terms of relief or of the likely cost to the Exchequer, but what these measures have done, and what they were intended to do, has been to transfer some of the cost from the ratepayer to the taxpayer—something that is central to this Motion.
Costs of education and teachers' salaries must enter into such a debate as this, because education accounts for about two-thirds of the total rate-borne expenditure of local authorities. I would have preferred to see rather more rapid action at national level than we have so far seen towards giving local authorities relief in this respect.
887 One argument sometimes advanced among local authorities against doing this is that if the Government took over 100 per cent. of the cost of teachers' salaries it would destroy a great deal of the local control which is a feature of our whole national system of education. Frankly, I consider this to be a false argument. For instance, the school meals and milk service is paid for 100 per cent. by the national Exchequer, yet it is locally administered—and I speak now as one who was for 11 years a member of a local education authority before becoming a Member of this House.
I will pause there, Mr. Speaker, as I see that my right hon. Friend the Member for Easington (Mr. Shinwell) is impatient to intervene.
§ Mr. E. Shinwell (Easington)
I am not at all impatient. I am rather in an inquisitive mood. I should like to raise a point of order with you, Mr. Speaker, of which I regret having been unable to give you advance notice, because I have just come into the House and made the discovery.
There is at the entrance to the Committee Corridor a huge stand, a magnificent, new, embroidered stand, which has the inscription "Council of Europe". When I look at some of the documents on display I find the title "Forward in Europe". This is a propagandist document in support of United Kingdom entry into the Common Market. If facilities had been provided for those who have other views about our entry into the Common Market, I could have had no objection.
As it is, could inquiries be made as to why an organisation—the Council of Europe—is permitted to erect a stand within the precincts of the House of Commons which is of a propagandist character; and who was responsible for it? I presume that the Serjeant at Arms must have been consulted, and I should like to know, Mr. Speaker, whether you were consulted, because, with great respect, you are in charge of the House.
§ Mr. Speaker
I know nothing of what the right hon. Gentleman has said except what he has told me just now. I gather, however, from what he has said that the documents were documents of the Council of Europe, to which the House of Com- 888 mons sends some hon. Members. But I shall look into the point the right hon. Gentleman raises.
§ Mr. Watkins
Before my right hon. Friend intervened, Mr. Speaker, I had given way, I think, four times, but with all due respect to those hon. Members who intervened on matters more related to this present discussion, the last was by far the most interesting intervention.
I believe that the whole of our local government financing system needs reviewing. This is a point of principle that is accepted, although, very clearly, there will inevitably be differences of opinion about how it should be reviewed. I have always thought it completely anomalous that local government is still largely financed by a system introduced in basic principle in the reign of Queen Elizabeth I. Now, in a totally different world—in the space age, a world of electronics, of vastly increased population and enormously increased responsibilities put on local authorities, we still use that basic system.
By no means the least of the anomalies in this system is that increases in national wealth are not necessarily reflected in increases in rate income. With other forms of taxation, an overall increase in national wealth brings an overall increase in revenue, and it is anomalous that this does not apply to the rating system.
The hon. Member for Harwich discussed some very interesting proposals. He spoke of a local sales tax, and so on. When I first saw the suggestion in his Motion that local authorities should have more power to raise revenue by means other than rates I hoped, for one blinding moment, that he had been converted to municipal trading. If that were so, he might do some good work among those of his hon. Friends who may not be so inclined.
Several hon. Members have touched on the anomaly that rates do not relate to the ratepayer's ability to pay. The system takes no account of family responsibilities. For example, it does not, basically, take into account the circumstances of a large family with young children at school and not earning, and neither does it take into account an increase in family income when those same children go out into the world and start earning. 889 It does not take into account that a person in retirement often has an income only half what he or she has been accustomed to. The same applies to a woman who is suddenly widowed. The amount of rates remains the same. But we have, at least, the prospect that the Measures introduced by this Government go some way towards relieving or remedying some of the grosser inequalities of such situations.
Above all, we must seek to relate what people pay in local taxation to their ability to pay. There has been some discussion this morning of the pros and cons of a local income tax system. Massive arguments are always deployed against this idea, but, in my view, the difficulties raised, although I recognise their existence, are not insurmountable. I understand that there are European countries and some states of the United States of America which levy local income tax in one form or another. Whether such local income tax would be collected locally is a difficult question. It would put large administrative burdens on the local authorities. If it were collected nationally, this would, it seems to me, entail a perpetuation of the block grant system in allocating it. There are difficulties in that way, but, as systems of local income tax are used in other countries, it should not be beyond the ingenuity of this nation to devise a satisfactory solution.
I have pointed out, as some of my hon. Friends have, that this Government have taken at least some measures to relieve householders, particularly those most hard hit, but I accept the point made by hon. Members on both sides that a thorough review of our system of local taxation is required. I regret that the terms of reference of the Royal Commission on Local Government do not extend to cover finance. One cannot divorce one from the other. The mere altering of boundaries will of itself deprive some local authorities of large parts of their rateable value. By way of example, I refer briefly to the proposal, in abeyance for the moment, for the creation of a Greater Tyneside authority. This would have the effect of depriving the Counties of Durham and Northumberland of a large amount of their rateable value. One cannot divorce the question of local government finance from 890 the whole question of organisation, administration, boundaries and the rest.
I say again that a fundamental review of the whole set-up is needed, and I have hope that my hon. Friend the Joint Parliamentary Secretary will not be too negative in his reply to the debate.
§ 12.54 p.m.
Sir Stephen Mc Adden (Southend, East)
I hope to find favour in your eyes, Mr. Speaker, by not succumbing to the occupational disease in this House of restating in the same words, or sometimes in slightly different words, the arguments already advanced by previous speakers. I shall not repeat a word of what has been said, save the courtesy compliment which one always pays to the hon. Member whose Motion it is. My hon. Friend the Member for Harwich (Mr. Ridsdale) is to be congratulated on his good fortune and on his choice of subject. In addition, on this occasion, I congratulate my hon. Friend the Member for Croydon, North-West (Mr. Frederic Harris) on the circumstance that, although his luck in the Ballot eight weeks ago did not come to full fruition and the speech with which he was then pregnant could not be delivered, his period of gestation and delayed delivery has been extended by only eight weeks, so that he has now been able to say what he wanted to say then. We all congratulate my hon. Friend on the relief which that delivery must have given him.
There is not much difference between the two sides of the House about the importance of this problem. We all recognise this, and I feel that no good purpose is served by arguing about whether the Measures introduced by this Government for the relief of rates are better than the Measure which was introduced by the previous Government. It is common ground between both sides that the Conservative Measure of 1964 was never intended to be, and was never proclaimed to be, anything more than an interim measure to give a little immediate relief. Hon. Members will concede that whichever Government got into power would have had to bring in another Measure more far-reaching than that timorous Measure. We admit that it was timorous because it was an emergency Measure, introduced at a time when it was hoped to give some kind of immediate 891 relief. After experience, we found that it was not as much as was necessary, and, as I say, whichever Government came into power would have been forced to take further steps.
I come now to the specific matter which I wish to draw to the attention of the Government spokesman. It has direct bearing upon the question of relief of rates for the domestic ratepayer. Local authorities as rating authorities have certain discretionary powers under which they can accord relief of rates to certain worthy causes, cultural establishments, educational and institutions of that kind. There has been some criticism which I do not share—of rate relief being given to educational establishments which some people might regard as not actually needing it. But this is not the burden of my observations this morning.
My purpose is to draw attention to the fact that some local authorities, in the use of their discretionary power, are giving relief to clubs of various kinds. I can readily accept that the discretionary power should be used in favour of some clubs, clubs for spastics, clubs for people who suffer from some kind of disability or trouble, old people's homes, and the like, but what worries me is that some local authorities are giving rate relief to clubs which are licensed premises, which are used for commercial purposes such as the playing of bingo and other moneymaking activities.
This cannot be a right use of the discretionary power of local authorities to give rate relief. If it is being used in that way in some parts of the country—I am assured that it is—I hope that the Minister will think it right to send a circular to local authorities pressing upon them their responsibility to look after the general body of ratepayers and not to accord relief of this kind to commercial institutions, no matter how they may be mis-described as clubs or whatever it might be. The local authority should have proper regard to the husbanding of the ratepayers' resources.
I raise this matter as a new point, and I apologise to the Minister for not having given him earlier notice. I have sought to inform his Department that I proposed to raise it today, and I hope that he will give an assurance that, where this practice is being carried on, the Ministry will 892 use such influence as it has to persuade the local authorities concerned that their greater responsibility is to the general body of ratepayers and that they should not give rate relief to commercial institutions, however misleadingly described.
§ 12.59 p.m.
§ Mr. Arnold Shaw (Ilford, South)
Like other hon. Members on both sides of the House, I am most grateful to the hon. Member for Harwich (Mr. Ridsdale) for giving us an opportunity to debate a subject of such importance to the constituents of each one of us. Before going further, I must take up the point made by the hon. Gentleman the Member for Southend, East (Sir S. McAdden), when he brushed aside in rather peremptory fashion the difference in approach between the Conservative Administration and the present Labour Government. As he admits, the Measures which the Conservative Administration brought in before the 1964 election did not quite meet the case, and I hope to show, as I discuss the impact of the various Acts on my constituents, that far more thought has been devoted to this problem by the present Administration than has ever been done before.
Most hon. Members speaking today have pointed out the many injustices of the rating system, but it is necessary to put rating in its proper context. We have to face the fact that under any circumstances rating is unpopular. It is as unpopular as any other indirect tax and it is full of anomalies. It brings about many anomalies. We have had reference to the case of an aged couple living next door to a family with a large number of wage earners. The aged couple feel very sore because they are called upon to pay the same in rates as their more affluent neighbours. These anomalies exist and have to be met. To a large extent they are being met by current legislation.
At the same time it is well to point out to ratepayers generally the tremendous benefits which they receive for the money they pay in this form of taxation. Without education, health, roads, all these various services which are very important to us, the whole concept of modern living would completely collapse. I may be a heretic in this matter, but I think that on the whole the ratepayer is getting a good deal for his money.
893 Nevertheless, we have to face the fact that the rate burden is rising at an alarming rate. It is necessary to find means for a more equitable sharing of this burden. Mention has been made of the fact that the system stems from a very ancient Statute and that the first rating was brought in to deal with the question of looking after the poor in the reign of Queen Elizabeth I. Although our method of rating may seem archaic because it stems from such an ancient practice, it is interesting to note that over the centuries no better method has been devised to meet the cost of local services.
I do not for a moment suggest that better methods are not available. This question has been under discussion and many proposals have been put forward, a number of which have been mentioned this morning. So far, no matter which Government have been in office, no solution has yet been found. I agree with my hon. Friend the Member for Birmingham, Aston (Mr. Julius Silverman) that until an extensive and thorough investigation into the whole system of local taxation is undertaken the immediate issue is how the ratepayer is to be eased in his burden. This, of course, will apply to ratepayers everywhere.
As my hon. Friend said, whatever proposals are made they will take many years to implement. It is therefore necessary to see that Acts of Parliament now on the Statute Book are strengthened in one way or another to deal with this subject. It would seem that the only feasible relief which can be brought immediately is an adjustment between the allocations from central and local funds. I mentioned the way in which the hon. Member for Southend, East lightly brushed aside the ways in which the Conservative Government and the present Labour Government have tackled this problem. That difference should be made perfectly clear and said loud and clear to ratepayers all over the country to show how much it affects them.
I was rather interested in the point made by the hon. Member for Croydon, North-West (Mr. Frederic Harris). He brought in a political point and I shall not excuse myself for bringing in political points. He said that the recent Conservative victory in the Greater London Council elections and the 894 Brierley Hill by-election were some sort of reflection on the question of rates. I am convinced that if the electors in the Greater London area had examined the rating policy and the results of the administration of Greater London Council since its inception, they would have found that the increase in rates in Greater London had probably been the lowest in the country.
I turn to the effects of the various Acts on the ratepayers of the Borough of Redbridge, of which my constituency forms part. I turn first to the effect of the Rating Act, 1966. That Act was devised to give rate rebates where they were most needed—for domestic ratepayers with low incomes. I have with me the figures of the numbers of applicants and the amount disbursed in rate relief. In the years 1966–67 the number of applicants was 5,900 and the amount of rebate was something over £100,000 of which the Exchequer afforded something over £75,000. In the current year, I am assured, the numbers are likely to be substantially the same.
I compare the effect of the 1966 Act with that of the Tory Rating (Interim Relief) Act, 1964. It is said that this was an interim Measure which was brought in to meet an immediate emergency. It took hon. Members opposite a long time to think out this emergency Measure on a subject which had been accumulating in intensity for many years, certainly during the 13 years of Conservative Administration. The object of that Act was to bring some relief to areas and individuals hard pressed or hard hit by the revaluation brought about by the Rating and Valuation Act, 1961. As a result of the relief to hard-hit areas, the Borough of Redbridge received in 1964–65 something over £36,000, in the following year something over £38,000 and, in the year 1966-67, something over £41,000, roughly the benefit of a penny rate.
When we look at the rebate for an individual ratepayer suffering hardship, we see that in 1964–65 the amount expended was £25 3s. 9d. for one case of hardship in the Wanstead and Woodford area of the present Borough of Redbridge. In the following year, the amount disbursed was £18 5s. 8d. In other words, as compared with £75,000 which the present Administration gives in relief 895 to needy ratepayers in the Borough of Redbridge, the previous Administration gave something like £10.
In addition, the relief which is granted by the 5d. aid to domestic ratepayers will represent in the current year a sum of £178,825. These are substantial figures. They mean something to the ratepayers. I hope that when, next year, the people of Redbridge are asked to decide the form of administration of their borough, the Conservative candidates will point out to the ratepayers the benefits which they derive from the Acts passed by the present Labour Administration. I am well satisfied with the interim Measures which the present Government have introduced.
I want, however, to add weight to a warning to the Government concerning relief to people on the lower income levels. There are many people within the Borough of Redbridge, as undoubtedly there are all over the country, who are, in effect, debarred from receiving relief because they happen to be just above the limit at which they would be entitled to the rebate.
That limit, too, is being reached by a number of other people who now enjoy the rebate, people like wage earners in the lower income brackets who receive small increases in pay, which do not represent an increase in their cost of living because of the current rises in prices. The small increases in pay for these people will take them above the rebate limit. It is necessary for the Government to watch this point so that hardship is not suffered by this group of people.
I welcome this opportunity which has been afforded to hon. Members, particularly on this side of the House, to deal with these questions and to make patently clear to ratepayers generally the benefits which they receive from the present Administration.
§ 1.14 p.m.
§ Mr. Bryant Godman Irvine (Rye)
The hon. Member for Ilford, South (Mr. Arnold Shaw) will hardly expect me to endorse the glowing tribute which he has paid to the way in which the rating system has operated since the accession of a Socialist Government. The hon. Member has told us what happens in the 896 Borough of Redbridge, and on that I can hardly argue with him in detail. I want to direct attention to some of the problems which arise in my constituency. Equally, the hon. Member for Ilford, South might not want to follow me in that.
I cannot, however, understand why, if the benefits of which the hon. Member has spoken are so clear to everybody, they were not clearly demonstrated at the ballot box a week or so ago, in his own borough, where, I understand, the Labour Party had its biggest disaster in the history of the borough.
That is also the assessment which my constituents would make of the way in which the Labour Party has dealt with the rating situation. When they read the promises that were made in 1964 about lightening the burden of rates which falls heavily on those with low incomes, they naturally thought that a good many of them might have the benefit of relief. When they found that the benefit was for only a very small number, and that the remaining ratepayers had to make a contribution to meet the reliefs which were given to those at the bottom end of the scale, they did not regard that as a very satisfactory solution.
My constituents remember that in 1964 they were promised a big changeover to the Exchequer of the burden which is put upon the ratepayers. We have not seen very much evidence of such a change. By the time that we came to the last election, the candidates for the Labour Party were saying that an area in which tax reform was urgently needed was the rating system. It is precisely because I regard it still as urgent that I wish to confine my brief remarks to a small part of this large problem.
On a number of occasions in recent years I have had the opportunity to make my contributions to debates on the general system of rating, and I should like, therefore, to refer merely to a particular problem to which, I hope, the Joint Parliamentary Secretary will devote his attention. The aspect which I would like to pursue is the problem of the domestic element in an area with little industry.
The area which I represent has at least four elements which are rather different from, perhaps, a large part of the country. In the first place, we have a 897 considerable number of visitors who come in during the summer. I have just received the Report of the National Parks Commission on the Coasts of Kent and Sussex. The map at the end of that Report shows the percentage of local residents compared with the number of people who visit the area during the summer. In Bexhill, the indication is that only one-quarter of the people are local residents as against three-quarters who come as visitors for a short or, perhaps, a more lengthy stay. That is the first element in our case which is different from a great many other parts of the country.
Secondly, we have to deal with the problem of coast protection. I happen to be President of the British Resorts Association. Coast protection is a matter which is constantly ventilated by that Association on behalf of our many resorts, which feel that this is a burden which falls heavily upon them and in connect ion with which they should receive more assistance. Not only is there the original cost of coast protection, but they also have to maintain the coast protection works. This represents a quite heavy burden for the ratepayers because only 25 per cent. of the total is met by the Government.
The third element is that in my constituency we have a high percentage of pensionable population. The figures relating to pensioners in Kent and Sussex show that in Bexhill, for example, at the 1961 census, there were 10,721 pensionable persons out of a population of 28,941. In other words, 37 per cent. of the people of Bexhill are in the pensionable bracket. That is the highest element in any area in Kent and Sussex. Further, between 1951 and 1961 it has increased by 9.2 per cent., which again is the highest increase of pensioners anywhere in the south-east of England.
§ Mr. George Wallace (Norwich, North)
The hon. Gentleman says that he has a large number of old-age pensioners in his constituency. I have the same problem. To what extent is the local authority providing services for those old-age pensioners from the rates?
§ Mr. Godman Irvine
The Bexhill local authority is providing facilities which I think are second to none. In addition to its excellent facilities there are a num- 898 ber of people who have devoted a lifetime to these services, and Bexhill can be particularly proud of the facilities offered.
That is the third element—we have a very high percentage of pensionable population. My hon. Friend the Member for Folkestone and Hythe (Mr. Costain) has already referred to those people in his constituency, which is adjacent to mine. The problems which he outlines are precisely those which I find in my constituency. A great many people have come to live there having calculated precisely what they could afford with their pension. But they find that with inflation, the increase of rates and costs generally they cannot in due course make ends meet in the house which they had selected for their retirement.
This is particularly hard for widows, because the widow is left with a house which she may not find convenient and does not fit her financial requirements, but she equally finds it almost impossible to find something more suitable. She is, therefore, saddled with a very heavy burden which, with her diminished resources, she often cannot meet.
There is also the group of people who have deliberately decided that as they are getting older they will move to a smaller house, hoping that they will achieve economies. But when they get there they find that the smaller house or bungalow is rated at a higher level than their previous house, and they feel that they have been cheated in some way because they are paying more in rates.
Those people are affected particularly by the fourth element, to which I want the Parliamentary Secretary to give special attention, the very high rates paid by the ratepayers in my area. The Institute of Municipal Treasurers and Accountants Return of Rates sets out the latest figures available, those for 1966–67. These show that Bexhill's annual rate payment is £71 18s. 5d. Out of 790 local authorities outside London which were included in the return, in only six are higher rates paid than are paid in the borough of Bexhill.
A number of factors contribute to that. One is that the industrial element in Bexhill is only 1 per cent. of the total, and the average industrial rateable value is £500, which is not what I imagine some hon. Members would be 899 used to for their industries. That means that there is virtually no way of raising revenue, except from the domestic ratepayer. The commercial properties comprise 12½ per cent. and average £133.
That is why I ask the Parliamentary Secretary to look at this problem in particular. Because in an area with a large and increasing number of pensionable people, virtually no industry, and a very high rateable value, the people find the greatest difficulty in meeting their rates. I regard this problem as being so urgent that it should not be left until there is a further report from the Royal Commission.
§ 1.24 p.m.
§ Mr. Roy Roebuck (Harrow, East)
I hope that I shall not be thought unduly presumptuous as a comparatively new Member if I open my remarks by paying a warm tribute to the hon. Member for Harwich (Mr. Ridsdale) for putting such an important Motion on the Order Paper and giving the House such an interesting speech. He mentioned that he had put down a similar Motion five years ago and had made pretty much the same sort of speech then. After he said that I went to the Library and read his words on 2nd March, 1962, and it is true that he then ventilated progressive views similar to those the House had the benefit of hearing this morning. It is perhaps fair to say that if the then Government Front Bench had taken note of what he said it would have been unnecessary for him to put down the Motion which we are now debating.
The hon. Gentleman also said that he hoped tht he would not have to put down the same sort of Motion again in another five years. The progress which has been made by my right hon. and hon. Friends over the past 2½ years will be sufficient guarantee that there will be no need for him to do so.
I think that there has been demonstrated from the Opposition benches a certain degree of ingratitude about the progress the Government have achieved on this terrible rates problem. They might have acknowledged that my right hon. and hon. Friends had gone part of the way towards meeting some of the more serious criticisms which have been made about the rating system over recent years. but we have not had any of that 900 this morning from hon. Members opposite.
Another small criticism I wish to make is that it was said at Question time on 6th December, 1966—by an hon. Gentleman who is not now in the Chamber—that rates throughout the country were likely to rise this year by 10 per cent. In fact, over the country as a whole they have risen by about only 1 per cent. One would have thought that a word of encouragement to my right hon. Friend might have been in order.
I am happy to tell the House that the domestic rate in the Borough of Harrow has decreased by 11 per cent. Therefore, I do not know why hon. Members opposite could not have been a little nicer, particularly as rates had been rocketing for many years under their administration.
§ Mr. Murton
I should like to remind the hon. Member that a Tory Council administers the Borough of Harrow.
§ Mr. Roebuck
It is indeed. I was coming to that, but as the hon. Member has raised the point I may as well deal with it now. I have nothing up my sleeve, but I have a newspaper cutting in my pocket from the reputable local newspaper, the Harrow Observer. It is a report of a ratepayers' meeting at which an official of a ratepayers' association said that instead of a reduction of 1s. 3d. in the £ in Harrow's current rate, there might well have been an increase of about is. 6d. in the £ but for increased Government grants and £700,000 taken from balances.
As the hon. Gentleman is showing such a great interest in my borough, perhaps I might go on to tell him what the Conservative Chairman of the Finance Committee, Councillor Sellers, said at the meeting after these observations. The Harrow Observer of 27th April reported him as saying, "I accept what you say completely," and as giving an assurance that the Council would do what it could to contain expenditure. If the hon. Gentleman has any further points about my constituency or the Borough of Harrow which he wishes to raise, I shall willingly deal with them.
As I was saying, rates had been rocketing under the Conservative Government for many years, and injustices had been multiplying considerably.
§ Mr. Iremonger
There was one point that I wanted to ask the hon. Gentleman about his borough. If what he says is true, and I am sure that it is accurate, is it not rather odd that when there was a recent opportunity for the electorate to express its opinion it gave his party the biggest drubbing it has ever had in that borough?
§ Mr. Roebuck
If hon. Gentlemen opposite wish to take such a passionate interest in my constituency they ought to do their homework rather than just having a chat with the hon. Member for Harrow, Central (Mr. Grant) in the doorway as I rise. The swing in the Greater London Council election was about 9 per cent. in Harrow, considerably less than in the hon. Gentleman's borough.
§ Mr. Iremonger
I do not want to appear pettifogging, but the swing in my borough was quite exceptionally high for a safe borough. The swing in the hon. Gentleman's borough was well up to the average of comparable boroughs in the area. The Labour Party failed to make any impact at all.
§ Mr. Roebuck
I do not propose to waste the time of the House upon this tedious matter. The hon. Gentleman is well known as the biggest bore in the House and I do not propose to encourage him.
§ Mr. Roebuck
The hon. Gentleman says something about eagles. But I know something about natural history, and do not, as he does, regard a Belgian hare as not being a rabbit.
To get on with some more serious points, I was attempting to demonstrate how much the proportion of rates as a tax had increased under Conservative Administrations. According to my researches, in 1952 out of every £1 in tax 1s. 7d. was accounted for by rates, and in 1963 out of every £1 in tax 2s. 4d. was accounted for by rates. Hon. Gentlemen opposite did not deal with the situation, despite the powerful advocacy of the hon. Member for Harwich and the tiny minority of progressive hon. Members opposite. It was only after the Allen Report was reluctantly commissioned, following a great deal of pressure, by the then Government that 902 the nation really had some hard facts to go on. We then discovered that 85 per cent. of householders with incomes below £10 a week were pensioners and people living on savings, and that the amount of money that they were paying in rates was unduly high.
All we got as a result of that report was the miserable Rating (Interim Relief) Act, 1964. That Act, I am happy to tell the hon. Member for Ilford, North, who is so interested in my constituency, was no use at all to the hard-pressed ratepayers of Harrow, because they did not get a brass farthing out of it. On the other hand, under the Rating Act, 1966, needy ratepayers in my borough have been assisted to the tune of £83,500 in 1966–67. Because of the high rateable values in Harrow, which has very little industry, the average rebate paid has been £24, against the national average of £15.
The hon. Member for Rye (Mr. Bryan Godman Irvine) made much of the fact that the Labour Party had made promises and cast doubts on their fulfilment. There is evidence that the Government have done a considerable amount. If the hon. Member doubts it, he should speak to any of the 3,500 ratepayers in my borough who have benefited from rebates to the tune of £24 this year. Not only have the Government assisted those who are most in need, but they have also helped all domestic ratepayers by reducing the demand this year by 5d., next year by 10d., and the following year by 1s. 7d. I do not claim that the whole of the 11 per cent. decrease in Harrow this year has been due to Government action—we are far more generous on this side of the House than hon. Gentlemen opposite are—but it is certainly due largely to Government action, both fiscally and also because of the exhortations from the Government urging councils to exercise restraint. We must be objective in this matter.
The hon. Member for Harwich and other hon. Members mentioned salaries of school teachers and said that many hon. Members want them transferred to the national Exchequer. That is an idea to which I am not unsympathetic. But hon. Gentlemen and the country generally ought to realise that the Exchequer already makes a substantial contribution to education. It meets more than half the local authority education expenditure. 903 The recent incorporation of the needs element in the rate support grant has helped many local authorities considerably. Certainly this is the case with my local authority, mainly because we have many older children who are still in full-time education. I concede that some other boroughs, particularly in the North, may have done rather badly out of it, but I am sure that hon. Members representing those constituencies will make their own case. Harrow certainly is very grateful to the Government.
There can be no doubt about the substantial improvement that has been achieved in the rate position. Instead of rates soaring, as they did when hon. Gentlemen opposite were in power, they have been more or less held steady. I accept that this is largely as a result of piecemeal legislation. But the hon. Member for Harwich was advocating piecemeal legislation. He was saying, "Do not wait for the full Report of the Royal Commission. Let us get on with the job now." I would agree with that provided that it does not hold up the very thorough-going review which is necessary. I shall be interested to hear what the Joint Parliamentary Secretary has to say on this subject.
The tremendous work that the Royal Commissions are doing is long overdue. It should have been started many years ago by the Conservative Administration. It is churlish for hon. Members opposite to complain that we cannot yet move forward to a wholesale reorganisation of the rating system. The fault lies with hon. Gentlemen opposite.
§ 1.37 p.m.
§ Mr. James Allason (Hemel Hempstead)
We have heard some remarkable statements from hon. Gentlemen opposite, and I shall deal with some of them.
First, I would point out that we had very striking stability of rates during the period of Tory rule until 1960–61. I wonder how many hon. Members realise that in 1960–61 the average rate paid was less than it was in 1952–53. That is a startling fact. Thereafter, the rate began to go up. I put that as the date when rates started to get out of control. It was extremely perceptive of my hon. Friend the Member for Harwich (Mr. Ridsdale) to speak as he did in 1962, pointing out that the rate burden was 904 getting out of control. It was a fact that was not generally recognised at that point.
The reason is the very considerable expansion of local government services that is going on all the time. There is no corresponding expansion of the tax base. There is the natural expansion of rateable values in an area, but this is nothing like sufficient to meet the expansion of services. What is necessary is some other form of taxation to help out local government.
Quite a few red herrings have been drawn across our path today. The hon. Member for Birmingham, Aston (Mr. Julius Silverman) told us that rates had never been stable. I have been able to contradict him by pointing out that, in 1954–55 and 1955–56, without any revaluation or anything of that sort, the rates were identical on average over the country.
The hon. Member for Consett (Mr. David Watkins)—I am sorry that he is not with us now—made a number of such statements. I tried to contradict him on some of them, but was unable to do so and he must, therefore, expect them to be contradicted later. He told us that, in 1957, relief for shops and offices was given at the expense of domestic rate payers. That is true in the narrow sense, but it must be looked at in the wider sense. This was that the year before there had been a tremendous change in rating as a result of which, for example, the average rate came down from 23s. 4d. to 16s. 2d. It was found that this fell very hardly on shops and offices, which found themselves paying considerable increases as a result of valuation changes. They were on modern valuations whereas domestic premises were still on pre-war valuations.
I hope that the hon. Member for Harrow, East (Mr. Roebuck) is not leaving us, because I want to deal in a moment with some of the remarks he made.
As I was saying, it was, therefore, only justice to correct what had turned out to be an unfair rating burden and the shops and offices were given natural justice. But nevertheless domestic ratepayers were paying 18s. 5d. in the £ as compared with 23s. 4d. in the £ two years earlier. They had nothing to complain about in that.
905 The hon. Member for Consett also told us that the average rate paid had doubled in the 13 years of Tory rule. That is true, but the average paid by the domestic rate payer is represented 50 per cent. by an increase in standards. Only the other half represents an actual increase in rates paid by someone living in the same house as before.
Even so, taking this fact along with the average domestic ratepayer's demand over the years, that represents 5.4 per cent. increase each year. The hon. Gentleman tried to brush my intervention off by saying that, if one divided 100 per cent. by 13, the answer was 8 per cent., so that this must have been a rise of 8 per cent. a year. He tried to contrast this with the 8 per cent. average increase we have had under the present Government but this produces ridiculous results. If the Government continue their present course, and the increase in rates goes on over the future years as it has over the past three years, rates will double in eight years, not in 13. In face of this, the hon. Member for Harrow, East tells us that rates were rocketing under the Tories whereas Labour is holding them steady.
How the hon. Gentleman can believe that I cannot understand. We have heard that, or average, the rate paid by domestice ratepayers was £32 in 1964 and is now about £40. That is not holding the rates steady. The one statistic the hon. Gentleman produced to prove that rates rocketed under the Tories was that, in 1952, out of every £ of taxation 1s. 7d. was represented by rates and, in 1964, 2s. 4d. He omitted to say that, in 1938, the comparable figure was 3s. 9d.
Thus, before the war, a substantially greater proportion was taken in rates but this went down under the Tories after the war. It is gradually going up again. The hon. Gentleman gave a misleading impression. The truth is that, under the 13 years of Tory rule, the average paid by domestic ratepayers rose by 5.4 per cent.
In the first two years of Labour rule, the rise was 11.3 per cent. This year we are celebratinig the fact that it only rose by 1 per cent. But compare this with the promises. The Labour Party's 1964 election manifesto said that it would give 906… early relief to ratepayers by transferring a larger part of the burden of public expenditure from the local authorities to the Exchequer. … Labour will … transfer the larger part of the cost of teachers' salaries from the rates to the Exchequer.What else would one expect from that but early relief for rate payers? Apparently the hon. Member for Harrow, East is satisfied that this has been achieved. I hope I have shown that what has been achieved is something disastrous.
§ Mr. Roebuck
I did not say that I was completely satisfied. I specifically stated that on the question of teachers' salaries I was not unsympathetic to the idea. I tried to demonstrate that the Government had made considerable progress and I contrasted that with the dismal and gloomy record of their predecessors.
§ Mr. Allason
I do not accept a 5.4 per cent. increase on average as dismal and gloomy compared with the 8 per cent. average increase under the present Government. I would say that the boot is rather on the other foot. But digging into the balances is not a satisfactory way of preserving the rates year after year. This is what has been done this year to try to hold rates down.
In accordance with the policy of the Government, who asked the local authorities to be as economical as possible and do everything they could not to increase rates this year, a tremendous effort has been made and as a result of this, of digging into the balances and of the 5d. stabiliser, there is a reasonable measure of stability this year. It will not last. A stabiliser of 5d. a year for the next year or so is totally inadequate to meet the problem of rates.
The remedy is at hand in the general grant. That was what one would expect from the Labour manifesto. One would expect a substantial increase in the general grant but it has not materialised. But, of course, there are other methods of raising revenue and I want to deal with one or two of these because they raise interesting prospects.
Local income tax has been mentioned. I do not think that anyone has suggested strongly that it is as wonderful solution as so many people apparently think. I would ask anyone advocating local income tax whether this would be a further increase in direct taxation or a transfer of existing Income Tax. If it were to be 907 a further increase in taxation, this would only make it more certain of there being no incentive to work harder.
I would strongly deprecate an increase in Income Tax by the introduction of local income tax as well. If the scheme were merely a transfer of some of the central Income Tax to local authorities, it would be a rather unwieldy way of providing central money for local government. It would be better to do it by the present system, which is highly selective and which attempts to give local authorities what they need rather than do it by means so purely fortuitous that a local authority might for example, be lucky enough to have a millionaire living in its area.
Now I turn to the poll tax. Many people feel that this should be introduced because of the case of, for example, a large family of earners living next to old-age pensioners and paying the same rates. I sympathise with this, but a poll tax by itself is highly regressive, and, therefore, does not command much respect. On the other hand, if it is highly selective it has its attractions, and now that we have a system of rate relief under the Rating Act exactly the opposite can take place. The exact corollary of rating relief could be increased taxation on those houses where there are a large number of wage earners. There could be a system of poll tax which would work.
I believe that the levying of the betting tax should be transferred to local authorities. While it is collected by the central Revenue, it is unwieldy, and always has to cater for the customers who can pay least. When the Chancellor decides what tax to impose on fruit machines, he does not look only at the highly profitable fruit machines in the more prosperous areas, but also at those in the remote and depressed areas, and he then decides how much tax to impose. He does not know, anyway. He has to guess, and, therefore, he probably puts the figure too low. If there were a local system whereby betting and gambling could be taxed, each local authority could look to the experience of others and substantially increase its revenue from these sources. I believe that this is a real chance for the central Government to give up a tax. They should hand it over to local authorities who would be able to be much more effective in using.
908 I believe that we have reached the stage when there is far too much reliance on the rating of houses to provide local finance, but local government must remain independent, and it is, therefore, urgently necessary to see what else can be done. The percentage grant is the worst of all worlds, because it ensures that local government cannot be independent, that the central Government must oversee every form of local government expenditure.
The general grant is a ready instrument which the Government ought to use a great deal more effectively than they are doing at the moment. To give 5d. this year, and 10d. next year, is not enough. A substantial increase in the general grant is both possible and necessary.
There are, of course, other methods of giving local authorities a chance of raising revenue locally. I have described only one or two because of the shortage of time, but these methods are available, and I hope, therefore, that the Government will take a great deal of notice of the Motion.
§ 1.53 p.m.
§ Mr. George Wallace (Norwich, North)
For a number of years I served on various types of local authority, always, unfortunately, as a member of the minority party, so much so that quite often when I got to the entrance to the Chamber I thought that it ought to have engraved over its portals "Abandon hope all ye who enter here".
The hon. Member for Harwich (Mr. Ridsdale) said that in the past in many areas rates had been held and stabilised. I know how this was done in many instances. It was achieved by adopting ruthless economic measures, by cutting back, or cutting out completely, the maintenance of schools and other public buildings, holding back essential schemes, and so on, and over the years building up an ever-increasing burden of arrears of work, but eventually the truth had to be faced, and up went the rates.
I welcome this debate, and I congratulate the hon. Member for Harwich, a fellow East Anglian Member, if I may so describe him, for selecting this topic for our discussion. I do not accuse him of what I would accuse many others, because we are facing local elections at the moment. The cry of "Down with rates" and "Up with me" is the cheapest electioneering gimmick there is, but retribution eventually follows. This is a 909 parrot cry without responsibility, and it would be completely unfair of me to accuse the hon. Gentleman of this, because I know that he is trying to put forward constructive suggestions for easing a tremendous burden which faces thousands of ratepayers throughout the country.
I support the hon. Gentleman in general on the idea that he has put forward about education. It is desirable that there should be some move on the lines suggested, but I must emphasise that whatever we do we must preserve local control over education because this is invaluable.
I am intrigued by the suggestion in the Motion that local authorities should have more power to raise revenue other than by rates, and suggestions have been made for doing this, but I wonder whether this means some aspect of municipal trading. Does it mean the building of houses by first-class direct labour schemes, and selling them at a profit? If it does it is a good idea. It might help the rates considerably. What local builders will say is another matter, but this is something to think about although I know that the Conservative Party is against any form of municipal trading.
I am sorry that hon. Gentlemen opposite have not given the Government credit for the interim measures which they have taken to ease the rate burden. In my constituency there are a large number of elderly people. The hon. Member for Harwich knows that the average wage level in my area and in East Anglia is very low. It is certainly below the national average, and the rate rebate scheme has eased the burden for thousands of people in areas like mine. I hope that we shall give more publicity to this scheme, because, as with the old supplementary pension idea, there are many people who are a little too proud to seek assistance which is theirs as a right. One thing which we should all do, irrespective of our party allegiance, is to publicise this scheme.
I am sure that the hon. Member for Harwich will expect me to say something about the City which I have the honour to represent. It is the finest example of good local government administration in the country. This is 910 not my opinion but that of many experts in local government. I can therefore speak of a local authority which, by means of good administration, provides extensive services without necessarily imposing a tremendous rate burden, and one of the key factors in a discussion on rates is the question of value for money spent.
It is easy to criticise rates, but the main factor in deciding whether one is getting value for money is that of the services provided. A good service is a result of wise administration and forward planning. Recent local government elections have highlighted another problem. I wish that our local elections, of whatever kind could be decided on local issues. The concentration is upon national issues, and this is not good for local government. I know that at the moment, national issues affect my party adversely. However, local people tend to forget the issues affecting them locally because of this concentration.
In Norwich there is a fine example of wise administration and forward planning, particularly in housing. There are 18,000 municipally-owned houses, without a subsidy from the rates, and at rents which are among the lowest in the country. There is one of the finest and most successful municipally-owned cattle markets in Europe. Already it is being expanded. Thanks to Government policy, the city council has stabilised its rate while expanding services.
I agree that a reform of local government finance is urgently needed. This complicated problem cannot be divorced from a reform of local government. Action is needed, but to rush a solution would create further difficulties. There has been a tendency to rush through too quickly, amalgamations of local authorities which in many cases have created administrative problems, which can only be solved by spending thousands of millions of £s. Careful thought and planning must be devoted to this.
For many years I have believed in the rating of empty properties, which is now being dealt with by Government legislation. I have also advocated the provision of interest free, or selective, low interest rates for local authority schemes of social importance, so that money would be granted to a local authority at an interest rate based on the social 911 importance of the project to the community.
This would help to ease the rate burden, because one of the great problems is the high interest rate. I have been trying to keep out of party politics in my speech. The problem cannot be tackled by cutting services; it must be tackled in some other way, such as the reduction of interest rates or the careful reform of local government, bearing in mind the possible results. We must beware of the creation of very large areas. The hon. Gentleman the Member for Harwich has provided us with a good, constructive debate.
§ 2.5 p.m.
§ Mr. Oscar Murton (Poole)
We have all listened with very great interest to my hon. Friend the Member for Harwich (Mr. Ridsdale), and as a mere tyro in these matters compared to him, I should like to pay my own warm tribute to the skill with which he introduced his Motion.
This Motion deals with a subject dear to the hearts of all of us, and my hon. Friend is to be congratulated on the way in which he advanced his case. My hon. Friend reminded Mr. Speaker, who was then in the Chair, that it was just over five years since he drew attention to the increasing level of local government expenditure, and the consequent burden on the rates, which was falling particularly heavily on those less able to bear it. This might also be termed a Quinquennial Evaluation rather than a revaluation, because my hon. Friend has said that he hopes, in another five years, if matters have not been improved, to be successful in the Ballot again, and to have another debate.
It is important to remind the House of what we have done to help the domestic ratepayers. We have progressively rerated industry and, by pursuing that policy, have reduced the proportion of rates paid by the great majority of domestic ratepayers. The figures speak for themselves. In the three-year period, 1955–58, when industry was still 75 per cent. derated, domestic ratepayers in England and Wales were paying yearly 60 per cent. of the total rate bill. By 1963, industry was totally rerated and the domestic ratepayer's proportion of the 912 total bill in 1965–66 had fallen to just over 47 per cent.
In money terms this was an improvement of about £538 million. If the full rerating of industry had not taken place, the domestic ratepayer would still have been faced with the original 60 per cent. and this would have amounted in money terms now to £667 million. Conservative action in this direction has spared the domestic ratepayer the unpleasant task of having to foot an additional bill of £139 million. This relief contrasts very markedly with a mere £23 million of relief which the present Administration have given for the current rating year. It is important to emphasise how misleading and inaccurate was a rather portentous remark made in this House last year by the right hon. Gentleman the Member for Coventry, East (Mr. Crossman), in his then official capacity of Minister of Housing and Local Government, when he said, of this £23 million relief, when introducing the Rating Bill:… it is a great deal more money than anything attempted by our predecessors."—[OFFICIAL REPORT, 14th June, 1965; Vol. 729, c. 1280.]Hon. Members will also recall that the 1963 revaluation rated in full for the first time in 13 years all the main classes of property apart from agricultural land and charities which received special terms, and made these assessments on the basis of up-to-date values. It was recognised that this revaluation could, after all the previous artificial values, cause great hardship particularly to elderly people on small fixed incomes.
In his original Motion in March, 1962, my hon. Friend foreshadowed such a situation. This was why my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), when Minister, appointed Professor R. G. D. Allen in May, 1963, to chair the Committee whose terms of reference were:to assess the impact of rates on households in different income groups and in different parts of Great Britain, with special regard to any circumstances likely to give rise to hardship.We recognise how valuable that comprehensive and documented Report was.
Also, in December, 1963, the Conservative Government introduced the Rating (Interim Relief) Act, which empowered local authorities to remit rates to elderly ratepayers. I have heard the 913 party opposite pour scorn on that Act. It was an interim Measure and represented only a total of £6 million—
§ Mrs. Gwyneth Dunwoody (Exeter)
Perhaps the hon. Gentleman would like to know that, in Exeter, which is very much in the category mentioned by his hon. Friend as having no real industry, that Tory Act provided, in 1955–56, £25 10s., and that this Government's rate rebate scheme has been worth £38,000 to the ratepayers of Exeter.
§ Mr. Murton
I am interested in what the hon. Lady says. The Act's operation was uneven because local authority requirements were uneven. In Poole it was a considerable help to hard-pressed ratepayers and I am sure that my hon. Friend would agree that this applied in Harwich too. Seaside resorts particularly needed help because they have the highest proportion of elderly retired people and the lowest proportion of industry. I wanted to remind hon. Gentlemen of something which seems now to have been conveniently forgotten—
§ Mr. Deputy Speaker (Mr. Sydney Irving)
Order. The hon. Gentleman must not make a speech in an intervention.
§ Mr. Murton
If the hon. Gentleman had forgone his light lunch, he would have heard my correction of that slip of the tongue. It was indeed £6 million. I stressed that this was an interim Measure, a holding operation until the Conservative Government had carried out their review of the rating system, promised in October, 1963, which was to include the relationship between rate-borne and Exchequer expenditure on local government services, with particular reference to the share of each. It was also to ensure that the money collected from ratepayers was used as fairly as possible. That 914 review was still in progress at the time of the 1964 election and, with a change of Government, as we have heard nothing more, we must presume that it was swept aside and conveniently forgotten.
This decision was curious, in the light of Labour's pledge in their 1964 election manifesto to give early relief to ratepayers. With one exception, the ratepayers received no relief for three years thereafter. Labour did one thing, the Rating Act of 1966, the intentions of which were good, in that it set out to help the poorest ratepayers, But where the then Minister erred was in burdening local authorities with finding 25 per cent., which struck at the pockets of those ratepayers who were only marginally better off than those eligible for help.
This is serious, particularly in seaside towns such as Harwich, Poole, Rye, and Hove—
§ Mr. Murton
I see that we are all here in force today to point out the hardships which have fallen on our constituencies—
§ Mr. Murton
Harrow is a long way from the sea.
The Local Government Chronicle described this Act as "Mr. Crossman's mouse", perhaps following The Times article, which called it "a mousey little thing" That may not have been quite fair, but the legislation did have streaks of meanness, in that the Minister refused our urgent pleas on Report that war disability pension and other special allowances should be disregarded in determining entitlement. I understand that the grant for the current year will be £16.4 million. How much was spent last year, and how does it compare with the original estimate?
The Government's promises are shadow boxing. In the Labour document New Britain, they promised to transfer a large part of the cost of teachers' salaries from the rates to the Exchequer. This was also the Prime Minister's theme on 28th May, 1963, in a speech entitled "A Campaign for Education". We were entitled to expect these promises to be implemented—we thought in the Local Government Bill. But that became an Act and we still 915 had no clue. Important questions by my hon. Friends were either hedged or ducked by the present Minister.
Finally, in a written Answer to me which was transferred to the Secretary of State for Education and Science, I was told on 19th January:Any major reform of local government finance must await the recommendations of the Royal Commission on Local Gvernment in England."—[OFFICIAL REPORT, 19th January, 1967; Vol. 739, c. 98.]So much for that promise, safely shelved for the remainder of the life of this Parliament, as is well known by the present Administration. It is no wonder that my hon. Friend the Member for Harwich in his Motion calls attention to the principle of something already promised by a Labour Administration which would cost the Exchequer £250 million a year to put into effect. If this transfer cannot be faced, why was such an irresponsible promise ever made in the first place? Do the Government ever intend to fulfil it, supposing that they are ever returned again and given the opportunity to do so?
I should like to turn very quickly to the general Rate Act, 1967. In the debate on 13th March on a Motion introduced by my hon. Friend the Member for Croydon, North-West (Mr. Frederic Harris) calling attention to the burden on rate payers, the Parliamentary Secretary, who is present, made great play of how very successful had been the Government's policy in keeping domestic rates down in the year 1967–68 by the operation of the new domestic element of the rate support grant of £23 million, to which I have already referred, which this year is equal to a 5d. rate.
So far as we can judge, not knowing the final figures, we understand that non-domestic ratepayers have had to pay rather less than 5 per cent. increase while domestic ratepayers have had to pay less than 1 per cent. more. In my opinion, however, there cannot be much virtue in this, and I suggest that there is very little enthusiasm in Ministerial circles when we consider the underlying reasons why the rate poundage has been held this year.
Paragraph 9 of the House of Commons Paper No. 252 of 14th December, 1966, gives the sober facts which underlie the reason why the rate has been held: 916It is clear that over the two years ahead the rate of growth of the economy will fall short of that postulated in the National Plan and in this situation growth of public expenditure must be restrained …This is a very different story from the Government's attitude a few days before the last election. On 29th March, 1966, when my right hon. Friend the Member for Bexley (Mr. Heath) asked the Prime Minister how he proposed to pay for his programme which was based on a growth rate of 4 per cent. now thatit is absolutely apparent that this growth rate is not going to be achieved",the Prime Minister replied,It is only apparent to Mr. Heath. It is not apparent to us. We shall pay for our programme out of the provision in the National Plan involving a growth rate of 4 per cent. The National Plan stands, and we intend to fulfil it.Those words were reported in The Times on 30th March, 1966.
By July the National Plan was dead. What was the result? Savage cuts in local authority estimates, these on top of sharp cutbacks of spending initiated the previous autumn as a result of the emergency measures of 20th July, 1966. Local authorities, in many cases committed to programmes of expenditure which they were unable to halt, had to resort to the raiding of balances—very heavy raiding of balances—and that answers the question of the hon. Member for Harrow, East (Mr. Roebuck), who has left the Chamber, presumably to have his lunch.
Local authorities were fortuitously helped to some extent—but it was not so fortuitous for those who suffered—by the prices and incomes freeze which has held down local authority wage bills for which they had already budgeted in the spring of 1966. Many of those balances which were meant to pay the increases promised to local authority staff—increases which were frozen—were used in order to hold the rate. Had it not been for these two factors, the 5d. derating provisions would certainly not have been adequate to hold the rate in a normal year of economic stability. It was expected that the rate would have risen by about ls., in which case the domestic ratepayer would have still had an increase of 7d. to meet. This has not happened. For that all ratepayers, including all of us here, will be very grateful.
917 The tide of local authority spending may have been stemmed, but it is quite impossible for this false situation to continue into a second year, when some of the flood must be released, unless there is to be what one might call a permanent cutback in spending and a check in the development of local authority services which are so badly needed. If this flood is released it will be interesting to see whether the Minister will be more effective than Canute was in similar liquid circumstances.
I hazard a guess that if the floodgates have to be released and if the economic situation has not improved, the 10d. derating provision for next year will not be sufficient to meet the cost if there is any tendency whatever by local authorities to try to make up for the time lost during the current year.
If hon. Members opposite claim credit that their £23 million has stabilised the rates, may I suggest how much more worth while to the hard-pressed ratepayers of Great Britain would have been the Conservative plan to provide £100 million of relief, as stated in our manifesto, by transferring the entire cost of certain services from the rates to the Exchequer. What one might term "one-tenth off the rate bill" is infinitely a better scheme in that as the transferred services develop and expand, so is their extra cost borne by the Exchequer. Indeed, I would point out that what was worth £100 million of relief in 1966 is probably worth nearer £120 million at present.
My hon. Friend the Member for Harwich urges the Government to ensure that interim reports of the two Royal Commissions are made available so that action on the reform of the financing of local government will be taken before the next General Election. It will be interesting to hear from the Parliamentary Secretary on the future of the rating system. Is it or is it not dependent on the outcome of the Report of the Royal Commission? Is there any connection at all? There have been an interesting series of obiter dicta on the subject of the rating system and alternative methods, so far unspecified, of raising local authority finance during the past two years by right hon. and hon. Gentlemen opposite. The right hon. Member for Coventry, East who, as we know, is never 918 short of an idea or the words to express it, admitted on 14th December, 1965,I shall have no specific proposals for such a tax for some time to come."—[OFFICUD., REPORT, 14th December, 1965; Vol. 722, c. 229.]He was referring to a new local tax. His right hon. Friend the Prime Minister at the Dispatch Box on 9th November, 1965, saidWe all hope that someone will stumble on the secret some day."—[OFFICIAL REPORT, 9th November, 1965; Vol. 720, c. 45.]He was referring to the problem of easing the burden of rates—and never was there a more sincere or open remark, because "stumbling upon it" is at present all that anybody has been hoping to do.
At this point a junior Minister became bolder. On 28th April, 1966, the noble Lord, Lord Kennet, speaking in another place, 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.]If that is a Government statement, why did the Minister of Housing and Local Government say six weeks later,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 shall have to be content with rates patched up as best we can.Just to make it perfectly easy for all hon. Members to understand the position, in the same debate and on the same day, in answer to an inquiry about whether the whole question of an alternative basis for local authority finance had been remitted to the Royal Commission, the Parliamentary Secretary, the hon. Member for Widnes (Mr. MacColl) said:It was not remitted specifically, because there is no mandate … 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."—[OFFICIAL REPORT, 14th June, 1966; Vol. 729, c. 1261 and 1377.]I become somewhat alarmed at the ambiguity of the answers which we receive. We on this side of the House are firmly of the opinion that one cannot undertake the study of a new pattern of local government without considering at the same time the vital matter of the 919 sources of revenue which will be available to it. I hope that the Parliamentary Secretary will make a further statement on the matter today. I need remind him of only one sentence in the terms of reference to the Royal Commissions which cover the point:… the need to sustain a viable system of local democracy.That could mean two things. It could mean only the need to sustain the system itself, not as a revenue raising organisation but merely seeing that it worked and was economical. But obviously it must mean the question of revenue raising, too, because that is what the local organisation is for, after all. We should like to know whether the Royal Commission is studying the whole problem as one piece, as we believe it must.
Finally, I turn to the problem of local government reorganisation. We know that a Conservative Administration created the concept of the Greater London Council, and plans were worked out for the unification of several of the bigger conurbations. The hon. Member for Consett (Mr. David Watkins) mentioned Greater Tyneside and seemed to be pleased that this had now been scrapped, as I understand it has been by the Minister—
§ Mr. David Watkins
I do not know how the hon. Gentleman draws the conclusion from anything which I said that I was pleased about it.
§ Mr. Murton
I apologise if I misunderstood the hon. Gentleman. He mentioned it, and I thought that he thought it best that it should be left over. I am glad to hear that he agrees with me that it is a pity that it has been deferred.
The Local Government Commission has been wound up, and now we have these two Royal Commissions. We are told that they will not be reporting for 18 months, but it is already possible to see a pattern of thought emerging, because all one has to do is to read the evidence which has been submitted to the Royal Commissions. To take Government Departments alone, the evidence which they have submitted can be condensed into one sentence. The structure recommended is something in the region of 30 to 40 first-tier authorities, while beneath should be an unspecified number 920 of second-tier authorities. But there is a difficulty here. How many of these second-tier authorities are there to be to replace the 1,400 odd local units which there are at present?
From studying the evidence, not many people seem to have a very clear idea of what the organisation is to be. However, I stress that the key to the whole problem possibly is not so much the finding of new forms of local government taxation as being sure that our gross national product mounts. From that flows the amount of money which can be given in the way of Exchequer grants. During the Conservative Administration from 1951 to 1964, the gross national product rose from £12,901 million to something over £25,000 million, which is virtually a doubling. At the same time, as a corollary, it was possible to reduce taxes. That to my mind is the real way to provide the necessary finance for local government.
We are all in favour of larger units. I think that everyone understands that there must be larger units, because, the larger the unit, the easier it is to cut down on overheads. At the same time, one wants to cut down the proliferation of appointed bodies. If I may quote from "Local Government Finance", which is the journal of the I.M.T.A., in the April, 1967, issue there is a very interesting article written by Mr. Lynch, the Treasurer of Crawley Urban District Council. In relation to joint boards and committees, he says:It is interesting to read in several places that various departments, whilst recognising the need for joint boards and committees of various kinds under existing conditions, do not really favour them and would prefer to see their functions revert to the local government authorities if they are enlarged. The Treasury think that a drastic reduction in the number of local authorities would probably render unnecessary many of the joint boards and joint committees, numbering at present over 900. Even in respect of the recent police amalgamations, the Home Office say that if local government units emerged of a suitable size and shape to maintain separate police forces, it would be possible to restore the direct local authority link with the police service.It is a pity that the Land Commission should have compulsory purchase powers when local authorities have them already. One has to remember also that the National Health Service could well benefit under the reorganisation of local 921 government. One possible suggestion is that there should be one authority on an area basis which would deal with hospitals, with general practitioners and with local health and welfare, which, as we all know, are now dealt with by separate boards.
We must ensure that the new authorities are truly elected authorities. We must give more power to people on the spot, and we have to trust the new local councils when they are formed. We want to remove the threats from central Government, of which we have had too many in recent months, such as a Minister of Education who threatens what will happen if comprehensive schools are not formed, a Minister of Housing who makes similar threats about the sale of council houses, and a Government who quite blatantly and openly postpone the London borough elections.
In addition, we need better business organisation within these local authority units. I know that there have been a number of attempts. The Borough of Wandsworth in 1962 saved £20,000 in the first year, in the next year it saved £30,000 and, I believe, £40,000 thereafter. A less happy solution was arrived at in the County Borough of Bournemouth, where a committee of business consultants has recently been sitting. After making certain references to how affairs could be regulated and costs cut down, it made the rather sweeping statement that the County Borough of Bournemouth should be recommended to take over the Borough of Poole and the Borough of Christchurch to help it out of its difficulties. I deplore such a thought, and it would find no favour in my sight. However, that is only by the way.
I think that the financial problems are best summed up by Mr. Lynch in his article. He refers to the evidence given by Government Departments to the Royal Commissions, and says:There are, of course, numerous references to finance. The Royal Commission is told that the most significant factor about local authority finance is the rate of growth of revenue expenditure—a good deal faster than central government expenditure or the national product. What is not mentioned is that local authorities are in the main carrying out national policy and that apart from the periodic 'freezes' they are being continuously urged by the central departments 922 themselves to extend and improve their services. The variations in expenditure per head, rateable values and rate poundages from area to area are mentioned and the point made that it would be better if local authorities had more flexible tax arrangements rather than have to depend on a single and highly regressive tax. But the evidence goes on to say that it would be a mistake to think that it was only the present fragmented pattern of local government which stood in the way of new forms of local tax. Much of the field was already pre-empted by national taxation.The Association of Municipal Corporations says in paragraph 282 of its Report:Furthermore, the Association has not as yet been able to give consideration to the sources of revenue of the new authorities and would not consider it sensible to do so in the absence of at least provisional or preliminary conclusions"—and that meets the point made by my hon. Friend the Member for Harwich—by the Royal Commission".The Association goes on to talk of offering at a suitable time to submit a paper on the question of the future of local government finance.
The country awaits these reports with interest. If it is possible to have interim reports, we should all be grateful. Otherwise, we hope that the final reports of the two Royal Commissions will not be too long delayed, and we know that we can expect that they will in all ways be thoroughly constructive.
§ 2.41 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl)
This has been a very remarkable debate if only because it has taken a form which I do not think that anyone—I certainly did not—expected it to take. The great attack on the Government in their most vulnerable spot, as we are always being told local government finance is, has completely fizzled out.
This has become a most valuable and helpful debate on the very important question of the future of local government finance. It is a subject on which I hope the House feels that it wants to spend a good deal of time. I speak at this stage, not in any sense to indicate, or to be impertinent enough to suggest on a private Member's Motion, that the time has come to end the debate, but to try to tidy up some of the points that have so far been made.
923 Nothing can alter the fact that all the prophecies about enormous increases in rates just did not come off. A whole succession of hon. Members opposite have at one time or another committed themselves to prophecies of 10 per cent. or 15 per cent., but those increases have not eventuated. The people to whom the Motion is primarily directed by its wording, the domestic ratepayers, have had an increase, owing to the working of Government policy, of about 1 per cent.
§ Mr. Allason rose—
§ Mr. MacColl
No, I am only just warming up. The hon. Gentleman will probably have an opportunity later.
I must make quite clear the part that has been played by the local authorities. The point has been made by hon. Members on both sides, and it is only right that it should be said. In the White Paper published with the Rate Support Grant Order, the Government made it clear that we had asked local authorities to cut their estimates of relevant expenditure, partly because we thought their programmes were too ambitious and not likely to be reached, and partly because in the state of the nation's finances it was not possible to spend as much money.
It is no use the Government or hon. Members calling for economy unless, when the time comes, they are prepared to take the responsibility for saying there must be a reduction in the rate of expenditure. That is what we said. We did not call for a cut back—and this is not always made clear—but for a slowing down of developments that we recognised were desirable in themselves, but just could not be afforded. The hon. Member for Croydon, North-West (Mr. Frederic Harris) asked the very pertinent question whether these were cuts in the sense that they have gone for good, or a rephasing on which we hope to catch up later.
That is a slight misunderstanding of how negotiations on the rate support grant are conducted between central and local government. The whole point of a grant of this kind, for better or worse—and that is a matter of argument—is that we do not go in form meticulous control of expenditure. We fix a global figure for the country and then allocate the amount according to a formula. It is then entirely up to local authorities to decide what they will spend and what rate they will fix. 924 The actual working out of the proposals remains a matter for local authorities. They can decide where they want to moderate their proposals, where they want to put them back, and so on.
It is extremely difficult to know just what the hon. Member for Poole (Mr. Murton) really wants. He talked a great deal about the urgent need to improve local authority services. Does he want economy in local authority services, does he want economy in local taxation, or does he want an expansion of the services and an increase in expenditure upon them? That was not made clear, and it should have been made clear, because this is surely a question—
§ Mr. Murton
One naturally wants an expansion in the services, but that can only be obtained by economic stability and with an expansion of the gross national product.
§ Mr. MacColl
I agree and that is precisely why the various proposals put forward by the Government since July have been aimed at, and are getting, that degree of economic and financial stability from which the country is already beginning to gain enormously.
It is just for that reason that we have had to have the courage to incur hostility from the Left, and that we have to have the courage to make clear where we stand on this vital point and not try to gloss it over and pretend that we do not need to make up our minds about unpleasant facts.
Another rather curious inconsistency in the hon. Member for Poole is his attitude to interim rate relief. I know that he thinks he got returned in the 1964 election only because of the Rating (Interim Relief) Act, but I think that he is being too modest. I do not think that it could have had all that effect in Poole, although I know that there was a lot of distress there. But is the hon. Gentleman saying that the Labour Government's rate rebate Act was a very shoddy, poor, inadequate thing, or that the outrageous thing about it was that the ratepayers had to pay part of the cost of the rebate?
If, under the Rate (Interim Relief) Act, large sums of money were paid to the hon. Gentleman's constituents and to people in all the other seaside resorts—which I do not think is true, but it is 925 what we were told just now, to a chorus of agreement—the only corollary is that that was a double burden on the ratepayers, because the grant under it was only 50 per cent., whereas the grant under our Measure was 75 per cent.
One cannot get over the point that either it was a flop, and that that is why it did not cost the ratepayers anything, or that it was a triumphant success, in which case it entailed far harsher and more brutal treatment of the domestic ratepayer than did our system—
§ Mr. Murton
I do not want to keep breaking into the theme of the hon. Gentleman's rather complicated argument, although he has more or less challenged me. I stressed that that was entirely an interim Measure—no one pretended that it was the answer. On the other hand, I hope that the hon. Gentleman will answer the question, if he can: what happened to the Treasury review of the whole question of rates which was instituted in 1963?
§ Mr. MacColl
The hon. Gentleman is adroitly trying to go off on another point. I am making just a short and simple point, showing the utter inconsistency of his arguments. He is now dropping the idea that that Measure was of any value at all. It was just an interim quick scheme—in other words, a rapid attempt to bolster up the situation before the election as a result of a rather rocky party conference at Blackpool, if I remember aright.
I was asked how the figures were going. We are getting in the returns of accurate figures now from the local authorities. We have not wanted to press them too much because we are always in trouble for "throwing" too much paper at them. We have asked for a detailed analysis of their spending, and we have no reason to doubt that our estimate of about £15 million for 1 million people is about right. However, as I say, that is subject to a certain amount of change as the figures come in.
The hon. Member for Harwich (Mr. Ridsdale) did us a great service by moving his Motion and, if I may be so impertinent as to say so, by speaking to it in the way he did. He set a standard for the debate for which the House is much indebted. The only feature of it which shocked me a little came when I shut my eyes and let 926 my attention wander for a moment. I wondered whether I was having a horrible nightmare, dreaming that I was a junior Minister in a Tory Government listening to speeches from a Labour Opposition. It was my hon. Friend the Member for Birmingham, Aston (Mr. Julius Silverman) who called me back to strict Socialist orthodoxy, as he always does, to my great satisfaction. The hon. Member for Harwich was preaching pure and plain gas and water Socialism. I wondered where I was, and, when I heard the hon. Gentleman talking about rates being an unbearable tax, I thought that it was my right hon. Friend the Lord President of the Council, for no one else could speak with so much force about the rating system.
The hon. Gentleman is entitled to feel in that way because he has had a very rough deal. He was treated in a shoddy way by his own Government, and he knows it. The debate in 1962 to which he referred was on a Friday, a debate in which the hon. Gentleman, on the very similar subject of local government finance with special reference to elderly ratepayers, called for an inquiry into the effects of the rating system. But the Government treated him with studied contempt, a distinguished back bencher, supported by other distinguished back benchers. My predecessor in office at the time, now the right hon. and learned Member for Hexham (Mr. Rippon), simply said:… I should be the last to stand here and suggest that the present system embodies immutable perfection. I might in years to come regret taking such a stringent view. The question is whether now is the time for such a committee as the Motion suggests should be set up.My hon. Friend the Member for Harwich suggested that this matter has not been considered recently by the Government "—and he went on to quote the White Paper on Local Government Finance of 1957. But he refused to agree to an inquiry.
As has been said in this debate—it should be pointed out again and again—we lost invaluable time through the failure of the Conservative Government to recognise the importance of this problem. The hon. Gentleman the Member for Hemel Hempstead (Mr. Allason), paying tribute to his hon. Friend the Member for Harwich, said that he was a prophet without honour in his own country, he being the one man who, in 927 1962, realised that the burden of rates would increase. That implies a fair description of the Tory Party of the day, but a very unfair description of my hon. Friends and, if I may say so, of myself. In all our speeches at that time in the House and outside, we asked for just this kind of inquiry, for delay in the setting up of which we are now being attacked.
Checking my references—always an important thing to do—I notice that the right hon. and learned Gentleman, talking about a local income tax, said:… when this matter was discussed in Standing Committee, only the hon. Member for Widnes (Mr. MacColl) made the suggestion."—[OFFICAL REPORT, 2nd March, 1962: Vol. 654, c. 1779–81.]I hope that my hon. Friends, who may think that I am a stick-in-the-mud, unable to have any flexible views on the organisation of local income tax, will take a more charitable view of me now. I shall come to the question in a moment.
One point which has been made, and which needs to be made, is that, in the rates, the public get great value for money. As several hon. Members have said, rates can become an intolerable burden for some people, but without the local government system the services could not be provided. In the working of the grants and the distribution of domestic, commercial and industrial rates, for every 15s. the domestic ratepayer pays he gets about 60s. in services. This is a pretty good investment, and one ought not to forget it in the tendency to decry the workings of our present system. However, it does emphasise the importance of the distinction between domestic and other ratepayers, a matter to which the hon. Gentleman draws attention in his Motion.
Obviously, it not only affects the value of our system of grant but it is relevant to the question of transfer of services. There are political aspects to, for example, the transfer of education completely to central Government financing, which my hon. Friend the Member for Norwich, North (Mr. Wallace) mentioned in his speech. The hon. Gentleman the Member for Poole objected to my right hon. Friend interfering in the way education is being run locally. Here is the difficulty. Hon. Members who think that 928 there is a danger of the central Government interfering too much can hardly be in favour of complete financing of the service by the central Government. The hon. Member for Poole got under my skin a bit. There he was, admonishing my right hon. Friend for daring to interfere with the discretion of local education authorities. I do not know about the hon. Gentleman himself, but the Opposition have voted against us because we will not order housing authorities to do no building by direct labour, because we will not order housing authorities to have compulsory systems of rent rebate. How it can be said that it is wrong for the Government to take a view about leaving things to local authorities in one field and right in another, I do not know.
Of the total rate burden, only 46 per cent. is domestic. Therefore, if one takes the amount of money one can afford for financing an operation of this sort, and one merely transfers a service en bloc, the majority of the help does not go to the domestic ratepayer; it goes to the commercial and industrial ratepayer. This has an effect in taxation too, inasmuch as commercial and industrial rates can be set off against tax.
Therefore, if one wishes to make the most efficient use of the money one can afford for the financing of local government services, the best way to get the quickest results is our way of doing it, by concentrating on the domestic element in the rates rather than on a general payment of grant. This, of course, was the weakness of the interim relief scheme, the £5 a head for old-age pensioners. It never reached the old-age pensioners. The majority of that money went into the rebate of the rates of the banks and general stores and other ratepayers. They are worthy people and I am not decrying them, but they are not the people for whom this much-boosted operation of relief was intended.
§ Mr. Murton
It was in the discretion of the local authorities as to how they applied it. Many did not need it, but others did and they used it for the elderly people.
§ Mr. MacColl
That is the whole criticism of the scheme—many did not need it but, regardless of that, they got their £5 a head and out of £6 million only about £60,000 went in payment to 929 individuals. The rest went in relief of the general rate fund. A comprehensive relief like that is the most inefficient way of dealing with the problem, because so much goes in relief of people who either set it off against tax or do not require to have it.
Before coming to the most constructive side of our debate, I should like to say something about miscellaneous points which have been raised. The hon. Member for Southend, East (Sir S. McAdden) raised the question of the discretionary derating of licensed clubs. Under the law, there is a discretionary power for a local authority to give extra relief. It is not quite fair to say that this is a mockery and that there are commercial institutions masquerading as charitable bodies because the law decides on which side they come in the definition.
§ Sir S. McAdden
I appreciate that 1 did not give the hon. Gentleman notice of this point, but surely it is wrong that this should happen when the council, the magistrates and those who run a club are all the same persons?
§ Mr. MacColl
I do not want at this stage to give free legal advice to the hon. Member and his local authority, but I am quite sure that if he got a good lawyer he could find a way of getting round that and getting the matter to the High Court. The point is that it would be a little difficult for the central Government to issue a general circular saying to local authorities that they must not exercise their discretion in this field in the way in which Parliament has said that they should. The question of derating charities and similar bodies was hotly debated.
The hon. Member for Rye (Mr. Bryant Godman Irvine) spoke about coast protection. A county council has powers to make grants towards coast protection. I should have thought that some of the burden could be taken off the borough or district authority in that way. A similar point was made by the hon. Member for Folkestone and Hythe (Mr. Costain) about urban sewerage and the fact that a grant can be paid for a rural scheme but not for urban sewerage. The county council could intervene and take up some of that expenditure on the county precept.
My hon. Friend the Member for Ilford, South (Mr. Arnold Shaw) made refer- 930 ence to the working of the rate rebate scheme and said that we should watch carefully to see that it did not outdistance the present income limits. We have powers to alter the limits, but my right hon. Friend has no intention at the moment of doing that because he very much hopes and expects that as a result of the Government's policy the great increases there have been in inflation will not continue. It would be a great pity if we had to take a step of that sort, although there is power to take it.
I wish to come to the question of the future. I do not know whether I am being unfair to the hon. Member for Harwich, but I was a little startled to find that in the second draft of his Motion the words aboutgiving to local authorities more power to raise revenue other than by rateshad been inserted as they were not in the original Notice of Motion. I do not know whether that was because the hon. Member suddenly thought of it, or whether it was a Freudian slip when he drafted it.
The point was made by several hon. Members, including particularly my hon. Friend the Member for Aston and my hon. Friend the Member for Rushcliffe (Mr. Gardner), that we cannot look at any new sources of revenue until we know what will be the size of the authorities and what they will be doing. That has been the weakness of previous attempts to tinker with the problem.
When my right hon. Friend the Lord President of the Council took the courageous decision to advise his colleagues that the time had come to write off the Local Government Commission and the appallingly protracted wrangles that were going on, and to have a comprehensive review of the whole picture with a Royal Commission—which has been justified by the response —the whole character of local government changed in the sense that associations are now producing to the Royal Commission evidence which they never would have been induced to submit before. There is a feeling in the country that people want a more effective and efficient system of local government. Therefore, it is essential to find out what the authorities will do and what size they will be. Then, one can see what the resources will be.
931 Several hon. Members have made the point that if we were to have a sales tax, for example, or a local income tax, we could not have every district council, with, perhaps, a population of 10,000 or less, having a separate system of taxation. We must have reasonable, continuous areas with which to do it. Therefore, any hope of having further sources of revenue means that we must first see what proposals the Royal Commission makes.
The hon. Member for Harwich spoke of the reorganisation of London government as a pathfinding exercise. For outer London, however, education was left with the minor, or lower-tier, authority. Although the I.L.E.A. was introduced rather perfunctorily and rapidly at the end of our debates, when we tried to keep it permanently we had a scolding from hon. Members opposite for doing it. The essential feature of this operation is that we must have powerful and strong education authorities if there is to be any hope for them to finance education effectively on their own. We are, therefore, waiting for the Report of the Royal Commission.
The hon. Member for Poole quoted me as having said that the Royal Commission was free, if it wished, to look at the financial repercussions of what it was doing, but that this was not specifically within its terms of reference. That is a fair statement of the position. We are not using that as an excuse for doing nothing. I do not know what the Royal Commission will report, what attitude it will take or what it will say about finance, but we are getting on with our own ideas. We are clearing away some of the ground and preparing a contingency policy according to what the Commission reports so that we will not be hit by this as something entirely novel when the Report comes out, we hope, next year.
Therefore, I would merely say that my right hon. Friend and the Government recognise the value of this debate. I hope that we will continue to have more help to guide us in our thoughts about the future. We are not by any means complacent or pretending that we know all the answers. It is, however, a difficult problem. We have to get together in our discussions about it and we have to 932 wait for the Royal Commission to see the kind of set-up which we are to have.
Meanwhile, we think that the present arrangements which we have made, coming into office, as we did, and having to face these problems immediately, have changed the whole face of the rating system, have been of tremendous value to the ratepayer and have taken the controversial polemical sting out of this debate. For that, I am grateful.
§ Several Hon. Members rose—
§ Mr. Speaker
Order. A number of hon. Members still wish to speak. I shall call first the two hon. Members who have sat here all day.
§ 3.10 p.m.
§ Mr. T. L. Iremonger (Ilford, North)
When we sat on the opposite side of the House many of my right hon. and hon. Friends and I used to admire the style of the Parliamentary Secretary. We used to admire his clarity and the constructive nature of his speeches. I am sorry to say that it has been very disappointing today to find that the only valuable quality he brought to his speech was its lightness. When he said that he was making a small point I thought that he over-estimated it at one time. He made a number of small points, and some of them were very small.
At one stage the Parliamentary Secretary said, "Before I come to the constructive part of my speech …", and I thought, "Well, we shall not have to wait long, and then it will be fine." I waited, but I do not think that the hon. Gentleman can have finished his speech, because there was nothing constructive in what he said. I do not blame him, because I think that very little constructive could have been said, but it would have been far better if he had not tried to be constructive and had put everything entirely on the Royal Commission and told us that he could not say anything. That would have been fair, and it is what he should have said.
The hon. Gentleman did not answer the real point of the debate, which I thought was put by my hon. Friend the Member for Poole (Mr. Murton), who said that, if the financing of local government was to be reconsidered, the financing, structure and functions must be considered together, and has never been made 933 absolutely clear to the Royal Commission, either in terms of reference or anything that any Minister has said, exactly what it is supposed to do in relation to local government finance. I hope that it will assume that it must make fundamental and far-reaching suggestions for reforming local government finance. This was an opportunity for the Parliamentary Secretary to say that, to recognise that principle and say, "I am glad that the debate enables me to say that the Royal Commission must consider methods of finance along with everything else, for otherwise suggestions on structure and functions will be absolutely useless." I am sorry that he did not say that, instead of telling us now that he was not using the Royal Commission as an excuse for doing nothing, and that the Ministry is working out contingency policies and so on. It was a miserable way to misuse this opportunity.
The debate has been thoughtful and serious. I think that I am entitled to say that because, with the possible exception of my hon. Friend the Member for Poole, together with my hon. Friend the Member for Moray and Nairn (Mr. G. Campbell), I am the only Member who has sat through the entire debate. There has been very little blatant vote-catching in a very tempting exercise, with the possible exception of the speeches of the hon. Members for Harrow, East (Mr. Roebuck), making one of his brief incursions into the Chamber—and very welcome too—and Ilford, South (Mr. Arnold Shaw). I always listen with the greatest attention to anything he says, because he is a constituent of mine. If he has any problems he has only to write to his Member of Parliament.
It was painful to see how ungrateful is the electorate of his constituency and the rest of the borough for all the wonderful things the Government have done, for his party got the biggest drubbing it has ever had in the elections. I was interested to hear that he hoped for better next year. We see now how right we were to accuse his party of gerrymandering. We knew that it would not get away with it this year, but it hopes for better things next year.
§ Mr. Iremonger
That was a thoroughly well deserved rebuke, Mr. Speaker. I shall now move on to the more serious aspects of the debate.
What I fear is that we may possibly delude ourselves or the electorate that there is a painless solution to the problem of rates. There is no painless solution that I can see, any more than there is to the problem of taxation. In fact, there is rather less chance of such a solution in the case of rates, for reasons I shall explain.
We ought to say frankly why local taxation is important. It is important that local revenues should be raised locally by local taxes by people locally elected who will administer the services which are paid for by the taxes raised from the people who elected them. Otherwise, local government is a sham. Unless the electorate can call to book that people they elect for how they spend the money, we are turning local government into a mere agency of the central Government and we shall end up with men of low quality elected to act as local government agents entirely subservient to men of high quality who administer for local government the services delegated to them by the central Government, and subservient to the central Government who have the final say in policy because they pay for it. So we must expect some system of local taxation. That is the nub of the problem raised by my hon. Friend the Member for Harwich (Mr. Ridsdale) in his Motion, and I am sure that the House is grateful to him for having done so.
It was very interesting to see the hon. Member for Ilford, South facing the question of why we should have rates at all. He said frankly—I am entirely in accord with him—that the rating system is not necessarily bad because it was thought of a long time ago. He also said frankly that it had certain virtues. We ought to recognise them, although, naturally, we find them very difficult to defend to those who are always harder hit by rates than by any other form of taxation—the elderly retired people living on small incomes.
The rating system has the virtue that there is no tax which is more certain in its method of assessment, no tax which it is easier and cheaper to collect, no tax which is more immediately and easily identifiable with the product of the 935 money that is raised from it. I am inclined to think that, however much we supplement rating by other taxes, if we can, or however much we relieve local government of the burden of paying for certain services, we are bound to end up with the rating system in substantially the same form as a large part of local taxation.
I recognise the vices of the system. Its prime vice is that the resources of the ratepayer as ratepayer do not necessarily expand at the same rate as the requirements for extra services that he has to pay for. For example, a retired householder, who might be a widow living on a fixed income in a house of a rateable value of £60 a year, has the same income next year as in the year before, and if more local services such as education have to be paid for next year, it means that more money is taken from her and so she is poorer next year and has less to live on.
However, it is not necessarily so with the Income Tax payer. For example, an employee of the local authority who is getting more money out of the poor widow's rates, and whose income has gone up, has a higher income in the next year, because the widow has contributed to it, and, therefore, the extra rates do not actually have to come out of his spendable income and his standard of living is not actually decreased. Extra Government expenditure is likewise financed from extra tax yield without any extra tax necessarily having to be put on at all or any Income Tax payer having any less income to live on the next year when extra services to be paid for.
This is bound to mean that all these living on fixed incomes will have a permanent and chronic complaint against the rating system because it will hit them harder every year as the standard of living of the country increases.
I am not so terribly worried about the other classic objection to the rating system —that it is a regressive tax. Everyone is supposed to be progressive and have long hair and dirty finger nails and anything regressive is supposedly immoral and reprehensible. But it is not so objectionable as might be thought, because otherwise there is no way of making those who may not pay Income Tax contribute in any way for the services they enjoy. 936 Purchase Tax, tobacco tax and beer tax, are regressive because they are an outlay tax as opposed to Income Tax. Taking the broad structure of taxation as a whole, I do not think that we could get a system which did not have an outlay element as well as an income element.
On occasions when I can pluck up the courage, I am disposed to defend the rating system as such, even though it will never be a popular tax. But we should ask ourselves, even in advance of the Royal Commission, what we can do to remove services from rates and what we should do to supplement the rates. I do not want to eliminate rates.
Of one thing I am certain—that the expense of the police force should come off the rates. I am in favour of a national police force and I see no virtue in pretending that there is any substantial and real local control over police forces, and so long as there is no local control I do not believe that local people should have to finance the police in any way.
I am sure that a substantial part of road expenditure could be taken off the rates properly and equitably on the principle that, unless a road was more used by people who lived in the area than by people going through the area, it should be paid for nationally and not locally.
I am also certain that all further education should come off the rates in so far as rates are concerned with a rather narrow local area. We argued this during the proceedings on the Local Government Act, 1958, when the Joint Parliamentary Secretary was a member of the Standing Committee. I put down an Amendment at the time to take further education out of local government responsibility so far as finance was concerned. It was resisted then and would no doubt be resisted again, but I am sure that this would be the right course and I hope that it will come.
I am not so happy at the thought of taking teachers' salaries off the rates and putting them on the Exchequer altogether. Certainly the National Union of Teachers does not support the idea. It is not fair to argue that school meals are paid for nationally and that this does not mean that local people have no say in the administration of school meals. But that is what the hon. Member for Consett (Mr. David Watkins) said.
937 Control of education locally should be a reality. There is no great virtue in local control of dishing out the custard. What is needed is local control of administration of education and of the schools and of the recruitment of teachers and the standards in which they work.
Again, I am certain that those who borrow books from local public libraries should be charged. In this, I am a Herbert-ite. Sir Alan Herbert's proposal for copyright for books borrowed in public libraries would solve this problem entirely. Of course, I realise there will be no support for this proposition from either side of the House but I still maintain that it is right. It is not just that a poor widow's rates should go to pay for people living in households, into which perhaps £30 a week is coming, to borrow Westerns free. It is known that 60 per cent. of the books taken out of public libraries are romances and Western fiction. No doubt there is virtue in them but I do not see why such intellectual ice-cream should be paid for for others by people who have great difficulty in paying for their bread.
In administering their property, the local authorities ought to do what the Government think is right for private property owners and require a return of 12½ per cent. on their houses, with rent rebate schemes for those who cannot afford it—a means test. In this way, the local authorities could raise finance through profit on their investments.
Those are a few modest, and mostly totally unacceptable, suggestions for cutting the burden of local government expenditure, and those who do not like them can have the consolation that they are not likely to get them unless I become Prime Minister with a larger majority than I see likely in the near future.
I turn now to the supplementing of the sources of local revenue, which I shall deal with briefly because many of them have been mentioned. I remember that when we were in Committee upstairs considering the Local Government Bill in 1957 the Joint Parliamentary Secretary gave us a long lecture on a new Clause which he tabled about local income tax. It was very instructive and thought-provoking. What evidence is his Department giving to the Royal Commission about this? He has been very modest while sitting on the Government Front Bench. I should have thought that we 938 would have had this fresh wind from Widnes blowing through the Department and he would have said, "At the time I was a mere back bencher, and 1 was able to raise only a feeble voice in favour of local income tax, but now that I am the Joint Parliamentary Secretary you, the Ministry, will make constructive proposals and put them to the Royal Commission". We have not heard a word about that. Has the hon. Gentleman lost faith in the idea?
There are, of course, serious objections to it. Everybody gets cross when one talks about local Income Tax. The same sort of thing happens when one talks about the fluoridation of water supplies, and cruelty to animals. It brings out a kind of Freudian aggression.
§ Mr. Gordon Campbell (Moray and Nearn)
The hon. Gentleman refused to proffer any legal advice, but we have had some professional advice from our side of the House.
§ Mr. Iremonger
Leaving aside the Freudian aspects, everybody gets very cross when the subject of local income tax is raised. Everybody seems to think that any questioning of it is a kind of heresy, or an affront to their personality. There are great objections to it. My own major objection to it is that I do not think any system of Income Tax ought to be administered by a public authority which is not opjen to scrutiny by the members elected by the public to supervise that authority.
If there is a local Income Tax, I know what people will say about the person who lives next door who happens to be a member of the council and the chairman of the finance committee. They will not be too keen on him having access to their incomes. People are shy about this kind of thing. This is an insuperable difficulty. It is either an Income Tax which is not administered locally, in which case it is a sham, or it is one that is, and then we will either keep the elected representatives of the people out of the scrutiny of its administration, or they will poke their noses into their 939 neighbour's business, which will not be acceptable.
We have heard about a local sales tax. It will not be a viable proposition unless there is a large locality, a regional tax, and in this connection perhaps I might make a comment on regional government about which it is fashionable to talk. Everybody genuflects at the mention of regionalism. Regional government is supposed to be a good thing. Regions look after people, and a regional tax will be a good thing.
I hope the hon. Gentleman will accept it from this side of the House that when we talk about regional planning we do not want great big regional education authorities. We do not want great big regional housing authorities. We do not want great big regional children's authorities. We want to abide by the principle of the London Government Act, which I am sure was right, that every possible service should be kept down to the smallest possible viable authority, so that people who live in identifiable areas and elect their representatives shall be able to have a direct say in the way in which the services with which they are concerned are administered, and only after one is obliged to take services out of that concept shall one go to the higher regional authority.
I think that the London Government Act provided pretty well for the Greater London Council to have only these things which manifestly could not be administered locally, roads which go from Uxbridge to Hornchurch, planning, fire and ambulance services, sewerage, and so on.
Those are obviously regional responsibilities. I hope that we are not to get a regional government which is really another great bureaucracy, second only to Whitehall. I always suspect any Socialist once he begins to talk about anything regional. I feel that it is only another way of getting bureaucracy to work again.
One of my great principles is never to mention Liberals, but I am going to break it now. Year after year I have been lectured in my constituency about the rating of site values; year after year I have been beaten over the head with blunt and sharp instruments by my negligible Liberal opponents about the 940 rating system, and all its iniquities. We have had the splendid orange spectacle of the Chief Whip of the Liberal Party for a few minutes now and then.
§ Mr. Iremonger
I had my back to the hon. Gentleman, and I did not have my stop-watch, but my Freudian colleague has been keeping a sharp eye on the hon. Gentleman. There was not a peep out of him about the principle which, with the usual Liberal integrity, he has supported so enthusiastically, gerrymandering in local government elections—although I should probably be out of order to pursue this. The House ought to observe, and the country ought to realise, that when it comes to it, and we have had a full day's debate on the rating system, dealt with seriously by both sides of the House, the one thing that we do not have is a real contribution from the Liberal benches.
One of the most essential principles is that we should have local services administered by local people, who raise the cash.
Burke said that it was no more given to man to tax and be loved, than it was to love and be wise. Unfortunately, all taxation is always regarded as grossly unjust. Any of the fruits which are handed out to our electorate as a result of taxation are always regarded as grossly inadequate. This is the dilemma of a politician, and he has to bear it. He performs a very useful psychological, psychiatric function in being the scapegoat on which the inadequacies of the entire population can be unloaded. We must accept that with pride and pleasure.
In the meantime, I do not think that there is an awful lot that can usefully be said on the subject of rating, with very great respect to my hon. Friend the Member for Harwich. The Parliamentary Secretary should have said that the Royal Commission will have to consider this whole matter fully and then report to the House. I hope that it will not hurry matters, but that it will take its time. The impatience that we display over two or three years is a small thing compared with the kind of reassessments of local government, particularly its financing, that we ought to have from the Royal Commission.
941 When we do have it, I hope that the House will have a White Paper, and be able to take a long time debating this, just as we are taking a long time debating Europe. I hope that we shall not fail to get into local government, as we may fail to get into Europe. It is premature to come to any conclusions on this, and it would be fair to say that my hon. Friend the Member for Harwich has done a very valuable service in reminding us and the Royal Commission that the sort of people whom he represents in such large numbers are those who have to be very carefully considered by the Commission. If they are to be so considered, it is essential that the Government should tell the Royal Commission that finance is the first thing to consider, not the question of a loss.
§ 3.35 p.m.
§ Mr. Gordon Campbell (Moray and Nairn)
I, too, would like to congratulate my hon. Friend the Member for Harwich (Mr. Ridsdale) on having brought this subject before the House today. It is one which has caused great anxiety throughout the country, in Scotland as well as in England and Wales. It is a tax which falls haphazardly. It is easy to criticise it, but I agree that it is not easy to find an acceptable substitute. I hope twat the Government will consider the points which have been made by my hon. Friends. But one reform which need not be delayed is the reduction of the amount which ratepayers pay and this probably means tranferring part of the burden to the Exchequer.
The Parliamentary Secretary was surprised that there had not been the criticism of the Government which he had expected. I do not know whether he expected the Government to get the drubbing they deserve, but I have heard substantial criticism. The first was that, in 1964, the party opposite made statements about rates which they have entirely failed to live up to. I refer of course to the statements in the 1964 election manifesto about early relief for ratepayers, and also that a Labour Government would… transfer the larger part of the cost of teachers' salaries from the rates to the Exchequer.Two and a half years later, there has been very little relief and nothing at all done on the transfer of teachers' salaries. 942 ernment there have been large rate in-
In the first two years of Labour Govereases. The rate rebate scheme has certainly assisted some of the worst-off, but it has also increased the burden for the others, who had to pay for part of the relief. The hon. Gentleman has not replied to this. Was that another interim Measure, or one of the major Measures referred to in 1964? If the former, perhaps it can be compared with the Conservative 1964 Act, but we understood it to be one of the major Measures.
The 1964 Act did not apply to Scotland, where £1 million was added to the Exchequer equalisation grant, as the most acceptable provision of interim relief there.
The rate support grant is an agreeable but misleading name because, in its early years, very little support will be given by these grants. I say "grants" because there is a separate one for Scotland.
The Government tried to say earlier this year that the grants would provide a little extra in the domestic element for local authorities. However, the amount was not only derisory but was arrived at by sleight of hand. The accompanying reports by the Minister of Housing and the Secretary of State for Scotland showed that the Government had not accepted the local authorities' estimates.
In the Scottish Report, the Government described how they reduced the total estimates by more than the proposed extra amount for the first year. It is said quite clearly in paragraphs 8 and 10 that the local authorities… estimated that the aggregate of reckon-able expenditure would come to £273 million",and later that the Government had decided that that amount should be £264 million. Thereby £9 million were lopped off the estimates for expenditure which the local authorities had arrived at, and, at the percentage rate of grant, about £6 million of that would have been in the rate support grant for Scotland. The Government claim that the domestic element has provided an extra £3 million in the first year. That £3 million has been more than neutralised by the £6 million lopped off by the Government.
In the same Report, the Government frankly—and I give them credit for this—explained that they did this because of 943 current economic conditions. This is recorded in paragraph 9:It is clear that over the two years ahead the rate of growth of the economy will fall short of that postulated in the National Plan".My hon. Friend the Member for Poole (Mr. Murton) gave the rest of that quotation. It is clearly stated that, because the rate of growth which the Government told us so many times they could produce, has not materialised, they had to lop off £9 million from the estimates of expenditure in Scotland.
The Government cannot blame this on the previous Conservative Administration or on the balance of payments, because the National Plan was published almost a year after the Labour Party came into office, and in that time they could make all their estimates of the balance-ofpayments difficulties and everything alse arising out of the economic situation. The Government brought out the National Plan showing what they thought they could do. Later, it was clear that they could not achieve the rate of growth which had been postulated. Economic conditions two-and-a-half years after the Labour Government came into office have caused the Exchequer assistance to fall short in this way, and local authorities are not getting the support they could have expected.
I believe that the reorganisation of local government must be linked with finance, as some of my hon. Friends have said Any major change in the system of rates or other local collection of taxes must clearly be decided at the same time as the future structure of local government. But that need not affect the amount. If the ratepayers have to bear a much greater burden than before, there is nothing to stop the Government from transferring more to the Exchequer. Later, they would be in a position to alter the whole system, should that seem a good thing to do, in the light of the reorganisation of local government in both England and Scotland.
We understand that the full reports of the Royal Commission are not likely to be available until towards the end of 1968. Unless the hon. Member can tell us anything different, that is the estimate which people are making. In Scotland, this means a considerable postponement 944 of the reorganisation of local government because in Scotland the setting up of machinery to discuss the changes needed in local government in order to modernise it started in the summer of 1963, two years before that stage was reached in England and Wales.
By advising the appointment of a Royal Commission for Scotland as well as for England, about two years of work has been wasted, or at least held up, and progress in Scotland in this matter has now to await a final report.
Therefore, I am particularly interested in the suggestion in my hon. Friend's Motion that there might be interim reports from the Commissions, and I am sorry that the Parliamentary Secretary, no doubt referring to England, was not sympathetic to the idea. However, perhaps he may be able to indicate what his right hon. Friend the Secretary of State feels about it in relation to Scotland; otherwise, it may be many years before any consideration of the alteration of rates can come before us.
Several of my hon. Friends referred to the Allen Committee, which considered the impact of rates on householders. It reached a significant conclusion concerning Scotland and, in its Summary of Conclusions, it stated briefly but succinctly that, in Scotland, rates are high and rents are low and that the first sub-sidise the second. As the House will recognise, that is a generalisation because it does not apply in every area in Scotland. Unfortunately, however, it applies to such large areas and to such a proportion of the population that as a generalisation it is correct.
It leads to an incredibly haphazard incidence of the rate burden on the one hand, and to large semi-concealed subsidies on the other, and both fall on various householders without any particular reason. There are anomalies such as the one which hon. Members will readily recognise, of an old lady living on a pension or on savings in her private house subsidising through rates a well-off family with several earners living in a council house. That is the kind of anomaly which arises with a situation of high rates and low rents. Everyone knows in his heart that it is wrong, and I believe that Scottish Ministers in the present Government know that it is 945 wrong. Unfortunately, through inertia, the councils concerned are slow to correct this distortion.
I give the Scottish Ministers credit for that, even though the Secretary of State told us from the Dispatch Box last Wednesday that flattery would get us nowhere with him. I need hardly say that that was after quite a bit of the opposite of flattery had been crossing the floor of the House.
I was hoping that a Scottish Minister would be present this afternoon. That is no reflection on the Parliamentary Secretary to the Ministry of Housing and Local Government, with whom I have participated in many debates on these subjects. Quite apart from anything else, the presence of a Scottish Minister would have given the hon. Gentleman an opportunity to leave the Chamber at some point for some refreshment.
He may not be able to provide the answers to some of the questions which I wish to raise. The first is to ask whether the Government can give an estimate of the percentage increase in Scotland of the rate burden in this calendar year. There has been reference to the situation in England and Wales, but I believe that the position in Scotland is somewhat different. I should also have liked to have had a reply from the Scottish Office on the suggestion of my hon. Friend for an interim report from the Royal Commission on Local Government in Scotland I hope that the hon. Gentleman will still gnd an opportunity to intervene in order to give the answers to these two questions.
§ 3.48 p.m.
§ Mr. W. O. J. Robinson (Walthamstow, East)
May I apologise sincerely to the hon. Member for Harwich (Mr. Ridsdale) for having been prevented from carrying out my intention to listen to his speech. I know of his continuing concern about this matter and his interest, in particular, in those living on fixed incomes. I ought then to apologise to the House for intervening in a debate when I have listened only to a small part of it. My excuse is that I have a deep interest in local government, having been associated with it for about 40 years both as an officer and as a member of a local authority.
No one in the House would or could deny that the increasing rate burden, particularly that falling on persons with fixed 946 incomes, is a matter of concern and one which calls for an investigation. However, we must also recognise that local government expenditure, inevitably, must increase year by year. I live in an area which, I imagine, hon. Members opposite would regard as being extremely favourable from the ratepayers' point of view, but during 13 years of Conservative government, with a Conservative Council and a minority of two, my rates more than doubled. I make no criticism of that. Even when local government services remain stationary it is inevitable that expenditure must go up and that if hon. Members—as I am sure they do, with the exception of one or two—wish to see local government services increased and improved, under the present system the rate burden must increase year by year.
I want to echo the point made earlier in relation to persons with small incomes, whether we do not over-estimate rising rates. I would apply the test not to the amount paid in the rate bill, but to the value of the services we get in return. It is comparatively easy to keep the rates low if we are prepared to trim the services, or not increase them as they ought to be increased.
I wonder whether or not we do not get local government very much on the cheap. For example, what would be the assessment of the amount that would have to be paid, measured in terms of the real value, for the benefits of education, lighting, street cleaning, sewerage, drainage, the police services, and water, which forms part of the local government rate demand? On that basis, I am sure that no one would say that we do not get extremely good value for money. I imagine that the average ratepayer gets all the services rendered by the local authority for about £2 10s. No one could complaint, in those circumstances, that they do not get value for money.
We should be dealing with the cases where, for one reason or another, there is inability to meet the rate demand and this, quite clearly, arises from the anomalous situation existing in the rate system. One should be expected and should be prepared to contribute to the Welfare State or to one's local services according to one's ability to pay. I make no excuse for propounding that doctrine. But, quite clearly, the present rating system is not based at all on the ability to pay.
947 The present system dates back almost to antiquity. Its basis, which is the value, or the assumed value, of the house in which one lives, might at one time have been very good for the calculation of one's ability to pay. One could size up the nature and size of a dwelling and from that estimate a person's ability to pay, but the days when that test was valid have long since gone. We cannot in any circumstances assess ability to pay by the number of rooms or the site of the property.
The anomaly that arises was clearly demonstrated by the Allen Committe, which pointed to the strange and striking difference between the taxation system and the rating system. The Allen Report pointed out that a rise in incomes, and a corresponding increase in consumers' expenditure automatically made available, through Income Tax and Purchase Tax, more money for the Government without increasing the standard rate of taxation, but that rating, the basis on which a local authority can draw its money, can only vary with the revaluation of property, which occurs, at most, at intervals of five years, or the building of new hereditaments which, again, does not provide a very ready or frequent opportunity for meeting extra expenditure, and that, for that reason, rates must inevitably go up.
I thought that the Allen Committee summed up the contrast between rates and taxes extremely well when it said:Someone who pays more Income Tax because his income has gone up may do so without much complaint"—the emphasis is, perhaps, on the word "much"—but if required to pay more rates resulting from a higher rate poundage he may feel bitter resentment.That very adequately sums up the situation.
It is one thing to talk about the need to reform local government finance. It is quite another to decide the best way to do it. Strangly, I find myself in agreement with the hon. Member for Ilford, North (Mr. Iremonger)—which worries me a little—in his suggestion that the Royal Commission ought not to be rushed to bring out an interim report or to be too swift in coming to a conclusion on this vitally important question of local 948 government reform and, linked with it, local government finance.
I, too, emphasise the advantages which are derived from the local rating system. We must be very careful, when attacking it, not to throw the baby out with the bath water. Several of the advantages have already been mentioned. Another is the fantastically low costs of collection of this local tax. Great tribute should be paid to local authorities and, perhaps, even more so to their treasurers for the remarkably low cost of collection.
Because I believe passionately in local government—I emphasise the word "local"—I am sure that we must approach very cautiously proposals for the wholesale transfer of blocks of local government expenditure to the national Exchequer. It is an old saying that he who pays the piper calls the tune, but it still has force. If the Treasury is doling out greater sums to local authorities, it might be inclined to increase the pressure which even now emanates from the Department. I have no enthuisasm whatever for Treasury control in any sphere. Not only that, but the power to raise money locally gives the local authority more independence of action in determining the nature and the extent of the services which should be rendered.
It would not be unnatural, from the Government's point of view, if more money came from the Exchequer, to wish to interfere, to scrutinise and to follow closely the proposals of local authorities to spend money which they were not expected to raise. Because I want local authorities to maintain their independence of action, I hope that we shall always consider such proposals with great caution, and I hope that the Royal Commission on Local Government will do so, too.
Another important feature of our local government system is the ability of the ratepayer himself to scrutinise the manner in which, and the rate at which, his local council spends money, expressing his view on whether the rates are spent wisely and well.
But there is no point in allowing the horse to starve while the grass is growing. Although I look forward to a good report from the Royal Commission, when it feels ready to do so, after a comprehensive review of the whole situation, and I hope, also, that the question of 949 local government finance will be tackled, I am delighted that the Labour Government have not allowed the situation to remain static in the meantime but have done what they can, in difficult financial circumstances, to relieve the burden falling upon the less fortunate. I take pride in the system of rate rebates. I am not anxious to draw comparisons or to take part political advantage, but there can be no doubt that the Labour scheme for rate rebates is infinitely better than the scheme of the previous Tory Administration.
It is said that the Tory scheme was an interim measure, but it is my experience that interim measures too often become permanent, and the only measures. What happened under that scheme? We were told that the system was a good one because it applied relief where large number; of elderly people lived. It is difficult to follow the argument that, if there are 1,000 old-age pensioners in one area unable to meet their rate bill, each of those 1,000 is more deserving than, perhaps, the two or three living in another constituency. If the need exists, it ought to be met whatever number of deserving people live in the particular area. This must be right, and the point is reinforced by the contrast between the amounts received by various local authorities under the earlier Act.
I understand that in Liverpool, for example, with a massive population, the grants totalled £32,000 in a year. In Bournemouth, on the other hand, with about one-fifth of Liverpool's population, the figure was £91,000. It is difficult to see any logical basis in that. Moreover, the giving of relief was entirely discretionary, it being a matter for the local authority to determine whether or not hardship existed in particular cases. In my view, this is a most unsatisfactory form of means test.
The Labour Government's proposals give relief wherever the need arises, but not because a certain number of old-age pensioners live in the area. In my constituency, no relief whatever was received under the—
§ It being Four o'clock, the debate stood adjourned.