HC Deb 15 December 1969 vol 793 cc1063-89

10.13 p.m.

The Minister of State, Ministry of Housing and Local Government (Mr. Denis Howell)

I beg to move, That the Rate Support Grant (Increase) Order 1969, dated 21st November, 1969, a copy of which was laid before this House on 26th November, be approved. The House will know that the main order in respect of rate support grant for the two annual periods 1969–70 and 1970–71 was laid before the House in December, 1968. We are now discussing the increase order which authorises the Government to increase amounts in the main order due to the unforeseen circumstances of increased wages and other factors which have occurred since December, 1968, when that order became operative.

It may be for the convenience of the House if I briefly say in passing that the figures that we were talking about—the local authority expenditure for 1969–70 on which 56 per cent, grant was based—amounted to £2,976 million and this order increases that figure to £3,131 million, an increase of £155 million. In both cases of the original order and this order the Government's share of the increase agreed with the local authority associations for 1969–70 is based upon a percentage, namely 56 per cent. The expenditure figures for 1970–71, agreed in December, 1968—the basis of a 57 per cent, grant—were then £3,128 million and are now, in this order, £3,329 million, an increase of £201 million.

I should like to take the House through the main headings which justify the increase order that is before us tonight. First, much the most important part of the order is due to increased pay for local government employees which has become operative since the main order was made. Of that, I suppose much the largest element for increased salaries is in respect of education—teachers' salaries. The House will know that there was an agreement to increase teachers' salaries by 7 per cent., which became effective from April this year. The effect of that agreement was to increase substantially pay to local government employees by £49.7 million for this year and by £52.2 million for the financial year 1970–71.

Secondly, the increase of pay is in respect of manual workers, particularly dustmen, whose case is vividly in our memories, roadmen and other local government manual workers. In their case the increase of pay produces a figure of £16.1 million for this year 1969.70 and £32.5 million for 1970–71.

The third element in the increased pay is in respect of administrative, professional, technical and clerical workers, and the figures there are £11.3 million for 1969–70 and £25.3 million for 1970–71.

There are also a few others which, in size and total of finance, are nothing like the figures that I have read out but ought to be mentioned in order to complete the picture, and these are specifically to do with firemen, nurses, midwives, dentists, medical officers and a few other sundry categories which can be found on page 5, in appendix 1, of the accompanying Statement which is before the House. To sum up in respect of pay increases, the total pay increases for this year are £85.7 million and for next year, a full year, £119 million.

I should now like to turn to the question of interest charges, since clearly this is another important factor in respect of local authorities.

Calculated in this interim order in respect of interest charges is an increase for this year of £32.1 million, and for 1970–71 £35.3 million.

As I have said, the Government meet 56 per cent, of local government expenditure in 1969–70, leaving the ratepayers to find the other 44 per cent., so what that means as regards interest charges, about which so much is being heard at the moment, is that less than half the cost of increased interest charges falls to be met by the ratepayer. I do not discount the seriousness of increased interest charges, but it is worth making that point in order to have the picture clear.

Mr. Gwynfor Evans (Carmarthen)

Can the hon. Gentleman say what this means for the Welsh local authorities? Has he consulted any body representative of the Welsh local authorities about it?

Mr. Howell

The local authority associations; represent the Welsh authorities, too. I cannot, off the cuff, give the figures for Wales, but, if I have the leave of the House to speak again later, I shall try to answer that point.

There are some small offsets in respect of income to be set against the increases to which I have referred, and the net result is that the total of all increases for 1969–70 is £155 million and for 1970–71 £201 million.

Those are the two figures on which the grant is calculated, and, as I have said already, the Government will be paying 56 per cent, this year and 57 per cent, in 1970–71. Taking those percentages into account, therefore, the extra grant which we are discussing is £87 million this year and £115 million next year. However, there are one or two small adjustments in respect of increases in costs which lead to some increases in specific revenue grants, for example, for the police and the administration of justice. These also have to be allowed for in our calculations. Allowing for them, the net result at the end of the day is to produce for 1969–70, a figure of £84 million and for 1970–71 £111 million.

The intelligence service is working quite quickly this evening, and I am able to tell the hon. Member for Carmarthen (Mr. Gwynfor Evans) that the figures which I have given include Wales, but it is not possible for us to separate Wales from England in the presentation of the figures.

I come now to the effect on the various elements in the rate support grant. First, however, I should mention in passing the domestic element. This is not affected by the order, but, as the House knows, the Government give 1s. 3d. in the £ of direct assistance to the domestic ratepayer to maintain stability in rates, and this costs us £73 million this year. Next year, when it will rise another 5d. to 1s. 8d. so that every domestic ratepayer will receive direct help to the tune of 1s. 8d. in the £, the cost will be £100 million.

Mr. Arthur Jones (Northants, South)

Will the hon. Gentleman explain the final sentence of paragraph 10 of the explanatory report: The product of these rates is not affected by any increase in costs and no change is necessary in the estimates previously made. I do not understand what that means.

Mr. Howell

I do not think that I do at the moment, either. But I think that the domestic element we are talking about was determined by Parliament some time ago up to 1970–71 and therefore the domestic element—the direct assistance to the domestic ratepayer—has been an additional figure of 5d. each year since it started, has reached 1s. 3d. this year and will reach 1s. 8d. next year. That element again is not generally affected by the order.

I was explaining the remarkable effect this element of direct support has had for the ratepayers.

Mr. Speaker

Order. The domestic rate is not altered by the order. We cannot debate it.

Mr. Howell

I bow to your Ruling, Mr. Speaker, but since it is an element in the make-up of the rate I thought I should refer to it in passing.

Mr. Speaker

The hon. Gentleman can talk only about the increases provided in the order.

Mr. Howell

I shall have to seek an opportunity elsewhere of speaking of the Government's virtues, Mr. Speaker, but since we get so few occasions to do so, I am sure you will not mind my having tried to do so tonight. I will merely comment that this has had a profound effect on the domestic ratepayers, and I will leave the matter for other occasions.

I turn now to the resources element in the make-up of the order. This, of course, deals with local authorities whose income is below the national average. In the order, we calculate that there should be for them an increase of £12 million for this year, making a total of £237 million, and next year an increase of £14 million, making a total of £250 million.

The third element in rate support is the needs element, which is the main heading calculated by reference to educational factors, population, and so forth, and containing special weighting in respect of the number of children below the age of five, the number below the age of 15, the number of adults over 65. It also, of course, takes into account expenditure on highways, which is determined on the basis of mileage. This takes a major part of the increase and goes up by £72 million for this year to £1,302 million for 1969–70 and by £97 million next year to £1,394 million.

There are also certain weightings which I mention again only to give the full picture and which can be found in paragraphs 14 and 15 of the explanatory report. They deal with the necessary changes in amount per head per unit per mile of road, and so on, in order to distribute these increased grants.

I have gone through the main headings of the order and have given the House, as clearly as I could, the make-up of the increased distribution. In conclusion, I express on behalf of my right hon. Friend our gratitude to the local authority associations for their co-operation in the very complicated procedure necessary to calculate these amounts and I am sure that I express on behalf of all hon. Members profound relief that the local authority associations and those representing the Government were, in such a complex matter, able to reach agreement on exactly what the amount of the increase order ought to be.

If I might make one last point of clarification, the order takes into account all wage settlements and other variations quantified by the end of the first week in November. That means, for example, that any increase negotiated after the first week in November, for example, any change in school meals coming into effect after the first week in November, is not taken account of in this order.

I am glad that the order represents a return to normality in our proceedings, with general negotiations on the main rate support grant order and then, at reasonable intervals, usually yearly, taking into account all the pay and price changes which have occurred since agreeing to the main order.

I commend this order to the House.

10.31 p.m.

Mr. Graham Page (Crosby)

I am sure that the House is grateful to the hon. Gentleman for his explanation of the figures relating to the order. We are debating a Rate Support Grant (Increase) Order and, at ths risk of being called to order at once, I would say that what we are debating is next year's demand note for rates. In saying that, I do not think that I am going outside the terms of the order.

We are debating next year's demand note for rate, and it will show a mighty jump on last year's. Within the law relating to rate support grants, the order could do a lot more than it does to relieve the burden of rates. Adopting the Prime Minister's words in the last two General Elections, he promised that the Labour Government would give the people …relief from the burden of rates". Of course, the Government make a song and dance about the domestic element—

Mr. Denis Howell

On a point of order, Mr. Deputy Speaker. When I was stopped by Mr. Speaker, I was seeking to demonstrate how successful the Government's policy had been in keeping down rates. I shall be pleased if the hon. Gentleman is allowed to go on with his point, since that will enable me to demonstrate this to the House. However, I ask your guidance, Mr. Deputy Speaker, in view of Mr. Speaker's ruling.

Mr. Deputy Speaker (Mr. Sydney Irving)

This cannot be a general debate on rates. It must be related to the increases in the two elements, and no more.

Mr. Page

Indeed, Mr. Deputy Speaker, and I will confine my remarks to that.

The order shows that, in next year's rates, there will be an increase in the amount by something like £7 to £8 per head of the population, and it might be even as much as £10 per person if we knew all the facts. I make no excuse for dealing with the rates on the basis of the average per person rather than per ratepayer. Any increase will be passed on to the individual ratepayer, even though it may be charged on commercial and industrial premises. It is no good kidding ourselves that the householder really gets off rates by any reduction granted under certain parts of the order.

This is a grant increase order and, as such, is limited in scope, as the Minister explained. I am sure that right hon. and hon. Members, when faced with a rate support grant increase order, such as this, have to remind themselves whether it is a grant order or a grant increase order. In this case we had, as the Minister explained, the relevant grant order in December, 1968. That order calculated the cost of local government services at November, 1968, added a growth percentage for 1969–70 and 1970–71, and fixed the Exchequer contributions on that estimated basis for two years.

I can never find anyone inside or outside local authorities who has any faith in the Government's estimates of local government expenditure. This is not surprising after the Government's election promises and their wrong estimates on the first two years of the grant under the rate support grant system.

But this increase order has to stick to those 1968 Government estimates. It cannot take into account any development of any addition to or any increase in local government services. We are dealing only with the unforeseen increase in the level of prices, costs and remuneration in respect of the services upon which the 1968 order was based.

The Government were in one of their craziest moods when they devised this procedure in 1966. The great bulk of local government expenditure plods relentlessly, rather like a huge elephant, and periodically the Minister mounts it waving an increase order, but facing the tail of the elephant instead of the trunk, and looking at what has been trampled by this elephant in the past rather than what is likely in future. Therefore, he tries to estimate the future course by looking into the past.

So this order is a projection of October, 1969, costs into the rest of the year 1969–70 and all the year 1970–71 as an addition to a grant based upon the November, 1968, costs projected into 1969–70 and 1970–71.

If that is not complicated enough for the House, it is made even more complicated by the printer nonchalantly tossing a spare nought into the sixth figure down in column 3 of the table in the order. That figure is quite unintelligible. But many of these calculations are necessarily unintelligible to hon. Members because we are not informed of the calculations upon which they are based.

However, despite these defects in procedure and printing, these periodic debates on grant orders and grant increase orders give us a chance to look into the Government's crystal ball of local government expenditure. That is why I said that we are debating tonight next year's demand note for rates. This order is an admission that the total demand note should increase by £154 million. That is after receipt of the Exchequer subsidy. I calculate that £154 million by the amount which has to be found by the ratepayer, even after the taxpayer has contributed. It comprises £68 million for the overspending in this year and £86 million to meet the increase in costs for next year. That is an average increase in rates of about £3 per person—not just per ratepayer, but per head of the population. After the taxpayer has contributed £202 million, it is nearly £4 per person.

Those are the deductions we can make from the order itself, but there are some important omissions in the calculation of the figures. The order deals with increases on the November, 1968, prices, but local authorities maintain that the base figure fixed by the Government in 1968 is £132 million short.

The local authorities can claim some accuracy in that by referring to their forecasts and the actual results in the two previous years. The Government estimates were £40 million short in 1967–68 and £53 million short in 1968–69. These shortages have never been made up, so that one starts from the wrong base. It looks as if the ratepayer, if the local authorities do their housekeeping well, may have to find yet another £132 million, which is about £2 10s. 0d. per person. That is in order to dispose of this built-in error in the calculations.

The second omission in calculating the figures in the order is the expenditure which will result from the increases which are coming. The Minister said that the order is based on wage and salary increases, etc., up to the first week in November, 1969. That is six months after the commencement of the two-year period of the main grant order. Therefore, the order takes no account of the increased expenditure which is coming, for example teachers' salaries, which could mean £25 to £30 million more on the rates, and the pending claim by N.A.L.G.O., the resulting amount of which one does not know. I am not sure whether these figures take into account the increase in building wages due to start in the new year, but that again will be a substantial amount. And what about the increased rate contribution to housing due to the restriction in rent increases?

One then takes the figure allowed for the increase in interest rates which was mentioned by the Minister in his speech. One wonders whether this takes account of the future increases in interest rates. In view of the recent yield from Treasury stock of 9¼ per cent, and a Save As You Earn yield of 12 per cent., how can interest rates keep to the meagre increase of some £3 million in the two years covered by the order?

I must change my zoological metaphor from the elephant to the ostrich and ask why the Government are asking the House and the ratepayers in general to bury their heads in the sand over these future increases in the burden of the rates.

The third omission in the calculation of these figures is the disregard of the absolutely necessary expenditure on postponed work. The Government demanded a severe set-back in local government expenditure in the two years 1967–68 and 1968–69. Repair and maintenance of buildings cannot be neglected for more than two years without major expenditure on structures becoming necessary. Repairs on roads cannot be neglected for more than two years without resulting in major expenditure on road foundations. School books and school equipment cannot be left to become worn and dated for more than two years. This is what has been happening over those years of, in the Prime Minister's phrase, hard slog. These matters have to be brought up to date in the years 1969–70 and 1970–71.

My inquiries show that many local authorities are trying to cope with this by cutting down expenditure that they had hoped to incur—and which they ought to incur—on such things as clean air, street lighting and ambulances. These items seems to occur frequently in the cut-back in local authority expenditure. I do not know whether the Minister has made any estimate of that postponed expenditure, or how much must be spent now. Has he made any estimate of the increases which might result from the wages and salaries claims in the pipeline? In short, can he tell the House by how much the increase in the support grant in this order falls short of the increase in rates which will have to be made for next year? It is a lucky local authority which, after the hard slog years of 1967 and 1968 and the rate contribution to council house rents, has any balance to raid to relieve this expenditure out of the rates. What the taxpayer does not contribute will have to be found by the ratepayer next year. It looks as though the taxpayer will be contributing an increase of about £3 or £4 and the ratepayer an increase of about £7 or £8 per head of population.

This is guesswork, as it must be, because hon. Members are called upon to debate this order without any information. Unless they happen to be members of the local authority associations engaged in the negotiations with the Government they are without any information about the figures upon which the calculations have been made. One of the faults of this procedure is that we have to debate this order unaware of the calculations underlying the increases in costs. The councillors of our local authorities, and their officers, are also ignorant of those figures. They cannot brief hon. Members on the extent to which it is affecting their own areas. The House of Commons Paper No. 21 of this Session, which is laid in support of the order, gives us the results of the calculations—but only the results. The table to the order applies those results. The Minister has not taken the matter any further in the figures that he has given the House tonight.

This does not give Parliament the ghost of a chance to offer any constructive criticism. I am not prepared to say, on the information before the House at the moment, that the Government are wrong in trying to keep in check the continual increase in local government expenditure and the consequent increase in rates. They may well be right in trying to put a check on that. I am not prepared to say that the Government are wrong in trying to keep in check the increases in the taxpayers' contribution to local government revenue. But when the Government are trying to keep these increases in check they should do so in a straightforward manner and not by means of ridiculous under-estimates in a rate support grant order. That method—as we heard from the local authorities—merely causes chaos in local government.

It may be that the straightforward way to deal with the increases would be to study to what extent local government services ought to be provided in return for fees, rather than on the rates. There is no doubt that the ratepayer is getting very good value for his money. If we studied the matter more closely we might see that some ratepayers were getting too much value for their money—value for which they could afford to pay. This has been found to be so in local government housing and it may be so elsewhere in local government service.

I sometimes wonder, when I see these increase orders coming before the House, whether, in our enthusiasm for local government, we are making it do too much. This order discloses a situation which cannot be allowed to drift indefinitely. The Minister has given no sign that he appreciates the serious position, or that the Government are pursuing a policy which will prevent the drift turning into a flood.

10.50 p.m.

Mr. Arthur Blenkinsop (South Shields)

It is hard to tell from the speech of the hon. Member for Crosby (Mr. Graham Page) that the local authorities are broadly satisfied with the result of the negotiations and have said that they felt that the results were not unreasonable—which is almost a term of congratulation coming from local authority associations in these annual discussions. The problem we are concerned about is that our differing local authorities are affected in differing ways by higher interest charges, and many other charges, depending on the particular dates when certain housing loans fall for renewal, and such matters.

Some local authorities are relatively fortunate in that they do not yet have to meet the costs of the change-over from relatively low interest charges to relatively higher ones on past housing. Therefore, they do not have to meet the same kind of heavy charges that others have to meet. Local authorities, like my own, in development areas, desperately trying to build up better standards, face very heavy charges indeed.

My local authority is only too conscious of the fact that it will probably be faced with difficulties because of the heavy and unusual charges it is having to meet, for such things as major trunk sewers and new incineration plant. Major changes like a great new library system, and new transport provisions are heavy and real charges. As the hon. Member has made clear, we cannot expect any additional encouragement or help from his side of the House. From what he was saying, it is clear that he is recommending that many of these projects ought never to be started. Yet these are vital matters for the areas concerned if we are to build up a proper standard and attract industries and people to the area, as we wish to do.

In making any criticism of this position and bringing to the attention of my hon. Friend the anxieties that many have expressed, I do not do so with any expectation of encouragement or help from the other side of the House. I know that if they had any responsibility our position might be worse and we might have to throw overboard the whole series of major schemes. My hon. Friend may not be able to give a spot answer tonight, but after consultation he might be able to offer some encouragement as to the way in which an authority like mine can face these exceptionally high charges, which as a result of high interest charges and heavy new capital charges we are having to meet. It may be that the regional officer of his Ministry may be able to offer encouragement for the future, because we are very anxious that there should be no delay in these schemes. In the North-East we still face heavy unemployment. The last thing we want to do is to cut back projects which have a positive value for the future and which we hope will generate the kind of redeployment we want to see.

10.55 p.m.

Mr. Arthur Jones (Northants, South)

I recognise the difficulties which face a spokesman from the Government Bench when this inescapable anniversary of the rate support grant is brought before the House. It is a distasteful exercise for the Government, particularly this year. It exposes the under-estimation and the escalation of the costs in which local government services have found themselves. There is little profit in the remarks which the Minister made, and I was sorry that on the one point about which matters were running a little for him—the domestic element—he was prevented by Mr. Speaker from pursuing the matter.

I want to take up the claim that this rate support grant is agreed each year with the local authorities. They are faced with circumstances in which the Government must reach a conclusion and require acceptance by the local authorities, and I see the great difficulties which their negotiators face. I will deal briefly with the point that there has been a great under-estimation of the increased costs arising across the field which the Minister mentioned, but this is in the context of all the hopeful remarks made by his predecessors when they dealt with the subject. In the White Paper "Public Expenditure 1968–69 and 1969–70", quoted in last year's rate support grant order, there was the following promise: …the Government expects that in 1969–70 local authorities as a whole will restrain the level of their expenditure so that it does not in total exceed a figure in the region of 3 per cent, in real terms…". All the long-term commitments to which local authorities are committed make a hope of that character completely unrealistic and, as a result, we have seen the tremendous expenditure and the eventual loss of grant which local authorities have had to endure, a point made clearly by my hon. Friend the Member for Crosby (Mr. Graham Page). In the debate on the order last year, as reported at column 43 of the OFFICIAL REPORT of 9th December, 1968, the Minister said: The Government's purpose in the negotiations…has been to ensure that the experience and judgment of the local authority associations and of the Government Department has been combined to produce what I believe to be reliable forecasts of expenditure, Service by service."—[OFFICIAL REPORT, 9th December, 1968; Vol. 775, c. 43.] That hope has not been realised. In spite of all that local authorities did in the negotiations, although they pointed out the error of the Government's ways in under-estimating these costs and closing their eyes to local authorities' long- term commitments, it is clear that these estimates are neither accurate nor reliable to judge from the size of the increase order which we have before us.

There is a further contradiction in the Government's attitude on local government expenditure. On the one hand, the Ministry of Housing and Local Government says, with its hand on its heart, that these figures are agreed with the local authority associations and that a negotiated settlement is made, but on the other hand, in Appendix I, page 73, of Cmnd. 4234, the White Paper "Public Expenditure 1968–69 to 1973–74", dealing with the financial relationship of local authorities with the Government, paragraph 5 states, It is far from easy to translate programmes of these capital projects into forecasts of annual expenditure. Generally speaking the estimates of the phasing of the expenditure year by year are worked out by the Departments from their central experience rather than provided by the local authorities themselves. Thus, on the one hand, the Ministry is saying that it is relying on figures submitted by local authorities, while, on the other, we are told in the recent White Paper that expenditure year by year is worked out by Government Departments from their central experience and not from the experience provided by local authorities.

This must place the Minister in a dilemma. While I do not expect him to answer a question of this nature in detail now, since the Government are trying to pin on local authorities the responsibility for the escalating costs of local government services, it is not fair that the blame should fall on local authorities. The blame clearly lies with the central Government, who will not accept the local authority figures. The Government have their long-term estimates, as the recent White Paper points out, based not on information provided by local authorities; and there is, therefore, a complete contradiction of approach between the two quotations which I have given.

I agree with the remarks of my hon. Friend the Member for Crosby about the estimates of the escalation of wages. There was an exhortation in paragraphs 15 to 23 of last year's order for the further provision of local services—that at a time when, on the one hand, money was being restricted, while, on the other, it was. promised by the Government. There were references to increased educational facilities, local health and welfare services, police, fire, child care, the administration of justice and sewage disposal. All these services were to be expanded, but the Government were not providing the necessary finance to local authorities to undertake the work.

There is a clear responsibility on the Government for the accuracy or otherwise of their estimates and for the higher level of expenditure which local authorities must face in future. Do the figures arise from inaccuracies and misjudgment or from a deliberate decision to shift expenditure from the taxpayer to the ratepayer? There is evidence to support the latter; that local authorities are being encouraged—indeed, required—to extend their services without being allowed the resources to meet that expenditure, and the inevitable result is that the ratepayer, rather than the taxpayer, is having to foot the increased bill. The figures quoted by my hon. Friend the Member for Crosby bear this out.

In that context, would the Minister agree that a case might be made for the retrospective review of grants; in other words, that we should not, in circumstances in which there are such large inaccuracies, have to determine the rate grant for the next year and, to some extent, for the year beyond that, and so tie local authorities to that expenditure permanently? Or, to put it another way, would it not be better, if large errors have been made, for grants to be made retrospectively?

Mr. Deputy Speaker

Order. The hon. Gentleman is attempting to debate the methods by which grants are paid, which he cannot do in discussing this Instrument.

Mr. Jones

I am considering the question of the increased cost of public expenditure both at central and local government level. In doing so, I am considering ways by which the increases demanded under the order from the ratepayer might to some extent be alleviated.

In the White Paper on Public Expenditure, Cmnd. 4234, Table 3.6 provides a contingency reserve. This might provide a method which could be applied to local government expenditure. The reserve for 1970–71 is £75 million, and for 1971–72 it is £175 million. Could we not ease out the high peaks in local authority expenditure either by a retrospective grant or by a contingency reserve for future high levels of expenditure?

The Government's policy in regard to the recent grant orders is condemned in the December issue of "Local Government Finance." It states: The actual consequences of an overall limit of 3 per cent, in real terms they now know". It is fair to assume that by "they" is meant the Government: They know of the dubious economies of an almost complete standstill in some cases on repair and maintenance work on buildings"— and my hon. Friend referred to that specifically: and of the swingeing cuts which had to be made on highways expenditure, and even more fundamentally, perhaps, they know of the severe cut-backs on the education service in the provision of books and supplies… This is the great problem that faces local authorities. There is a genuine recognition that they are not getting the support and help to which they are entitled from central Government. I believe that the ratepayer needs further protection by means of some readjustment of the procedure under this order, and I ask the Minister to consider the two suggestions I have made.

11.6 p.m.

Mr. John Lee (Reading)

It may seem somewhat churlish when we are discussing an increase order that the Minister should be subjected to so many strictures from all sides with regard to its adequacy, but that is inevitable in this kind of situation. I speak with gratitude, because a grant in aid of rates of 1s. 8d. will bring in between £125,000 and £130,000 to the Reading Corporation next year, but in view of the basis of the grant, this criticism is, as I think, inevitable.

As the hon. Member for Crosby (Mr. Graham Page) has pointed out, the grant is falsely based. It was calculated on the wrong basis in 1967–68, and from that error everything has sprung. It is rather like the situation in which someone finds himself in having his increment deferred: he suffers a continuous loss of earnings to the end of the scale. Where the analogy breaks down is that in the present case there is a continuous and open-ended situation in which year by year local authorities receive less than they should because the calculation was wrongly based in the first place on approved expenditure, when that was exceeded very considerably by actual expenditure.

Certain other factors help to distort the situation further. There was an arbitrary reduction in expenditure in 1967–68–69, and then there was the refusal to put in an increase order such as this in 1968. Now we have a situation in which approved expenditure for 1970–71 represents a standstill in percentage. The 4 per cent, for 1971–72 is a reduced rate of increase. So, year by year, the situation gets that much more difficult for local authorities.

It would be out of order for me to lament the general state of local authority finance, but I do not think we shall get this right as long as the present rating system persists. Local authorities, most of which are in the hands of our political enemies, are giving all kinds of reasons for not doing the kind of socially desirable things which my hon. Friends the Member for South Shields (Mr. Blenkinsop) and the Member for Birmingham, Small Heath (Mr. Denis Howell) want them to carry out. It does not help to give those authorities any excuse for not carrying out those desirable projects. So long as we continue this system on a false base of reference, we are giving them that excuse and I have no doubt that many will be only too willing to use it.

11.11 p.m.

Mr. Oscar Murton (Poole)

I was astonished to hear the hon. Member for Reading (Mr. John Lee) make the allegation about local authorities that they are responsible for not implementing what they ought to be implementing in the way of local services. He should realise that it is the fault of the Government that this has happened because the Government have cut back on spending.

I remind the hon. Member of the debate on 9th December, 1968, on the rate support grant. It was stated categorically in the Ministry circular that the proposed cut-back would involve hard and painful decisions and little room would be left for improvement of services and in some cases there might have to be a temporary lapse in standards. That is exactly what has happened. It was extremely fortunate that we did not have a hard winter. I hope that we shall be spared a hard winter this time, because with lack of maintenance on our highways if we were to have heavy frost I fear that many roads would break up.

Those of us who travel about the countryside to and from our constituencies have been appalled by the fact that many county councils have had to postpone, or in some cases entirely to omit, cutting back hedges and this causes danger to traffic. This has been entirely because the authorities have lacked money to do the work. I am worried because the increase in this order is not commensurate with increasing costs. This will mean that to put right what has been neglected for the last few years local authorities will have to raid their balances even further. I am alarmed because I wonder to what extent most local authorities have any workable balances left. If through the ingenuity of a borough treasurer something cannot be found in the way of a working balance, the rate-payers have to foot the bill. This will be inevitable in the coming year.

The hon. Member mentioned something with which I agree. That is the false base on which grants are formulated. I hope that the Government will realise the great difficulty which arises in trying to assess the difference between the actual and approved expenditure of local authorities. If the actual expenditure is greater than the approved expenditure, as inevitably it is, and the Government work on a false premise in their consultations with local authorities, the base of the increase order each year will not be sufficient to catch up with what is necessary.

It would be out of order to suggest ways and means by which this might be put right. The Association of Municipal Corporations and the County Councils Association are most exercised over the matter. If we are not to have a constantly spiralling increase in rates, we must go back to first principles to get the base line right. Then we shall get annual orders which are more in keeping with the needs of local authorities.

11.15 p.m.

Mr. Martin Maddan (Hove)

Five years ago we used to hear from hon. Gentlemen opposite the cry, "Public squalor amidst private affluence", but the cry of 1969 and 1970 is going to be "Local squalor amidst Whitehall waste", because that is all this order is leading to. It does not enable local authorities to catch up at all with necessary increased expenditure, because of the artificially reduced basis on which all calculations have been made. As I understand it, in 1967–68, excess of expenditure which was not allowed amounted to £40 million, which led to a loss of grant of £21 million, and in 1968–69, the excess of expenditure which was not allowed came lo £53 million which led to a loss of grant of £29 million. This was apart from other vast slashes the Government have made in local authorities' expenditure. I think that my hon. Friend for Northants, South (Mr. Arthur Jones) was on the point that this makes no attempt to mitigate the effect and the reference to the domestic element grant is complete hypocrisy.

Turning to the White Paper on Public Expenditure 1968–69 to 1973–74, which has already been alluded to, Paragraph 30 refers to 4 per cent, growth rate of local government expenditure as being "an acceptable basis". There may be questions of definition of the rate of negotiation which has been talked about, and the negotiation standard has been a rate of 5 per cent. All this can mean is that local authorities will be under increasing constraints to cut standards and expenditure, and the hypocrisy of it is that the Government never give any indication of what the standards are to be and what services are to be cut.

The hon. Member for South Shields (Mr. Blenkinsop) said that my hon. Friend the Member for Crosby (Mr. Graham Page) had foreshadowed certain policies. I do not know whether he did so or not, but if my hon. Friend had been in charge of the matter, we could have been certain of getting from him an honest and straightforward statement of the intention and implication of what was being done. This was singularly missing from the hon. Gentleman tonight.

11.19 p.m.

Mr. James Allason (Hemel Hempstead)

The Minister of Stale told us that the local authority associations were reasonably satisfied with this grant order. Of course, because he has laid down the rules and put on the strait-jacket and they had no option but to agree on his formula. But is his formula right? I do not think it is. The House knows perfectly well that his formula is based on approved relevant expenditure. Local authorities originally put before the Government approved relevant expenditure, which was £132 million higher but the Government say, "No. We know better. This figure is the approved relevant expenditure and this is what we are going to work on". But that approved relevant expenditure has never been right and is not right now.

I take the example of education pooled services-teacher training and advanced further education. On the very latest figures, local authorities, having considered what the Government have said, are still convinced that they will be spending £13 million more this year and £17 million more next year than the Government allow for. This is typical. The figures for the out-turn in 1967–68 were £40 million higher than the Government's estimate and in 1968–69 £53 million higher. We know that the out-turn this year will be substantially higher than the Government's estimates. It is ridiculous to claim that local authorities are satisfied with this procedure. They are satisfied only with the narrow margin under which they have to work.

For interest charges there is to be an increase of £32 million in 1969–70. I do not accept the Minister's percentage figures, because percentage figures, owing to the shortfall, are about 0.9 per cent, lower than those promised. Therefore, a substantial proportion of the £32 million must be found by the ratepayers. There will be a substantial increase falling on the rates next year.

There is a £50 million increase in the figure for teaching for 1969–70. We know that a figure of £50 million increase has been offered and rejected in the present negotiations. I do not know what the position is today. There will be a substantial increase on that. The Labour Party manifesto for 1964 said that all education salaries should be paid for by the central Government. The increase we are approving tonight would be gigantic for the central Government if that pledge were to be fulfilled. I ex- pected it to be fulfilled, because the Patronage Secretary told us to wait for this year's Queen's Speech and all Labour election promises would be fulfilled. This is yet another which is not being fulfilled.

All the indications are that there is a very gloomy prospect for ratepayers when they receive their demands next year. They have the Government to thank for that.

11.23 p.m.

Mr. Denis Howell

With the permission of the House I will reply to this fascinating debate. The Government have been accused of every crime in the calendar that hon. Members could lay their tongues to, but I never thought that even the powers of imagination of hon. Members opposite would stretch as far as that of the hon. Member for Poole (Mr. Murton), who lamented the absence of a hard winter last year and this year.

Mr. Murton

I said the very contrary. I said that I was thankful that there had not been.

Mr. Howell

I am well aware of what the hon. Gentleman said. He said that he was glad that there had not been a hard winter, but it was quite clear from his tone and the context in which he said it that this was a matter to be lamented by him and his colleagues. Then the hon. Member for Hove (Mr. Maddan)—I took down his words because they were so extraordinary—in a magnificent passage about Galbraith and public affluence, said that there would be squalor in local authority areas. What squalor is to be found in Hove? Will the hon. Gentleman tell us?

Mr. Maddan

I can tell the hon. Gentleman where. I led a deputation to his Ministry at the beginning of this year because, owing to local conditions and a lack of loan, there cannot be more local authority building. The hon. Gentleman's Government will not allow that authority enough money to enable people to have mortgages to house themselves. That is an example of the public squalor to which I referred.

Mr. Howell

I thought the hon. Gentleman was going to tell us that we were preventing him knocking down slum houses in Hove. But it is nothing to do with that at all. He would be very hard put to it to give the House examples of squalor in the excellent constituency which he represents and to which we go in order to get away from the squalor which may be found in other places.

If I may now turn to what has been the main burden of argument, I think I detected in many speeches a genuine feeling that some local authority associations have been placed on what has now come to be called a false base. It is true that in negotiations prior to the original grant settlement, the Government reduced local authority forecasts of expenditure by £169 million for 1967–68 and £184 for 1968–69. One of the two main reasons for that was that these forecasts postulated a rate of growth far higher than the economic circumstances of the country could sustain at that time.

The second reason that the approved expenditure figures are low is that no order increasing the grant for pay and prices was made last year. The reason for that was that consciously the Government said that in the aftermath of devaluation the local authorities, as in other sections of the community, had to play their part in that situation. I can tell the House that if the expenditure taken for grant purposes is adjusted for pay and price increases, the 1967–68 figure, of which hon. Members were making such great play, after allowing for additional expenditure on police services which earn a specific grant, falls short of actual expenditure by only £12 million, or less than ½ per cent. So the forecasts and the moaning that we have heard about grossly over-cutting estimates have not been borne out.

I therefore suggest that the Government's forecasting and computerising have proved far more accurate than hon. Members have been prepared to give us credit for.

Mr. Graham Page

Before the hon. Gentleman leaves that point, he must be aware that the County Councils Association—I have a statement of the Association in front of me—says that Having lost out on the first two years of rate support grant the question is bound to be asked whether the signs are any more propitious for the second period. The statement goes on to say: Hence the signs for 1969–70 and 1970–71 are not propitious from the local authority point of view, even before regard is paid to the growing pressures to let up on expenditures which have been held back during the two years of hard slog. They are still not satisfied with the figures.

Mr. Howell

Whatever Government have been in power, the local authority associations have always pressed that too little is being done or that it has been too late or that expansion ought to be greater. All I am saying is that, in the event, the forecasting on which we based our calculations seems to have been remarkably close to actuality, and I believe that that will be the position as regards the present rate support grant and future orders coming before the House. That is the main issue before us tonight.

The hon. Member for Crosby (Mr. Graham Page) made a blood-curdling speech, though I am not quite sure what the object of the exercise was. The hon. Gentleman is very good at making party-political blood-curdling speeches; we admire him for it, he goes from strength to strength, and each speech is more blood-curdling than the one before. But in taking about the burden which the ratepayer will have to meet, the 44 per cent, of the increased costs in 1969–70, the hon. Gentleman was careful not to distinguish too closely between the burden on the domestic ratepayer and that borne by the industrial and commercial ratepayer.

I shall be out of order again if I trespass too far on that ground, but, in view of what the hon. Gentleman said, perhaps I may point out that there has never been a Government, at least since the war, who have done more to protect the domes lie ratepayer—this has been especially so in the last three years—from the effects of the situation which the order is designed to meet. I made clear in my opening speech that, although interest charges, for instance, had risen, 56 per cent, of the cost of the increase in 1969–70 was being met by the Government. In the last three years, the increase met by the domestic ratepayer has been only 7d. in the £, compared with 2s. 6d. in the previous three years. I ask the House and the ratepayers to ponder those figures. They may then appreciate the beneficial results of Government policy.

I was asked about future increases, and there were specific references to teachers' salaries and to N.A.L.G.O. Whatever increases are approved by the Government and the local authorities, or a combination of those two, after the first week in November will be taken into account in future negotiations. That is the normal procedure. If the Government do not draw attention to the increases, the local authority associations will. I am advised that that is the normal practice, and we have no intention of departing from it.

Mr. Graham Page

Does that mean that the hon. Gentleman is giving an undertaking that there will be an interim order next November to take account of them?

Mr. Howell

No, I am not giving any undertaking. I am saying that all increased expenditure is taken into account in the negotiations. It becomes a matter of hard bargaining. But, if this order is anything to go by, it seems that the criteria which we and the local authority associations use in the matter have been settled reasonably amicably between the two sides.

The hon. Gentleman the Member for Crosby devoted a fascinating part of his speech to interest rates. He spoke of the "Save As You Earn" scheme as based on 12 per cent, and then asked: How can interest rates be kept down to the present level? That was a fascinating comment. If it means anything—and he did not give us his conclusion—it means either that interest rates for local authorities ought to go up because they are borrowing money below the level which we now recognise in the S.A.Y.E. scheme, or that interest rates should come down for the S.A.Y.E. scheme and savings generally. That is a remarkable piece of Tory doctrine. No wonder the hon. Gentleman evaded giving the conclusion of his argument. Perhaps we can return to it on another occasion, but it would be nice to know whether the Opposition are asking that local government interest rates go up or that interest rates for the savings movement come down. Either eventuality would not be popular with the parties involved.

Mr. Graham Page

The hon. Gentleman knows perfectly well what I was trying to say—that interest rates are so high in other sectors that they are causing local authorities to borrow at high rates. I referred to the increase between two years from £32.1 million to £35.3 million.

Mr. Howell

If the hon. Gentleman is questioning whether we can hold these rates it is an incipient tribute to the Government in that, despite all the forebodings, we have managed to hold these rates at that level. The hon. Gentleman is really trying to have his cake and eat it. I take note of the fact.

Similarly, referring to housing finance, in another purple passage the hon. Gentleman said that too many local authority tenants are getting too good value out of the Government or out of local authority financing. If that means anything, it must mean that rents should go up.

Mr. Graham Page indicated assent.

Mr. Howell

The hon. Gentleman nods his head in agreement.

Mr. Page

I have said it many times.

Mr. Howell

Then no one will object to my underlining on this occasion that the Tory Party, at 25 minutes to midnight on this historic day, is saying that local rents have not gone up enough and should go up more. The hon. Gentleman was saying that the tenants were getting too good value for money— in other words, that their rents on the whole should go up.

My hon. Friends the Members for South Shields (Mr. Blenkinsop) and Reading (Mr. John Lee) raised points of considerable substance while recognising what the Government are doing to produce more help for the local authorities. I agree that, at a time when high interest rates are prevalent throughout the world, and when local authorities and certainly the Government wish for major capital schemes to be undertaken, there is here perhaps a considerable dilemma for both Government and the local authorities. There may well be something in what was implicit in the remarks of my hon. Friends about the whole question of local government financing. I will consider in detail their suggestions, especially those of my hon. Friend the Member for South Shields, but I think that, in general, the considerations they were advancing properly fall to be taken under the general review of local government finance which is following the Report of the Royal Commission on Local Government and all the thinking that the Government are doing on this at present

The hon. Member for Northants, South (Mr. Arthur Jones) referred to wages and salaries. I thought his speech rather interesting. I was not sure, however, whether he was complaining about the wages bill of the local authorities, which this order is partly about. I was under the impression that right hon. and hon Gentlemen opposite opposed the Government's prices and incomes policy and any attempt by the Government to regulate prices and incomes. Had we not done so, the increases in local government expenditure would have been considerably greater than they are at present.

The other fascinating feature of his speech was his reference to the Government trying to shift resources from the taxpayer to the ratepayer. That filled me with nostalgia because, a few years ago, I made much the same speech from almost exactly the same spot in the House. Now I have to give the answer, which is the same as that which he would have given if he had been replying on behalf of the Government.

Mr. Arthur Jones

I hope that the hon. Gentleman was not referring to resources, because that is where the difference between us would lie. I was referring to the shift of expenditure from central Government to local government —not resources.

Mr. Howell

I suggest that the hon Gentleman looks up the speech that I made on that occasion. I did not put it quite as eloquently as he did, but certainly that was the burden of what I said. At the time, I was opposing the general grant system and arguing that we ought to retain the percentage grant system, so that one could relate what one paid to the—

Mr. Graham Page

The hon. Gentleman is kicking the ball through his own goal.

Mr. Howell

I am not sure who is kicking it through which goal. Perhaps the match should be abandoned. However, I could not resist the temptation to talk about it.

With the support of the local authority associations, hon. Gentlemen opposite believe in the general grant system and wish it to continue. That means that we negotiate general grants in this way and not specifically, and there is no escape from that situation, at any rate, before a major review of local government finance, which is bound to follow shortly after the publication of the Government's views on the recommendations of the Royal Commission on the future of local government.

The charge of hypocrisy is thrown at us by the hon. Member for Hove. In fact, whatever one may think of the system, it is a product of the previous Administration. There is a great deal of increased productivity among local authorities, and we should have more. In this Session, the Government have produced a Bill which will enable economies to be found in various directions, such as bulk buying, so that local authorities can do a great deal—

It being one and a half hours after the commencement of Proceedings on the Motion, Mr. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 2 {Exempted business).

Question agreed to.

Resolved, That the Rate Support Grant (Increase) Order 1969, dated 21st November, 1969, a copy of which was laid before this House on 26th November, be approved.