RATE SUPPORT GRANT (SCOTLAND)

HC Deb 03 March 1970 vol 797 cc325-53

6.25 p.m.

The Minister of State, Scottish Office (Dr. J. Dickson Mabon)

I beg to move, That the Rate Support Grant (Increase) (Scotland) Order 1970, a copy of which was laid before this House on 11 February, be approved. The Order increases the amounts of rate support grant which were prescribed for the two years 1969–70 and 1970–71 by the Rate Support Grant (Scotland) Order 1969. The Order also makes minor changes in the formulae by which grant is distributed, formulae which were also prescribed by the 1969 Order. The provisions of the Order, and the underlying considerations, are explained in House of Commons Paper No. 124.

For the two-year period from May, 1969 to May, 1971—the second period of rate support grant—the aggregate amounts of grant were fixed at £182.22 million for 1969–70 and £194.63 million for 1970–71. Provision for this was debated in the House about a year ago, when my right hon. Friend explained that the aggregate amounts of grant represented 64½ per cent. and 65½ per cent. of estimated local authority revenue expenditure for those two years, and 62½ per cent. and 63½ per cent. for the two previous years. This estimate of revenue expenditure, £637 million over the two years, was reached in the light both of the information supplied by local authorities and of the guide lines laid down by the Government for expenditure and growth of expenditure in the public sector. Also, of course, the estimate was based on the level of prices, wages and incomes prevailing about the end of 1968.

During 1969 the cost of operating local authority services was affected by a number of price changes, and by wages or salary awards to different categories of local authority employees. At the end of September there was a wages award for manual workers. From 1st August there was an increase of salary for the administrative, professional and technical classes of local authority employees. There was a pay award for teachers with effect from April, 1969. These three awards are estimated to have the direct effect of adding £6.2 million to local authority revenue expenditure in 1969– 70, and the full year effect of about £8¾1: million is felt in 1970–71. There are, of course, further consequential increases, such as the employer's share of superannuation payments related to increased wage or salary levels. Other awards of increased pay or allowances have been announced, affecting most categories of local authority employment. After careful consideration of the terms and effects of different pay awards, we estimate that staff costs are increased by nearly £9 million in 1969–70 and by about £l2¾ million in 1970–71. Higher staff costs are in fact the largest single item in the list of changes which have affected the estimate of local authority expenditure in this grant period.

Debt service is another large item of current expenditure, and the high rates of interest at which local authorities have had to borrow and reborrow during the year are expected to increase this expenditure by about £3.8 million in 1969–70 and nearly £4½ million in 1970–71. There are also increases in the cost of maintaining local authority buildings such as offices and schools, and of the wide range of goods and services which they have to buy. The resulting increase in expenditure is estimated at about £5£ million, but the higher cost of services will be reflected in the charges and other contributions which local authorities will receive, and off-setting income from these sources should be about £2.6 million higher in a full year.

These estimates of increased costs are based on information supplied by the local authorities and discussed and considered with them in the light of carefully gathered data about general movements of prices and costs, the composition of expenditure and, of course, the terms of particular pay awards. As a result we are satisfied that the reckon-able expenditure on local authority rate fund services expenditure will be altogether some £326 million in 1969–70 and £346 million in 1970–71. That is, an increase of £16 million in the first year and £20 million in the second year over and above the estimates on which the main order was based. The Government intends that the present standard of local authority services should be maintained, and allowed to grow at the rate previously envisaged. Accordingly, the increase Order steps up the aggregate of rate support grant so that the Government contribution to local expenditure remains at the designated levels of 64½ per cent. and 65½ per cent.

For the year 1969–70 this means that the total amount of rate support grant is increased by £9.8 million to just over £192 million. For the year 1970–71 the total amount of rate support grant is increased by £12.7 million, from £194.6 to £207.3 million. The House is asked to approve the taking of powers to make these additional payments to local authorities.

Of the additional grant, about £120,000 will be distributed as domestic element, which is used to reduce the rates poundage local authorities would otherwise require to levy on dwelling houses. The increase of domestic element does not change the effect on householders—equivalent to a rate reduction of 2s. 6d. in the £ in 1969–70 and 3s. 4d. in the £ in 1970–71—but is applied to adjust the amount of this element to allow for new estimates of domestic rateable value.

For distribution of the balance, the grant increase is divided between the resources element and the needs element in the same proportion as in the main order; three-quarters as needs element and one-quarter as resources element. These are the three channels of rate support—through the domestic element to relieve the private householder, through the resources element to assist those authorities with below-average rateable resources, and through the needs element to give assistance in proportion to population as weighted for such factors as the number of children below school age, the proportion of elderly persons, roads mileage relative to population, rate of population change and relative urban or rural distribution of population.

Mr. Tam Dalyell (West Lothian) rose

Dr. Mahon

If I may finish first. My hon. Friend has had the advantage, as have many hon. Members, of having a very lengthy letter dealing with an individual point concerning the people of West Lothian. I am certain that he would like me to comment on that at the end of the debate. I would like to explain the main burden of the position before going into details as to how it affects particular counties.

These weightings, of course, adapt the distribution of grant in some degree to the different needs which different local authorities have to meet, or in the case of the sparsity weightings to the high unit costs of providing almost all services in remote areas.

When we debated the main Order for the current grant period in this House on 20th February last year my right hon. Friend explained that changes were being made by the Order in the arrangements for distributing the resources element and the needs element which had been reviewed by representatives of the local authorities in association with officers of his Departments during 1968.

The most important of these changes was to take out of the calculation of weighted population for purposes of the resources element the weightings for children under 15, and for sparsity, which had survived till then from the days when support for local authority services was by direct percentage grants. Increased weightings for "education units" replaced the under-15 weightings and greatly increased weightings for sparsity were given in the needs element to compensate the authorities which lost the corresponding weighting on the resources element.

My right hon. Friend explained to the House that, although these changes were generally recognised as an improvement, they were not entirely satisfactory and the review of the arrangements was to continue, with special reference to the distribution of the roads portion of the needs element which was not considered in 1968. Temporary arrangements were made for one year to limit the maximum increase in rates for any authority as a result of the formula changes to ls. by paying transitional grants amounting in all to £113,000. The cost of this was borne by all authorities proportionately. The authorities assisted in this way were the small burghs of Annan, Lerwick, Fort William and Kingussie, and the County Council of Inverness. We did not provide for transitional payments in 1970–71 because we intended to remove the need for them and this is achieved by the improvements of grant distribution which are introduced by this Order.

We have decided to modify the formulae used for distribution of the needs element, and the changes are explained in Part C of the report. They are quite straightforward. They comprise, firstly, an increase of the roads portion of needs element—with weightings where the roads mileage is high in relation to population, which is a reference to my hon. Friend and the reply he has received from the Minister. Secondly there is some scaling down of sparsity weightings for the general portion of needs element.

For rural counties such as Inverness, Perth and Dumfries this means more grant payable as roads portion, but less grant payable as general portion because the sparsity weightings are reduced. The result is to assist these county authorities and through them their small burghs, but not their large burghs, for the large burghs do not share the county roads portion but they do share the general portion. The unintentional result of last year's Order was that for 1969–70 a few of the burgh authorities were too generously treated, at the expense of landwards areas and small burghs. For the year 1970–71 the new formula goes most of the way to correct this.

The four cities and most large burghs are not affected by the formula changes incorporated in the Order. There are incidental changes in grant entitlement for a number of counties, and some of those affected might consider that the changes go in the wrong direction. Unfortunately, every grant change cannot be an increase, and in this large and complex grant system it is impossible to manipulate one part without producing effects in another part, but we have consulted the local authority associations and the new formulae are generally accepted by the county councils as bringing an all-round improvement, correcting a localised and specific defect in the mechanism of grant distribution.

It is a necessary, though not perhaps desirable, consequence of the present grant system and of the "constant prices" assumption on which public expenditure is planned, that a very large and diverse body of local authority expenditure has to be revalued each year. We have been greatly assisted in carrying out the 1969 revaluation by the detailed analysis of expenditure on each service which local authorities have been supplying since 1968, in their out-turn statements for the last completed year. I know, and so does my noble Friend and the Secretary of State, that this has involved, particularly at the start, much extra work for the chief finance officers of local authorities and their staffs, and it is right that in introducing this Order I should put on record the value both for central and for local government of the information which this hard work has produced.

I commend the Order, and I will seek to reply to detailed points on any other matters which hon. Gentlemen may seek to raise at the end of the debate, if I may.

6.38 p.m.

Mr. Alick Buchanan-Smith (North Angus and Mearns)

I would like to thank the Minister of State for the way in which he has introduced the Order and the explanations he has given. These Orders are not easy to understand, and we are grateful to the hon. Gentleman for his explanation of the figures and the way in which he has described the distribution of the increase in the different ways and between the different elements.

As I said last year, I have to express a certain amount of sympathy with the hon. Gentleman because in all these questions of distribution, as he said, there are some local authorities which appear to benefit and others which feel that they have been hurt in some way. It was during the debate on the main Order last year that I said it required something like the wisdom of Solomon to be able to distribute this money and keep everyone happy.

I endorse what the Minister of State said about the amount of work done by local authorities and others in contributing towards the work that goes into the preparation of an Order like this. Obviously, it is extremely helpful to have as much information as possible, and what is provided in this Order and to us as individual Members is very helpful in trying to determine whether this money has been fairly distributed.

On these occasions the hon. Gentleman comes to the House and reads out these figures, increases of another £9.8 million in grants for 1969–70 and £12.7 million in 1970–71. The figures trip off his tongue so readily that they give an appearance that the Government are being generous towards local authorities.

Of course, we welcome the amount of money that is being given, but at the same time there are three other matters which we have to take into account.

In the first place, so far as local authorities are concerned—I will refer to what I said in a similar debate a year ago—let us remember that reckonable expenditure which the Government agreed with local authorities, what they have to spend, falls short of what the local authorities themselves believe is necessary for them to carry out the services which we in Parliament have laid upon them. I would remind the House that for the year 1969–70 reckonable expenditure fell £11½ million short of the local authorities' estimate; and for 1970–71, £11 million short of what the local authorities themselves thought was necessary. I would emphasise to the House that these figures are before any cost increases such as we are discussing this evening have been taken into account.

I would remind the Minister of State that many of the cost increases contained in the Order which the Minister has described are a direct result of Government action, a direct result of what the Government themselves have done, and are not matters within the control of the local authorities themselves. Here I instance the interest charges, which are one of the highest single items in this Increases Order which we are debating. We have an increase in interest charges for 1969–70 amounting to £3.81 million and in 1970–71, to £4.47 million. I can only think that many local authorities must be looking back and yearning for those days of Tory Government when interest rates were not as high as they are today.

Mr. A. Woodburn (Clackmannan and East Stirlingshire)

Is not the hon. Gentleman aware that interest charges are high all over the world? Is he suggesting that the Government have caused that, as well?

Mr. Buchanan-Smith

I am suggesting that the Government are to a great extent responsible for the high interest charges from which this country is suffering at the present time. It is certainly not the fault of local authorities. It is something which the Socialist Government have imposed upon them.

A third point I want to make which the Minister of State must bear in mind is that many extensions of services have taken place in the course of the year which are not covered by this Order. Only the extra costs are covered. I understand, for example, that in the estimates for running the new social work departments local authorities' actual costs are running out very much higher than was envisaged when we discussed what the reckonable expenditure should be. These are not covered by this Order, and that is an item which local authorities are unable to recoup in an interim period in any way at all.

Whilst I welcome the fact that the Government recognise that these increases have taken place, and accept that these have been agreed with representatives of local authorities, and recognise also that the Government met in 1969–70 64½ per cent. and in 1970–71 65½ per cent. of these increases, the remainder of these increases—roughly 35–36 per cent.—has to be borne by local authorities them selves and by the ratepayers.

There are one or two specific questions I would like to ask the Minister, which he has said he will answer at the end of the debate. First or all, in relation to the increases in costs of local authorities, as a result of pay awards, the Minister of State made reference to a specific pay award which took place last year. I would ask the Minister up to what date these pay awards have been taken into account. We all know that there are pay awards under discussion at the moment in relation to teachers and that a nurses pay award has been agreed within the last few weeks. Are these most recent pay awards taken into account in the estimate of increases in reckonable expenditure this year and next, or have these items that are still not completely finalised not been estimated at all?

It would be helpful to know, because increases of £7 million in the first year and over £10 million in the second year are very big items and if these more recent, very substantial awards have to be taken into account this will be an increase in expenditure which local authorities will have to face. These may not have been taken into account in this Order.

My second question is in relation to interest charges. Next to increase through pay awards, these are the biggest single items in the increases that local authorities have had to face. I would ask the Minister of State how he has allocated between different local authorities, and the different interest charges which local authorities have, in the calculation of the increased interest charges. One of our greatest aids in these debates is the Rating Review which is published each year by the Institute of Municipal Treasurers. Unfortunately, this has not yet been published this year, and therefore I have to rely on the figures for 1968–69.

If we look at those figures in relation to the cities, for example, there is quite a range of average borrowing rates which the different local authorities have to face. Aberdeen, for instance, borrows at an average of 5.87 per cent.; Dundee at 6.16. If we look at the large burghs we find that Coatbridge borrows at an average rate of 5.25 per cent. while Kirkcaldy has to borrow at 6.23. If we look at the counties we find an even wider spread of borrowing rates. At one end of the scale there is Peebles, which borrows at an average rate of 4.94, with my own county of Angus, borrowing at 6.25 per cent., at the other end of the scale.

Where interest charges are obviously such a big single major item of these increased costs, how is this increase allocated between different authorities with the different rates of interest charges they have to bear? This is an important point because the policies of different authorities vary. Some borrow on a long-term basis; some have to renew loans more frequently; some have particular projects for which they have to borrow at higher rates. Therefore, the actual burden of interest charges varies considerably in different areas of Scotland. I would like to know how all that is taken into account.

The third specific point I would like to put to the Minister is: are all the increased costs which local authorities have had to face accounted for? I would like to raise just one item which appears in Appendix 2 to this Order, on page 8, in relation to the Registration of Electors. I notice that the increased costs expected are estimated at £1,000 for 1969–70 and £3,000 for 1970–71. Yet in answer to a Parliamentary Question that I put to the Secretary of State on 4th December last: What extra costs are being incurred by local authorities following the decision to reduce the voting age to 18; and whether such costs are eligible for grant", the Secretary of State replied: This expenditure has been approximately estimated at £50,000 in the first year and £20,000 a year thereafter. He went on to say: Expenditure on electoral registration is reckonable for rate support grant"— and therefore one would expect it to be dealt with in an Order of this nature— but the total of the grants up to 1970–71 was fixed before the passing of the Act of 1969. As I indicated to the local authority associations in the course of my meeting with them on 24th January, 1969, it is not normal practice to provide for situations of this kind in a subsequent Increase Order".—[OFFICIAL REPORT, Vol. 792, c. 359–60, 4th December, 1969.] In other words, here we have one single item of increase which in itself may not be very great but in total to any particular local authority may be as much as about £50,000. It is an increase which, for reasons which the Secretary of State has not explained but which he regards as normal practice, is not taken into account in an Order of this kind, although it is an item which normally comes into reckonable expenditure. It is a considerable item over Scotland as a whole. Why are such items not taken into account? The hon. Gentleman must acknowledge that this increase will have to be borne completely by the ratepayers unassisted by the Government.

I turn now to the distribution of needs element. What population figures have been used for this? The element depends very much on population and population densities and so forth. How up to date are the figures? There is some question, for example, of how much the Registrar-General's figures take into account movements of population and of whether some of the sample census figures recently taken are not more accurate. The Scottish Economic Planning Board has made certain estimates, as have others, of population movements. Are these estimates taken into account in determining the distribution of needs element in the rate support grant? This is an important factor. Those of us who come from the remoter areas where population changes take place want to ensure that these decisions are based on the most up-to-date figures.

There is also an item involved which I cannot follow. It is in relation to payments made to Scottish universities. There is nothing in detail to say just what these are. As a point of information, the House would like to know more about this item.

Although we welcome the assistance the Government give to local authorities in the Order, what is really important at the end of the day is the fact that local authorities and the ratepayers have to face increased costs. The Government take credit for the fact that through meeting nearly two-thirds of the increase in costs they are bearing a substantial part. At the same time, they will recognise that the local authorities have to bear a substantial proportion out of their own rates. In answer to a Parliamentary Question from my hon. Friend the Member for Ayr (Mr. Younger) on 19th January, the Secretary of State told us that in 1969–70 the domestic rate, despite the help given through the domestic element of the rate support grant, was reckoned to go up by ls. 4d. in the £ against an increase of 9d. in the previous year. At the same time, it was estimated that the rate on the non-domestic subjects was going up by 2s. 2d. in the £ as against 1s. 7d. in the previous year.

Despite the Government's claim, and despite what is done in this Order, the trend of rates is still remorselessly upward. Despite all the claim for the domestic element, at the end of the day the ordinary householder still has to pay for many of these increases in costs. We welcome what the Government do to help but they should recognise that the ordinary person in Scotland still has to pay heavily for these increased costs.

6.54 p.m.

Mr. George Willis (Edinburgh, East)

This Order deals with two things. It provides a calculated amount for the rate support grant for 1969–70 and 1970–71 and it alters the distribution formula which allocates the rate support amongst various local authorities.

I can understand the hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) not wishing to discuss the allocation of this grant because, in the change, his county benefits by £101,000, which is equal to what West Lothian loses. I have no doubt that this means about 7d. or 8d. benefit to the rates in Angus. I can well imagine how the Tories in Angus will claim at the next local elections that their policy has enabled rates to be reduced by 7d. or 8d. They will hail it as a great triumph for Tory rule instead of admitting it for what it is—the generosity of the Labour Government. I can well understand why the hon. Gentleman did not want to discuss that. Why should he? After all, £101,000 is no mean sum in his local authority's accounts.

Part of my constituency, Mussel-burgh, and also Midlothian wish to discuss this matter. For some reason, no special steps have been taken in the Order to bring about changes for the cities, although each of them finds its grant raised slightly under this new redistribution. But Midlothian and Mussel-burgh are put at great disadvantage as a result of the Order.

The distribution formula was last reviewed in 1968, resulting in the Rate Support Grant Order, 1969, which made grant provision for 1969–70 and 1970–71. That review led to a sharp increase in the rate poundage for certain authorities and, as a result, my noble Friend Lord Hughes undertook that the effects of the review would be further examined, with regard specifically to the position of Inverness County, which had been put at a serious disadvantage.

The result of this further review has been that certain of the growth areas are severely penalised. This is particularly true of West Lothian and Midlothian. Other areas penalised include Clackmannan. Stirling and Fife. It is hard to understand why growth areas have to be penalised in order to get this slight adjustment which had to be made in the previous formula.

The White Paper sets out in page 11 the distribution of the needs element of the rate support grant, but unfortunately does not give any comparison with previous years, so that we cannot see, in any of the papers issued by my hon. Friend the Minister of State, what exactly the effects are. Nevertheless, for Midlothian the effect is that it will lose £91,000, while Musselburgh, in my constituency, a progressive, efficient, forward-looking local authority, suffers a loss of nearly £13,000. Is it the penalty for being a good local authority that it has its rates increased by about 7d. or 8d.? There is something wrong about that.

Similarly, Midlothian has been one of the most forward-looking local authorities in Scotland. Years ago, it began making provision for the expected transfer of miners and others from Lanarkshire, and when that process did not quite come about as expected, it continued looking ahead as a growth area. In the provision of housing and other social services which make up a community it has been well in advance. In education it has also been well ahead. But now it find itself suddenly losing £91,000, equivalent, I believe, to about 5d. or 6d. on the rates.

My hon. Friend the Minister of State rather brushed aside the changes in the distribution formula. He said that one or two minor changes are embraced in it. I do not know whether he wanted to dampen the flames of anger at the beginning of the debate in that way, but certainly I cannot accept that these are minor changes. These are very serious changes for these growth areas which themselves fought the changes when the working party considered these proposals.

The working party makes a number of points about factors which should have been considered and ought to be considered and have not been considered, for example the alteration in the roads formula. Under the distribution formula now a mile of growth area road, which might be a six-lane road, does not receive any more credit than a mile of narrow two-lane road anywhere else. That seems to be grossly unfair, because there is a big difference between being financially responsible for a two-lane road or partly financially responsible for a six-lane road. This is one of the big differences, and no allowance has been made in this formula for it. The effect of the proposals in this Order is to remove any relationship between the roads element and the rate support grant and the previous percentage roads grants which it was specifically designed to replace.

Mr. John Brewis (Galloway)

I was confused by the example given by the right hon. Member for Edinburgh, East (Mr. Willis) of a six-lane road. Would that not be a principal road and would not the money for that come from some other source?

Mr. Willis

That might be, but only if it counts as a trunk road. I am dealing with the relationship between the road element and the rate support grant. While the total roads portion of grant increased, Midlothian's share drops in amount in the new proposals. Midlothian is a growing county and it is also one which surrounds Edinburgh and has a large number of important roads running through it from all directions except the north.

The working party also points out that in the assessment made of the effectivness of the formula and the proposed changes, account has not been taken of any expenditure on sewerage. This is very important in those areas, and Midlothian, in co-operation with West Lothian, has spent hundreds of thousands of pounds on a large new sewerage scheme. But no account has been taken of this, and obviously in a growing area it is an increasingly expensive and important matter.

The "in" word now is pollution. Everyone has suddenly discovered pollution and that we are destroying our environment because we are not disposing of refuse in the proper way. Yet it is precisely at this time that we find that the formula does not take account of this expenditure. It is very large in growth areas, and certainly over the country as a whole it is substantially greater than many of the services whose costs are taken account of in the assessments. That is quite clear.

Looking at the way in which the educational units are calculated, the working party also makes the point that the credit given for educational units is given only in respect of places which are occupied in schools. In Livingston and other places with new towns, schools are provided and sometimes places are empty for quite a time until the population builds up and occupies them. This is also unfair and none of these matters is taken account of in this new formula. These are all criticisms of the new formula. Some of these factors should have been taken into account and if they had been then the result for the growth areas in Scotland might have been more favourable than it has proved to be. Midlothian argues—and I have a certain sympathy with the argument—that it is difficult to know what to do at this stage, because one cannot oppose the Order otherwise one would not get any money at all and Midlothian wants the money. But Midlothian argues—supported I understand by West Lothian and by other areas—that the transitional arrangements made with respect to the previous formula should have continued for another year until there had been a much fuller examination of all the points that should be taken into account. Had this been done the result might have been much more equitable than it has turned out to be. This proposal has been made and I certainly hope that sooner or later the working party will consider the formula again.

It should consider it again and take account of some of the factors which I have mentioned. I have no doubt that the various financial experts on the working party could probably think of other matters. The hon. Member for North Angus and Mearns mentioned one or two which he thought should be taken into consideration—or at least he asked questions about the interest rates, and so on. Certainly there are a number of matters which should be taken into consideration. I should like to think that it might have been possible to do something about the Order. However, my experience of administration suggests that it is hardly possible, so I should like to ask for the next best thing. I ask my hon. Friend to undertake that the matter will be reconsidered and that some of the factors I have mentioned will be looked at and the formula for the distribution of this grant examined with a view to making the distribution of the grant much more equitable with a formula which takes account of a considerable number of matters which are not at present taken into account.

7.8 p.m.

Mr. W. H. K. Baker (Banff)

My hon. Friend the Member for North Angus and Mearns (Mr. Alick Buchanan-Smith) the Minister of State, and the right hon. Member for Edinburgh, East (Mr. Willis) have all paid tribute to the members of the working party in the job that they have done in advising the Government on the way that things should be done. My hon. Friend the Member for North Angus and Mearns also mentioned his own local authority, and I should like to pay my tribute to my local authority for the help it has given me. With the greatest respect to both my hon. Friend and the Minister of State, I find that I can understand things produced by my own county treasurer far more clearly than things produced by either Front Bench.

Be that as it may, I welcome the result of this review in that the county of Banff is better off by about £16,000. Admittedly, we shall be worse off on the needs element in the general part of the formula because of the change but we shall be better off on the roads element. Every time one of these Orders comes before the House I make the same plea. I acknowledge clearly that the Minister of State has gone a long way towards meeting the difficulties that are found in a county like mine, but, although we are grateful for the small mercy, as I call it, we could naturally do with a lot more. It would be perfectly equitable for us to have more support from the Government and, perhaps, the structure of the formula can be looked at once more. The right hon. Gentleman referred to this, and I take up that point, too.

The difficulty that I face in my constituency is somewhat different from that referred to by the right hon. Gentleman. It is that the landward portion of the population is less than 50 per cent. A comparison may be made with the constituency of my hon. Friend the Member for North Angus and Mearns because, after all, we represent two similar types of area. My hon. Friend's county benefits a great deal more than mine because he does not have the number of small burghs which I have, whose populations do not count in the respect that I have mentioned. I make no apology for returning to this, and I hope that the Government will bear it in mind yet again in the next round of negotiations.

7.11 p.m.

Mr. Alex Eadie (Midlothian)

I support what was said by my right hon. Friend the Member for Edinburgh, East (Mr. Willis) in his submissions on behalf of Midlothian County. I should have adopted the same arguments in challenging the Order tonight if it had been possible to do so. I think that we would have challenged it, because it means so much to the County of Midlothian, but, as my hon. Friend said, if we challenge the Order no money will be available. I hope that the Minister of State will pay heed to what my right hon. Friend said, and to what this Order means.

I do not want to deal with the points made by my right hon. Friend, but one rather significant fact which emerges from an examination of the re-appraisal which the Government have made of the formula is that they have put the new towns in the growth areas in a rather ridiculous position. The Government continue to appeal to local authorities in the new towns to build schools in advance of the arrival of school populations, but this formula means that credit for educational units is given only in respect of places occupied in schools.

I have had letters from angry constituents, particularly in the new town of Livingston, protesting that school places are vacant, and I have had to reply, "This is a calculated policy of the Government. You cannot wait until the school population arrives and then take the decision to build schools". The Government are making their policy look ridiculous, because they are in effect saying that they will penalise a local authority which does what is right and proper and builds schools in advance of the arrival of the school population.

My hon. Friend must be aware that there are sometimes great stresses and strains when a new town is built in an older part of the area. There are complaints by the older part of the county that the new town is getting more than it should, and that everything there is new, while the older parts have to wait for schools, roads, and so on. The very fact that a new town is built means that the infrastructure, too, has to be provided. There must be roads and sewers, but the formula which my hon. Friend is expousing penalises the policy which a local authority has to pursue when it has a new town. I am not surprised that the hon. Member for Banff (Mr. W. H. K. Baker) applauded the Government's change of heart in the calculation of the formula, because it benefits his area at the expense of the growth areas.

My right hon. Friend referred to the impact of this formula on the county. When I consider its impact in the burghs in my constituency, I find that in Landward it is £56,438; in Bonnyrigg and Lasswade it is £5,030; in Dalkeith it is £6,858; in Loanhead it is £4,324; and in Penicuik it is £5,761.

My hon. Friend the Minister of State cannot be ignorant of the fact that when I mention those burghs I am referring to an area in which the predominant industry—the mining industry—is contracting. At the weekend there was a crisis meeting at one of the collieries. If anything happens there, it will involve sustaining a population of between 6,000 and 7,000, yet the proposition which my hon. Friend is advancing tonight is that the areas which need to attract industry to replace older dying industries should impose heavier rate burdens. I do not know whether this is the proper way to attract industry. This Order has been subjected to great criticism, because when industrialists think about going to an area they look to see what rate burden will be inflicted on them.

I think that my right hon. Friend made a devastating case for the Government to consider this matter afresh. There should be the transitional period. It is not a question of the gross unfairness of the whole system. We are talking in terms of jobs and employment in part of this area. The Government have espoused the policy that the way to solve the unemployment problem is to have growth areas and big industrial units. They say that if there are big industrial units industries are attracted there. Having said that in one breath, they introduce a formula which imposes a substantial rate burden on the areas concerned. There is not consistency in this policy, and I suggest to my hon. Friend that he should consider this matter seriously and bring forward a proposition which will allow for a transitional period in which this gross injustice to the County of Midlothian and its burghs can be remedied.

7.17 p.m.

Earl of Dalkeith (Edinburgh, North)

After listening to the hon. Member for Midlothian (Mr. Eadie) one gets the impression that the formula on which the Government are working is grossly unfair. If it is unfair, I hope that the Minister of State will give some explanation how these calculations were made, because one cannot believe that any Government would go out of their way to inflict penal provisions on a county such as Midlothian. This cannot be what they are intending to do.

I was interested to hear what was said by the right hon. Member for Edinburgh, East (Mr. Willis). I might call him my right hon. constituent. As such he is fairly well placed because, as he said, Edinburgh will not do too badly, but he was speaking vigorously in support of his constituents in Musselburgh who will not do so well.

One thing which puzzles me is how, in the case of Midlothian, there appears to be a smaller, rather than a larger, allocation for roads. With the closure of the border railway line, one would have thought that for this area there would be an increase in what is provided under the heading of roads. I strongly support my hon. Friend who asked what provision had been made for pay increases for teachers and nurses. I should like to know, too, whether any special provision has been made for the commitment by Edinburgh to put its sewerage schemes in order. This amounts to a very considerable sum of money. I gather they will soon be in default of the law if they do not go ahead with the implementation of these schemes. If this has been allowed for I should be very interested to hear about it.

7.20 p.m.

Mr. Hugh D. Brown (Glasgow, Provan)

The Minister of State will be relieved to know I shall not involve myself in questions about Edinburgh, Midlothian and West Lothian. This is a most interesting discussion. Without being uncharitable to anybody, I think our debate proves that we do not know much about it, about how the calculations are made and the background to the Order. It is true that briefs are supplied, saying that authorities are getting more or are getting less. One can argue whether that is a good or a bad thing. It is simple and easily understood, but there are some points on which the Minister is obliged to give some more information.

One example is the reference to the social work department. Unfortunately in Glasgow this is being made a political football, to some extent, where there is an obsession by some people to keep the rates down. The point has already been made that the council do not indicate that it is partly because of the generous support the Government have given that the council was able to do that last year. Is this kind of thing taken into consideration? For example, when the estimates for the social work department are being drawn up in any authority, is it quite clear the additional expenditure envisaged—in this case in the year 1970–71—will be covered by the grant involved? To what extent is pressure put on local authorities, or to what extent is it understood by local authorities that this extra expenditure will attract more grants? Is this point covered in the Order we are discussing?

How much of this increase of £9.8 million and, for this year, £12.7 million, is budgeted for the increases in salary which have already been agreed for teachers, nurses and police? This is very important.

I am particularly interested in housing. The Government have always been very generous indeed to Glasgow. This has to be recognised. But are the calculations for Erskine, for example, included in this Order? If the city is saving some money under the arrangement that has been announced, does it mean there will be another recalculation of the grant expected in the city?

What estimate has the Minister made of expenditure that might be included in the "Report for Progress" issued by the Housing Advisory Committee? This is a most important element in local authority expenditure on the amenities in housing schemes. The reason I refer to this is because in my constituency—in Easter-house in particular—a fairly modest scheme of £80,000, where the scheme is only 10 years old, has suffered a cutback to an expenditure of something like £15,000. Within the Department's own estimate this seems to me an area where much more money will be required to be spent if, as the Government have already said, they support broadly the recommendations of that report. Is this the kind of anticipated expenditure included in this Order?

The excuse is being made by too many local authorities that they can do nothing, because they are getting insufficient money from the Government. This is a most important Order in view of the increased money that is being given, particularly to the domestic ratepayers. What I am concerned about here is the lack of communication by the Government to show the ratepayers how benevolent this Government are. For example, are local authorities required to make quite clear, when announcing the rate poundage or sending rate notices out, that the domestic rate is lower—I believe the figure is now 3s. 4d.—because of a specific Government subsidy? This seems an area worthy of consideration, in the interests of the political health of this Government. Far too many people in local authorities take this fro granted; indeed, so do ratepayers. Many do not even know that the domestic rate is much lower than the commercial or industrial rate. This Order might make it obligatory on local authorities to show the difference and to show where the extra money is coming from. This is an aspect worthy of consideration by the Government.

7.25 p.m.

Dr. Dickson Mabon

On the last point made by my hon. Friend, we can hardly expect hon. Gentlemen opposite to make it clear to the nation at large that the domestic element is so substantial and that this is entirely due to a new principle of local government finance which we introduced in 1966. The converse of that is that most certainly it falls on my right hon. Friend and myself and all our colleagues to make it quite clear to the people that the domestic element is a new part of rate relief in tis widest sense. Therefore, we ought to be anxious to impress on the general ratepayers that this 3. 4s. is a substantial contribution to offsetting the heavy burden which rates sometimes present to some people.

On the general proposition regarding industrial derating about which we sometimes hear from hon. Gentlemen opposite, it would place us in a very difficult position in Scotland if we were to derate on the same principle as in England and Wales at the present time. It would put Scottish industry at a considerable disadvantage in relation to English industry, and there would be a positive disincentive for industry to move from the south to Scotland.

Sir John Gilmour (Fife, East)

Is it not true that the rateable values of the industries in Scotland are comparable to those in England?

Dr. Mabon

Yes, this it true. It is a very complicated matter. I have heard it said by various persons in commerce that industry—like commerce, which is fully rated—ought to be fully rated.

Mr. Speaker

Order. We cannot discuss industrial derating in detail on this Order.

Dr. Mabon

Thank you for bringing me to order, Mr. Speaker, but it was a comparison between the industrial derating and domestic derating which was introduced. Now I have been returned to the path of righteousness, I shall continue.

Another point was made about the position of social work. In the original Order which the Secretary of State promoted last year, my right hon. Friend referred specifically to Section 92 of the Social Work (Scotland) Act, 1968. We have discussed this with the authorities concerned. The simple answer to my hon. Friend's question is that we have already allowed in the main Order for the estimated extra costs involved. No authority can offer as an alibi that we have not taken this into account. We have discussed this again and we are convinced the estimate in the original Order was perfectly proper and right. We believe that the work which can be done under the Social Work Act—of which we are very proud—can be done within the overall framework for growth in local authority current expenditure which we described in last year's Order. We make no further provision in this Order. My hon. Friend the Joint Under-Secretary of State will tell any authority that wants to evade its responsibilities in this that it is not being fair in claiming that financially it cannot so do.

Mr. Buchanan-Smith

Would the hon. Gentleman confirm it is the case that certain local authorities are finding the work laid upon them through the Social Work Act more than they estimated a year ago when they discussed this with his Department?

Dr. Mabon

That is an assertion by some authorities, but it is not supported by others. The formula has never been a Government formula. Since it began it has always been an agreed formula.

It is not unanimously agreed; no formula ever would be. The hon. Gentleman conceded that, and talked about the wisdom of Solomon.

My right hon. Friend the Member for Edinburgh, East (Mr. Willis) made a highly indignant speech last year, and I would have done the same, on behalf of the City of Edinburgh.

Mr. Willis

I made a speech that was highly emotional, not in defence of Edinburgh, but pointing out the justice of asking Edinburgh to pay more.

Dr. Mabon

I rephrase what I said. My right hon. Friend made an indignant or emotional speech in those terms. He was protesting, as Edinburgh was entitled to protest, that the formula had worked to its disadvantage.

Mr. Willis

I supported it.

Dr. Mabon

This year my right hon. Friend does not speak up for the city of Edinburgh. I do not deny a constituency Member his right to protest. Members of Parliament are the best Members of Parliament the constituencies have. This time my right hon. Friend objects to Midlothian being the loser. In no formula arrangement can everybody be a winner. It is absolutely impossible. I believe firmly in changing the formula —reviewing it in more detail, not only on every original and main Order, but also at the increase stage. That is why I tried to defend several of the changes to which I shall come later, which have affected Midlothian and West Lothian.

I am grateful to my hon. Friend the Member for West Lothian (Mr. Dalyell) for drawing the Government's attention to the complaints of both counties on that score. He received a letter from my noble Friend the Minister of State today in which we tried to answer some of the points made.

The noble Lord the Member for Edinburgh, North (Earl of Dalkeith) asked about Edinburgh's sewerage scheme. I shall come back to my hon. Friends the Members for West Lothian and Midlothian (Mr. Eadie) in a moment, because they raised the principle of sewerage schemes, as did my right hon. Friend. Edinburgh's sewerage scheme will not generate expenditure in the period concerned. The grant was up to 15th May, 1971, and the large sewage purification scheme that Edinburgh has in mind will not generate expenditure until after then.

The last paragraph of the memorandum my hon. Friend the Member for West Lothian sent to us referred to the fact that the rate support grant distribution formula takes no account of expenditure on sewerage. But sewerage has always been regarded as a capital-intensive service, and two-thirds of the current expenditure on it is for loan charges. This is the view not only of the Government but of the local authority associations. Their view is that no conceivable grant formula working with objective factors could be produced to take account of local or historical variations in the cost of the service provided by the landward areas of county councils and the councils of all burghs. Perhaps when we reform local government these things will be simpler, but now it is the view of local authorities, as it is ours, that this is not the kind of service that can be taken into account as an objective factor.

Many authorities have accepted burdens in the past on sewerage, and their burdens are less onerous today. Others have been slow in developing their sewerage schemes, and they are the ones that are naturally asking for additional aid now. Those who were progressive in these developments in the past would be the sufferers if we instituted a modification of this kind, and that modification is not accepted.

Let us look at the scandalous and penal effect on Midlothian—the gross effect on poor Midlothian—as a result of the changes. Last year, as a result of the changes we made in the formula, Midlothian as a whole gained 4½d. in the rate poundage. This year it loses 5d., so that the net result in the period is a halfpenny loss. I do not regard that as catastrophic. There were no speeches last year thanking us very much for the 4½d. There were plenty of speeches complaining that other places were losing. We must look at the global effect in any period.

My right hon. Friend the Secretary of State warned the House last year that we were thinking of reviewing the formula, and I give the pledge tonight that we shall review it again. It is a natural part of local authority life, and of my right hon. Friend's concern, that the formula, which is not enshrined in Statute, can be changed as we agree from time to time.

Robert the Bruce's spider is well emulated by the hon. Member for Banff (Mr. W. H. K. Baker), who constantly makes the same speech and is gradually gaining penny by penny, pound by pound, in changes of the formula. I do not say that everyone should follow him in that regard, but no one can say that he has been ineffective in his speeches on every rate support grant Order since I became a Minister.

Mr. Dalyell

As my hon. Friend knows, I live in a state of eternal gratitude, at any rate as far as the Government are concerned. But could he clarify our minds on one issue? In the determination of the rate support grant, have future populations and other factors, such as incoming industries, been taken into account. According to the treasurer of West Lothian, Mr. Hill, who is one of those excellent members of staff to whom my hon. Friend rightly referred, this has not been so. I should like clarification on that.

Dr. Mabon

That is a very important point. Here, my right hon. Friend the Member for Edinburgh, East was uninformed, which is very uncharacteristic of him, on the principle, though not on the effect. I do not criticise him on that score.

Let me look at the point about changing the formula in respect of roads which was originally argued. The aim was to even out a range of per capita expenditure after direct grant which extended as high as £26 10s. in Sutherland and went as low as £3 1s. 6d. in Clackmannan. The intention was to average out at just under £3. The result of the change in the formula is quite satisfactory to everyone concerned, except apparently Midlothian and West Lothian. Yet in the case of Midlothian the average comes out at £3.12 against a Scottish average of just under £3, and in West Lothian £3.38. I think that that is not bad for a formula, having had some experience of formulae over time and remembering the vast number of authorities we have, with which we have tried to work out a formula equitable to most. We can never be completely equitable to all.

I now turn to the argument about growth points. My hon. Friend the Member for Midlothian has argued the case not only on behalf of Midlothian but on behalf of other growth areas in Scotland for several years. The case was made particularly strongly in 1968. As a result of that case, we included a weighting for changes in population, introduced for the first time in last year's Order, in distributing the needs element. I agree that my hon. Friend and others can argue that the effect of that weighting is small, but the growth areas now have the principle accepted in the formula and it is up to them to argue how the weighting of that element in the formula should be increased in respect of not only their own areas but growth areas generally.

Mention has been made of Livingstone New Town. The cost to the rates of services supplies for the new town's benefits is regulated by the no-profit, no-loss arrangements between the two county councils and the development corporation, and it does not therefore affect their rates in the same way as similar growth elsewhere—for example, as was proposed near Newton Grange and Mayfield. That would come within the growth factor.

Education is also a matter we have discussed. It is not the view of the majority of authorities that we should take into account anything other than the actual children in the area. This is not a matter in which the Government say to the authorities, "You will do what we tell you". The Government take the general consensus of opinion. It is not a case of a great steamroller of one group of authorities against another. The Association of County Councils has said it is content with the changes—

An Hon. Member

They are all Tories.

Dr. Mabon

That is not fair. They are a mixture. It does not follow that there are not Socialist counties, if one may call them that, which are as dissatisfied as Midlothian and West Lothian.

Mr. Eadie

rose—

Dr. Mahon

Let us not bring party politics into a debate like this.

Mr. Eadie

As my hon. Friend knows, I am a former member of the County Councils Association. Is he seriously saying to the House that a new town authority should not build schools in advance of the school population, so as to try to fit in with the formula? Surely he would encourage local authorities to build schools in advance of requirements. If the formula is in contradiction to that, it is capable of being amended.

Dr. Mahon

I agree that it is capable of being amended. It may be that my hon. Friend's view is right and that in time the situation will change and people will be converted to that point of view, but at the moment it is not the agreed position. The Government are not willing to come in with a heavy hand and say, "You are wrong; the Eadie doctrine is right". I have enough experience, and so has my hon. Friend, to know that there is no point in trying to thrust upon local authorities a doctrine from which they dissent. Of course my hon. Friend is right in the sense that one must build schools in advance of requirements, but it is not the view of the associations that the formula should be based on that. We cannot force local authorities to accept a formula with which they profoundly disagree.

The hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) asked me several questions which I will answer quickly. Schedule 1 to the Local Government (Scotland) Act 1966 refers to Section 75(2) of the Education (Scotland) Act 1962, and that provides us with the answer to the question on page 6 which he mentioned about the Secretary of State's payments to Scottish universities. Schedule 1 provides that the needs element shall be reduced by the Secretary of State's payments to the Scottish universities under Section 75(2) of the 1962 Act.

Pay awards which are effective up to 30th November 1969, and a few known awards of definite amounts taking effect after that, are allowed for in the Order. All hon. Members will hope that agreement will soon be reached on individual salary scales for Scottish teachers. Whatever settlement is reached, we shall take account of it when the time comes to consider the case for a further increase Order. The figures for teachers' salaries on this Order cover the interim award of £50 per head made last summer and back-dated to April 1969 and the new scale for teachers in further education evening classes, which also took effect on 1st April 1969.

On the interest rates question, the Order takes into account the total capital debt of local authorities on reckonable expenditure and the weighted average of the actual loan fund rates. That is what we have done in the past and it is accepted as being the only functional way of working this complicated matter.

The figures of population which we use each year are drawn from the Registrar-General's estimates of population, and the figure is taken for each local authority area as at the previous June when we are making the calculations.

Mr. Dalyell

The answer to the question by Mr. Hill is that future population is taken into account as per the Registrar-General. Is the same true of likely incoming industry?

Dr. Mabon

Whenever the calculation is made, it is on the Registrar-General's figures for the previous June.

The hon. Member for North Angus and Mearns made two principal points in his opening speech. I was surprised to hear him suggest, in an otherwise competent speech, that the Government were entirely responsible for international interest rates. There are not Socialist Governments all over the world, and this is a matter of deep regret to me. I would hardly claim that President Nixon was a Socialist. There is no doubt that international interest rates are reflected in the British market, which in turn reflects the interest charged by the Government and the Public Works Loan Board. Much as we regret them, interest charges are there as a fact.

The questions which I was asked about housing do not come within the Order, and I cannot respond to them, although I deplore the fact that some authorities are cutting down on housing in order, as they say, to save money. I think that is a penny-wise pound-foolish policy for any authority in Scotland.

The hon. Gentleman mentioned many times in his speech that the Order falls short of whatever the local authorities ask for. There never has been a time when any Government have given to the local authorities what they asked for. If they did, the most surprised people would be the local authority associations. They would think that the Government had collapsed or gone stark raving mad to agree to what they had put forward. Of course they come forward knowing that the Government will pare down what they ask for and bring it to a realistic point. I do not think it is fair to say they are short of whatever estimate they have devised. If the hon. Gentleman says that, he is giving a magnificent hostage to fortune, but that may be in a hundred years' time.

Earl of Dalkeith

Before the hon. Gentleman sits down, will he answer the point about whether provision has been made for teachers' and nurses' pay?

Dr. Mabon

I did answer the noble Lord. I said that all pay awards up to 30th November 1969, and those that we can quantify which take effect after that, are included. As to other arrangements, we shall have to make provision in future increase Orders to take them into account because we do not know what they are.

Question put and agreed to.

Resolved,

That the Rate Support Grant (Increase) (Scotland) Order 1970, a copy of which was laid before this House on 11th February, be approved.