HC Deb 10 March 1972 vol 832 cc1905-12

3.40 p.m.

Mr. Julian Ridsdale

I beg to move, That this House, observing the increased burden of rates, particularly in areas with little industry, calls upon Her Majesty's Government to ensure that the cost of local government and at least some part of the cost of education, now estimated to cost approximately £3,000 million in the year 1972–73, excluding the cost of universities, should be more fairly apportioned between taxpayer and ratepayer, and by giving local authorities more power to raise revenue other than by rates alone and urges Her Majesty's Government to press ahead with the reform of local government finance as quickly as possible. This is the third time that I have had the opportunity in a Private Member's Motion to raise the question of local government finance. It is almost "the hon. Member for Harwich's quinquennial review of local government finance."

Just ten years ago I drew attention to the increasing level of local government expenditure, which I then warned was likely to lead to an increasing rate burden falling on those especially with small fixed incomes. I am glad to say that this led to the setting up of the Arran Committee and the start of the rate rebate scheme which is now helping so many elderly ratepayers who are having to face the battle of inflation.

I also pressed then for the setting up of a Royal Commission on local government finance to consider other alternatives for raising local government revenue. Although the Commission has reported and we have now had the Green Paper, we are still waiting for action to be taken by the Government. Indeed, we had the Green Paper last July, but we have not yet had a debate on the Floor of the House. Yet the problems of local government finance are pressing. I am convinced that early action should be taken by the Government, because over the last financial year industrial, commercial and domestic ratepayers have paid £1,943 million to local authorities in England and Wales. Five years ago that figure was just £1,300 million. When I entered the House in 1954 it was only £400 million.

We know that the rates of inflation at the present time are bound to increase this bill considerably in the next two years. But a rate bill which increases at this rate must be regarded as heavy by any standards, especially when a lot of it is falling on the retired section of the community, the domestic ratepayers, many of whose incomes do not increase relatively to the increased national income.

A great part of the problem which I debated five years ago is still with us, and, indeed, grows. But in fairness to local councils, especially urban, rural and small boroughs, it is only right, as I pointed out five years ago, to indicate that a lot of this increase has been due to the necessary rising cost of education. This has increased since 1954, when I first came into the House, from £400 million through to £1,500 million in 1967, when I last drew the attention of the House to this matter, to the present figure of £3,000 million. The bill for education has doubled over the last five years. Local councils have done their best to keep a close watch on expenditure, and much necessary work has had to be delayed, as I know from experience in my division where I still have a considerable number of pre-1903 schools.

One of the chief problems facing local government finance and the country is what is the right way to finance education. This is something which has been ducked completely by the Green Paper on local government finance. It discussed new sources of local finance, ways and means of subsidising ratepayers by extending the rate rebate scheme. It put forward an idea about the super-rating of industry, which, incidentally, the C.B.I. has knocked on the head. But there is nothing in the Green Paper of any sign of relieving the domestic ratepayer of the huge burden that he is having to pay for education. Admittedly Government grants meet 60 per cent. of this expenditure, but there is still a huge amount collected through the rates. It amounts to £1,943 million, of which £843 million is the domestic ratepayers' share.

Rather than have this huge system of subsidy for local government, it would be far better and far fairer to relieve the domestic ratepayer from paying the education charge and make that amount, or at least some part of it, a national charge. I should collect it not as income tax but as a separate education tax. We would get far better value for education in that way. It is not right to disguise the amounts being raised for education in the way that they are now and put such a heavy burden on the domestic ratepayer. We would never contemplate getting money for defence by means of a tax on property, yet that is what we do for education, and the bill now is far bigger than it is for defence.

I know the argument that a change in the system would take away from making education a local interest, but I believe in the duality of governors—some from the centre and some from the local authority. That would be a much better system and a much more realistic one than the present system of subsidy, counter-subsidy and disguising the whole cost of education.

I welcome the fact that in his coming Budget the Chancellor of the Exchequer will reduce taxes, but is it not paradoxical that at one moment the Chancellor will reduce taxes and the next we shall get a hugely increased rate demand and find that all the advantages—or many of them—of reduced taxation have gone by the board?

In this time of inflation when, quite rightly, the Government are looking at ways and means of helping to keep down the cost of living by working to get price stability in the areas which they can influence let them look at householders' rates in this light, too. The right way is to relieve the domestic ratepayer of his burden. I know that there is a domestic element in the rate support grant, but it is only a small one, and it only disguises the cost of education. That is why I ask the Government to consider the matter. In the White Paper the Government talk about extending the rate rebate scheme and the subsidy. But if there were another subsidy this would disguise the real cost which ratepayers have to face. If there were an education tax rather than an extension of subsidy, it would be possible for the Chancellor to keep rate increases to within his 5 per cent. limit of price increases.

There is also the quinquennial review coming up. This could lead to an enormous change in rateable values, especially if the basis of assessment were that proposed in the Green Paper of capital value. I am sure that it is better to stick to rental values, as we have done in the past, rather than use capital values as a means of assessing property, as discussed in the Green Paper, otherwise the burden of the charge will be far too onerous and radical in these inflationary times when stability must surely be the primary aim of the Government.

In the last two debates when I discussed alternative sources of local government finance I proposed a local sales tax. But now that the Government have brought forward the idea of a value-added tax I say that that is an additional argument for having an education tax and for the Government to remove from the domestic ratepayer the burden of paying for education. I should not like to see two rates of value-added tax, which would be too complicated and difficult. The existence of a value-added tax would make it more difficult to have a local sales tax.

In 1967 when I last raised this matter I thought that the Government would have gone for bigger areas of local government and that a sales tax would have been suitable. Now that that is not possible, I believe the best way to solve the problem is to have one rate of value-added tax and accept that as a sales tax, the revenue from which could be used to help the domestic ratepayer.

The Green Paper deals with other sources of revenue. I do not wish to complicate legislation any more by bringing in any new taxes, but I would suggest one possible additional source of revenue; namely, a lottery, which could be used to raise revenue for local projects such as a swimming pool, hospital, library or other local amenity. This would give a great deal of interest locally in financing such projects. I am sure that something could be done on these lines.

I hope that the Government will press ahead with the reform of local government finance. I am sure that such a reform is far more important than altering boundaries or pressing ahead with the Housing Finance Bill. I am most disappointed that the Government have not put this priority first. It is the domestic ratepayer more than anyone else who at present is having to suffer from inflation. I am certain that even at this late stage the Government will give time for a longer debate on local government finance on the Floor of the House. I hope I shall get support for an education tax for I am sure that this would be in the interests of domestic ratepayers and, indeed, in the interests of price stability.

3.54 p.m.

The Under-Secretary of State for the Environment (Mr. Paul Channon)

Not for the first time both the House and the constituents of my hon. Friend the Member for Harwich (Mr. Ridsdale) should be grateful to him for raising this important matter. I remember previous occasions on which he has raised the problem of rates, and I know his keen interest in this subject. I also know that he has done his utmost to safeguard the interests of domestic ratepayers in his own constituency and has always put forward his own strong views about this subject.

As a fellow Essex Member of Parliament with a similar problem involving rates, I have a great deal of sympathy with what my hon. Friend has said about the burden that is borne. I must, however, disagree with him—and I am sure my hon. Friend the Member for St. Albans (Mr. Goodhew) will agree with me—if he is suggesting that we have not been usefully employing our time in the Standing Committee on the Housing Finance Bill. This will represent an extremely important advance on rents. I agree that the problem of domestic rates is also very important.

I have a great deal of interest in this subject both as a constituency Member as well as a Minister. I appreciate my hon. Friend's part in setting up the Arran Committee, and we all know that that led to the implementation of the original rate rebate scheme. I know that my hon. Friend will very much welcome the extra help due to the higher income limit as from next month. The income limits at present applicable to this scheme are £10 per week for a single person and £12.25 per week for a married couple and an additional £2 for each dependent child, but from next month these figures will go up to £12 per week, £14.75 per week and £2.50 per week respectively. Where incomes are below the limits, the householder has to pay only one-third of any increase in rates, and there is some benefit even where incomes are slightly over the limits. I think that it is very welcome to my constituents and I am sure to those of my hon. Friend that there should be this improvement in rate rebates.

My hon. Friend has dealt with the future and the reform of local government finance. He has made a number of very important suggestions. I can assure him that all that he has said in this necessarily truncated debate will be considered carefully by my right hon. and hon. Friends before decisions are taken about the future of local government finance. I note especially my hon. Friend's views about a local sales tax, about rental and capital values and whether rates should be based on capital values or rental. I know his views about a lottery. Such a proposal would have many opponents as well as friends in this House, though I strongly supported the idea of a national lottery some years ago when we were in opposition, and I have no objection on moral grounds, though there may be others on practical grounds that the House would have to consider.

My hon. Friend knows that the Government have made a number of suggestions in the Green Paper, "The future shape of local government finance". It is a discussion document. It is intended to be the basis for further debate and consultation. My hon. Friend has added to that process today. His views and suggestions made inside and outside the House will be taken into account. Consultations with the various authorities involved are in progress. The Government hope to complete these during the spring, and we shall reach our decisions in the light of what has been said and written in the hope of translating them into law in time for local government reorganisation in 1974. I think that that is the practical way to proceed.

One of the main improvements suggested in the Green Paper and especially relevant to the debate is that of an extended rate rebate scheme. This would extend to people higher up the income scale and would give relief more closely tailored to their financial circumstances. This is one of the major topics under consultation at present.

The Green Paper also suggests a radical re-examination of the system of Exchequer grants to local authorities. This is a very complicated subject, but the broad aim is to ensure that ratepayers in comparable properties and getting a comparable level of local government services will pay roughly the same amount in rates.

Sources of local revenue other than rates, including a local sales tax, are discussed in the Green Paper, and these will also be considered. I will make sure that my hon. Friend's view about an education tax are considered. There are considerable difficulties as well as advantages in such an idea, and I do not know whether local education authorities would welcome it. The Green Paper points out: Leaving local authorities with these responsibilities while passing the bill to central government would sharply divorce financial from managerial responsibility. This would have to be borne in mind. But, naturally, what my hon. Friend says will be carefully noted.

When the Green Paper was published, it was widely assumed that the Government did not intend to permit any other source of revenue because so many difficulties and disadvantages had been found in those discussed. This is not so. The Government's mind is open on this topic. Its important to remember that these problems exist and that ways need to be found to overcome them. Many have tried to solve the problems in the past, and it has not been found easy. It is not easy to find solutions to some of the problems inherent in ideas of this sort

I can certainly assure my hon. Friend that my right hon. and hon. Friends who are primarily responsible are studying all the ideas in the Green Paper. Before coming to conclusions, they will consider the points put to them by local authorities and others and, most important, the views expressed in this House.

I hope that my hon. Friend will take any further opportunities that occur to him to debate these matters. It is important that these ideas should be examined publicly before the Government come to final decisions about them. Obviously at this stage it is easier to consider possible ideas for the future of local government finance rather than wait for decisions to be announced, when it may be more difficult to change fundamentally any conclusions to which the Government may have come.

I congratulate my hon. Friend on the service that he has done the House and his constituents by raising this matter. I know that he will continue to express his interest——

It being Four o'clock, the debate stood adjourned.