RATE SUPPORT GRANT

HC Deb 20 December 1973 vol 866 cc1696-735

7.49 p.m.

The Minister for Local Government and Development (Mr. Graham Page)

I beg to move, That the Rate Support Grant (Increase) (No. 1) Order 1973, a copy of which was laid before this House on 6th December, be approved.

Mr. Deputy Speaker (Sir Robert Grant-Ferris)

It will be convenient for the House to discuss at the same time the following motion, That the Rate Support Grant (Increase) (No. 2) Order 1973, a copy of which was laid before this House on 6th December, be approved.

Mr. Page

The Local Government Act 1966, under which the orders are made, requires the orders to be accompanied by explanatory reports by my right hon. and learned Friend the Secretary of State. The reports are House of Commons Papers Nos. 47 and 48. They were duly laid before the House at the same time as the orders were laid. The orders and the reports deal with the two financial years 1972–73 and 1973–74. Under the Local Government Act 1966 the main grant settlement was made every two years, but the procedure was amended for 1973–74 by the Local Government Act 1972, and only that year was covered. The new arrangement is the precursor of the grant settlement which we are proposing in the Local Government Bill which is now before the House.

To deal with these orders is perhaps a little confusing. I shall try to put on record as succinotly as possible exactly what we are dealing with in each order and how it comes about. In 1970 we debated the Rate Support Grant Order 1970, which fixed the amount of grant for 1971–72 and 1972–73. The year 1971–72 was wound up by the Rate Support Grant (Increase) Order 1972 which we debated last year. So this year in the (Increase) (No. 1) Order we are dealing only with the year 1972–73. Last year we debated at the same time the Rate Support Grant Order 1972, which fixed the amount of grant for 1973–74 only. We are now dealing with the increases necessary for that year in the (Increase) (No. 2) Order.

I had hoped—and I know that the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) knew of my hopes—that it would be possible to publish before now a White Paper giving the details of the rate support grant settlement for 1974–75. I can assure the hon. Gentleman that we had a White Paper printed. It has been delayed as a result of the expenditure reductions announced by my right hon. Friend the Chancellor of the Exchequer on Monday.

The debate, unlike last year's debate, is only on the increase orders. We are not debating at the same time the main Rate Support Grant Order for 1974–75. We shall conclude the main settlement as soon as possible after further discussions with the local authorities. In fact, those discussions started this week.

Mr. Denis Howell (Birmingham, Small Heath)

Whilst that may be true, will the right hon. Gentleman confirm that the orders before the House, having regard to what the Government might do in terms of expenditure, have a consequential effect on expenditure in future years, and particularly next year's expenditure? Will he confirm that they cannot be discussed in isolation because, as the local authority associations are telling us, there is a considerable carryover into next year?

Mr. Page

No, the hon. Gentleman is not quite right. The orders deal with the period up to March 1974. The No. 2 order deals with the increase in costs for the period up to the end of March 1974. Therefore, we are not dealing with 1974–75. It may be that when we come to November or December 1974 we shall be obliged to look again at the settlement for 1973–74—namely, that which we are discussing now. Perhaps a further increase order may then be necessary. Alternatively, we may be able to take a considerable amount of the increase which we would be making next November into the main settlement of this year.

I think that the hon. Gentleman has in mind whether we can take more into account as we are starting off with new local authorities with a new main support grant order, despite the fact that we have been delayed a little. I can assure the hon. Gentleman that we have that well in mind. I cannot make any promises. It is a matter which must be considered and discussed with the local authority associations.

The orders before the House take account of increases in prices, costs and remuneration since last year. That is as far as they go. Each year the main grant settlement is based on expenditure reflecting the levels of prices, costs and remuneration which are current when the main order is made. To prevent the value of the grants being eroded by subsequent unforeseen rises in the level of prices, costs and remuneration, my right hon. and learned Friend is empowered by the Act to increase the grant if it appears to him that the effect of the rises in prices, costs and remuneration on relevant expenditure by local authorities is substantial.

Mr. Gerald Kaufman (Manchester, Ardwick)

How does what the right hon. Gentleman has just said, which in normal circumstances would be welcome, square with what his right hon. Friend the Chancellor of the Exchequer said, as reported in HANSARD, on Monday when he talked about a reduction in the amount of grant previously envisaged for 1974–75? The right hon. Gentleman talked about an increase while the Chancellor told us that there will be a reduction.

Mr. Page

If the hon. Gentleman will refer me to the column I shall endeavour to read it and to see exactly what was said. I do not think that the hon. Gentleman is quoting my right hon. Friend correctly, with respect. Perhaps he will quote the words in HANSARD.

Mr. Kaufman

On Monday the Chancellor said: These decisions on public expenditure will entail a reduction in the total of the current expenditure which was accepted by the local authorities in England and Wales in the recent rate support grant discussions, and a reduction in the amount of grant previously envisaged for 1974–75."—[OFFICIAL REPORT, 17th December 1973; Vol. 866, c. 964.]

Mr. Page

Of course, but the hon. Gentleman is entirely on the wrong track. We are dealing with the increase in costs, of pay and the costs of materials during 1972–73 and 1973–74. My right hon. Friend has called upon local authorities to make a reduction in their expenditure. That follows the settlement which had already been made. I call it a settlement because we had the statutory meeting between the local authorities and the Ministers. That had already been made on previous figures. Local authorities are now asked to reduce capital expenditure by 20 per cent. and procurement by 10 per cent. That includes goods and services and excludes pay and debt charges. That is for future expenditure in 1974–75. We are dealing with anticipated expenditure as increased during 1973–74.

If the hon. Gentleman wishes to develop that matter, and if he catches your eye, Mr. Deputy Speaker, I shall try to answer him in more detail towards the end of the debate if I, too, catch your eye. I cannot see that that matter is relevant to the increase orders dealing with the position only up to March 1974. The only options to the Secretary of State in making an increase order are either to make the increase order and to take into account all the changes in prices, costs and remuneration which have come about at the time when the order is made, or to decline to make an order. As the 1966 Act has been interpreted, those are the only options he has.

In 1968, the then Government took the option of not making an increase order. Apart from that, in each year an increase order has been made. There is no flexibility about this. The order has to be made taking into account all the cost increases, or no order has to be made. If the House accepts the provisions of the Local Government Bill now before it the Secretary of State will have a little more freedom in this respect.

I deal now with the No. 1 order. This is the third increase relating to the year 1972–73, the grant for which was originally settled in 1970, increased in 1971 and 1972 and is now being increased for 1972–73 for that period remaining after November 1972 of the year 1972–73. The main arrangements for 1972–73 are covered by the 1966 Act provisions, that is to say, the original settlement was made three years before the end of the year to which it relates. We have a third increase order for that year to take account of the pay and price movements in the five months November 1972 to March 1973 when that financial year ended.

The No. 1 order and the explanatory papers show that there was a net increase in costs between November 1972 and March 1973 on the relevant services of £12.9 million. The rounded figure is £12 million. The figures are clearly set out in the explanatory papers and in the order. In the No. 1 order the effect of the increases for that year is to add £6 million to the rate support grant for the year 1972–73, all of which is allocated to the needs element. With an increase of this sort one applies the formulae for the resources element and the needs element. In some cases it will come out as a division between the resources element and the needs element. In other cases it will be found that the resources element is sufficient even with the increase in relevant expenditure. In this case the formula applied the whole of the increase to the needs element.

The No. 2 order covers 1973–74 taking into account the net increased costs between November 1972 and November 1973. I need not go into the figures as the details are clearly set out in the explanatory papers, which show that the total net increase in costs of pay and material prices amount to £396.7 million. The final result of the No. 2 order is that, allowing for all the figures set out in the explanatory paper No. 48, the rate support grant is increased by £223 million. The order allocates the increase in the rate support grant between the needs and resources elements, and it allocates £30 million to the resources element and the remaining £193 million to the needs element.

Many of the detailed estimates on which these figures are based have been supplied by the local authority associations or the Greater London Council. Other estimates are provided by the Government Departments concerned and discussed with the local authority associations. Figures have been agreed with the local authority associations for these orders.

Almost invariably when an increase order is made some increase falls on the wrong side of the line. In this case it is regrettable, perhaps, that it has not been possible to take into account the increase awarded to the firemen and the increase which is under discussion for the manual workers. These matters have not yet been cleared by the Pay Board so they do not come within the definition in the 1966 Act of figures which have definitely been decided. The effects of these can be taken into account in next year's increase order, or we shall consider whether it is possible to take them into account in the main settlement order for 1974–75. I do not think that I need to go into the figures in detail. If any hon. or right hon. Gentlemen have queries on the figures and I am able to catch your eye, Mr. Deputy Speaker, and have the leave of the House to reply to the debate, I will endeavour to deal with the figures.

On behalf of my right hon. and learned Friend and myself I express our great gratitude to all those in the local authority associations and the Greater London Council who have co-operated in working out these figures. As usual with an increase order, the figures are agreed. Once one has accepted the estimates, the increase order is automatic. It is of great importance to the local authorities that we should take into account the increases that have occurred since the first estimates were made. That is what the orders do, and I commend them to the House.

8.7 p.m.

Mr. Denis Howell (Birmingham, Small Heath)

I am grateful to the Minister for explaining the orders and for his appreciation of the part that the local authorities have played in co-operating with the Government. That is important, in view of what I shall have to say about the lamentable performance on other matters affecting local authorities, which contrasts with the courtesy and understanding always shown to local authorities by the Minister for Local Government and Development, who seems to have lost control of his colleagues in Government in their dealings with local government.

The Government's policy for local government lies in absolute ruins. Even before the events of the last two weeks there was utter confusion throughout the land about local government reorganisation. There have been created great new metropolitan areas, great new county areas, great new district councils, regional water authorities, new health executive councils and area boards. All that has been going on for the last two years and it is extremely expensive, as we warned it would be time and again in debating the Local Government Bill now before the House and the Local Government Bill of last year.

What have these new local authorities been doing? They have been appointing new officers at salaries the like of which have not previously been seen in local government. Top jobs have been filled at very high salaries and, now, these senior officers of the new metropolitan councils are busy recruiting new staff to fill the new departments. This is an inescapable consequence of the system. In any case it was bound to be an expensive burden for ratepayers.

That was the situation that existed even before the economic crisis, and the Opposition warned time and again about the costs. This is why we have opposed this form of local government reorganisation. But to all this confusion there will now be added the chaos of the Government's present economic policies. In considering cut-backs in essential services, it is inexcusable that the high costs of local government administration should be duplicated at the expense of the services provided, for this is the consequence of the Government's present action. It might still be cheaper to scrap local government reorganisation, even though it has already gone a long way. In the present crisis I believe that a feasibility study should be undertaken to examine the costs and the merits of local government reorganisation. The process has probably gone too far to reverse entirely at this stage, but I suggest that the situation should be re-examined.

Whatever the case about local government reorganisation and however far that has gone, I am certain that the Government should at once scrap their proposals for reorganisation of water undertakings and also the health service. The present emergency demands that, in the national interest, expensive duplication of administration should end forthwith. There can be no doubt that in the two services which I have mentioned, reorganisation has not yet gone too far. Some chairmen and top officials have been appointed, but their jobs can be put "on ice" for a time and this will save many millions of pounds.

There is growing evidence of concern among Ministers on this topic. We heard the Leader of the House a little earlier express concern about the duplication of staffing in local government reorganisation and the very high salaries paid to some of the new appointees. As an old local government man, I bitterly resent the outrageous threats which are now being levelled by successive Government Ministers against local government. The hysterical note that has come into Ministers' voices is to be deprecated. The Under-Secretary of State for the Environment has made a recent speech on the subject, and there have been comments by other Ministers, particularly by the Chief Secretary to the Treasury, who was in an aggressive mood when addressing a recent conference of municipal treasurers.

Perhaps I may first quote the words of the Under-Secretary of State for the Environment: It will be too soon to judge with certainty whether local government reorganisation will be more or less prodigal in its use of manpower, but some of the signs are disturbing. In many parts of the country we are getting reports that the new authorities, formed by amalgamations of four or five previous districts, are budgeting for a level of staff 10, 20 or even 30 per cent. higher than the combined total staffs employed by their predecessors. The Chief Secretary to the Treasury in his remarks made what most of us regard as a considerable threat to local authorities, but that threat pales into insignificance when we examine the words of his right hon. Friend the Chancellor of the Exchequer in the House last night. The right hon. Gentleman said: If any local authority deliberately sets out to flaunt the national interest, if it deliberately sets out to pursue a policy counter to the request that we have made and the rates go up in consequence, the necessary steps will no doubt be taken to remind electors where responsibility lies. I would add this: such deliberate action could well call in question the continuance of the present system of local autonomy over current expenditure which also carries with it the duty to act responsibly." [OFFICIAL REPORT 19th December, 1973; Vol. 866, c. 1470.] In my 18 years in the House I have taken part in many debates on local government matters, but this is the first time that I have heard any Minister in any political party suggest, on behalf of the Government, that local authorities are deliberately setting out, or might be setting out, to act against the national interest.

Mr. James Allason (Hemel Hempstead)

Clay Cross?

Mr. Howell

I do not want to take Clay Cross in particular, because I am dealing with local authorities as a whole. There may be one or two local authorities which do things of which some of us disapprove. I am talking about the majority of local authorities, and it was about the majority that the Chancellor of the Exchequer was speaking.

The House will know that there are no more responsible people in this country than the thousands of men and women who give a great deal of their time freely and voluntarily in local government to serve the country and their fellow citizens. Therefore, it is outrageous that those local government officials should be addressed in such terms by the Chancellor. It is monstrous that he should suggest that the whole freedom of local government spending programmes relating to capital or income might be called into jeopardy, and it will be bitterly resented in local government. Of course there are these duplications. Of course there are these expensive posts being created. Did not the Government think that this would happen, especially after so many of us had warned them month in and month out that it was bound to happen? Indeed, the Government wanted it to happen to a degree, though possibly not to the extent that it has happened.

It was the Government who created a two-tier system of local government which was bound to cause duplication. That is why we objected to it. What does the right hon. Gentleman think that the two-tier system is about? In a two-tier system with county councils and district councils, with metropolitan county councils and metropolitan district councils, the two kinds of councils have to speak to each other. It is not a case of one treasurer and one finance department. There are two. The metropolitan treasurer has to talk to the district treasurer. The metropolitan planning department has to talk to the district planning department. The county education people talk to the district councils about education matters. The same applies all round and goes through the whole of local government services. Everywhere two sets of officials have to be talking to each other, whereas if we had had the unitary system which the Opposition supported, a single official would be doing each job. The Government have created this duplication of machinery, and they have done it at a very high cost to the ratepayer, as he is bound to discover.

The speech yesterday by the Chancellor of the Exchequer was one of the most offensive, unjustified and repugnant speeches ever to be made by any Minister on the subject of local government. I hope that the Minister for Local Government and Development will have the courage to dissociate himself from it.

I come to another aspect of what the Chancellor of the Exchequer was discussing. Not only was his speech repugnant but he was actively engaged in deceiving the House of Commons about the extent to which rates were bound to go up. My right hon. Friend the Member for Leeds, East (Mr. Healey) had said that there were bound to be whopping increases for ratepayers. The Chancellor of the Exchequer said: I must tell the House that there is not one shred of truth in those assertions, and I will explain why. The rate support grant will be reduced only in line with the savings in expenditure and if, like the rest of the public sector, the local authorities reduce their current expenditure in accordance with the Government's request, that will not lead to one extra penny on the rates."—[OFFICIAL REPORT, 19th December 1973; Vol. 866, c. 1470.]

Mr. Deputy Speaker (Mr. E. L. Mallalieu)

Order. Inadvertently, I am sure, the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) has accused the Chancellor of the Exchequer of deliberately misleading the House. That is rather improper. Perhaps the hon. Gentleman will reconsider that statement.

Mr. Howell

You put me in a very difficult position, Mr. Deputy Speaker. I am always anxious to do what you ask. However, the previous day the Secretary of State for the Environment told the House that rates were bound to go up 7p. The Secretary of State and the Chancellor of the Exchequer cannot both be right. I had assumed that the Secretary of State was right the previous day—incidentally, I do not believe that his 7p is accurate since in my view it is likely to be nearer 10p, but that is another matter—and that in that event the Chancellor of the Exchequer must have been wrong. If the Chancellor was saying this inadvertently—

Mr. Deputy Speaker

Order. It is one thing to be mistaken. It is quite another deliberately to mislead the House.

Mr. Howell

I hesitate to accuse the Chancellor of the Exchequer of deliberately misleading the House, but if he were accidentaly misleading the House by saying that there was to be no increase on the rates when the day before the Secretary of State for the Environment had said that they would go up by 7p, the right hon. Gentleman is even a bigger fool than I thought. Either he is a knave or he is a fool. If you, Mr. Deputy Speaker, rule authoritatively that he is not a knave, I must accept that he is a fool. He must be one or the other.

Mr. Allason

Is not there a slight difference between an increase in rates between one year and another and an increase in rates due to certain circumstances such as a cut in the rate support grant and a reduction in expenditure?

Mr. Howell

I do not think that there is, but to the extent that there is any validity in that point, I shall try to show that we cannot have the cuts which the Government are imposing on local government without considerable consequences upon the rates. I am trying to discover what Government policy is. Since I suspect that Ministers do not know, there is not much chance of the rest of us finding out.

I come to what the Chancellor of the Exchequer said on Monday, 17th December, when making his original statement. He said that we were to have these mammoth cuts in local government expenditure and that it would be done without any unemployment of staffs in local government. I shall not burden the House with the quotation. I am sure that hon. Members will take it from me.

We are told that the astronomical sum of at least £180 million is to be cut off the agreed expenditure of local authorities next year. The right hon. Gentleman probably will put figures to the percentages that he gave us—20 per cent. off capital and 10 per cent. off most revenue items. According to the Chancellor of the Exchequer, these astronomical cuts will be made without any unemployment and without putting up the rates one penny. That is Government policy. Those are the three authentic statements. It is a nonsense. It is unattainable.

By far the biggest portion of local authority expenditure cannot be cut because it is statutory. It means that we are discussing £180 million of cuts which cannot come out of the employment or payment of teachers if we are not to have unemployment and which cannot come out of the police service which is statutory. It means that the local government services to which these astronomical cuts can be applied are very limited in extent.

If we are to have no unemployment, what will happen is that, for example, the various baths departments round the country will sack no baths attendants, the attendants will continue to turn up at the baths, but there will be no money to heat the water in which members of the public might wish to swim. That is the sort of absurd situation in which local authorities will now find themselves. The area of choice available to the local authorities is extremely limited.

Mr. Graham Page

On a point of order, Mr. Deputy Speaker. I do not resent a full debate on local government finance, but I am a little worried as to how far I may go in answer to the hon. Gentleman. I came prepared to put before the House simple orders increasing the rate of support grants settled some years ago by reason of increased expenditure in the past—increases in costs and such like. The hon. Gentleman is going into the future, about cuts in local government expenditure, and how they are to be brought about. If the debate is to be developed in that way I am only too happy to answer, but it will take a considerable time to answer a full local government debate.

Mr. Howell

Further to that point of order, Mr. Deputy Speaker. This is an unusual year. In any normal year the right hon. Gentleman might be right, but this year the rate support increase order is providing the expenditure to establish new local authorities which will begin to operate next year. So this year, for the one and only time in the history of the House, the expenditure in the order has direct relevance to expenditure which local authorities should or should not undertake next year. It was because I had that point in mind that I interrupted the right hon. Gentleman at the start of his speech to get the point clear, although he did not agree with me.

Mr. Page

Further to my point of order, Mr. Deputy Speaker. I submit that the increase orders now before the House take the matter up only to the end of March 1974. The orders are relevant to the years 1972–73 and 1973–74. That is all that is before the House at present.

Mr. Deputy Speaker

The hon. Member for Birmingham, Small Heath (Mr. Denis Howell) has to be allowed a certain latitude in this matter, in the exceptional circumstances in which we find ourselves, but the right hon. Gentleman will be entitled to reply to him on the points he has raised.

Mr. Howell

Thank you, Mr. Deputy Speaker.

I now turn to what will be carried over, and directly relate it to the order. The local authorities contend that £164 million ought to have been added to the rate support grant orders, which must be carried over to next year's expenditure by ratepayers. This arises because the relevant expenditure increase for the year 1972–73 was £12 million and for the year 1973–74 it is £397 million. The local authorities say that grant offered by the Department of 58 per cent. of all local government expenditure for the year 1972–73 leaves a shortfall of £7 million, while on a grant rate of 60 per cent. for the following year there is a shortfall of £238 million. Therefore, the local authorities deduce that the ratepayers will have to find the difference between these two sums. It is a rather technical matter, but I am sure that the House will take note of what I have been informed by one of the local authority associations. That association puts the total shortfall at £164 million which must be carried over till next year.

To the extent that we fail to provide for the local authorities this year there is bound to be an increase in rates. I am told that a 1p rate produces around £60 million for the country as a whole. That being the case, the local authority associations are telling me—and I advise the House—that a 3p increase in rates is bound to be carried over to next year due to the shortfall in the expectation of the rate support grant order.

Mr. Graham Page

Can the hon. Gentleman inform me from which local authority association that information comes? I have told the House—and I would have to withdraw, if what the hon. Gentleman says is correct—that the figures in the orders were agreed by the local authority associations. I am surprised that a local authority association has advised the hon. Gentleman to the contrary.

Mr. Howell

With the customary courtesy practised between us I shall hand over the document to which I have referred. The right hon. Gentleman will see that it is from the Association of Municipal Corporations. He might care to get his officials to look at the document during the debate.

Mr. Allason

As the hon. Gentleman is aware, there is a precept this year to act as a starter for the new district authorities for next year. What is the global figure which presumably should be set against the figure which the hon. Gentleman has quoted?

Mr. Howell

I do not know, but I think that it was on the basis of a 1p rate. No doubt the Minister can tell us.

I return to the question of staffing. A monolithic Department of the Environment has been established. Has the Minister found it possible to achieve the sort of economies of staffing and so on which are obviously desirable in local authorities? Three Ministries—the Ministry of Local Government and Housing, the Ministry of Transport and the Ministry of Public Buildings and Works—were brought together in the Department. If, as I and most people suspect, it has not been possible to make substantial savings there—the signs are the other way round, and I do not necessarily complain about that—it is obvious that local authorities setting up a duplicated system of local government will not achieve the results which the Department has not been able to achieve.

We are in an unprecedented situation, which will have a tremendous effect upon local authority services, as my right hon. Friends said in the debate over the past few days. The country should be under no illusions about the situation. The Government are advising local authorities to make slashing reductions in many nonstatutory services. There will be enormous cut-backs in all our local authorities in adult education, training centres, social service departments, and the home help service, which is essential in helping the sick and the needy. The Government are advising local authorities to cut back also on day centres, miscellaneous community care services and meals on wheels. All of that is work to help the handicapped in our society. The benefits under measures put on the statute book by my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris), placing a statutory obligation upon local authorities to help handicapped and elderly people living alone, and to provide telephones and aids of different kinds, are to be drastically cut back because of the Government's economic measures.

It is worth putting on record what the Government have told the local authority associations. They have said: The Government accepts that to achieve these reductions would involve refraining from recruiting staff to make good wastage or to fill additional posts, depressing standards of maintenance and repair and increasing charges where possible. It also accepts that this could mean less frequent collections of refuse, reducing the hours of opening recreational facilities, increased delays in dealing with planning and environmental health matters, and some longer-term diseconomies. There can be no doubt that what the Government intend as a result of their local government cuts is a substantial lowering of the standard of life and the quality of services for almost every citizen. It is not just for the ordinary citizen, who might be expected to take care of himself, but for the old, the needy, the sick and the handicapped. They, too, will have to bear the full brunt of the cuts.

That is one of the charges we make against the Government. There has been no attempt to get their priorities right, no attempt to have any priorities. There has been no selectivity about what the Government propose.

The deficiencies of the order are to be added to future orders. The Secretary of State for the Environment has now told us that he expects a minimum of 7 per cent. to be added to the rate bill next year, even though there will be a cut-back in so much of the service. My calculation, based on the best advice I can obtain, is that the Government have no hope of keeping the increase in rates down to 7 per cent. unless they are prepared to be much more active about the provision of finance in future rate support grant increase orders. This is because of the increased charges that local authorities are already facing and the higher wages and salaries, even under phase 3, that they will have to pay.

Next year, ratepayers will at one and the same time face a monumental decrease in the quality of local government services and a monumental increase in the rates they will have to pay for the deteriorated services. Those are the stark facts which local authorities and rate-payers have to face in the coming months.

I hope and believe that local authorities will try responsibly to help the Government in the national emergency. We on this side say that they should try, and we believe that they will. This is why I ask the Government to give a lead by cutting back where they can on new organisations which have not yet been set up.

Local authorities should make economies where they can, but they have a prime duty to look after the quality of life for the ordinary people. That cannot be cut back without disastrous results. We have said many times that that is what matters more than anything else to the ordinary people. It is often taken for granted, but essentially the services provided by local government are of that high degree of importance.

If at the end of the day it is found impossible to achieve all the contradictory aims and instructions of various Ministers, particularly of the Chancellor, we shall expect Ministers at the Department of the Environment to tell their Cabinet colleagues that they are asking for the moon, that it is impossible to have the cut-backs, to face the increased charges and to do all that without raising rates by 1p, which is what the Chancellor demanded. Those contradictions in Government policy must be resolved before the House debates the White Paper on local government finance which has been promised to us for so long.

I make no complaint about the Minister not having produced the White Paper although he promised it. Obviously with the country in a serious economic situation it would have made nonsense to have produced a White Paper until the up-to-date information was available for the House and for local authorities.

I hope that the Government understand the impossible position in which local authority treasurers find themselves. By now most treasurers in any normal year have done their sums, they have been able to do their estimating and have been able to advise their finance committees what the rate should be for the coming year. This year they cannot even start on that task for at least another month or two.

The choice which local authority officers throughout the country will have to make between various priorities and their attempt to conform with Government policy, such as it is, will make life almost impossible for them. To the confusion of local government reorganisation the Government have added the chaos of their situation on the economic front. The people who will have to bear that chaos are those working the machinery of local government and those whom it serves.

8.44 p.m.

Mr. Arthur Jones (Northants, South)

I want to take this occasion to recall the contributions made by our late friend and colleague Martin Maddan to our debates on rate support grant orders. He specialised for many years in local government finance. He became an authority on the subject. We always looked forward to the contributions he made on occasions such as this. He brought to our deliberations extensive knowledge and the positive approach which he had to many subjects which came to his notice as a Member of this House. I am sure that I speak for Members on both sides of the House in paying recognition to the great service he gave to the House

I always look forward to these debates on rate support grant orders. I sometimes wonder why I do, but I always find something intensively interesting in the comments made on either side of the Chamber on these occasions, and I look back to the debates we had in the previous year and the year before that. It is interesting to see how the tale unfolds. On previous occasions my right hon. Friend has apologised for the fact that it was the third time he had to have an amending order to a rate support grant proposition. He is getting conditioned to having to do that, but we have not had an apology this year.

I am reminded that in 1968 the then Socialist Government were facing a serious economic situation but declined to make an increase order, and that meant that the local authorities had to bear the increased costs themselves. I make no comparison between the circumstances then and those in which we are today, but the fact I have just recalled shows between the one Government and the other a slight difference of approach.

I very much welcomed my right hon. Friend's reference to the White Paper. He referred to it in Committee on the Local Government Bill. I understand why it has had to be delayed. I know that it will form the basis of useful discussion on a subsequent occasion.

The rising degree of local government expenditure expressed as a proportion of total public expenditure has been of increasing concern to both sides of the House in recent years. That proportion has risen well beyond that of the Government. We have had for some time to consider ways and means by which local government expenditure can be contained. Although I would not express it in such harsh terms as did the hon. Member for Birmingham, Small Heath (Mr. Denis Howell), I think that my right hon. Friend the Chancellor, in that remark yesterday, was unfair to local government as a whole. The remark was not made in the context of the real problem of the extent of local government responsibility and of the degree to which local government expenditure is tied to Government decisions.

As the debate has continued this evening I have looked at the various services represented in the orders we are discussing. There is a series of substantial expenditures outside the responsibility of the Department to which my right hon. Friend the Minister for Local Government belongs. One wonders to what extent Government decisions are coordinated when demands are made on local government and when extensions and improvement of local government services are sought. Looking at the prob- lem in that context, I for one am conscious that local government is at a very grave disadvantage when so many of its decisions are taken by Government Departments, each, understandably, concerned with the extension and improvement of the standards of the services for which it is responsible. One is bound in that context to think of the overall effect on local government expenditure.

There is no doubt that, following the Redcliffe-Maud proposals in the early 1960's, local government in the main has introduced a greater degree of managerial capacity in the co-ordination of departments than there used to be. What it has done is to break down the departmentalism that we used to have extensively in local government and brought it together under a management group of chief officers representing the whole spectrum of services under local government control. In this way we have introduced managerial disciplines. One questions the extent to which this is possible in the central Government, with their tremendous number of Departments.

I much welcomed the centralisation of three earlier Ministries and their joining together within the Department of the Environment. We have seen substantial economies resulting in expenditure for which the Department is responsible in the new circumstances. But when one considers the pressures from other Departments—for example health and education—and the continuing demands for extension of services, although supported sometimes by large grants but generally under the rate support grant arrangements which provide 60 per cent. of the expenditure, one realises that tremendous sums of money are still to be found in the remaining 40 per cent.

In referring to central Government the criticism I direct is in no way a party point, but under successive administrations we have seen expectations created for local government services beyond the capacity of the country to foot the bill. This is the basis of a substantial degree of the problem in present discontents about public expenditure activities, whether by central or by local Government. Although we have the rate support grant of 60 per cent., it is a compounding of local government expenditure when the demands of central Departments are added to the proper expectations and aims of the locally-elected representatives in local government. To a great extent, the matter is open-ended in relation to local government finance.

Speaking of the capital accounts yesterday my right hon. Friend the Chancellor of the Exchequer said: As for capital expenditure, the Government have effective control through the machinery of loan sanctions, and this will be adjusted so as to achieve the required reductions in expenditure."—[OFFICIAL REPORT, 19th December 1973; Vol. 866, c. 1469.] If I thought that it were possible for the Ministers in all of these Departments to take the decisions on loan sanctions, I could see a way of controlling the issue of loan sanctions. I am speaking only from my own limited knowledge. But I feel that so many loan sanctions are passed by the Department itself and do not come from a political decision at all that when it has the proper departmental wish to extend its services, with the decision on loan sanctions coming back to it for adjudication and not to the departmental Ministers, we see that the question is open-ended. This also applies to the extension of services on current expenditure.

I hope that we shall have my right hon. Friend's assurance that the necessary political decisions in containing expenditures will be taken and that it will be found possible to make them effective. If decisions are left to departmental adjudication it will not be possible to contain the capital expenditure, which is so clearly necessary. I do not see this as just a requirement of the emergency situation with which we are faced. I have continually advocated that there should be a containment of local government expenditure.

I know that one is at once asked which services one would contain or curtail. It is a fair question, and one would need to look at each case on its merits. Last year, when I suggested that the library services should be carefully looked at, the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) made some inappropriate interjection. But there are many ways in which the expectations which we have had are unrealisable in the short, medium and long term, and we must give these matters the political attention they require.

It is in that context that I support the increase orders, but I hope that, when we have the promised White Paper, we shall see the Government's determination to bring a proper measure of decision taking into local government services and ensure that their expansion and their extension shall be seen to be properly within the compass of the ability of the country to foot the bill.

8.57 p.m.

Mr. Gerald Kaufman (Manchester, Ardwick)

I went a good deal of the way with the hon. Member for Northants, South (Mr. Arthur Jones), but I fear that I cannot join him in his final remarks. I differ profoundly with him on that matter.

Those of us who have known the devotion of the Minister for Local Government and Development to local government have very great sympathy with him in the predicament in which he has been placed by the Cabinet. We know that Ministers in spending Departments like to protect their own Departments. Unfortunately, the right hon. Gentleman's Department is carrying one of the most serious and severe burdens of the present economic crisis. We know that it is not his doing, but at the same time I join my hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell) in condemning utterly the approach of the Chancellor of the Exchequer towards local government and what it means to people who live in our great cities.

My hon. Friend the Member for Manchester, Gorton (Mr. Marks) and I represent some of the most stricken areas in one of the greatest cities of the country, and in the orders and in what is to come there is naught for the comfort of the city of Manchester and naught, I fear, for the comfort of the other great cities of the country.

Six months ago we had a parliamentary by-election in Manchester. The Home Secretary paid us a brief visit. He visited part of the constituency of Manchester, Exchange and condemned what he saw. He expressed horror at the human jungles which he briefly surveyed. He was then appointed by the Prime Minister to deal with deprived urban areas, and I fear that the rate support grants which are being provided by the Government, let alone the prospect which the Chancellor has given us in two deplorable speeches this week, will do nothing to help the Home Secretary in assisting the areas such as my hon. Friend the Member for Gorton and I represent. Already the only discernible effect of the Home Secretary's appointment has been his veto of a much-needed youth centre in my constituency.

I fear that, with the Chancellor's announcement, unless the greatest struggle is made by local authorities, the present Government will preside—I do not use these words lightly—over the murder of our great cities.

The new local authorities which will take office next spring, for which provision is made in one of the orders, have been given a totally impossible task by the Government. They are attempting to set up, with whatever criticisms we may make of the way they are doing it, machinery for the regeneration of our great cities. Instead, however, the cuts announced by the Government this week may mean the downfall of organised life in those cities.

So much is needed to keep the life of our cities going in a satisfactory way; so much is needed to put right what is seriously wrong with the life of our great cities; and so much money, organisation and work are needed to remedy the dereliction in constituencies such as mine. So much work and organisation are needed to ensure that new developments going on in our great cities are not only constructive but operate in human terms. So much organisation and money are needed to improve the environment of those areas of our great cities which are not being torn down and rebuilt. This is one of the most urgent problems of all in my constituency.

I have told the House on a number of occasions in debates such as this that my constituency contains some of the most deprived areas in this country. The degree of poverty in parts of my constituency can be measured by the census returns that hon. Members have received for their constituencies this week by taking three simple levels of affluence in an area. The national average of motor car ownership is 51 per cent. In my constituency it is 25 per cent.—less than half the national average. In the country as a whole, only 17 per cent. of homes—houses, flats and so on—do not have exclusive use of all the basic amenities: hot water, bath, and inside water closet. In my constituency 41 per cent. of households do not have these basic amenities.

That is a measure of the poverty in my constituency that the money provided by the Government through the rate support grant should do something to pm right. In the country as a whole, only 11 per cent. of homes do not have an inside water closet. In my constituency, 27 per cent. of homes are in this unfortunate situation.

Mr. Deputy Speaker

Order. I think that the hon. Gentleman is going a little wide of the order.

Mr. Kaufman

I apologise, Mr. Deputy Speaker. I was attempting to illustrate vividly the predicament in which my constituency is placed. Obviously, I apologise for having gone out of order. I trust that I shall now return within the rules of order, as I had intended to do all along.

On the finance which is available to it, Manchester City Council is obviously anxious to remedy the poverty which exists in constituencies such as mine. It does it by a huge building programme, though for financial reasons that programme will be cut back very severely next year. After having had an unrivalled building programme in proportion to its size, Manchester is now having to pull back very severely. It is heartrending that this should be so. But even the new estates which are to be completed, including the vast Longsight development in my constituency, will require amenities when completed. It is for the rates to provide those amenities and for the Government to provide their share of that revenue.

We are already falling behind. The youth centre in that new development, which has been forbidden, is one example. But it is not just the new estates, the estates which will turn into the concrete jungles which the Home Secretary so deplored when he came to Manchester, which require money to be spent on them under the provisions of these orders and in succeeding years. The older estates, which are falling into decrepitude, need regeneration.

Only this week I received a letter from the Secretary of the Union Street Tenants' Association in my constituency. A lady there asked for a better outlook. She said: We have no playing fields, no proper shops. Soon the wash-house is closing down, so we will have nowhere to do our washing. These are very elementary things for people to require. Finance is required to provide them. I deeply regret that the prospect ahead does not promise that that kind of finance will be made available.

My hon. Friend the Member for Small Heath, in giving the totally depressing and demoralising list of services which are to be hacked about as a result of the Chancellor's statement, mentioned services for the disabled. We have a particularly proud record in Manchester of help for the disabled. It is probably the best record of any great city in Britain. When the disabled ask me for something to be done, I have higher hopes in approaching our splendid director of social services than I have in approaching any other department of the city council. Whether it is ramps for wheelchairs, special amenities in the home, special taps for arthritics, and so on, or a telephone provided under the Act introduced by my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris), all these things are very likely at present to be provided by the magnificent service of Manchester City Council.

I have a great foreboding that as a result of the Chancellor's announcement this kind of service, which is transforming the lives of so many disabled in Manchester, will fall into rack and ruin. It deeply depresses me to think that that may be so.

From where is the money to come for these services? How are even existing programmes to be maintained? Following the Chancellor's announcement on Monday I contacted the chairman of Manchester City's finance committee, Alderman Norman Morris. He described the outcome of what the Chancellor had told the House as "chaos and standstill." He said Practically everything that I can see is going to come to a standstill. Agreed contracts may have to be put off. Regardless of what the Chancellor may have said on Monday, the chairman of Manchester's finance committee very bitterly and regretfully told me that he did not see how unemployment would not result from what the Chancellor had said.

The cuts in public expenditure which the Chancellor announced on Monday, and which he made sound painless, are indeed painless for the rich and the well-off. For the ordinary people, however, and particularly for the poor whose whole life and environment depend so much upon the services provided for them by their local authorities, life will not merely be made difficult; in many cases is will be made almost impossible. What is most regrettable is that the Government are the cause of this situation, but the councils will be blamed for it. The councils have no responsibility for these cuts, they have not been consulted about them in any way whatever, but they will get the blame because they are not providing the services which the people of the cities wish to have.

Yet none of this was necessary. My hon. Friend the Member for Small Heath told us that the cost of the cuts will be £182 million. But £300 million was given away by the Chancellor of the Exchequer earlier this year to people whose incomes were such that they did not require a tax concession. This sum could have been saved nearly twice over by taking back that money. I regard what the Government have done as a monstrous interference with local government.

My hon. Friend the Member for Small Heath, has quoted the quite incredible statement made last night in his winding-up speech by the Chancellor of the Exchequer, as reported at c. 1470 of HANSARD—the speech which contained the Chancellor's denunciation of any local authority which deliberately set out, as he put it, to flaunt the national interest". His misuse of the word "flaunt" shows that he is illiterate as well as inhuman. The Chancellor went on to say that deliberate action of the kind which he denounced could well call in question the continuance of the present system of local autonomy over current expenditure."—[OFFICIAL REPORT, 19th December 1973; Vol. 866, c. 1470.] That was an appalling threat to be made by any Chancellor, but it was a particularly appalling threat to be made by a Chancellor who was Chairman of the Conservative Party when "A Better Tomorrow" was issued three and a half years ago, which included these words: The independence of local authorities has been seriously eroded by Labour Ministers. On many issues, particularly education and housing, they have deliberately overriden the views of elected councillors. We think it wrong that the balance of power between central and local government should have been distorted and we will redress the balance and increase the independence of local authorities. The Chairman of the Conservative Party who promised to increase the independence of local authorities is now the Chancellor of the Exchequer, who threatens to take away the autonomy of local authorities. I say with deep regret—and I say it with particularly deep regret to the Minister to whom I have to address these words—that the Government have set out deliberately, as is shown by the announcement of the Chancellor on Monday, to create squalor in our great cities. In this aim, unlike most of his other aims, the Chancellor will very likely succeed, but the people of our cities, certainly the people of the city of Manchester, will never forgive him.

9.14 p.m.

Mr. James Allason (Hemel Hempstead)

The House has listened with great sympathy to the plea by the hon. Member for Manchester, Ardwick (Mr. Kaufman) about conditions in Manchester. He spoke first of the programme to deal with urban deprivation and implied there would be cuts, but as that item is on the Home Office Vote it seems a little inappropriate to seek to discuss it at this time. But I sincerely hope that there will be no cuts in that direction.

The hon. Member then spoke of the need for improvement grants and better conditions in housing. I am with him 100 per cent. there, but there is no intention of cutting housing or improvement grants. Improvement grants are expanding year by year and we are very proud of our record in this regard.

Mr. Kaufman

Is the hon. Gentleman aware that Manchester is an assisted area, and that at the end of June our improvement grant allocation will be cut by one-third?

Mr. Allason

The grant will be cut by 50 per cent. rather than 75 per cent., except in a housing action area, and I should imagine that the hon. Member's constituency will qualify under that heading. It is somewhat misleading to say that there is to be a cut. It is a question of who pays for it. There is the possibility of insisting on improvements to be carried out by reluctant landlords, and surely the hon. Member will welcome that. I do not know whether in his case it is a reluctant landlord or a reluctant council which is failing to carry out improvements. Nevertheless, he can take courage from the fact that the improvement grant scheme is continuing with vigour.

It is unreasonable to say that no service should be exempt from cuts. As my hon. Friend the Member for Northants, South (Mr. Arthur Jones) explained, it is difficult to seize on one service and say that it should take all the cuts. The hon. Member for Birmingham, Small Heath (Mr. Denis Howell) has had experience in local government and has, no doubt, served on a libraries committee—

Mr. Dennis Howell indicated dissent.

Mr. Allason

Then perhaps my experience of local government is greater than his in that respect. What usually happens is that an estimate is put forward and the librarian says he would like, say £40,000 to spend on new books next year. The committee then cuts it to £30,000 and the librarian looks disgruntled. Nevertheless, £30,000 is a handsome allocation for expenditure on new books. At a time of severe crisis, when everyone in the country is asked to tighten his belt, it is possible to secure considerable savings in the library service through the purchase of books.

When it comes to caring for the sick and the disabled, it is necessary to take a careful look. It may be that there is in next year's estimates an allocation for the replacement of an old minibus. It may be possible to patch up the minibus so that it can go on for another year. That is within a service which the hon. Member for Small Heath says should not in any circumstances be cut.

The hon. Member for Ardwick went somewhat further than the hon. Member for Small Heath, who did not actually suggest that taxation should be increased and that there should be no cuts in local government expenditure. That was what was said, and I understood the hon. Member for Small Heath to give his approval. It is interesting, if that is the firm view of the Opposition, that they seem to be suggesting that increased taxation should take care of these cuts.

Mr. Denis Howell

I thought I made it clear that we agreed that there was a crisis and we agreed that in the crisis the situation could not be left as it is. The burden of my case against the Government is that on the one hand there will inevitably be increased rates and on the other hand, where cuts have to be made, the Government have been totally nonselective and priorities have not been established. We disapprove of that.

Mr. Allason

We hear from the hon. Member for Small Heath a stirring call against reform and against retrenchment. He resists any attempt to bring local government into the twentieth century, which we shall achieve in 1974. One of his reasons for opposing reform was extravagance in salaries and staffs and in staff numbers. I agree that this is a fair criticism of local government reform, but it is not an argument against reform; it is an argument for getting the thing right.

That was what my hon. Friend the Under-Secretary of State for the Environment was saying on 30th November. He was saying that it was scandalous that jobs for the boys were being created. I have sent him evidence of jobs being deliberately created so that local government officers should not become redundant. We know that that has happened. My hon. Friend made no threats. He said that local authority costs resulting from such action would be considered carefully, and not least by the ratepayers and by the electors. That was a reasonable thing to say. At least, these increases afford some relief to ratepayers. If these considerable sums were not voted by us tonight, they would fall on the ratepayers. The ratepayers are already thoroughly dissatisfied with this year's level of rates.

As I have already told the House, the rates in Hertfordshire rose in 1972–73 by 15 per cent. over the previous year. In the current year they have risen by an additional 13 per cent. We now hear that they are likely to rise by 7 per cent. next year. I understand that the increase will be 7 per cent. and not 7p. Let us hope that by the time the 1974–75 financial year reaches us we shall have got rid of some of the current self-inflicted injuries. Let us hope that by then the economic situation may be better. If there is any possibility of relief being offered, I urge that the highest priority be given to consideration of the ratepayers. They are being asked to pay much too much already. Let next year's order substantially increase the domestic element and so help the impoverished ratepayers.

9.23 p.m.

Mr. Kenneth Marks (Manchester, Gorton)

I shall deal in particular with the period covered by the No. 2 Order—namely, 1972–73. That is a period which has been affected by the rate support grant which was debated exactly a year ago. I must echo what the hon. Member for Northants, South (Mr. Arthur Jones), said about the contributions which were made by the late Martin Maddan to our debates. He took part in the debate of a year ago and made a valuable contribution.

Last year's order was affected by the counter-inflation legislation which started its passage through the House in January of this year. It is important that we consider the effect of the rate support grant orders and the counter-inflation legislation.

The Chancellor of the Exchequer talked yesterday about local authorities which flaunt the national interest. Unconsciously he chose the right word. That is what is done by local authorities. The national interest is the welfare of the people of the nation and not a commitment to what a Prime Minister, a Chancellor or even a majority party which was elected several years ago thinks is the right thing at the right time. It is not in the national interest that the House or the country should accept without question all that a Government say.

In the rate support grant debate a year ago I welcomed what the Minister said. He told us that the Government are anxious that the level of rates should be held down as an act of deliberate policy in the national interest. If that is the Government's policy, as it is, obviously the Government have to come in to assist in keeping the rates down to a reasonable level. The Government's immediate policy with regard to rates is to keep the overall rise in rates to a level compatible with the Government's policies on prices and incomes while recognising, of course, that local variations will be inevitable. He went on in words which could be echoed by us all: In value for money, rates really are the best buy. Think of all the services which one gets for the rates one pays—roads, schools, sewerage, refuse collection and disposal, street lighting and a host of other services. Therefore, in bringing rates down we must not bring down the quantity or quality of those services."—[OFFICIAL REPORT, 20th December 1972; Vol. 848, c. 1439.] I believe that the right hon. Gentleman was right in saying that rates are our best buy. The Government had a choice between cuts in public expenditure and cuts in private spending. They have chosen cuts in public expenditure, and I do not think that at heart the right hon. Gentleman can agree with what the Government have done. Public expenditure is the basis of the welfare of our people, and I believe that that is the national interest.

In last year's debate I pointed out several anomalies that had grown up in the rate support grant system which particularly affected large cities and industrial urban areas. I shall not weary the House with a recital of the numerous debates we had in December, January and February of last Session on that problem. The Government now accept that there were anomalies, and they have tried to do something about them in future rate support grants.

The trouble is that during 1973–74 inflation has further exaggerated the problems of those cities. The cost which they have to bear is greater than the cost which the rest of the country has to bear, and the proportion of the increase in rate support grant which they receive is less than that which other areas receive. So the problems have become even more pronounced. Is there no way under existing legislation by which an adjustment can be made to help them? Their rates last year were very high, and they are now faced with the tremendous problem of passing on that burden to next year.

Towns particularly were placed in a difficult position by the Counter-Inflation Act. Hon. Members will recall that the former Secretary of State for Employment explained Clause 13 of the Counter-Inflation Bill in this way: I should also refer to Clause 13. This is the new provision under which my right hon. Friends the Secretaries of State concerned—for the Environment, Scotland, Wales and Northern Ireland—may obtain information from local authorities about rate demands. The clause will enable the Government to consider whether a rate increase seems unnecessarily large and, if so, to ask the local authority to reconsider the matter. Although the clause contains no powers to compel local authorities to make a new lower rate in place of the one questioned by the appropriate Secretary of State, its provisions make such an alteration possible."—[OFFICIAL REPORT, 29th January 1973; Vol 849, c. 964.] I am sure that the Minister realised at the time the difficulties in which that clause placed him.

Faced as they were with essential and large increases in expenditure, towns and counties tried hard to reduce their expenditure. We had the spectacle of 12 men in the Department of the Environment trying to monitor the rates of hundreds of local authorities. What does the Minister think of the monitoring system? Does he propose to continue that same system under the Counter-Inflation Act in future?

Although reorganisation does not take place until next April, many of the initial costs of new staffs will already have been expended and other expenses will be placed on this year's rates. A fair rate of increase for administration is set out in the order. Will this sum be large enough?

The cost allowed for by the Government was £396.7 million and the increase in the grant within the Rate Support Grant (Increase) (No. 2) Order is £237.3 million. This means that £159 million must be found from the rates, and this sum has not been allowed for and was not included in last year's estimates. The Government did not anticipate this expenditure and have not taken it into consideration. The present order envisages an increase of 8 per cent. compared with last year's estimates.

Mr. Alec Jones (Rhondda, West)

The hon. Gentleman will appreciate that most local authorities have a contingency sum in their estimates which could cover this figure.

Mr. Marks

That is possibly the case with urban districts and some counties. but the cities and towns cannot work with the same sort of reserves. Each year they face rising inflation, and this order represents 8 per cent. more than was anticipated. In other words, they will have to find 8 per cent. more than the Chancellor allowed for this year, and this figure has not been budgeted for.

I welcome the orders because they reflect an increase and show that the Government accept that inflation has made life very difficult for councils. We must be grateful for small mercies in that the Government have accepted the responsibility for these increases.

9.32 p.m.

Mr. John E. B. Hill (Norfolk, South)

I apologise to the House for coming into the debate at this very late stage, but I have just returned from a committee meeting in Brussels to find the House still discussing the rate support grant. I have a considerable regional interest in the level of rate support grant because the county of Norfolk is affected, not so much by the situation produced by these orders as by the prospect of moving away from the sort of formulae on which the present rate support grant is based.

In view of the overall national situation, my right hon. Friend the Chancellor of the Exchequer last night exhorted local authorities to keep down any addition to their current expenditure. That is a worthy objective, but we must bear in mind the fact that many local authorities, particularly the new Norfolk authority, which is typical, have a heavy on-going commitment. So much has been added as a result of legislation that new resources will have to be found unless some of the undertakings already given are resiled from.

I wish to instance one or two examples. The degree of administration and staff required to supervise fire precautions has particular relevance in Norfolk because of the large number of hotels, boarding houses and similar establishments in coastal areas. It is fair to say that the county feels that it will be extremely difficult to keep down its future expenditure and therefore its rates if there is any substantial diminution in the rate support grant.

As I understand it, the formula is being changed so that the vital factor of sparsity, which hitherto has meant the population per mile of road within the authority, will in future become that of density. In other words, the population will be divided into the acreage of the local authority. That is the main factor as a result of which the new county of Norfolk looks like losing some 3.8 per cent. of its present level of grant, and that means a sum of about £1.25 million.

The difficulty is that the computer does not seem to realise the difference between sparsity and density. It is most easily described by comparing two types of area. Let us say 100,000 inhabitants live in 500 square miles. There is the same density of population, namely 200 to the square mile, whether the area is an evenly-inhabited stretch of arable farmland with many scattered villages and small market towns or a large area of uninhabited moorland with a valley in' the middle of it, at either end of which there is a substantial town, with most of the population gathered in centres. A similar situation can occur within the village structure. A typical East Anglian village often stretches along a mile or two of road with a church at one end and a pub at the other. That has to be compared with a village clustered round a green with the population living much closer together.

One can imagine the difference in costs in terms of connections for sewerage or electricity, for refuse collection and for school transport, and the difference in capital costs where no towns or villages are big enough to justify a new school because the population is so thin that the catchment area has to spread over a number of villages. All this adds greatly to costs.

I reflect that this sparsely populated county is none the less amongst the fastest-growing counties in the country. It has the additional numbers without, on the whole, the advantage of scale. The numbers are scattered. In the event of the overloading of a village school or of a local sewage works, it is always on a small scale and the total county problem requires separate remedies in several places.

The final matter worrying us in Norfolk is that the test seems to be changing. It is no longer one of need, which hitherto has been the ingredient in the rate support grant. The new basis is to be that of previous expenditure. It happens that Norfolk in recent years, in response to Government exhortations to keep down the level of local expenditure, has moved from being one of the counties with rates well above the county average to one of those with rates below the county average. If we now change from a basis of need to one of previous expenditure, the authorities which have co-operated in previous Government policies will be penalised.

Therefore, I must ask my right hon. Friend carefully to reconsider the future formula on which rate support grant is to be based. Certainly, the needs of a county such as Norfolk have increased as a result of expansion and the matters I have mentioned. In particular, will my right hon. Friend distinguish in his formula, and in the Government computer, between density and sparsity? If he will, I think that Norfolk's grant will not be cut to the degree that at present seems likely.

9.41 p.m.

Mr. Graham Page

With your leave, Mr. Speaker, and that of the House, I should like to reply to the debate.

The hon. Member for Birmingham, Small Heath (Mr. Denis Howell) drew attention first to what he called the terribly expensive reorganisation. Certainly, expense is involved in reorganising local government from 1,400 local authorities to about 400. It has been taken into account in the rate support grant, after full discussion with local authorities, in considering what sort of expenditure both local and central government can expect in the reorganisation.

I do not think that there is any squabble about the figures for the sum taken into account in the rate support grant. I hope that we have given full consideration to what would normally be expected in setting up new authorities from the old authorities. Where our expectations have gone wrong is in connection with staffing. The hon. Gentleman spoke about his anxiety in that regard, and it is my anxiety. I have discussed the matter with individual local authorities very fully in the past few weeks. It seemed that some have been able to devise an establishment which employed no more than the authorities which had been merged, but in others the establishment has increased by perhaps 50 per cent. over the numbers employed by the authorities which merged to form that district or new county authority.

It is not possible to judge the matter purely by the numbers employed in the previous districts which have been merged or have become the county, because the functions have changed. To study the matter carefully one must examine the functions being undertaken by the new authority and whether it is engaging too great a staff for those functions. I was attracted by the hon. Gentleman's suggestion that a feasibility study should begin at once into the cost of reorganisation from the staffing point of view.

We have probably taken into account the question of new offices. With the need to restrain building, we shall have to do with existing offices. I think that a very close study should be carried out quickly into the establishment of the new authorities. I am sure that the public will expect that a reduction in the number of local authorities from 1,400 to 400 should lead to a streamlining of staff. However, it must be remembered that the functions have changed.

The hon. Member for Small Heath talked about threats being made by Ministers against local government, and he rather associated that with the question of staff increases. What Ministers have been doing is to call the attention of those in local government to the fact that their enthusiasm for local government has in many cases run away with them and that the public will look askance at the increase in salaries and in staff which is occurring in some authorities. Other authorities have been very careful and have carried out the streamlining which is possible.

We propose to issue a circular to local authorities saying not only where cuts can be made in accordance with the requests of the Chancellor of the Exchequer but also that local authorities should show economy in their new staffing.

The hon. Member for Small Heath said that the two-tier system was bound to increase the cost. I do not think so. If we are reducing the number of local authorities by the figures which I have mentioned, there should be a streamlining in the staffs and a possibility of employing fewer.

My right hon. Friend the Chancellor of the Exchequer was not attacking local authorities in his statements concerning local authority expenditure. To use the words he employed, there is at present autonomy in local government over current expenditure. The whole trend—by the previous Government as well as by the present one—is to give local government a greater discretion in the spending of the money which the taxpayer contributes to local government. We have the rate support grant. We are proposing, in the Local Government Bill now before the House, to move a number of other items into the rate support grant and away from specific grants.

When one considers the control which local government has over the amount which the taxpayer contributes, it is only fair for the Chancellor of the Exchequer to point to the responsibility of local government to keep back unnecessary expenditure.

Mr. Marks

Have we not nationally made commitments—I am not talking now about the functions of local authorities—as regards the protection of staffs who lose their jobs as a result of reorganisation? Are not authorities bound to give such staff protection at their existing salaries? Is not this element in this year and next year a very large added commitment for which the individual authorities themselves have not made the decision?

Mr. Page

Central Government was very generous over the question of those who wished to retire from local government in the course of the reorganisation and in the case of redundancies. In many cases I have been personally accused of encouraging the House to be too generous over this. A great number of chief officers have retired at a young age to take up employment elsewhere at better remuneration and drawing their pensions also. Good luck to them. The intention was that we should streamline local government establishments and enable people to find jobs elsewhere.

Mr. Nicholas Winterton (Macclesfield)

Does not my right hon. Friend agree that by making this offer—which has been accepted, I think in dramatic numbers-local authorities have lost some wonderful experience that could have been put to good use in the new authorities?

Mr. Page

No, I do not think that. There are enough to go round. We are sorry to lose some of the very experienced town clerks, and so on, but there are still a good number of well experienced ones left to undertake the reorganised local government.

I was dealing with the question of the phrases and words used by my right hon. Friend the Chancellor of the Exchequer. I was pointing out that local government has considerable control over what the taxpayer pays. As right hon. and hon. Members know, the rate support grant is divided into three factors—the domestic element, the resources element and the needs element. The domestic element has been this year a reduction of the rate poundage in any area by 6p. We have said that next year it will be 10p, and on top of that a variable domestic element—variable geographically—given to those authorities who will lose by reduction in resources element or by an increase in the cost of water and sewerage.

This means that the taxpayer comes in as a ratepayer to the extent of that domestic element whether it is 6p or 10p or 10p-plus and comes in at the rate poundage which the local authority chooses to charge. So the local authority has considerable control over what it gets out of the taxpayer on the domestic element. Not only that, but the resources element is taken as the amount by which one local authority falls below a standard line for the country nationally, and by that amount it falls below, again, the Government—that is to say the taxpayer—comes in as a ratepayer at the rate poundage which the local authority chooses to charge.

It was very reasonable, then, for my right hon. Friend the Chancellor of the Exchequer to say that local authorities should realise their responsibility in keeping down their expenditure for which they have to call for rates. Indeed, if there were irresponsible local authorities to any great number I would have thought it would be necessary for any Government to reconsider the trend of global grants—rate support grant—and, perhaps, turn the trend round and go back to specific grants and say "If you wish to spend money on this subject or that subject we shall contribute a certain percentage of that but not leave you discretion on which to calculate your expenditure". I hope we shall not do that. I hope we shall still leave discretion to the local authorities to decide in a responsible way what their expenditure should be and what their needs are from the taxpayer and the ratepayer.

The hon. Member for Small Heath produced a set of figures which had been supplied to him, he said, by the Association of Municipal Corporations, and on those figures he came to the conclusion that the Government had failed to take into account a sum of £164 million, and that there was a shortfall to that extent. The hon. Member for Manchester, Gorton (Mr. Marks) came rather to the same concluison.

What we are talking about here is the amount of increase in costs during a certain period of time and the increase of costs to local government expenditure. We apply to that the same percentages as applied to the main settlement with the result that 60 per cent. will be contributed by the taxpayer and 40 per cent. by the ratepayer, and the ratepayer will have to pay that 40 per cent. calculated on these figures perfectly correctly. When I say "correctly" I am not being rude to the local authorities in any way, but these are the figures which were agreed between the officials of my Department and the officials of the Association of Municipal Corporations. The ratepayer will contribute to this increase a sum of £164 million, being the 40 per cent., or, taking the earlier years, 42 per cent.; the taxpayer will contribute the rest. This is really not a shortfall but application of the normal procedures to the rate support grant.

Mr. Denis Howell

It still has to be found next year, at a time when the Chancellor is saying that there should not be a penny increase in the rates.

Mr. Page

This is something which is found each year by the local authorities and the taxpayers. My right hon. Friend did not say that there would not be a penny increase in the rates. He said that there would not be an increase, due to the reductions which he was asking for.

The hon. Member for Small Heath was quite right in saying that my right hon. and learned Friend the Secretary of State had mentioned an increase in the domestic rates of probably 7 per cent. This is a fairly low figure compared with the increases we have seen over past years, a deliberate endeavour to keep down the increase in rates which we have seen over each year in the past, and it is based on an inflation figure which has been discussed and agreed with the local authority associations.

Mr. Marks

What is it?

Mr. Page

It is no secret. Looking at these increase orders, we get an inflation figure of about 10 per cent. for last year or for this current year. This has been agreed with the local authority associations. There need not be more than an increase of 7 per cent. in the domestic rates throughout the country.

Mr. John E. B. Hill

My right hon. Friend has referred to an average increase of 7 per cent. in the rates. I remind him that, because of the factors I mentioned earlier, the likely increase in the new Norfolk is pointing towards more than 20 per cent.

Mr. Page

I shall be dealing with my hon. Friend's speech in due course.

The hon. Member for Small Heath talked about an enormous cut-back in the rate support grant and quoted a figure of £182 million. There is still under discussion the figure by which relevant expenditure may be reduced as a result of the cuts proposed, but it is certainly not £182 million. It is not much more than half that figure, I would have thought. The very circumstances in which these cuts are demanded give all the more reason for the expenditure of local authority money on just the sort of social subjects which both the hon. Member for Small Heath and the hon. Member for Manchester, Ardwick (Mr. Kaufman) mentioned. I have endeavoured to lay down guidelines.

Mr. Denis Howell

Am I not correct in saying that, after the local authorities had their first discussions with the Government, they were requested to save about £81 million or £82 million and that now, through the Chancellor's announcement this week, at least a further £100 million is likely to be saved? Therefore, is not the figure which the right hon. Gentleman is suggesting £182 million and not about £90 million?

Mr. Page

I am glad that the hon. Gentleman has made his figure clear. The £81 million represented cuts requested last May. They were being taken into account, of course, in the rate support grant discussions. One estimates that the addition brought about by the new cuts will be about £100 million. The hon. Gentleman is quite right. I did not appreciate that he was taking into account the £81 million asked for in May. Here we are faced with a situation in which it is necessary for the Government, because of the need to conserve resources, particularly those which demand energy and fuel, to make this cut-back. In making these cuts, the guidelines that I give and have been giving to local authorities come under three headings—

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