RATE SUPPORT GRANT

HC Deb 31 January 1973 vol 849 cc1452-86

7.59 p.m.

Mr. Kenneth Marks (Manchester, Gorton)

I wish to refer to the supplementary provision for rate support grant to local revenues, Class VI, Vote 18, in the Supplementary Estimates.

These grants involve vast amounts of money. I accept immediately that the Government have made a considerable increase in their grants to local authorities. My theme is that they are not enough to enable local authorities to do all the jobs required of them and placed upon them by the Government and this House and to keep to the target of rate increases that the Government would like.

The order referred to was made on 30th November and was one of two orders, the Rate Support Grant Order, for 1973–74, and the Rate Support Grant (Increase) Order, for 1972–73. They were debated for only three hours, which was a quite inadequate time. I do not apologise for having taken the opportunity since then to raise the matter on a number of occasions.

In the debate on the orders we were concerned more about the 1973–74 proposals, and no mention was made of any of the other matters in the orders. One of the difficulties in the debate on 20th December was lack of information. There was not enough information in the orders or in the Secretary of State's report on either of them. A number of matters have arisen since then. We did not know what would be the effect of the revaluation of rateable values. We were guessing. Lists were to be published two days later. The analysis of those lists arrived in town halls on 26th January. Rate rebate orders were discussed in the House only last night. I hope that whatever system is adopted when local government finance is reorganised, the importance of parliamentary discussion each year on any grants from Government to local authorities will be considered. I hope also that within the Bill on local government finance we shall take that into consideration and see how much information the House can be given. Hon. Members often do not take part in these discussions because the relevant statistics seem to be presented in such a way as to frighten them away.

One of the problems next year is that councils will have to find the money for this year's inflation, which has probably been the greatest ever in peacetime. They must do that before even starting to consider the extra costs they must bear next year. The Government have recognised this to some extent by increasing the grant for 1972–73 by about 9 per cent. I want to deal later with the 9 per cent. itself. However, what should be realised is that a proportional share of the increase received from the Government has to be borne by local authorities. So out of next year's rates—if the Government's figures are right—they will have to pay 9 per cent. more than what they estimated for this year, and then they will have to consider next year's spending.

The City Council of Liverpool estimates that the cost of inflation during this year is £7 million. That means approximately a 28p rate increase. That is before the city even starts to consider what it should do next year. I imagine that about half of that amount will be met for Liverpool by grant increases. Even so, it leaves that city with a 15p increase to pay this year's debts out of next year's rates.

I do not think that this was realised by the Prime Minister and his advisers when he replied to the five cities after they had asked to meet him. He probably thought that they were talking about next year rather than this year. He has now realised this, and that is one of the reasons why he has decided to meet representatives of the five cities on 9th February. I trust that that meeting will mean that some additional help is forthcoming from the Government. I do not suggest for one moment that these five cities are the only local authorities with worries. My hon. Friend the Member for Colne Valley (Mr. David Clark), who represents a constituency with a very large rural area, will also have something to say about this if he catches Mr Speaker's eye.

Another factor in inflating the costs for the current year is the additional tasks given to local authorities during the year, such as contributions to clearance of derelict areas and to improvements generally. Their efforts during the year under consideration to reduce unemployment have cost them money, and again the Government have helped; but the councils have had to find a share.

Is 9 per cent. enough? The period that was considered was from November 1971 to November 1972. In appendix 1 to his report, the Secretary of State showed us that the changes in prices cost about that much, and he gives a detailed list of those increases taken into consideration. Our difficulty is that the House was not given the original figures of what teachers' pay would cost, and so on, so we cannot make an assessment of what the percentage increase is. Perhaps the Minister will tell us something of the various percentage increases required by appendix 1 of the Secretary of State's report.

On 18th January the Association of Municipal Corporations issued a statement referring to wage rates and earnings and the Government's statement about them. I should like to quote from the association's statement about them. It said: The problem which has been facing those in local government responsible for preparing their rate estimates for the forthcoming year, 1973–74, is that the operation is carried out in the background of an inflation which the Government describes in paragraph 24 of the White Paper in relation to wage rates and earnings as running at 15 per cent.-16 per cent. We have repeatedly heard the argument from the Government that prices have been rising at about 8 per cent. and that wages have been rising by about 15 per cent. or 16 per cent. But at least half of local authority spending is on pay, and that ought to be considered. Local authorities spend their money partly on goods, partly on interest—about 25 per cent. on the whole—and about 50 per cent. on wages. This means that there is a considerable increase above the price increases that must be met. Local authorities have also had to meet increased, national insurance contributions and, because of this, a great deal of money has gone to the Government. With all these pay increases, about one-third goes to the Government in income tax, whereas it is paid out by local authorities. In its statement the association goes on to say that local authorities are faced with the cost of inflation up to November 1972 in that year alone at the rate of £410 million of which local authorities would have to find 42 per cent., namely, £172 million. Thus even though assisted by the Government's raising of their proportion of the rate support grant to 60 per cent. instead of 58 per cent., there remains a heavy burden for local authorities". This is a particularly heavy burden with some local authorities, because these figures are averages and some authorities do not do as well in grants proportionately, as do others. The association also mentions the cost of land purchases, which has increased greatly in the last year, and it says: It is to he recognised that some local authorities will have estimated for a degree of inflation when they made their rates early in 1972 but there is no reason to think that those who did so will have allowed for more than 5 per cent. (or a figure of that order) and it is clear that the balances in the hands of the urban authorities, faced with very heavy costs in recent years, are extremely limited. I have mentioned the question of balances. On the whole, the large cities do not keep great rate balances. They are usually too hard pressed to do so, and their rate increases are usually so phenomenal that they dare not start saving as well. I think it is true that counties and county districts—and urban districts particularly—tend to overestimate their needs a little and finish with some reserves. I think it is true that district treasurers and finance chairmen come to an understanding about the estimate of the 1p rate product, and that is usually below the final figure. They also tend to keep large working balances. In many cases they have to, because a disaster hitting a small council can present heavy costs suddenly and they have to look out for that. Changes in political control, too, often mean that balances are spent before an election. That has happened, I think, on a number of occasions. On the whole, big cities do not allow for inflation. They do not put up rates because their rate increases are pretty high in any case.

Another factor is costs, and interest costs for buildings. Housing does not affect the support grant, but an example of costs of building during the past year is evidenced by one of the urban districts in my constituency. Denton Urban District Council, which was building a small estate of houses to rehouse people moved for a motorway, found the yardstick cost was £226,000 at the end of the 1971. The lowest tender the council got was £291,000 in 1972, an increase of 29 per cent. The Government, through their regional offices, approved that increase. Increases like that are not of 9 per cent. A great deal of building for housing is done by local authorities. In the case I have mentioned the land was not included in the cost, for the council already owned the land. Yesterday Manchester and Salford received a rate precept from the police force and there was an increase of 19 per cent.

My view is that the Government grant—both the revised figure for 1972–73 and the new figure for 1973–74—will not permit local authorities to keep to the average of 5 per cent. for which the Government are asking. The averages hide huge problems for the big cities and for many of the industrial towns. If cuts take place as a result of monitoring by the Department of the Environment, where will they come? Are the Government going to tell these areas what cuts they should make? Usually, when there are sudden cuts they come too late to do anything about pay, and it is usually books, repairs, school equipment, and so on which bear them. If the cuts have to be substantial these means are not enough, and redundancies will have to be faced.

The Government are beginning to recognise this problem. We had the first Press release on the rate support grant in a blaze of glory. I think the Government are realising that the situation for local authorities is not all that rosy. The Prime Minister is meeting representatives of the cities next week and I have no doubt that he will meet representatives of other authorities as well. There are others besides the cities which have great difficulty because of the increases this year. This is not a political matter. Newcastle-upon-Tyne, which has a Conservative majority, faces the same problem and is talking in terms of 20 per cent. I hope that the Prime Minister will listen and that all the Departments will act.

Before meeting them the Prime Minister has gone to meet the President of the United States. There have been a number of similarities in the approaches which the Prime Minister and the President have made to local authorities in recent months. I trust that in his discussions with the cities and in the action which the Government take in the Budget that similarity will end.

The Guardian today, referring to the United States budget, said that Among the programmes to be phased out are important unemployment, housing, urban renewal, and education projects. The future looks bleak for the poor people the Great Society programmes were designed to help. The President's message can only increase the despair that already permeates the decaying inner cities of America. … There are to be tax deductions for parents sending children to private schools and there is to be more money for the SST, the supersonic plane which was scrapped by Congress. Senator Mansfield summed it up well when he said, 'The people will get the idea that they are forgotten.' The people of our inner cities must not be forgotten. The Government can help and they must help.

8.15 p.m.

Mr. Michael Cocks (Bristol, South)

I am grateful for another opportunity to discuss particular aspects of the rating problem facing local authorities today.

We are grateful to my hon Friend the Member for Manchester, Gorton (Mr. Marks) for the opportunity recently of an Adjournment debate on the problems of the cities, and tonight we are dealing, as he says, with the rate support grant. Only yesterday we were talking about the rate rebate order before the House. There has been talk in this debate about the effect of revaluation. I hope that the Minister who is to reply tonight will take the little more time which is at his disposal than when he dealt with the affairs of the big cities and that he will give us a full exposition of the Government's position.

I personally welcome the Under-Secretary of State, the hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths), to the Government Front Bench tonight because his hands are clean on the assassination of Bristol, an assassination which has taken place under local government reorganisation. I am grateful to him for that.

The rather narrow terms of reference of this rate support grant will, nevertheless, give us an opportunity to deal with a particular aspect of the matter and the effect of inflation. In the Supplementary Estimate, Class VI, Vote 18, on page 65 of the Supply Estimates, there is reference to changes in the level of prices, costs and remunerations. This, of course, is basically talking about inflation.

In discussion with officials of the House about the rules of order in discussing the increased provision and the level of the increases and whether it was an increase in order of magnitude or not, it was pointed out that £196 million on the present provision of £2,333,000,000 is an 8½ per cent. increase, but in reality it is larger than that because the bulk of the amount referred to on page 65 is taken up by the needs element. The second item deals with the resources element. This is the money supplied per head for authorities with below-average resources. This is subject to change, because next year, for the first time, so the Department has informed Bristol, we shall get grant under this heading. Then there is the domestic element to offset the cost of reductions by a prescribed amount. Hon. Members will see that there is no change there.

So, although we talk about an increase in this expenditure, the sum of £465,662,000 does not change. The element which has changed is increased by £196 million, on the lesser figure of £1,869,705,000. There is an increase of 10½ per cent. So the increase here is larger than it looks at first sight, if we remove the two items which are not changing. The bulk is taken up with the needs element, which, according to the original Estimates, is arrived at on the basis of population and other objective factors. In Bristol the units for population and education account for approximately 85 per cent. of what we receive. As these are declining factors, much more detail should have been given in this section on page 65. The heading includes the words "additional detail" but there is precious little.

There is no indication that the needs element is subject to change. Some areas with a declining population and a reducing number of education units are considerably worse off. There is no flexibility. The theoretical concept behind the formula takes no account of change. Will the Minister tell us broadly to which type of authority the bulk of the 10½ per cent. increase will go and which services are claiming the lion's share of the increase. The 10½ per cent., taken as a national average of the increase in costs, takes no account of the wide variations which exist. A tremendous range of variations must be concealed in this figure, and it would be helpful if the Minister would tell us more about the variations.

In considering prices and remuneration we are really talking about inflation. Inflation hits local authorities particularly hard because municipal services are labour-intensive. One-third of Bristol's increase is accounted for by pay awards. How does Bristol's figure compare with that of other authorities? Charges on the city's loan debt, the cost of services, repairs, maintenance and so on have to be taken into account.

In talking about costs, do we mean general cost increases, or is there a concealed element which reflects the impact of the new services provided by local authorities as a result of legislation? Legislation on the school leaving age and the Housing Finance Act have imposed a greater burden on local authorities. What proportion of the increase can be allocated to the new services that are being provided. This information would be useful to local authorities throughout the country in tackling the substantial estimates that face them.

Page 137 of the original Estimates contains a list of items such as "Education", "School milk and meals" and "Libraries, museums and art galleries". Over the years that list has hardly changed. I know that the Minister is extremely concerned with environmental and traffic problems, and he knows that in large urban areas like Manchester and Bristol the environmental problems are becoming extremely grave. What extra provision is made within this £196 million to enable local authorities to cope with the sudden increase in interest in and determination to tackle this problem? The system by which the rate support grants are calculated does not give sufficient prominence to environmental problems. Population and education unit factors have become outdated.

Will the Minister say what is Bristol's share in the increase? Bristol's share of the national grant has fallen from 0.819 per cent. in 1967 to 0.713 per cent. in 1973. Will the supplementary figure now before the House have any effect upon this decline in Bristol's share of national resources?

Will the Minister explain how the Supplementary Estimates will affect the amount of local authority expenditure met from the rate support grant? My hon. Friend the Member for Gorton said that the national average had gone up from 54 per cent. in 1967 to 60 per cent. in 1973. Again, that is an average figure, just as the 10½ per cent. increase is an average figure, and it conceals wide variations. It would be helpful if the Minister would make available a breakdown of the individual areas and different types of authority. The average amount of rate support grant which Bristol has received over the years has remained approximately constant at 43 per cent. It is so substantially below the national average that I am sure the Minister will realise the serious position——

The Under-Secretary of State for the Environment (Mr. Eldon Griffiths)

I take it that the hon. Gentleman is not suggesting that everybody should be above the national average? I hope he accepts that some cities will have to be below the average if there is to be an average.

Mr. Cocks

I am most grateful to the Minister for making my point more clearly than I should have done. I appreciate the hon. Gentleman's point. I have in the past writhed in agony on seeing an advertisement showing a class of school-children in a dental laboratory and a meter swinging across their teeth checking them for resistance to dental decay. A shocked voice is saying that the group of children had been tested and it was found that their teeth had only average resistance to decay.I have always thought it complete nonsense to gull the public with that sort of point because by taking a normal group one will get an average result. However, I take the Minister's point that the average is made up of different components.

The situation which faces local authorities has changed in the last year or so in order of magnitude. They now face a different and new situation. The presentation of a Supplementary Estimate in the House in this form is not helpful to those who are increasingly concerned with these problems. Averages are made up of diverse matters, and it is impossible to generalise about particular areas from average figures. The Minister should make available more detailed Estimates so that we are in a better position to see the extent of the problem. I hope that the Prime Minister will appreciate the problem facing large urban areas. If more detail is not made available, and if there is not more discussion of these topics, the local authorities will face the appalling decision of choosing between large increases in rates and the slashing of services.

All the Government talk about monitoring rate increases will be against the background of local authorities having to choose between maintaining existing services and running down services to elderly people, the handicapped, provision for education and all the rest. This is an appalling dilemma. However good the Estimates have been in the past, they are quite inadequate in the present situation.

8.30 p.m.

Mr. Charles R. Morris (Manchester, Openshaw)

I welcome this opportunity of being able to support the case which has been made by my hon. Friend the Member for Manchester, Gorton (Mr. Marks) and also by my hon. Friend the Member for Bristol, South (Mr. Michael Cocks) in regard to the rate support grant, the details of which are to be found on page 65 of the Civil Estimates for 1972–73. The provisions in that paragraph are inadequate to meet the needs of local authorities. There is a real and growing anxiety in provincial cities and among ratepayers generally at the increasing financial burdens which they are now being obliged to shoulder.

The year 1973 will be an onerous one for local authorities. We need only to catalogue some of the financial problems which local authorities will have to face in the year ahead. They will face increases in the salaries and wages of local authority staff. They will be burdened with value added tax. They will face an increasing financial burden arising from increasing precepts from public transport authorities, police authorities and many others. I am mindful that it was recently announced that the cost of policing in the Manchester and Salford area rose by 18.9 per cent., to £10 million. Turning to page 65 of the Estimates, simple arithmetic tells us that they provide for less than a 9 per cent. increase in rate support.

A further burden will fall upon local authorities in the coming year flowing from local government reorganisation. For example, in 1974 Failsworth Urban District Council, in my constituency, will merge with Oldham Borough Council. Failsworth, which is greatly concerned with the interest of the community, like so many other authorities, is going ahead with projects which it hopes to complete before it merges with the larger metropolitan authority. I instance Failsworth because I have experience of that authority. However, what is happening there is reflected equally in many other parts of the country.

I have heard it suggested that the Government are to monitor rate increases. Rumour has it that the Government have in mind that if the rate increases proposed to be levied by local authorities exceed a certain percentage the authorities will be obliged to inform the Government of their proposals in that regard and must wait 10 days for the Government to comment on the size of the increase envisaged. Perhaps the Minister will give us his thinking on that rumour which is circulating among local authorities.

When we had the opportunity of debating this issue on the Rate Support Grant Order 1972, I noted that the Minister for Local Government and Development said: The personal social services are growing fast and need to continue to grow."—[OFFICIAL REPORT, 20th December 1972; Vol. 848, c. 1438.] I support that view. However, it is very little use Ministers making that kind of comment in this Chamber if they do not use their influence to make available the increased rate support grant to enable local authorities to enlarge the personal social services which we all wish to see grow.

There is an increasing amount of legislation which obliges local authorities to carry the financial burden of providing services for the communities that they serve. My hon. Friends and I were delighted that the Chronically Sick and Disabled Persons Act reached the Statute Book. That legislation is by no means mandatory on local authorities. It is permissive legislation. But it is not good enough for the Government to encourage local authorities to provide and implement the services set out in that Act and similar Acts while at the same time keeping the rate support grant to the level envisaged in the Estimates. This is a major problem, which is giving rise to real concern in the population at large.

I hope that in considering the level of the rate support grant the Government will bear in mind the regressive features of rates levied by local authorities. Apart from the rate rebate scheme, it should be remembered that many people are burdened with living in homes which attract high rateable values. The Minister will be aware that the regressive nature of rates makes no provision for or takes no account of the ability of the owner of a house to pay the rates levied upon it.

I hope that the Minister recognises the importance of and the need for prompt Government action on this growing problem.

8.40 p.m.

Mr. A. E. P. Duffy (Sheffield, Attercliffe)

I refer to Supplementary Estimate 1972–73, Class VI, 18 dealing with the rate support grant to local authorities in mentioning briefly the additional relevant expenditure now required by the Sheffield City Council arising from changes in the level of prices, costs, wages and salaries since the 1972 order was made.

Sheffield's additional needs arise primarily from two sources. First is the ever-mounting cost of inflation, about which my hon. Friends have spoken so convincingly, which is adding to the financial means of Sheffield as well as Manchester. Is the Minister aware that Sheffield faces an increase in costs of the region of 20 per cent.?

It is easy to understand why the great industrial cities of Manchester, Bristol and now Sheffield——

Mr. Julius Silverman (Birmingham, Aston)

And Birmingham.

Mr. Duffy

Yes, Birmingham, and Newcastle. They face a great financial crisis such as they have never faced before. I did not mention Liverpool because Liverpool took the initiative some weeks ago. It is anxious to meet again in the presence of the Prime Minister. The problems of the great cities do not arise merely from inflation. As from 1st April rates will be demanded on a new basis laid down by the Government in the revaluation of individual properties. Generally speaking, and contrary to belief in some quarters, that will have a marked effect on the country as a whole.

However, in the great cities that I have just mentioned the circumstances are quite different. It is expected, for example, in Liverpool that nearly all domestic ratepayers could pay a substantially increased rate charge next year. Whereas domestic rate bills will mainly go up, industry—and much of my constituency is occupied and dominated by industry—will pay on average 25 per cent. less because industrial rateable values have risen less than average. Thus it seems inevitable that domestic ratepayers will subsidise industry unless the Government takes action.

In the event there is to be in Sheffield a rate freeze. That has been made possible for three reasons: first, because of a pruning of the budget for 1973–74 of approximately £3 million; secondly, because of an increase in the Government rate support grant in the region of £3½ million, and I shall look to the Minister to confirm that; thirdly, because of an unexpected windfall, which the Sheffield City Council did not seek but which my hon. Friends want me to mention, which arises from the Prime Minister's wage freeze. It has meant that £300,000 could be taken out of a fund set aside for anticipated wage increases, thus leaving £1 million to meet the £1 plus 4 per cent. formula. Therefore, the present crisis in Sheffield is being relieved to some extent by wage earners—manual employees. Of course, much greater relief will come from budget cuts.

That raises the obvious question of how cuts in the region of, for example, 5 per cent. in response to the Government's request can be inflicted on the affairs of a city like Sheffield and yet not do grave harm to the quality of life. How can such cuts be undertaken without affecting the city's desire to maintain the momentum of expansion in recent years?

The Minister may say that some expansion will take place. But will he bear in mind my concern that cuts should not be absolute in at least three quarters because, though I expect that the Government will have regard for all the major spending heads to which my hon. Friend referred, there may be some that are so obvious as to be deemed to be not so important. However, they may almost approach urgency.

The first is the need to ensure that the transitional period covering local government reorganisation is not adversely affected by lack of funds. The second may not have received much attention in most parts of the country but it is of growing importance in the great industrial cities, especially in areas like mine. I have already ventilated this matter in the House. I raised it in a Question which I put to the Under-Secretary's Department last year, and received a sympathetic response. I refer to the community industry project which is already being practised in South Yorkshire. I urged the Secretary of State last year that it be given wider application in the Yorkshire and Humberside region, especially in my constituency. For the benefit of hon. Members who may not be familiar with the project's purpose, I wish briefly to explain that it gives employment to jobless youngsters by sending teams to clear up waste areas, to decorate and restore older property, and to help old-age pensioners.

The Minister, who knows South Yorkshire, realises the need for such projects. Moreover, I know that he is acquainted with my constituency and that he is sympathetic to its needs; he is well aware of its acute environmental problems. If there are greater problems in other areas, I should not care to visit those areas. But the Minister does visit them, and he is, therefore, well aware of the prime environmental needs.

I am afraid that any cuts made in the budget of the Sheffield City Council will be visited mainly on the east end. I do not suppose that I shall get any thanks in Sheffield this weekend for having said that. But the east ends of cities usually suffer, and I am concerned that it should not happen in Sheffield.

I am very modest in my request to the Minister. I ask him to bear my concern in mind. I have specified only three matters, but there are other elements in the matter of environmental improvement, notably pollution, of which the Minister is aware as a result of his visit to my area and South Yorkshire generally.

I wish to ask the Minister whether he was in attendance with the Prime Minister when the right hon. Gentleman addressed the Association of Municipal Corporations on 13th December last year. If he was, he may recall that the Prime Minister, in a very fine speech, expressed confidence that in future the community will look to local authorities to provide an even more extensive range of services. Will the Minister bear in mind that it is precisely this kind of expansion which all the great city authorities that are now anxious to meet him and look forward to meeting him on 9th February, especially the Sheffield City Council, fear they will be obliged to slash in the coming year?

8.50 p.m.

Mr. J. R. Kinsey (Birmingham, Perry Barr)

It is very strange that when the Government's rate support grant is this year the highest we have had we should be getting this attack on the Supplementary Estimates.

Mr. Charles R. Morris

I am sorry to interrupt the hon. Member at such an early stage, but would he not also accept that inflation has equally been at a higher level than ever before, involving local authorities in an extra £410 million?

Mr. Kinsey

That has been taken into account throughout the whole consideration of the support grant which we now have before us in the Supplementary Estimates. I am certain that my hon. Friend the Under-Secretary is surprised that the attack should be coming in this direction, but if he looks around him he will see that it comes from representatives of the cities.

The cities are affected in one or two ways. In most instances these days they have Socialist councils. If a Socialist Government had given this amount and local councils had been Conservative controlled the attacks from the other side would have been on the councils and not so much on the Government. A statement in the Birmingham Post says that the rate support grant is enabling Staffordshire to do just what the Government intended should be done, which is to keep the rate at level pegging in the county. If, with all the inflationary elements that hon. Gentlemen have spoken about, Staffordshire can do it, why cannot the cities do so as well? That is where the crux of the whole argument with the Government lies, and not so much with the support grant.

The whole point is that the Socialists are getting away with it in the local councils because of the distortion caused by putting off revaluation for 10 years. In those years that postponement has been taking away the ratepayers' feelings against those Socialist councils. In Birmingham the amount of the 30 per cent. increase directly attributable to the city council is 16 per cent. If we had the support grant going in that direction it would be very useful indeed because it would bring that 16 per cent. down considerably but, at the same time, we would then have the local authorities looking at that 16 per cent., as they will have to do in any case, in order to make economies to reduce that percentage still further.

The point we cannot get over is the distortion caused by revaluation. In effect, the Minister is shielding Socialist local councils from the wrath of the ratepayers, and we should look at it from that point of view and take these matters into consideration. I ask my hon. Friend to direct his attention to this side of the matter.

We in Birmingham would feel much better if the Minister could protect us from the distortion caused by revaluation and the actions of Socialist local councils in bringing in extra services such as free contraception and going back to direct labour. [Hon. Members: "Oh."] Yes, it is all this that is causing the 16 per cent. distortion in Birmingham. We seek the Minister's help on the inflationary side. The really important thing that we face in Birmingham is revaluation, not the support grant.

8.55 p.m.

Mr. Julius Silverman (Birmingham, Aston)

I regret the political tone of the speech of the hon. Member for Birmingham, Perry Barr (Mr. Kinsey). The major factor in the rate increase in Birmingham is revaluation. The hon. Gentleman says that the Socialists are getting away with it, but the fact is that the revaluation was embarked upon by his Government. They need not have proceeded with it, but they did so without having regard to the effect that it would have in large cities such as Birmingham.

We have been faced with inflation for years. There is nothing new about it, except perhaps the scale on which we have experienced it during the last two years. The ratepayer is accustomed to his rate bill going up by a steady amount each year. There is nothing new about that. At the hustings for local elections one side attacks the other over the level of rates, but when one examines the rate demand and the commitment to expenditure by the council concerned one finds that the amount of money that could he saved is peanuts.

The hon. Gentleman talked about the provision of free contraceptives. Trivial savings can be made on matters such as that. It is not possible to save money on the main items of council expenditure. It is not possible to save on education, except perhaps on the trimmings. Does anyone suggest that we should save on the police force, or on the collection of salvage, or on the disposal of sewage? It is not possible to save on those services, and to suggest that major savings can be made by one party or the other is nonsense. Irrespective of which party is in power, savings can be made only on the trimmings. Unless a council neglects its duty it is not possible to save a significant amount on its services.

As a result of revalution a 30 per cent. increase is expected in the rates. I shall be delighted if the Government tell us how, with the present rating system, Birmingham can limit its rate increase to 5 per cent. without neglecting its duty to provide the necessary services. It must be emphasised that the major factor in the rent increases in our large cities is revaluation, as my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) rightly said. Business companies and industrial concerns may benefit to the extent of 25 per cent. but the amount that the domestic ratepayer will pay will increase substantially.

If the low wage earner—the man who works for the council, for instance—is told that his wage is to be allowed to go up by only 4 per cent. plus £1 as a maximum, and at the same time is told that his rate bill is to go up by 30 per cent., he will not understand what it is all about and he will conclude that it is simply a method of taking him for a ride, which to a large extent it is.

I appeal to the Government—and the appeal comes not just from one party but also from the local Conservative Party through the Birmingham Mail—to do something about the present situation. This matter is outside party politics. The Government should consider freeing the revaluations. There is no reason why the present valuations should not continue for another year. If he feels that he cannot do that there will have to be substantial further financial assistance to those cities hardest hit by the revaluation.

Therefore, I entirely support the claim for an addition to the rate support grant. It may be the largest we have had so far, but the increased costs are also much the largest we have had so far, and the revaluation has not taken place before. I do not care how the Government do it, but assistance must somehow be given not merely to the hard-pressed local authorities but, particularly, to the hard-pressed domestic ratepayers. They are the people I am concerned about.

9.0 p.m.

Mrs. Jill Knight (Birmingham, Edgbaston)

I support what the hon. Member for Birmingham, Aston (Mr. Julius Silverman) has just said about the importance of giving specific and direct help to cities, such as our city of Birmingham.

There are many reasons why our domestic ratepayers will be under stress after the present revaluation. One is that in the past mistaken decisions were made stopping industry in Birmingham from advancing as it might have done. I do not want to dwell on that, but I strongly support the plea for help, which, as the hon. Gentleman said, comes from all sides.

I was attracted earlier to the suggestion that postponing the revaluation might be a way out of our difficulty. We all know how important it is at present to look very carefully at any increased expenditure and increased demands thrown on local ratepayers. Therefore, it seemed as though postponement might be reasonable. But I make the point that at this stage, when the plans for revaluation have gone very far, that would throw great difficulties on many local authorities. If that is so, and it is not possible to postpone it, there is no doubt that cities such as Birmingham should be given specific and direct help to alleviate the burden. Our local paper has estimated it to be possibly no less than an extra 30 per cent. That cannot be allowed by the Government at this time.

9.2 p.m.

Mr. David Clark (Come Valley)

Every other speaker in the debate has spoken for the large cities, explaining the terrible difficulties that they face. My hon. Friends have said that the extra £196 million is not enough at this time of such high inflation.

I come from an area which does not comprise a big city but is sandwiched between the conurbations of Manchester, Sheffield and Leeds. We, too, have great difficulties. Unless we receive extra rate support grant we shall have great increases in the rates, particularly for domestic ratepayers.

It has been said that the £196 million increase represents an extra 8 per cent. or 10 per cent., but it must be borne in mind that the recent revaluation alone, with its shift of emphasis from industry to the domestic ratepayers, will probably add 3 per cent. to the average domestic ratepayer's rates this year. Therefore, almost immediately we find some of the increase being devoured.

Hon. Members have spoken of difficulties in their own cities to show why the increase is not sufficient. I should like to show that the problem exists even outside the cities, and to take two very different areas of my constituency. One, on the east side, is an ex-mining area, where there is no Conservative councillor. On the other side—the Saddle-worth area on the Manchester side—there are only two Labour councillors. They are very different areas, with different political complexions, yet both are suffering greatly from the present inflation and the revaluation.

The difficulties are acute now because local people are rightly demanding ever better and more efficient local government services. But unless there can be a massive increase in the rate support grant there will be injustice for many ratepayers outside the cities. Either they will face rate increases of up to 30 per cent. in places or they will see their services cut to a minimum.

In Denby Dale, for example, the domestic ratepayer faces an average increase in valuation of 3.4 times, and in Saddleworth the figure is roughly the same. The Saddleworth case underlines the point that I am making. The multiplier there is 3.125. The result is that for Saddleworth urban district this year—a year in which we face inflation, and in which requests to try to keep down rate increases are made—the rate support grant is cut from 45 per cent. to 32 per cent., a reduction of £52,000 according to the treasurer, which means that rates will have to be increased by 10p in the £ to cover the loss in rate support grant itself. Those are figures produced by the treasurer of the Saddleworth Urban District Council and reported in the local paper. They show the difficulties which confront the local council and its officials.

The matter has to be taken a stage further. As an urban district, Saddle-worth has a precept upon it by the county council. Because the domestic rate has risen much higher than the average, the precept demand from the county council on Saddleworth rates will be increased by one-fifth more than the average for the rest of the West Riding.

In the same area, half the population face a water rate increase of 45 per cent. while the rest get off lightly with an increase of 23 per cent. Also, increased provision will have to be made for SELNEC, and the compounding will be lost because of the increase in the rateable valuation.

Those facts show the extent of the problem faced by a council such as Saddleworth. I cannot predict what its rate increase will be, but, obviously, it could be in the region of 20 per cent to 30 per cent. on last year, even if it can peg its expenditure at last year's level.

I am sure that the Minister recognises that this is not a satisfactory state of affairs. If we are to try to explain to people in urban districts such as Saddleworth that there is some social justice, and are to try to explain why their wages are frozen while their rates increase by up to 30 per cent., more cash must come from the Government.

It is even more ironic in some senses because one way by which local authorities might try to reduce the increase would be by pawning the future. As my hon. Friend the Member for Manchester, Gorton (Mr. Marks) said, some urban districts have reserves. These urban districts are to go into metropolitan districts under the local government reorganisation—one centred round Oldham and one round Huddersfield. I need not emphasise that these will not be rich metropolitan districts; they are on the small side, with low rateable values. It will be disastrous for the reform of local government if the constituent local authorities which make up the larger units enter those units without any reserves, and I hate to think what the consequences will be in 1974 if we fail to get action from the Government to increase the rate support grant.

It is ironic also that these are intermediate areas with the problem of having only one industry. They are areas which the various Governments have tried to help by producing a reasonable road communication system. We look to that as a way of solving the problem, yet we find that one reason why the revaluation is so high is that The demand to reside in rural areas, made possible by an improved road system, has caused residential values to increase relatively faster than urban areas. So, having built the roads to try to help the expansion of the areas, we now find that either the rates have to be increased at an exorbitant pace or services, especially those services to do with environmental matters, have to be cut back. I fear that the efforts which are made to clean up an area, which are also necessary to attract new industry, will suffer.

While I appreciate the terrifying and terrible problems of the cities, I know, too, of the problems of the urban districts and the rural districts. Therefore, while the increase is large it is not generous enough and it must be increased if there is to be social justice.

9.13 p.m.

Mr. Geoffrey Rhodes (Newcastle-upon-Tyne, East)

I should like to draw attention, under the heading of the Rate Support Supplementary Estimates and grant aid to local authorities, to certain points of principle and to apply them to one city I know well.

On the first point of principle I wonder how far the Government have considered the peculiar problems of cities which are undergoing massive and costly redevelopment largely but not entirely financed by local ratepayers at a time when the population of its rateable area may be in rapid decline. I have in mind, of course, the city of Newcastle. About 20 years ago—the point is relevant—four parliamentary constituencies of approximately 60,000 adult population were created in the city. Now one of those has fallen to less than 30,000, one to 46,000, and one to 40,000, and those figures include the 18-year-olds. The only one to have held its population has done so largely because of rehousing outside the city boundary.

The development of the city is highly costly, and its services are provided not just for the residents of the city but for people living throughout Tyneside and areas beyond with relatively low rateable values, who use the services of the city the burden of which falls upon a relatively ageing population. It may surprise the Minister to know that in my constituency of approximately 47,000 people there are nearly 15.000 over the age of 60, many of whom do not qualify for the various subsidies. An intolerable and utterly oppressive burden of taxation will, therefore, shortly be placed upon the shoulders of many thousands of householders in the city.

The current talk is of an increase in the rate levy of 25 per cent. That is expected in a city which is already one of the most highly rated in terms of its levies in the United Kingdom. In practical terms, apart from the increasing burden being related not to the ability to pay but to the property occupied, it means that the city council is faced with a prospect of cuts to save money and so reduce the burden. Leaving aside the moral issues, large-scale elections are about to take place and nobody pretends at this time of the year that the issue of the rates does not count.

There is one issue that I know to be dear to the Under-Secretary's heart and about which, as he knows, I have the deepest respect for him—smoke control. I heard the Under-Secretary sincerely appeal for the clearing of the filthy air in the area which is mainly located in the east end of the city, the west end having been largely made a smoke-control area. I gaze out in the morning from my bedroom window over the smoke-filled atmosphere. I know that I have the Minister's support in this: I think that he may be unaware that, although many promises have been made to him that the authorities will act quickly in this matter, currently the city is discussing a cutback in the appointment of the staff necessary to free the east end of the city of the filth and the smoke and to create a smokeless zone as an economic measure, for that cutback would help to reduce the massive increase in the rate burden that would otherwise fall on the shoulders of the city.

Incidentally, this is a city with one of the highest incidences of lung cancer in the United Kingdom and of asbestosis among shipbuilding workers and pneumoconiosis among mining workers and one of the highest rates of bronchitis in the United Kingdom—again, especially in the east end of the city, which is the filthiest area. In order to achieve an economy of £7,000 or £8,000 or £10,000, the city treasurer is giving himself considerable worry thinking how to reduce the burden on the ratepayers of the city.

Another human issue is transport. Not long ago there was a massive increase in the cost of travelling on Newcastle's former corporation buses, now run by the Tyneside Passenger Transport Authority. A half-fare system for pensioners and the disabled when the cost of transport was rapidly increasing meant a crippling burden. I could quote instances of elderly people's choral societies that used to travel round the city entertaining one another or elderly people's bowling clubs and similar activities having to be abandoned because of the cost of travel arising from the increase in the PTA's fares.

In the east end of the city where we have many old people we collected the signatures of 10,000 elderly persons in one constituency and sent them to the corporation, which in turn sent them to the PTA requesting a minimum fare of 1p or 1½p. The Labour-controlled PTA went one better: it agreed to free transport for the elderly, and the mass of the elderly people of the city welcomed that. The authority explained that it would have to go back to the local authority for a substantial sum to finance the operation.

It is difficult to calculate how much it would cost, because when buses are running anyway it does not necessarily increase the cost of running them to fill them up with elderly people. But because of that situation, the Conservative members of the Newcastle City Council—I know that I am being party political and I know that their motivation is well intentioned—opposed the introduction of free transport for the elderly and the disabled on the ground that it would place an undue burden on the ratepayers at a time when costs generally were rising. A bitter battle is now being fought in the council by the rearguard rump of Conservative councillors—they are in a minority, but the aldermen keep them in power—to abandon a scheme to help not just a few hundred thousand people in the city and its immediate environs but all the elderly people in the passenger transport area.

This problem would not have arisen had it not been for the increasing costs of local government. The city would have been able to afford it. It is because of these real, human situations that I appeal to the Minister to consider ways and means of financing centrally a much bigger proportion of the rate burden which falls upon the city, for the reasons that I have stated. There is a need for national help for several reasons.

The city council has made its representations, of course. It even asked to see the Prime Minister. He said that it was not a big enough authority to justify his time but that he was seeing some of the larger authorities. I appreciate the point. I am sure that the Prime Minister is a very busy man. However, I suggest that in some respects the burdens falling upon Newcastle are even worse than those in other parts of the country.

I have said many times—I said it even when I was PPS to the Minister of Housing and Local Government—I do not like the rating system. It is regressive and unfair. It bears very little relation to the capacity and capability of the person to pay. We are not discussing that this evening. However, a relevant point to this debate is that revaluation of property is about to commence. In that revaluation there is already prima facie evidence that, although it is said in theory that an X per cent. rise in rateable values means an X per cent. fall in the rate in the £ levied, it all depends upon the proportion of the new rateable value of the city which falls upon the industrial, the commercial or the domestic ratepayer. According to my calculations, the burden which will fall upon the domestic ratepayer in the city of Newcastle is a higher proportion than it was in the past.

About three months ago when this was first announced I made a statement that was quoted in the Newcastle Evening Chronicle in the course of which I said that a massive intolerable burden that would shake the people of Newcastle rigid would fall upon their shoulders before many months had passed. As usual my political opponents said "Ah, Rhodes is scaremongering again." Today Conservative councillors are saying the same and appealing to the Government to help, The forecast which was made then was correct. It is useless for the Government to talk to shipbuilding workers, engineers and others—and council tenants pay their rates, too—about freezing their wages when they know that rents will go up because the rates will go up.

I will continue to fight in my constituency for higher pensions and for an end to the wage freeze in order to maintain the living standards of the people. I will not co-operate with the Government's policy of a freeze on incomes unless they are prepared to ease the burdens which fall upon the shoulders of my constituents. The burden which will fall upon Newcastle citizens will shake them rigid in a few months' time. I think that they will pay their rates in anger because they will feel there should have been more Government help for schemes of development which were not for the benefit of the elderly, many of whom will be dead before their real value is felt, but which will be more to the benefit of people moving in and out of the city each day who do not pay rates in the city.

Council tenants will fight bitterly against increases in their rents which will inevitably arise from the rate increases, leaving aside any effect of the fair rents policy.

If the Government will not act fairly in this matter, I say in all seriousness that this will be the biggest rate increase ever to have fallen upon the citizens of any city in the country, and we shall fight every Conservative candidate in my constituency unless he presses the Government successfully on this issue

When I first became a Member of Parliament for Newcastle it was dominated by Tory councillors. I warn the Minister that unless the Government respond to the pressures coming from councillors on both sides, we shall clear every member of his party out of my constituency on polling day.

9.25 p.m.

The Under-Secretary of State for the Environment (Mr. Eldon Griffiths)

I think that the House will very much regret the steep decline in the standard of debate from its beginning, where the hon. Member for Manchester, Gorton (Mr. Marks), followed by his colleague the hon. Member for Bristol, South (Mr. Michael Cocks) spoke with moderation, good sense and some knowledge of the complexities of the rating situation in the country. I am only sad that the hon. Member for Newcastle-upon-Tyne, East (Mr. Rhodes), for whom I have some regard, as he knows, should have concluded the debate from the Opposition side of the House with something that was no more than a piece of local electioneering in very doubtful taste. In reply I shall address myself mainly to the serious points that have been made by hon. Members earlier.

Mr. Rhodes

Is it wrong, as a member of a political party, to indulge in a political party argument on an issue which affects one's constituents? As for knowledge, I happened to teach the subject of local government finance for 10 years. I know the complexities. I am saying that this is basically a political issue for which the hon. Gentleman's Government must take responsibility. If the hon. Gentleman says that that is in bad taste, then all our debates in this House are in bad taste.

Mr. Griffiths

The hon. Gentleman demonstrates by his sensitivity that he has something, perhaps, for which to apologise; but I leave him to accept responsibility for reducing the level of the debate to the local electioneering in which he engaged.

What we have been discussing, not for the first time, are really two separate problems, one of them being the impact of revaluation on local authorities and the other the special difficulties of some local authorities, notably in the great cities, which are faced with the need for above-average expenditure on their many social problems but which in some cases are receiving a decreasing share of the rate support grant. I think that that defines the parameters of our debate this evening.

A number of hon. Members spoke of revaluation as if it were some terrible infliction upon the suffering population. One hon. Member spoke of his constituents "suffering" from revaluation. From the speeches we have heard, one would have supposed that some Opposition Members assume that the present relationship between rating assessments is right and fair and should be retained all over the country, that any change that is made in these rating assessments must be wrong, and that it is for the Government, who have allowed this change to take place, to defend making it. But this is not the situation at all.

As we all know, rates are a tax on property. We may not like it, but that is what they are. The amount of the tax is based very simply on the value of the occupancy of that property. Those values of occupancy of property, in the real world, always have and always will change with time and circumstances. Some areas get richer and some get poorer. They change, but they do not change uniformly. Obviously, if they changed uniformly between one part of the country and another we could manage perfectly well without revaluations. But in the real world that is not so. Some values increase more than others, and some fall. Therefore, revaluation is not a plague or an infliction. It is absolutely fundamental and essential to any rating system. If it is not undertaken, people who pay rates in respect of property which has not risen in value as much as the average end up paying far more than their fair share of the rate-borne expenditure, and those whose values have increased by more than the average end up paying less than their fair share.

I therefore ask the House to recognise that revaluation itself is not an injustice; it is bringing fairness as between one ratepayer and another, and I am sure that the hon. Member for Gorton. who understands the subject very well, will understand that from time to time revaluations are indispensable.

Mr. Marks

I think the criticism is of revaluation at this time, in the middle of a freeze, and that by it the Government are causing an upheaval in the amounts which people have to pay—people on average earnings who do not qualify for rebates, and so on, and are probably in houses where they will suffer most. They are organised workers, too. All I am saying is that the Government should consider this in the light of their counter-inflation policy.

Mr. Julius Silverman

The Minister may deal with this point at the same time. Surely the circumstances are different, because the rise in the rating valuation of domestic property is due to the extraordinary inflation which has taken place in house prices. This is surely the exceptional circumstance which justifies delay or reconsideration of the whole question of revaluation at present.

Mr. Griffiths

I will come to inflation. I just wanted to get clear, at the very beginning, what revaluation is. I hope that there is no disagreement on either side about that.

In the Government's view it is those who postpone revaluation and therefore prolong inequities as between one citizen and another who ought to be on the defensive at this time. It will be within the memory of everyone in this House that the last Administration, when they postponed revaluation, which should have taken place in 1968, did not argue that postponement was a good thing; on the contrary, they clearly recognised that it was a bad thing. The fact of the matter was—and the House may be interested to learn this—that they needed valuers for a new creature, the Land Commission. That was the reason why they did not carry out the revaluation at that time. It is because of the postponement in 1968 that we are now having rather bigger changes than one would normally expect in correcting the present inequities in the distribution of rate liabilities.

In this context the fact that values have gone up is not important; what matters is the rate call on the individual citizen. The assessments themselves are quite objective; what counts is the levy which the local authority will make. Therefore, I cannot emphasise too strongly, in contrast to so many hon. Members who have threatened increases of enormous sizes within their constituencies, that no individual ratepayer will know how he will fare under the combined effect of revaluation, on the one hand, and, on the other hand, the decisions of his local authority on expenditure, till he has ascertained his new rateable value and has multiplied it by the rate in the pound fixed by his local authority. Till that sum is done, all the oratory which has been heard in this House tonight does not inform the citizen what his exact burden will be.

I will reply now specifically to some of the points which have been raised.

The hon. Member for Gorton, who spoke with great moderation and good sense, challenged the figures in an increase order—for the first time ever, I am advised, in the memory of the House. He is perfectly entitled to challenge them, but they were based on information provided by the local authority associations, including the Association of Municipal Corporations, and they have been agreed by the local authority associations as being correct.

The figures represent the actual increases in costs between November 1971 and November 1972 as they affect local authority expenditure for the current year. The effect depends on the timing of particular increases. I hope the hon. Gentleman will accept that the calculations are made on the information provided and agreed by the local authorities.

The hon. Gentleman also mentioned the Liverpool inflation. I am advised that Liverpool claims to have made no provision in its budget in April 1972 for any inflation in 1972–73. I am not criticising Liverpool for failing to do that, but most other local authorities have made provision for it, and we shall be looking into this in the monitoring procedure.

The hon. Member for Bristol, South made a good contribution—all ship-shape and Bristol-fashion. He asked me for more details. I will read his speech carefully tomorrow and send him such breakdown as I can. He will understand that the central Government do not necessarily have a detailed breakdown on particular local auhorities, but I will go as far as possible to meet him on that point.

The hon. Gentleman seemed to fall into the confusion that the increase order is concerned to update the price basis of the grants that were fixed in 1970 and does not affect in any way the percentage of expenditure to be met by grant. On the contrary, its purpose is to ensure that despite inflation the rate of grant is kept the same. It was 58 per cent. in the preceding year and it will become 60 per cent. this year. The increase order does not affect the distribution of grants. Bristol will receive the same share of the extra sum as it received of the original grant settlement.

It is a fundamental principle of the rate support grant to make a distinction between increased expenditure due to improvement of services and increased expenditure due to inflation. The improvement of services is dealt with in the main order which provided, last November, for all the factors mentioned by hon. Members—more schools, better social services and so on. Inflation is dealt with by the increase orders, and the Act which governs all our proceedings specifically forbids the Government to take account in increase orders of anything except inflation.

The hon. Member for Newcastle-upon-Tyne, East spoke about smoke control, and I will look into that. He also spoke of elderly people with low incomes in Newcastle. As it stands, the rebate scheme relieves those who qualify of two-thirds of any increase in rates. Under the order made in accordance with my right hon. Friend's statement, the income limits for a single person from 1st April next are increased from £12 per week to £13.50 and for a married couple from £14.75 to £16.50, and the addition for children is raised from £2.50 to £2.75. The net effect is that from next April those people who qualify for rebate will have to meet only one-third of any increase in their rate bill. I hope the House will acquit the Government of the hon. Gentleman's charge that elderly people over the age of 60 on small fixed incomes in the Newcastle area would be confronted with some terrifying increases.

In terms of expenditure revaluation has its effect on the situation, as does the level of Government rate support. This matter will be looked into by my Department and no doubt will be considered in the conversations which my right hon. Friend the Prime Minister will be having with the large authorities when the whole question of levels of rate support grant can be examined.

At the end of the day the rates paid by the citizen will reflect more than anything the decisions on expenditure made by local councils. It must he emphasised that the cheque written by the local council in deciding on expenditure is drawn on the ratepayers' bank account. The ultimate responsibility must rest with the local authority.

Mr. Marks

The hon. Gentleman said that in considering its 1972–73 rate position Liverpool should have made allowance for inflation. What advice has he to give local authorities on what rate of inflation they should allow for in 1973–74?

Mr. Griffiths

I am quite sure that under the provisions of the Government's legislation, and following the valiant actions of my right hon. Friends, the rate of inflation will certainly come down. I am equally sure that local authorities will assist in achieving what is right in the national interest.

I wish to illustrate some of the consequences in Manchester flowing from the decisions of the local authorities. The hon. Member for Gorton knows that there has been a change in the political control of the council, and he will draw his own conclusions about that aspect. I shall not attempt to deal with that matter, but will simply give the hon. Gentleman some facts. In education the increase from 1971 to 1972 in rate demand notes in the County Borough of Manchester was 17 per cent. In respect of libraries and art galleries the figure was 23 per cent.; on social services, 37 per cent.; on housing, 26 per cent.; on administration 19 per cent.; and on other services 26 per cent. The total rate call was increased by 30 per cent.

I make no comment on the decisions of that local authority which no doubt judged what was right in its own ratepayers' interests, but the burden on the ratepayer arises in large degree from the decision of that authority to increase expenditure across the board.

Mr. Charles R. Morris

Will the Minister accept that it is misleading for him merely to give a list of percentages? What element of those percentages refers to increases in salaries and wages of staffs of local authority departments?

Mr. Griffiths

I have no doubt that wages and salaries represent a significant proportion of the increased expenditure.

Mr. Morris

Therefore, the element of choice did not arise.

Mr. Griffiths

The hon. Gentleman must recognise that if in any local authority area a group of citizens is able to earn higher wages and incomes it cannot be shielded from the inflationary consequences that that has on the cost of the services provided by the authority. Is he suggesting that if there is this increase in cost, because people in his area have higher incomes, somehow central Government should immediately save that local authority from the consequences of its own decisions? The hon. Gentleman has not thought this matter through.

I turn now to the levels of rate support grant which have an impact on local authorities.

Mr. David Clark

The Minister has not mentioned the urban districts. He has laid great emphasis on the responsibility of elected councillors for the rate levy, and we might accept that. Will he explain to my constituents in Saddleworth why their rates will have to go up by a minimum of 10p in the pound as a result of a decision by an appointed valuer?

Mr. Griffiths

The hon. Gentleman will excuse me if I do not give him the answer to Saddleworth's rate increase. I will, if he wishes, look at that matter and write to him about it. I hope that he will not go in for unnecessary scares which may turn out to be rather less worrying than he has suggested.

Mr. Clark

rose——

Mr. Griffiths

I must get on. I owe it to the subsequent debates, which have been held up by this rather lengthy debate, to get on with my speech.

Mr. Clark

On a point of order, Mr. Deputy Speaker. Is it in order for the Minister to accuse me of alarming people and making a scare?

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

Yes, it is quite in order.

Mr. Griffiths

I am sure that you, Mr. Deputy Speaker, intended no endorsement; only that I was within my rights within the House to say what I liked on that subject.

We have settled with the local authorities that, for the first time, the Government will provide 60 per cent. of their expenditure. That is a substantial increase from 58 per cent. previously—in fact, the largest increase ever. In arriving at this figure in negotiations with the local authorities we took into account the increased expenditure that they would have to meet, including that arising from inflation. Some hon. Gentlemen have suggested that inflation comes on top. This was taken into account in the negotiations which took place with the local authorities. We also took into account other factors affecting rates—the effects of revaluation and of the Housing Finance Act on the contribution that authorities will have to make to or receive from their housing revenue accounts.

What is the effect of the 60 per cent. grant settlement? The normal growth of rateable value from year to year is about 2 per cent. from new property coming into the valuation lists. Add to this the fact that local government's share of its own expenditure is reduced from 42 per cent. in 1972–73 to 40 per cent. in the subsequent year, and we have a situation in which—this is the most important point I can make tonight—the first 7 per cent. of growth of local authority expenditure is absorbed before the ratepayer is asked to dig any deeper into his pocket. It is not a question of local authorities having to cut. It is simply that the first 7 per cent. of any increase that they bring about is taken care of by the extra grant from the Government. It is only on increases above 7 per cent. where they will have to bear their share. If, at a time when we are seeking to moderate inflation, a local authority can count on increasing its expenditure by 7 per cent. and that is met by an additional grant from the Government, it can hardly claim to have been ungenerously treated.

I will now summarise the various points that I have made. The Government have increased the grants to the local authorities for 1972–73 by more than £400 million. We have increased the grants to local authorities by the equivalent of £8 per head of the population of all local authorities in the country. Nothing like that has been done before. The domestic element—that is to say, the direct subsidy to the domestic ratepayer—is increased from 10½p in the pound to the equivalent of 15½p in the pound. That again is an unprecedented increase of 50 per cent. The hon. Member for Manchester, Openshaw (Mr. Charles R. Morris), who cares deeply about the personal services and the disabled in particular, will be glad to hear that the total grant allows a 10 per cent. increase over and above the inflation element for growth in the expenditure of personal social services. Moreover, it allows for an increase of 50 per cent. over two years in the services for the handicapped. I doubt if the hon. Gentleman knew that, but I hope that he will recognise that it is not an ungenerous arrangement.

As a Government defending the national interest, we expect local authorities to assist in the general policy of containing inflation. I believe that we are entitled to ask that of them. All the local authority associations, to their great credit, have agreed to counsel their members to assist us. I only wish that the same counsel had come from some hon. Members opposite.

Rates are a serious problem, and so is inflation. The Government have made a generous settlement to the local authorities. However, I am bound to accept that the increasing problems of our great cities—pollution, transport, housing and social problems, and the rest—confront us all, on both sides of the House. The growing problems of where the finance is to come from to deal with these growing problems is one of the subjects which my right hon. Friend the Prime Minister will undoubtedly be discussing with the great cities. I welcome very much some of the constructive contributions that a number of hon. Members opposite, as well as my hon. Friends, have made to the debate.